Rule: Air Programs: Fuels and Fuel Additives&#8212 Renewable Fuel Standard Program

Tuesday,
May 1, 2007
Part II
Environmental
Protection Agency
40 CFR Part 80
Regulation of Fuels and Fuel Additives:
Renewable Fuel Standard Program; Final
Rule
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23900 Federal Register / Vol. 72, No. 83 / Tuesday, May 1, 2007 / Rules and Regulations
ENVIRONMENTAL PROTECTION will provide reductions in carbon e.g., confidential business information
AGENCY dioxide emissions that have been (CBI) or other information whose
implicated in climate change. Also, disclosure is restricted by statute.
40 CFR Part 80 there will be some reductions in air Certain other material, such as
[EPA–HQ–OAR–2005–0161; FRL–8299–9] toxics emissions such as benzene from copyrighted material, is not placed on
the transportation sector, while some the Internet and will be publicly
RIN 2060–AN76 other emissions such as oxides of available only in hard copy form.
nitrogen are expected to increase. Publicly available docket materials are
Regulation of Fuels and Fuel
This action finalizes regulations available either electronically through
Additives: Renewable Fuel Standard
designed to ensure that refiners, www.regulations.gov or in hard copy at
Program
blenders, and importers of gasoline will the EPA Docket Center, EPA/DC, EPA
AGENCY: Environmental Protection use enough renewable fuel each year so West, Room 3334, 1301 Constitution
Agency (EPA). that the total volume requirements of Ave., NW., Washington, DC. This
ACTION: Final rule. the Energy Policy Act are met. Our rule Docket Facility is open from 8:30 a.m.
describes the standard that will apply to to 4:30 p.m., Monday through Friday,
SUMMARY: Under the Clean Air Act, as these parties and the renewable fuels excluding legal holidays. The telephone
amended by Section 1501 of the Energy that qualify for compliance. The number for the Public Reading Room is
Policy Act of 2005, the Environmental regulations also establish a trading (202) 566–1744 and the telephone
Protection Agency is required to program that will be an integral aspect number for the EPA Docket Center is
promulgate regulations implementing a of the overall program, allowing (202) 566–1742.
renewable fuel program. The statute renewable fuels to be used where they FOR FURTHER INFORMATION CONTACT: Julia
specifies the total volume of renewable are most economical while providing a
fuel that the regulations must ensure is MacAllister, U.S. Environmental
flexible means for obligated parties to Protection Agency, National Vehicle
used in gasoline sold in the U.S. each comply with the standard.
year, with the total volume increasing and Fuel Emissions Laboratory, 2000
over time. In this context, this program DATES: This final rule is effective on Traverwood, Ann Arbor MI, 48105;
is expected to reduce dependence on September 1, 2007. The incorporation telephone number (734) 214–4131; fax
foreign sources of petroleum, increase by reference of certain publications number (734) 214–4816; e-mail address
domestic sources of energy, and help listed in the rule is approved by the macallister.julia@epa.gov.
transition to alternatives to petroleum in Director of the Federal Register as of SUPPLEMENTARY INFORMATION:
the transportation sector. The increased September 1, 2007.
I. General Information
use of renewable fuels such as ethanol ADDRESSES: EPA has established a
and biodiesel is also expected to have docket for this action under Docket ID Entities potentially affected by this
the added effect of providing an No. EPA–HQ–OAR–2005–0161. All action include those involved with the
expanded market for agricultural documents in the docket are listed in production, distribution and sale of
products such as corn and soybeans. the www.regulations.gov Web site. gasoline motor fuel or renewable fuels
Based on our analysis, we believe that Although listed in the index, some such as ethanol and biodiesel. Regulated
the expanded use of renewable fuels information is not publicly available, categories and entities could include:
NAICS 1 SIC 2
Category Examples of potentially regulated entities
codes codes
Industry ........................ 324110 2911 Petroleum Refineries.

Industry ........................ 325193 2869 Ethyl alcohol manufacturing.
Industry ........................ 325199 2869 Other basic organic chemical manufacturing.
Industry ........................ 424690 5169 Chemical and allied products merchant wholesalers.
Industry ........................ 424710 5171 Petroleum bulk stations and terminals.
Industry ........................ 424720 5172 Petroleum and petroleum products merchant wholesalers.
Industry ........................ 454319 5989 Other fuel dealers.
1 North American Industry Classification System (NAICS).
2 Standard Industrial Classification (SIC) system code.
This table is not intended to be persons listed in the preceding FOR 5. Post 2012 RFS Standards
exhaustive, but provides a guide for FURTHER INFORMATION CONTACT section. B. Program Structure
readers regarding entities likely to be 1. What Is the RFS Program Standard?
Table of Contents 2. Who Must Meet the Standard?
regulated by this action. This table lists
I. Introduction 3. What Qualifies as a Renewable Fuel?
the types of entities that EPA is now 4. Equivalence Values of Different
aware could potentially be affected by A. The Role of Renewable Fuels in the
Transportation Sector Renewables Fuels
this action. Other types of entities not B. Requirements in the Energy Policy Act 5. How Will Compliance Be Determined?
listed in the table could also be affected. C. Development of the RFS Program 6. How Will the Trading Program Work?
To decide whether your organization II. Overview of the Program 7. How Will the Program Be Enforced?
might be affected by this action, you A. Impacts of Increased Reliance on C. Voluntary Green Labeling Program
should carefully examine today’s notice Renewable Fuels III. Complying With the Renewable Fuel
1. Renewable Fuel Volume Scenarios Standard
and the existing regulations in 40 CFR

Analyzed A. What Is the Standard That Must Be Met?
part 80. If you have any questions 1. How Is the Percentage Standard
2. Emissions
regarding the applicability of this action 3. Economic Impacts Calculated?
to a particular entity, consult the 4. Greenhouse Gases and Fossil Fuel 2. What Are the Applicable Standards?
Consumption 3. Compliance in 2007
Federal Register / Vol. 72, No. 83 / Tuesday, May 1, 2007 / Rules and Regulations 23901
4. Renewable Volume Obligations E. How Are RINs Distributed and Traded? 2. Technology Available To Produce
B. What Counts as a Renewable Fuel in the 1. Distribution of RINs With Volumes of Cellulosic Ethanol
RFS Program? Renewable Fuel a. Sugar Platform
1. What Is a Renewable Fuel That Can Be a. Responsibilities of Renewable Fuel i. Pretreatment
Used for Compliance? Producers and Importers ii. Dilute acid hydrolysis
a. Ethanol Made From a Cellulosic b. Responsibilities of Parties That Buy, iii. Concentrated acid hydrolysis
Feedstock Sell, or Handle Renewable Fuels iv. Enzymatic hydrolysis
b. Ethanol Made From any Feedstock in c. Batch Splits and Batch Mergers b. Syngas Platform
Facilities Using Waste Material To 2. Separation of RINs From Volumes of c. Plasma Technology
Displace 90 Percent of Normal Fossil Renewable Fuel d. Feedstock Optimization
Fuel Use 3. Distribution of Separated RINs 3. Renewable Fuel Distribution System
c. Ethanol That Is Made From the Non- 4. Alternative Approaches to RIN Capability
Cellulosic Portions of Animal, Other Distribution VII. Impacts on Cost of Renewable Fuels and
Waste, and Municipal Waste IV. Registration, Recordkeeping, and Gasoline
d. Foreign Producers of Cellulosic and Reporting Requirements A. Renewable Fuel Production and
Waste-Derived Ethanol A. Introduction Blending Costs
2. What Is Biodiesel? B. Registration 1. Ethanol Production Costs
a. Biodiesel (Mono-Alkyl Esters) 1. Who Must Register Under the RFS a. Corn Ethanol
b. Non-Ester Renewable Diesel Program? b. Cellulosic Ethanol
3. Does Renewable Fuel Include Motor 2. How Do I Register? 2. Biodiesel Production Costs
Fuel That Is Made From Coprocessing a 3. How Do I Know I am Properly Registered 3. Diesel Fuel Costs
Renewable Feedstock With Fossil Fuels? With EPA? B. Distribution Costs
a. Definition of ‘‘Renewable Crudes’’ and 4. How are Small Volume Domestic 1. Ethanol Distribution Costs
‘‘Renewable Crude-Based Fuels’’ Producers of Renewable Fuels Treated a. Capital Costs To Upgrade Distribution
b. How Are Renewable Crude-Based Fuel for Registration Purposes? System for Increased Ethanol Volume
Volumes Measured? C. Reporting b. Ethanol Freight Costs
4. What Are ‘‘Equivalence Values’’ for 1. Who Must Report Under the RFS 2. Biodiesel Distribution Costs
Renewable Fuel? Program? C. Estimated Costs to Gasoline
a. Authority Under the Act To Establish 2. What Reports Are Required Under the 1. Description of Cases Modeled
Equivalence Values RFS Program? a. Base Case (2004)
b. Energy Content and Renewable Content 3. What Are the Specific Reporting Items b. Reference Case (2012)
as the Basis for Equivalence Values for the Various Types of Parties Required
c. Control Cases (2012)
c. Lifecycle Analyses as the Basis for To Report?
2. Overview of Cost Analysis Provided by
Equivalence Values 4. What are the Reporting Deadlines?
the Contractor Refinery Model
C. What Gasoline Is Used To Calculate the 5. How May I Submit Reports to EPA?
3. Overall Impact on Fuel Cost
Renewable Fuel Obligation and Who Is 6. What Does EPA Do With the Reports it
a. Cost Without Ethanol Subsidies
Required To Meet the Obligation? Receives?
1. What Gasoline Is Used To Calculate the 7. May I Claim Information in Reports as b. Gasoline Costs Including Ethanol
Volume of Renewable Fuel Required To CBI and How Will EPA Protect it? Consumption Tax Subsidies
Meet a Party’s Obligation? 8. How are Spilled Volumes With VIII. What Are the Impacts of Increased
2. Who Is Required To Meet the Renewable Associated Lost RINs To Be Handled in Ethanol Use on Emissions and Air
Fuels Obligation? Reports? Quality?
3. What Exemptions Are Available Under D. Recordkeeping A. Effect of Renewable Fuel Use on
the RFS Program? 1. What Types of Records Must Be Kept? Emissions
a. Small Refinery and Small Refiner 2. What Recordkeeping Requirements are 1. Emissions From Gasoline Fueled Motor
Exemption Specific to Producers of Cellulosic or Vehicles and Equipment
b. General Hardship Exemption Waste-Derived Ethanol? a. Gasoline Fuel Quality
c. Temporary Hardship Exemption Based E. Attest Engagements b. Emissions From Motor Vehicles
on Unforeseen Circumstances 1. What Are the Attest Engagement c. Nonroad Equipment
4. What Are the Opt-in and State Waiver Requirements Under the RFS Program? 2. Diesel Fuel Quality: Biodiesel
Provisions Under the RFS Program? 2. Who Is Subject to the Attest Engagement 3. Renewable Fuel Production and
a. Opt-in Provisions for Noncontiguous Requirements for the RFS Program? Distribution
States and Territories 3. How Are the Attest Engagement B. Impact on Emission Inventories
b. State Waiver Provisions Requirements in this Final Rule Different 1. Primary Analysis
D. How Do Obligated Parties Comply With From Those Proposed? 2. Sensitivity Analysis
the Standard? V. What Acts Are Prohibited and Who Is 3. Local and Regional VOC and NOX
1. Why Use Renewable Identification Liable for Violations? Emission Impacts in July
Numbers? VI. Current and Projected Renewable Fuel C. Impact on Air Quality
a. RINs Serve the Purpose of a Credit Production and Use 1. Impact of Increased Ethanol Use on
Trading Program A. Overview of U.S. Ethanol Industry and Ozone
b. Alternative Approach To Tracking Future Production/Consumption 2. Particulate Matter
Batches 1. Current Ethanol Production IX. Impacts on Fossil Fuel Consumption and
2. Generating RINs and Assigning Them to 2. Expected Growth in Ethanol Production Related Implications
Batches 3. Current Ethanol and MTBE A. Impacts on Lifecycle GHG Emissions
a. Form of Renewable Identification Consumption and Fossil Energy Use
Numbers 4. Expected Growth in Ethanol 1. Time Frame and Volumes Considered
b. Generating RINs Consumption 2. GREET Model
c. Cases in Which RINS Are Not Generated B. Overview of Biodiesel Industry and a. Renewable Fuel Pathways Considered
3. Calculating and Reporting Compliance Future Production/Consumption b. Modifications to GREET
a. Using RINs To Meet the Standard 1. Characterization of U.S. Biodiesel c. Sensitivity Analysis
b. Valid Life of RINs Production/Consumption 3. Displacement Indexes (DI)
c. Cap on RIN Use To Address Rollover 2. Expected Growth in U.S. Biodiesel 4. Impacts of Increased Renewable Fuel
d. Deficit Carryovers Production/Consumption Use

4. Provisions for Exporters of Renewable C. Feasibility of the RFS Program Volume a. Greenhouse Gases and Carbon Dioxide
Fuel Obligations b. Fossil Fuel and Petroleum
5. How Will the Agency Verify 1. Production Capacity of Ethanol and B. Implications of Reduced Imports of
Compliance? Biodiesel Petroleum Products
C. Energy Security Implications of program. We have evaluated the impacts A. The Role of Renewable Fuels in the
Increases in Renewable Fuels of a range of renewable fuel volumes as Transportation Sector
1. Effect of Oil Use on Long-Run Oil Price, high as 10 billion gallons in 2012. This
U.S. Import Costs, and Economic Output Renewable fuels have been an
2. Short-Run Disruption Premium From
represents a significant increase over the important part of our nation’s
Expected Costs of Sudden Supply volume of renewable fuel used in 2004 transportation fuel supply for many
Disruptions which was approximately 3.5 billion years. Following the CAA amendments
3. Costs of Existing U.S. Energy Security gallons, and this increase is estimated to of 1990, the use of renewable fuels,
Policies produce a number of significant effects. particularly ethanol, increased
X. Agricultural Sector Economic Impacts For instance, we estimate that the
XI. Public Participation dramatically. Several key clean fuel
transition to renewable fuels will reduce programs required by the CAA
XII. Administrative Requirements
petroleum consumption by 2.0 to 3.9 established new market opportunities
A. Executive Order 12866: Regulatory
Planning and Review billion gallons or approximately 0.8 to for ethanol. A very successful mobile
B. Paperwork Reduction Act 1.6 percent of the petroleum that would source control strategy, the reformulated
C. Regulatory Flexibility Act otherwise be used by the transportation gasoline (RFG) program, was
1. Overview sector. implemented in 1995. This program set
2. Background The increased use of renewable fuels
4. Summary of Potentially Affected Small
stringent new controls on the emissions
is also expected to produce reductions performance of gasoline, which were
Entities in some regulated pollutants. Carbon
5. Impact of the Regulations on Small designed to significantly reduce
Entities monoxide emissions from gasoline summertime ozone precursors and year
6. Small Refiner Outreach powered vehicles and equipment will round air toxics emissions. The RFG
7. Reporting, Recordkeeping, and be reduced by 0.9 to 2.5 percent and program also required that RFG meet an
Compliance Requirements emissions of benzene (a mobile source oxygen content standard. Several areas
8. Related Federal Rules air toxic) will be reduced by 1.8 to 4.0 of the country began blending ethanol
9. Conclusions percent.1 At the same time, other
D. Unfunded Mandates Reform Act into gasoline to help meet this new
emissions may increase. Nationwide, we standard, such as Chicago and St. Louis.
E. Executive Order 13132: Federalism
estimate between a 41,000 and 83,000 Another successful clean fuel strategy
F. Executive Order 13175: Consultation
and Coordination With Indian Tribal ton increase in VOC + NOX emissions. required certain areas exceeding the
Governments However, the effects will vary national ambient air quality standard for
G. Executive Order 13045: Protection of significantly by region with some major carbon monoxide to also meet an
Children From Environmental Health metropolitan areas experiencing small oxygen content standard during the
and Safety Risks emission benefits, while other areas may winter time to reduce harmful carbon
H. Executive Order 13211: Actions see an increase in VOC emissions from
Concerning Regulations That monoxide emissions. Many of these
4 to 5 percent and an increase in NOX areas, such as Denver and Phoenix, also
Significantly Affect Energy Supply,
emissions from 6 to 7 percent from blended ethanol during the winter
Distribution, or Use
I. National Technology Transfer gasoline powered vehicles and months to help meet this new standard.
Advancement Act equipment. Today, the role and importance of
J. Executive Order 12898: Federal Actions The use of renewable fuel will renewable fuels in the transportation
to Address Environmental Justice in likewise reduce greenhouse gas sector continue to expand. In the past
Minority Populations and Low-Income emissions such as carbon dioxide by 8.0 several years as crude oil prices have
Populations. to 13.1 million metric tons, about 0.4 to
K. Congressional Review Act
soared above the lower levels of the
0.6 percent of the anticipated 1990’s, the relative economics of
L. Clean Air Act Section 307(d)
greenhouse gas emissions from the renewable fuel use have improved
XIII. Statutory A
transportation sector in the United dramatically. In addition, since the vast
I. Introduction States in 2012. Greenhouse gas majority of crude oil produced in or
Through today’s final rule, we are emissions contribute to climate change, imported into the U.S. is consumed as
putting in place a compliance and and thus, increased renewable use is an gasoline or diesel fuel in the U.S.,
enforcement program that implements important step in addressing this issue. concerns about our dependence on
the renewable fuel program, also known Finally, we estimate that increases in foreign sources of crude oil have
as the Renewable Fuel Standard (RFS) the use of renewable fuels will increase renewed interest in renewable
program. This program accomplishes net farm income and the nation’s energy transportation fuels. The emergence of
the statutory goal of increasing the security. Net U.S. farm income is more in-depth understanding of the
volume of renewable fuels that are estimated to increase by between $2.6 impacts of human activities on climate
required to be used in vehicles in the and $5.4 billion through transfers from change has also focused attention on the
U.S. as required in Section 211(o) of the users of gasoline and consumers of various ways that renewable fuels can
Clean Air Act (CAA) enacted as part of agricultural products used to produce reduce the consumption of fossil fuels.
the Energy Policy Act of 2005 (the ethanol. However, as feedstocks used in The passage of the Energy Policy Act of
Energy Act or the Act). This final rule the production of renewable fuels 2005 demonstrated a strong
resulted from a collaborative effort with expand beyond the corn and soybeans commitment on the part of U.S.
stakeholders, including refiners, that are most common today, the policymakers to consider additional
renewable fuel producers, and renewable fuels industry is expected to means of supporting renewable fuels as
distributors, who together helped to continue to diversify and grow in its a supplement to petroleum-based fuels
design a program that is simple, flexible, ability to benefit the nation’s in the transportation sector. The RFS
and enforceable. environment and economy. program is one such means.
As a result of the favorable economics The RFS program was debated by the
1 These reductions are relative to the Mobile
of renewable fuels in comparison to U.S. Congress over several years before
Source Air Toxics (MSAT) standards in effect.
conventional gasoline and diesel, Additional benzene emission reductions will occur
finally being enacted through passage of
renewable fuel volumes are expected to as a result of the recently finalized MSAT2 the Energy Policy Act of 2005. The RFS
exceed the requirements of the RFS standards (72 FR 8428, February 26, 2007). program is first and foremost designed
to increase the use of renewable fuels in may create new opportunities for production. However, market demand
motor vehicle fuel consumed in the U.S. blending of E85, a blend of 85 percent for renewable fuels is expected to
In this context, it is expected to ethanol and 15 percent gasoline, in the exceed the statutory minimums. We
simultaneously reduce dependence on long run. The increased availability of believe that the program we are
foreign sources of petroleum, increase E85 will mean that more flexible fueled finalizing today will operate effectively
domestic sources of energy, and vehicles (FFV) can use this fuel. Of the regardless of the level of renewable fuel
diversify our energy portfolio to help approximately 5 million FFVs currently use or market conditions in the energy
transition to alternatives to petroleum in in use in the U.S, most are currently sector.
the transportation sector. Based on our fueled with conventional gasoline rather
B. Requirements in the Energy Policy
analysis, we also believe that the than E85, in part due to the limited
Act
expanded use of renewable fuels will availability of E85.
provide reductions in carbon dioxide Given the ever-increasing demand for Section 1501 of the Energy Policy Act
emissions that contribute to climate petroleum-based products in the amended the Clean Air Act and
change and in air toxics emissions such transportation sector, the RFS program provides the statutory basis for the RFS
as benzene from the transportation also moves the nation in the direction program in Section 211(o). It requires
sector, while other emissions such as of replacing part of this demand with EPA to establish a program to ensure
hydrocarbons and oxides of nitrogen are renewable energy. The RFS program that the pool of gasoline sold in the
projected to increase. The increased use provides the certainty that at least a contiguous 48 states contains specific
of renewable fuels such as ethanol and minimum amount of renewable fuel will volumes of renewable fuel for each
biodiesel is also expected to have the be used in the U.S., which in turn calendar year starting with 2006. The
added effect of providing an expanded provides some certainty for investment required overall volumes for 2006
market for agricultural products such as in production capacity of renewable through 2012 are shown in Table I.B–1
corn and soybeans. The expected fuels. However, it should be understood below.
increase in cellulosic ethanol that the RFS program is not the only
production will also expand the market factor currently impacting demand for TABLE I.B–1.—APPLICABLE VOLUMES
opportunities to a wider array of ethanol and other renewable fuels. As OF RENEWABLE FUEL UNDER THE
feedstocks. Congress was developing the RFS RFS PROGRAM
The requirement for use of a specified program in the Energy Act, several large
volume of renewable fuels complements states were adopting and implementing Billion
other provisions of the Energy Act. In bans on the use of MTBE in gasoline. As Calendar year gallons
particular, the required volume of a result, refiners supplying reformulated 2006
renewable fuel use will offset any gasoline (RFG) in those states switched
2006 .............................................. 4.0
possible loss in demand for renewable to ethanol to satisfy the oxygen content 2007 .............................................. 4.7
fuels occasioned by the Act’s repeal of mandate for their RFG, causing a large, 2008 .............................................. 5.4
the oxygen content mandate in the RFG sudden increase in demand for ethanol. 2009 .............................................. 6.1
program while allowing greater Even more importantly, with the 2010 .............................................. 6.8
flexibility in how renewable fuels are removal of the oxygen content mandate 2011 .............................................. 7.4
blended into the nation’s fuel supply. for RFG, refiners elected to remove 2012 .............................................. 7.5
The RFS program also creates a specific essentially all MTBE from the gasoline
annual level for minimum renewable supply in the U.S. during the spring of In order to ensure the use of the total
fuel use which increases over time, 2006. In order to accomplish this renewable fuel volume specified for
ensuring overall growth in the demand transition quickly, while still each year, the Agency must set a
and opportunity for renewable fuels. maintaining gasoline volume, octane, standard for each year representing the
Because renewable fuels such as and gasoline air toxics performance amount of renewable fuel that each
ethanol and biodiesel are not new to the standards, refiners elected to blend refiner, blender, or importer must use,
U.S. transportation sector, the ethanol into virtually all reformulated expressed as a percentage of gasoline
expansion of their use is expected to gasoline nationwide. This caused a sold or introduced into commerce. This
follow distribution and blending second dramatic increase in demand for yearly percentage standard is to be set
practices already in place. For instance, ethanol, which in the near term was met at a level that will ensure that the total
the market already has the necessary by temporarily shifting large volumes of renewable fuel volumes shown in Table
production and distribution ethanol out of conventional gasoline I.B–1 will be used based on gasoline
mechanisms in place in many areas and and into the RFG areas. volume projections provided by the
the ability to expand these mechanisms Perhaps the largest impact on Energy Information Administration
into new markets. Recent spikes in renewable fuel demand, however, has (EIA). The standard for each year must
ethanol use resulting first from the state been the increase in the cost of crude be published in the Federal Register by
MTBE bans, and now the virtual oil. In the last few years, both crude oil November 30 of the previous year.
elimination of MTBE from the prices and crude oil price forecasts have Starting with 2013, EPA is required to
marketplace, have tested the limits of increased dramatically. This has establish the applicable national
the ethanol distribution system. resulted in a large economic incentive volume, based on the criteria contained
However, future growth is expected to for the use of ethanol and biodiesel. The in the statute, which must require at
move in a more orderly fashion since Energy Information Administration least the same overall percentage of
the use of renewable fuels will not be (EIA) and others are currently projecting renewable fuel use as was required in
geographically constrained and, given renewable fuel demand to exceed the 2012.
EIA volume projections, investment minimum volumes required under the The Act defines renewable fuels
decisions can follow market forces RFS program by a substantial margin. In primarily on the basis of the feedstock.
rather than regulatory mandates. In this context, the effect of the RFS In general, renewable fuel must be a
addition, the increased production program is to provide a minimum level motor vehicle fuel that is produced from
volumes of ethanol and the expanded of demand to support ongoing plant or animal products or wastes, as
penetration of ethanol in new markets investment in renewable fuel opposed to fossil fuel sources. The Act
specifically identifies several types of renewable fuel, and the general II. Overview of the Program
motor vehicle fuels as renewable fuels, framework for a credit trading program. Today’s action establishes the final
including cellulosic biomass ethanol, Various aspects of the program require requirements for the RFS program, as
waste-derived ethanol, biogas, biodiesel, additional development by the Agency well as our assessment of the
and blending components derived from beyond the specifications in the Act. environmental and economic impacts of
renewable fuel. The Agency must develop regulations to the nation’s transition to greater use of
The standard set annually by EPA is ensure the successful implementation of renewable fuels. This section provides
to be a single percentage applicable to the RFS program, based on the an overview of our program and
refiners, blenders, and importers, as framework spelled out in the statute. renewable fuel impacts assessment.
appropriate. The percentage standard is Under the RFS program the trading Sections III through V provide the
used by obligated parties to determine a provisions comprise an integral element details of the structure of the program,
volume of renewable fuel that they are of compliance. Many obligated parties while Sections VI through X describe
responsible for introducing into the do not have access to renewable fuels or
domestic gasoline pool for the given our assessment of the impacts on
the ability to blend them, and so must emissions of regulated pollutants and
year. The percentage standard must be use credits to comply. The RFS trading
adjusted such that it does not apply to greenhouse gases, air quality, fossil fuel
program is also unique in that the use, energy security, economic impacts
multiple parties for the same volume of parties liable for meeting the standard
gasoline. The standard must also take in the agricultural sector, and cost from
(refiners, importers, and blenders of the expanded use of renewable fuels.
into account the use of renewable fuel gasoline) are not generally the parties
by small refineries that are exempt from who make the renewable fuels or blend A. Impacts of Increased Reliance on
the program until 2011. them into gasoline. This creates the Renewable Fuels
Under the Act, the required volumes need for trading mechanisms that
in Table I.B–1 apply to the contiguous In a typical major rulemaking, EPA
ensure that the means to demonstrate would conduct a full assessment of the
48 states. However, Alaska and Hawaii compliance will be readily available for
can opt into the program, in which case economic and environmental impacts of
use by obligated parties. the specific rule that it is promulgating.
the pool of gasoline used to calculate
The first step we took in developing However, as discussed in Section I.A.,
the standard, and the number of
the proposed program was to seek input the replacement of MTBE with ethanol
regulated parties, would change. In
addition, other states can request a and recommendations from the affected and the extremely favorable economics
waiver of the RFS program under stakeholders. There were initially a for renewable fuels brought on by the
certain conditions, which would affect wide range of thoughts and views on rise in crude oil prices are causing
the national quantity of renewable fuel how to design the program. However, renewable fuel use to far exceed the RFS
required under the program. there was broad consensus that the requirements. Given these
The Act requires the Agency to program should satisfy a number of circumstances, it is important to assess
promulgate a credit trading program for guiding principles, including, for the impacts of this larger increase in
the RFS program whereby an obligated example, that the compliance and renewable use and the related changes
party may generate credits for over- trading program should provide occurring to gasoline. For this reason we
complying with their annual obligation. certainty to the marketplace and have carried out an assessment of the
The obligated party can then use these minimize cost to the consumers; that the economic and environmental impacts of
credits to meet their requirements in the program should preserve existing the broader changes in fuel quality
following year or trade them for use by business practices for the production, resulting from our nation’s transition to
another obligated party. Thus the credit distribution, and use of both greater utilization of renewable fuels, as
trading program allows obligated parties conventional and renewable fuels; that opposed to an assessment that is limited
to comply in the most cost-effective the program should be designed to to the RFS program itself.
manner by permitting them to generate, accommodate all qualifying renewable To carry out our analyses, we elected
transfer, and use credits. The trading fuels; that all renewable volumes to use 2004 as the baseline from which
program also permits renewable fuels produced are made available to to compare the impacts of expanded
that are not blended into gasoline, such obligated parties for compliance; and renewable use. We chose 2004 as a
as biodiesel, to participate in the RFS that the Agency should have the ability baseline primarily due to the fact that
program. to easily verify compliance to ensure all the necessary refinery production
The Agency must determine who can that the volume obligations are in fact data, renewable fuel production data,
generate credits, under what conditions met. These guiding principles and the and fuel quality data were already in
credits may be traded, how credits may comments we received on our Notice of hand at the time we needed to begin the
be transferred from one party to another, Proposed Rulemaking (NPRM) helped to analysis. We did not use 2005 as a
and the appropriate value of credits for move us toward the program in today’s baseline year because 2005 may not be
different types of renewable fuel. If a final rule. an appropriate year for comparison due
party is not able to generate or purchase We published a Notice of Proposed to the extraordinary impacts of
sufficient credits to meet their annual Rulemaking on September 22, 2006 (71 hurricanes Katrina and Rita on gasoline
obligation, they are allowed to carry FR 55552) which described our production and use. To assess the
over the deficit to the next annual proposed approach to compliance and impacts of anticipated increases in
compliance period, but must achieve the trading program, as well as renewable fuels, we elected to look at
full compliance in that following year. preliminary analyses of the what they would be in 2012, the year
environmental and economic impacts of the statutorily-mandated renewable fuel
C. Development of the RFS Program increased use of renewable fuels. The volumes will be fully phased in. By
Section 1501 of the Energy Act program finalized today largely mirrors conducting the analysis in this manner,
prescribed the RFS program, including the proposed program, with some the impacts include not just the impact
the required total volumes, the timing of revisions reflecting continued input of expanded renewable fuel use by
the obligation, the parties who are from stakeholders during the formal itself, but also the corresponding
obligated to comply, the definition of comment period. decrease in the use of MTBE, and the
potential for oxygenates to be removed assessing the impacts of expanded use constant. Therefore, we created a 2012
from RFG due to the absence of the RFG of renewable fuels, we evaluated two reference case from the 2004 base case
oxygenate mandate. Since these three comparative scenarios, one representing for use in the emissions and air quality
changes are all inextricably linked and the statutorily required minimum, and analysis that maintained current fuel
are occurring simultaneously in the another reflecting the higher levels quality parameters while incorporating
marketplace, evaluating the impacts in projected by EIA. Although the actual forecasted increases in vehicle miles
this manner is both necessary and renewable fuel volumes produced in traveled and changes in fleet
appropriate. 2012 may differ from both the required demographics. The 2012 fuel reference
We evaluated the impacts of and projected volumes, we believe that case was developed by growing out the
expanded renewable fuel use and the these two volume scenarios together 2004 renewable fuel baseline according
corresponding changes to the fuel represent a reasonable range for analysis to EIA’s forecasted energy growth rates
supply on fuel costs, consumption of purposes.3 between 2004 and 2012.
fossil fuels, and some of the economic The Act also stipulates that at least For the analyses, we created two 2012
impacts on the agricultural sector and 250 million gallons out of the total scenarios representing expanded
energy security. We also evaluated the volume required in 2013 and beyond renewable fuel production. The ‘‘RFS
impacts on emissions, including must meet the definition specified for Case’’ represents volume levels
greenhouse gas emissions that cellulosic biomass ethanol. As described designed to exactly meet the
contribute to climate change, and the in Section VI, there are a number of requirements of the RFS program, and
corresponding impacts on nationwide companies already making plans to includes the effects of higher credit
and regional air quality. Our analyses produce ethanol from cellulosic values for cellulosic ethanol and
are summarized in this section. feedstocks and/or waste-derived energy biodiesel. Since higher credit values
sources that could potentially meet the mean that one gallon of renewable fuel
1. Renewable Fuel Volume Scenarios
definition of cellulosic biomass ethanol. counts as more than one gallon for
Analyzed Accordingly, we anticipate a ramp-up in compliance purposes, less than 7.5
As shown in Table I.B–1, the Act production of cellulosic biomass billion gallons of renewable fuel is
stipulates that the nationwide volumes ethanol production in the coming years, needed to meet the 7.5 billion gallon
of renewable fuel required under the and for analysis purposes we have statutory requirement, but credits
RFS program must be at least 4.0 billion assumed that 250 million gallons of equivalent to 7.5 billion gallons of
gallons in 2006 and increase to 7.5 cellulosic biomass ethanol will be used renewable fuel would still be available
billion gallons in 2012. However, we in 2012. for compliance purposes. The ‘‘EIA
expect that the volume of renewable As discussed in Section VI, we chose Case’’ represents volume levels based on
fuel will actually exceed the required 2004 to represent current baseline EIA projections. A summary of the
volumes by a significant margin. Based conditions. However, a direct assumed renewable fuel volumes for the
on economic modeling in 2006, EIA comparison of the fuel quality impacts scenarios we evaluated is shown in
projected renewable fuel demand in on emissions and air quality that are Table II.A.1–1. Details of the
2012 of 9.6 billion gallons for ethanol, expected to occur once the RFS program calculations used to determine these
and approximately 300 million gallons is fully phased in required that changes volumes are given in Chapter 2 of the
for biodiesel using crude oil prices in overall fuel volume, fleet Regulatory Impact Analysis (RIA) in the
forecast at $48 per barrel.2 Therefore, in characterization, and other factors be docket for this rulemaking.
TABLE II.A.1–1.—RENEWABLE FUEL VOLUME SCENARIOS (BILLION GALLONS)

2012
2004
base case Reference RFS case EIA case
case
Corn-ethanol ............................................................................................................................ 3.548 3.947 6.421 9.388

Cellulosic ethanol ..................................................................................................................... 0 0 0.25 0.25
Biodiesel .................................................................................................................................. 0.025 0.030 0.303 0.303
Total volume ..................................................................................................................... 3.573 3.977 6.974 9.941
2. Emissions emissions in 2012 will increase about more. We focused on July emissions
0.9% for the RFS Case and 1.6% for the since these are most relevant to ozone
We evaluated the impacts of increased EIA Case. These increases are equivalent formation and modeled 2015 because
use of ethanol and biodiesel on to an additional 18,000 to 43,000 tons of our ozone model is based upon a 2015
emissions and air quality in the U.S. VOC per year, and an additional 23,000 emissions inventory (though we would
relative to the reference case. We to 40,000 tons of NOX per year. expect similar results in 2012). Finally,
estimated that nationwide VOC We also estimated the change in we developed separate estimates for
emissions in 2012 from gasoline emissions in those areas which are RFG areas, low RVP areas (i.e., RVP
vehicles and equipment will increase by projected to experience a significant standards less than 9.0 RVP), and
about 0.3% in the RFS Case and about change in ethanol use; i.e., where the conventional gasoline areas with a
0.7% in the EIA Case. For NOX, we market share of ethanol blends was summer 9.0 RVP standard. For areas
estimated that nationwide annual projected to change by 50 percent or with a significant change in ethanol use,
2 $48/barrel from Annual Energy Outlook 2006, 3 Subsequent to the analysis for this final rule, use, which increase the projection to 11.2 billion
Energy Information Administration, Department of EIA has released its 2007 AEO forecasts for ethanol gallons by 2012.
Energy.
compared to the reference case, VOC levels for both the RFS Case and the EIA through 2012. For corn ethanol, we
emissions in RFG areas increased by up Case. The ozone RSM approximates the estimate the per gallon cost of ethanol
to 2.3%, while NOX emissions increased effect of VOC and NOX emissions in a to range from $1.26 per gallon in 2012
by up to 1.6%. In low RVP areas, VOC 37-state eastern area of the U.S. Using (2004 dollars) in the RFS Case to $1.32
emissions increased by up to 4.6%, this model, we projected that the per gallon in the EIA Case. These costs
while NOX emissions increased by up to changes in VOC and NOX emissions take into account the cost of the
6.2%. In 9.0 RVP areas, VOC emissions could produce a very small increase in feedstock (corn), plant equipment and
increased by up to 4.6%, while NOX ambient ozone levels. On average, operation and the value of any co-
emissions increased by up to 7.3%. population-weighted ozone design value products (distiller’s dried grain and
Unlike VOC and NOX, emissions of concentrations increased by about 0.05 solubles, for example). For biodiesel, we
CO and benzene from gasoline vehicles ppb, which represents 0.06 percent of estimate the per gallon cost to be
and equipment were estimated to the standard. Even for areas expected to between $1.89 and $2.06 per gallon if
decrease in 2012 when the use of experience a significant increase in produced using soy bean oil, and less if
renewable fuels increased. Reductions ethanol use, population-weighted ozone using yellow grease ($1.11 to $1.56 per
in emissions of CO varied from 0.9% design value concentrations increased gallon) or other relatively low cost or
percent to as high as 2.5% percent for by only 0.15 to 0.18 ppb, about 0.2 no-cost feedstocks. The price paid for
the nation as a whole, depending on the percent of the standard. These ozone ethanol, however, is reduced by the
renewable fuel volume scenario. impacts do not consider the reductions $0.51 per gallon federal tax subsidy as
Similarly, benzene emissions from in CO emissions mentioned above, or well as any state subsidies that might
gasoline vehicles and equipment were the change in the types of compounds apply. Similarly the price paid for
estimated to be reduced from 1.8% to comprising VOC emissions. biodiesel is reduced due to the $1.00 per
4.0% percent. Directionally, both of these factors may gallon federal tax subsidy biodiesel
We do not have sufficient data to mitigate these ozone increases. produced from soy bean oil and $0.50
predict the effect of ethanol use on We investigated several other issues per gallon tax subsidy for biodiesel
levels of either directly emitted related to emissions and air quality that produced from yellow grease. We also
particulate matter (PM) or secondarily could affect our estimates of the impacts note that these costs represent the
formed PM. The increased NOX of increased use of renewable fuels. production cost of the fuel and not the
emissions are expected to lead to These are discussed in Section VIII and market price. In recent years, the prices
increases in secondary nitrate PM, but at in greater detail in the RIA. For of ethanol and biodiesel have tended to
the same time reduced aromatics instance, our current models assume track the prices of gasoline and diesel
resulting from ethanol blending are that recent model year vehicles are fuel, in some cases even exceeding those
likely to lead to a decrease in secondary insensitive to many fuel changes. prices.
organic PM, as discussed in Section However, a limited amount of new test These renewable fuels are then
VIII.C. In addition, biodiesel use is data suggest that newer vehicles may be blended in gasoline and diesel fuel.
expected to result in some reduction in just as sensitive as older model year While biodiesel is typically just blended
direct PM emissions, though small in vehicles. Our sensitivity analysis with typical petroleum diesel,
magnitude due to the relatively small suggests that if this is the case, VOC additional efforts are sometimes
volumes. emissions could decrease by as much as necessary and/or economically
The emission impact estimates 0.3%, instead of increasing by up to advantageous at the refiner level when
described above are based on the best 0.7%. NOX emissions could increase by adding ethanol to gasoline. For example,
available data and models. However, it up to 4.2%, up from a 1.6% increase. ethanol’s high octane reduces the need
must be highlighted that most of the fuel We also evaluated the emissions from for other octane enhancements by the
effect estimates are based on very the production of both ethanol and refiner, whereas offsetting the volatility
limited or old data which may no longer biodiesel fuel and determined that they increase caused by ethanol may require
be reliable in estimating the emission will also increase with increased use of removal of other highly volatile
impacts on vehicles in the 2012 fleet these fuels. Nationwide, emissions components. Section VII examines these
with advanced emission controls.4 As related to the production and fuel cost impacts and concludes that the
such, these emission estimates should distribution of ethanol and biodiesel net cost to society in 2012 in
be viewed as preliminary. EPA hopes to fuel are projected to be of the same comparison to the reference case will
conduct significant new testing in order order of magnitude as the emission range from an estimate of 0.5 cent to 1.0
to better estimate the impact of fuel impacts related to the use of these fuels cent per gallon of gasoline due to the
changes on emissions from both in vehicles. increased use of renewable fuels and
highway vehicles and nonroad Finally, a lack of emission data and their displacement of MTBE. The
equipment, including those fuel changes atmospheric modeling tools prevented resulting total nationwide costs in 2012
brought about by the use of renewable us from making specific projections of are $823 million per year for the RFS
fuels. We hope to be able to incorporate the impact of renewable fuels on case and $1,739 million per year for the
the data from such additional testing ambient PM levels. As mentioned, EIA case. This total excludes the effects
into the analyses for other studies however, ethanol use may affect of the 51 cent/gal federal excise tax
required by the Energy Act, and into a ambient PM levels due to the increase credit as well as state tax subsidies.
subsequent rule to set the RFS program in NOX emissions and the reduction in Our estimates of fuel impacts do not
standard for 2013 and later. the aromatic content of gasoline, which consider other societal benefits. For
We used the Ozone Response Surface should reduce aromatic VOC emissions. example, the displacement of
Model (RSM) to estimate the impacts of All of these issues will be the subject of petroleum-based fuel (largely imported)
the increased use of ethanol on ozone further study and analysis in the future. by renewable fuel (largely produced in
the United States), should reduce our

4 Advanced emission controls include close- 3. Economic Impacts use of imported oil and fuel. We
coupled, high-density catalysts and their associated
electronic control systems for light-duty vehicles,
In Section VII of this preamble, we estimate that 95 percent of the lifecycle
and NOX adsorbers and PM traps for heavy-duty estimate the cost of producing the extra petroleum reductions resulting from the
engines. volumes of renewable fuel anticipated use of renewable fuel will be met
through reductions in net petroleum Due to the greater demand for corn as indeed on the use of all fossil fuels,
imports. In Section IX of this preamble a feedstock for ethanol production, corn accounts not only for the direct use and
we estimate the value of the decrease in prices are estimated to increase in 2012 combustion of the finished fuel in a
imported petroleum at about $2.6 by 18 cents per bushel for the RFS Case vehicle or engine, but also includes the
billion in 2012 for the RFS Case and and 39 cents per bushel of corn for the petroleum use associated with
$5.1 billion for the EIA Case, in EIA Case from $2.32 (in 2004 dollars) in production and transportation of that
comparison to our 2012 reference case. the Reference Case. Although soybean fuel. For instance, fossil fuels are used
Total petroleum import expenditures in prices are expected to rise slightly, the in producing and transporting
2012 are projected to be about $698 increased cost is likely due to higher renewable feedstocks such as plants or
billion. input costs, such as land prices. We animal byproducts, in converting the
Furthermore, the above estimate on estimate a price increase of 18 cents renewable feedstocks into renewable
reduced petroleum import expenditures (RFS Case) to 21 cents (EIA Case) per fuel, and in transporting and blending
only partly assess the economic bushel of soybeans from a Reference the renewable fuels for consumption as
impacts. One of the effects of increased Case price of $5.26 per bushel. These motor vehicle fuel. Likewise, fossil fuels
use of renewable fuel is that it higher commodity prices are predicted are used in the production and
diversifies the energy sources used in to also result in higher U.S. farm transportation of petroleum and its
making transportation fuel. To the income. Our analysis predicts that farm finished products. In order to estimate
extent that diverse sources of fuel income will increase by $2.6 billion the true impacts of increases in
energy reduce the dependence on any annually by 2012 for the RFS Case and renewable fuel use on fossil fuel use, we
one source, the risks, both financial as $5.4 billion for the EIA Case, roughly a must take these steps into account. Such
well as strategic, of a potential 5 to 10 percent increase. analyses are termed lifecycle analyses.
disruption in supply reflected in the Due to higher corn prices, U.S. There is also no consensus on the
price volatility of a particular energy exports of corn are estimated to decrease most appropriate approach for
source are reduced. As indicated in the by $573 million in the RFS Case and by conducting such lifecycle analyses. We
proposal, EPA has worked with $1.29 billion in the EIA Case in 2012. have chosen to base our lifecycle
researchers at Oakridge National With higher commodity prices, we analysis on Argonne National
Laboratory to update a study they would expect some upward pressure on Laboratory’s GREET model for the
previously published and which has food costs as the higher cost of corn and reasons described in Section IX.
been used or cited in several soybeans is passed along to consumers. However, there are other lifecycle
government actions impacting oil We estimate a relatively modest increase models in use. The choice of model
consumption. A draft report is being in annual household food costs inputs and assumptions all have a
made available in the docket at this time associated with the higher price bearing on the results of lifecycle
for further consideration. This analysis commanded by corn and soybeans. For analyses, and many of these
only looks at the impact of reduced the RFS Case, annual per capita assumptions remain the subject of
petroleum imports on energy security. wholesale food cost are estimated to debate among researchers.
Other energy security issues could arise increase by approximately $7, while the With these caveats, we compared the
with the wider use of biofuels. For higher renewable fuel volumes lifecycle impacts of renewable fuels to
example, ethanol’s production and costs anticipated by the EIA Case will result the petroleum-based gasoline and diesel
are determined by the availability of in a $12 annual increase in the per fuels that they replace. This analysis
corn as a feedstock. Corn production, in capita wholesale food cost. This equates allowed us to estimate not only the
turn, is weather-dependent. Also, the to roughly a $2.1 to $3.6 billion increase overall impacts of renewable fuel use on
use of biofuels may increase the use of in nationwide food costs in 2012. petroleum use, but also on emissions of
natural gas. A full integrated analysis of greenhouse gases such as carbon
4. Greenhouse Gases and Fossil Fuel dioxide from all fossil fuels. In
the energy security implications of the
Consumption comparison to the reference case, we
wider use of biofuels has yet to be
undertaken. There has been considerable interest estimate that the increased use of
While increased use of renewable fuel in the impacts of fuel programs on renewable fuels in the RFS and EIA
will reduce expenditures on imported greenhouse gases implicated in climate cases will reduce transportation sector
oil, it will also increase expenditures on change and on fossil fuel consumption petroleum consumption by about 0.8
renewable fuels and in-turn, on the due largely to concerns about and 1.6 percent, respectively, in the
sources of those renewable fuels. The dependence on foreign sources of transportation sector in 2012. This is
RFS program attempts to spur the petroleum. Therefore, in this equivalent to 2.0–3.9 billion gallons of
increased use of renewable rulemaking we have undertaken an petroleum in 2012. We also estimated
transportation fuels made principally analysis of the greenhouse gas and fossil that greenhouse gases from the
from agricultural crops produced in the fuel consumption impacts of a transition transportation sector will be reduced by
U.S. As a result, it is important to to greater renewable fuel use. This is the about 0.4 and 0.6 percent for the RFS
analyze the consequences of the first analysis of its kind in a high profile and EIA cases, respectively, equivalent
transition to greater renewable fuel use rule, and as such it may guide future to about 8–13 million metric tons. These
in the U.S. agricultural sector. To work in this area. reductions are projected to continue to
perform this analysis, EPA selected the As a result of the transition to greater increase beyond 2012 since crude oil
Forest and Agricultural Sector renewable fuel use, some petroleum- prices have been projected by EIA to
Optimization Model (FASOM) based gasoline and diesel will be continue to be high relative to the prices
developed by Professor Bruce McCarl of directly replaced by renewable fuels. of the 1990’s, and as a result there is
Texas A&M University and others over Therefore, consumption of petroleum- expected to be an economic advantage
the past thirty years. FASOM is a based fuels will be lower than it would to using renewable fuels beyond 2012.
dynamic, nonlinear programming model be if no renewable fuels were used in These greenhouse gas emission
of the agriculture and forestry sectors of transportation vehicles. However, a true reductions are also highly dependent on
the U.S. (For this analysis, we focused measure of the impact of greater use of the expectation that the majority of the
on the agriculture portion of the model.) renewable fuels on petroleum use, and future ethanol use will be produced
from corn. If advances in the technology system would all be elements of a post- corresponding renewable fuel standards
for converting cellulosic feedstocks into 2013 program. Depending on the expressed as a percent of gasoline
ethanol allow cellulosic ethanol use to structure of any final legislation production or importation. The
exceed the levels assumed in our approved by Congress and signed into renewable volume obligation that will
analysis, then even greater greenhouse law, such elements could also be apply to an individual obligated party
gas reductions may result.5 incorporated into an expanded will then be determined based on this
renewable and alternative fuels percentage and the total gasoline
5. Post 2012 RFS Standards production or import volume in a
program.
The Energy Policy Act of 2005, in calendar year, January 1 through
addition to setting the standards to be B. Program Structure December 31. EPA will publish the
adopted through 2012, requires EPA, in The RFS program being finalized percentage standard in the Federal
coordination with the Departments of today requires refiners, importers, and Register each November for the
Agriculture and Energy, to determine blenders (other than oxygenate following year based on the most recent
the applicable volume for the renewable blenders) to show that a required EIA gasoline demand projections.
fuel standard for the year 2013 and volume of renewable fuel is used in However, for compliance in 2007 we are
subsequent calendar years. This gasoline. The required volume is publishing the percentage standard in
determination is to be based on a review determined by multiplying their annual today’s action. The standard for 2007 is
of the program’s implementation in gasoline production by a percentage 4.02 percent. Section III.A describes the
2006 through 2012 as well as review of standard specified by EPA. Compliance calculation of the standard.
the impact of renewable fuels on the is demonstrated through the acquisition
2. Who Must Meet the Standard?
environment, air quality, energy of unique Renewable Identification
security, job creation, rural economic Numbers (RINs) assigned by the Under our program, any party that
development and the expected annual producer or importer to every batch of produces or imports gasoline for
rate of renewable fuel production, renewable fuel produced or imported. consumption in the U.S., including
including production of cellulosic The RIN shows that a certain volume of refiners, importers, and blenders (other
ethanol. renewable fuel was produced or than oxygenate blenders), will be
In today’s final rulemaking, we do not imported. Each year, the refiners, subject to a renewable volume
suggest any specific renewable fuel blenders and importers obligated to obligation that is based on the
volumes for 2013 and beyond that may meet the renewable volume requirement renewable fuel standard. These
be appropriate under the statutory (referred to as ‘‘obligated parties’’) must obligated parties will determine the
criteria. However, we would note that acquire sufficient RINs to demonstrate level of their obligation by multiplying
the President, in his State of the Union compliance with their volume the percentage standard by their annual
address this January, set specific goals obligation. RINs can be traded, thereby volume of gasoline production or
reducing the amount of gasoline usage functioning as the credits envisioned in importation. The result will be the
in the United States by 20 percent in the the Act. A system of recordkeeping and renewable fuel volume which each
next 10 years. This would be electronic reporting for all parties that party must ensure is blended into
accomplished by reforming and have RINs ensures the integrity of the gasoline consumed in the U.S., with
modernizing fuel economy standards for RIN pool. This RIN-based system will credit for certain other renewable fuels
cars and setting mandatory fuels both meet the requirements of the Act that are not blended into gasoline.
standard equivalent to requiring use of and provide several other important For 2007, we are requiring that the
35 billion gallons of renewable and advantages: renewable fuel volume obligation be
• Renewable fuel production volumes determined by multiplying the
alternative 6 fuels in 2017. Therefore,
can be easily verified. percentage standard by the volume of
given the necessity to address the post-
• RIN trading can occur in real time gasoline produced or imported
2013 period under the Energy Act and
as soon as the renewable fuel is prospectively from September 1, 2007
the prospect of continued attention by
produced rather than waiting to the end until December 31, 2007. While the
the Administration and Congress to this
of the year when an obligated party standard will not apply to all of 2007
issue, EPA will continue to devote
would determine if it had exceeded the gasoline production, we are
attention to the issue of renewable and
standard. nevertheless confident that the total
alternative fuel volumes in the post-
• Renewable fuel can continue to be volume of renewable fuel used in all of
2013 period.
produced, distributed, and blended in 2007 will still exceed the volume
From a program structure perspective,
those markets where it is most specified in the Act due to expectations
we believe that what we are putting in
economical to do so. that the demand for renewable fuel will
place today will remain useful as part of
• Instances of double-counting of exceed the RFS requirements.
a 2013 and later program. For example, In determining their annual gasoline
EPA considers that the identification of renewable fuel claimed for compliance
purposes can be identified based on production volume, obligated parties
renewable fuel via a Renewable must include all of the finished gasoline
Identification Number (RIN), the electronically reported data.
Our RIN-based trading program is an which they produced or imported for
determination of liable parties, the use in the contiguous 48 states, and
averaging, banking and trading system essential component of the RFS
program, ensuring that every obligated must also include reformulated
and the recordkeeping and reporting blendstock for oxygenate blending
party can comply with the standard
5 Cellulosic ethanol is estimated to provide a while providing the flexibility for each (RBOB), and conventional blendstock
comparable petroleum displacement as corn obligated party to use renewable fuel in for oxygenate blending (CBOB). For
derived ethanol on a per gallon basis, though the the most economical ways possible. refiners and importers this includes
impacts on total energy and greenhouse gas unfinished gasoline produced or

emissions differ. 1. What Is the RFS Program Standard? imported that will become gasoline
6 While the RFS program is specific to renewable
fuels, the president’s goal of 35 billion gallons by

EPA is required to convert the upon addition of an oxygenate
2017 would include not only renewable fuels, but aggregate national volumes of renewable downstream of the refiner. Other
also other types of alternatives fuels. fuel specified in the Act into producers of gasoline, such as blenders,
will count as their gasoline production were 2.5 gallons of renewable fuel for used, either by themselves or by
only the volumes of blendstocks which compliance purposes, but does not someone else, and the RIN is evidence
become gasoline upon their addition to specify the values for other renewable that this occurred for a certain volume
finished gasoline, unfinished gasoline, fuels. Although in the NPRM we of renewable fuel. Exporters of
or other blendstocks. Renewable fuels considered a range of options including renewable fuel will also be required to
blended into gasoline by any party will straight volume, energy content, and acquire RINs in sufficient quantities to
not be counted as gasoline for the requested comment on the merit and cover the volume of renewable fuel
purposes of calculating the annual basis for setting ‘‘Equivalence Values’’ exported. RINs claimed for compliance
gasoline production volume. on several metrics including lifecycle purposes by obligated parties will thus
Small refiners and small refineries are energy or greenhouse gas emissions, for represent renewable fuel actually
exempt from meeting the renewable fuel this final rule we are requiring that the consumed as motor vehicle fuel in the
requirements through 2010. All gasoline ‘‘Equivalence Values’’ for the different U.S.
producers located in Alaska, Hawaii, renewable fuels be based on their energy RINs are valid for compliance
and noncontiguous U.S. territories and content in comparison to the energy purposes for the calendar year in which
parties who import gasoline into these content of ethanol, and adjusted as they are generated, or the following
areas will be exempt indefinitely. necessary for their renewable content. calendar year. This approach to RIN life
However, if Alaska, Hawaii or a The result is an Equivalence Value for is consistent with the Act’s prescription
noncontiguous territory opts into the corn ethanol of 1.0, for biobutanol of that credits be valid for compliance
RFS program, all of the refiners (except 1.3, for biodiesel (mono alkyl ester) of purposes for 12 months as of the date of
for exempt small refiners and 1.5, for non-ester renewable diesel of generation, where credits are generated
refineries), importers, and blenders 1.7, and for cellulosic ethanol and at the end of a year when compliance is
located in the state or territory will be waste-derived ethanol of 2.5. The determined. An obligated party can
subject to the renewable fuel standard. proposed methodology can be used to either use RINs to demonstrate
Section III.A provides more details on determine the appropriate Equivalence compliance, or can transfer RINs to any
the standard that must be met, while Value for any other potential renewable other party. If an obligated party is not
Section III.C describes the parties that fuel as well. Section III.B.4 provides able to accumulate sufficient RINs for
are obligated to meet the standard. details of the determination of compliance in a given year, it can carry
3. What Qualifies as a Renewable Fuel? Equivalence Values. a deficit over to the next year so long as
the full deficit and obligation is covered
We have designed the program to 5. How Will Compliance Be in the next year.
cover the range of renewable fuels Determined? In order to ensure that previous year
produced today as well as any that Under our program, every gallon of RINs are not used preferentially for
might be produced in the future, so long renewable fuel produced or imported compliance purposes in a manner that
as they meet the Act’s definition of into the U.S. must be assigned a unique would effectively circumvent the
renewable fuel and have been registered RIN. A block of RINs would be assigned limitation that RINs be valid for only 12
and approved for use in motor vehicles. to any batch of renewable fuel that is months after the year generated, we are
In this manner, we believe that the valid for compliance purposes under the setting a cap on the use of RINs
program provides the greatest possible RFS program. These RINs must be generated the previous year when
encouragement for the development, transferred with renewable fuel as demonstrating compliance with the
production, and use of renewable fuels ownership of a volume of renewable renewable volume obligation for the
to reduce our dependence on petroleum fuel is initially transferred through the current year. The cap will mean that no
as well as to reduce the carbon dioxide distribution system. Once the renewable more than 20 percent of a current year
emissions that contribute to climate fuel is obtained by an obligated party or obligation can be satisfied using RINs
change. In general, renewable fuels must actually blended into a motor vehicle from the previous year. In this manner
be produced from plant or animal fuel, the RIN can be separated from the there is no ability for excess renewable
products or wastes, as opposed to fossil batch of renewable fuel and then either fuel use in successive years to cause an
fuel sources. Valid renewable fuels used for compliance purposes, held, or accumulation of RINs to significantly
include ethanol made from starch seeds, traded. depress renewable fuel demand in any
sugar, or cellulosic materials, biodiesel RINs represent proof of production future year. In keeping with the Act,
(mono-alkyl esters), non-ester renewable which is then taken as proof of excess RINs not used in the year they
diesel, and a variety of other products. consumption as well, since all but a are generated or in the subsequent year
Both renewable fuels blended into trivial quantity of renewable fuel will expire.
conventional gasoline or diesel and produced or imported will be either Section III.D provides more details on
those used in their neat (unblended) consumed as fuel or exported. For how obligated parties must use RINs for
form as motor vehicle fuel will qualify. instance, ethanol produced for use as compliance purposes.
Section III.B provides more details on motor vehicle fuel is denatured
specifically so that it can only be used 6. How Will the Trading Program Work?
the renewable fuels that will be allowed
to be used for compliance with the as fuel. Similarly, biodiesel is produced Renewable fuel producers and
standard under our program. only for use as fuel and has no other importers will be required to generate
significant uses. An obligated party RINs when they produce or import a
4. Equivalence Values of Different demonstrates compliance with the batch of renewable fuel (unless, for
Renewables Fuels renewable fuel standard by importers, the RINs have been assigned
One question that we faced in accumulating sufficient RINs to cover by a foreign producer registered with
developing the program was what value their individual renewable volume EPA). They will then be required to
to place on different renewable fuels obligation. It will not matter whether transfer those RINs along with the
and on what basis should that value be the obligated party used the renewable renewable fuel batches that they
determined. The Act specifies that each fuel themselves. An obligated party’s represent whenever they transfer
gallon of cellulosic biomass ethanol and obligation will be to ensure that a ownership of the batch to another party.
waste-derived ethanol be treated as if it certain amount of renewable fuel was Likewise any other non-obligated party
that takes ownership of a volume of The majority of respondents were subject to the standard. Obligated
renewable fuel with RINs will be very supportive of voluntary labeling parties must also know which
required to transfer those RINs with a and encouraged EPA to establish this renewable fuels are valid for RFS
volume of renewable fuel. The RIN can program through this final rulemaking. compliance purposes, and the relative
be separated from renewable fuel only Two commenters opposed the labeling values of each type of renewable fuel in
by obligated parties (at the point when concept, telling EPA that the number terms of compliance. This section
they take ownership of the batch) or a and complexity of issues associated discusses how the annual standard is
party that converts the renewable fuel with fuel production, and particularly determined and which parties and
into motor vehicle fuel (such as upon with farming practices, would make volumes of gasoline will be subject to
blending with gasoline or diesel). such a program impractical and difficult the requirements.
Once a RIN is separated from a to implement. EPA also was told that it Because renewable fuels are not
volume of renewable fuel, it can be used would be hard to audit such a program. produced or distributed evenly around
for compliance purposes, banked, or Most commenters agreed that using the the country, some obligated parties will
traded to another party. Separated RINs RIN to host the label makes sense, have easier access to renewable fuels
can be transferred to any party any however the use of ‘‘G’’ for green fuel than others. As a result, the RFS
number of times. Recordkeeping and is insufficient to capture the full range program depends on a robust trading
reporting requirements will apply to any of environmental impacts of renewable program. This section also describes all
party that takes ownership of RINs, fuel production and that it would be the elements of our trading program.
whether through the ownership of a difficult for EPA to establish an
batch of renewable fuel or through the appropriate cut-off point for A. What Is the Standard That Must Be
transfer of separated RINs. determining which fuel qualified for a Met?
Thus obligated parties can acquire ‘‘G’’ designation. Several respondents 1. How Is the Percentage Standard
RINs directly through the purchase of suggested that EPA instead use a more Calculated?
renewable fuel with assigned RINs or continuous scale based on energy or
through the open market for RINs that Table I.B–1 shows the required total
lifecycle greenhouse gas emissions.
is allowed under this proposal. Section A well designed voluntary labeling volume of renewable fuel specified in
III.E provides more details on how our program could permit producers and the Act for 2007 through 2012. The
RIN trading program will work. blenders to distinguish their fuels in the renewable fuel standard is based
marketplace and allow consumers to primarily on (1) the 48-state gasoline
7. How Will the Program Be Enforced? consumption volumes projected by EIA
express preferences for ‘‘green’’
As in all EPA fuel regulations, there products through their fuel purchases. (as the Act exempts Hawaii and Alaska,
is a system of registration, While such a program could be valuable subject to their right to opt-in, as
recordkeeping, and reporting to producers, blenders, and consumers, discussed in Section III.C.4), and (2) the
requirements for obligated parties, given the range of comments received volume of renewable fuels required by
renewable producers and importers on the topic, we believe it is important the Act for the coming year. The
(RIN generators), and any parties that first to continue the dialogue with the renewable fuel standard will be
procure or trade RINs either as part of various stakeholders to ensure that the expressed as a volume percentage of
their renewable purchases or separately. program adequately addresses the issues gasoline sold or introduced into
In most cases, the recordkeeping raised prior to putting any such program commerce in the U.S., and will be used
requirements are not significantly in place. Thus we are not finalizing a by each refiner, blender or importer to
different from what these parties might voluntary labeling program. We will determine their renewable volume
be doing already as a part of normal continue to investigate the issues obligation. The applicable percentage is
business practices. The lynch pin to the surrounding a voluntary labeling set so that if each regulated party meets
compliance program, however, is the program and the various ways in which the percentage and total gasoline
unique RIN number itself coupled with it could be designed. In particular we consumption does not fall short of EIA
an electronic reporting system where are interested in further exploring projections then the total amount of
RIN generation, RIN use, and RIN methods to incorporate lifecycle renewable fuel used will meet the total
transactions will be reported and impacts into a voluntary labeling renewable fuel volume specified in
verified. Thus, EPA, as well as industry program and consumer expectations for Table I.B–1.
can have confidence that invalid RINs such ‘‘green’’ labeling. In determining the applicable
are not generated and that there is no percentage for a calendar year, the Act
III. Complying With the Renewable requires EPA to adjust the standard to
double counting.
Fuel Standard prevent the imposition of redundant
C. Voluntary Green Labeling Program According to the Energy Act, the RFS obligations on any person and to
In the proposal EPA asked for program places obligations on account for the use of renewable fuel
comments on the idea of creating a individual parties such that the during the previous calendar year by
voluntary labeling program to encourage renewable fuel volumes shown in Table exempt small refineries, defined as
the adoption and use of practices that I.B–1 are used as motor vehicle fuel in refineries that process less than 75,000
minimize the environmental concerns the U.S. each year. To accomplish this, bpd of crude oil. As a result, in order
associated with renewable fuel the Agency must calculate and publish to be assured that the percentage
production. The proposal suggested a standard by November 30 of each year standard will in fact result in the
adding a ‘‘G’’ (for green) to the end of which is applicable to every obligated volumes shown in Table I.B–1, we must
the RIN of a fuel to indicate that a gallon party. On the basis of this standard each make several adjustments to what is
of renewable fuel was produced with obligated party determines the volume otherwise a simple calculation.
the combination of best farming of renewable fuel that it must ensure is As stated, the renewable fuel standard
practices and environmentally friendly consumed as motor vehicle fuel. In for a given year is basically the ratio of
production methods and facilities. EPA addition to setting the standard, we the amount of renewable fuel specified
received a number of comments on this must clarify who the obligated parties in the Act for that year to the projected
idea. are and what volumes of gasoline are 48-state non-renewable gasoline volume
for that year. While the required amount in Section III.C.3.a, as proposed, EPA is renewable fuel volumes from the
of total renewable fuel for a given year also exempting small refiners 8 from the anticipated total gasoline volumes in
is provided by the Act, the Act requires RFS requirements until 2011, and is EIA projections. The Act requires that
EPA to use an EIA estimate of the treating small refiner gasoline volumes the renewable fuel be consumed in the
amount of gasoline that will be sold or the same as small refinery gasoline contiguous 48 states unless Alaska,
introduced into commerce for that year. volumes. Since small refineries and Hawaii, or a U.S. territory opt-in.
The level of the percentage standard is small refiners are exempt from the However, because renewable fuel
reduced if Alaska, Hawaii, or a U.S. program until 2011, EPA is excluding produced in Alaska, Hawaii, and U.S.
territory choose to participate in the their gasoline volumes from the overall territories is unlikely to be transported
RFS program, as gasoline produced in or non-renewable gasoline volume used to to the contiguous 48 states, including
imported into those states or territories determine the applicable percentage. their renewable fuel volumes in the
would then be subject to the standard. EPA believes this is appropriate because calculation of the standard would not
Should any of these states or territories the percentage standard should be based serve the purpose intended by the Act
opt into the RFS program, the projected only on the gasoline subject to the of ensuring that the statutorily required
gasoline volume would increase above renewable volume obligation. Because renewable fuel volumes are consumed
that consumed in the 48 contiguous small refineries and small refiners are in the 48 contiguous States. We are
states. exempt (unless they waive exemption) finalizing the exclusion of these areas’
In the proposal, we stated that EIA only through the 2010 compliance renewable fuel use as proposed.
had indicated that the best estimation of period when the exemption ends,
the coming year’s gasoline consumption calculation of the standard for calendar We stated that any deficit carryover
is found in Table 5a (U.S. Petroleum year 2011 and beyond will include from 2006 would increase the 2007
Supply and Demand: Base Case) of the small refinery and small refiner standard. Since renewable fuel use in
October issue of the monthly EIA volumes.9 Using information from 2006 exceeded the 2.78 percent default
publication Short-Term Energy Outlook gasoline batch reports submitted to EPA, standard, there is no deficit to carry over
which publishes quarterly energy EIA data, and input from the California to 2007. Beginning with the 2007
projections. Commenters on this issue Air Resources Board regarding compliance period, when annual
supported the use of the October issue California small refiners, we are individual party compliance replaces
of EIA’s Short-Term Energy Outlook finalizing a small refiner exemption collective compliance, any deficit is
(STEO), Table 5a, for the purpose of adjustment to the standard of a constant calculated for an individual party and is
estimating the next year’s gasoline 13.5%,10 consistent with the proposal. included in the party’s Renewable
consumption, and we have used the The Act requires that the small Volume Obligation (RVO)
October 2006 STEO values for refinery adjustment also account for determination, as discussed in Section
estimating 2007 gasoline consumption renewable fuels used during the prior III.A.4.
for this final rule. year by small refineries that are exempt In summary, the total projected non-
The gasoline volumes in the STEO and do not participate in the RFS renewable gasoline volumes from which
include renewable fuel use. As program. Accounting for this volume of the annual standard is calculated is
discussed below in Section III.C.1, the renewable fuel would reduce the total based on EIA projections of gasoline
renewable fuel obligation does not volume of renewable fuel use required consumption in the contiguous 48
apply to renewable blenders. Thus, the of others, and thus directionally would states, adjusted by a constant percentage
gasoline volume used to determine the reduce the percentage standard.
of 13.5% to account for small refinery/
standard must be the non-renewable However, as discussed in the proposal,
portion of the gasoline pool, in order to refiner volume, with built-in correction
there are no such data available, the
achieve the volumes of renewables factors to be used when and if non-
amount of renewable fuel that would
specified in the Act. In order to get a contiguous states and territories opt-in
qualify (i.e., that was used by exempt
total non-renewable gasoline volume, to the program. If actual gasoline
small refineries and small refiners but
we must subtract the renewable fuel consumption were to exceed the EIA
not used as part of the RFS program) is
volume from the total gasoline volume. projection, the result would be that
expected to be very small and would not
EIA has indicated that the best renewable fuel volumes will exceed the
significantly change the resulting
estimation of the coming year’s percentage standard. Because whatever statutory requirements. Conversely, if
renewable fuel consumption is found in renewables small refiners and small actual gasoline consumption was less
Table 11 (U.S. Renewable Energy Use by refineries blend will be reflected as RINs than the EIA projection for a given year,
Sector: Base Case) of the October issue available in the market, there is no need theoretically a renewable fuel shortfall
of the STEO. As with the gasoline for a separate accounting of their could occur. However, our projections
projections discussed above, we have renewable fuel use in the equation used of renewable fuel use due to market
used the October 2006 STEO values for to determine the standard. We thus demand would make a shortfall
estimating 2007 renewable fuel values proposed that this value be zero, and we extremely unlikely regardless of the
for this final rule. are finalizing the equation as such. error in gasoline consumption
The Act exempts small refineries 7 We also proposed not to include projections.
from the RFS requirements until the renewable fuel used in Alaska, Hawaii, The following formula will be used to
2011 compliance period. As discussed or U.S. territories when subtracting calculate the percentage standard:
7 Under the Act, small refineries are those with barrels per calendar day, bpcd) and employee (no extended under 211(o)(9)(A)(ii) or (B) of the Clean
75,000 bbl/day or less average aggregate daily crude more than 1500 people) criteria as specified in Air Act as amended by the Energy Policy Act.
oil throughput. previous EPA fuel regulations. 10 ‘‘Calculation of the Small Refiner/Small
8 Small refiners are those entities who produced Refinery Fraction for the Renewable Fuel Program,’’
9 As discussed in section III.C.3.a of this
gasoline from crude oil in 2004, and who meet the preamble, the small refinery exemption may be memo to the docket from Christine Brunner, ASD,
crude processing capability (no more than 155,000 OTAQ, EPA September 2006.
RFVi − Celli
RFStd i = 100 ×
( i i ) + ( GSi − RSi ) − GEi
G − R
Where: calculating the cellulosic standard that the Federal Register by November 30 of
RFStdi = Renewable Fuel standard in year i, is required beginning in 2013: the preceding year. The standards are
in percent. used to determine the renewable
RFVi = Annual volume of renewable fuels Celli volume obligation based on an obligated
required by section 211(o)(2)(B) of the RFCelli = 100 ×
Act for year i, in gallons. ( G i − R i ) + ( GSi − RSi ) party’s total gasoline production or
import volume in a calendar year,
Gi = Amount of gasoline projected to be used
in the 48 contiguous states, in year i, in Where, except for RFCelli, the variable January 1 through December 31. The
gallons. descriptions are as discussed above. The percentage standards do not apply on a
Ri = Amount of renewable fuel blended into definition of RFCelli is: per gallon basis. An obligated party will
gasoline that is projected to be consumed RFCelli = Renewable Fuel Cellulosic calculate its Renewable Volume
in the 48 contiguous states, in year i, in Standard in year i, in percent Obligation (discussed in Section III.A.4)
gallons. using the annual standard.
GSi = Amount of gasoline projected to be
Note that after 2012 cellulosic RINs
used in Alaska, Hawaii, or a U.S. cannot be used to satisfy the non- In the NPRM, we estimated the
territory in year i if the state or territory cellulosic RFS standard (RFStdi). The standards for 2007 and later using data
opts-in, in gallons. amount of renewable fuel that is available at the time and the formulas
RSi = Amount of renewable fuel blended into required to come from cellulosic sources discussed above.11 We have revised
gasoline that is projected to be consumed (Celli) is a fixed amount. these values based on more recent data,
in Alaska, Hawaii, or a U.S. territory in We are not finalizing regulations that and using EIA’s October 2006 STEO
year i if the state or territory opts-in, in would specify the criteria under which gasoline and renewable fuel
gallons. a state could petition the EPA for a consumption projections.12 In the
GEi = Amount of gasoline projected to be
waiver of the RFS requirements, nor the proposal, we had used the lower heating
produced by exempt small refineries and
small refiners in year i, in gallons ramifications of Agency approval of value of ethanol for converting from Btu
(through 2010 only unless exemption such a waiver in terms of the level or to gallons of ethanol for the purpose of
extended under §§ 211(o)(9)(A)(ii) or applicability of the standard. As calculating the standard. However, for
(B)). Equivalent to 0.135*(Gi¥Ri). discussed in the proposal, there was no this final rule, we have used the higher
Celli = Beginning in 2013, the amount of clear way to include such a provision in heating value of ethanol as
renewable fuel that is required to come the context of the program being recommended by commenters, to be
from cellulosic sources, in year i, in finalized. As a result, the formula for the consistent with EIA practices.13 14
gallons (250,000,000 gallons minimum). standard shown above does not include Variables related to state or territory opt-
After 2012 the Act requires that the any components to account for Agency ins were set to zero since we do not
applicable volume of required approval of a state petition for a waiver have any information related to their
renewable fuel specified in Table I.B–1 of the RFS requirements. Should EPA participation at this time. As mentioned
include a minimum of 250 million grant such a waiver in the future, it will earlier, we estimate the small refinery
gallons that are derived from cellulosic determine at that time what adjustments and small refiner fraction to be 13.5%.
biomass. As shown in Table III.A.2–1 to make to the standard. The exemption for small refineries and
below, we have estimated this value small refiners ends at the end of the
(250 million gallons) as a percent of an 2. What Are the Applicable Standards? 2010 compliance period, unless
obligated party’s production for 2013. As discussed in the proposal, EPA extended as discussed in Section
Thus, an obligated party will be subject will set the percentage standard for each III.C.3.a. Based on all of these factors,
to two standards in 2013 and beyond, a upcoming year based on the most recent the standard for 2007 is 4.02%.
non-cellulosic standard and a cellulosic EIA STEO projections, and using the Projected values of the standard for
standard. We are therefore also other sources of information as noted 2008 and beyond are shown in Table
finalizing the following formula for above. EPA will publish the standard in III.A.2–1.
TABLE III.A.2–1.—PROJECTED STANDARDS

Year Projected standard Cellulosic standard
2008 ................................................................... 4.63% ............................................................... Not applicable.

2009 ................................................................... 5.21% ............................................................... Not applicable.
2010 ................................................................... 5.80% ............................................................... Not applicable.
2011 ................................................................... 5.38% ............................................................... Not applicable.
2012 ................................................................... 5.42% ............................................................... Not applicable.
2013+ ................................................................. 5.24% min. (non-cellulosic) .............................. 0.18% min.
ER01MY07.057</MATH>
11 ‘‘Calculation of the Renewable Fuel Standard’’ 13 The higher (or gross or upper) heating value is 14 The lower heating value (LHV) is used to
memo to the docket from Christine Brunner, ASD, used in all Btu calculations for EIA’s Annual Energy represent energy content in the context of setting
OTAQ, EPA, September 2006. Review and in related EIA publications (see Equivalence Values as described in Section III.B.4
12 ‘‘Calculation of the Renewable Fuel Standard—
discussion in EIA’s Annual Energy Review, because it more accurately reflects the energy
Revised’’ memo to the docket from Christine
ER01MY07.056</MATH>
Appendix A, Thermal Conversion Factors). available in the fuel to produce work.

Brunner, ASD, OTAQ, EPA, April 2007.
As discussed in Section II.A.5, for date of the final rule. Essentially the applicable standard. Delaying a credit
calendar year 2013 and thereafter, the renewable volume obligation for 2007 program until 2008 would mean the
applicable volumes will be determined would be based on only those volumes credit provisions have no meaning at all
in accordance with separate statutory of gasoline produced or imported by an for 2007, since under a collective
provisions that include EPA obligated party prospectively from the compliance approach no individual
coordination with the Departments of effective date of the rulemaking forward, facility or company would be liable for
Agriculture and Energy, and a review of and renewable producers would not meeting the applicable standard.
the program during calendar years 2006 have to begin generating RINs and Including a ‘‘collective’’ credit or deficit
through 2012. The Act specifies that this maintaining the necessary records until carryforward as part of a collective
review consider the impact of the use of this same date. compliance program would also not
renewable fuels on the environment, air We received no comments supporting fully implement the credit provisions of
quality, energy security, job creation, the alternative ‘‘full year’’ approach to the Act. The prospective compliance
and rural economic development, and 2007 compliance. However, several approach, in contrast, not only provides
the expected annual rate of future parties expressed a preference for either obligated parties with the opportunity to
production of renewable fuels, a collective compliance approach for generate credits, but also provides the
including cellulosic ethanol. We intend 2007, or if not that then delaying industry with the certainty they need to
to conduct another rulemaking as we implementation of the comprehensive comply and is relatively straightforward
approach the 2013 timeframe that program to January 1, 2008. They argued to implement.
would include our review of these that regulated parties needed additional Rather than requiring the program to
factors. That rulemaking will present time to put into place the sophisticated begin on the effective date of the rule as
our conclusions regarding the RIN tracking systems that would be proposed (60 days following publication
appropriate applicable volume of required. The additional time would in the Federal Register), we are
renewable fuel for use in calculating the also allow regulated parties to debug the finalizing a start date of September 1,
renewable fuel standard for 2013 and systems, train personnel, and put 2007. From this date forward, the
beyond. The program finalized by support programs into place. The renewable fuel standard will be
today’s rule will continue to apply after American Coalition for Ethanol also applicable to all gasoline produced or
2012, though some elements may be argued that the prospective approach imported, and all renewable fuels
modified in the rulemaking setting the did not guarantee that the total produced or imported will have to be
standards for 2013 and beyond. Today’s renewable fuel volumes required by the assigned a RIN. All regulated parties
rule does not contain a mechanism for Act for 2007 would actually be used in must be registered by this date, and the
establishing a post-2012 standard. 2007, whereas a collective compliance recordkeeping responsibilities will also
approach would. Parties in favor of a begin. By setting such a date, industry
3. Compliance in 2007 collective compliance approach argued will be able to plan with confidence to
The Energy Act requires that EPA that EPA has the authority to implement start complying upon signature of the
promulgate regulations to implement such an approach despite the fact that rule, rather than having the start date
the RFS program, and if EPA did not the Act does not explicitly give EPA this depend upon the timing of publication
issue such regulations then a default authority, and also argued that there of this final rule in the Federal Register.
standard for renewable fuel use would was no need to include any form of We recognize the concerns expressed in
apply in 2006. On December 30, 2005 credit carryover under a collective comments that time is needed to
we promulgated a direct final rule to compliance approach. prepare Information Technology (IT)
interpret and implement the application However, a number of refiners and systems to comply with the program.
of the statutory default standard of 2.78 their associations opposed a collective However, we believe that a September 1,
percent in calendar year 2006 (70 FR compliance approach to 2007 and 2007 start date will provide sufficient
77325). However, the Act provides no expressed strong support for the time. The final rule is in most respects
default standard for any other year. proposed prospective approach. They consistent with the NPRM, and based on
In the NPRM we stated our argued that a start date at least 60 days discussions with industry, plans for
expectation that, due to the limited time from the date of publication of the final implementation are already underway.
available for this rulemaking, we would rule would provide sufficient time to Furthermore, a September 1, 2007 start
be unable to publish the final rule and obligated parties for making the date will likely provide regulated
have it become effective by January 1, necessary adjustments for compliance. parties some additional time to prepare
2007. We discussed several ways that They also argued that they should be in comparison to simply setting the start
we could specify how, and for what afforded the opportunity to participate date as 60 days following publication of
time periods, the applicable standard as soon as possible in the trading the rule.
and other program requirements would program, which the collective As stated in the NPRM, we recognize
apply to regulated parties for gasoline compliance approach used for 2006 that the prospective approach to 2007
produced during 2007. We discussed a would preclude for 2007. compliance will not guarantee by
collective compliance approach similar We continue to believe that a regulation that the total renewable fuel
to that applied in 2006, as well as a ‘‘full collective compliance approach is not volumes required by the Act for 2007
year’’ approach that would have based appropriate for 2007. The Energy Act would actually be used in 2007.
the renewable volume obligation for requires us to promulgate regulations However, current projections from the
each obligated party on all gasoline that provide for the generation of credits Energy Information Administration
produced starting on January 1, 2007 by any person who over complies with (EIA) on the volume of renewable fuel
regardless of the effective date of the their obligation. It also stipulates that a expected to be produced in 2007
rule. However, due to a number of person who generates credits must be indicate that the Act’s required volumes
issues with these approaches, we permitted to use them for compliance will be exceeded by a substantial margin
proposed a ‘‘prospective’’ approach in purposes, or to transfer them to another due to the relative economic value of
which the renewable fuel standard party. These credit provisions have renewable fuels in comparison to
would be applied to only those volumes meaning only in the context of an gasoline. We are confident that the
of gasoline produced after the effective individual obligation to meet the combined effect of the regulatory
requirements for 2007 and the expected The Energy Act only permits a deficit animal, or fish materials including fats,
market demand for renewable fuels will carryover from one year to the next if greases and oils, sugarcane, sugar beets,
lead to greater renewable fuel use in the obligated party achieves full tobacco, potatoes or other biomass (such
2007 than is called for under the Act. compliance with its RVO including the as bagasse from sugar cane, corn stover,
Current renewable production already deficit carryover in the second year. and algae and seaweed). In addition, it
exceeds the rate required for all of 2007, Thus deficit carryovers could not occur includes motor vehicle fuels made using
and as discussed in Section VI, capacity two years in succession. They could, a feedstock of natural gas if produced
is expected to continue to grow. however, occur as frequently as every from a biogas source such as a landfill,
Furthermore, refiners and importers are other year for a given obligated party. sewage waste treatment plant, feedlot,
not required to meet any requirements The calculation of an obligated party’s or other place where decaying organic
under the Act until EPA adopts the RVO is necessarily retrospective, since material is found.
regulations, and EPA is authorized to the total gasoline volume that it According to the Act, the motor
consider appropriate lead time in produces in a calendar year will not be vehicle fuels must be used ‘‘to replace
establishing the regulatory known until the year has ended. or reduce the quantity of fossil fuel
requirements.15 Under this option we However, the obligated party will have present in a fuel mixture used to operate
believe there will be reasonable lead- an incentive to project gasoline a motor vehicle.’’ Some motor vehicle
time for regulated parties to meet their volumes, and thus the RVO, throughout fuels can be used in both motor vehicles
2007 compliance obligations. While no the year so that it can spread its efforts or nonroad engines or equipment. For
option before us is perhaps totally to comply across the entire year. Most example, highway gasoline and diesel
consistent with all of the provisions of refiners and importers will be able to fuel are often used in both highway and
the Act, we believe the rule as adopted project their annual gasoline production off-highway applications. Compressed
does the best job possible given the volumes with a minimum of uncertainty natural gas can likewise be used in
circumstances of implementing all of based on their historical operations, either highway or nonroad applications.
the provisions of the Act for 2007. capacity, plans for facility downtimes, For purposes of the renewable fuel
knowledge of gasoline markets, etc. program, EPA considers a fuel to be a
4. Renewable Volume Obligations Even if unforeseen circumstances (e.g., ‘‘motor vehicle fuel’’ and to be ‘‘a fuel
hurricane, unit failure, etc.) significantly mixture used to operate a motor
In order for an obligated party to
reduced the production volumes in vehicle,’’ based on its potential for use
demonstrate compliance, the percentage in highway and nonroad vehicles,
standards described in Section III.A.2 comparison to their projections, their
RVO will likewise be reduced without regard to whether it, in fact, is
which are applicable to all obligated used in a highway vehicle application.
parties must be converted into the proportionally and their ability to
comply with the RFS requirements will EPA does not believe that the much
volume of renewable fuel each obligated more complex and costly regulatory
party is required to satisfy. This volume be only minimally affected. Each
obligated party’s projected RVO for a scheme that would be needed to track
of renewable fuel is the volume for motor vehicle fuel use versus off-road
which the obligated party is responsible given year becomes more accurate as
that year progresses, but the obligated fuel use would be justified. (As
under the RFS program, and is referred discussed further below, heaters and
to here as its Renewable Volume party should nevertheless have a
sufficiently accurate estimate of its RVO boilers are not considered highway or
Obligation (RVO). nonroad engine applications and
at the beginning of the year to allow it
The calculation of the RVO requires to begin its efforts to comply. renewable fuel produced or imported
that the standard shown in Table specifically for use in such equipment is
III.A.2–1 for a particular compliance B. What Counts as a Renewable Fuel in not valid for compliance purposes
year be multiplied by the gasoline the RFS Program? under the RFS program.) If it is a fuel
volume produced by an obligated party Section 211(o) of the Clean Air Act that could be used in highway vehicles,
in that year. To the degree that an defines ‘‘renewable fuel’’ and specifies it will satisfy these parts of the
obligated party did not demonstrate full many of the details of the renewable definition of renewable fuel, whether it
compliance with its RVO for the fuel program. The following section is later used in highway or nonroad
previous year, the shortfall is included provides EPA’s views and applications. This will allow a motor
as a deficit carryover in the calculation. interpretations on issues related to what vehicle fuel that otherwise meets the
The equation used to calculate the RVO fuels may be counted towards definition to be counted towards a
for a particular year is shown below: compliance with the RVO, and how party’s RVO without the need to track
they are counted. it to determine its actual application in
RVOi = Stdi × GVi + Di¥1 a highway vehicle, and provided only
Where: 1. What Is a Renewable Fuel That Can that the producer does not know that
RVOi = The Renewable Volume Obligation Be Used for Compliance? the fuel will be used for a purpose other
for the obligated party for year i, in The statutory definition of renewable than highway and nonroad engine
gallons. fuel includes cellulosic ethanol and applications. This is also consistent
Stdi = The RFS program standard for year i, waste derived ethanol. It includes with the requirement that EPA base the
in percent. renewable fuel obligation on estimates
biodiesel, as defined in the Energy
GVi = The non-renewable gasoline volume
Act.16 It also includes all motor vehicle of the entire volume of gasoline
produced by an obligated party in year
i, in gallons. fuels that are produced from biomass consumed, without regard to whether it
material such as grain, starch, oilseeds, is used in highway or nonroad
Di¥1 = Renewable fuel deficit carryover from applications.
the previous year, in gallons. 16 As discussed below, for purposes of this Renewable fuel as defined, may be
rulemaking, the regulations separate ‘‘biodiesel’’ as made from a number of different types
15 The statutory default standard for 2006 is the defined in the Energy Act, into biodiesel (diesels of feedstocks. For example, the Fisher-
one exception to this, since it directly establishes that meet the Energy Act’s definition and are a
a renewable fuel obligation applicable to refiners mono-alkyl ester) and renewable diesel (other
Tropsch process can use methane gas
and importers in the event that EPA does not diesels that meet the Energy Act’s definition but are from landfills as a feedstock, to produce
promulgate regulations. not mono-alkyl esters). diesel or gasoline. Vegetable oil made
from oilseeds such as rapeseed or EPA expects that the overwhelming converted to sugars (by hydrolysis); then
soybeans can be used to make biodiesel volume of renewable fuel used to the same fermentation process is used as
or renewable diesel. Methane, made demonstrate compliance with the for sugar to make ethanol. Cellulosic
from landfill gas (biogas) can be used to renewable fuel obligation would still be feedstocks (composed of cellulose and
make methanol, or can be used directly ethanol blended with gasoline. Finally, hemicellulose) are currently more
as a fuel in vehicles with engines as discussed later, EPA’s compliance difficult and costly to convert to sugar
designed to run on compressed natural program is based on assigning volumes than are starches. While the cost and
gas. Also, some vegetable oils or animal at the point of production, and not at difficulty are a disadvantage, the
fats can be processed in distillation the point of blending into motor vehicle cellulosic process offers the advantage
columns in refineries to make gasoline; fuel. This interpretation avoids the need
that a wider variety of feedstocks can be
as such, the renewable feedstock serves to track renewable fuels downstream to
used. Ultimately with more feedstocks
as a ‘‘renewable crude,’’ and the ensure they are blended with gasoline
resulting gasoline or diesel product and not used in their neat form; the available from which to make ethanol
would be a renewable fuel. This last gasoline that is used in motor vehicles more volume of ethanol can be
example is discussed in further detail in is reduced by the presence of renewable produced.
Section III.B.3 below. fuels in the gasoline pool whether they The Act provides the definition of
As this discussion shows, the are blended with gasoline or not. cellulosic biomass ethanol, which
definition of renewable fuel in the Act Comments received on this states:
is broad in scope, and covers a wide interpretation were favorable towards it.
‘‘The term ‘cellulosic biomass ethanol’
range of fuels. While ethanol is used EPA continues to believe, therefore, that
means ethanol derived from any
primarily in combination with gasoline, this approach is consistent with the
lignocellulosic or hemicellulosic matter that
the definition of renewable fuel in the intent of Congress and is a reasonable
is available on a renewable or recurring basis,
Act is not limited to fuels that can be interpretation of the Act. One including:
blended with gasoline. Various fuels commenter indicated that a logical (i) Dedicated energy crops and trees;
that meet the definition of renewable extension of this reasoning would (ii) Wood and wood residues;
fuel can be used in their neat form, such provide that renewable fuel that could (iii) Plants;
as ethanol, biodiesel, methanol or be used in motor vehicles is still a (iv) Grasses;
natural gas. Others, including ethanol renewable fuel under the Act when used (v) Agricultural residues;
may be used to produce a gasoline by renewable fuel producers in a boiler (vi) Animal wastes and other waste
blending component (such as ETBE). At or heater. EPA disagrees. The term materials, and
the same time, the RFS regulatory ‘‘renewable fuel’’ means ‘‘motor vehicle (viii) Municipal solid waste.’’
program is to ‘‘ensure that gasoline sold fuel that * * * is used to replace or
or introduced into commerce * * * reduce the quantity of fossil fuel present Examples of cellulosic biomass source
contains the applicable volume of in a fuel mixture used to operate a material include rice straw, switch
renewable fuel.’’ This applicable motor vehicle.’’ We believe that all but grass, and wood chips. Ethanol made
volume is specified as a total volume of a trivial quantity of renewable fuels that from these materials would qualify
renewable fuel on an aggregate basis. can be used in motor vehicles will under the definition as cellulosic
Congress also clearly specified that one ultimately be used as motor vehicle fuel. ethanol. In addition to the above sources
renewable fuel, biodiesel, could be Producers of ethanol biodiesel and other of feedstocks for cellulosic biomass
counted towards compliance even products that can be used as motor
ethanol, the Act’s definition also
though it is not a gasoline component, vehicle fuel can generally assume,
and does not directly displace or replace includes animal waste, municipal solid
therefore, that their products will be
gasoline. The Act is unclear on whether used in that way, and can assign RINs wastes, and other waste materials.
other fuels that meet the definition of to their product without tracking its ‘‘Other waste materials’’ generally
renewable fuel, but are not used in ultimate use. However, renewable fuel includes waste material such as sewage
gasoline, could also be used to used onsite in a boiler or heater by a sludge, waste candy, and waste starches
demonstrate compliance towards the renewable fuel producer clearly is not a from food production, but for purposes
aggregate national use of renewable motor vehicle fuel used to replace or of the definition of cellulosic ethanol
fuels. reduce the quantity of fossil fuel present discussed in III.B.1.b below, it can also
EPA interprets the Act as allowing in a fuel mixture used to operate a mean waste heat obtained from an off-
regulated parties to demonstrate motor vehicle. site combustion process.
compliance based on any fuel that meets Under the Act, renewable fuel Although the definitions of
the statutory definition for renewable includes ‘‘cellulosic biomass ethanol’’ ‘‘cellulosic biomass ethanol’’ and
fuel, whether it is directly blended with and ‘‘waste derived ethanol’’, each of ‘‘waste derived ethanol’’ both include
gasoline or not. This would include neat which is defined separately. Ethanol can animal wastes and municipal solid
alternative fuels such as ethanol, be cellulosic biomass ethanol in one of waste in their respective lists of covered
methanol, and natural gas that meet the two ways, as described below.
definition of renewable fuel. This is feedstocks, there remains a distinction
appropriate for several reasons. First, it a. Ethanol Made From a Cellulosic between these types of ethanol. If the
promotes the use of all renewable fuels, Feedstock animal wastes or municipal solid wastes
which will further the achievement of The simplest process of producing contain cellulose or hemicellulose, the
the purposes behind this provision. ethanol is by fermenting sugar in sugar resulting ethanol can be termed
Congress did not intend to limit the cane or beets, but ethanol can also be ‘‘cellulosic biomass ethanol.’’ If the
program to only gasoline components, produced from starch in corn and other animal wastes or municipal solid wastes
as evidenced by the provision for feedstocks by first converting the starch do not contain cellulose or
biodiesel, and the broad definition of to sugar. Ethanol can also be produced hemicellulose, then the resulting
renewable fuel evidences an intention to from complex carbohydrates, such as ethanol is labeled ‘‘waste derived
address more renewable fuels than those the cellulosic portion of plants or plant ethanol.’’ This is discussed further in
used with gasoline. Second, in practice products. The cellulose is first Section III.B.1.c below.
b. Ethanol Made From Any Feedstock in believes that such use does not subvert market value for waste heat used to
Facilities Using Waste Material To the intent of the definition.17 Since corn qualify ethanol as cellulosic would
Displace 90 Percent of Normal Fossil kernels can readily be used as a therefore be of relatively short duration
Fuel Use feedstock in a typical ethanol and not likely to warrant investment in
The definition of cellulosic biomass production facility, their use as a fuel oversized combustion units.18
ethanol in the Act also provides that for gasified/boiler units at a corn The term ‘‘fossil fuel normally used in
ethanol made at any facility—regardless ethanol plant would not be considered the production of ethanol’’ means fossil
of whether cellulosic feedstock is used use of ‘‘other waste material’’ for fuel used at the facility in the ethanol
or not—may be defined as cellulosic if purposes of the definition of cellulosic production process itself, rather than
at such facility ‘‘animal wastes or other biomass ethanol. other phases such as trucks transporting
Regarding the use of waste heat as a product, and fossil fuel used to grow
waste materials are digested or
source of thermal energy, we note that and harvest the feedstock. Therefore the
otherwise used to displace 90 percent or
there may be situations in which an off- diesel fuel that trucks consume in
more of the fossil fuel normally used in
site furnace, boiler or heater creates hauling wood waste from sawmills to
the production of ethanol.’’ The
excess or waste heat that is not used in the ethanol facility would not be
statutory language suggests that there
the process for which the thermal counted in determining whether the
are two methods through which ‘‘animal
energy is employed. For example, a 90% displacement criterion has been
and other waste materials’’ may be
glass furnace generates a significant met. We are interpreting it in this way
considered for displacing fossil fuel.
amount of waste heat that often goes because we believe the accounting of
The first method is the digestion of
unused. We have therefore included in fuel use associated with transportation
animal wastes or other waste materials.
the regulatory definition of cellulosic and other life cycle activities would be
EPA has interpreted the term biomass ethanol waste heat generated extremely difficult and in many cases
‘‘digestion’’ to mean the conversion of from off-site sources in the definition of impossible.19
animal or other wastes into methane, ‘‘other waste materials’’ that can be used Based on the operation of ethanol
which can then be combusted as fuel. to displace 90% of the fossil fuel plants, we are viewing this definition to
We base our interpretation on the otherwise used at an ethanol production apply to waste materials used to
practice in industry of using anaerobic facility. produce thermal energy rather than
digesters to break down waste products Several commenters argued that electrical energy. Electrical usage at
such as manure into methane. because the source of the waste heat is ethanol plants is used for lights and
Anaerobic digestion refers to the ultimately a fossil fuel in most cases equipment not directly related to the
breakdown of organic matter by bacteria that it should not be considered an production of ethanol. Also, the
in the absence of oxygen, and is used to ‘‘other waste material’’. The Agency calculation of fossil fuel used to
treat waste to produce renewable fuels. recognizes that fossil fuel is ultimately generate such electrical usage would be
We note also that the digestion of the source of most waste heat, but it is difficult because it is not always
animal wastes or other waste materials also the case that waste heat that is possible to track the source of electricity
to produce the fuel used at the ethanol uncaptured represents a loss of energy that is purchased off-site. Therefore, the
plant does not have to occur at the plant that could otherwise displace fossil fuel final regulations consider displacement
itself. Methane made from animal or use elsewhere. Specifically, waste heat of 90 percent of fossil fuels at the
other wastes offsite and then purchased used at an ethanol plant would result in ethanol plant to mean those fuels
and used at the ethanol plant would displacement of fossil fuel use at the consumed on-site and that are used to
also qualify. plant. In writing the proposed rule, we generate thermal energy used to produce
The second method is suggested by were aware of the concern raised by the ethanol.
the term ‘‘otherwise used’’ which we commenters and therefore proposed to One commenter suggested that
interpret to mean (1) the direct restrict waste heat to off-site sources electricity from cogeneration (i.e.,
combustion of the waste materials as only. We believe that this approach combined heat and power) units be
fuel at an ethanol plant, or (2) the use minimizes the concern. We disagree considered in determining the
of thermal energy that itself is a waste with another commenter that such percentage of fossil fuel use that is
product; e.g., waste heat that is obtained restriction would create a perverse displaced. The commenter claims that
from an off-site combustion process incentive for facilities near ethanol allowing consideration of electricity use
such as a neighboring plant that has a plants to oversize its combustion units would provide an incentive for
furnace or boiler from which the waste to sell waste heat to the neighboring cogeneration to be used at ethanol
heat is captured. With respect to the ethanol facilities where it would be plants. Our findings regarding the use of
first meaning, ‘‘other waste materials’’ used to displace fossil fuel. It is highly electricity at ethanol plants remain the
includes but is not limited to waste unlikely that businesses would incur same—that is, it is not used as part of
materials from tree farms (tops, the additional expense of building an
branches, limbs, etc.), or waste materials oversized combustion unit for the sale 18 The term ‘‘other waste materials’’ is also
from saw mills (sawdust, shavings and of waste heat. Also, the 2.5 gallon value included in the portions of the definitions of
bark) as well as other vegetative waste ‘‘cellulosic biomass ethanol’’ and ‘‘waste-derived
given for one gallon of cellulosic ethanol’’ that identify feedstocks. The inclusion of
materials such as corn stover, or sugar ethanol as provided by the Act extends off-site generated waste heat in the definition of
cane bagasse, that could be used as fuel only through 2012. Any additional ‘‘other waste materials’’, however, applies only to
for gasifier/boiler units at ethanol the portion of the definition of cellulosic biomass
plants. Since these materials are not also 17 On the other hand, wood from plants or trees ethanol that relates to displacement of fossil fuels,
that are grown as an energy crop may not qualify and does not apply to the term ‘‘other waste
used as a feedstock to starch-based materials’’ as otherwise used in these definitions.
as a waste-derived fuel in an ethanol facility
ethanol plants, they are truly waste because such wood would not qualify as waste 19 In Section IX of today’s preamble we discuss
materials. Although these waste materials under this portion of the definition. our analysis of the lifecycle fuel impacts of the RFS
materials conceivably could be Under the definition of renewable fuels and rule, with respect to greenhouse gas (GHG)
cellulosic biomass ethanol, however, such wood emissions. While we do account for fuel used in
feedstocks to a cellulosic ethanol plant, material could serve as a feedstock in a cellulosic hauling materials to ethanol plants in our analysis,
their use in that manner is sufficiently ethanol plant, since these definitions do not restrict we are using average nationwide values, rather than
challenging at the current time that EPA such feedstock to waste materials only. data collected for individual plants.
the heat source in ethanol production ethanol treated in the same manner as a. Biodiesel (Mono-Alkyl Esters)
for economic reasons. We note also that domestic cellulosic or waste-derived Under today’s rule, the term
the commenter did not present any ethanol under the RFS program because ‘‘biodiesel (mono-alkyl esters)’’ means a
evidence to the contrary. As such, we of the difficulty in verifying their motor vehicle fuel which: (1) Meets the
continue to maintain that electricity is compliance with the provisions registration requirements for fuels and
not ‘‘normally used in the production of discussed above. Today’s rule allows fuel additives established by the
ethanol’’ and we are therefore only such producers to participate, provided Environmental Protection Agency under
considering the displacement of fossil they meet the requirements discussed in section 7545 of this title (Clean Air Act
fuels associated with thermal energy at Section IV.D.2. of the preamble. The Section 211); (2) is a mono-alkyl ester;
the plant. requirements for foreign producers of
Owners who claim their product (3) meets ASTM specification D–6751–
cellulosic or waste-derived ethanol are 07; (4) is intended for use in engines
qualifies as cellulosic biomass ethanol different than for domestic producers
based on the 90 percent fossil fuel that are designed to run on
and allow for verification of conventional, petroleum-derived diesel
displacement through the use of waste compliance.
materials (i.e., animal wastes, and other fuel, and (5) is derived from
waste materials) are required under 2. What Is Biodiesel? nonpetroleum renewable resources.
today’s rule to keep records of fuel The Act states that ‘‘The term b. Non-Ester Renewable Diesel
(waste-derived and fossil fuel) used for ‘renewable fuel’ includes * * * The term ‘‘non-ester renewable
thermal energy for verification of their biodiesel (as defined in section 312(f))
claims. They will also be required to diesel’’ means a motor vehicle fuel
of the Energy Policy Act of 1992.’’ This which: (1) Meets the registration
track the fossil fuel equivalent of any definition, as modified by Section 1515
off-site generated waste heat that is requirements for fuels and fuel additives
of the Energy Act states: established by the Environmental
captured and which displaces fossil fuel
The term ‘‘biodiesel’’ means a diesel fuel Protection Agency under section 7545 of
used in the ethanol production process. substitute produced from nonpetroleum
Since such waste heat would typically this title (Clean Air Act Section 211); (2)
renewable resources that meets the is not a mono-alkyl ester; (3) is intended
be purchased through agreement with registration requirements for fuels and fuel
the off-site owner, we do not feel it for use in engines that are designed to
additives established by the Environmental
burdensome for owners to track such Protection Agency under section 7545 of this
run on conventional, petroleum-derived
information. Owners will therefore title, and includes biodiesel derived from diesel fuel, and (4) is derived from
calculate the amount of energy in Btu’s animal wastes, including poultry fats and nonpetroleum renewable resources.
associated with waste-derived fuels poultry wastes, and other waste materials, or Current examples of a non-ester
(including the fossil fuel equivalent municipal solid waste and sludges and oils renewable diesel include: ‘‘Renewable
derived from wastewater and the treatment of diesel’’ produced by the Neste or UOP
waste heat), and divided by the total
wastewater. process, or diesel fuel produced by
energy in Btus used to produce ethanol
in a given year. Ethanol produced from This definition of biodiesel would processing fats and oils through a
such facilities will get the benefit of the include both mono-alkyl esters which refinery hydrotreating process.
2.5 ratio. (Section III.D.3.e discusses the meet the current ASTM specification D– 3. Does Renewable Fuel Include Motor
requirements for owners of facilities that 6751–07 20 (the most common meaning Fuel That Is Made From Coprocessing a
claim to have produced cellulosic of the term ‘‘biodiesel’’) that have been Renewable Feedstock With Fossil Fuels?
ethanol under the 90 percent registered with EPA, and any non-esters
displacement provision, but which fail that are intended for use in engines that Renewable fuels can be produced by
to meet those requirements.) are designed to run on conventional, processing biologically derived wastes
petroleum-derived diesel fuel, have such as animal fats, as well as other
c. Ethanol That Is Made From the Non- been registered with the EPA, and are nonpetroleum based feedstocks in a
Cellulosic Portions of Animal, Other made from any of the feedstocks listed traditional refinery—that is, a refinery
Waste, and Municipal Waste above. that normally uses crude oil or other
‘‘Waste derived ethanol’’ is defined in To implement the above definition of fossil fuel-based blendstocks as feeds to
the Act as ethanol derived from ‘‘animal biodiesel in the context of the RFS processing units. Such wastes are pre-
wastes, including poultry fats and rulemaking while still recognizing the processed so that they are in liquid form
poultry wastes, and other waste unique history and role of mono-alkyl to enable their further processing in
materials; * * * or municipal solid esters meeting ASTM D–6751, we have units at a traditional refinery. In the
waste.’’ Both animal wastes and divided the Act’s definition of biodiesel proposed rule, we defined such
municipal solid waste are also listed as into two separate parts: Biodiesel feedstocks as ‘‘biocrudes’’ and included
allowable feedstocks for the production (mono-alkyl esters) and non-ester a discussion on how the fuels resulting
of ‘‘cellulosic biomass ethanol.’’ When renewable diesel. The combination of from these feedstocks should be
such feedstocks do not contain ‘‘biodiesel (mono-alkyl esters)’’ and counted. Our basic approach remains
cellulose, however, the resulting ethanol ‘‘non-ester renewable diesel’’ in the the same. We have changed the term
is waste derived. Both waste-derived regulations fulfills the Act’s definition ‘‘biocrudes’’ to ‘‘renewable crudes’’,
and cellulosic ethanol both are of biodiesel. Commenters supported since we believe it is more accurate. We
considered equivalent to 2.5 gallons of EPA’s approach in defining biodiesel in are providing additional discussion in
renewable fuel when determining this manner. this preamble on how renewable fuels
compliance with the renewable volume are made from renewable crudes.
obligation. 20 In the event that the ASTM specification D– The fuels resulting from the co-
6751 is succeeded with an updated specification in processing of the pre-processed liquid
d. Foreign Producers of Cellulosic and
the future, EPA may revise the regulations form of these renewable crudes (i.e.,
Waste-Derived Ethanol accordingly at such time. Regulations cannot be those feedstocks listed in the definition
promulgated that only reference ‘‘the most recent
Some commenters stated that foreign version’’ of an ASTM standard, since doing so
of ‘‘renewable fuel’’ and, for biodiesel,
ethanol producers should not be able to would place the American Society for Testing and in the statutory definition of
have their cellulosic or waste-derived Materials in the position of a regulatory body. ‘‘biodiesel’’) in a traditional refinery are
themselves indistinguishable from the refinery.21 In this case, a batch of block codes that are in the RIN
gasoline and diesel products produced renewable crude used as feedstock to a (discussed in further detail in Section
from crude oil. As such, the treatment production unit would replace crude oil III.D).22 The general counting procedure
of any resulting renewable fuel presents or other petroleum based feedstocks for renewable crude-based fuels that are
a particular complication in terms of which ordinarily would be the feedstock not derived through coprocessing with
RFS program compliance—namely, if in that process unit. The third approach fossil fuels is that the volumes of
such fuels are indistinguishable from would be non-ester renewable diesel renewable fuel produced are measured
gasoline and diesel produced from fuel produced by processing fats and directly, and an appropriate
crude oil feedstocks, how are the oils through a refinery hydrotreating Equivalence Value is assigned according
volumes to be measured? Also, some process. All three approaches can to the methodology discussed in Section
renewable feedstocks are used to produce renewable fuel that is valid for III.B.4.
produce renewable diesel (discussed in compliance purposes under the RFS
program, but the measurement of 4. What Are ‘‘Equivalence Values’’ for
Section III.B.2 above). In other Renewable Fuel?
circumstances renewable feedstocks are volumes produced and/or their
processed in dedicated facilities or associated Equivalence Values may One question that EPA needed to
units—that is, in either (1) facilities differ. address in developing the regulations
other than refineries that process fossil was how to count volumes of renewable
b. How Are Renewable Crude-Based
fuels, (2) equipment located within a fuel in determining compliance with the
Fuel Volumes Measured?
traditional refinery but which is renewable volume obligation. The Act
dedicated to renewable feedstocks, or As discussed above, some renewable stipulates that every gallon of waste-
(3) equipment located within a feedstocks are processed in facilities derived ethanol and cellulosic biomass
traditional refinery that processes other than refineries, or in equipment ethanol should count as if it were 2.5
renewable and conventional feedstocks located within a traditional refinery but gallons for RFS compliance purposes.
but solely for the production of motor which is dedicated to renewable The Act does not stipulate similar
vehicle fuels. feedstocks. The resulting product is values for other renewable fuels, but as
‘‘renewable diesel’’ (and such units may described below we believe it is
The processing approach for the in the future also produce ‘‘renewable appropriate to do so.
renewable feedstock dictates whether gasoline’’ though none is currently We are requiring that the
the resulting fuel is distinguishable from made in such dedicated facilities). In ‘‘Equivalence Values’’ for renewable
crude oil-based fuels by virtue of its other situations, renewable crudes are fuels other than those for which specific
being made and stored separately from coprocessed along with crude oils in values are set forth in the Act be based
fossil fuels as discussed in further detail traditional refineries, resulting in on their energy content in comparison
below. Therefore, our method for gasoline or diesel products that may be to the energy content of ethanol,
counting renewable fuels made from combinations of renewable and non- adjusted as necessary for their
renewable feedstocks differ based on renewable fuels. renewable content. The result is an
how the renewable feedstock is In the case of renewable crude Equivalence Value for corn ethanol of
processed coprocessed with fossil fuels in 1.0, for biobutanol of 1.3, for biodiesel
a. Definition of ‘‘Renewable Crudes’’ refineries, we are assuming that all of (mono alkyl ester) of 1.5, and for non-
and ‘‘Renewable Crude-Based Fuels’’ the renewable crude used as a feedstock ester renewable diesel of 1.7. However,
in a refinery unit will end up as a the methodology can be used to
Under some circumstances renewable renewable crude-based fuel that is valid determine the appropriate equivalence
feedstocks can be preprocessed into a for RFS compliance purposes. We are value for any other potential renewable
liquid that is similar to petroleum-based taking this approach because renewable fuel as well.
feedstocks used in traditional refineries. crudes that are processed through This section describes why the use of
We are classifying such liquids as distillate hydrotreaters are first pre- the Equivalence Value approach in
‘‘renewable crudes,’’ and any motor processed so that they are in liquid today’s rule is appropriate under the
vehicle fuel that is made from such form, and such liquid produces diesel Act, and our conclusions regarding the
liquids is defined broadly as ‘‘renewable fuel in volumes approximately equal to possible future use of lifecycle analyses
crude-based fuel’’. the amount that is input to the as the basis of Equivalence Values.
There are three approaches that can hydrotreater. We are assuming that
renewable crudes could also be a. Authority Under the Act To Establish
be taken to making renewable fuels from Equivalence Values
renewable crudes. The first would processed in other process units at
include gasoline or diesel products refineries to make gasoline. The We are requiring that Equivalence
resulting from the processing of renewable crude processed at a refinery Values be assigned to every renewable
renewable crudes in production units is functionally equivalent to crude oil, fuel to provide an indication of the
within refineries that simultaneously and the end products (gasoline and/or number of gallons that can be claimed
process crude oil and other petroleum diesel) are indistinguishable from for compliance purposes for every
based feedstocks. In these cases, the products made from crude oil. Thus, physical gallon of renewable fuel. An
final product consists of a mixture of rather than requiring the refiner to Equivalence Value of 1.0 means that
renewable fuel and fossil-based fuel, document what portion of the every physical gallon of renewable fuel
and may include both motor vehicle renewable crude-based fuel is renewable counts as one gallon for RFS compliance
fuel and non-motor vehicle fuel. The fuel, we are requiring that the volume of purposes. An Equivalence Value greater
second approach would include diesel the renewable crude itself count as the than 1.0 means that every physical
volume of renewable fuel produced for gallon of renewable fuel counts as more
and other products resulting from

processing renewable crudes at a stand- the purposes of determining the volume than one gallon for RFS compliance
alone facility that does not process any 21 Renewable crude-based fuels will need to be 22 We are considering the volumes of renewable
fossil fuels, or at a facility dedicated to registered under the provisions contained in 40 CFR crude itself, not the feedstocks that are made into
renewable crudes within a traditional 79 Part 4 before they can be sold commercially. renewable crude.
purposes, while a value less than 1.0 ‘‘appropriate’’ credit for biodiesel, and required by the Act may not be
counts as less than one gallon. also establishes a 2.5 value for cellulosic consumed in use.
We have interpreted the Act as biomass ethanol and waste-derived Some commenters disagreed with our
allowing us to develop Equivalence ethanol. As ethanol and biodiesel were belief that there will only be very
Values according to the methodology likely the two primary renewable fuels limited additional situations where an
discussed below. We believe that the envisioned in the near-term under the Equivalence Value other than 1.0 is
use of Equivalence Values based on Act, it would seem normal for Congress used. They expressed concern that the
energy content in comparison to the to have focused on these. However, provision for Equivalence Values will
energy content of ethanol is consistent Congress also clearly allowed for other interfere with meeting the total national
with the intent of Congress to treat renewable fuels to participate in the volume goals for usage of renewable
different renewable fuels differently in RFS program, and it is appropriate for fuel.
different circumstances, and to provide EPA to consider how they should be While in the long term we agree that
incentives for use of renewable fuels in treated under the Act. Furthermore, in renewable fuels with an Equivalence
certain circumstances, as evidenced by addition to the Act’s direction that EPA Value greater than 1.0 may grow to
those specific circumstances addressed determine an appropriate level of credit become a larger portion of the
by Congress. The Act has several for biodiesel, the Act also directs EPA renewable fuel pool, we do not believe
provisions that provide for mechanisms to determine the ‘‘appropriate’’ amount that this is likely to be the case before
other than straight volume measurement of credit for renewable fuel use in 2013, the time period when the statute
to determine the value of a renewable excess of the required volumes, and to specifies the overall national volumes.
fuel in terms of RFS compliance. For determine the ‘‘renewable fuel portion’’ EPA will be issuing a new rule prior to
example, 1 gallon of cellulosic biomass of a blending component derived from 2013, and can reconsider its approach to
or waste derived ethanol is to be treated a renewable fuel. These statutory Equivalence Values for renewable fuel
as 2.5 gallons of renewable fuel. EPA is provisions lend further support to our at that time if it is appropriate to do so.
also required to establish an belief that Congress did not limit the For instance, EIA projects that biodiesel
‘‘appropriate amount of credits’’ for RFS program solely to a straight volume volumes will reach 300 million gallons
biodiesel, and to provide for ‘‘an measurement of gallons. Having by 2012. With the Equivalence Value of
appropriate amount of credit’’ for using concluded that it is appropriate to 1.5 that we are finalizing today, this
more renewable fuels than are required determine an appropriate level of credit means that the 7.5 billion gallons
to meet your obligation. EPA is also to for biodiesel based on energy content as required by the Act for 2012 could be
determine the ‘‘renewable fuel portion’’ compared to ethanol, EPA is using a met with 7.35 billion gallons of
of a blending component derived from consistent approach for other types of renewable fuel. However, this result is
a renewable fuel. These statutory well within the variability in actual
renewable fuels for which a specific
provisions provide evidence that volumes resulting from the other
statutory credit value is not prescribed.
Congress did not limit this program statutory provisions described above,
solely to a straight volume measurement Another reason given by parties and would still result in 7.5 billon
of gallons in the context of the RFS opposing our approach to Equivalence gallons of ethanol-equivalent (in terms
program. Values was that Equivalence Values of energy content) renewable fuel being
In response to the NPRM, some higher than 1.0 would result in actual consumed. Congress explicitly
commenters supported our view that the volumes of renewable fuel being less recognized the expected use of credits
Act provides sufficient context and than the volumes required by the Act. for biodiesel, as it did for cellulosic
direction to permit the use of Although it is true that the Act specifies ethanol. By requiring or authorizing
Equivalence Values, while other the annual volumes of renewable fuel EPA to assign credit values for such
commenters opposed this view. Some that the program must require and products, Congress recognized that the
parties commented that the directs EPA to promulgate regulations national volumes specified in the Act
methodology proposed in the NPRM did ensuring that gasoline sold each year would not necessarily be met on a
not go far enough. These parties argued ‘‘contains the applicable volume of gallon per gallon basis. For the very
that instead of energy content, EPA renewable fuel,’’ the Act also contains limited number of other renewable fuels
should be using lifecycle impacts to set language that makes the achievement of not covered by these express statutory
the Equivalence Values. Lifecycle those volumes imprecise. For instance, provisions, assigning an equivalence
analyses are discussed in more detail in the deficit carryover provision allows value is consistent with this overall
Section III.B.4.c. any obligated party to fail to meet its approach. Moreover, EIA is projecting
Parties that opposed our proposed RVO in one year if it meets the deficit that the total volume of renewable fuel
approach to Equivalence Values argued and its RVO in the next year. If many will exceed the Act’s requirements by a
that since the Act did not explicitly give obligated parties took advantage of this substantial margin due primarily to the
EPA the authority to set Equivalence provision, it could result in the favorable economics of ethanol in
Values for renewable fuels other than nationwide total volume obligation for a comparison to gasoline. Under such
cellulosic biomass ethanol and waste- particular calendar year not being met. projections, the existence of renewable
derived ethanol, EPA had no authority In addition, the calculation of the fuels with Equivalence Values higher
to do so. In their view, the explicit renewable fuel standard is based on than 1.0 will have no impact on the
inclusion of a 2.5 credit value for projected nationwide gasoline volumes demand for renewable fuel.
cellulosic and waste-derived ethanol provided by EIA (see Section III.A). If Finally, the Act also contains
and the omission of any credit values the projected gasoline volume falls short language indicating that EPA has
for other renewables fuels should be of the actual gasoline volume in a given flexibility in determining how various
taken as evidence that Congress year, the standard will fail to create the renewable fuels should count towards
intended all other renewable fuels to demand for the full renewable fuel meeting the required annual volumes.
have Equivalence Values of 1.0. volume required by the Act for that For instance, valid renewable fuels are
We disagree that our discretion is so year. The Act contains no provision for defined as those that ‘‘replace or reduce
strictly limited. The Act specifically correcting for underestimated gasoline the quantity of fossil fuel present in a
gave EPA the authority to determine an volumes, and as a result the volumes fuel mixture used to operate a motor
vehicle.’’ Fossil fuels such as gasoline or Equivalence Value that precisely atoms’’), but rather must be based on the
diesel are only replaced or reduced to accounts for the amount of petroleum in energy inherent in that portion of the
the degree that the energy they contain motor vehicle fuel that is reduced or molecules comprised of renewable
is replaced or reduced. We do not replaced by that renewable fuel in atoms. To identify the renewable atoms
believe it would be appropriate to treat comparison to ethanol. To the degree within the molecules that comprise the
a renewable fuel with very low that corn-based ethanol continues to renewable fuel, we must examine the
volumetric energy content as being dominate the pool of renewable fuel, chemical process through which the
equivalent to a renewable fuel with very this approach allows actual volumes of renewable fuel was produced. A
high volumetric energy content, since renewable fuel to be consistent with the detailed explanation of calculations for
the impact on motor vehicle fossil fuel volumes required by the Act. R and several examples are given in a
use is very different for these two Equivalence Values also account for technical memorandum in the docket.23
renewable fuels. The use of Equivalence the renewable content of renewable In the case of ethanol, denaturants are
Values based on volumetric energy fuels, since the presence of any non- added to preclude the ethanol’s use as
content helps to achieve this goal. renewable content impairs the ability of food. Denaturants are generally a fossil-
A case in point would be butanol. It the renewable fuel to replace or reduce fuel based, gasoline-like hydrocarbon in
is produced from the same feedstocks as the quantity of fossil fuel present in a concentrations of 2–5 volume percent,
ethanol (i.e., starch crops such as corn) fuel mixture used to operate a motor with 5 percent being the most common
in a similar process. However, it results vehicle. The Act specifically states that historical level. One commenter argued
in an alcohol with a higher volumetric only the renewable fuel portion of a that the Equivalence Value of ethanol
energy content than ethanol. If we were blending component should be must be specified as 0.95 for this very
to give butanol an Equivalence Value of considered part of the applicable reason. However, as described in the
1.0, it would provide an economic volume under the RFS program. As NPRM, we believe that the Equivalence
disincentive for corn to be used to described in more detail below, we have Value for ethanol should be specified as
produce butanol instead of ethanol. interpreted this to mean that every 1.0 despite the presence of a denaturant.
As a result, we continue to believe renewable fuel should be evaluated at First, as stated above, ethanol is
that the assignment of Equivalence the molecular level to distinguish expected to dominate the renewable fuel
Values other than 1.0 to some renewable between those molar fractions that were pool for at least the next several years,
fuels is a reasonable way for the RFS derived from a renewable feedstock, and it is likely that the authors of the
program to establish ‘‘appropriate’’ versus those molar fractions that were Act recognized this fact. Thus it seems
credit values while also ensuring that derived from a fossil fuel feedstock. likely that it was the intent of the
the Act’s volume obligations, read Along with energy content in authors of the Act that each physical
together with the Act’s directions comparison to ethanol, the relative gallon of denatured ethanol be counted
regarding credit values towards energy fraction of renewable versus non- as one gallon for RFS compliance
fulfillment of that obligation, are renewable content is thus used directly purposes. Second, the accounting of
satisfied. This approach is consistent as the basis for the Equivalence Value. ethanol has historically ignored the
with the way Congress treated the We are requiring that the calculation presence of the denaturant. For
various specific circumstances noted of Equivalence Values simultaneously instance, under Internal Revenue
above, and thus is basically a take into account both the renewable Service (IRS) regulations the denaturant
continuation of that process. content of a renewable fuel and its can be counted as ethanol by parties
b. Energy Content and Renewable energy content in comparison to filing claims to the IRS for the federal
Content as the Basis for Equivalence denatured ethanol. To accomplish this, excise tax credit. Also, EIA reporting
Values we are requiring the following formula: requirements for ethanol producers
EV = (RRF / REth) × (ECRF / ECEth) allow them to include the denaturant in
To appropriately account for the their reported volumes. The commenter
different energy contents of different Where:
arguing for the use of an Equivalence
renewable fuels as well as the fact that EV = Equivalence Value for the renewable
fuel. Value of 0.95 for ethanol provided no
some renewable fuels actually contain additional information to counter these
RRF = Renewable content of the renewable
some non-renewable content, we are fuel, in percent of molecular energy. arguments.
requiring that Equivalence Values be REth = Renewable content of denatured Since we are requiring that denatured
calculated using both the renewable ethanol, in percent of molecular energy. ethanol be assigned an Equivalence
content of a renewable fuel and its ECRF = Energy content of the renewable fuel, Value of 1.0, this must be reflected in
energy content. This section describes in Btu per gallon (LHV). the values of REth and ECEth. We have
the calculation methodology for ECEth = Energy content of denatured ethanol,
calculated these values to be 93.1
Equivalence Values. in Btu per gallon (LHV).
percent and 77,550 Btu/gal,
In order to take the energy content of Instead of the higher heating value, respectively. Details of these
a renewable fuel into account when the lower heating value (LHV) is used to calculations can be found in the
calculating the Equivalence Values, we represent energy content because it aforementioned technical memorandum
must identify an appropriate point of more accurately reflects the energy to the docket. The final equation to be
reference. Ethanol is a reasonable point available in the fuel to produce work. used for calculation of Equivalence
of reference as it is currently the most R is a measure of that portion of the Values is therefore:
prominent renewable fuel in the renewable fuel molecules which can be EV = (R / 0.931) * (EC / 77,550)
transportation sector, and it is likely considered to have come from a
that the authors of the Act saw ethanol renewable source. Since R (that is, RRF Where:
as the primary means through which the and REth) is being combined with EV = Equivalence Value for the renewable
required volumes would be met in at relative energy content in the formula fuel.
least the first years of the RFS program. above, the value of R cannot be based 23 ‘‘Calculation of equivalence values for
By comparing every renewable fuel to on the weight fraction of the atoms in renewable fuels under the RFS program’’, memo
ethanol on an equivalent energy content the molecule which came from a from David Korotney to EPA Air Docket OAR–
basis, each renewable fuel is assigned an renewable feedstock (the ‘‘renewable 2005–0161.
R = Renewable content of the renewable fuel, TABLE III.B.4–1.—EQUIVALENCE but which has a different renewable
expressed as a percent, on an energy VALUES FOR SOME RENEWABLE FUELS content or energy content than the
basis, of the renewable fuel that comes values assumed for our calculations. For
from a renewable feedstock. Equiva- such cases we have created a regulatory
EC = Energy content of the renewable fuel, lence mechanism through which the producer
in Btu per gallon (lower heating value). value may submit a petition to the Agency
(EV)
describing the renewable fuel, its
For the specific case of biogas which feedstock and production process, and
cannot be measured in volumetric units, Cellulosic biomass ethanol or
waste-derived ethanol 24 ........... 2.5 the calculation of its Equivalence Value.
we are specifying that 77,550 Btu of Ethanol from corn, starches, or The Agency will review the petition and
biogas will be considered to be the sugar ......................................... 1.0 approve an appropriate Equivalence
equivalent of one gallon of renewable Biodiesel (mono alkyl ester) ......... 1.5 Value based on the information
fuel. Non-ester renewable diesel and provided. We will publish newly
hydrotreated renewable crudes 1.7 assigned Equivalence Values in the
The calculation of the Equivalence Butanol .......................................... 1.3
Value for a particular renewable fuel Renewable crude-based fuels ...... 1.0
Federal Register at the same time as the
can lead to values that deviate only annual standard is published each
slightly from 1.0, and/or can have Consistent with the NPRM, the November.
varying degrees of precision depending Equivalence Value for renewable crude- In the NPRM, we also described an
based fuels is 1.0. Although some additional approach to setting the
on the uncertainty in the value of R or
renewable crude-based fuels might Equivalence Value for biodiesel (mono
ECRF. In the NPRM we proposed several
warrant a higher value based on their alkyl esters). Since ethanol derived from
simplifications to streamline the waste products such as animal wastes
application of Equivalence Values in the energy content, it is also likely that
some of the renewable crude does not and municipal solid waste will be
context of the RFS program. These assigned an Equivalence Value of 2.5
included the use of pre-specified bins, end up as a motor vehicle fuel. Rather
than requiring the refiner to document based on a requirement in the Act, we
rounding, and the use of an Equivalence pointed out that it might be appropriate
what portion of the biocrude-based
Value of 1.0 when the calculated value to create a parallel provision for
renewable fuel is other than diesel or
was close to 1.0. We received some biodiesel made from wastes. Under this
gasoline (e.g., jet fuel), we are
comments suggesting that these three combining the Equivalence Value of 1.0 approach, biodiesel made from waste
simplifications unnecessarily with a requirement that the volume of products would have been assigned an
complicated the determination of the renewable crude itself count as the Equivalence Value of 2.5 through 2012.
Equivalence Values. Based on volume of renewable fuel produced for Supporters of 2.5 Equivalence Value
comments received, we have the purposes of determining the volume argued that it would place the treatment
determined for the final rule to simplify block codes that are in the RIN of waste-derived biodiesel on the same
the application of Equivalence Values (discussed in further detail in Section level as waste-derived ethanol, and that
by only requiring the calculated values III.D). While this approach may result in it would be good Agency policy to
be rounded to the first decimal place. some products such as jet fuel being encourage and reward parties that turn
Also, based on consideration of counted as renewable fuel, we believe materials that would otherwise be
the majority of the products produced wasted into usable motor vehicle fuel.
comments received on how such
will be motor vehicle fuel because we While some of these arguments may
products should be counted, for
assume refiners who elect to use have merit, we nevertheless believe that
renewable diesel produced by it is most appropriate to maintain the
processing fats and oils through a biocrudes would do so to help meet the
requirements of this rule. Furthermore, general methodology applicable to
refinery hydrotreating process, we have renewable fuels at this time and reserve
determined that the default Equivalence both diesel and gasoline presently make
up about 85 percent of the product slate the 2.5:1 valuation for just the fuel
Value should be 1.7 consistent with specified by Congress. Therefore, we
renewable diesel produced through of refineries on average. This amount
that has been steadily increasing for have not finalized a 2.5 Equivalence
other processes. This approach Value for waste-derived biodiesel.
over time, and we expect that the
recognizes that hydrotreating produces a For the specific case of ETBE, we have
percentage will continue to increase as
product consistent with our definition chosen for this final rule to eliminate a
demand for gasoline and diesel
of non-ester renewable diesel. uniquely determined Equivalence
increases. Thus the designation of an
Furthermore, based on comments Value. As described in Section III.D.2.b,
Equivalence Value of 1.0 balances out
received, the volume of the final ETBE is generally made from ethanol to
the potentially higher energy content of
product is expected to be comparable to which RINs will have already been
renewable crude-based fuels with the
the volume of the input renewable assigned. An ETBE producer, therefore,
potential for lower yields of renewable
crude. Therefore, the volume of would need only assign the RINs
fuel produced as motor vehicle fuel. We
renewable crude will be used as a received with the ethanol to the ETBE
received no comment on this issue and
surrogate for the volume of the final made from that ethanol. In this case,
are finalizing it as proposed.
Since there are a wide variety of there will be no need to generate new
product. With the exception of
possible renewable fuels that could RINs, and therefore no need for a
renewable diesel produced through
qualify under the RFS program, there separate Equivalence Value.
hydroteating fats or oils which is Except for cellulosic biomass ethanol
identical to renewable diesel, none of may be cases in which a party produces
a renewable fuel not shown in Table and waste-derived ethanol, the
the specific Equivalence Values Equivalence Values shown in Table
III.B.4–1. A party may also produce a
proposed in the NPRM have changed as III.B.4–1, or any others approved

a result of this simplification. The final renewable fuel listed in the above table,
through the petition process, will be
values are shown in the table below. 24 The 2.5 value is specified by the Energy Act, applicable for all years. However,
and is not based on the EV formula discussed beginning in 2013, the 2.5 to 1 ratio no
earlier. longer applies for cellulosic biomass
ethanol. The Act is unclear about picture of the potential impacts of There currently exists no organized,
whether the 2.5 to 1 ratio for waste- different fuels or different fuel sources. comprehensive dialogue among
derived ethanol will apply after 2012, While the use of energy content to stakeholders about the appropriate tools
though it might be appropriate to treat establish Equivalence Values is an and assumptions behind any lifecycle
cellulosic biomass ethanol and waste- improvement over a simple gallon-for- analyses. We will be initiating more
derived ethanol in a consistent manner. gallon approach, a lifecycle basis would comprehensive discussions about
Nevertheless, in the subsequent provide a further level of sophistication lifecycle analyses with stakeholders in
rulemaking mentioned above, we will in assessing the net energy input and the near future.
address this issue explicitly. In today’s output of fuels and the emissions Another issue related to using
final rule we are only specifying the associated with the use of different lifecycle analyses as the basis for
ratio for cellulosic biomass and waste- fuels. Equivalence Values pertains to the
derived ethanol prior to 2013. Supporters of the use of lifecycle ultimate impact that the RFS program
analyses for setting the Equivalence would have on petroleum use, fossil
c. Lifecycle Analyses as the Basis for Values of different renewable fuels fuel use, regulated pollutant emissions,
Equivalence Values pointed to several advantages of this and/or emissions of GHGs. With a fixed
In the NPRM we also described an approach. First, doing so could create an volume of renewable fuel required
alternative approach in which incentive for obligated parties to choose under the RFS program, any renewable
Equivalence Values for renewable fuels renewable fuels having a greater ability fuel with an Equivalence Value greater
would be based on lifecycle analyses. to reduce fossil fuel use or resulting than 1.0 would necessarily mean that
We described both the merits and emissions, since such renewable fuels fewer actual gallons would be needed to
challenges associated with such an would have higher Equivalence Values meet the RFS standard. Thus, the
approach and requested comment. and thus greater value in terms of advantage per gallon may be offset with
Based on the comments received we compliance with the RFS requirements. fewer overall gallons, resulting in no
continue to believe that lifecycle The preferential demand for renewable overall additional benefit under the
analyses could provide a means of fuels having higher Equivalence Values chosen metric for using fuels with
reflecting the relative benefits of one could in turn spur additional growth in higher Equivalence Values unless the
renewable fuel in comparison to production of these renewable fuels. RFS standard was simultaneously
another. However, we are not, in this Second, using lifecycle analyses as the adjusted by Congress.
action, establishing Equivalence Values basis for Equivalence Values could Based on comments received in
on a lifecycle basis. Rather, we intend orient the RFS program more explicitly response to our NPRM, we continue to
to continue evaluating and updating the towards reducing petroleum use, fossil believe that the current state of
tools and assumptions associated with fuel use or emissions. scientific inquiry surrounding lifecycle
lifecycle analyses in a collaborative However, the use of lifecycle analyses analyses is not sufficiently robust to
effort with stakeholders. This to establish the Equivalence Values for warrant its use to set Equivalence
rulemaking makes no determination and different renewable fuels also raises a Values in this final rule. Since
should not be interpreted to make any number of issues, generally renewable fuel use is expected to far
determination regarding whether EPA acknowledged by supporters of the use exceed the standards being finalized
has the legal authority under section of lifecycle analyses. For instance, today, a higher equivalence value for
1501 of the Energy Act, as incorporated lifecycle analyses can be conducted those renewables with greater lifecycle
in section 211(o) of the Clean Air Act, using several different metrics, benefits will likely do little to stimulate
to use lifecycle analysis in establishing including total fossil fuel consumed, their use. However, if in the future the
Equivalence Values in general or petroleum energy consumed, regulated RFS standard more closely matches
Equivalence Values specifically related pollutant emissions (e.g., VOC, NOX, renewable demand, this could be
to greenhouse gas or carbon dioxide PM), carbon dioxide emissions, or important. We are committed to
emissions. This section describes some greenhouse gas emissions. Each metric continuing our investigations into
of the comments we received on the use would result in a different set of lifecycle analyses.
of lifecycle analyses and our responses. Equivalence Values. At the present time
Lifecycle analyses involve an C. What Gasoline Is Used To Calculate
there is no consensus on which metric
examination of fossil fuel used, and the Renewable Fuel Obligation and Who
would be most appropriate for this
emissions generated, at all stages of a Is Required To Meet the Obligation?
purpose or the purposes of the Act.
renewable fuel’s life. A typical lifecycle There is also no consensus on the 1. What Gasoline Is Used To Calculate
analysis examines production of the approach to lifecycle analyses the Volume of Renewable Fuel Required
feedstock, its transport to a conversion themselves. Although we have chosen To Meet a Party’s Obligation?
facility, the conversion of the feedstock to base our lifecycle analyses on The Act requires EPA to promulgate
into renewable motor vehicle fuel, and Argonne National Laboratory’s GREET regulations designed to ensure that
the transport of the renewable fuel to model for the reasons described in ‘‘gasoline sold or introduced into
the consumer. At each stage, every Section IX, there are a variety of other commerce in the United States (except
activity that consumes fossil fuels or lifecycle models and analyses available. in noncontiguous states or territories)’’
results in emissions is quantified, and The choice of model inputs and contains on an annual average basis, the
these energy consumption and emission assumptions all have a bearing on the applicable aggregate volumes of
estimates are then summed over all results of lifecycle analyses, and many renewable fuels as prescribed in the
stages. By accounting for every activity of these assumptions remain the subject Act.25 To implement this provision,
associated with renewable fuels over of debate among researchers. Lifecycle today’s final rule provides that the
their entire life, we can assess analyses must also contend with the fact volume of gasoline used to determined
renewable fuels in terms of not just their that the inputs and assumptions the renewable fuel obligation must
impact within the transportation sector, generally represent industry-wide include all finished gasoline (RFG and
but across all sectors and thus for the averages even though energy consumed
nation as a whole. In this way, lifecycle and emissions generated vary widely 25 CAA Section 211(o)(2)(A)(i), as added by
analyses provide a more complete from one facility or process to another. Section 1501(a) of the Energy Policy Act of 2005.
conventional) produced or imported for subject to the renewable fuel obligation that obligated parties with multiple
use in the contiguous United States for the volume of ethanol that they facilities could gain an economic
during the annual averaging period and blend. There are currently advantage over obligated parties with
all unfinished gasoline that becomes approximately 1,200 such ethanol only a single facility if aggregate
finished gasoline upon the addition of blenders. Of these blenders, only those compliance is allowed, we do not
oxygenate blended downstream from who blend ethanol into RBOB are believe that this will be the case given
the refinery or importer. This would regulated parties under current fuels the unrestricted trading allowed under
include both unfinished reformulated regulations. Designating all of these our program. We also believe that
gasoline, called ‘‘reformulated gasoline ethanol blenders as obligated parties clarification in the regulations regarding
blendstock for oxygenate blending,’’ or under the RFS program would greatly the basis on which the obligation may
‘‘RBOB,’’ and unfinished conventional expand the number of regulated parties be determined is a necessary and logical
gasoline designed for downstream and increase the complexity of the RFS outgrowth of the proposal. As a result,
oxygenate blending (e.g. sub-octane program beyond that which is necessary the regulations have been modified in
conventional gasoline), called ‘‘CBOB.’’ to carry out the renewable fuels the final rule to clarify that the
The volume of any other unfinished mandate under the Act. renewable fuels obligation may be
gasoline or blendstock, such as butane, The Act provides that the renewable determined based on the gasoline
is not included in the volume used to fuel obligation shall be ‘‘applicable to production of all of an obligated party’s
determine the renewable fuel obligation, refiners, blenders, and importers, as facilities in the aggregate, or each
except where the blendstock is appropriate.’’ 27 For the reasons facility individually.
combined with other blendstock or discussed above, we believe it is
We received comment that EPA
finished gasoline to produce finished appropriate to exclude downstream
should clarify when obligated parties
gasoline, RBOB, or CBOB. Where a renewable fuel blenders from the group
must include imported gasoline that is
blendstock is blended with other of parties subject to the renewable fuel
used as ‘‘gasoline treated as
blendstock to produce finished gasoline, obligation and to exclude renewable
blendstock’’, or GTAB, in the volume of
RBOB, or CBOB, the total volume of the fuels from the volume of gasoline used
gasoline used to determine the party’s
gasoline blend is included in the to determine the renewable fuel
renewable fuel obligation. As stated in
volume used to determine the obligation. This exclusion applies to any
the preamble to the proposed rule,
renewable fuels obligation for the renewable fuels that are blended into
GTAB is to be treated as a blendstock
blender. Where a blendstock is added to gasoline at a refinery, contained in
imported gasoline, or added at a with regard to the RFS rule. Where the
finished gasoline, only the volume of
downstream location. Thus, for GTAB is blended with other blendstock
the blendstock is included, since the
example, any ethanol added to RBOB or (other than only renewable fuel) to
finished gasoline would have been
CBOB downstream from the refinery or produce gasoline, the total volume of
included in the compliance
importer would be excluded from the the gasoline blend, including the GTAB,
determinations of the refiner or importer
volume of gasoline used to determine is included in the volume of gasoline
of the gasoline.
Gasoline produced or imported for the obligation. Any non-renewable fuel used to determine the renewable fuel
use in a noncontiguous state or U.S. added downstream, however, would be obligation. Where the GTAB is blended
territory 26 is not included in the volume included in the volume of gasoline used with finished gasoline, only the GTAB
used to determine the renewable fuel to determine the obligation. This volume is included in the volume of
obligation (unless the noncontiguous approach has no impact on the total gasoline used to determine the
state or territory has opted-in to the RFS volume of renewable fuels required renewable fuel obligation (since the
program), nor is gasoline, RBOB or (which is specified in the Act and must finished gasoline will already be
CBOB exported for use outside the be met regardless of the approach taken included in the RFS calculations of the
United States. here), but merely on the number of refiner of that gasoline). For purposes of
For purposes of this preamble, the obligated parties. As discussed earlier, compliance demonstrations, the RFS
various gasoline products (as described this volume of renewable fuel is rule treats GTAB in a manner that is
above) that are included in the volume likewise excluded from the calculation consistent with the reformulated
of gasoline used to determine the performed each year by EPA to gasoline (RFG) and conventional
renewable fuel obligation are determine the applicable percentage. gasoline (CG) regulations. Under the
collectively called ‘‘gasoline.’’ The NPRM was unclear with regard to RFG/CG regulations, importers who
The final rule excludes the volume of whether obligated parties are to designate imported gasoline as GTAB
renewable fuels contained in gasoline determine their renewable fuel must be registered with EPA as both an
from the volume of gasoline used to obligation based on the gasoline importer and a refiner. The importer
determine the renewable fuels production of all of their facilities in the submits separate compliance reports to
obligation. In implementing the Act’s aggregate, or each facility individually. EPA, one in its capacity as an importer,
renewable fuels requirement, our As discussed above, EPA has discretion and one in its capacity as a refiner. The
primary goal was to design a program under the Energy Act to determine the GTAB is blended by the importer and
that is simple, flexible and enforceable. renewable fuels obligation applicable to included in the importer’s compliance
If the program were to include parties, ‘‘as appropriate.’’ We believe calculations in its capacity as a refiner
renewable fuels in the volume of that allowing obligated parties to of the GTAB, and is excluded from the
gasoline used to determine the determine their obligation based on importer’s compliance calculations in
renewable fuel obligation, then every either their facilities in the aggregate or its capacity as an importer. The RFS
blender that blends ethanol downstream individually is appropriate, since rule treats GTAB in a similar manner;
from the refinery or importer would be allowing this flexibility will not affect i.e., the importer includes the GTAB in
compliance with the RFS. Although the volume of gasoline used to

26 The noncontiguous states are Alaska and
some commenters expressed concern determine the renewable fuel obligation
Hawaii. The territories are the Commonwealth of of the importer in its capacity as a
Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, and the Commonwealth of the 27 CAA Section 211(o)(3)(B), as added by Section refiner of the GTAB, and excludes the
Northern Marianas. 1501(a) of the Energy Policy Act of 2005. GTAB in the volume of gasoline used to
determine the renewable fuel obligation states is an obligated party if it 75,000 barrels.’’ 28 Thus, any gasoline
of the importer in its capacity as an ‘‘imports’’ into the 48 states any produced at a refinery that qualifies as
importer. The regulations have been gasoline produced or imported by a a small refinery under this definition is
clarified with regard to how GTAB is refiner or importer located in a not counted in determining the
used to determine the GTAB importer’s noncontiguous state or territory. renewable fuel obligation of a refiner
renewable fuels obligation. We received comment that EPA until January 1, 2011. Where a refiner
We received comment that EPA should clarify how the RFS rule applies complies with the renewable fuel
should clarify that the terms RBOB and to transmix processors and blenders. obligation on an aggregate basis for
CBOB include ‘‘blendstocks for Transmix processors and blenders are multiple refineries, the refiner may
oxygenate blending’’ that are designed treated like any other blenders under exclude from its compliance
to comply with state fuels requirements, the RFS rule. Transmix processors are calculations gasoline produced at any
such as CARBOB (California), AZRBOB parties that separate the gasoline portion refinery that qualifies as a small refinery
(Arizona), and LVBOB (Las Vegas). As of the transmix from the transmix and under the RFS program. This exemption
discussed in Section III.C.1, all gasoline, either sell the gasoline portion as applies to any refinery that meets the
and all unfinished gasoline that finished gasoline or blend it with other definition of small refinery stated above
becomes finished gasoline upon the components to produce gasoline. regardless of the size of the refining
addition of oxygenate, that is produced Transmix processors exclude the company that owns the refinery. Based
or imported for use in the contiguous gasoline portion of the transmix from on information currently available to us
United States is included in the volume the volume that is used to determine the we expect 42 small refineries to qualify
of gasoline used to determine an party’s renewable fuel obligation, since for this exemption. Beginning in 2011,
obligated party’s renewable fuels the gasoline portion of the transmix small refineries will be required to meet
obligation. As such, any finished would have been included in the the same renewable fuel obligation as all
gasoline, or unfinished gasoline that volume used to determine the other refineries, unless their exemption
becomes finished gasoline upon the renewable fuels obligation of the refiner is extended pursuant to § 80.1141(e).
addition of oxygenate, that is produced or importer of the gasoline. In In addition to small refineries as
or imported to comply with state fuels calculating the volume used to defined in the Act, we proposed to
programs must also be included in the determine its renewable fuel obligation, extend this relief to refiners who, during
volume of gasoline used to determine an the transmix processor would include 2004: (1) Produced gasoline at a refinery
obligated party’s renewable fuels any blendstocks (other than renewable by processing crude oil through refinery
obligation. The regulations have been fuels) that are added to the gasoline processing units; (2) employed an
clarified in this regard. separated from the transmix. Where the average of no more than 1,500 people,
transmix processor combines the including all employees of the small
2. Who Is Required To Meet the
gasoline portion of the transmix with refiner, any parent company and its
Renewable Fuels Obligation?
purchased finished gasoline, both the subsidiary companies; and (3) had a
Under the final rule, any person who total average crude oil processing
gasoline portion of the transmix and the
meets the definition of refiner under the capability for all of the small refiner’s
finished gasoline would be excluded,
fuels regulations, which includes any refineries of 155,000 barrels per
blender who produces gasoline by since the finished gasoline would have
been included in the volume used to calendar day (bpcd). These size criteria
combining blendstocks or blending were established in prior rulemakings
blendstocks into finished gasoline, is determine the renewable fuels
obligation of the refiner or importer of and were the result of our analyses of
subject to the renewable fuels small refiner impacts. Based on
obligation. Any person who brings the finished gasoline. Transmix
blenders are parties that blend small information currently available to us,
gasoline into the 48 contiguous states we believe that there are only three
from a foreign country or from an area amounts of unprocessed transmix into
gasoline. Transmix blenders are not gasoline refineries owned by small
that has not opted-in to the RFS refiners that meet these criteria and that
program, or brings gasoline from a obligated parties if they only blend
transmix into finished gasoline. If the currently exceed the 75,000 bpcd crude
foreign country or an area that has not oil processing capability defined by the
opted-in to the RFS program into an transmix blender adds blendstocks to
the transmix, the transmix blender Act.
area that has opted-in to the RFS We received comments supporting the
program, is considered an importer would be an obligated party with regard
proposed extension of the small refinery
under the RFS program and is subject to to the volume of blendstocks added. The
exemption to small refiners, and we also
the renewable fuels obligation. As noted regulations have been clarified with
received comments opposing the
above, a blender who only blends regard to how the RFS rule applies to
proposed provision. Commenters that
renewable fuels downstream from the transmix processors and blenders.
supported the provision generally stated
refinery or importer is not subject to the 3. What Exemptions Are Available that they believe that a small refiner
renewable fuel obligation. Any person Under the RFS Program? exemption is necessary as those entities
that is required to meet the renewable (i.e., companies) that would qualify as
fuels obligation is called an ‘‘obligated a. Small Refinery and Small Refiner
Exemption small refiners are generally at an
party.’’ We generally refer to all of the economic disadvantage due to their
obligated parties as refiners and The Act provides an exemption from company size—whereas the Act only
importers, since the covered blenders the RFS standard for small refineries recognizes facilities, based on the size of
are all refiners under the regulations. during the first five years of the each location. These commenters also
A refiner or importer located in a program. The Act defines small refinery stated that they have concerns with the
noncontiguous state or U.S. territory is as ‘‘a refinery for which the average cost and the availability of credits under
not subject to the renewable fuel aggregate daily crude oil throughput for this program, and believe that
obligation and thus is not an obligated a calendar year (as determined by provisions for small refiners are
party (unless the noncontiguous state or dividing the aggregate throughput for
territory opts-in to the RFS program). A the calendar year by the number of days 28 CAA Section 211(o)(a)(9), as added by Section
party located within the contiguous 48 in the calendar year) does not exceed 1501(a) of the Energy Policy Act of 2005.
necessary to help mitigate any will not impose a significant adverse comments on this provision in which
significant adverse economic impact on economic impact on small refiners if commenters stated that requiring small
these entities. Commenters that opposed they are given the small refinery refinery applications was inconsistent
the provision stated that they believe exemption. Further, as noted above, we with the language set out in the Act. The
that EPA exceeded its discretionary believe that no more than three commenters stated that small refineries
authority, that there appears to be no additional refiners that do not meet the should not be obligated parties in 2007
basis on which the Agency can Energy Policy Act’s definition of a small even if they do not submit a small
legitimately expand this statutory refinery will qualify as small refiners for refinery application by September 1,
exemption to add small refiners, and this rule. Therefore, we are finalizing 2007. We agree with these statements,
that Congress ‘‘clearly did not intend the proposed provision that the small and believe that the Energy Policy Act
that the exemption be broadened to also refinery exemption will be provided to did in fact intend to provide this
include small refiners.’’ One commenter qualified small refiners. This exemption exemption without the need for small
also stated that it does not believe that does not mean that less renewable fuel refineries to submit applications.
small refiner provisions are necessary will be used than is required in the However, in order to ensure that this
because this rule does not require costly Energy Policy Act; rather, it just means provision is not being misused, we
capital investments like previous fuel that small refiners will not be obligated believe that it is necessary for refiners
regulations. to ensure that those volumes are to verify that their refineries meet the
As stated in the proposal, we believe attained during the period of their definition set out in the Act. Therefore,
that we have discretion in determining exemption. we are finalizing that the small refinery
an appropriate lead-time for the start-up We also proposed to allow foreign exemption will become active
of this program, as well as discretion to refiners to apply for a small refinery or immediately upon the effective date of
determine the regulated refiners, small refiner exemption under the RFS the rule. Refiners will only be required
blenders and importers, ‘‘as program. We requested comment on the to send a letter to EPA verifying their
appropriate.’’ We continue to believe provision and related aspects, and we status as a small refinery. We did not
that some refiners, due to their size, received some comments in which receive any comments on our proposal
generally face greater challenges commenters stated that they believe that to base eligibility on 2004 data, nor did
compared to larger refiners. The Small there is no reason to extend the small we receive comments on whether a
Business Regulatory Enforcement refinery exemption to these refiners. multiple-year average should be used.
Fairness Act (SBREFA) also recognizes One commenter even stated that it We believe that eligibility should be
this and requires agencies, during believes that such an allowance would based on 2004 data rather than on 2005
promulgation of new standards, to be unlawful. We proposed this data, since it was the first full year prior
assess the potential impacts on small provision for consistency with prior to passage of the Energy Act. In
businesses (as defined by the Small gasoline-related fuel programs (anti- addition, some refineries’ production
Business Administration (SBA) at 13 dumping, MSAT, and gasoline sulfur) may have been affected by Hurricanes
CFR 121.201). For those instances where which allowed foreign refiners to Katrina and Rita in 2005. We are thus
the Agency cannot certify that a rule receive such exemptions, and we are finalizing our proposed approach to
will not have a significant economic finalizing the provision in this action. base eligibility on 2004 data.
impact on a substantial number of small Under this provision, foreign small As discussed above, we proposed that
entities, we are required to convene a refiners and foreign small refineries can refiners that do not qualify for a small
SBREFA Panel. A SBREFA Panel apply for an exemption from the RFS refinery exemption under the 75,000
process—which generally takes at least standards such that importers would not bpcd criteria, but nevertheless meet the
six months to complete—entails count the small refiner or small refinery criteria of a small refiner may apply for
performing outreach with entities that gasoline volumes towards the importer’s small refiner status under the RFS rule.
meet the definition of a small business renewable volume obligation. The We proposed that the applications must
to develop ways to mitigate potential Energy Policy Act does not prohibit EPA be received by EPA by September 1,
adverse economic impacts on small from granting this avenue of relief to 2007 for the exemption to be effective in
entities, in consultation with SBA and foreign entities, and EPA believes it is 2007 and subsequent calendar years
the Office of Management and Budget consistent with the spirit of (similar to the small refinery
(OMB). international trade agreements to exemption). We also proposed that
‘‘Small refiners’’ have historically provide it. small refiner status would be
been recognized in EPA fuel regulations In the proposal we stated that determined based on documentation
as those refiners who employ no more applications for a small refinery submitted in the application which
than 1,500 employees and have an exemption must be received by EPA by demonstrates that the refiner met the
average crude oil capacity of 155,000 September 1, 2007 for the exemption to criteria for small refiner status during
bpcd. These refiners generally have be effective in 2007 and subsequent the calendar year 2004 and that EPA
greater difficulty in raising and securing calendar years. We proposed that the would notify a refiner of approval or
capital for investing in capital application should include disapproval of small refiner status by
improvements and in competing for documentation that the small refinery’s letter.
engineering resources and projects. This average aggregate daily crude oil The final rule provides that qualified
rulemaking does not require that throughput for calendar year 2004 did small refiners receiving the small
refiners make capital improvements, not exceed 75,000 barrels; and that refinery exemption will also receive the
however there are still significant costs eligibility would be based on 2004 data exemption immediately upon the
associated with meeting the standard. (rather than 2005). Further, we proposed effective date of the rule. These refiners
While we were not required to assess that the small refinery exemption would must also submit a verification letter
the impacts on small businesses under be effective 60 days after receipt of the showing that they meet the small refiner
the Energy Policy Act, we are required application by EPA unless EPA notifies criteria. This letter will be similar to the
to do so under SBREFA. Based on our the applicant that the application was small refiner applications required
own analysis and outreach with small not approved or that additional under other EPA fuel programs (and
refiners, our assessment is that this rule documentation is required. We received must contain all the required elements
specified in the regulations at We proposed that the automatic circumstances. We proposed not to
§ 80.1142), except the letter will not be exemption to 2011 and any small include such an exemption in the RFS
due prior to the program. Small refiner refinery extended exemptions may be program. The need for such an
status verification letters for this rule waived upon notification to EPA; and exemption would primarily be based on
that are later found to contain false or we are finalizing this provision. the inability to comply with the
inaccurate information will be void as of Gasoline produced at a refinery which renewable fuels standard due to a
the effective date of these regulations. waives its exemption will be included natural disaster, such as a hurricane.
Unlike the case for small refineries, in the RFS program and will be However, in the event of a natural
small refiners who subsequently do not included in the gasoline used to disaster, we believe it is likely that the
meet all of the criteria for small refiner determine the refiner’s renewable fuel volume of gasoline produced by an
status (i.e., cease producing gasoline by obligation. If a refiner waives the obligated party would also drop, which
processing crude oil, employ more than exemption for its small refinery or its would result in a reduction in the
1,500 people or exceed the 155,000 exemption as a small refiner, the refiner renewable fuel requirement. We,
bpcd crude oil capacity limit) as a result will be able to separate and transfer therefore, reasoned in the NPRM that
of a merger with or acquisition of or by RINs like any other obligated party. If a unforeseen circumstances, such as a
another entity are disqualified as small refiner does not waive the exemption, hurricane or other natural disaster,
refiners, except in the case of a merger the refiner could still separate and would not result in a party’s inability to
between two previously approved small transfer RINs, but only for the renewable obtain sufficient RINs to comply with
refiners. As in other EPA programs, fuel that the refiner itself blends into the applicable renewable fuels standard.
where such disqualification occurs, the gasoline (i.e. the refinery operates as an We received several comments
refiner must notify EPA in writing no oxygenate blender facility). Thus, regarding the inclusion of a temporary
later than 20 days following the exempt small refineries and small hardship exemption based on
disqualifying event. refiners who blend ethanol can separate unforeseen circumstances. One
The Act provides that the Secretary of RINs from batches without opting in to commenter believes it would be of value
Energy must conduct a study for EPA to the program in the same manner that an to have a mechanism for selectively
determine whether compliance with the oxygenate blender is allowed to do. waiving or modifying the RFS
renewable fuels requirement would downward on a temporary basis in the
b. General Hardship Exemption event of unforeseen circumstances such
impose a disproportionate economic In recent rulemakings, we have as significant drought affecting potential
hardship on small refineries. If the included a general hardship exemption crop production. The commenter
study finds that compliance with the for parties that are able to demonstrate believes that crop shortages could have
renewable fuels requirements would severe economic hardship in complying an impact on a national level, or a major
impose a disproportionate economic with the standard. We proposed not to disaster may impact logistics of
hardship on a particular small refinery, include provisions for a general renewable fuel distribution regionally,
EPA is required to extend the small hardship exemption in the RFS necessitating a more rapid response
refinery’s exemption for a period of not program. Unlike most other fuels from EPA than is provided in the Energy
less than two additional years (i.e., to programs, the RFS program includes Act. Another commenter believes that a
2013). The Act also provides that a inherent flexibility since compliance temporary hardship exemption based on
refiner with a small refinery may at any with the renewable fuels standard is unforeseen circumstances should be
time petition EPA for an extension of based on a nationwide trading program, included in the rule since it is
the exemption for the reason of without any per gallon requirements, impossible to predict how the RFS
disproportionate economic hardship. In and without any requirement that the program will impact small refiners.
accordance with these provisions of the refiner or importer produce the Another commenter believes that, given
Act, we are finalizing the provision that renewable fuel. By purchasing RINs, the variety of potentially challenging
refiners with small refineries may obligated parties will be able to fulfill unforeseen events during the last
petition EPA for an extension of the their renewable fuel obligation without several years, it is not inconceivable that
small refinery exemption. As provided having to make capital investments that man-made or natural circumstances
in the Act, EPA will act on the petition may otherwise be necessary in order to could adversely impact the RFS
not later than 90 days after the date of blend renewable fuels into gasoline. We program. A natural disaster in the
receipt of the petition. Today’s believe that sufficient RINs will be agricultural section, for example, may
regulations do not provide a comparable available and at reasonable prices, given make it difficult to meet the renewable
opportunity for an extension of the that EIA projects that far greater fuels mandate which, in turn, could
small refinery exemption for small renewable fuels will be used than drive the price of RINs high enough to
refiners. Therefore, all parties required. Given the flexibility provided disrupt the gasoline market. The
temporarily exempted from the RFS in the RIN trading program, including commenter believes that a mechanism
program on the basis of qualifying as a the provisions for deficit carry-over, and built into the program from the outset
small refiner, rather than a small the fact that the standard is proportional would provide a more flexible and less
refinery, must comply with the program to the volume of gasoline actually disruptive way to address unforeseen
beginning January 1, 2011 (unless they produced or imported, we continue to circumstances than the more time-
waive their exemption prior to this believe a general hardship exemption is consuming waiver process provided in
date). not warranted. As a result, the final rule the Energy Act.
During the initial exemption period does not contain provisions for a general Under other EPA fuels programs,
for small refineries and small refiners hardship exemption. compliance is based on a demonstration
and any extended exemption periods for that the fuel meets certain component or
c. Temporary Hardship Exemption
small refineries, the gasoline produced emissions standards. Unforeseen

by exempted small refineries and Based on Unforeseen Circumstances circumstances, such as a natural
refineries owned by approved small In recent rulemakings, we have disaster, may affect an individual
refiners will not be subject to the included a temporary hardship refiner’s or importer’s ability to produce
renewable fuel standard. exemption based on unforeseen or import fuel that complies with the
standards. As a result, we have included Energy Act. As a result, the final rule properly delivered to EPA, EPA does
in other fuels programs provisions for a does not contain provisions for a not envision providing an opportunity
temporary hardship exemption from the temporary hardship exemption based on to comment on an opt-in request,
standards in the event of an unforeseen unforeseen circumstances. although we will provide notice in the
natural disaster that affects a party’s publication of the standard for the
4. What Are the Opt-in and State Waiver
ability to produce gasoline that following year.
Provisions Under the RFS Program? We received several comments
complies with the standards. Unlike
most other fuels programs, compliance a. Opt-in Provisions for Noncontiguous regarding when a noncontiguous state or
under the RFS program is based on a States and Territories territory should be able to opt-in to the
demonstration that a party has fulfilled The Act provides that, upon the RFS program. One commenter
its individual renewable fuels obligation petition of a noncontiguous state or U.S. supported the approach in this final rule
on an annual basis, as compared to territory, EPA may apply the renewable that EPA use the EIA Short-term Energy
meeting specific gasoline content fuels requirements to gasoline produced Outlook published each October to
requirements. The renewable fuels in or imported into that noncontiguous assist in determining the percentage
obligation can be met through the use of state or U.S. territory at the same time standard and therefore a state can only
purchased RINs, and there is a deficit as, or any time after the promulgation of opt-in beginning with the first full
carry forward provision allowing regulations establishing the RFS compliance period of 2008. Another
compliance to be shown over more than program.30 In granting such a petition, commenter believed we should include
one year. In the event of a natural EPA may issue or revise the RFS a provision to allow noncontiguous
disaster, the volume of gasoline regulations, establish applicable volume states or territories to opt-in to the first
produced by an obligated party is also percentages, provide for generation of compliance period which starts
likely to drop, which would result in a credits, and take other actions as September 1, 2007. While we see the
reduction in the party’s renewable fuel necessary to allow for the application of merits of allowing a noncontiguous state
obligation. As a result, we believe that the RFS program in a noncontiguous or territory to opt-in to the first
an individual party would be able to state or territory. We believe that compliance period, we intend to
meet its renewable fuel obligation even approval of the petition does not require maintain the current approach and
in the event of a natural disaster that a showing other than a request by the allow noncontiguous states and
affects the party’s refinery or blending Governor of the State or the equivalent territories to opt-in beginning with the
facility. Therefore, unlike other fuels official of a Territory to be included in 2008 compliance year. The statute
programs, we do not believe there is a the program. clearly states that the program may
need to include a temporary hardship Today’s final rule will implement this apply to noncontiguous states and
exemption in the RFS rule to address an provision of the Act by providing a territories (that have petitioned EPA) at
individual party’s inability to comply process whereby the governor of a any time after these regulations have
with its renewable fuels obligation due noncontiguous state or territory may been promulgated. Given the short
to unforeseen circumstances. petition EPA to have the state or period of time between publication of
Most of the concerns raised by the territory included in the RFS program. the final rule and the effective date of
commenters relate to problems that The petition must be received by EPA the program, the need for a state and
would have a more regional or national on or before November 1 for the regulated parties to discuss opting-in
effect, as compared to affecting one or noncontiguous state or territory to be with knowledge of the final version of
a few individuals. In the event that included in the RFS program in the next the rule, and the requirement for EPA to
unforeseen circumstances do occur calendar year. A noncontiguous state or notify obligated parties with sufficient
which result in a shortage of renewable territory for which a petition is received lead time to any change in the standard,
fuel and available RINs, we believe that after November 1 would not be included EPA believes 2008 is the earliest
Congress provided an adequate in the RFS program in the next calendar practical date for an opt-in to be
mechanism for addressing such year, but would be included in the RFS effective. In addition, EPA notes that
situations in the Energy Act.29 The program in the subsequent year. For none of the noncontiguous states or
Energy Act provides that on petition by example, if EPA receives a petition on territories indicated a strong interest in
one or more States, EPA, in consultation September 1, 2007, the noncontiguous opting-in for the remainder of the 2007
with the Departments of Agriculture and state or territory would be included in compliance period.
Energy, may waive the required the RFS program beginning on January Where a noncontiguous state or
aggregate renewable fuels volume 1, 2008. If EPA receives a petition on territory opts-in to the RFS program,
obligation in whole or in part upon a December 1, 2007, the noncontiguous producers and importers of gasoline for
sufficient showing of economic or state or territory would be included in that state or territory will be obligated
environmental harm, or inadequate the RFS program beginning January 1, parties subject to the renewable fuel
supply. As a result, we believe that a 2009. We believe that requiring requirements. All refiners and importers
renewable fuel supply problem that petitions to be received by November 1 who produce or import gasoline for use
affects all parties can be addressed using is necessary to allow EPA time to make in a state or territory that has opted-in
this statutory provision. We have any adjustments in the applicable to the RFS program will be required to
carefully considered the comments; standard. The method for calculating comply with the renewable fuel
however, we do not believe that the the renewable fuels standard to reflect standard and will be able to separate
comments provide a compelling the addition of a state or territory that RINs from batches of renewable fuels in
rationale for providing a temporary has opted into the RFS program is the same manner as other obligated
hardship exemption from the RFS discussed in Section III.A. Because parties.
obligation based on unusual today’s regulations make EPA approval Once a petition to opt-in to the RFS
circumstances that goes beyond the of an opt-in petition automatic if it is program is approved by EPA, the state
provisions that Congress included in the signed by the appropriate authority and or territory would remain in the RFS
program and be treated as any of the 48
29 CAA section 211(o)(7), as added by Section 30 CAA Section 211(o)(2)(A)(ii), as added by contiguous states. We received a
1501(a) of the Energy Policy Act of 2005. Section 1501(a) of the Energy Policy Act of 2005. comment asserting that once a state or
territory opts-in, they should be prohibition on the sale or consumption territories which have opted-in to the
required to remain in the program for at of renewable fuels in that state. In fact, program as well. Once a state or
least 5 years. As stated earlier, EPA will the Act prohibits the regulations from territory has opted-in to the program,
recognize a state or territory that opts- restricting the geographic areas in which they will be treated as identical to any
in to the program as identical to any of renewable fuels may be used.32 other state and specific relief will not be
the 48 states. The current regulations do Renewable fuel use in the state in provided to regulated parties serving
not allow a state to opt-out and the only question would thus continue to be these areas after the approval of a
form of relief from the program is a driven by natural market forces and, waiver. Noncontiguous states and
waiver, in whole or in part, of the perhaps if the economics of ethanol territories should consider this in
national renewable fuel volume blending were less favorable than today, discussions with regulated parties
requirement. Noncontiguous states and the nationally-applicable renewable fuel before opting-in to the program.
territories should be aware of the standard.
obligations of the program and should Given that state petitions for a waiver Another commenter stated that EPA
only choose to opt-in if they expect to of the RFS program appear unlikely to should publish regulations outlining
meet those obligations for the indefinite affect renewable fuel use in that state, specific criteria that will be considered
future. If in the future a state believes we have not finalized regulations in reviewing a petition, so that the
EPA should change its regulations and providing more specificity regarding the public would have a more meaningful
allow an opt-out the state could petition criteria for a waiver or the ramifications opportunity to participate in the
EPA to change the regulations. As in of Agency approval of such a waiver in process. While EPA realizes that the
other situations where a party petitions terms of the level or applicability of the criteria provided by the statute are quite
EPA to revise its regulations, EPA standard. However, states can still general, the rationales of severe
would be in a position at that point to submit petitions to the Agency for a environmental or economic harm or
consider the concerns raised by the state waiver of the RFS requirements under inadequate domestic supply are
as well as other interested stakeholder the provision in the Energy Act and sufficient for a basic framework upon
and to determine whether it would be such petitions will be addressed by EPA which a petition can be built and
appropriate to revise the regulations. on a case-by-case basis. evaluated. Each situation in which a
We received several comments waiver may be requested will be unique,
b. State Waiver Provisions
objecting to the decision to not propose and promulgating a list of more specific
The Energy Act provides that EPA, in regulations detailing the waiver process
consultation with the U.S. Department criteria in the abstract may be counter-
and our rationale for not doing so. One productive. Communication between
of Agriculture (USDA) and the commenter stated that nothing in the
Department of Energy (DOE), may waive the petitioning state(s), EPA, DOE,
statute prevents relief from being USDA, and public and industry
the renewable fuels requirements in directed toward a state which has
whole or in part upon a petition by one stakeholders should begin early in the
requested the waiver by reducing the
or more states by reducing the national process, well before a waiver request is
renewable fuel obligation of refiners,
quantity of renewable fuel required submitted. This communication will
blenders, and importers who market
under the Act.31 The Act also outlines supply these federal agencies with a
gasoline in the affected state. Contrary
the basic requirements for such a to the commenter’s assertion, the statute knowledgeable background of the
waiver, such as a demonstration that states that, ‘‘[t]he Administrator * * * situation prompting the potential waiver
implementation of the renewable fuels may waive the requirements * * * by request. The waiver request may even
requirements would severely harm the reducing the national quantity of prove unnecessary after an initial
economy or environment of a state, a renewable fuel required’’.33 Congress’s investigation and analysis of the
region, or the United States or that there clear intent was to limit EPA’s authority situation. If not, and if the state
is an inadequate domestic supply of to provide relief under the state waiver continues to believe that a valid basis
renewable fuel. provision of section 211(o)(7). Relief for submission of a petition exists,
If EPA, after public notice and under that provision is limited to federal agencies can instruct the state(s)
opportunity for comment, approves a reducing the total national volume as to what more detailed information is
state’s petition for a waiver of the RFS required under the RFS program. Thus, needed for waiver approval. Petitions
program, the Act stipulates that the the renewable volume obligation for will be published in the Federal
national quantity of renewable fuel regulated parties would be reduced, but Register, as required by statute, to
required (Table I.B–1) may be reduced the reduced obligation would still apply provide public notice and opportunity
in whole or in part. This reduction to all obligated refiners, blenders and for comment.
could reduce the percentage standard importers, including those in the state A third commenter raised the point
applicable to all obligated parties. that requested the waiver. This may that there is no provision in the Act that
However, there is no provision in the provide some relief to the part of the would permit EPA to waive any
Act that would permit EPA to reduce or country submitting the petition, but obligations for specific entities in a state
eliminate any obligations under the RFS EPA is not authorized to grant other that has petitioned for a waiver, and in
program specifically for parties located more targeted relief such as reducing the the case of an emergency, such as a
within the state that petitioned for the percentage for some refiners and not
waiver. Thus all refiners, importers, and natural disaster, specific relief may be
others or refusing to count towards warranted. The commenter is correct in
blenders located in the state would still compliance renewable fuel that is
be obligated parties if they produce the observation that EPA cannot waive
produced or used in certain parts of the obligations for specific entities or
gasoline. In addition, an approval of a country. It should be noted here that
state’s petition for a waiver may not locations. However, the Act does
this approach holds true for states or
have any impact on renewable fuel use authorize EPA to waive the obligations
in that state since it would not be a 32 CAA Section 211(o)(2)(iii), as added by Section
of the program as it applies to all
1501(a) of the Energy Policy Act of 2005. obligated parties, in whole or in part,
31 CAA Section 211(o)(7), as added by Section 33 CAA Section 211(o)(7), as added by Section depending on the severity of the
1501(a) of the Energy Policy Act of 2005. 1501(a) of the Energy Policy Act of 2005. situation.
D. How Do Obligated Parties Comply program and minimizing the influence point of its production. Finally, the RIN
With the Standard? that the program has on the operation of will identify the year in which the batch
Under the Act, EPA is to establish a the market. was produced, a critical element in
In order to implement a program that determining the applicable time period
renewable fuel standard annually,
is based on production of a certain within which RINs are valid for
expressed as a percentage of gasoline
volume of renewable fuels, we are compliance purposes.
sold or introduced into commerce, that
finalizing a system of volume Although production volumes of
will ensure that overall a specified total
accounting and tracking of renewable renewable fuels intended for blending
national volume of renewable fuels will
fuels. We are requiring that this system into gasoline are a reasonably accurate
be used in gasoline in the U.S. The Act
be based on the assignment of unique surrogate for volumes ultimately
does not require each obligated party to
numbers to each batch of renewable blended into gasoline, changes can
necessarily do the blending themselves
fuel. These numbers are called occur at various times throughout the
in order to comply with this obligation. Renewable Identification Numbers or year in the volumes of renewable fuel
Rather, under the credit trading program RINs, and are assigned to each batch by that are in storage. These stock changes
required by the Act, each obligated the renewable fuel producer or involve the temporary storage of
party is allowed to satisfy its obligations importer. renewable fuel during times of excess
either through its own actions or The use of RINs allows the Agency to and can affect the length of time
through the transfer of credits from measure and track renewable fuel between production and ultimate use.
others who have more than satisfied volumes starting at the point of their While there may be seasonal
their individual requirements. production rather than at the point fluctuations in stocks due to seasonal
This section describes our final when they are blended into demand, these stock changes always
compliance program. It is based on the conventional fuels. Although an have a net change of zero over the long
use of unique renewable identification alternative approach would be to term since there is no economic benefit
numbers (RINs) assigned to batches of measure renewable fuel volumes as they to stockpiling renewable fuels. As a
renewable fuel by renewable fuel are blended into conventional gasoline result there is no need to account for
producers and importers. These RINs or diesel, measuring renewable fuel stock changes in our program.
can then be sold or traded, and volumes at the point of production Exports of renewable fuel represent
ultimately used by any obligated party provides more accurate measurements the only significant distribution
to demonstrate compliance with the that can be easily verified. For instance, pathway that could impair the use of
applicable standard. Excess RINs serve ethanol producers are already required production as a surrogate for renewable
the function of the credits envisioned by to report their production volumes to fuel blending into gasoline or other use
the Act and also provide additional EIA through Monthly Oxygenate as a motor vehicle fuel. However, our
benefits, as described below. We believe Reports. These data provide an approach accounts for exports through
that our approach is consistent with the independent source for verifying an explicit requirement placed upon
language and intent of the Act and volumes. The total number of batches exporters (discussed in Section III.D.4
preserves the natural market forces and and parties involved are also minimized below). As a result, we are confident
blending practices that will keep in this approach. The total number of that our approach satisfies the statutory
renewable fuel costs to a minimum. batches is smallest at the point of obligation that our regulations impose
1. Why Use Renewable Identification production, since batches are commonly obligations on refiners and importers
Numbers? split into smaller ones as they proceed that will ensure that gasoline sold or
through the distribution system to the introduced into commerce in the U.S.
Once renewable fuels are produced or each year will contain the volumes of
place where they are blended into
imported, there is very high confidence renewable fuel specified in the Act. By
conventional fuel. The number of
that all but de minimus quantities will tracking the amount of renewable fuel
renewable fuel producers is also far
in fact be blended into gasoline or produced or imported and subtracting
smaller than the number of blenders.
otherwise used as motor vehicle fuels, the amount exported, we will have an
Currently there just over 100 ethanol
except for exports. Renewable fuels are accurate accounting of the renewable
plants and 85 biodiesel plants in the
not used for food, chemicals, or as fuel actually consumed as motor vehicle
U.S., compared with approximately
feedstocks to other production fuel in the U.S. Exports of renewable
1200 blenders 34 based on IRS data.
processes. In fact the denaturant that fuel are discussed in more detail in
The assignment of RINs to batches of
must be added to ethanol is designed Section III.D.4.
renewable fuel at the point of their
specifically to ensure that the ethanol is
production also allows those batches to a. RINs Serve the Purpose of a Credit
primarily used as motor vehicle fuel. In
be identified according to various Trading Program
discussions with stakeholders prior to
categories important for compliance
release of the NPRM, it became clear According to the Act, we must
purposes. For instance, the RIN will
that other renewable fuels, including promulgate regulations that include
contain a component that specifies
biodiesel and renewable fuels used in provisions for a credit trading program.
whether a batch of ethanol was made
their neat (unblended) form, likewise The credit trading program allows a
from cellulosic feedstocks. This RIN
are not used in appreciable quantities refiner that overcomplied with its
component will be of particular
for anything other than motor vehicle annual RVO to generate credits
importance for 2013 and beyond when
fuel. Therefore if a refiner ensures that representing the excess renewable fuel.
the Act specifies a national volume
a certain volume of renewable fuel has The Act stipulates that those credits can
requirement for cellulosic biomass
been produced, in effect they have also then be used within the ensuing 12
ethanol. The RIN will also identify the
ensured that this volume will be month period, or transferred to another
Equivalence Value of the renewable fuel
blended into gasoline or otherwise used refiner that had not blended sufficient
which will often only be known at the
as a motor vehicle fuel. Focusing on renewable fuel into its gasoline to
production of renewable fuel as a 34 Those blenders who add ethanol to RBOB are satisfy its RVO. In this way the credit
surrogate for use of such fuel has many already regulated under our reformulated gasoline trading program permits current
benefits as far as streamlining the regulations. blending practices to continue wherein
some refiners purchase a significant gasoline or diesel or used in their neat registration process as described in
amount of renewable fuel for blending form as motor vehicle fuel. The NPRM Section IV.B. Company IDs will be used
into their gasoline while others do little described a number of significant primarily to determine compliance,
or none, thus providing a means for all problems that this approach would while the inclusion of facility IDs allows
refiners to economically comply with create, including the potential for the assignment of batch numbers unique
the standard. double-counting, increasing the number to each facility. The use of both
Our RIN-based program fulfills all the of parties subject to enforcement company and facility IDs is also
functions of a credit trading program provisions, and the loss of a distinction consistent with our approach in other
and thus meets the Act’s requirements. between cellulosic ethanol and other fuel programs. The batch number is
If at the end of a compliance period a forms of ethanol. We concluded that a chosen by the producer and includes
party had more RINs than it needed to blender-based approach to tracking five digits to allow for facilities that
show compliance with its renewable volumes of renewable fuel was inferior produce up to a hundred thousand
volume obligation, these excess RINs to our proposed program focusing on batches per year. In the NPRM we
would serve the function of credits and the point of production and proposed that batch numbers be
could be used or traded in the next importation. We did not receive any sequential values starting with 00001 at
compliance period. RINs can be comments supporting a blender-based the beginning of each year. Following
transferred to another party in an approach and, consistent with the release of the NPRM, some stakeholders
identical fashion to a credit. However, rationale provided in the proposed rule, expressed the desire to be able to align
our program provides additional have decided not to implement it. RIN batch numbers with numbers used
flexibility in that it permits all RINs to in other aspects of their business. As a
be transferred between parties before 2. Generating RINs and Assigning Them
result, we have determined that the
they are deemed to be in excess of a to Batches
requirement that the batch numbers be
party’s annual RVO at the end of the a. Form of Renewable Identification sequential is not necessary so long as
year. This is because a RIN serves two Numbers each batch number is unique within a
functions: It is direct evidence of Each RIN is generated by the producer given calendar year. Batches are
compliance and, after a compliance year or importer of the renewable fuel and described more fully in Section III.E.1.a.
is over, excess RINs serve the function uniquely identifies not only a specific The RR, D, and K codes together
of credits for overcompliance. Thus the batch, but also every gallon in that describe the nature of the renewable
RIN approach has the advantage of batch. The RIN consists of a 38- fuel and the RINs that are generated to
allowing real-time trading without character code having the following represent it. The RR code simply
having to wait until the end of the year form: represents the Equivalence Value for the
to determine excess. renewable fuel, multiplied by 10 to
As in other motor vehicle fuels credit RIN: KYYYYCCCCFFFFFBBBBB
eliminate the decimal place inherent in
programs, we are also requiring that any RRDSSSSSSSSEEEEEEEE
Equivalence Values. Equivalence Values
renewable producer that generates RINs Where: form the basis for the total number of
must use an independent auditor to K = Code distinguishing assigned RINs from RINs that can be generated for a given
conduct annual reviews of the party’s separated RINs.
volume of renewable fuel, and are
YYYY = Calendar year of production or
renewable production, RIN generation, import. described in Section III.B.4.
and RIN transactions. These reviews are CCCC = Company ID. The D code identifies cellulosic
called ‘‘attest engagements,’’ because the FFFFF = Facility ID. biomass ethanol batches as such. Since
auditor is asked to attest to the validity BBBBB = Batch number. the Act requires that a minimum of 250
of the regulated party’s credit RR = Code identifying the Equivalence Value. million gallons of cellulosic biomass
transactions. For example, the D = Code identifying cellulosic biomass ethanol be consumed starting in 2013,
reformulated gasoline program requires ethanol. obligated parties will need to be able to
attest engagements for refiners and SSSSSSSS = Start of RIN block. distinguish RINs representing cellulosic
EEEEEEEE = End of RIN block.
importers, and downstream oxygenate biomass ethanol from RINs representing
blenders to verify the underlying In response to the NPRM, one other types of renewable fuel. This
documentation forming the basis of the commenter requested that the full RIN requirement is discussed in more detail
required reports (40 CFR part 80, generation date, not just the year, be in Section III.A.
subpart F). In the case of RIN included in the RIN. We believe that In the NPRM, the K code served to
generation, the auditor is required to this is unnecessary and would unduly distinguish between standard-value
verify that the number of RINs generated lengthen the RIN. Compliance with the RINs and extra-value RINs, and it was
matched the volume of renewable fuels standard is determined on a calendar placed in the middle of the RIN. As
produced, that any extra value RINs are year basis, and the year of RIN described more fully in Section III.E.1.a,
appropriately generated, and that RIN generation is necessary in order to our final rule eliminates the need for a
numbers are properly transferred with ensure that RINs are used for distinction between standard-value
the renewable fuel as required by the compliance purposes only in the RINs and extra-value RINs, but requires
regulations. calendar year generated or the following a distinction between RINs that must be
year. See Section III.D.3.b. The full RIN transferred with a volume of renewable
b. Alternative Approach to Tracking generation date, while a potentially fuel (assigned RINs) and RINs that can
Batches useful piece of information in the be transferred without renewable fuel
If we had not implemented a RIN- context of potential enforcement (separated RINs). Thus for the final rule
based system for uniquely identifying, activities, is not necessary as a we have changed the purpose of the K
measuring, and tracking batches of component of the RIN since code. As described in Section III.E.2, we
renewable fuel, the RFS program would recordkeeping requirements contain this are requiring that RINs separated from
necessarily require that we measure same information and can be consulted volumes of renewable fuel be identified
renewable fuel volumes at the point in in the enforcement context. as such, by changing the K code from a
the distribution system where they are The company and facility IDs are value of 1 to a value of 2. Placing the
actually blended into conventional assigned by the EPA as part of the K code at the beginning of the RIN
makes this process more straightforward renewable fuel in inventory at the start The RIN block will often represent the
for obligated parties and oxygenate of the program that was produced prior actual number of gallons in the batch,
blenders who will be responsible for to September 1, 2007, we are also for cases where the Equivalence Value
changing the K code after separating a allowing them to generate RINs for such is 1.0. In other cases, the RIN block start
RIN from renewable fuel. renewable fuel. This provision ensures and RIN block end values in the batch-
The RIN also contains two codes that every gallon that a producer or RIN will not exactly correspond to the
SSSSSSSS and EEEEEEEE that together importer sells starting on September 1, volume of the batch. For instance, in
identify the ‘‘RIN block’’ which 2007 can have an assigned RIN, and cases where the Equivalence Value is
demarcates the number of gallons of obligated parties that take ownership of larger than 1.0, the number of gallon-
renewable fuel that the batch represents renewable fuel directly from a producer RINs generated will be larger than the
in the context of compliance. Depending or importer will have greater assurance number of gallons in the batch. In such
on the Equivalence Value, this may not of having access to RINs at the start of cases the batch will have a greater value
necessarily be the same as the actual the program. Other volumes of ethanol in terms of compliance than a batch
number of gallons in the batch. The in inventory in the distribution system with the same volume but an
methodology for designating the on September 1, 2007 will continue to Equivalence Value equal to 1.0.
SSSSSSSS and EEEEEEEE values is be sold and distributed without RINs. Likewise, a batch with an Equivalence
described in Section III.D.2.b below. Value less than 1.0 will have a smaller
In the NPRM we assigned six digits to In order to determine the number of
gallon-RINs that must be generated and value in terms of compliance than a
the RIN block codes to allow batches up batch with the same volume but an
to a million gallons in size. Based on assigned to a batch by a producer or
Equivalence Value equal to 1.0. In the
comments received, we have decided to importer, the actual volume of the batch
context of our modified approach to RIN
expand the number of digits to eight to must be multiplied by the Equivalence
distribution as described in Section
accommodate batches up to 100 million Value to determine an applicable ‘‘RIN
III.E.1, however, the transfer of RINs
gallons in size. Although it is highly volume’’:
with batches will be straightforward
unlikely that a single tank would hold VRIN = EV × Vs regardless of the number of gallon-RINs
this volume, we are adding a definition assigned to a particular volume of
Where:
of ‘‘batch’’ to our final regulations that renewable fuel, as every gallon-RIN will
VRIN = RIN volume, in gallons, representing
would allow this high volume to be always have the capability of covering
the number of gallon-RINs that must be
counted as a single batch for the generated (rounded to the nearest whole one gallon of an obligated party’s RVO.
purposes of generating RINs. gallon). In response to the NPRM, some
In the NPRM we pointed out that EV = Equivalence value for the renewable obligated parties requested that
‘‘RIN’’ can refer to either the number fuel. fractional RINs be used for cases in
representing an entire batch or the Vs = Standardized volume of the batch of which the Equivalence Value is less
number representing one gallon of renewable fuel at 60 °F, in gallons. than 1.0. Under this approach, every
renewable fuel in the context of gallon in a batch would still have an
compliance. In order to make the When RINs are first assigned to a
batch of renewable fuel by its producer assigned gallon-RIN, but those gallon-
distinction clear, we are defining the RINs would represent only a fraction of
latter as a gallon-RIN, and a batch-RIN or importer, the RIN block start for that
batch will in general be 1 (i.e., a gallon for compliance purposes. The
will represent multiple gallon-RINs. In commenters also argued that our
the case of a gallon-RIN, the values of SSSSSSSS will have a value of
00000001). The RIN block end value proposed system in which RINs are
SSSSSSSS and EEEEEEEE will be assigned to only a portion of a batch
identical. A batch-RIN, on the other EEEEEEEE will be equal to the RIN
volume calculated above. The batch-RIN would be unworkable given the need to
hand, will generally have different ensure that RINs remain assigned to
values for SSSSSSSS and EEEEEEEE, then represents all the gallon-RINs
assigned to the batch. Table III.D.2.b–1 batches as they travel through the
representing the starting and ending distribution system.
values of a batch of renewable fuel. provides some examples of the number
We continue to believe that the most
Examples of RINs are presented in the of gallon-RINs that would be assigned to
straightforward system calculates the
next section. a batch under different circumstances.
number of gallon-RINs representing a
b. Generating RINs batch as the product of the Equivalence
TABLE III.D.2.B–1.—EXAMPLES OF
Value and the actual volume of the
As described in Section III.E.1.a, we BATCH-RINS 35 batch. Then every gallon-RIN will have
have eliminated the distinction between the capability of covering one gallon of
standard-value RINs and extra-value Batch volume: 2000 gallons corn ethanol.
an obligated party’s RVO, and thus
RINs for this final rule. Instead, all Equivalence value: 1.0.
Gallon-RINs: 2000. every gallon-RIN has the same value.
gallon-RINs must be assigned to batches This is true both for renewable fuels
of renewable fuel by the producer or Batch-RIN: 1–2007–1234–12345–00001–10–
2–00000001–00002000. with Equivalence Values less than 1.0,
importer. Consistent with the NPRM, and renewable fuels with Equivalence
each gallon-RIN will continue to Batch volume: 2000 gallons biodiesel. Values greater than 1.0. Also, as
represent one gallon of renewable fuel Equivalence value: 1.5. described in Section III.E.1, we have
in the context of compliance. Gallon-RINs: 3000. modified our approach to the
Also consistent with the NPRM, we Batch-RIN: 1–2007–1234–12345–00002–15– distribution of RINs assigned to volumes
are requiring that RIN generation begin 2–00000001–00003000.
of renewable fuel. As a result, the batch-
at the same time that the renewable fuel splitting and batch-merging protocols
standard becomes applicable to Batch volume: 2000 gallons cellulosic eth-
anol. have become largely irrelevant, and thus
obligated parties. Thus RINs must be the transfer of renewable fuels having an
Equivalence value: 2.5.
generated for all renewable fuel Gallon-RINs: 5000.
produced or imported on or after Batch-RIN: 1–2007–1234–12345–00003–25– 35 RIN codes have been separated by hyphens in
September 1, 2007. Since many 1–00000001–00005000. this table for demonstrative purposes only. In actual
producers and importers will have use, no hyphens would be present in the RIN.
Equivalence Value less than 1.0 has A second case in which some volume of renewable fuel that the
become greatly simplified. We are renewable fuel would not have an obligated party must ensure is used in
therefore finalizing our proposed assigned RIN would occur for small the U.S. in a given calendar year. Since
approach in which renewable fuels volume producers. We are allowing the nationwide renewable fuel volumes
having an Equivalence Value less than renewable fuel producers who produce shown in Table I.B–1 are required by
1.0 result in fewer assigned gallon-RINs less than 10,000 gallons in a year to the Act to be consumed in whole
than gallons in a batch. avoid the requirement to generate RINs calendar years, each obligated party
Following release of the NPRM, we and assign them to batches. Such must likewise calculate its RVO on an
also identified some cases in which the producers would not contribute annual basis.
generation of RINs for a partially meaningfully to the nationwide pool of Since our program uses RINs as a
renewable fuel or blending component renewable fuel, and we do not believe measure of the amount of renewable
would result in double-counting of RINs that the very small business operations fuel used as motor vehicle fuel that is
generated. For instance, ethyl tertiary involved should be subject to the sold or introduced into commerce
butyl ether (ETBE) is made from burden of recordkeeping and reporting. within the U.S., obligated parties must
combining ethanol with isobutylene. Although two commenters disagreed meet their RVO through the
The ethanol is generally from corn, and that these small volume producers accumulation of RINs. In so doing, they
the isobutylene is generally from should be exempt from the requirement will effectively be causing the
petroleum. The ETBE producer may to generate RINs, they did not provide renewable fuel represented by the RINs
purchase ethanol from another source, compelling evidence that the exemption to be consumed as motor vehicle fuel.
and that ethanol may already have RINs would create a problem in the Obligated parties are not required to
assigned to it. In such cases it would not distribution system or provide an unfair physically blend the renewable fuel into
be appropriate for the ETBE producer to advantage to small producers. As a gasoline or diesel fuel themselves. The
generate additional RINs for the ETBE result we are finalizing this provision as accumulation of RINs is the means
made from that ethanol. Even if the proposed. Note that if a small producer through which each obligated party
ETBE producer purchased ethanol chooses to register as a renewable fuel shows compliance with its RVO and
without assigned RINs, our program producer under the RFS program, they thus with the renewable fuel standard.
design ensures that either RINs were will be subject to all the regulatory For each calendar year, each obligated
generated for the ethanol and separated provisions that apply to all producers, party is required to submit a report to
prior to purchase by the ETBE producer, including the requirement to assign the Agency documenting the RINs it
or RINs were legitimately not assigned RINs to batches. acquired and showing that the sum of
to the ethanol. The NPRM did not In the NPRM we proposed that a all gallon-RINs acquired is equal to or
address the potential for generating renewable fuel producer which also greater than its RVO. This reporting is
RINs twice for the same renewable fuel operated as an exporter would not be discussed in more detail in Section IV.
in these cases. Therefore, we are required to generate and assign a RIN to In the context of demonstrating
finalizing a provision prohibiting a any renewable fuel that it produced and compliance, all gallon-RINs have the
party from generating RINs for a exported. However, one commenter same compliance value. The Agency can
partially renewable fuel or blending pointed out that this approach could then verify that the RINs used for
component that it produces if the lead to confusion regarding which compliance purposes are valid by
renewable feedstock used to make the gallons should have an assigned RIN simply comparing RINs reported by
renewable fuel or blending component and which should not, given the producers to RINs claimed by obligated
was acquired from another party. Any complex nature of tracking volumes of parties. We can also verify simply that
RINs acquired with the renewable renewable fuel. As a result we have any given gallon-RIN was not double-
feedstock (e.g. ethanol) must be assigned determined that this provision should counted, i.e., used by more than one
to the product made from that feedstock be eliminated. Our final regulations obligated party for compliance
(e.g. ETBE). This approach is consistent require that producers assign RINs to all purposes. In order to be able to identify
with comments submitted by Lyondell renewable fuel, regardless of whether it the cause of any double-counting,
Chemical Company. is exported. Exports of renewable fuel however, additional information is
are discussed further in Section III.D.4. needed on RIN transactions as discussed
c. Cases in Which RINS Are Not in Section IV.
Generated 3. Calculating and Reporting If an obligated party has acquired
Although in general every batch of Compliance more RINs than it needs to meet its
renewable fuel produced or imported Under our program, RINs form the RVO, then in general it can retain the
must have an assigned batch-RIN, there basis of the volume accounting and excess RINs for use in complying with
are several cases in which a RIN may tracking system that allows each its RVO in the following year or transfer
not be assigned to a batch by a producer obligated party to demonstrate that they the excess RINs to another party. The
or importer. For instance, if the have met their renewable fuel obligation conditions under which this is allowed
renewable fuel was consumed within each year. This section describes how are determined by the valid life of a
the confines of the production facility the compliance process using RINs RIN, described in more detail in Section
where it was made, it would not be works. Our approach to the distribution III.D.3.b below. If, alternatively, an
acquired by either an obligated party or and trading of RINs is covered obligated party has not acquired
a gasoline blender. In such cases, the separately in Section III.E below. sufficient RINs to meet its RVO, then
RIN could not be separated from the under certain conditions it can carry a
batch and transferred separately since a. Using RINs To Meet the Standard deficit into the next year. Deficit
producers do not have this right. A RIN Under our program, each obligated carryovers are discussed in more detail
is assigned to renewable fuel when party must determine its Renewable in Section III.D.3.d.
ownership of the renewable fuel is Volume Obligation (RVO) based on the The regulations prohibit any party
transferred to another party. Since no applicable percentage standard and its from creating or transferring invalid
such transfer would occur in this case, annual gasoline volume as described in RINs. Invalid RINs cannot be used in
no RIN should be generated. Section III.A.4. The RVO represents the demonstrating compliance regardless of
the good faith belief of a party that the meaning that credits would only be price of credits as represented by RINs,
RINs are valid. These enforcement valid for compliance purposes for the and thus ethanol blends, could rise
provisions are necessary to ensure the following compliance year. Hence if a above the levels that would exist if no
RFS program goals are not compromised refiner or importer overcomplied with minimum required volumes existed.
by illegal conduct in the creation and their 2007 obligation they would The 12 month valid life creates some
transfer of RINs. generate credits that could be used to flexibility in the market to help mitigate
As in other motor vehicle fuel credit show compliance with the 2008 price fluctuations. The renewable fuels
programs, the regulations address the compliance obligation, but the credits market could also experience a
consequences if an obligated party is could not be used to show compliance significant drop in supply if, for
found to have used invalid RINs to for later years. Since RINs fulfill the role instance, a drought were to limit the
demonstrate compliance with its RVO. of credits, the statutory provisions production of the feedstocks needed to
In this situation, the refiner or importer regarding credits apply to RINs produce renewable fuel. Obligated
that used the invalid RINs will be The Act’s limit on credit life helps parties could use banked credits to
required to deduct any invalid RINs balance the risks between the needs of comply rather than carry a deficit into
from its compliance calculations. The renewable fuel producers and obligated the next year.
refiner or importer will be liable for parties. Producers are currently making In the context of our RIN-based
violating the standard if the remaining investments in expanded production program, we have been able to
number of valid RINs is insufficient to capacity on the expectation of a accomplish the same objective as the
meet its RVO, and the obligated party statutorily guaranteed minimum Act’s 12 month life of credits by
may be subject to additional monetary quantity demanded. Under the market allowing RINs to be used to show
penalties if it used invalid RINs in its conditions we are experiencing today compliance for the year in which the
compliance demonstration. See Section that make ethanol use more renewable fuel was produced and its
V of this preamble for further discussion economically attractive, the annual associated RIN first generated or for the
regarding liability for use of invalid volume requirements in the RFS following year. RINs not used for
RINs. program will not drive consumption of compliance purposes in the year in
Just as for RIN generators, we are also renewable fuels. However, if the price of which they were generated will by
requiring that obligated parties conduct crude oil dropped significantly or the definition be in excess of the RINs an
attest engagements for the volume of use of ethanol in gasoline became obligated party needed in that year,
gasoline they produce and the number otherwise less economically attractive, making excess RINs equivalent to the
of RINs procured to ensure compliance obligated parties could use stockpiled credits referred to in the Energy Act.
with their RVO. In most cases, this credits to comply with the program Excess RINs are valid for compliance
should amount to little more than is requirements. As a result, demand for purposes in the year following the one
already required under existing EPA renewable fuel could fall well below the in which they initially came into
gasoline regulations. In the case of RFS program requirements, and many existence.36 RINs not used within their
renewable fuel exporters, the attest producers could end up with a stranded valid life will expire. This approach
engagement will verify the volume of investment. The 12 month valid life satisfies the Act’s 12 month duration for
renewable fuel exported and therefore limit for credits minimizes the potential credits.
the magnitude of their RVO. Attest for this type of result. Thus we are requiring that every RIN
engagement reports must be submitted For obligated parties, the Act’s 12 be valid for the calendar-year
to the party that commissioned the month valid life for credits provides a compliance period in which it was
engagement and to EPA. See Section IV window within which parties who do generated or the following year. If a RIN
of this preamble for further discussion not meet their renewable fuel obligation was created in one year but was not
of the attest engagement requirements. through their own physical use of used by an obligated party to meet its
renewable fuel can obtain credits from RVO for that year, the RIN can be used
b. Valid Life of RINs
other parties who have excess. This for compliance purposes in the next
The Act requires that renewable fuel critical aspect of the trading system year (subject to certain provisions to
credits be valid for showing compliance allows the renewable fuels market to address RIN rollover as discussed
for 12 months as of the date of continue operating according to natural below). If, however, a RIN was created
generation. This section describes our market forces, avoiding the possibility in one year and was not used for
interpretation of this provision in the that every single refiner would need to compliance purposes in that year or in
context of our program wherein excess purchase renewable fuel for blending the next year, it will expire. In response
RINs fulfill the Act’s requirements into its own gasoline. But the 12 month to the NPRM, this approach was
regarding credits. life also provides a window within supported by a number of obligated
As discussed in Section III.D.1.a, we which banking and trading can be used parties and their representative
interpret the Act such that credits to offset the negative effects of associations. These commenters agreed
would represent renewable fuel fluctuations in either supply of or that allowing RINs to be used for the
volumes in excess of what an obligated demand for renewable fuels. For year generated or the following year was
party needs to meet their annual instance, if crude oil prices were to drop not only supported by the statutory
compliance obligation. Given that the significantly and natural market language, but was also an element of
renewable fuel standard is an annual demand for ethanol likewise fell, the program flexibility that would be
standard, obligated parties will RFS program would normally bring critical for offsetting the negative effects
determine compliance shortly after the demand back up to the minimum of potential fluctuations in either supply
end of the year, and credits would be required volumes shown in Table I.B–1. of or demand for renewable fuels.
identified at that time. Obligated parties But in this circumstance, the use of
will typically demonstrate compliance ethanol in gasoline would be less 36 The use of previous-year RINs for current year
by submitting a compliance economically attractive, since demand compliance purposes will also be limited by the 20
percent RIN rollover cap under today’s final rule.
demonstration to EPA. Given the 12- for ethanol would not be following price However, as discussed in the next section, we
month life of a credit as stated in the but rather the statutorily required believe that this cap will still provide a significant
Act, we interpret this provision as minimum volumes. As a result, the amount of flexibility to obligated parties.
However, in response to our NPRM, the deficit carryover provision allows life for RINs virtually meaningless in
other commenters said that the Energy any obligated party to fail to meet its practice.
Act’s 12-month credit life provision RVO in one year if it meets the deficit RIN rollover also undermines the
should be interpreted as applying and its RVO in the next year. If several ability of a limit on credit life to
retrospectively, not prospectively. obligated parties took advantage of this guarantee a market for renewable fuels.
Under this approach, the 12-month provision, it could result in the As described in Section III.D.3.b, if the
timeframe in the Act would be nationwide total volume obligation for a natural market demand for ethanol was
interpreted to refer to the full calendar particular calendar year not being met. higher than the volumes required under
year within which a credit was In a similar fashion, the statutory the RFS program for several years in a
generated. Under this alternative requirement that every gallon of row, as may occur in practice, obligated
approach no RINs could be used for cellulosic biomass ethanol be treated as parties could amass RINs that, in the
compliance purposes beyond the 2.5 gallons for the purposes of extreme, could be used entirely in lieu
calendar year in which they originally compliance means that the annually of actually demanding ethanol in some
came into existence. As discussed required volumes of renewable fuel subsequent year.
below, we do not believe that this could be met in part by virtual, rather As described in the NPRM, we believe
approach is appropriate. than actual, volumes. Finally, the that the rollover issue must be
Commenters who supported the calculation of the renewable fuel addressed. The Act’s provision
retrospective approach to the Act’s 12- standard is based on projected regarding the valid life of credits is
month credit life provision argued that nationwide gasoline volumes provided clearly intended to obtain the benefits
the Energy Act could have been written by EIA (see Section III.A). If the associated with a limited credit life.
to explicitly allow a valid life of projected gasoline volume falls short of Any program structure in which some
multiple years if that had been the actual gasoline volume in a given RINs effectively have an infinite life,
Congress’ intent. In response, the Act year, the standard will fail to create the regardless of the technical life of
explicitly indicates that obligated demand for the full renewable fuel individual RINs, does not appropriately
parties may either use the credits they volume required by the Act for that achieve the benefits expected from the
have generated or transfer them. For a year. The Act contains no provision for Act’s provision regarding the 12-month
party to be able to use credits generated, correcting for underestimated gasoline life of credits. The authority to establish
such credit use must necessarily occur volumes. Additional responses to the a credit program and to implement a
in a compliance year other than the one issues raised by commenters on RIN life limited life for credits includes the
in which the credit was generated. Thus can be found in the S&A document. authority to limit actions that have the
we do not believe that a retrospective practical effect of circumventing this
approach to the Act’s 12-month credit c. Cap on RIN Use To Address Rollover limited credit life.
life provision is consistent with the As described in Section III.D.3.b To be consistent with the Act, we
explicit credit provisions of the Act. In above, RINs are valid for compliance believe that the rollover issue should be
addition, we believe that an purposes for the calendar year in which addressed in our regulations. However,
interpretation leading to a valid life of they are generated or the following year. we also believe that the limits to
one year after the year in which the RIN We believe that this approach is most preclude such unhindered rollovers
was generated is most consistent with consistent with the Act’s prescription should not preclude all previous-year
the program as a whole. In comparison that credits be valid for compliance RINs from being used for current-year
to a single-year valid life for RINs, our purposes for 12 months as of the date of compliance. To accomplish this, we
approach provides some additional generation. Our approach is intended to must restrict the number of previous-
compliance flexibility to obligated address both the risk taken by producers year RINs that can be used for current
parties as they make efforts to acquire expecting a guaranteed demand to cover year compliance. To this end, we
sufficient RINs to meet their RVOs each their expanded production capacity proposed a 20 percent cap on the
year. This flexibility will have the effect investments and the risk taken by amount of an obligated party’s
of keeping fuel costs lower than they obligated parties who need a guaranteed Renewable Volume Obligation (RVO)
would otherwise be. supply in order to meet their regulatory that can be met using previous-year
In the comments we received on the obligations under this program. RINs. After review of the comments we
NPRM, one objection to our proposed However, the use of previous year received on the NPRM, we have decided
approach was that the use of RINs RINs to meet current year compliance to finalize this provision. Thus each
generated in one compliance period to obligations does create an opportunity obligated party will be required to use
satisfy obligations in a subsequent for effectively circumventing the valid current-year RINs to meet at least 80
compliance period could result in less life limit for RINs. This can occur in percent of its RVO, with a maximum of
renewable fuel used in a given year than situations wherein the total number of 20 percent being derived from previous-
is set forth in the statute. While this is RINs generated each year for a number year RINs. Any previous-year RINs that
true, we believe this approach is most of years in a row exceeds the number of an obligated party may have that are in
consistent with the Act, as described RINs required under the RFS program excess of the 20 percent cap can be
above. The Act clearly set up a credit for those years. The excess RINs traded to other obligated parties that
program with a credit life, meaning generated in one year could be used to need them. If the previous-year RINs in
Congress intended parties to use credits show compliance in the next year, excess of the 20 percent cap are not
in some cases instead of blending leading to the generation of new excess used by any obligated party for
renewable fuel. The Act is best read to RINs in the next year, causing the total compliance, they will expire. The net
harmonize all of its provisions. In number of excess RINs in the market to result will be that, for the market as a
addition, we note that other provisions accumulate over multiple years despite whole, no more than 20 percent of a
of the Act may lead to less renewable the limit on RIN life. The NPRM given year’s renewable fuel standard can
fuel use in a given year than the included examples of how this be met with RINs from the previous
statutorily-prescribed volumes, but ‘‘rollover’’ might occur. The rollover year.
Congress adopted them and intended issue would in some circumstances As described in the NPRM, we believe
that they could be used. For instance, essentially make the applicable valid that the 20 percent cap provides the
appropriate balance between, on the one waiver would not occur in a timely provision allowing the cap to be raised
hand, allowing legitimate RIN fashion. The availability of excess in the event that supply shortfalls
carryovers and protecting against previous-year RINs would thus provide overwhelmed the 20 percent cap. Under
potential supply shortfalls that could compliance certainty in the event that this conditional provision, the Agency
limit the availability of RINs, and on the the supply of current-year RINs falls would monitor standard indicators of
other hand ensuring an annual demand below the RFS program requirements agricultural production and renewable
for renewable fuels as envisioned by the and the Agency does not waive any fuel supply to determine if sufficient
Act. We believe this approach also portion of the program requirements. volumes of renewable can be produced
provides the certainty all parties desire In contrast to obligated parties, to meet the RFS program requirements
in implementing the program. The same renewable fuel producers provided in a given year. Prior to the end of a
cap will apply equally to all obligated comments on the NPRM indicating that compliance period, if the Agency
parties, and the cap will be the same for 10 percent would be more appropriate. determined that a supply shortfall was
all years, providing certainty on exactly They argued that a 10 percent cap was imminent, it could raise the cap to
how obligated parties must comply with closer to their preferred approach to RIN permit a greater number of previous-
their RVO going out into the future. A life in which the Act’s 12-month life of year RINs to be used for current-year
20 percent cap will be readily a credit is interpreted as allowing RINs compliance. Although this approach
enforceable with minimal additional to be used for compliance purposes only would not change the required volumes,
program complexity, as each obligated in the year in which they are generated. it could create some additional
party’s annual report will simply We continue to believe that a cap set temporary flexibility. However, we did
provide separate listings of previous- at 20 percent is appropriate, and the not propose this provision, and
year and current-year RINs to establish comments submitted in response to the commenters did not address it. We do
that the cap has not been exceeded. A NPRM did not provide compelling not believe it is necessary, and thus we
20 percent cap will have no impact on evidence to the contrary. The level of 20 have not finalized it.
who could own RINs, their valid life, or percent is consistent with past ethanol Finally, the cap is designed to prevent
any other regulatory provision regarding market fluctuations. As described above, the rollover of RINs generated two years
compliance. the largest single-year drop in ethanol ago from being used for compliance
supply occurred in 1996 and resulted in purposes in the current year. No RINs
Some NPRM commenters did not 21% less ethanol being produced than were generated in 2006 when the
perceive a problem with the RIN in 1995. While future supply shortfalls default standard of 2.78 percent was in
rollover issue and argued for no rollover may be larger or smaller, the effect on a collective basis, so the first
cap or at least for a more flexible one. circumstances of 1996 provide one year in which RINs will be generated is
They pointed to the need for maximum example of their potential magnitude. 2007. Consequently, the first year in
flexibility in responding to fluctuations We believe that a cap of 20 percent is which there could be rollover would be
in the market, and they were primarily a reasonable way to limit RIN rollover 2009. Therefore, we proposed that the
concerned about potential supply and provide some assurances to cap would not be effective until
problems. For instance, if a drought renewable fuel producers regarding compliance year 2009. Two commenters
were to reduce the availability of corn demand for renewable fuel. A cap of 20 pointed out that this approach could
for ethanol production, there may percent also ensures that many under some scenarios lead to a situation
simply not be sufficient RINs available previous-year RINs can still be used for in which more than 20 percent of the
for compliance purposes. A drought current year compliance, providing RINs used for compliance purposes in
situation actually occurred in 1996, and some flexibility in the event of market 2008 were actually generated in the
as a result 1996 ethanol production was disruptions. previous year, 2007. EPA believes that
21% less than it had been in 1995. In Given the competing needs expressed implementing the rollover cap in 2008
1997, production had not yet returned by renewable fuel producers and would, indeed, prevent the initiation of
to the 1995 levels. Moreover, there is no refiners, a rollover cap of 20 percent an excess buildup of past RINs. In
guarantee that future droughts, should also balances the risk taken by addition, it would simplify the
they occur, would result in a reduction producers of renewable fuels expecting regulations, since there would be no
in ethanol production of only 21 a guaranteed quantity demanded to need for an exception from the RIN cap
percent. As a result, in the NPRM we cover their production capacity for 2008. Consequently we are finalizing
requested comment on whether a higher investments and the risk taken by the 20 percent cap to apply to all years,
cap, such as 30 percent, would be more obligated parties who need a guaranteed including 2008.
appropriate. A number of refiners and supply in order to meet their regulatory
refinery associations commented that 30 obligations under this program. We are d. Deficit Carryovers
percent would indeed provide them therefore finalizing a rollover cap of 20 The Energy Act also contains a
with the additional flexibility they percent. provision allowing an obligated party to
would need in the case of a significant In the NPRM we also considered an carry a deficit forward from one year
market disruption. Some requested a alternative approach whereby we would into the next if it cannot comply with
cap of 40 percent or even no cap at all. set the cap annually based on the actual its RVO. However, deficits cannot be
These parties also expressed concern excess renewable fuel production. We carried over two years in a row.
that, although the Agency has the did not propose this approach, and Deficit carryovers are measured in
authority to waive the required commenters did not support it. We have gallons of renewable fuel, just as for
renewable fuel volumes in whole or in determined that fixing the cap at 20 RINs and RVOs. If an obligated party
part in the event of inadequate domestic percent both provides certainty to the does not acquire sufficient RINs to meet
supply, this can occur only on petition RIN market and ensures that some its RVO in a given year, the deficit is
by one or more states and then only minimum level of flexibility exists for calculated by subtracting the total
after consultation with both the individual obligated parties even in a number of RINs an obligated party has
Department of Agriculture and the market without excess RINs. acquired from its RVO. There are no
Department of Energy. Some obligated We also requested comment on volume penalties, discounts, or other
parties expressed concern that such a whether the Agency should adopt a factors included when calculating a
deficit carryover. As described in be made up in the following year. on the volume of renewable fuel
Section III.D.1, the deficit is then added Finally, any threshold we could set to exported. One commenter supported
to the RVO for the next year. The demonstrate an obligated party’s this alternative approach, explaining
calculation of the RVO as described in inability to generate or purchase that the proposed approach of requiring
Section III.A.4 shows how a deficit sufficient credits would likely require a the exporter to acquire sufficient RINs to
would be carried over into the next year: comprehensive investigation of their offset an RVO equal to the exported
RVOi = (Stdi × GVi) + Di-1 opportunities to acquire RINs. Such volume would place a significant
Where:
investigations would consume Agency recordkeeping burden on exporters.
resources that would be better spent, in This commenter also expressed concern
RVOi = The Renewable Volume Obligation
for the obligated party for year i, in
terms of ensuring that the goals of the that exporters would receive no value in
gallons. Act are met, on other compliance return for compliance with an RVO. We
Stdi = The RFS program standard for year i, enforcement matters. Therefore, we do not believe that these are compelling
in percent. have not set any thresholds in the final reasons to place the burden for exported
GVi = The non-renewable gasoline volume rule. renewable fuel on obligated parties. Not
produced by an obligated party in year only would this alternative approach
i, in gallons. 4. Provisions for Exporters of Renewable
Fuel have required an estimate of the volume
Di-1 = Renewable fuel deficit carryover from
the previous year, in gallons. of renewable fuel exported in the next
As described in Section III.D.2.a, we year, but would also mean that every
If an obligated party does not acquire believe that U.S. consumption of obligated party would share in
sufficient RINs to meet its RVO in year renewable fuel as motor vehicle fuel can accumulating RINs to cover the
i-1, the obligated party must procure be measured with considerable accuracy activities of other parties not under their
sufficient RINs to cover the full RVO for through the tracking of renewable fuel control.
year i including the deficit. There are no production and importing records. This
In the NPRM we pointed out that in
provisions allowing for another year of is the basis for our RIN-based system of
specific circumstances involving
carryover. If the obligated party does not compliance. However, exports of
exports of renewable fuels, the need for
acquire sufficient RINs to meet its RVO renewable fuel must be accounted for
RINs might not be necessary. For
for that year plus the deficit carryover under this approach. For instance, if a
instance, if the exporter was wholly
from the previous year, it will be in gallon of ethanol is produced in the U.S.
owned by a renewable fuel producer,
noncompliance. but consumed outside of the U.S., the
The Act indicates that deficit RIN associated with that gallon is not there would be no need to generate RINs
carryovers are to occur due to valid for RFS compliance purposes for the exported product. We therefore
‘‘inability’’ to generate or purchase since the RFS program is intended to proposed to allow exported product to
sufficient credits. We believe that require a specific volume of renewable be excluded from the exporter’s RVO if
obligated parties will make a fuel to be consumed in the U.S. Exports the exporter was also the producer and
determined effort to satisfy their RVO of renewable fuel currently represent no RINs were generated for that product.
on an annual basis and that a deficit about 5 percent of U.S. production, However, one commenter pointed out
will demonstrate that they were unable though the exact value varies each year. that this approach could lead to
to do so. Thus, we did not propose that To ensure that renewable fuels confusion regarding which gallons
any particular demonstration of exported from the U.S. cannot be used should have an assigned RIN and which
‘‘inability’’ be a prerequisite to the by an obligated party for RFS should not, given the complex nature of
ability of obligated parties to carry compliance purposes, the RINs tracking volumes of renewable fuel. As
deficits forward. However, one associated with that exported renewable a result we have determined that this
commenter requested that we should fuel must be removed from circulation. provision should be eliminated. Our
establish some sort of standard or For this final rule we have concluded final regulations require producers to
threshold that obligated parties must that it should be the exporter’s assign RINs to all renewable fuel,
meet before they would be allowed to responsibility to account for exported regardless of whether it is exported. In
use the deficit carryover provision. renewable fuel in our RIN-based this case the renewable producer would
Although the commenter provided no program. We are therefore requiring that merely use these RINs to cover its
suggestions regarding how such a an RVO be assigned to each exporter obligation as an exporter.
threshold could be established, he that is equal to the annual volume of As described in Section III.D.2, there
indicated that in the absence of such a renewable fuel it exported. Just as for are cases in which there is not a one-to-
threshold obligated parties could obligated parties, then, the exporter is one correspondence between gallons in
potentially use the deficit carryover required to acquire sufficient gallon- a batch of renewable fuel and the gallon-
provision to undermine the amount of RINs to meet its RVO. If the exporter RINs generated for that batch. If the
actual renewable fuel used in a given purchases renewable fuel directly from RVO assigned to the exporter were
year. a producer, that renewable fuel will based strictly on the actual volume of
We agree that the deficit carryover come with associated gallon-RINs which the exported product, it would not
provision could result in less renewable can then be applied to its RVO under necessarily capture all the gallon-RINs
fuel being consumed in a given year our program. In this circumstance, the which were generated for that exported
than is required by the Act, especially exporter will not need to acquire RINs volume. Thus we are requiring that the
if several obligated parties took from any other source. If, however, the RVO assigned to an exporter be based
advantage of it at the same time. exporter receives renewable fuel not on the actual volume of renewable
However, in any given year some parties without the associated RINs, it will need fuel exported, but rather on a volume
may be making up deficits from a prior to acquire RINs from some other source adjusted by the Equivalence Value
year, while other parties might be in order to meet its RVO. assigned to each batch. The Equivalence
generating deficits. This fact will tend to In the NPRM we presented an Value is represented by the RR code
reduce the net effect in any given year, alternative approach which would have within the RIN as described in Section
and regardless, the deficit in demand in increased the obligation placed on III.D.2.a. Thus the exporter must
one year will by regulatory requirement refiners and importers of gasoline based multiply the actual volume of a batch by
that batch’s Equivalence Value to obtain obligated party had not exceeded the 20 EPA’s final program was developed in
the volume used to calculate the RVO. percent cap to address RIN rollover, as light of the somewhat unique aspects of
In cases wherein an exporter obtains described in Section III.D.3.c. the RFS program. As discussed earlier,
a batch of renewable fuel whose RIN has In order to verify compliance for each under this program the refiners and
already been separated by an obligated obligated party, the primary Agency importers of gasoline are the parties
party or blender, the exporter may not activity will involve the validation of obligated to comply with the renewable
know the Equivalence Value. We are RINs. The Agency will perform the fuel requirements. At the same time,
requiring that for such cases the following four basic elements of RIN refiners and importers do not generally
exporter use the equivalence value validation: produce or blend renewable fuels at
applicable to that type of renewable fuel (1) RINs used by an obligated party to their facilities and so are dependent on
(e.g., 1.5 for biodiesel). However, in the comply with its RVO will be checked to the actions of others for the means of
case of ethanol, the same product could ensure that they are within their two- compliance. Unlike EPA’s other fuel
have been produced as corn ethanol or year valid life. The RIN itself will programs, the actions needed for
cellulosic ethanol. Thus, in the case of contain the year of generation, so this compliance largely center on the
ethanol, if the exporter does not know check involves only an examination of production, distribution, and use of a
the equivalence value we are requiring the listed RINs. product by parties other than refiners
that the exporter use the actual volume (2) All RINs owned by an obligated and importers. In this context, we
of the batch to calculate its RVO. This party will be cross-checked with reports believe that the RIN transfer mechanism
will introduce some small error into the from renewable fuel producers to verify should focus primarily on facilitating
calculation of the RVO for cases in that each RIN had in fact been compliance by refiners and importers
which the ethanol had in fact been generated. and doing so in a way that imposes
assigned an Equivalence Value of 2.5. (3) All RINs used by an obligated minimum burden on other parties and
However, we believe that the potential party for compliance purposes will be minimum disruption of current
impact of this on the overall program cross-checked with annual reports from mechanisms for distribution of
will be exceedingly small. other obligated parties to ensure that no renewable fuels.
two parties used the same RIN to Our final program does this by relying
5. How Will the Agency Verify comply. on the current market structure for
Compliance? (4) Previous-year RINs used for ethanol distribution and use and
The primary means through which compliance purposes will be checked to avoiding the need for creation of new
the Agency will verify an obligated ensure that they do not exceed 20 mechanisms for RIN distribution that
party’s compliance with its RVO will be percent of the obligated party’s RVO. are separate and apart from this current
the annual compliance demonstration In cases where a RIN is highlighted structure. Our program basically
reports. These reports will include a under suspicion of being invalid, the requires RINs to be transferred with
variety of information required for Agency will then need to take renewable fuel until the point at which
compliance and enforcement, including additional steps to resolve the issue. In the renewable fuel is purchased by an
the demonstration of compliance with general this will involve a review of RIN obligated party or is blended into
the previous calendar year’s RVO, a list transfer records submitted quarterly to gasoline or diesel fuel by a blender. This
of all transactions involving RINs, and the Agency by all parties in the approach allows the RIN to be
the tabulation of the total number of distribution system that held the RINs. incorporated into the current market
RINs owned, used for compliance, RIN transfers will be recorded through structure for sale and distribution of
transferred, retired and expired. EPA’s Central Data Exchange as renewable fuel, and avoids requiring
Reporting requirements for obligated described in Section IV. These RIN refiners to develop and use wholly new
and non-obligated parties are covered in transfer records will permit the Agency market mechanisms. While the
detail in Section IV. to identify all transaction(s) involving development of new market
In its annual reports, an obligated the RINs in question. The Agency can mechanisms to distribute RINs is not
party will be required to include a list then contact liable parties and take precluded under our program, it is also
of all RINs held as of the reporting date, appropriate steps to formally invalidate not required.
divided into a number of categories. For a RIN improperly claimed by a In the NPRM the Agency also
instance, a distinction must be made particular party. Additional details of evaluated several options for
between current-year RINs and the liabilities and prohibitions distributing RINs other than the option
previous-year RINs as follows: attributed to parties in the distribution incorporated into today’s rule. We are
Current-year RINs: RINs that came system are discussed in Section V. not finalizing these alternatives because
into existence during the calendar year they tend to require the development of
E. How Are RINs Distributed and
for which the report is demonstrating new market mechanisms, as compared
Traded?
compliance. to relying on the current market
Previous-year RINs: RINs that came Under our final program structure, a structure for distribution of ethanol, and
into existence in the calendar year Renewable Identification Number (RIN) they are less focused on facilitating
preceding the year for which the report must (with certain exceptions) be compliance for the obligated parties.
is demonstrating compliance. generated for all renewable fuel
The report must also indicate which produced or imported into the U.S., and 1. Distribution of RINs With Volumes of
RINs have been used for compliance RINs must be acquired by obligated Renewable Fuel
with the RVO including any potential parties for use in demonstrating We are requiring that RINs be
deficit, which current-year RINs have compliance with the RFS requirements. transferred with volumes of renewable
not been used for compliance and are However, as described in the NPRM, fuel as they move through the
therefore valid for compliance the next there are a variety of ways in which distribution system, until ownership of
year, and which previous-year RINs RINs could theoretically be transferred those volumes is assumed by an
have not been used for compliance and from the point of generation by obligated party, exporter, or a party that
therefore expire. The report must also renewable fuel producers to the converts the renewable fuel into motor
include a demonstration that the obligated parties that need them. vehicle fuel. At such time, RINs can be
separated from the volumes and freely renewable fuel producer in cases where result the producer may not receive any
traded. This approach places certain the renewable fuel in question had an economic benefit from them. Therefore,
requirements on anyone who takes Equivalence Value greater than 1.0. We for the case of cellulosic biomass and
ownership of renewable fuels, including proposed that all standard-value RINs waste-derived ethanol we are
renewable fuel producers, importers, must be assigned to volumes of maintaining the ability of the producer,
marketers, distributors, blenders, and renewable fuel, but that producers should they so choose, to retain the
terminal operators. should have the option of whether to extra value and not assign these RINs to
assign extra-value RINs to batches. We the renewable fuel that they represent.
a. Responsibilities of Renewable Fuel
took this approach in part out of In such cases, the producer of the
Producers and Importers
concern that the assignment of extra- cellulosic biomass or waste-derived
The initial generation of RINs and value RINs to volumes would mean that ethanol would be required to change the
their assignment to batches of renewable the number of gallon-RINs assigned to a K code from 1 to 2 in order to designate
fuel will be the sole responsibility of batch could be greater than the number these extra RINs as separated RINs.
renewable fuel producers and renewable of gallons in that batch. This was of This approach is also consistent with
fuel importers. As described in Section particular concern for ethanol, since a one of the primary motivations for the
III.D.1, volumes of renewable fuel can tank could contain both corn-ethanol approach described in our NPRM,
be measured most accurately and be and cellulosic ethanol. When volume namely that each gallon-RIN be allowed
more readily verified at these was withdrawn from the tank, it would to have a value of 1.0 to facilitate
originating locations. have been unclear whether the volume trading. Even though different
The final rule defines a batch of should be assigned the extra-value RINs renewable fuels will have different
renewable fuel as a volume that has or not. In the process of designing the Equivalence Values and therefore
been assigned a unique batch-RIN. This proposed program structure to different numbers of gallon-RINs per
simple and flexible definition of a batch accommodate such situations, however, gallon, each gallon-RIN will still count
allows renewable fuel producers and the program became more complicated as one gallon of renewable fuel for RFS
importers to construct each batch-RIN than it needed to be. compliance purposes.
based on the particular circumstances In response to the NPRM, some However, the distinction between
associated with the batch. In this commenters requested that extra-value standard-value RINs and extra-value
context, a batch is not confined to the RINs be treated just like standard-value RINs is no longer necessary. The total
volume that can be held in a tank, but RINs. Specifically, some obligated number of gallon-RINs that can be
instead can include a significantly larger parties, as well as gasoline marketers generated for a given batch of renewable
volume. However, we are placing two and distributors, argued that all RINs, be fuel will be determined directly by its
limits on the volumes of renewable fuel they standard-value or extra-value, Equivalence Value as described in
that are identified as a single batch. should be required to travel with Section III.D.2.b, and all such gallon-
First, the RIN contains only enough volumes of renewable fuel so that they RINs will be summarized in a single
digits to permit the assignment of will all be equally available to the batch-RIN assigned to a batch. In cases
99,999,999 gallon-RINs to a single batch. obligated parties that need them for where the Equivalence Value is greater
For corn-ethanol with an Equivalence compliance. These commenters than 1.0, there will be more gallon-RINs
Value of 1.0, this means that a single expressed concern that some producers assigned to a batch of renewable fuel
batch can be comprised of up to may not release extra-value RINs, if than gallons in that batch. Once again,
99,999,999 gallons of ethanol. In given the choice, in an effort to drive up in the context of the changes we are
contrast, for biodiesel with an demand for renewable fuel. making to the RIN distribution program
Equivalence Value of 1.5, a single batch After further consideration, we have structure as described in Section
can contain up to 66,666,666 gallons of determined that in most cases there is III.E.1.b below, we do not believe that
biodiesel. Second, in order to provide no need to treat extra-value RINs this will in any way complicate the
more clarity in the event that an differently from standard-value RINs in process of distributing RINs with
investigation of a party’s volume and terms of whether each should be renewable fuel. For the specific case of
RIN generation records is conducted, we assigned to batches of renewable fuel by cellulosic biomass or waste-derived
are also limiting a batch to the the producer or importer. Therefore, for ethanol with an Equivalence Value of
maximum volume that is produced or most renewable fuels we are finalizing 2.5, producers will be required to assign
imported by the renewable fuel a requirement that all RINs be assigned only one gallon-RIN to each gallon of
producer or importer within a calendar to batches of renewable fuel by the ethanol, each of which has a K code
month. Within these two limits, producer or importer. Since each value of 1. The additional 1.5 gallon-
producers and importers can define renewable fuel with a different RINs that can be generated for each
batches of renewable fuel according to Equivalence Value is a distinct fuel, gallon can remain unassigned, and thus
their own discretion and practices, producers and importers will still be assigned a K code value of 2.
including using individual tankfulls to receive the added value of extra-value In addition to cases where the
represent each batch. These parties must RINs that are assigned to volumes of Equivalence Value is greater than 1.0,
designate a unique serial number for renewable fuel if those volumes are there are several other cases in which
each batch (RIN code BBBBB) and priced appropriately in comparison to the gallon-RINs assigned to a batch will
specify its Equivalence Value. The other renewable fuels with different not exactly correspond to the number of
batch-RIN will identify all the gallon- Equivalence Values. The only exception gallons in that batch. First, if a
RINs assigned to the batch. See Section to this is cellulosic biomass and waste- renewable fuel has an Equivalence
III.D.2.a for details on the format for derived ethanol. Producers of such Value less than 1.0, then there will be
RINs. ethanol may have difficulty marketing fewer gallon-RINs than gallons in the
In the NPRM, we proposed different their product at prices different than batch. Such potential circumstances are
approaches to the assignment of that for corn ethanol given the fungible described in Section III.D.2.c. RINs may
standard-value RINs and extra-value distribution system for ethanol. The also not correspond exactly to gallons if
RINs. Under the proposal, extra-value added value of the extra-value RINs may the density of the batch changes due to
RINs could be generated by the not be reflected in the price and as a changes in temperature. For instance,
under extreme changes in temperature, producers and importers of renewable PTDs, we are also requiring that the PTD
the volume of a batch of ethanol can fuel the flexibility to determine which transferring ownership of the volume
change by 5 percent or more. For this of the volumes they own on September must indicate whether RINs are being
reason we are requiring that all batch 1, 2007 constitute production as of the transferred and the number of gallon–
volumes be corrected to represent a start of the program. RINs being transferred, though it need
standard condition of 60 °F prior to the Although a RIN is generated when not list the actual RINs.
assignment of a RIN. For ethanol,37 we renewable fuel is produced or imported, As described in Section III.E.1.b
are requiring that the correction be done we do not define the point of below, while assigned RINs must always
as follows:38 production. However, the RIN must be be transferred to another party with a
Vs,e = Va,e × (¥0.0006301 × T + 1.0378) assigned to a batch no later than the volume of renewable fuel, we are
point in time when ownership of the allowing any party that received
Where:
batch is transferred from the producer or assigned RINs with renewable fuel to
Vs,e = Standard volume of ethanol at 60 °F, in
importer to another party. If ownership thereafter transfer anywhere from zero
gallons.
Va,e = Actual volume of ethanol, in gallons. of the batch is retained by the producer to 2.5 gallon-RINs with each gallon of
T = Actual temperature of the batch, in °F. or importer after the batch leaves the renewable fuel. This provision provides
originating facility, the RIN need not be the flexibility to transfer more assigned
Since batches of ethanol are generally transferred along with the batch on RINs with some volumes and less
sold using standard volumes rather than product transfer documents identifying assigned RINs with other volumes
actual volumes, this approach to transfer of custody. depending on the business
assigning RINs to batches is consistent The means through which RINs are circumstances of the transaction and the
with current practices and will maintain transferred with volumes of renewable number of RINs that the seller has
the one-to-one correspondence between fuel will in some respects be left to the available. However, for producers and
the volume block in the batch-RIN and discretion of the renewable fuel importers of renewable fuel, this level of
the standardized volume of the batch. producer or importer. The primary flexibility could contribute to short-term
We are requiring a similar approach for requirement would be that the RIN hoarding that was the primary concern
biodiesel, where the volume correction transfer be recorded on a product expressed by obligated parties during
must be calculated using the following transfer document (PTD). The PTD can development of the proposed program.
equation:39 be included in any form of standard Therefore we are also finalizing a
Vs,b = Va,b × (¥0.0008008 × T + 1.0480) documentation that is already provision that requires producers and
Where: associated with or used to identify title importers to transfer assigned gallon-
Vs,b = Standard volume of biodiesel at 60 °F, to the volume or can be a separate RINs with gallons such that the ratio of
in gallons. document as described below. In many assigned gallon-RINs to gallons is equal
Va,b = Actual volume of biodiesel, in gallons. cases an invoice could serve this to the equivalence value for the
T = Actual temperature of the batch, in °F. purpose. As in other fuels programs, we renewable fuel. Since this is not
Consistent with the NPRM, we are believe the PTD requirement can be met possible for exempt small volume
requiring that RIN generation begin at by including the required information producers, or when a producer or
the same time that the renewable fuel generated and transferred in the normal importer obtains renewable fuel from
standard becomes applicable to course of business. another party without assigned RINs,
obligated parties. Thus RINs must be RINs are transferable in the context of exceptions are made in these cases.
generated for all renewable fuel the RFS program and initially must be We received comment that EPA
produced or imported on or after transferred along with ownership of a should require a purchaser of imported
September 1, 2007. Since many volume of renewable fuel. The approach gasoline who subsequently blends
producers and importers will have that a producer or importer takes to the renewable fuel into the imported
renewable fuel in inventory at the start transfer or sale of RINs and volumes gasoline to transfer the RINs associated
of the program that was produced prior would be at their discretion, under the with the renewable fuel back to the
to September 1, 2007, we are also condition that the RIN and volume be importer of the gasoline. The
allowing them to generate RINs for any transferred or sold on the same day and commenter suggested that this
renewable fuel that they own on to the same party. Based on comments requirement would ensure that the
September 1, 2007. This provision received, we are also permitting the importer of the gasoline obtains all the
ensures that every gallon that a transfer of RINs to be done in a separate RINs associated with the renewable fuel
producer or importer sells starting on PTD from the PTD used to transfer blended into that gasoline in cases
September 1, 2007 can have an assigned ownership of the volume of renewable where the importer has a long-term
RIN, and obligated parties that take fuel. This will provide some additional contractual agreement with the party
ownership of renewable fuel directly flexibility to parties who take ownership that purchases the gasoline and adds the
from a producer or importer will have of renewable fuel with assigned RINs, renewable fuel. However, we do not
greater assurance of receiving RINs at permitting IT systems managing RIN believe that such a provision is
the start of the program. Since RINs are transfers to be more easily incorporated warranted. The RFS program places the
not assigned to volumes until those into existing business management renewable fuels obligation on parties
volumes are transferred to another systems. Thus a party may use two based on ownership of the gasoline at
separate PTDs, one for the volume and the refiner or importer level. We believe
party, this approach also provides
another for the RINs. However, transfer this approach is the most effective way
37 An appropriate temperature correction for of the RINs must occur on the same day to implement and enforce the renewable
other renewable fuels must likewise be used. that transfer of the volume occurred, fuels requirement. We also believe it is
38 Derived from ‘‘Fuel Ethanol Technical and the two PTDs must contain appropriate to allow parties who add
Information,’’ Archer Daniels Midland Company, sufficient information to uniquely the renewable fuel to gasoline,
v1.2, 2003. cross–reference them. In many cases an including blenders, to separate RINs
39 Derived from R.E. Tate et al., ‘‘The densities of
three biodiesel fuels at temperatures up to 300 °C,’’

electronic transfer will suffice if from the renewable fuel volume and to
Fuel 85 (2006) 1004–1009, Table 1 for soy methyl sufficient information about the transfer have the right to sell those RINs to any
ester. is recorded. In the case of such parallel party. Individual parties may agree that,
in certain situations, it would be where they originated to the places • Small volume producers are exempt
appropriate for the RINs to be where they are blended into from generating and assigning RINs to
transferred from the renewable fuels conventional gasoline or diesel. Some of their product.
blender to the importer of the gasoline. these parties take custody but not • At the start of the program, some
In such cases, the parties may make ownership of these volumes, storing and parties may have renewable fuel in their
contractual arrangements for the transmitting them on behalf of those inventories that have not been assigned
transfers. We do not believe it would be who retain ownership. Other parties a RIN.
appropriate or workable for EPA to take ownership but not custody, such as • Batches of renewable fuels with
require such transfers. a refiner who purchases ethanol and has Equivalence Values less than 1.0 will
The NPRM did not specify whether it delivered directly to a blending have fewer gallon-RINs than gallons.
RINs should be generated for and facility. Thus prior to blending, each • Batch volumes can swell or shrink
assigned to renewable fuel that is volume of renewable fuel can be owned due to temperature changes.
already contained in imported gasoline or held by any number of parties • Batch volumes can shrink due to
(for example, a blend of 10 percent including marketers, distributors, evaporation, spillage, leakage, or
ethanol and 90 percent gasoline). Since terminal operators, and refiners. accidents.
the renewable fuel contained in In the NPRM, we proposed that in • Volume metering imprecision.
imported gasoline is part of the total general all parties that assume Indeed, if the program could be
volume of renewable fuel in gasoline ownership of any volume of renewable designed such that every gallon in the
sold or introduced into commerce in the fuel would be required to transfer all distribution system always had an
U.S., we believe it is appropriate to treat RINs assigned to that volume to another assigned RIN, the complete fungibility
it as any other imported renewable fuel. party to whom ownership of the volume of RINs would be straightforward.
Thus, we believe it would be is being transferred. The only However, this is not the case.
appropriate for importers to assign RINs exceptions to the requirement that RINs In order to make assigned RINs more
to renewable fuel contained in imported be transferred with volumes would be fungible, we are finalizing a modified
gasoline. However, the volume of for parties who are obligated to meet the version of our proposed approach.
renewable fuel contained in imported renewable fuel standard and parties Consistent with the NPRM, no party
gasoline is very small in comparison to who convert the renewable fuel into will be permitted to change a RIN
the volume requirements of the RFS motor vehicle fuel. Commenters assigned to a volume of renewable fuel
program. If an importer of gasoline overwhelmingly supported this into an unassigned (separated) RIN
containing renewable fuel imports less approach to the distribution of RINs except for those parties explicitly given
than 10,000 gallons per year of assigned to volumes of renewable fuel, the right to do so (for example, obligated
renewable fuel, then that party is not and as a result we are adopting this parties and oxygenate blenders). Also
required to generate RINs. But a small approach in our final program. In this consistent with the NPRM, any party
volume importer that chooses to context, we are also clarifying that not authorized to separate an assigned
generate and assign RINs to any volume parties taking custody of a volume of RIN that takes ownership of a RIN
of renewable fuel in imported gasoline renewable fuel but not ownership of assigned to a volume of renewable fuel
is required to fulfill all of the that volume would have no cannot transfer ownership of that RIN to
requirements that apply to renewable responsibilities with regard to the another party without simultaneously
fuel importers under the RFS rule, in transfer of RINs. transferring an appropriate volume of
addition to all of the requirements that However, in response to the NPRM, renewable fuel.
apply to gasoline importers as obligated several stakeholders apprised us of However our final regulations allow
parties. An importer that assigns RINs to certain aspects of our proposed program any party to transfer a volume of
the renewable fuel in imported gasoline that would limit the intended renewable fuel without assigned RINs,
may separate the RINs from the fungibility of RINs assigned to volumes or with a different number of assigned
renewable fuel, since the renewable fuel of renewable fuel. While the goal of our RINs than were received with the
has been blended into gasoline. proposed program was to permit RINs to renewable fuel, as long as the number of
Regardless of a small volume be interchangeable with one another assigned gallon-RINs held by that party
importer’s decision to generate and and to permit one assigned RIN to be at the end of a quarter is no higher than
assign RINs to renewable fuel contained exchanged with another RIN, our the number of gallons it owns at the end
in imported gasoline, an importer that proposed regulations did not of the quarter. This will provide parties
imports any gasoline containing sufficiently capture this level of with the flexibility to decide which
renewable fuel must include the fungibility. Instead, the proposed RINs are transferred with which
gasoline portion of the imported regulations effectively required that a volumes, and to transfer some volumes
product in the volume used to specific RIN assigned to a specific without RINs if the party took
determine the importer’s renewable fuel gallon of renewable fuel must remain ownership of some volumes without
obligation (and exclude the renewable assigned to that specific gallon as it assigned RINs. Our final regulations
fuel portion of the batch). RINs must be travels through the distribution system. require only that the number of gallon-
assigned to imported renewable fuels This approach was taken in order to RINs held by a party at the end of a
that are not contained in gasoline at the accommodate the legitimate existence of quarter be no higher than the number of
time of importation, unless less than some volumes of renewable fuel without gallons held by that party, adjusted by
10,000 gallons of renewable fuel are assigned RINs, and some assigned RINs their Equivalence Value. Aside from
imported per year. that have no corresponding volume. spillage, evaporation, or volume
These situations can occur in the metering imprecision, the only way that
b. Responsibilities of Parties That Buy, distribution system for several reasons, the number of gallon-RINs that are held
Sell, or Handle Renewable Fuels
such as the following: by a party could be higher than the

Volumes of renewable fuel can be • RINs can be separated from number of gallons held (adjusted for
transferred between many different renewable fuel by obligated parties or their Equivalence Value) is if that party
types of parties as they make their way blenders, and the renewable fuel re- transferred some volume without RINs.
from the production or import facilities introduced into the distribution system. In such a case the excess RINs held
would be deemed to have been available for obligated parties’ annual RINs he could have received given the
separated from renewable fuel, in compliance. Quarterly reports will volume of renewable fuel that he owns.
violation of the prohibition against provide us with the ability to monitor Parties that do not satisfy the above
separating RINs. the activities of marketers and equation are deemed to be in violation
While this approach creates more distributors in real time to ensure that of the prohibition against separating
flexibility for parties that hold assigned they are transferring RINs with RINs from volumes.
RINs, it requires three additional renewable fuel, and to address potential Under our modified approach to RIN
changes to the proposed regulations. violations as soon as they arise. distribution, it might be possible for a
First, we are requiring parties that hold As discussed in Section III.E.1.a party who owns volumes of renewable
assigned RINs to also report the volumes above, we are requiring that producers fuel with assigned RINs to hold onto all
of renewable fuel held at the end of each and importers of renewable fuel assign the RINs until near the end of a quarter
quarter. While the NPRM did not all RINs to volumes of renewable fuel, while selling volume without RINs.
propose that volumes held be reported, consistent with our proposed approach Then, in order to comply with the above
we believe that the additional burden on to standard-value RINs. As a result, equation, the party could transfer all
parties holding assigned RINs will be downstream parties can legitimately assigned RINs with a single volume of
minimal. The NPRM proposed that the hold more gallon-RINs than gallons if renewable fuel prior to the last day of
recordkeeping requirements include some of the renewable fuel has an the quarter. This approach would
information on all renewable fuel Equivalence Value greater than 1.0. In amount to short-term hoarding. To
volumes transferred, so under the the context of our modified approach to prevent it, we are also placing a cap on
proposal parties holding assigned RINs RIN distribution, this fact must be taken the maximum number of gallon-RINs
would in general already have the into account in the end-of-quarter that can be transferred with any gallon
information available. In addition, we comparison of gallon-RINs held and of renewable fuel. The cap is dictated by
are not requiring that all volumes held gallons held. Thus the following the maximum number of gallon-RINs
at any time during the quarter be equation must be satisfied at the end of that a party could receive with a volume
reported, nor are we requiring that all each quarter by each party that has of renewable fuel, which is 2.5 in the
volumes transferred be reported. Rather, taken ownership of any assigned RINs: case of cellulosic biomass ethanol or
parties will be required only to report S(RIN)D ≤ S(Vsi×EVi)D waste-derived ethanol. For a party that
the total volume of renewable fuel and took ownership of these types of
the total number of gallon-RINs held on Where: renewable fuel, we must allow them to
the last day of a quarter, in addition to D = Last day of a quarter (Jan–Mar, Apr–Jun, transfer up to 2.5 gallon-RINs with each
other information regarding RINs held Jul–Sep, Oct–Dec). gallon.
S(RIN)D = Sum of all assigned gallon-RINs We are also aware that there are
and transferred. with a K code of 1 that are owned on the
Second, our modified approach last day of the quarter.
situations in which the volume
requires that we distinguish between (Vsi)D = Volume i of renewable fuel owned on transferred to another party might be
RINs assigned to renewable fuel and the last day of the quarter, standardized smaller than the volume originally
RINs that have already been separated to 60 °F, in gallons. received. This could occur due to fuel
from renewable fuel, since only EVi = Equivalence Value representing volume evaporation, spillage, leakage, or
assigned RINs would be subject to the i. volume metering imprecision, and
end-of-quarter comparison of RINs held S(Vsi×EVi)D = Sum of all volumes of would have the effect of raising the ratio
and volumes held. We have chosen to renewable fuel owned on the last day of of gallon-RINs held to gallons held. For
use the K code in the RIN for this the quarter, multiplied by their spillage/leakage involving significant
respective equivalence values.
purpose, since it no longer serves the volumes, we have developed a
purpose of distinguishing between Under our fungible distribution mechanism for formally retiring the
standard-value and extra-value RINs. system, the RINs received with a RINs associated with the lost volume.
The K code has also been moved to the volume of renewable fuel may not be See Section IV. Smaller volume losses
beginning of the RIN to make its value the RINs originally generated to can be accommodated by a RIN transfer
more prominent. RINs assigned to represent that particular volume. Thus cap of 2.5, which would in general
renewable fuel must have a K code of the Equivalence Value for a volume of allow RINs associated with lost volume
1. Parties who legally separate a RIN renewable fuel cannot be based on the to be transferred with remaining
from renewable fuel must change the K RR code of associated RINs, but instead volume. In the rare case that a party
code for that RIN to a value of 2. The should be determined from the takes ownership of only cellulosic
RIN then formally becomes an composition of the renewable fuel. If the biomass ethanol or waste-derived
unassigned RIN that can be transferred Equivalence Value for a volume of ethanol and experiences some small
independent of renewable fuel volumes. renewable fuel cannot be determined volume loss, he can take ownership of
The end-of-quarter comparisons from its composition, it should be a small volume of some other form of
between RINs held and volumes held assumed to be 1.0. However, in the renewable fuel with an Equivalence
apply only to RINs with a K value of 1. specific case of ethanol the owner may Value less than 2.5. This will permit
Third, we are requiring quarterly not know if a volume can be categorized him to transfer RINs associated with lost
reporting in addition to annual reports as cellulosic biomass ethanol or waste- volume to another party while still
for RINs held and transferred. In the derived ethanol. Thus for volumes of meeting the RIN transfer cap of 2.5.
NPRM we took comment on requiring ethanol held at the end of a quarter, the Our program is designed to allow RIN
quarterly reporting for various reasons. Equivalence Value should be assumed transfer and documentation to occur as
We received both comments supporting to be 2.5 to ensure that a party can part of normal business practices in the
and opposing quarterly reporting. As legitimately hold more RINs than context of renewable fuel distribution.
discussed further in Section IV, we are gallons. Thus the incremental costs of
requiring quarterly reporting in this The above equation ensures that the transferring RINs with volumes is
final rule. Under our modified program total number of gallon-RINs that can be expected to be minimal. Marketers and
structure, quarterly reporting will be held by a party at the end of a quarter distributors must simply add the RIN to
necessary to ensure that RINs are is no greater than the number of gallon- product transfer documents such as
invoices, and record the RINs in their would be reasonable to transfer RINs requiring a blender to separate the RIN
records of volume purchases and sales. with volumes in a manner consistent from the renewable fuel if he takes
Finally, the final rule also provides with the Equivalence Value of the ownership of the renewable fuel and
that a foreign entity may apply to EPA renewable fuel, but this would not be actually blends it into gasoline (or, in
for approval to own RINs. As an required under our final regulations in the case of biodiesel, into diesel fuel).
approved foreign RIN owner, the foreign which the number of assigned gallon- This would only apply to volumes
entity will be able to obtain, sell, RINs transferred with each gallon of where the RIN had not already been
transfer and hold both assigned and renewable fuel can be anywhere separated by an obligated party. Since
separated RINs. An approved foreign between zero and 2.5. In addition, blenders will in general not be obligated
RIN owner will be required to comply volumes of renewable fuel can be split parties under our program, blenders
with all requirements that apply to or merged any number of times while who separate RINs from renewable fuel
domestic RIN owners under the RFS remaining under the ownership of a will have no need to hold onto those
rule. In addition, similar to other fuels single party, with no impact on RINs. It RINs and thus can transfer them to an
programs, an approved foreign RIN is only when ownership of a volume of obligated party for compliance purposes
owner will be required to comply with renewable is transferred to another party or to any other party.
additional requirements designed to that an appropriate number of gallon- There may be occasions in which a
ensure that enforcement of the RFS RINs need to be withdrawn from the retailer downstream of a blender
regulations at the foreign RIN owner’s party’s inventory and assigned to the actually owns the volume of renewable
place of business will not be transferred volume, subject to the fuel when it is blended into gasoline or
compromised. flexibility associated with the quarterly diesel. In such cases the blender will
average as discussed above. have custody but not ownership of the
c. Batch Splits and Batch Mergers
renewable fuel. In today’s final rule we
In the RIN distribution approach 2. Separation of RINs From Volumes of are requiring the RIN to be separated
proposed in the NPRM, RINs assigned to Renewable Fuel from the volume of renewable fuel when
a given volume of renewable fuel Separation of a RIN from a volume of that volume is blended into gasoline,
remained assigned to that volume as it renewable fuel means that the RIN is no but the RIN can only be separated by the
moved through the distribution system. longer included on the PTD and can be party that owns that volume of
In that context, batch splits and batch traded independently from the volume renewable fuel at the time of blending.
mergers required special treatment. We to which it had originally been assigned. In the case of a blender and a
discussed the need for protocols to In general commenters supported our downstream customer who might both
ensure that RINs assigned to parent proposed approach of limiting the lay claim to the right to separate any
batches were appropriately distributed parties that can separate a RIN from a assigned RINs (for instance, if transfer of
among daughter batches, and that RINs batch, and the associated conditions ownership occurred simultaneous with
assigned to batches that were merged under which separation can occur. blending), these two parties would need
were all re-assigned to the new In designing the regulatory program, to come to agreement between
combined batch. The proposed we structured it around facilitating themselves regarding which party will
regulations included some restrictions compliance by obligated parties with own the separated RINs.
on how parent batch RINs were to be their renewable fuel obligation, with the As described in Section III.B, many
apportioned to daughter batches during intention of giving obligated parties the different types of renewable fuel can be
splits, but fell short of prescribing a power to market the renewable fuel used to meet the RFS volume
detailed batch split protocol. separately from the RIN originally obligations placed upon refineries and
Nevertheless, commenters by and large assigned to it. Our final program importers. Currently, ethanol is the most
did not address these protocols in their therefore requires a refiner or importer prominent renewable fuel and is most
comments. to separate the RIN from renewable fuel commonly used as a low level blend in
The need for protocols for batch splits as soon as he assumes ownership of that gasoline at concentrations of 10 volume
and batch mergers was directly related renewable fuel. In the case of ethanol percent or less. However, some
to the NPRM’s approach to the blended into gasoline at low renewable fuels can be used in neat
distribution of RINs with volumes of concentrations (≤ 10 volume percent), form (i.e. not blended with conventional
renewable fuel. As described in Section stakeholders have informed us that a gasoline or diesel). The two RIN
III.E.1.b above, we are modifying our large volume of the ethanol is purchased separation situations described above
approach to permit assigned RINs to be by refiners directly from ethanol would capture any renewable fuel for
more fungible. As a result, there is no producers, and is then passed to which ownership is assumed by an
need for the regulations to specify any blenders who carry out the blending obligated party or a party that blends the
batch splitting or batch merging with gasoline. Therefore, in many cases renewable fuel into gasoline or diesel.
protocols. RINs assigned to renewable fuel will However, renewable fuels which are
Under our final regulations, parties pass directly from the producers who used in their neat (unblended) form as
taking ownership of volumes of generated them to the obligated parties motor vehicle fuel would not be
renewable fuel with assigned RINs will who need them. captured. This would include such
simply retain an inventory of all However, significant volumes of renewable fuels as neat biodiesel (B100)
assigned RINs owned. As volumes of ethanol are also blended into gasoline or renewable diesel, methanol for use in
renewable fuel are then transferred to without first being purchased by a a dedicated methanol vehicle or biogas
other parties, an appropriate number of refiner. In some cases, the blender itself for use in a CNG vehicle.
gallon-RINs are withdrawn from the purchases the ethanol. In other cases, a Under our final program, producers
party’s inventory and transferred along downstream customer purchases the and importers must assign a RIN to all
with the renewable fuel. There is no ethanol and contracts with the blender renewable fuels produced or imported,
need for the party to determine which to carry out the blending. Regardless, including neat renewable fuels. To
RINs were originally assigned to the the ethanol may never be held or owned avoid the possibility that the RIN
volume being transferred. For parties by an obligated party before it is assigned to neat renewable fuel would
handling both ethanol and biodiesel, it blended into gasoline. Thus we are also never become available to an obligated
party for RFS compliance purposes, in generating RINs for the renewable fuel esters) 40 and the conditions under
the NPRM we proposed to more broadly produced. But since renewable crude is which we believed a RIN should be
define the right to separate a RIN from generally processed in a traditional separated from a volume of such
renewable fuel. In addition to obligated refinery, the refiner will be an obligated biodiesel. As described in the proposal,
parties and blenders, we proposed that party and can therefore immediately biodiesel is one type of renewable fuel
any producer holding a volume of separate those RINs from the renewable that can under certain conditions be
renewable fuel for which the RIN has fuel and transfer them to another party. used in its neat form. However, in the
not been separated could separate the As described in III.E.1.a above, vast majority of cases it is blended with
RIN from that volume if the party cellulosic and waste-derived ethanol conventional diesel fuel before use,
designates it for use only as a motor producers will also be permitted to typically in concentrations of 20 volume
vehicle fuel in its neat form and it is in separate the RINs associated with the percent or less. This approach is taken
fact only used as such. This approach extra 1.5 value of their ethanol for a variety of reasons, such as to
would recognize that the neat form of production. reduce impacts on fuel economy, to
the renewable fuel is valid for mitigate cold temperature operability
Once a RIN is separated from a
compliance purposes under the RFS issues, to address concerns of some
volume of renewable fuel, the PTD
program, as described in Section III.B. engine owners or manufacturers
associated with that volume can no
In effect, it would place neat fuel regarding the impacts of biodiesel on
longer list the RIN. However, in the
producers in the same category as engine durability or drivability, or to
NPRM we requested comment on
blenders, in that they are producing reduce the cost of the resulting fuel.
whether PTDs should include some
motor vehicle fuel. We did not receive Biodiesel (mono alkyl esters) is also
any negative comments on this notation indicating that the assigned
used in low concentrations as a lubricity
proposal, and thus are finalizing this RIN has been removed to avoid
additive and as a means for complying
provision as proposed. concerns about whether RINs assigned
with the ultra-low sulfur requirements
As discussed above, under our final to batches have not been appropriately
for highway diesel fuel. Biodiesel (mono
rule, obligated parties must separate transferred with the batch. One refiner
alkyl esters) is occasionally used in its
RINs from volumes of renewable fuel. commented that the addition of such a
neat form. However, this approach is the
This applies to all volumes of renewable note on a PTD would represent an
exception rather than the rule.
fuel that an obligated party owns. The unnecessary burden, while two
Consequently, in the NPRM we
requirement to separate a RIN from the commenters representing fuel
proposed that the RIN assigned to a
renewable fuel is intended to apply to distribution operations indicated that
volume of biodiesel could only be
refiners, blenders and importers for such a notation would be useful. Based
separated from that volume if and when
whom the production or importation of on comments we received, we have
the biodiesel was blended with
gasoline is a significant part of their determined that such notation on PTDs
conventional diesel. To avoid claims
overall business operations. Parties that would not only be useful to parties
that very high concentrations of
are predominately renewable fuel receiving volumes of renewable fuel, but
biodiesel count as a blended product,
producers or importers, but which must would also be an important element of
we also proposed that biodiesel must be
be designated as obligated parties due to our RIN distribution requirements under
blended into conventional diesel at a
the production or importation of a small our modified approach. The
concentration of 80 volume percent or
amount of gasoline, should not be able requirement will ensure that parties
less before the RIN could be separated
to separate RINs from all renewable who take ownership of renewable fuel
from the volume.
fuels that they own. For example, we without assigned RINs will know that A number of commenters expressed
believe it would be inappropriate to RINs were originally assigned but concern that the 80 volume percent
permit an ethanol producer to separate subsequently removed. We also believe limit put biodiesel at odds with the RIN
RINs from all volumes that they own that such a requirement would be of separation criteria applicable to other
simply because the producer imported, minimal burden to parties that have renewable fuels, including neat fuels.
for example, a single truckload of separated a RIN from a volume of Upon further consideration, we have
gasoline from Canada or Mexico. As a renewable fuel. determined that the 80 volume percent
result, the final rule prohibits obligated As described in Section III.E.1.b, we limit remains a valid means for ensuring
parties from separating RINs from have modified the RIN transfer that the separation of RINs from
volumes of renewable fuel that they requirements for the final rule to make biodiesel is consistent with its common
produce or import that are in excess of RINs more fungible and to provide more use at low blend levels just as for
their RVO. However, obligated parties flexibility to distributors while still ethanol, and that RINs are generally
must separate any RINs from volumes of requiring RINs to be transferred with separated at the point in time when the
renewable fuel that they own if that volumes of renewable fuel. However, biodiesel can be deemed to be motor
volume was produced or imported by our modified approach requires that we vehicle fuel. However, based on
another party. distinguish between RINs assigned to comments received, we are changing the
As described in Section III.B.2, RINs renewable fuel and RINs that have treatment of biodiesel for the final rule
can be generated for renewable fuels already been separated from renewable in two ways.
made from renewable crude which is fuel. Our final rule thus requires that First, obligated parties are required to
treated as if it were a petroleum-derived parties who separate a RIN from separate RINs from volumes of biodiesel
crude oil or derivative, and is used as renewable fuel must change the K code at the point when they gain ownership
a feedstock in a traditional refinery for that RIN to a value of 2. The RIN of the biodiesel, not when they blend
processing unit. Whether the renewable then becomes an unassigned RIN that biodiesel with conventional diesel fuel.
crude is coprocessed with petroleum can be transferred independent of This approach is consistent with our
derivatives or is processed in a facility treatment of the RIN separation

renewable fuel volumes.
or unit dedicated to the renewable
crude, the final product is generally a In the NPRM we also provided a 40 Throughout this Section III.E.2, ‘‘biodiesel’’
motor vehicle fuel. In such cases the discussion of the unique circumstances means mono alkyl esters, not non-ester renewable
refinery will have the responsibility of regarding biodiesel (mono alkyl diesel.
requirements for obligated parties for been allowed to transfer credits, and provide us the ability to verify the
other renewable fuels. Parties that argued that the success of those validity of RINs and the source of any
actually blend biodiesel into programs should compel the Agency to invalid RINs. Since all RINs generated,
conventional diesel fuel at a use those past credit program structures traded, and used for compliance would
concentration of 80 volume percent or as the model for the RFS program. be recorded electronically in an Agency
less would continue to be required to We continue to believe that there is a database, these types of investigations
separate the RIN from the biodiesel, as need to provide for more open trading should be straightforward. The number
proposed. in the RFS program and that this need of RIN trades, and the parties between
Second, we have determined that a warrants a unique approach for this whom the RINs are being traded, will
biodiesel producer should be allowed to rule. First, unlike other programs where only have the effect of increasing the
separate a RIN from a volume of credits generally represent size of the database.
biodiesel that it produces if it designates overcompliance with an applicable Some commenters were concerned
the volume of biodiesel specifically for standard and are thus supplemental to that an open RIN market could lead to
use as motor vehicle fuel in its neat the means of compliance, under the RFS price volatility and potentially higher
form, and the neat biodiesel is in fact program RINs are the fundamental unit prices as non-obligated speculators
used as motor vehicle fuel. In general for compliance. There will be many enter the market expressly to profit from
this demonstration would require that more RINs in the RFS program than the sale of RINs. According to
the producer track the volume of credits in other programs, and the commenters, these speculators would
biodiesel to the point of its final use. trading structure must maximize the hold an unfair advantage over obligated
However, this approach to the treatment fluidity of those RINs. A wider RIN parties that must purchase credits for
of neat biodiesel is consistent with how market will make it easier for obligated compliance since speculators can hold
we are treating other renewable fuels parties to get access to RINs. onto RINs indefinitely, driving up their
used in their neat form. Second, obligated parties are typically price. However, by expanding the
not the ones producing the renewable number of parties that can hold RINs,
3. Distribution of Separated RINs fuels and generating the RINs, nor we minimize the potential for any one
In the NPRM, we proposed that RINs blending the renewable fuels into party to exercise market power, and
become freely transferable once they are gasoline, so there is a need for trades to thus we do not believe that such activity
separated from a batch of renewable occur between obligated parties and on the part of speculators is likely to
fuel. Each RIN could be held by any non-obligated parties. If we prohibited substantively affect the availability of
party and transferred between parties everyone except obligated parties from RINs or their price. Moreover, we do not
any number of times. We argued that the holding RINs after they have been believe that a given party will hold a
unique features of the RFS program separated from a batch, non-obligated RIN indefinitely simply to increase
warranted more open trading than in parties seeking avenues for releasing profit because RINs have a limited life
past fuel credit programs. In particular, their RINs would only be able to release and new RINs will be generated and
RINs are generated by parties other than them to obligated parties. Having fewer will enter the market continuously.
obligated parties, and many avenues through which they could Based on our review of the comments
nonobligated parties will own RINs (for market their RINs, some non-obligated received, we did not find compelling
example, oxygenate blenders who have parties might opt not to transfer their evidence that an open market for RINs
the right to separate RINs from RINs at all rather than participate in the would create particular difficulties for
volumes). While recognizing that RIN market with the attendant obligated parties seeking RINs or would
limiting trading to and between recordkeeping requirements. limit the enforceability of the program.
obligated parties might help obligated Furthermore, a potentially large number As a result we are finalizing a RIN
parties to maintain control of those RINs of oxygenate blenders, many of which trading program that permits any party
being traded, such an approach could will be small businesses, will be looking to hold RINs and for RINs to be traded
have the unintended effect of limiting for ways to market their RINs. Allowing any number of times.
the number of RINs that non-obligated other parties, including brokers, to own As with other credit-trading programs,
parties contribute to the RIN market. and transfer RINs may create a more the business details of RIN transactions,
The RFS program must work efficiently fluid and free market that would such as the conditions of a sale or any
not only for a limited number of increase the venues for RINs to be other transfer, RIN price, role of
obligated parties, but a number of non- acquired by the obligated parties that mediators, etc. will be at the discretion
obligated parties as well. need them. Limiting RIN trading to and of the parties involved. The Agency is
There was disagreement among among obligated parties could make it concerned only with information such
commenters about whether an open RIN more difficult for RINs to eventually be as who holds a given RIN at any given
market was appropriate. Several parties transferred to the obligated parties that moment, when transfers of RINs occur,
supported our proposed approach, need them. who the party to the transfers are, and
saying that unlimited trading among all Some commenters argued that ultimately which obligated party relies
interested parties would increase limiting the RIN trading market to and on a given RIN for compliance purposes.
liquidity and transparency in the RIN among obligated parties would make the This type of information will therefore
market. They also argued that increasing program more enforceable, since there be the subject of various recordkeeping
the number of participants would would be fewer parties to track and the and reporting requirements as described
facilitate the acquisition of RINs by sources of RINs would be more reliable. in Section IV, and these requirements
obligated parties and promote economic While this may be directionally true, we will generally apply regardless of
efficiency. believe the RFS program will remain whether a RIN has been separated from
However, some commenters sufficiently enforceable under an open a batch.
disagreed, arguing instead that an open RIN market, and as discussed above, the The means through which RIN trades
market does not necessarily make the greater need for market fluidity for this occur will also be at the discretion of
market any more fluid and free. They program warrants the change. The RIN the parties involved. For instance,
pointed to past credit programs in number, along with the associated parties with RINs can create open
which only refiners and importers have electronic reporting mechanism, will auctions, contract directly with those
obligated parties who seek RINs, use today requires an obligated party to fuels or the business agreements
brokers to identify potential transferees separate a RIN from a batch as soon as developed by parties transferring
and negotiate terms, or just transfer the it gains ownership of that batch. Our renewable fuels. For instance, we are
RINs to any other party. Brokers final program design is based on the exempting small volume producers from
involved in RIN transfer can either expectation that all but a negligible generating RINs, renewable fuels with
operate in the role of arbitrator without quantity of renewable fuels will equivalence values less than 1.0 may
owning the RINs, or alternatively can eventually be consumed as motor have fewer RINs than gallons, and
take custody of the RINs from one party vehicle fuel, primarily through blending volume swell and metering
and transfer them to another. If they are with gasoline or diesel. See further discrepancies can all contribute to
the transferee of any RINs, they will also discussion in Section III.D. As a result, situations in which batches legitimately
be subject to the registration, we do not believe that it is necessary to do not have assigned RINs
recordkeeping, and reporting verify that blending has actually corresponding to their actual volumes.
requirements. The Agency will not be occurred in order to provide a program Parties that sell such batches could
directly involved in RIN transfers, other that adequately ensures it occurs. The choose to price such product differently
than in the role of providing a database American Petroleum Institute agreed from product that has assigned RINs
within which transfers will be recorded that tracking renewable fuels to the with a one-to-one correspondence to
for enforcement purposes. point of blending would represent an product volume. We are also requiring
In order to provide public information unnecessary burden and added that that PTDs associated with transfers of
that could be helpful in managing and such a requirement could preclude volume include notation indicating
trading RINs as well as understanding many obligated parties from taking whether RINs are being simultaneously
how the program is operating, we intend direct steps to obtain RINs to meet their transferred to address these types of
to publish a report each year that obligations. situations.
summarizes information submitted to us The Renewable Fuels Association, Another commenter argued that the
through the quarterly and annual however, argued that allowing obligated alternative approach could limit the
reports required as part of our parties to separate RINs from batches potential for one refiner to purchase
enforcement efforts (see Section IV). before blending occurred could give rise large volumes of renewable fuel with
Annual summary reports published by to RIN hoarding, fraud, and confusion. the intent of separating the RINs and
EPA may include such information as Most importantly, they noted, the exercising market power in the RIN
the number of RINs generated in each alternative approach would provide market. However, the commenter did
month or in each state, the average direct verification of blending. For the not provide any information regarding
number of trades that RINs undergo reasons described in Section III.D, we how such market power could be
before being used for compliance do not believe that a compliance system exercised by one refiner in a system
purposes, or the frequency of deficit requiring verification of blending is where unassigned RINs can be
carryovers. However, we will not necessary, given that, with the transferred freely between parties any
publish information identifying specific exception of exports, essentially all number of times, and access to those
parties. renewable fuel produced in the U.S. is RINs is not limited geographically in
used as motor vehicle fuel in the U.S. any way. In addition, RINs that have
4. Alternative Approaches to RIN
This is a foundational principle of the been separated from their assigned
Distribution
use of a RIN-based program design that batches by oxygenate blenders represent
In the NPRM, we also described enjoyed widespread support among
several alternative approaches to the an additional safety valve in the RIN
stakeholders and widespread market, providing additional assurances
proposed trading and compliance recognition that it accurately describes
program that were offered by that no one refiner could exercise
real world practices. market power in the RIN market.
stakeholders. Most of these alternatives If verification of blending were Commenters supporting a
recognized the value of a RIN-based required before a RIN could be requirement that RINs be separated only
system of compliance, but they differed separated from a batch, both obligated
in terms of which parties would be at the point of blending offered no other
parties and blenders would be subject to
allowed to separate a RIN from a batch arguments that hoarding or fraud could
additional recordkeeping and
and the means through which the RINs actually occur under our proposed
paperwork burdens. The Agency would
would be transferred to obligated approach. Therefore, we are finalizing
be compelled to enforce activities at the
parties. We invited comment on all of an approach that requires obligated
blender level, adding about 1200 parties
these alternatives in the NPRM, but parties to separate RINs from batches at
to the list of those subject to
received very few. Based on those the point of ownership.
enforcement under our final program.
comments we did receive, we do not Although we agree that the reformulated IV. Registration, Recordkeeping, and
believe that any of these alternative gasoline program could act as a model Reporting Requirements
approaches should be implemented at from which to construct such a
this time. In general our responses to recordkeeping and enforcement system, A. Introduction
comments on the alternatives can be we continue to believe that such a Registration, recordkeeping and
found in the Summary and Analysis of system would be both unnecessary and reporting are necessary to track
Comments document in the docket, but burdensome. compliance with the renewable fuels
we have addressed one particular The Renewable Fuels Association also standard and transactions involving
subject area below. argued that our proposed program RINs. This summarizes these
In the NPRM, we described an would result in confusion in the requirements. Our estimates as to the
alternative approach to RIN distribution distribution system, since there would burden associated with registration,
in which obligated parties would only be renewable fuel both with and recordkeeping and reporting are
be able to separate a RIN from a batch without RINs. However, there are many contained in this Federal Register
of renewable fuel at the point in time other reasons that this situation could notice in Section XII.B and explained
when blending actually occurs. In arise, and none is expected to negatively fully in ‘‘OMB–83 Supporting
contrast, the approach we are finalizing impact the distribution of renewable Statement—Renewable Fuels Standard
(RFS) Program (Final Rule)—EPA ICR or handle transactions involving RINs basis. It is focused on calculating the
No. 2242.02,’’ which has been placed in until you have registered and received RVO, indicating RINs used for
the public docket for this rulemaking. your registration numbers from us. It is compliance, and determining any deficit
advisable to register as soon as possible carried over.
B. Registration
if you believe you will be engaged in The second report is a quarterly RIN
1. Who Must Register Under the RFS activities that may require registration generation report that is required to be
Program? under the RFS program. Registration can submitted by producers and importers
Obligated parties (including refiners occur any time following signature of of renewable fuel. This report is focused
and importers), exporters of renewable this final rule. on providing information on all batches
fuels, producers and importers of If you are already registered under of renewable fuel produced and
renewable fuels, and any party who another fuels program, such as RFG and imported and all RINs generated.
owns RINs must register with EPA. Any anti-dumping or diesel sulfur, then you The third report is a RIN transaction
party may own RINs including, but not do not have to register again. You will report that is required to be submitted
limited to, the above-named parties and use the same company and facility by any party that owns RINs, including
marketers, blenders, terminal operators, identification number you are currently RIN marketers and brokers, as well as
jobbers, and brokers. Owning RINs, and using for RFS reporting. Parties in this obligated parties, exporters, and
engaging in any activities regarding situation may contact the Agency for renewable fuel producers and importers.
RINs, is prohibited as of September 1, confirmation or clarification of the This report is focused on providing
2007 unless the party has registered and appropriate registration numbers to use. information on individual RIN
received EPA company and facility As noted above, registrations never purchases, RIN sales, retired RINs, and
identification numbers. expire, but you are responsible for expired RINs.41 A separate RIN
Most refiners and importers and many keeping the information we have up to transaction report is required to be
biodiesel producers are already date. If you have previously registered submitted for each RIN purchase and
registered with us under various with us but have not had to report until sale, and for each retired or expired RIN,
regulations in 40 CFR part 80 related to now, then you may wish to contact the and must be submitted by the end of the
reformulated (RFG) and conventional person listed on our renewable fuels quarter in which the activity occurred.
gasoline or diesel fuel. Parties who are Web page (http://www.epa.gov/otaq/ The purpose of the RIN transaction
already registered will not have to take renewablefuels/index.htm) in order to report is to document the ownership
any action to register under the RFS confirm the information in your and transfer of RINs, and to track
program, because their existing registration file. expired and retired RINs. This report is
registration will be applied to the RFS 4. How Are Small Volume Domestic necessary because compliance with the
program as well. Producers of Renewable Fuels Treated RVO is primarily demonstrated through
for Registration Purposes? self-reporting of RIN trades and
2. How Do I Register? therefore we must be able to link
Registration is a simple process. We Small volume domestic producers of transactions involving each unique RIN
will use the same basic forms for RFS renewable fuels are those who produce in order to verify compliance. We will
program registration that we use under less than 10,000 gallons per year or who be able to import reports into our
the reformulated gasoline (RFG) and import less than 10,000 gallons per year. compliance database and match RINs to
anti-dumping program. You may These parties are not required to register transactions across their entire journey
download our registration forms at if they do not wish to generate RINs. If from generation to use. As with our
http://www.epa.gov/otaq/regs/fuels/ a small volume domestic producer of other 40 CFR part 80 compliance-on-
rfgforms.htm. These forms are well renewable fuels wishes to generate average and credit trading programs,
known in the regulated community and RINs, then that party must register and many potential violations are expected
are very simple to fill out. Information comply with all recordkeeping and to be self-reported.
requested includes company and facility reporting requirements. The fourth report is a quarterly gallon-
names, addresses, and the identification C. Reporting RIN activity report that also is required
of a contact person with telephone to be submitted by any party that owns
number and e-mail address. 1. Who Must Report Under the RFS RINs. This report is focused on the total
Registrations never expire and do not Program? number of gallon-RINs owned at the
have to be renewed. However, all Obligated parties, exporters of start and end of the quarter, and the
registered parties are responsible for renewable fuel, producers and importers total number of gallon-RINs purchased,
notifying us of any change to their of renewable fuel, and any party who sold, retired and expired during the
company or facility information. owns either assigned or unassigned quarter. This report also requires
RINs such as marketers or brokers must
3. How Do I Know I Am Properly
submit periodic reports to us covering 41 In this final rule, we have clearly distinguished
Registered With EPA?
RIN generation, RIN use, and RIN expired RINs, which are no longer valid due to the
Upon receipt of a completed transactions. passage of time, from retired RINs, which are RINs
no longer valid due to the reportable spillage of
registration form, we will provide you their assigned volumes under § 80.1132, RINs used
with a unique 4-digit company 2. What Reports Are Required Under the
to satisfy an enforcement action, or RINs used to
identification number and a unique RFS Program? effect an import volume correction under
5-digit facility identification number. There are four basic reports under the § 80.1166(k). Rather than leaving retired RINs under
‘‘any additional information that the Administrator
These numbers will appear in RFS program. The first report is an may require,’’ we have specifically addressed them
compliance reports and, in the case of annual compliance demonstration in this final rule. We believe it is useful to
renewable fuel producers and importers, report that is required to be submitted specifically distinguish between retired and expired
they will be incorporated in the unique by obligated parties and exporters of RINs because it will be easier for us to determine
whether a report is complete and to quality assure
RINs they generate for each batch of renewable fuel. This report provides the and check reported information by applying a
renewable fuel. Timely registration is RFS compliance demonstration and is consistent reporting distinction between expired
important because you cannot generate required to be submitted on an annual and retired RINs.
information on end-of-quarter 3. What Are the Specific Reporting type of report by the type of regulated
renewable fuel volumes. Items for the Various Types of Parties party:
Required To Report?
The following table summarizes the
information to be submitted in each
TABLE IV.C.3–1.—INFORMATION CONTAINED IN REPORTS BY REGULATED PARTY *

Exporters of renewable Producers and importers Other parties who own
Type of report Obligated parties fuel of renewable fuel RINS
Annual Compliance Dem- • Calculation of RVO ....... • Calculation of RVO ....... No report ........................... No report.
onstration Report. • List of RINs used for • List of RINS used for
compliance. compliance.
• Calculation of deficit car- • Calculation of deficit car-
ryover. ryover.
Quarterly RIN Generation No report ........................... • Volume of each batch
No report ........................... No report.
Report. produced or imported.
• RINs generated for each
batch.
• Volume of denaturant
and applicable equiva-
lence value of each
batch.
RIN Transaction Report .... Separate report for each Separate report for each Separate report for each Separate report for each
transaction:. transaction:. transaction:. transaction:
• RIN purchase ................ • RIN purchase ................ • RIN purchase ................ • RIN purchase.
• RIN sale ........................ • RIN sale ........................ • RIN sale ........................ • RIN sale.
• Expired RIN ................... • Expired RIN ................... • Expired RIN ................... • Expired RIN.
• Retired RIN ................... • Retired RIN ................... • Retired RIN ................... • Retired RIN.
Quarterly gallon-RIN Activ- • Number of gallon-RINs* • Number of gallon-RINs • Number of gallon-RINs • Number of gallon-RINs
ity Report. owned at start of quarter. owned at start of quarter. owned at start of quarter. owned at start of quar-
• Number of gallon-RINs • Number of gallon-RINs • Number of gallon-RINs ter.
purchased. purchased. purchased. • Number of gallon-RINs
• Number of gallon-RINs • Number of gallon-RINs • Number of gallon-RINs purchased.
sold. sold. sold. • Number of gallon-RINs
• Number of gallon-RINs • Number of gallon-RINs • Number of gallon-RINs sold.
retired. retired. retired. • Number of gallon-RINs
• Number of gallon-RINs • Number of gallon-RINS • Number of gallon-RINs retired.
expired (4th quarter expired (4th quarter expired (4th quarter • Number of gallon-RINs
only). only). only). expired (4th quarter
• Number of gallon-RINs • Number of gallon-RINs • Number of gallon-RINs only).
at end of quarter. at end of quarter. at end of quarter. • Number of gallon-RINs
• Volume (gals) of renew- • Volume (gals) of renew- • Volume (gals) of renew- at end of quarter.
able fuel owned at end able fuel owned at end able fuel owned at end • Volume (gals) of renew-
of quarter. of quarter. of quarter. able fuel owned at end
of quarter.
* A gallon-RIN is a RIN that represents an individual gallon of renewable fuel. See § 80.1101.
4. What Are the Reporting Deadlines? be submitted by February 28th for the compliance. This information must be
prior calendar year. For the RIN reported by May 31, 2008 for calendar
In the proposed rule, we had transaction and quarterly gallon-RIN year 2007. All other reporting follows
requested comment on whether activity reports, the following schedule the schedule indicated above.
reporting should be annual or quarterly. applies to all reporting parties:
After consideration of comments 5. How May I Submit Reports to EPA?
received, we have determined that each TABLE IV.C.4–1.—QUARTERLY RE- We will use a simplified and secure
RIN transaction report must be method of reporting via the Agency’s
PORTING SCHEDULE FOR RFS PRO-
submitted by the end of the quarter in Central Data Exchange (CDX). CDX
which the transaction occurred, and the GRAM
permits us to accept reports that are
gallon-RIN activity report should be electronically signed and certified by
Quarter covered by Due date for
submitted quarterly. Quarterly reporting quarterly report quarterly report the submitter in a secure and robustly
is better because it provides us with the encrypted fashion. Using CDX will
information necessary to confirm the January–March ................ May 31. eliminate the need for wet ink
validity and legitimacy of RINs prior to April–June ........................ August 31. signatures and will reduce the reporting
their use in compliance. Additionally, July–September ............... November 30. burden on regulated parties. Guidance
quarterly reporting enables EPA to October–December ......... February 28. for reporting will be issued before
enforce the RIN/inventory balance implementation and will contain

requirements for producers and In the first year of the RFS program specific instructions and formats
marketers of renewable fuels. only, obligated parties and exporters are consistent with provisions in this final
The annual compliance given an extra quarter to submit their rule. The guidance will be posted on our
demonstration for obligated parties must list of RINs used to demonstrate renewable fuels Web page: http://
www.epa.gov/otaq/renewablefuels/ multiplied by its equivalence value. If cannot be summarized by a shorter

index.htm. the equivalence value for the spilled code.
We will accept electronic reports volume may be determined based on its Parties must keep copies of all records
generated in virtually all commercially composition, then the appropriate for a period of not less than five (5)
available spreadsheet programs and will equivalence value shall be used. If the years. In addition to documentation
even permit parties to submit reports in equivalence value for the spilled related to transfers, parties must keep
comma delimited text, which can be volume cannot be determined, the information related to the sale,
generated with a variety of basic equivalence value is 1.0. In the case that purchase, brokering and trading of RINs
software packages. the fuel must be reported in pounds and copies of any reports they submit to
CDX will confirm delivery of your rather than gallons, the party that us for compliance reports. For example,
report. As described below with regard reported the spill should use the best if a volume of fuel and its associated
to recordkeeping, you must retain available conversion for converting the RINs are reported to us as lost due to
copies of all items submitted to us for volume into gallons. In the event that spillage, documentation related to that
five (5) years. volume is spilled in transport, the spill must be retained for the five year
owner of the RINs will need to request period. Upon request, parties are
6. What Does EPA Do With the Reports
a copy of the spill report from the party responsible for providing records to the
it Receives?
that reported the spill. Administrator or the Administrator’s
In order to permit maximum authorized representative.
flexibility in meeting the RFS program D. Recordkeeping
requirements, we must track activities 2. What Recordkeeping Requirements
involving the creation and use of RINs, 1. What Types of Records Must Be Kept? Are Specific to Producers of Cellulosic
as well as any transactions such as or Waste-Derived Ethanol?
The recordkeeping requirements for
purchase or sale of RINs. Reports will be obligated parties and exporters of In addition to the records applicable
imported into a compliance database renewable fuels support the to all ethanol producers, producers of
managed by EPA’s Office of enforcement of the use of RINs for cellulosic biomass or waste-derived
Transportation and Air Quality and will compliance purposes. Records kept by ethanol must keep records of fuel use in
be reviewed for completeness and for parties are central to tracking individual order to ensure compliance with, and
potential violations. It is important to RINs through the fungible distribution enforcement of, the definitions of these
keep your company contact updated system after those RINs are assigned to types of renewable fuel. Producers of
(this is an item on the registration form), batches of renewable fuel. Parties use cellulosic biomass or waste-derived
because we may need to speak to that invoices or other types of product ethanol must keep records of volume
person about any problems with a report transfer documentation, which are and types of all feedstocks purchased to
submitted. Potential violations will be customarily generated and issued in the ensure compliance with, and
referred to EPA enforcement personnel. enforcement of, the feedstock aspect of
course of business and which are
the definitions of cellulosic biomass and
7. May I Claim Information in Reports familiar to parties who transfer or
waste-derived ethanol. In addition,
as CBI and How Will EPA Protect it? receive fuel. Parties are afforded
producers of cellulosic biomass or
significant freedom with regard to the
You may claim information submitted waste-derived ethanol are required to
form these documents take, although
to us as confidential business arrange for an independent third party
they must travel in some manner (on
information (CBI). Please be sure to to review the ethanol producer’s records
paper or electronically) with the volume
follow all reporting guidance and and verify that the facility is, in fact, a
of renewable fuel being transferred. On
clearly mark the information you claim cellulosic biomass or waste-derived
each occasion any person transfers
as proprietary. We will treat information ethanol production facility and that the
ownership of renewable fuels subject to ethanol producer is producing cellulosic
covered by such a claim in accordance
this regulation, that transferor must biomass or waste-derived ethanol. The
with the regulations at 40 CFR part 2
provide the transferee with documents independent third party must be a
and other Agency procedures for
identifying the renewable fuel and licensed Professional Engineer (P.E.) in
handling proprietary information.
containing the identifying information the chemical engineering field.
8. How Are Spilled Volumes With that includes: The name and address of Domestic ethanol producers are not
Associated Lost RINs To Be Handled in the transferor and transferee, the EPA- required obtain prior approval of the
Reports? issued company identification number independent third party P.E. or submit
Since spills can happen whenever of the transferor and transferee, the the engineering verification to EPA,
renewable fuel with assigned RINs is volume of renewable fuel that is being however, the ethanol producer and the
held, owners have two options if the transferred, the date of transfer, and P.E. are required to keep records related
spill causes their organization to be out each associated RIN. These types of to the required engineering verification
of compliance. The owners of the documents must be used by all parties and to produce them upon request of
spilled fuel may either retire RINs lost in the distribution chain down to the the Administrator or the Administrator’s
in reported spills or purchase and sell point where the renewable fuel is authorized representative.
a volume of renewable fuel equal to the blended into conventional gasoline or A foreign ethanol producer may apply
reported volume and not associated diesel. to us to have its cellulosic biomass or
with RINs in order to meet compliance. Except for transfers to truck carriers, waste-derived ethanol treated in the
Reportable spills for the purposes of this retailers or wholesale purchaser- same manner as domestic cellulosic
rule refers to spills of renewable fuel consumers, product codes may be used biomass or waste-derived ethanol under
with assigned RINs and a requirement to convey the information required, as the RFS program. A foreign ethanol
by a federal, state, or local authority to long as the codes are clearly understood producer with an approved application
report said spills. The party that owns by each transferee. However, the RIN will be required to comply with all of
the spilled renewable fuel must retire a must always appear in its entirety before the requirements that apply to domestic
number of gallon-RINs corresponding to it is separated from a batch, since it is ethanol producers, including
the volume of spilled renewable fuel a unique identification number that registration, recordkeeping, reporting,
attest engagements, and the E. Attest Engagements other fuels programs. We have
independent third party verification considered these comments but
1. What Are the Attest Engagement
discussed above. The attest engagements continue to believe that the attest
Requirements Under the RFS Program?
for a foreign ethanol producer must be engagements are an appropriate means
conducted by a U.S. auditor (if not a Attest engagements are similar to of verifying the accuracy of the
U.S. based auditor, the auditor must be financial audits and consist of an information reported to us by obligated
independent, professional review of parties. In addition to documentation of
approved in advance by EPA). Similar
compliance records and reports. Similar RIN transactions and use, the reports
to other fuels programs, the foreign
to other fuels programs, the RFS include information on production and
ethanol producer will be required to program requires reporting parties to
comply with additional requirements import volumes and calculation of the
arrange for annual attest engagements to party’s RFS obligation. We believe that
designed to ensure that enforcement of be conducted by an auditor that is attest engagements are necessary in
the regulations at the foreign ethanol ‘‘independent’’ under the criteria order to verify that the underlying data
facility will not be compromised. The specified in the regulations. We believe regarding production and import
independent third party P.E. conducting that the attest engagements provide an volumes and RFS obligation, as well as
the facility verification must be appropriate and useful tool for verifying the underlying data regarding RIN
approved by EPA before the foreign the accuracy of the information reported transactions and use, support the
entity will be allowed to treat its to us. Attest engagements are performed information included in the reports. As
cellulosic biomass or waste-derived in accordance with standard procedures a result, the final rule includes an attest
ethanol in the same manner as domestic and standards established by the engagement requirement for obligated
producers. The foreign ethanol producer American Institute of Certified Public parties.
must arrange for the P.E. to inspect the Accountants and the Institute of Internal We also received several comments
facility and submit a report to us which Auditors. The attest engagement that the attest engagement auditor
describes the physical plant and its consists of an outside certified public should be required to examine only
operation and includes documentation accountant (CPA) or certified representative samples of the party’s
of the P.E.’s qualifications. The foreign independent auditor (CIA) following RIN transaction documents rather than
ethanol producer must agree to provide agreed upon procedures to determine the documents for each RIN transaction,
access to EPA personnel for the whether underlying records, reported as required in the proposed regulations.
items, and transactions agree, and We agree that examination of
purposes of conducting inspections and
issuing a report as to their findings. representative samples of RIN
audits, post a bond, and arrange for an
Attest engagements are performed on an transaction documents would provide
independent inspector to monitor ship annual basis. sufficient oversight and that the
loading and offloading records to ensure requirement included in the proposed
that volumes of ethanol do not change 2. Who Is Subject to the Attest
regulations may be unnecessarily
from port of shipping to port of entry. Engagement Requirements for the RFS
burdensome. As a result, the attest
The independent inspector must be Program?
engagement provisions have been
approved by EPA prior to the shipment Obligated parties, producers, modified to require the auditor to
of any ethanol designated by the foreign exporters and importers of renewable examine only representative samples of
ethanol producer as ethanol which is to fuel, and any party who own RINs are RIN transaction documents. However, in
be treated as cellulosic biomass or all subject to the attest engagement the case of attest engagements applied to
waste-derived ethanol. Cellulosic requirements. RIN generation by producers or
biomass or waste-derived ethanol 3. How Are the Attest Engagement importers of renewable fuel, or the use
produced by a foreign ethanol producer Requirements in This Final Rule of RINs for compliance purposes by
must be identified as such on product Different From Those Proposed? obligated parties or exporters, the
transfer documents that accompany the auditor must examine documentation
We had proposed that obligated for all RINs generated or used. We
ethanol to the importer. (These
parties, exporters, and renewable fuels believe this requirement is necessary to
additional provisions for foreign ethanol producers be subject to attest
producers are contained in § 80.1166.) ensure that obligated parties and
engagement requirements. We received exporters are meeting their RFS
The provisions for foreign ethanol several comments on this proposal. obligation and that ethanol producers
producers are optional and are available Some commenters suggested that the and importers are assigning RINs to
only to foreign producers of cellulosic attest engagements should be required each batch of renewable fuel produced
biomass or waste-derived ethanol. for renewable fuels producers and or imported as required under the
Ethanol or other renewable fuels importers, but not for obligated parties. regulations.
produced and exported to the United These commenters believe that attest The proposed attest engagement
States by other foreign producers are engagements are needed for renewable regulations at § 80.1164(b) did not
regulated through the importer. An fuel producers and importers in order to include importers of renewable fuels.
importer that receives ethanol identified verify reported production and RIN One commenter pointed out these
as cellulosic biomass or waste-derived volumes, whereas we can monitor procedures should apply to both
ethanol produced by a foreign producer compliance by obligated parties by renewable fuels producers and
with an approved application would not cross-checking their reports regarding importers. Renewable fuel importers
assign RINs to the ethanol, as RINs for RIN transactions and use with the have the same reporting requirements as
such ethanol will be assigned by the reports from other parties. These renewable fuel producers, and,
commenters also believe that the therefore, there is the same need for
foreign ethanol producer. The importer,
information required by obligated verification of the information given on

like any other marketer, would transfer
parties under the RFS program is not the reports through attest engagements.
the RINs assigned by the foreign such that an attest engagement is It was an inadvertent oversight that
producer with a volume of ethanol and needed because the rule does not renewable fuel importers were not
report the transactions to us. require verification of raw data as with included in the parties required to
comply with the attest engagement for improperly transferring renewable conduct in the creation and transfer of
procedures in proposed § 80.1164(b), fuel volumes without RINs or retaining RINs.
and that applying the requirements in more RINs during a quarter than the Any obligated party that reports the
§ 80.1164(b) to renewable fuel importers party’s inventory of renewable fuels. use of invalid RINs to meet its
is a logical outgrowth of the proposed Any party may be liable for creating, renewable fuels obligation may be liable
regulations. As a result, the regulations transferring, or using an invalid RIN, or for a regulatory violation for use of
have been modified to include transferring a RIN that is not properly invalid RINs. If the obligated party fails
renewable fuel importers in the parties identified. to meet its renewable fuels obligation
required to comply with the attest In addition, any person who is subject without the invalid RINs, the party may
procedures in § 80.1164(b). to an affirmative requirement under the also be liable for not meeting its
In addition to obligated parties, RFS program will be liable for a failure renewable fuels obligation. In addition,
exporters and renewable fuel producers to comply with the requirement. For the transfer of invalid RINs is
and importers, we believe that an attest example, an obligated party will be prohibited, so that any party or parties
engagement requirement is necessary for liable for a failure to comply with the that transfer invalid RINs may be liable
any party who takes ownership of a RIN. annual compliance reporting for a regulatory violation for transferring
As discussed above, attest engagements requirements. A renewable fuel the invalid RINs. In a case where invalid
provide an appropriate and useful tool producer or importer will be liable for RINs are transferred and used, EPA
for verifying the accuracy of the a failure to comply with the applicable normally will hold each party that
information reported to us. Like renewable fuel batch reporting committed a violation responsible,
obligated parties and renewable fuel requirements. Any party subject to including both the user and the
producers and importers, the final rule recordkeeping or product transfer transferor of the invalid RINs. For this
requires RIN owners to submit document requirements would be liable reason, obligated parties and RIN
information regarding RIN transaction for a failure to comply with these brokers should use good business
activity to us. We believe that attest requirements. Like other EPA fuels judgment when deciding whether to
engagement audits are necessary to programs, the final rule provides that a purchase RINs from any particular seller
verify the accuracy of the information party who causes another party to and should consider including prudent
included in these reports. Therefore, violate a prohibition or fail to comply business safeguards in RIN transactions,
this final rule includes an attest with a requirement may be found liable such as requiring RIN sellers to sign
engagement requirement for RIN owners for the violation. contracts with indemnity provisions to
who are not obligated parties or protect the purchaser in the event
The Energy Act amended the penalty
renewable fuel producers or importers. penalties are assessed because we find
and injunction provisions in section
We believe that inclusion of the the RINs are invalid. Similarly, parties
211(d) of the Clean Air Act to apply to
requirement in the final rule is a logical that sell RINs should take steps to
outgrowth of the proposed attest violations of the renewable fuels ensure any RINs that are sold were
engagement requirements for other requirements in section 211(o).42 properly created to avoid penalties that
parties who are required to submit Accordingly, under the final rule, any result from the transfer of invalid RINs.
similar information regarding RIN person who violates any prohibition or As in other motor vehicle fuel credit
transaction activity to us. requirement of the RFS program may be programs, the regulations address the
subject to civil penalties for every day consequences if an obligated party is
V. What Acts Are Prohibited and Who of each such violation and the amount found to have used invalid RINs to
Is Liable for Violations? of economic benefit or savings resulting demonstrate compliance with its RVO.
The prohibition and liability from the violation. Under the final rule, In this situation, the obligated party that
provisions applicable to the RFS a failure to acquire sufficient RINs to used the invalid RINs will be required
program are similar to those of other meet a party’s renewable fuels to deduct any invalid RINs from its
gasoline programs. The final rule obligation will constitute a separate day compliance calculations. As discussed
identifies certain prohibited acts, such of violation for each day the violation above, the obligated party will be liable
as a failure to acquire sufficient RINs to occurred during the annual averaging for not meeting its renewable fuels
meet a party’s renewable fuel obligation period. obligation if the remaining number of
(RVO), producing or importing a Because there are no standards under valid RINs is insufficient to meet its
renewable fuel without properly the RFS rule that may be measured RVO, and the obligated party may be
assigning a RIN, creating, transferring or downstream, we believe that a subject to monetary penalties if it used
using invalid RINs, improperly presumptive liability scheme, i.e., a invalid RINs in its compliance
transferring renewable fuel volumes scheme in which parties upstream from demonstration. In determining an
without RINs, improperly separating the facility where the violation is found appropriate penalty, EPA will consider
RINs from renewable fuel, retaining are presumed liable for the violation, a number of factors, including whether
more RINs during a quarter than the would not be applicable under the RFS the obligated party did in fact procure
party’s inventory of renewable fuel, or program. As a result, the RFS rule does sufficient valid RINs to cover the deficit
transferring RINs that are not identified not contain such a scheme. created by the invalid RINs. A penalty
by proper RIN numbers. Any person The regulations prohibit any party may include both the economic benefit
subject to a prohibition will be held from creating, transferring or using of using invalid RINs and a gravity
liable for violating that prohibition. invalid RINs. These invalid RIN component.
Thus, for example, an obligated party provisions apply regardless of the good Although an obligated party may be
will be liable if the party fails to acquire faith belief of a party that the RINs are liable for a violation if it uses invalid
sufficient RINs to meet its RVO. A party valid. These enforcement provisions are RINs for compliance purposes, we
who produces or imports renewable necessary to ensure the RFS program normally will look first to the generator
fuels will be liable for a failure to goals are not compromised by illegal or seller of the invalid RINs both for
properly assign RINs to batches of payment of penalty and to procure
renewable fuel produced or imported. A 42 Section 1501(b) of the Energy Policy Act of sufficient valid RINs to offset the invalid
renewable fuels marketer will be liable 2005. RINs. However, if EPA is unable to
obtain relief from that party, attention a violation unless the party knowingly VI. Current and Projected Renewable
will turn to the obligated party who may used the invalid RINs to demonstrate Fuel Production and Use
then be required to obtain sufficient compliance. Where the suspect RINs are While the definition of renewable fuel
valid RINs to offset the invalid RINs. later proved to be valid, the party does not limit compliance with the
We received several comments on the should be able to use the RINs in the standard to any one particular type of
prohibition regarding use of invalid subsequent year regardless of the year of renewable fuel, ethanol is currently the
RINs. Some commenters believe that an generation or any rollover cap. For the most prevalent renewable fuel blended
obligated party that uses RINs which are reasons stated above, we believe that it into gasoline today. Biodiesel represents
later found to be invalid should be given is appropriate to hold an obligated party another renewable fuel which, while not
an opportunity to ‘‘cure’’ the shortfall responsible for using invalid RINs even as widespread as ethanol use (in terms
caused by the invalid RINs without
where the party in good faith believed of volume), has been increasing in
penalty. As indicated above, a penalty
the RINs to be valid. Normally, suspect production capacity and use over the
for a good faith purchaser is not
RINs will be not be replaced until the last several years. This section provides
automatic. Where an invalid RIN was
RINs are proved to be invalid. In the a brief overview of the ethanol and
created by another party, such as the
unlikely circumstance that a RIN is first biodiesel industries today and how they
producer or marketer of the renewable
determined to be invalid and then later are projected to grow into the future.
fuel, the party responsible for the
existence of the invalid RIN would be found to be valid, the ability to use the A. Overview of U.S. Ethanol Industry
liable and would be required to RIN in a subsequent year would be and Future Production/Consumption
purchase a RIN to make up for the determined in the context of the
enforcement action. 1. Current Ethanol Production
invalid RIN and pay an appropriate
penalty. If the responsible party cannot Finally, parties that are predominately As of October 2006, there were 110
be identified or is out of business, or if renewable fuel producers or importers, ethanol production facilities operating
EPA is otherwise unable to obtain relief but which must be designated as in the United States with a combined
from the party, then the obligated party obligated parties due to the production production capacity of approximately
that used the RIN would be required to or importation of a small amount of 5.2 billion gallons per year.43 All of the
purchase a RIN to make up for the gasoline, should not be able to separate ethanol currently produced comes from
invalid RIN. However, any penalty for a RINs from all renewable fuels that they grain or starch-based feedstocks that can
good faith purchaser would likely be easily be broken down into ethanol via
own. To address such circumstances,
small, particularly where EPA is able to traditional fermentation processes. The
we are prohibiting obligated parties
obtain relief from the party that was majority of ethanol (almost 92 percent
from separating RINs that they generate
responsible for the invalid RIN. Where by volume) is produced exclusively
from volumes of renewable fuel in from corn. Another 7 percent comes
a RIN was originally believed to be valid
but is later found to be invalid, whether excess of their RVO. However, obligated from a blend of corn and/or similarly
a current year RIN may be used to make parties must separate any RINs processed grains (milo, wheat, or barley)
up for the prior-year invalid RIN would generated by other parties from and less than 1 percent is produced
be determined in the context of the renewable fuel if they own the from waste beverages, cheese whey, and
enforcement action. renewable fuel. sugars/starches combined. A summary
Another commenter suggested that an of ethanol production by feedstock is
obligated party should not be liable for presented in Table VI.A.1–1.
TABLE VI.A.1–1.—2006 U.S. ETHANOL PRODUCTION BY FEEDSTOCK

Percent
Capacity Number Percent
Plant feedstock of
MMgy of plants of plants
capacity
Cheese Whey .................................................................................................................................. 8 0.1 2 1.8

Corn a ............................................................................................................................................... 4,780 91.6 90 81.8
Corn, Barley ..................................................................................................................................... 40 0.8 1 0.9
Corn, Milo b ...................................................................................................................................... 244 4.7 8 7.3
Corn, Wheat ..................................................................................................................................... 90 1.7 2 1.8
Milo, Wheat ...................................................................................................................................... 40 0.8 1 0.9
Sugars, Starches ............................................................................................................................. 2 0.0 1 0.9
Waste Beverages c ........................................................................................................................... 16 0.3 5 4.5
Total .......................................................................................................................................... 5,218 100.0 110 100.0

a Includes two facilities processing seed corn and another facility processing corn which intends to transition to corn stalks, switchgrass, and
biomass in the future.
b Includes one facility procesisng small amounts of molasses in addition to corn and milo.
c Includes two facilities processing brewery waste.
43 The October 2006 ethanol production capacity publications (June 2006 through October 2006); ICF since transitioned into the fuel-grade ethanol
baseline was generated based on the June 2006 International, Ethanol Industry Profile (September market. Where applicable, current ethanol plant
NPRM plant list and updated on October 18, 2006 30, 2006); BioFuels Journal, News & Information for production levels have been used to represent plant
based on a variety of data sources including: the Ethanol and BioFuels Industries (breaking news capacity, as nameplate capacities are often
Renewable Fuels Association (RFA), Ethanol posted June 16, 2006 through October 18, 2006);
underestimated. This analysis does not consider
Biorefinery Locations (updated October 16, 2006); and ethanol producer Web sites. The baseline
Ethanol Producer Magazine (EPM), plant list includes small-scale ethanol production facilities as ethanol plants that may be located in the Virgin
(downloaded October 18, 2006) and monthly well as former food-grade ethanol plants that have Islands or U.S. territories.
There are a total of 102 plants In addition to grain and starch-to- or biomass into ethanol. For a more
processing corn and/or other similarly ethanol production, another method detailed discussion on future cellulosic
processed grains. Of these facilities, 92 exists for producing ethanol from a ethanol plants and production
utilize dry-milling technologies and the more diverse feedstock base. This technologies, refer to RIA Sections
remaining 10 plants rely on wet-milling process involves converting cellulosic 1.2.3.6 and 7.1.2, respectively.
processes. Dry mill ethanol plants grind materials such as bagasse, wood, straw, Ethanol production is a relatively
the entire kernel and produce only one switchgrass, and other biomass into resource-intensive process that requires
primary co-product: Distillers’ grains ethanol. Cellulose consists of tightly- the use of water, electricity, and steam.
with solubles (DGS). The co-product is linked polymers of starch, and Steam needed to heat the process is
sold wet (WDGS) or dried (DDGS) to the production of ethanol from it requires generally produced onsite or by other
agricultural market as animal feed. In additional steps to convert these dedicated boilers. Of today’s 110
contrast to dry mill plants, wet mill polymers into fermentable sugars. ethanol production facilities, 101 burn
facilities separate the kernel prior to Scientists are actively pursuing acid and natural gas, 7 burn coal, 1 burns coal
processing and in turn produce other enzyme hydrolysis as well as and biomass, and 1 burns syrup from
co-products (usually gluten feed, gluten gasification to achieve this goal, but the the process to produce steam.44 Our
meal, and oil) in addition to DGS. Wet technologies are still not fully research suggests that 11 plants
developed for large-scale commercial currently utilize cogeneration or
mill plants are generally more costly to
production. As of October 2006, the combined heat and power (CHP)
build but are larger in size on average.
only known cellulose-to-ethanol plant technology, although others may exist.
As such, nearly 22 percent of the
in North America was Iogen in Canada, CHP is a mechanism for improving
current overall ethanol production
which produces approximately one overall plant efficiency. Whether owned
comes from the 10 previously-
million gallons of ethanol per year from by the ethanol facility, their local utility,
mentioned wet mill facilities. wood chips. Several companies have or a third party; CHP facilities produce
The remaining 8 plants which process announced plans to build cellulose-to- their own electricity and use the waste
waste beverages, cheese whey, or ethanol plants in the U.S., but most are heat from power production for process
sugars/starches, operate differently than still in the research and development or steam, reducing the energy intensity of
their grain-based counterparts. These pre-construction planning phases. The ethanol production. A summary of the
facilities do not require milling and majority of the plans involve converting energy sources and CHP technology
instead operate a simpler enzymatic bagasse, rice hulls, wood, switchgrass, utilized by today’s ethanol plants is
fermentation process. corn stalks, and other agricultural waste found in Table VI.A.1–2.
TABLE VI.A.1–2.—2006 U.S. ETHANOL PRODUCTION BY ENERGY SOURCE

Percent
Capacity Number Percent CHP
Plant energy source of
MMgy of plants of plants tech.
capacity
Coal .............................................................................................................................. 1,042 20.0 7 6.3 2

Coal, Biomass .............................................................................................................. 50 1.0 1 0.9 0
Natural Gas a ................................................................................................................ 4,077 78.1 101 91.8 9
Syrup ............................................................................................................................ 48 0.9 1 0.9 0
Total ...................................................................................................................... 5,218 100.0 110 100.0 11

a Includes three facilities burning natural gas which intend to transition to coal or biomass in the future.
The majority of domestic ethanol is production facilities, 100 are located in production, as shown in Table VI.A.1–
currently produced in the Midwest PADD 2. As a region, PADD 2 accounts 3.
within PADD 2—where most of the corn for 96 percent (or over five billion
is grown. Of the 110 U.S. ethanol gallons) of the annual domestic ethanol
TABLE VI.A.1–3.—2006 U.S. ETHANOL PRODUCTION BY PADD

Percent
PADD of
capacity
PADD 1 ............................................................................................................................................ 0.4 0.0 1 0.9

PADD 2 ............................................................................................................................................ 5,012 96.0 100 90.9
PADD 3 ............................................................................................................................................ 30 0.6 1 0.9
PADD 4 ............................................................................................................................................ 105 2.0 4 3.6
PADD 5 ............................................................................................................................................ 71 1.4 4 3.6
Total .......................................................................................................................................... 5,218 100.0 110 100.0

44 Facilities were assumed to burn natural gas if
the plant fuel type was not mentioned or

unavailable.
Leading the Midwest in ethanol feedstocks, while others rely on a 2. Expected Growth in Ethanol
production are Iowa, Illinois, Nebraska, combination of both. Production
Minnesota, and South Dakota with a The U.S. ethanol industry is currently Over the past 25 years, domestic fuel
combined capacity of nearly four billion comprised of a mixture of corporations ethanol production has steadily
gallons per year. Together, these five and farmer-owned cooperatives (co- increased due to environmental
states’ 70 ethanol plants account for 76 ops). More than half (or 60) of today’s regulation, federal and state tax
percent of the total domestic product. plants are owned by corporations and, incentives, and market demand. More
However, although the majority of on average, these plants are larger in recently, ethanol production has soared
ethanol production comes from PADD 2, size than farmer-owned co-ops. due to the phase out of MTBE, an
there are a growing number of plants Accordingly, company-owned plants increasing number of state ethanol
located outside the traditional corn belt. account for almost 64 percent of the mandates, and elevated crude oil prices.
In addition to the 15 states comprising total U.S. ethanol production capacity. As shown in Figure VI.A.2–1, over the
PADD 2, ethanol plants are currently Further, more than 50 percent of the past three years, domestic ethanol
located in California, Colorado, Georgia, total domestic product comes from production has nearly doubled from 2.1
New Mexico, and Wyoming. Some of plants owned by just 6 different billion gallons in 2002 to 4.0 billion
these facilities ship in feedstocks companies—Archer Daniels Midland, gallons in 2005. For 2006, the
(namely corn) from the Midwest, others Broin, VeraSun, Hawkeye Renewables, Renewable Fuels Association is
rely on locally grown/produced Global/MGP Ingredients, and Aventine anticipating about 4.7 billion gallons of
Renewable Energy.45 domestic ethanol production.46
EPA forecasts that domestic ethanol impacts of federal and state tax the removal of MTBE from all U.S.
production will continue to grow into incentives, as well as the more recent gasoline, crude oil prices are expected
the future. In addition to the past impacts of state ethanol mandates and to continue to drive up demand for
45 Includes Broin’s minority ownership in 18 U.S. 46 Based on RFA comments received in response
ER01MY07.047</GPH>
ethanol plants. to the proposed rulemaking, 71 FR 55552

(September 22, 2006).
ethanol. As a result, the nation is on exceeding the 2007 renewable fuel summary of the new construction and
track to exceed the renewable fuel requirement (4.7 billion gallons). In plant expansion projects currently
volume requirements contained in the addition, there is another 3.4 billion underway (as of October 2006) is found
Act. Today’s ethanol production gallons of ethanol production capacity in Table VI.A.2–1.
capacity (5.2 billion gallons) is already currently under construction.47 A
TABLE VI.A.2–1.—UNDER CONSTRUCTION U.S. ETHANOL PRODUCTION CAPACITY

Oct. 2006 baseline Under const. Base + under const.
PADD
MMgy Plants MMgy a Plants MMgy a Plants
PADD 1 .......................................................................... 0.4 1 115 1 115 2

PADD 2 .......................................................................... 5,012 100 2,764 39 7,776 139
PADD 3 .......................................................................... 30 1 230 3 260 4
PADD 4 .......................................................................... 105 4 50 1 155 5
PADD 5 .......................................................................... 71 4 198 3 269 7
Total ........................................................................ 5,218 110 3,357 47 8,575 157

a Includes plant expansions.
A select group of builders, technology construction projects described in Table approximately 18 months, resulting in
providers, and construction contractors VI.A.2–1. As such, the completion dates the gradual phase-in of ethanol
are completing the majority of the of these projects are staggered over production shown in Figure VI.A.2–2.48
47 Under construction plant locatons, capacities, construction plant list (downloaded October 18, Web sites. This analysis does not consider ethanol
feedstocks, and energy sources as well as planned/ 2006) and monthly publications (June 2006 through plants under construction or planned for the Virgin
proposed plant locations and capacities were October 2006); ICF International, Ethanol Industry Islands or U.S. territories.
derived from a variety of data soruces including Profile (September 30, 2006); BioFuels Journal, 48 Construction timelines based on information
Renewable Fuels Association (RFA), Ethanol News & Information for the Ethanol and BioFuels
Biorefinery Locations (updated October 16, 2006); Industries (breaking news posted June 16, 2006 obtained from press releases and ethanol producer
Ethanol Producer Magazine (EPM), under through October 18, 2006); and ethanol producer Web sites.
As shown in Table VI.A.2–1 and VI.B.1), this would be more than enough gaining local approval to applying for
Figure VI.A.2–2, once all the renewable fuel to satisfy the 2012 RFS permits to financing/fundraising to
construction projects currently requirements (7.5 billion gallons). obtaining contractor agreements.
underway are complete (estimated by However, ethanol production is Together these potential projects could
March 2008), the resulting U.S. ethanol expected to continue to grow. There are result in an additional 21 billion gallons
production capacity would be about 8.6 more and more ethanol projects being of ethanol production capacity as shown
billion gallons. Without even announced each day. These potential in Table VI.A.2–2.
considering forecasted biodiesel projects are at various stages of planning
production (described below in Section from conducting feasibility studies to
TABLE VI.A.2–2.—OTHER POTENTIAL U.S. ETHANOL PRODUCTION CAPACITY

Base + under const. Planned Proposed
PADD
MMgy a Plants MMgy a Plants MMgy a Plants
PADD 1 .................................................................................................... 115 2 548.0 8 934 21

PADD 2 .................................................................................................... 7,776 139 4,633 44 11,722 136
PADD 3 .................................................................................................... 260 4 250 4 876 14
PADD 4 .................................................................................................... 155 5 100 1 783 14
PADD 5 .................................................................................................... 269 7 232 8 775 23
Subtotal ...................................................................................... 8,575 157 5,763 65 15,090 208
Total b ......................................................................................... ................ ................ 14,339 222 29,428 430

a Includes plant expansions.
b Total including existing plus under construction plants.
Although there is clearly a great announced projects would actually the large number of projects moving
potential for ethanol production growth, reach completion in a reasonable forward. Since there is no precise way
ER01MY07.048</GPH>
it is highly unlikely that all the amount of time, or at all, considering to know exactly which plants will come
to fruition in the future, we have chosen (refer to Table VI.A.2–1) or in the final fundraising/financing, and had builders
to focus our subsequent discussion on planning stages (denoted as ‘‘planned’’ assigned with definitive construction
forecasted ethanol production on plants in Table VI.A.2–2). The distinction timelines whereas proposed projects did
which are likely to be online by 2012.49 between ‘‘planned’’ versus ‘‘proposed’’ not.
This includes existing plants as well as is that as of October 2006 planned
projects which are under construction projects had completed permitting,
TABLE VI.A.2–3.—FORECASTED 2012 ETHANOL PRODUCTION BY PADD

Percent
PADD of
capacity
PADD 1 ............................................................................................................................................ 663 4.6 10 4.5

PADD 2 ............................................................................................................................................ 12,409 86.5 183 82.4
PADD 3 ............................................................................................................................................ 510 3.6 8 3.6
PADD 4 ............................................................................................................................................ 255 1.8 6 2.7
PADD 5 ............................................................................................................................................ 501 3.5 15 6.8
Total .......................................................................................................................................... 14,339 100.0 222 100.0
As shown above in Table VI.A.2–3, According to a current report by F.O. feedstocks and two would start off
once all the under construction and Licht, U.S. net import demand is processing corn and later transition to
planned projects are complete the estimated to be around 300 million cellulosic materials. Of the four
resulting ethanol production capacity gallons per year by 2012, being supplied dedicated cellulosic plants, one would
would be 14.3 billion gallons. The primarily through the Caribbean Basin process bagasse, one would process a
majority of which would still originate Initiative (CBI), with some direct combination of bagasse and wood, and
from PADD 2. This volume, expected to imports from Brazil during times of two would process biomass. Of the two
be online by 2012, exceeds the EIA AEO shortfall or high price. For more transitional corn/cellulosic plants, one
2006 demand estimate (9.6 billion information on ethanol imports, refer to would ultimately process a combination
gallons by 2012, discussed more in RIA RIA Section 1.5.
of bagasse, rice hulls, and wood and the
Section 2.1). The forecasted growth Of the 112 forecasted new ethanol
plants (47 under construction and 65 other would ultimately process wood
would nearly triple today’s production
capacity and greatly exceed the 2012 planned), 106 would rely on grain-based and other agricultural residues. In
RFS requirement (7.5 billion gallons). feedstocks. More specifically, 89 would addition to the forecasted new plants,
While our forecast represents ethanol rely exclusively on corn, 13 would an existing corn ethanol plant plans to
production capacity (actual production process a blend of corn and/or similarly expand production and transition to
could be lower), we believe it is still a processed grains (milo or wheat), 3 corn stalks, switchgrass, and biomass in
good indicator of what domestic ethanol would process molasses, and 1 would the future. A summary of the resulting
production could look like in the future. process a combination of molasses and overall feedstock usage (including
In addition, we predict that domestic sweet sorghum (milo). Of the remaining current, under construction, and
ethanol production will continue to be six plants (all in the planned stage), four planned projects) is found in Table
supplemented by imports in the future. would process cellulosic biomass VI.A.2–4.
TABLE VI.A.2–4.—FORECASTED 2012 U.S. ETHANOL PRODUCTION BY FEEDSTOCK
Percent
Plant feedstock of
capacity
Bagasse ........................................................................................................................................... 7 0.1 1 0.5

Bagasse, Wood ............................................................................................................................... 2 0.0 1 0.5
Bagasse, Wood, Rice Hulls a ........................................................................................................... 108 0.8 1 0.5
Biomass ........................................................................................................................................... 55 0.4 2 0.9
Cheese Whey .................................................................................................................................. 8 0.1 2 0.9
Corn b ............................................................................................................................................... 12,495 87.1 178 80.2
Corn, Barley ..................................................................................................................................... 40 0.3 1 0.5
Corn, Milo c ...................................................................................................................................... 1,132 7.9 20 9.0
Corn, Wheat ..................................................................................................................................... 235 1.6 3 1.4
Corn Stalks, Switchgrass, Biomass a ............................................................................................... 40 0.3 1 0.5
Milo, Wheat ...................................................................................................................................... 40 0.3 1 0.5
Molasses d ........................................................................................................................................ 52 0.4 4 1.8
Sugars, Starches ............................................................................................................................. 2 0.0 1 0.5
Waste Beverages e .......................................................................................................................... 16 0.1 5 2.3
Wood Agricultural Residues a .......................................................................................................... 108 0.8 1 0.5
Total .......................................................................................................................................... 14,339 100.0 222 100.0

a Facilities plan to start off processing corn.
49 A more detailed summary of the plants we docket titled: RFS Industry Characterization—
considered is found in a March 5, 2007 note to the Ethanol Production.
b Includes two facilities processing seed corn.
c Includes one facility processing small amounts of molasses in addition to corn and milo.
d Includes one facility planning to process sweet sorghum (milo) in addition to molasses.
e Includes two facilities processing brewery waste.
Of the 112 forecasted new plants, 100 burn a combination of coal and biomass; plants would burn natural gas, three
would burn some amount of natural and 1 would burn a combination of coal, would burn coal, and one would burn
gas—at least initially. More specifically, tires and biomass. In addition to the a combination of coal, tires, and
91 plants would rely exclusively on new ethanol plants, three existing plants biomass. Among the existing CHP
natural gas; 2 would rely on a currently burning natural gas are plants, two are predicted to transition
combination of natural gas, bran and predicted to transition to alternate boiler from natural gas to coal or biomass at
biomass; 1 would burn a combination of fuels in the future. More specifically, this time. Overall, the net number of
natural gas, distillers’ grains and syrup; two plants plan to transition to biomass CHP ethanol plants would increase from
and 6 would start off burning natural and one plans to start burning coal. Our 11 to 18. A summary of the resulting
gas and later transition to coal. As for research suggests that 7 of the new
overall plant energy source utilization is
the remaining 12 plants, 3 would burn plants would utilize combined heat and
found below in Table VI.A.2–5.
manure-derived methane (biogas); 7 power (CHP) technology, although
would rely exclusively on coal; 1 would others may exist. Three of the new CHP
TABLE VI.A.2–5.—FORECASTED 2012 U.S. ETHANOL PRODUCTION BY ENERGY SOURCE

Percent
Capacity Number Percent CHP
Plant energy source of
MMgy of plants of plants tech.
capacity
Biomass a ..................................................................................................................... 112 0.8 2 0.9 1

Coal b ............................................................................................................................ 2,095 14.6 21 9.5 6
Coal, Biomass .............................................................................................................. 75 0.5 2 0.9 0
Coal, Biomass, Tires .................................................................................................... 275 1.9 1 0.5 1
Manure Biogas c ........................................................................................................... 144 1.0 3 1.4 0
Natural Gas .................................................................................................................. 11,275 78.6 189 85.1 10
Natural Gas, Bran, Biomass ........................................................................................ 264 1.8 2 0.9 0
Natural Gas, Distiller’s Grain, Syrup ............................................................................ 50 0.3 1 0.5 0
Syrup ............................................................................................................................ 49 0.3 1 0.5 0
Total ...................................................................................................................... 14,339 100.0 222 100.0 18

a Represents two existing natural gas-fired plants that plan to transition to biomass.
b Includes two plants planning on burning lignite coal or coal lines. Includes one existing plant currently burning natural gas that plans to transi-
tion to coal. Includes six new plants that will start off burning natural gas and later transition to coal.
c Includes one facility planning on burning cotton gin in addition to manure biogas.
The Energy Policy Act of 2005 Act’s cellulosic biomass ethanol 3. Current Ethanol and MTBE
requires that 250 million gallons of the requirement. However, as shown in Consumption
renewable fuel consumed in 2013 and Table VI.A.2–5, there are 12 facilities
beyond meet the definition of cellulosic that burn or plan to burn waste To understand the impact of the
biomass ethanol. The Act defines increased ethanol production/use on
materials to power their ethanol plants.
cellulosic biomass ethanol as ethanol gasoline properties and in turn overall
Depending on how much fossil fuel is
derived from any lignocellulosic or air quality, we first need to gain a better
displaced, these facilities (with a
hemicellulosic matter that is available understanding of where ethanol is used
combined ethanol production capacity today and how the picture is going to
on a renewable or recurring basis of 969 million gallons per year) could
including dedicated energy crops and change in the future. As such, in
also meet the definition of cellulosic addition to the production analysis
trees, wood and wood residues, plants,
biomass ethanol under the Act. presented above, we have completed a
grasses, agricultural residues, fibers,
animal wastes and other waste Considering both feedstock and waste parallel consumption analysis
materials, and municipal solid waste. energy plants, the total cellulosic comparing current ethanol consumption
The term also includes any ethanol ethanol potential could be as high as 1.3 to future predictions.
produced in facilities where animal or billion gallons. Even if only one fifth of
In the 2004 base case, 3.5 billion
other waste materials are digested or this ethanol were to end up qualifying gallons of ethanol 51 and 1.9 billion
otherwise used to displace 90 percent of as cellulosic biomass ethanol or come to gallons of MTBE 52 were blended into
more of the fossil fuel normally used in fruition by 2013, it would be more than gasoline to supply the transportation
the production of ethanol. enough to satisfy the 250 million gallon sector with a total of 136 billion gallons
As shown in Table VI.A.2–4, there are requirement specified in the Act.50 of gasoline.53 A breakdown of the 2004
seven ethanol plants planning to utilize
cellulosic feedstocks in the future. 50 We anticipate a ramp-up in cellulosic ethanol 51 EIA Monthly Energy Review, June 2006 (Table
These facilities have a combined production in the years to come so that capacity 10.1: Renewable Energy Consumption by Source,
ethanol production capacity of 320 exists to satisfy the Act’s 2013 requirement (250 Appendix A: Thermal Conversion Factors).
million gallons per year. It is unclear million gallons of cellulosic biomass ethanol). 52 File containing historical RFG MTBE usage
Therefore, for subsequent analysis purposes, we obtained from EIA representative on March 9, 2006.
whether these plants would be online have assumed that 250 million gallons of ethanol 53 EIA 2004 Petroleum Marketing Annually (Table
and capable of producing 250 million would come from cellulosic biomass sources by 48: Prime Supplier Sales Volumes of Motor
gallons of ethanol by 2013 to meet the 2012. Continued
gasoline and oxygenate consumption by PADD is found below in Table VI–A.3–

PADD is found below in Table VI–A.3– 1.
1.
TABLE VI.A.3–1.—2004 U.S. GASOLINE & OXYGENATE CONSUMPTION BY PADD

Ethanol MTBE a
Gasoline
PADD MMgal Percent of Percent of
MMgal MMgal
gasoline gasoline
PADD 1 .................................................................................................... 49,193 660 1.3 1,360 2.8

PADD 2 .................................................................................................... 38,789 1,616 4.2 1 0.0
PADD 3 .................................................................................................... 20,615 79 0.4 498 2.4
PADD 4 .................................................................................................... 4,542 83 1.8 0 0.0
PADD 5 b .................................................................................................. 7,918 209 2.6 19 0.2
California .................................................................................................. 14,836 853 5.8 0 0.0
Total .................................................................................................. 135,893 3,500 2.6 1,878 1.4

a MTBE blended into RFG.
b PADD 5 excluding California.
As shown above, nearly half (or about in CG, and 5 percent was used in winter has been a progression over the past few
45 percent) of the ethanol was oxy-fuel.55 years. From 2001 to 2004, ethanol
consumed in PADD 2 gasoline, where As shown above in Table VI.A.3–1, 99 consumption more than doubled (from
the majority of ethanol was produced. percent of MTBE use occurred in 1.7 to 3.5 billion gallons), while MTBE
The next highest region of use was the PADDs 1 and 3. This reflects the high use (in RFG) was virtually cut in half
State of California which accounted for concentration of RFG areas in the (from 3.7 to 1.9 billion gallons). A plot
about 25 percent of domestic ethanol northeast (PADD 1) and the local of oxygenate use over the past decade is
consumption. This is reasonable production of MTBE in the gulf coast provided below in Figure VI.A.3–1.
because California alone accounts for (PADD 3). PADD 1 receives a large The nation’s transition to ethanol is
over 10 percent of the nation’s total portion of its gasoline from PADD 3 linked to states’ responses to recent
gasoline consumption and all the fuel refineries who either produce the fossil- environmental concerns surrounding
(both Federal RFG and California Phase fuel based oxygenate or are closely MTBE groundwater contamination.
3 RFG) has been assumed to contain affiliated with MTBE-producing Resulting concerns over drinking water
ethanol (following their recent MTBE petrochemical facilities in the area. quality have prompted several states to
ban) at 5.7 volume percent.54 The bulk Overall, 100 percent of MTBE in 2004 significantly restrict or completely ban
of the remaining ethanol was used in was assumed to be used in reformulated MTBE use in gasoline. At the time of
reformulated gasoline (RFG) and winter gasoline.56 this analysis, 19 states had adopted
oxy-fuel areas requiring oxygenated In 2004, total ethanol use exceeded MTBE bans. A list of the states with
gasoline. Overall, 62 percent of ethanol MTBE use. Ethanol’s lead oxygenate MTBE bans is provided in RIA Table
was used in RFG, 33 percent was used role is relatively new, however the trend 2.1–4.
Gasoline by Grade, Formulation, PAD District, and ethanol based on a conversation with Dean 56 2004 MTBE consumption was obtained from
State). Simeroth at California Air Resources Board (CARB). EIA. The data received was limited to states with
54 Current California gasoline regualtions make it 55 For the purpose of this analysis, except where RFG programs, thus MTBE use was assumed to be
very difficult to meet the NOX emissions noted, the term ‘‘RFG’’ pertains to Federal RFG plus limited to RFG areas for the purpose of this
performance standard with ethanol content higher analysis.
California Phase 3 RFG (CaRFG3) and Arizona
than about 6 vol%. For our analysis, all California
RFG was assumed to contain 5.7 volume percent Clean Burning Gasoline (CBG).
4. Expected Growth in Ethanol conventional gasoline. More important VI.A.2, production capacity would be
Consumption than the removal of MTBE over the long sufficient.
As mentioned above, ethanol demand term, however, is the impact that the In assessing the impacts of expanded
is expected to increase well beyond the rise in crude oil price is having on renewable fuel use, we have chosen to
levels contained in the renewable fuels demand for renewable fuels, both evaluate two different future ethanol
standard (RFS) under the Act. With the ethanol and biodiesel. This has consumption levels, one reflecting the
removal of the RFG oxygenate dramatically improved the economics statutory required minimum, and one
mandate,57 all U.S. refiners are taking for renewable fuel use, leading to a reflecting the higher levels projected by
steps to eliminate the use of MTBE as surge in demand that is expected to EIA. For the statutory consumption
quickly as possible. In order to complete continue. In the Annual Energy Outlook scenario we assumed 6.7 billion gallons
this transition quickly (by 2007 at the (AEO) 2006, EIA forecasted that by of ethanol use (0.25 billion gallons of
latest) while maintaining gasoline 2012, total ethanol use (corn, cellulosic, which was assumed to be cellulosic)
volume, octane, and mobile source air and imports) would be about 9.6 billion and 0.3 billion gallons of biodiesel. This
toxics emission performance standards, gallons and biodiesel use would be figure is lower than the 7.2 billion
refiners have elected to blend ethanol about 0.3 billion gallons at a crude oil gallons of ethanol we modeled in the
into virtually all of their RFG.58 This has price forecast of $48 per barrel.59 This proposal because it considers the
caused a dramatic increase in demand renewable fuel equivalence values we
ethanol projection was not based on
for ethanol which, in 2006, was met by are finalizing for corn ethanol (1),
what amount the market would demand
temporarily shifting large volumes of biodiesel (1.5) and cellulosic ethanol
ethanol out of conventional gasoline (which could be higher), but rather on
the amount that could be produced by (2.5). For the higher projected renewable
and into RFG areas. By 2012, however, fuel consumption scenario, we assumed
ethanol production will have grown to 2012. Others are making similar
predictions, and as discussed above in 9.6 billion gallons of ethanol (0.25
accommodate the removal of MTBE billion gallons of which was assumed to
without the need for such a shift from
59 In AEO 2007, EIA is forecasted an even higher

be cellulosic) and 0.3 billion gallons of
57 Energy ethanol consumption of 11.2 billion gallons by
biodiesel. Although the actual
Act Section 1504, promulgated on May
8, 2006 at 71 FR 26691. 2012. The draft report was issued on December 5, renewable fuel volumes consumed in
58 Based on discussions with the refining 2006 and we could not incorporate it into the 2012 may differ from both the required
ER01MY07.049</GPH>
industry. refinery modeling used to conduct our analyses. and projected volumes, we believe that
these two scenarios provide a programming (LP) refinery cost model post-processing involved to ensure that
reasonable range for analysis purposes. (discussed in more detail in Section all state ethanol mandates and winter
For more information on how the VII). For both future ethanol oxy-fuel requirements were satisfied.
renewable fuel usage scenarios we consumption scenarios discussed above, The adjusted results for the 6.7 Bgal RFS
considered, refer to RIA Section 2.1. the modeling provided us with a case and the 9.6 Bgal EIA case are
To estimate where ethanol would be summary of ethanol usage by PADD, presented below in Tables VI.A.4–1 and
consumed in 2012, we used a linear fuel type, and season. There was some VI.A.4–2, respectively.
TABLE VI.A.4–1.—FORECASTED 2012 U.S. ETHANOL CONSUMPTION (MMGAL) 6.7 BGAL RFS CASE
Summer ethanol use Winter ethanol use Total
PADD ethanol
CG a RFG b Total CG a RFG b Total
PADD 1 ................................................................................ 399 679 1,078 350 706 1,057 2,134

PADD 2 ................................................................................ 1,667 59 1,726 1,082 288 1,370 3,096
PADD 3 ................................................................................ 161 47 208 146 0 146 354
PADDs 4/5 c ......................................................................... 135 0 135 138 0 138 274
California .............................................................................. 0 414 414 0 398 398 813
Total .............................................................................. 2,362 1,200 3,562 1,717 1,392 3,109 6,671

a Includes Arizona CBG and winter oxy-fuel.
b Federal RFG and California Phase 3 RFG.
c PADDS 4 and 5 excluding California.
TABLE VI.A.4–1.—FORECASTED 2012 U.S. ETHANOL CONSUMPTION BY SEASON (MMGAL) 9.6 BGAL EIA CASE
Summer ethanol use Winter ethanol use Total
PADD ethanol
CG a RFG b Total CG a RFG b Total
PADD1 ................................................................................. 610 630 1,240 267 973 1,240 2,481

PADD2 ................................................................................. 1,735 185 1,919 1,631 366 1,998 3,917
PADD3 ................................................................................. 901 47 949 856 0 856 1,805
PADD 4/5 c ........................................................................... 339 0 339 154 0 154 492
California .............................................................................. 0 435 435 0 470 470 905
Total .............................................................................. 3,584 1,298 4,882 2,908 1,809 4,718 9,600

a Includes Arizona CBG and winter oxy-fuel.
b Federal RFG and California Phase 3 RFG.
c PADDs 4 and 5 excluding California.
As shown above, the LP modeling fuel, even with the subsidies and credits biodiesel production in the U.S. are
predicts that the majority of ethanol will provided by federal and state programs. presented in Table VI.B.1–1 below.
be consumed in PADD 2, where most of Much of the demand occurred as a
the ethanol is produced. The results result of mandates from states and local TABLE VI.B.1–1.—ESTIMATED
show varying levels of ethanol usage in municipalities, that required the use of BIODIESEL PRODUCTION
RFG in response to the removal of the biodiesel. However, over the past couple
oxygenate requirement. For the higher of years biodiesel production has been Million
ethanol consumption scenario, the increasing rapidly. The combination of Year gallons
per year
modeling suggests that the majority of higher crude oil prices and greater
additional ethanol would be absorbed in federal tax subsidies has created a 2001 .............................................. 5
PADD 3 conventional gasoline. With favorable economic situation. The 2002 .............................................. 15
respect to seasonality, in both cases, the Biodiesel Blenders Tax Credit programs 2003 .............................................. 20
modeling predicts that a greater fraction and the Commodity Credit Commission 2004 .............................................. 25
of ethanol use would occur in the Bio-energy Program, both subsidize 2005 .............................................. 91
summertime due to the 1psi RVP 2006 .............................................. 150
producers and offset production costs. 2007 .............................................. 414
waiver. For a more detailed discussion The Energy Policy Act extended the 2012 .............................................. 303
on future ethanol consumption, refer to Biodiesel Blenders Tax Credit program
Chapter 2 of the RIA. to 2008. This credit provides about one Source: Historical data from 2001–2004 ob-
tained from estimates from John Baize ‘‘ The
B. Overview of Biodiesel Industry and dollar per gallon in the form of a federal Outlook and Impact of Biodiesel on the Oil-
Future Production/Consumption excise tax credit to biodiesel blenders seeds Sector’’ USDA Outlook Conference 06.
from virgin vegetable oil feedstocks and Year 2005 data from USDA Bioenergy Pro-
1. Characterization of U.S. Biodiesel 50 cents per gallon to biodiesel gram http://www.fsa.usda.gov/daco/bioenergy/
Production/Consumption 2005/FY2005ProductPayments, Year 2006
produced from recycled grease and data from verbal quote based on projection by
Historically, the cost to make animal fats. The program was started in NBB in June of 2006. Production data for
biodiesel was an inhibiting factor to 2004 under the American Jobs Act, years 2007 and higher are from EIA’s AEO
production in the U.S. The cost to spurring the expansion of biodiesel 2006.
produce biodiesel was high compared to production and demand. Historical With the increase in biodiesel
the price of petroleum derived diesel estimates and future forecasts of production, there has also been a
corresponding rapid expansion in and 2006, and was first available to biodiesel. The excess capacity, though,
biodiesel production capacity. produce fuel in the later part of 2005 may be from biodiesel plants that do not
Presently, there are 85 biodiesel plants and in 2006. Though the capacity has operate full time and from production
in operation with an annual production grown, historically the biodiesel capacity that is primarily devoted to
capacity of 580 million gallons per production capacity has far exceeded making esters for the ole-chemical
year.60 The majority of the current actual production with only 10–30 markets, see Table VI.B.1–2.
production capacity was built in 2005 percent of this being utilized to make
TABLE VI.B.1–2.—U.S. PRODUCTION CAPACITY HISTORY a

2001 2002 2003 2004 2005 2006
Plants ....................................................................................................................................................... 9 11 16 22 45 85
Capacity (million gal/yr) ........................................................................................................................... 50 54 85 157 290 580
a Capacity Data based on surveys conducted around the month of September for most years, though the 2006 information is based on a sur-
vey conducted in January 2006.61
2. Expected Growth in U.S. Biodiesel phase and 13 existing plants that are these plants should be completed by
Production/Consumption expanding their capacity, which when late 2007. As shown in Table VI.B.2–1
In addition to the 85 biodiesel plants completed would increase total if all of this capacity came to fruition,
already in production, as of early 2006, biodiesel production capacity to over U.S. biodiesel capacity would exceed
there were 65 plants in the construction one billion gallons per year. Most of 1.4 billion gallons.
TABLE VI.B.2–1.—PROJECTED BIODIESEL PRODUCTION CAPACITY

Existing Construction
plants phase
Number of plants ..................................................................................................................................................... 85 78

Total Plant Capacity, (MM Gallon/year) .................................................................................................................. 580 1,400
For cost and emission analysis C. Feasibility of the RFS Program strong demand. We estimate that this
purposes, three biodiesel usage cases Volume Obligations will require a maximum of 2,100
were considered: A 2004 base case, a This section examines whether there construction workers and 90 engineers
2012 reference case, and a 2012 control are any feasibility issues associated with on a monthly basis through 2012.
case. The 2004 base case was formed the meeting the minimum renewable 2. Technology Available To Produce
based on historical biodiesel usage (25 fuel requirements of the Energy Act. Cellulosic Ethanol
million gallons as summarized in Table Issues are examined with respect to
VI.B.1.1). The reference case was renewable production capacity, There are a wide variety of
computed by taking the 2004 base case cellulosic ethanol production capacity, government and renewable fuels
and growing it out to 2012 by applying and distribution system capability. Land industry research and development
the 2004–2012 EIA diesel fuel growth resource requirements are discussed in programs dedicated to improving our
Chapter 7 of the RIA. ability to produce renewable fuels from
rate.62 The resulting 2012 reference case
cellulosic feedstocks. In this discussion,
consisted of 30 million gallons of 1. Production Capacity of Ethanol and we deal with at least three completely
biodiesel. Finally, for the 2012 control Biodiesel different approaches to producing
case, forecasted biodiesel use was ethanol from cellulosic biomass. The
As shown in Sections VI.A. and VI.B.,
assumed to be 300 million gallons based increases in renewable fuel production first is based on what NREL refers to as
on EIA’s AEO 2006 report (rounded capacity are already proceeding at a the ‘‘sugar platform,’’ 63 which refers to
value from Table VI.B.1.1). Unlike pace significantly faster than required to pretreating the biomass, then
forecasted ethanol use, biodiesel use meet the 2012 mandate in the Act of 7.5 hydrolyzing the cellulosic and
was assumed to be constant at 300 billion gallons as well as the mandate hemicellulosic components into sugars,
million gallons under both the statutory (starting in 2013) of a minimum of 250 and then fermenting the sugars into
and higher projected renewable fuel million gallons of cellulosic ethanol. ethanol.
consumption scenarios described in The combination of ethanol and Corn grain is a nearly ideal feedstock
VI.A.4. EIA’s projection is based on the biodiesel plants in existence and for producing ethanol by fermentation,
assumption that the blender’s tax credit planned or under construction is especially when compared with
is not renewed beyond 2008. If the tax expected to provide a total renewable cellulosic biomass feedstocks. Corn
credit is renewed, the projection for fuel production capacity of over 9.6 grain is easily ground into small
biodiesel demand would increase. billion gallons by the end of 2012. particles, following which the exposed
Production capacity is expected to starch which has a-linked saccharide
continue to increase in response to polymers is easily hydrolyzed into
60 NBB Survey September 13, 2006 ‘‘U.S. 62 EIA

Annual Energy Outlook 2006, Table 1. Institute • B NREL, Golden, Colorado, May 1–2,
Biodiesel Production Capacity’’. 63 EnzymeSugar Platform (ESP), Project Next 2003; U.S. Department of Energy by Midwest
61 From Presentation ‘‘Biodiesel Production Steps National Renewable Energy, Dan Schell, FY03 Research Institute • Battelle • Bechtel.
Capacity,’’ by Leland Tong, National Biodiesel Review Meeting; Laboratory Operated for the U.S.
Conference and Expo, February 7, 2006. Department of Energy by Midwest Research
simple, single component sugar which hydrolysis. The most common chemical cellulose to glucose (6-carbon) and
can then be easily fermented into pretreatments for cellulosic feedstocks hemicellulose to xylose (5-carbon)
ethanol. By comparison, the biomass are strong acid, dilute acid, caustic, sugar, with little degradation to furfural;
lignin structure must be either organic solvents, ammonia, sulfur the reaction times are typically slower
mechanically or chemically broken dioxide, carbon dioxide or other than those of the dilute acid process.
down to permit hydrolyzing chemicals chemicals which make the biomass The critical factors needed to make this
and enzymes access to the saccharide more accessible to the enzymes. process economically viable are to
polymers. The central problem is that Following pretreatment, acidic (dilute optimize sugar recovery and cost
the cellulose/hemicellulose saccharide and concentrated) and enzymatic effectively recover the acid for
polymers are b-linked which makes hydrolysis are the two process types recycling. The concentrated acid
hydrolysis much more difficult. Simple commonly used to hydrolyze cellulosic process is somewhat more complicated
microbial fermentation used in corn feedstocks before fermentation into and requires more time, but it has the
sugar fermentation is also not possible, ethanol.64 primary advantage of yielding up to
since the cellulose and hemicellulose (6 about 90% of both hemicellulosic and
ii. Dilute Acid Hydrolysis
& 5 carbon molecules, respectively) cellulosic sugars.66 In addition, a
have not been able to be fermented by Dilute acid hydrolysis is the oldest significant advantage of the
the same microbe. We discuss various technology for converting cellulose concentrated acid process is that it is
pretreatment, hydrolysis and biomass to ethanol. The dilute acid carried out at relatively low
fermentation technologies, below. The process uses a 1-percent sulfuric acid in temperatures, about 212 °F, and low
second and third approaches have a continuous flow reactor at about pressure, such that fiberglass reactors
nothing to do with pretreatment, acids, 420 °F; reaction times are measured in and piping can be used.
enzymes, or fermentation. The second is seconds and minutes, which facilitates
continuous processing. The process iv. Enzymatic hydrolysis
sometimes referred to as the ‘‘syngas’’ or
‘‘gas-to-liquid’’ approach; we will call it involves two reactions with a sugar Enzymatic hydrolysis is not
the ‘‘Syngas Platform.’’ Briefly, the conversion efficiency of about 50 necessarily a recent discovery. We
cellulosic biomass feedstock is steam- percent. The process conditions at found reports of research conducted by
reformed to produce syngas which is which the cellulosic molecules are a variety of companies and government
then converted to ethanol over a converted into sugar are also those at agencies going back to at least
Fischer-Tropsch catalyst. The third which the sugar is almost immediately 1991. 67 68 69 The enzymatic hydrolysis
approach uses plasma technology. converted into other chemicals, of cellulose was reportedly discovered
principally furfural. The rapid when a fungus, trichoderma reesei, was
a. Sugar Platform conversion to furfural reduces the sugar identified which produced cellulase
Plant cell walls are made up of yield, which along with other by- enzymes that broke down cotton
cellulose and hemicellulose polymers products inhibits the fermentation clothing and tents in the South Pacific
embedded in a lignin matrix. This process. One way to decrease sugar during World War II. Since then,
complex structure prevents both the degradation is to use a two-stage process generations of cellulases have been
first step, hydrolyzation of the cellulose which takes advantage of the fact that developed through genetic
and hemicellulose polymers, and the hemicellulose (5-carbon) sugars degrade modifications of the fungus strain. As in
second step, fermentation of the more rapidly than cellulose (6-carbon) acid hydrolysis, the hydrolyzing
hydrolyzed sugars into ethanol. sugars. The first stage is conducted enzymes must have access to the
under mild process conditions to cellulose and hemicellulose in order to
i. Pretreatment
recover the 5-carbon sugars, while the work efficiently. Although enzymatic
Those who wish to use cellulosic second stage is conducted under harsher hydrolysis requires some kind of
biomass feedstocks to produce ethanol conditions to recover the 6-carbon pretreatment, purely physical
face several, difficult problems. The sugars. Both hydrolyzed solutions are pretreatments are typically not
lignin sheath, present in all cellulosic then fermented to ethanol. Lime is used adequate. Furthermore, the chemical
materials, prevents, or at the very least, to neutralize the residual acid before the method uses dilute sulfuric acid, which
severely restricts hydrolysis. To produce fermentation stage. Regardless, some is poisonous to the fermentation
ethanol from cellulosic biomass sugar degrades to furfural, which
feedstocks by fermentation, some type naturally limits the net yield of ethanol. 66 Ibid.
of thermo-mechanical, mechanical, The residual cellulose and lignin are 67 Technical and Economic Analysis Of An
chemical or a combination of these used as boiler fuel for electricity or Enzymatic Hydrolysis Based Ethanol Plant, Fuels
pretreatments is always necessary before steam production.65 and Chemicals Research and Engineering Division,
Solar Energy Research Institute, Golden CO, 80401,
the cellulosic and hemicellulosic June 1991 • DRAFT • SERI Protected Proprietary
polymers can be hydrolyzed. In effect, iii. Concentrated acid hydrolysis
Information • Do Not Copy.
the lignin structure must be ‘‘opened’’ to Concentrated acid hydrolysis uses a 68 Biomass to Ethanol Process Evaluation, A
allow efficient and effective strong acid 70-percent sulfuric acid solution, report prepared for National Renewable Energy
hydrolysis, weak acid hydrolysis, or followed by water hydrolysis to convert Laboratory, December 1994; Chem Systems Inc. 303
South Broadway, Tarrytown, New York, 10591.
weak acid enzymatic hydrolysis of the the cellulose into sugar. The process 69 Lignocellulosic Biomass to Ethanol Process
cellulose/hemicellulose to their glucose rapidly, and nearly completely, converts Design and Economics Utilizing Co-Current Dilute
and xylose sugar components. Over Acid Prehydrolysis and Enzymatic Hydrolysis
time, many pretreatment methods or 64 Appendix B, Overview of Cellulose-Ethanol Current and Futuristic Scenarios, July 1999 • NREL/
Production Technology; OREGON CELLULOSE- TP–580–26157; Robert Wooley, Mark Ruth, John
combinations of methods have been ETHANOL STUDY, An evaluation of the potential Sheehan, and Kelly Ibsen, Biotechnology Center for
tried, some with more success than for ethanol production in Oregon using cellulose- Fuels and Chemicals; Henry Majdeski and Adrian
others. Usually, intense physical based feedstocks; Prepared by: Angela Graf, Bryan Galvez, Delta-T Corporation; National Renewable
pretreatments such as steam explosion & Bryan Inc., 5015 Red Gulch, Cotopaxi, Colorado Energy Laboratory, 1617 Cole Boulevard, Golden,
81223; Tom Koehler, Celilo Group, 2208 S.W. First Colorado 80401–3393; NREL is a U.S. Department
are required; grasses and forest Ave, #320, Portland, Oregon 97204; For submission of Energy Laboratory Operated by Midwest
thinnings usually need to be chipped, to: The Oregon Office of Energy. Research Institute • Battelle • Bechtel; Contract No.
prior to chemical or enzymatic 65 Ibid. DE–AC36–98–GO10337.
microorganisms and must be detoxified. ‘‘syngas’’ consisting primarily of carbon underway for creating a syngas from
While original enzymatic hydrolysis monoxide and hydrogen. The syngas is which ethanol is produced. A plasma
processes used separate hydrolysis and then passed over in a Fischer-Tropsch ‘‘reactor,’’ generates an ionized gas
fermentation steps, recent process catalyst to produce ethanol. (plasma) which serves as an electrical
improvements integrate saccharification The biomass feedstock is dried to conductor to transfer intense radiant
and fermentation by combining the about 15% moisture content and ground energy to a biomass or waste material.
cellulase enzymes and fermenting small enough to be efficiently burned This intense energy is said to actually
microbes in one vessel. This results in and reacted in the reformer. The breakdown the various materials in the
a one-step process of sugar production reformer, an important upstream biomass or waste into their atomic
and fermentation, referred to as the element of the process, is essentially a components. Anything present in the
simultaneous saccharification and common solid-fuel gasifier, which with feed-mass that doesn’t gasify, is
fermentation (SSF) process. One some modification and steam injection essentially ‘‘vitrified.’’ This vitrified
disadvantage is that the cellulase becomes what is sometimes referred to stream is reportedly inert and can be
enzyme and fermentation organism as the ‘‘primary reformer.’’ used as aggregate in paving materials.
must operate under the same process When any fuel is completely burned, Following gasification, the syngas is
conditions, which could decrease the all of its potential energy is released as cooled, impurities are removed, and the
sugar and, ultimately, the ethanol heat which can be recovered for gas is sent to ethanol production as with
yields. An alternative to the SSF immediate use. In a common the syngas platform described above.72
technology is the sequential hydrolysis gasification process, the partially
and fermentation (SHF) process. The burned fuel (wood or coal) releases a d. Feedstock Optimization
separation of hydrolysis and small amount of heat, but leaves some
uncombusted, gaseous products. Cellulosic biomass can come from a
fermentation enables enzymes to variety of sources. Because the
operate at higher temperatures in the Ordinarily, the hot product gases are fed
directly to a nearby boiler or gas turbine, conversion of cellulosic biomass to
hydrolysis step to increase sugar ethanol has not yet been commercially
production and more moderate to do work; it has been reported that for
a well-designed system, the overall demonstrated, we cannot say at this
temperatures in the fermentation step to time which feedstocks are superior to
optimize the conversion of sugar into efficiency may approach that of a solid
fuel boiler. However, when steam is others. A few of the many resources are:
ethanol.
injected into the gasifier, it reacts with Post-sorted municipal waste, rice and
Cost-effective cellulase enzymes must
also be developed for this technology to the burning solid fuel to produce more wheat straw,73 soft-woods, hardwood,
be completely successful.70 Several gaseous product. The primary reaction switch grass, and bagasse. Regardless,
companies are using variations of these is between carbon and water which each feedstock requires a specific
technologies to develop processes for produces hydrogen and carbon combination of pretreatment methods
converting cellulosic biomass into monoxide and an inorganic ash. The ash and enzyme ‘‘cocktails’’ to optimize the
ethanol by way of fermentation. A few and heavy hydrocarbon-tars are operation and maximize the ethanol
groups, using recently developed removed from the raw syngas before it yield. One of the many challenges for
genome modifying technology, have is compressed and passed over Fisher- the cellulose-ethanol industry is to find
been able to produce a variety of new Tropsch catalyst to produce ethanol. the best feedstocks and then develop the
or modified enzymes and microbes that Fisher-Tropsch technology has been most cost-effective ways for converting
show promise for use in weak- or dilute- used for many years in the chemical and them into ethanol.
acid enzymatic-prehydrolysis. Another refining industries, most notably to 3. Renewable Fuel Distribution System
problem with cellulosic feedstocks is, as produce gasoline and diesel fuel from Capability
previously described, that the syngas produced by coal gasification.
hydrolysis reactions produce both Whether the Fischer-Tropsch reaction Ethanol and biodiesel blended fuels
glucose, the six-carbon sugar, and produces diesel or ethanol is primarily are currently not shipped by petroleum
xylose, the five-carbon sugar (pentose the result of changes to process product pipeline due to operational
sugar, C5H10O5; sometimes called ‘‘wood pressure, temperature and in some cases issues and additional cost factors.
sugar’’). Early conversion technology the use of custom catalysts. In most Hence, a separate distribution system is
required different microbes to ferment cases, the Fischer-Tropsch process did needed for ethanol and biodiesel up to
each sugar. Recent research has not produce pure ethanol in the first the point where they are blended into
developed better fermenting organisms. pass through the system. Rather, a petroleum-based fuel as it is loaded into
Now, glucose and xylose can be co- stream of mixed chemicals was tank trucks for delivery to retail and
fermented—hence, the present-day produced, including gasoline, diesel, fleet operators. In cases where ethanol
terminology: Weak-acid enzymatic and oxygenated hydrocarbons and biodiesel are produced within 200
hydrolysis and co-fermentation. (alcohol).71 miles of a terminal, trucking is often the
preferred means of distribution. For
b. Syngas Platform c. Plasma Technology
longer shipping distances, the preferred
The second platform for producing The development of another
cellulosic ethanol is to convert the technology, called plasma, is also 72 Ethanol From Tires Via Plasma Converter Plus
biomass into a syngas which is then Fischer Tropsch, March 15, 2006; http://
converted into ethanol. A ‘‘generic’’ 71 Gridley Ethanol Demonstration Project thefraserdomain.typepad.com/energy/2006/03/
Utilizing Biomass Gasification Technology: Pilot ethanol_from_ti.html.
syngas process is essentially a ‘‘steam
Plant Gasifier and Syngas Conversion Testing, 73 Wheat Straw for Ethanol Production in
reformer,’’ which ‘‘gasifies’’ biomass August 2002–June 2004; February 2005 • NREL/SR– Washington: A Resource, Technical, and Economic
and other carbon based substances 510–37581; TSS Consultants, For the City of Assessment, September 2001, WSUCEEP2001084;
including wastes, in a reduced-oxygen Gridley, California, 1617 Cole Boulevard, Golden, Prepared by: James D. Kerstetter, Ph.D., John Kim
environment and reacts them with Colorado 80401–3393, 303–275–3000 • http:// Lyons, Washington State University Cooperative
www.nrel.gov; Operated for the U.S. Department of Extension Energy Program, 925 Plum Street, SE.,
steam to produce a synthesis gas or Energy Office of Energy Efficiency and Renewable P.O. Box 43165, Olympia, WA 98504–3165;
Energy by Midwest Research Institute • Battelle Prepared for: Washington State Office of Trade and
70 Ibid. Contract No. DE–AC36–99–GO10337. Economic Development.
method of bringing renewable fuels to requirements. As such, the changes in and RVP caused by these fuel changes.
terminals is by rail and barge. the use of renewable fuels and their That analysis, however, could not
Modifications to the rail, barge, tank related cost impacts are not directly properly balance octane and other
truck, and terminal distribution systems attributable to the RFS rule. Rather, our gasoline qualities. For this final rule, we
will be needed to support the transport analysis assesses the broader fuels have therefore used the services of
of the anticipated increased volumes of impacts of the growth in renewable fuel Jacobs Consultancy to run their refinery
renewable fuels. These modifications use in the context of corresponding LP model to estimate the cost impacts
include the addition of terminal changes to the makeup of gasoline. of the RFS rule.
blending systems for ethanol and These fuel impacts include the The results from the refinery LP
biodiesel, additional storage tanks at elimination of the reformulated gasoline model indicate that the impacts on
terminals, additional rail delivery (RFG) oxygen standard which has overall gasoline costs from the increased
systems at terminals for ethanol and resulted in the refiners ceasing to use use of ethanol and the corresponding
biodiesel, and additional rail cars, the gasoline blendstock methyl tertiary changes to the other aspects of gasoline
barges, and tank trucks to distribute butyl ether (MTBE) and replacing it would be 0.49 cents per gallon for the
ethanol and biodiesel to terminals. with ethanol. Thus, in this analysis, we RFS case. The EIA case would result in
Terminal storage tanks for 100 percent are assessing the impact on the cost of increased total cost of 1.03 cents per
biodiesel will also need to be heated gasoline and diesel fuel of increased use gallon. The actual cost at the fuel pump,
during cold months to prevent gelling. of renewable fuels, the cost savings however, will be decreased due to the
The most comprehensive study of the resulting from the phase out of MTBE effect of State and Federal tax subsidies
infrastructure requirements for an and the increased cost due to the other for ethanol. Taking this into
expanded fuel ethanol industry was changes in fuel quality that result. consideration results in ‘‘at the pump’’
conducted for the Department of Energy As discussed in Section II, we chose decreased costs (cost savings) of ¥0.47
(DOE) in 2002.74 The conclusions to analyze a range of renewable fuel use. cents per gallon for the RFS case and ‘‘at
reached in that study indicate that the In the case of ethanol’s use in gasoline, the pump’’ decreased cost of ¥0.83
changes needed to handle the the lower end of this range is based on cents per gallon for the EIA case.
anticipated increased volume of ethanol the minimum renewable fuel volume Section 7 of the RIA contains more
by 2012 will not represent a major requirements in the Act, (the RFS case) detail on the cost analysis used to
obstacle to industry. While some and the higher end is based on AEO develop these costs.
changes have taken place since this 2006 (the EIA case). At both ends of this
A. Renewable Fuel Production and
report was issued, including an range, we assume that biodiesel
Blending Costs
increased reliance on rail over marine consumption will be the level estimated
transport, we continue to believe that in AEO 2006. We analyzed the projected 1. Ethanol Production Costs
the rail and marine transportation fuel consumption scenario and a. Corn Ethanol
industries can manage the increased associated program costs in 2012, the
year that the RFS is fully phased-in. The A significant amount of work has
growth in demand in an orderly fashion. been done in the last decade on
This belief is supported by the volumes of renewable fuels consumed
in 2012 at the two ends of the range are surveying and modeling the costs
demonstrated ability for the industry to involved in producing ethanol from
handle the rapid increases and summarized in Table II.A.1–1.
We have estimated an average corn corn to serve business and investment
redistribution of ethanol use across the purposes as well as to try to educate
country over the last several years as ethanol production cost of $1.26 per
gallon in 2012 (2004 dollars) for the RFS energy policy decisions. Corn ethanol
MTBE was removed. The necessary costs for our work were estimated using
facility changes at terminals and at retail case and $1.32 per gallon for the EIA
case. For cellulosic ethanol, we estimate a model developed by USDA in the
stations to dispense ethanol containing 1990s that has been continuously
fuels have been occurring at a record it will cost approximately $1.65 in 2012
(2004 dollars) to produce a gallon of updated by USDA. The most current
pace. Given that future growth is version was documented in a peer-
expected to progress at a steadier pace ethanol using corn stover as a cellulosic
feedstock. In this analysis, however, we reviewed journal paper on cost
and with greater advance warning in modeling of the dry-grind corn ethanol
assume that the cellulosic requirement
response to economic drivers, we process, and it produces results that
will be met by corn-based ethanol
anticipate that the distribution system compare well with cost information
produced by energy sourced from
will be able to respond appropriately. A found in surveys of existing plants.75 76
biomass (animal and other waste
discussion of the costs associated We made some minor modifications to
materials as discussed in Section III.B of
making the changes discussed above is the USDA model to allow scaling of the
today’s preamble) and costing the same
contained in Section VII.B of today’s plant size, to allow consideration of
as corn based ethanol produced by
preamble. plant energy sources other than natural
conventional means.
VII. Impacts on Cost of Renewable We estimated production costs for gas, and to adjust for energy prices in
Fuels and Gasoline soy-derived biodiesel of $2.06 per gallon 2012, the year of our analysis.
in 2004 and $1.89 per gallon in 2012. The cost of ethanol production is
This section examines the impact on
For yellow grease derived biodiesel, we most sensitive to the prices of corn and
fuel costs resulting from the growth in
estimate an average production cost of the primary co-product, DDGS. Utilities,
renewable fuel use between a base year
$1.19 per gallon in 2004 and $1.11 in capital, and labor expenses also have an
of 2004 and 2012. We note that based
2012. impact, although to a lesser extent. Corn
on analyses conducted by the Energy
For the proposed rule, we estimated feedstock minus DDGS sale credits
Information Administration (EIA),
the cost of increased use of renewable
renewable fuels will be used in gasoline
fuel and other major cost impacts by 75 Kwaitkowski, J.R., McAloon, A., Taylor, F.,
and diesel fuel in excess of the RFS Johnston, D.B., Industrial Crops and Products 23
developing our own cost spreadsheet
(2006) 288–296.
74 ‘‘Infrastructure Requirements for an Expanded model. That analysis considered the 76 Shapouri, H., Gallagher, P., USDA’s 2002
Fuel Ethanol Industry,’’ Downstream Alternatives production cost, distribution cost as Ethanol Cost-of-Production Survey (published July
Inc., January 15, 2002. well as the cost for balancing the octane 2005).
represents about 48% of the final per- will be significant, thus making overall similar basis.83 It is also reasonable to
gallon cost, while utilities, capital and production costs at these plants similar expect that the cost of cellulosic ethanol
labor comprise about 19%, 9%, and 6%, to gas-fired ethanol plants. As of the would be higher than corn ethanol
respectively. For this work, we used time of this writing, we know of only a because of the complexity of the
corn prices of $2.50/bu and $2.71/bu for few operating plants of this type, and cellulose conversion process. Recently,
the RFS and EIA cases, respectively, expect the quantity of ethanol produced process improvements and
with corresponding DDGS prices at this way to remain a relatively small advancements in corn production have
$83.35/ton and $85.16/ton (2004 fraction of the total ethanol demand. considerably reduced the cost of
dollars). These estimates are from Thus, the sensitivity of the overall producing corn ethanol. We also believe
modeling work done for this rulemaking analysis to this assumption is also very it is realistic to assume that cellulose-
using the Forestry and Agricultural small.81 Based on these factors, we have derived ethanol process improvements
Sector Optimization Model, which is assigned starch ethanol made using this will be made and that one can likewise
described in more detail in Chapter 8 of cellulosic criteria the same cost as reasonably expect that, as the industry
the RIA. Energy prices were derived ethanol produced from corn using matures, the cost of producing ethanol
from historical data and projected to conventional means. from cellulose will also decrease.
2012 using EIA’s AEO 2006. More b. Cellulosic Ethanol We calculated fixed and variable
details on how the ethanol production operating costs using percentages of
cost estimates were made can be found In 1999, the National Renewable
Energy Laboratory (NREL) published a direct labor and total installed capital
in Chapter 7 of the RIA. costs. Following this methodology, we
The estimated average corn ethanol report outlining its work with the USDA
to design a computer model of a plant estimate that producing a gallon of
production cost of $1.26 per gallon in
to produce ethanol from hard-wood ethanol using corn stover as a cellulosic
2012 (2004 dollars) in the RFS case and
chips.82 Although the model was feedstock would cost $1.65 in 2012
$1.32 per gallon in the EIA case
originally prepared for hardwood chips, (2004 dollars).
represents the full cost to the plant
operator, including purchase of it was meant to serve as a modifiable- 2. Biodiesel Production Costs
feedstocks, energy required for platform for ongoing research using
operations, capital depreciation, labor, cellulosic biomass as feedstock to We based our estimate for the cost to
overhead, and denaturant, minus produce ethanol. Their long-term plan produce biodiesel on the use of USDA’s,
revenue from sale of co-products. It was that various indices, costs, NREL’s and EIA’s biodiesel computer
assumes that 86% of new plants will technologies, and other factors would be models, along with estimates from
use natural gas as a thermal energy regularly updated. engineering vendors that design
source, at a price of $6.16/MMBtu (2004 NREL and USDA used a modified biodiesel plants. Biodiesel fuel can be
dollars).77 It does not account for any version of the model to compare the cost made from a wide variety of virgin
subsidies on production or sale of of using corn-grain with the cost of vegetable oils such as canola, corn oil,
ethanol. Note that the cost figure using corn stover to produce ethanol. cottonseed, etc. though, the operating
generated here is independent of the We used the corn stover model from the costs (minus the costs of the feedstock
market price of ethanol, which has been second NREL/USDA study for the oils) for these virgin vegetable oils are
related closely to the wholesale price of analysis for this rule. Because there similar to the costs based on using soy
gasoline for the past decade.78 79 were no operating plants that could oil as a feedstock, according to an
Under the Energy Act, starch-based potentially provide real world process analysis by NREL Biodiesel costs are
ethanol can be counted as cellulosic if design, construction, and operating data therefore determined based on the use
at least 90% of the process energy is for processing cellulosic ethanol, NREL of soy oil, since this is the most
derived from renewable feedstocks, had considered modeling the plant commonly used virgin vegetable
which include plant cellulose, based on assumptions associated with a feedstock oil, and the use of recycled
municipal solid waste, and manure first-of-a-kind or pioneer plant. The cooking oil (yellow grease) as a
biogas.80 It is expected that the vast literature indicates that such models feedstock. Production costs are based on
majority of the 250 million gallons per often underestimate actual costs since the process of continuous
year of cellulosic ethanol production the high performance assumed for transesterification, which converts these
required by 2013 will be made using pioneer process plants is generally feedstock oils to esters, along with the
this provision. While we have been unrealistic. ester finishing processes and glycerol
unable to develop a detailed production Instead, the NREL researchers recovery. The models and vendors data
cost estimate for corn ethanol meeting assumed that the corn stover plant was are used to estimate the capital, fixed
cellulosic criteria, we assume that the an Nth generation plant, e.g., not a and operating costs associated with the
costs will not be significantly different pioneer plant or first-or-its kind, built production of biodiesel fuel,
from conventionally produced corn after the industry had been sufficiently considering utility, labor, land and any
ethanol. We believe this is reasonable established to provide verified costs. other process and operating
because the costs of hauling, storing, The corn stover plant was normalized to requirements, along with the prices for
and processing this low or zero cost the corn kernel plant, e.g., placed on a
83 Determining the Cost of Producing Ethanol
waste material in order to combust it 81 See Table VI.A.1–2 for more details on number from Corn Starch and Lignocellulosic Feedstocks; A
of operating ethanol plants and their fuel sources. Joint Study Sponsored by: USDA and USDOE,
77 For more details on fuel sources and costs of
82 Lignocellulosic Biomass to Ethanol Process October 2000 • NREL/TP–580–28893 • Andrew
production, see RIA Chapter 1.2.2 and 7.1.1.2. Design and Economics Utilizing Co-Current Dilute McAloon, Frank Taylor, Winnie Yee, USDA,
78 Whims, J., Sparks Companies, Inc. and Kansas
Acid Prehydrolysis and Enzymatic Hydrolysis Eastern Regional Research Center Agricultural
State University, ‘‘Corn Based Ethanol Costs and Current and Futuristic Scenarios, Robert Wooley, Research Service; Kelly Ibsen, Robert Wooley,
Margins, Attachment 1’’ (Published May 2002). Mark Ruth, John Sheehan, and Kelly Ibsen, National Renewable Energy Laboratory,
79 Piel, W.J., Tier & Associates, Inc., March 9,
Biotechnology Center for Fuels and Chemicals, Biotechnology Center for Fuels and Chemicals,
2006 report on costs of ethanol production and Henry Majdeski and Adrian Galvez, Delta-T 1617 Cole Boulevard, Golden, CO, 80401–3393;
alternatives. Corporation; National Renewable Energy NREL is a USDOE Operated by Midwest Research
80 Energy Policy Act of 2005, Section 1501 Laboratory, Golden, CO, July 1999, NREL/TP–580– Institute • Battelle • Bechtel; Contract No. DE–
amending Clean Air Act Section 211(o)(1)(A). 26157. AC36–99–GO10337.
feedstock oils, methanol, chemicals and models and sources of information. For transport fuel, neglecting minor uses in
the byproduct glycerol. yellow grease derived biodiesel, we the heating oil market.
The USDA, NREL and EIA models are used the EIA and vendor estimates to For RFS cases, the net effect of
based on a medium sized biodiesel generate total production costs which biodiesel production on diesel fuel
plant that was designed to process raw range from $1.11 to $1.56 for year 2012. costs, including the biodiesel blenders’
degummed virgin soy oil as the With the current Biodiesel Blender subsidy, is a reduction in the cost of
feedstock. Additionally, the EIA model Tax Credit Program, producers using transport diesel fuel costs by $114
also contains a representation to virgin vegetable oil stocks receive a one million per year, which equates to a
estimate the biodiesel production cost dollar per gallon tax subsidy while reduction in fuel cost of about 0.20
for a plant that uses yellow grease as a yellow grease producers receive 50 cents per gallon.84 Without the subsidy,
feedstock. In the USDA model, the cents per gallon, reducing the net the transport diesel fuel costs are
equipment needs and operating production cost to a range of 89 to 115 increased by $91 million per year, or an
requirements for their biodiesel plant cents per gallon for soy oil and 61 to 106 increase of 0.16 cents per gallon for
was estimated through the use of cents per gallon for yellow greased transport diesel fuel.
process simulation software. This derived biodiesel fuel in 2012. This
software determines the biodiesel B. Distribution Costs
compares favorably to the projected
process requirements based on the use wholesale diesel fuel prices of 138 cents 1. Ethanol Distribution Costs
of established engineering relationships, per gallon in 2012, signifying that the
process operating conditions and There are two components to the costs
economics for biodiesel are positive associated with distributing the volumes
reagent needs. To substantiate the under the effects of the blender credit
validity and accuracy of their model, of ethanol necessary to meet the
program, though the tax credit program requirements of the Renewable Fuels
USDA solicited feedback from major will expire in 2008 if it is not extended.
biodiesel producers. Based on Standard (RFS): (1) The capital cost of
Congress may later elect to extend the making the necessary upgrades to the
responses, they then made adjustments blender credit program following the
to their model and updated their input fuel distribution infrastructure system,
precedence used for extending the and (2) the ongoing additional freight
prices to year 2005. The NREL model is ethanol blending subsidies.
also based on process simulation costs associated with shipping ethanol
Additionally, the Small Biodiesel to terminals. The most comprehensive
software, though the results are adjusted Blenders Tax credit program and state
to reflect NREL’s modeling methods, study of the infrastructure requirements
tax and credit programs offer some for an expanded fuel ethanol industry
using prices based on year 2002. The
additional subsidies and credits, though was conducted for the Department of
output for all of these models was
the benefits are modest in comparison to Energy (DOE) in 2002.85 That study
provided in spreadsheet format. We also
the Blender’s Tax credit. provided the foundation for our
use engineering vendor estimates as
another source to generate soy oil and 3. Diesel Fuel Costs estimates of the capital costs associated
yellow grease biodiesel production with upgrading the distribution
Biodiesel fuel is blended into infrastructure system as well as the
costs. These firms are primarily engaged
highway and nonroad diesel fuel, which freight costs to handle the increased
in the business of designing biodiesel
increases the volume and therefore the volume of ethanol needed to meet the
plants.
The production costs are based on an supply of diesel fuel and thereby requirements of the RFS in 2012.
average biodiesel plant located in the reduces the demand for refinery- Distribution costs are evaluated here for
Midwest using feedstock oils and produced diesel fuel. In this section, we both the RFS case and for the EIA case.
methanol, which are catalyzed into estimate the overall cost impact, The 2012 reference case against which
esters and glycerol by use of sodium considering how much refinery based we are estimating the cost of
hydroxide. Because local feedstock diesel fuel is displaced by the forecasted distributing the additional volume of
costs, distribution costs, and biodiesel production volume of biodiesel fuel. ethanol needed to meet the
plant type introduce some variability The cost impacts are evaluated requirements of the RFS is 3.9 billion
into cost estimates, we believe that considering the production cost of gallons.
using an average plant to estimate biodiesel with and without the subsidy
from the Biodiesel Blenders Tax credit a. Capital Costs To Upgrade Distribution
production costs provides a reasonable System for Increased Ethanol Volume
approach. Therefore, we simplified our program. Additionally, the diesel cost
analysis and used costs based on an impacts are quantified with refinery The 2002 DOE study examined two
average plant and average feedstock diesel prices as forecasted by Jacob’s cases regarding the use of renewable
prices since the total biodiesel volumes which is based on EIA’s AEO 2006. fuels for estimating the capital costs for
forecasted are not large and represent a We estimate the net effect that distributing additional ethanol. The first
small fraction of the total projected biodiesel production has on overall cost assumed that 5.1 billion gal/yr of
renewable volumes. for diesel fuel in year 2012 using total ethanol would be used in 2010, and the
The models and vendor estimates are production costs for biodiesel and diesel second assumed that 10 billion gal/yr of
further modified to use input prices for fuel. The costs are evaluated based on ethanol would be used in the 2015
feedstocks, byproducts and energy that how much refinery based diesel fuel is timetable. We interpolated between
reflect the effects of the fuels provisions displaced by the biodiesel volumes as these two cases to provide the
in the Energy Act. In order to capture a forecasted by EIA, accounting for energy foundation for our estimate of the
range of production costs, we generated density differences between the fuels. capital costs to support the use of 6.7
cost projections from all of the models The cost impact is estimated from a billion gal/yr of ethanol in 2012 for the
and vendors. We present the details on 2004 year basis, by multiplying the
these estimates in Chapter 7 of the RIA. production costs of each fuel by the 84 Based on EIA’s AEO 2006, 58.9 billion gallons
For soy oil biodiesel production, we respective changes in volumes for of highway and off-road diesel fuel is projected to
be consumed in 2012.
estimate a production cost ranging from biodiesel and estimated displaced diesel 85 Infrastructure Requirements for an Expanded
$1.89 to $2.15 per gallon in 2012 (in fuel. We further assume that all of the Fuel Ethanol Industry, Downstream Alternatives
2004 dollars) using these different forecasted biodiesel volume is used as Inc., January 15, 2002.
RFS case.86 The 10 billion gal/yr case For this final rule, we translated the EIA during the winter months.95 In the
examined in the DOE study was used as projections into State-by-State and proposal, we estimated that these
the foundation in estimating the capital national average freight costs to align capital costs would be approximately
costs under the EIA projected case with our State-by-State ethanol use $50,000,000. We adjusted our estimate
examined in today’s rule of 9.6 billion estimates. Not including capital of these capital costs for this final rule
gal/yr of ethanol.87 Our estimated recovery, we estimate that the freight based on additional information
capital costs in this final rule differ from cost to transport ethanol to terminals regarding the cost to install necessary
those in the proposed rule for several would range from 4 cents per gallon in storage and blending equipment at
reasons. We adjusted our capital costs the Midwest to 25 cents per gallon to terminals and the need for additional
from those in the proposal to reflect an the West Coast. On a national basis, this rail tank cars for biodiesel.96 As
increase in the cost of tank cars and averages to 11.3 cents per gallon of discussed in the RIA, we now estimate
barges used to ship ethanol since the ethanol under the RFS case and 11.9 that handling the increased biodiesel
DOE study was conducted. In addition, cents per gallon under the EIA case.91 volume will require a total capital cost
we are assuming an increased reliance We adjusted the estimated ethanol investment of $145,500,000 which
on rail transport over that projected in freight costs from those in the proposal equates to about 6 cents per gallon of
the DOE study.88 by increasing the cost of shipping new biodiesel volume.97
Table VII.B.1.a–1contains our ethanol to satellite versus hub terminals, In the proposal, we estimated that the
estimates of the infrastructure changes by increasing the cost of gathering freight costs for ethanol may adequately
and associated capital costs for the two ethanol for large volume shipments to reflect those for biodiesel as well. In
ethanol use scenarios examined in hub terminals, and by increasing the response to comments, we sought
today’s rule. Amortized over 15 years percentage of ethanol delivered to large additional information regarding the
with a 7 percent cost of capital, the total volume terminals versus the volume freight costs for biodiesel. This
capital costs equate to approximately delivered to lesser volume terminals.92 information indicates that freight costs
1.4 cents per gallon of ethanol under the Including the cost of capital recovery for biodiesel are typically 30 percent
RFS case and 1.2 cents per gallon under for the necessary distribution facility higher than those for ethanol which
the EIA case.89 changes, we estimate the national translates into an estimate of 15.5 cents
average cost of distributing ethanol to be per gallon for biodiesel freight costs on
TABLE VII.B.1.A–1.—ESTIMATED ETH- 12.7 cents per gallon under the RFS case a national average basis.98
ANOL DISTRIBUTION INFRASTRUC- and 13.1 cents per gallon under the EIA Including the cost of capital recovery
TURE CAPITAL COSTS ($M) * case.93 Thus, we estimate the total cost for the necessary distribution facility
for producing and distributing ethanol changes, we estimate the cost of
RFS case EIA case to be between $1.39 and $1.45 per distributing biodiesel to be 21.5 cents
6.7 Bgal/yr 9.6 Bgal/yr gallon of ethanol, on a nationwide per gallon. Depending on whether the
average basis. This estimate includes feedstock is waste grease or virgin oil,
Fixed Facilities: we estimate the total cost for producing
Retail ............. 20 44 both the capital costs to upgrade the and distributing biodiesel to be between
Terminals ...... 115 241 distribution system and freight costs.
Mobile Facilities: $1.33 and $2.11 per gallon of biodiesel,
2. Biodiesel Distribution Costs on a nationwide average basis.99 This
Transport
Trucks ........ 24 The volume of biodiesel used by 2012
50 estimate includes both the capital costs
Barges ........... 21 under the RFS is estimated at 300
43 to upgrade the distribution system and
Rail Cars ....... 172 297
million gallons per year. The 2012 freight costs, and the wide range reflects
baseline case against which we are differences in different types of
Total Cap- estimating the cost of distributing the production feedstocks.
ital Costs 352 675
additional volume of biodiesel is 30 C. Estimated Costs to Gasoline
* Relative to a 3.9 billion gal/yr reference million gallons.94
case. The capital costs associated with To estimate the cost of increased use
distribution of biodiesel are higher per of renewable fuels, the cost savings from
b. Ethanol Freight Costs
gallon than those associated with the the phase out of MTBE and the
The Energy Information distribution of ethanol due to the need production cost of alkylate, we relied on
Administration (EIA) translated the for storage tanks, blending systems,
ethanol freight cost estimates in the barges, tanker trucks and rail cars to be 95 See Chapter 1.3 of the Regulatory Impact
DOE study to a census division basis.90 insulated and in many cases heated
Analysis associated with today’s rule for a
discussion of the special handling requirements for
86 See chapter 7.3 of the Regulatory Impact biodiesel under cold conditions.
059 (2006), http://tonto.eia.doe.gov/FTPROOT/ 96 Biodiesel rail tank cars typically have a
Analysis associated with today’s rule for additional
discussion of how the results of the DAI study were modeldoc/m059(2006)-2.pdf. capacity of 25,500 gallons as opposed to 30,000
91 See Chapter 7.3 of the RIA. gallons for an ethanol tank car. Thus, additional
adjusted to reflect current conditions in estimating
the ethanol distribution infrastructure capital costs 92 Hub terminals refer to those terminals where tank cars are needed to transport a given volume
under today’s rule. ethanol is delivered in large volume shipments of biodiesel relative to the same volume of ethanol.
87 For both the 6.7 bill gal/yr and 9.6 bill gal/yr such as by unit train (consisting of 70 tank cars or 97 Capital costs will be incurred incrementally
cases, the baseline from which the DOE study cases more) or marine barges/tanker. Satellite terminals over the period of 2007–2012 as biodiesel volumes
were projected was adjusted to reflect a 3.9 bill gal/ are those terminals that are either supplied from a increase. For the purpose of this analysis, all capital
yr 2012 baseline. hub terminal or receive ethanol shipments in costs were assumed to be incurred in 2007 and were
88 This increased reliance on rail transport was smaller quantities directly from the producer. See amortized over 15 years at a 7 percent cost of
the subject of a sensitivity analysis conducted for Chapter 7 of the RIA regarding how these estimates capital.
the proposed rule. were adjusted from those in the proposal and the 98 The estimated ethanol freight costs were
89 These capital costs will be incurred check of our estimates against current ethanol increased by 30 percent to arrive at the estimate of
incrementally during the period of 2007–2012 as freight rates. biodiesel freight costs.
93 All capital costs were assumed to be incurred
ethanol volumes increase. For the purpose of this 99 See Section VII.A.2. of this preamble regarding
analysis, we assumed that all capital costs were in 2007 and were amortized over 15 years at a 7 biodiesel production costs. We estimated 2012
incurred in 2007. percent cost of capital. production costs of $1.89 per gal for soy-derived
90 Petroleum Market Model of the National Energy 94 2004 baseline of 25 million gallons grown with biodiesel and $1.11 per gal for yellow grease
Modeling System, Part 2, March 2006, DOE/EIA– diesel demand to 2012. derived biodiesel.
refinery modeling conducted by Jacob’s it is assumed that no MTBE is in reduce the RVP of the gasoline pool
Consultancy that established baselines gasoline, MSAT1 is in place, the psi from which it comes, helping to offset
based on 2004 volumes, which were waiver for conventional gasoline the RVP impacts of ethanol. Also, the
then used to project a reference case and containing 10 volume percent ethanol is increased production of alkylate
2 control cases for 2012. The contractor in effect, the RFS is in effect, and there provides a low RVP gasoline blendstock
developed a five region, U.S. demand is no RFG oxygenate mandate. which offsets a portion of the cracked
model in which specific regional clean Control Case 2 (EIA case): Same as stocks produced by the fluidized
product demands are sold at Control Case 1, except the ethanol catalytic cracker unit. Other means that
hypothetical regional terminals. volume in gasoline is 9.6 BGY. the refinery model used to offset the
1. Description of Cases Modeled 2. Overview of Cost Analysis Provided high blending RVP of ethanol included
by the Contractor Refinery Model purchasing gasoline components with
a. Base Case (2004) lower RVP, producing more poly
The estimated cost of increased use of
The baseline case was established by gasoline which has low RVP and selling
renewable fuels, the cost savings from
modeling fuel volumes for 2004, with more high-RVP naphtha to
the phase out of MTBE and the cost of
data on fuel properties provided to the petrochemical sales.
converting some of the former MTBE
contractor by EPA. Fuel property data feedstocks to produce alkylate, 3. Overall Impact on Fuel Cost
for this base case was built off of 2004 isooctane, and isooctene is provided by
refinery batch reports provided to EPA; the output of the refinery model. As Based on the refinery modeling
however, the base case assumed sulfur described in VII.C.1, the cost analysis conducted for today’s rule, we have
standards based on gasoline data in was conducted by comparing the 2012 calculated the costs of these fuels
2004, not with fully phased in Tier 2 reference case with the two control changes that will occur for the RFS and
gasoline standards at the 30 ppm level. cases which are assumed to take place EIA cases. The costs are expressed two
In addition we assumed the phase-in of in 2012. different ways. First, we express the cost
15 ppm sulfur standards for highway, The major factors which impact the of the program without the ethanol
nonroad, locomotive and marine diesel costs in the refinery model are (1) consumption subsidies in which the
fuel. The supply/demand balance for blending in more ethanol, (2) adjusting costs are based on the total accumulated
the U.S. was based on gasoline volumes the gasoline blending to lower RVP, (3) cost of each of the fuels changes.
from EIA and the California Air removing the MTBE, (4) converting Second, we express the cost with the
Resources Board (CARB). Our decision MTBE feedstocks to other high quality ethanol consumption subsidies
to use 2004 rather than 2005 as the replacement, and (5) adjusting for the included since the subsidized portion of
baseline year was because of the change in gasoline energy density. The the renewable fuels costs will not be
refinery upset conditions associated first is the addition of ethanol to the represented to the consumer in its fuels
with the Gulf Coast hurricanes in 2005. gasoline pool. The refinery model costs paid at the pump, but instead by
b. Reference Case (2012) estimates the cost impact of increasing being paid through the state and federal
the volume of ethanol in the reference tax revenues. In all cases, the capital
The reference case was based on case from 3.94 billion gallons to 6.67 costs are amortized at 7 percent return
modeling the base case, using 2012 fuel and 9.60 billion gallons in the RFS and on investment (ROI), and based on 2006
prices, and scaling the 2004 fuel EIA modeled cases, respectively. The dollars.
volumes to 2012 based on growth in fuel estimated production prices for ethanol
demand. In addition, we scaled MTBE for the RFS and EIA cases are provided a. Cost Without Ethanol Subsidies
and ethanol upward, in proportion to above in Section VII.A. We also show
gasoline growth, and assumed the RFS the results with the federal and state Table VII.C.3.a–1 summarizes the
program would not be in effect. For subsidies applied to the production costs without ethanol subsidies for each
example, if the PADD 1 gasoline pool price of ethanol. of the two control cases, including the
MTBE oxygen was 0.5 wt% in 2004, the The addition of ethanol to wintertime cost for each aspect of the fuel changes,
reference case assumed it should remain gasoline, and to summertime RFG, will and the aggregated total and the per-
at 0.5 wt%. Finally, we assumed the cause an increase of approximately 1 psi gallon costs for all the fuel changes.100
MSAT 1 standards would remain in in RVP which needs to be offset to This estimate of costs reflects the
place as would the RFG oxygen maintain constant RVP levels. One changes in gasoline that are occurring
mandate. We assumed the crude slate method that refiners could choose to with the expanded use of ethanol,
quality in 2012 is the same as the offset the increase in RVP is to reduce including the corresponding removal of
baseline case. the butane levels in their gasoline. To MTBE. These costs include the labor,
some extent, the modeling results utility and other operating costs, fixed
c. Control Cases (2012) costs and the capital costs for all the
showed some occurrences of that, but it
Two control cases were run for 2012. also did not report an overall increase fuel changes expected. The per-gallon
The assumptions for each of the control in butane sales as a result of the costs are derived by dividing the total
cases are summarized below increased use of ethanol. costs over all U.S. gasoline projected to
Control Case 1 (RFS case): 6.7 billion To convert the captive MTBE over to be consumed in 2012. We excluded
gallons/yr (BGY) of ethanol in gasoline; alkylate, after the rejection of methanol, federal and state ethanol consumption
it reflects the renewable fuel mandate. refiners will need to combine refinery- subsidies which avoids the transfer
We have also assumed that 0.3 billion produced isobutane with the payments caused by these subsidies that
gallons of biodiesel will be consumed as isobutylene that was used as a feedstock would hide a portion of the program’s
reflected in Table II.A.1–1. In addition, for MTBE. The use of the isobutane will costs.
100 EPA typically assesses social benefits and cost of production of ethanol and gasoline without tend to distort the market price of agricultural
costs of a rulemaking. However, this analysis is accounting for the effects of farm subsidies that commodities.
more limited in its scope by examining the average
TABLE VII.C.3.A–1.—ESTIMATED COST WITHOUT ETHANOL CONSUMPTION SUBSIDIES

[Million dollars and cents per gallon; 7% ROI and 2006 dollars]
RFS case 6.8 EIA case 9.6 EIA case 9.6

billion gals in- billion gals in- billion gals in-
cremental to cremental to cremental to
reference case reference case RFS case
Capital Costs ($MM) .................................................................................................................... ¥5,878 ¥7,311 ¥1,433

Amortized Capital Costs ($MM/yr) .............................................................................................. ¥647 ¥804 ¥158
Fixed Operating Cost ($MM/yr) ................................................................................................... ¥178 ¥222 ¥43
Variable Operating Cost ($MM/yr) ............................................................................................... ¥201 ¥491 ¥290
Fuel Economy Cost ($MM/yr) ...................................................................................................... 1,848 3,255 1407
Total Cost ($MM/yr) .............................................................................................................. 823 1739 915
Capital Costs (c/gal of gasoline) ................................................................................................. ¥0.40 ¥0.49 ¥0.10
Fixed Operating Cost (c/gal of gasoline) ..................................................................................... ¥0.11 ¥0.14 ¥0.03
Variable Operating Cost (c/gal of gasoline) ................................................................................ ¥0.12 ¥0.30 ¥0.18
Fuel Economy Cost (c/gal of gasoline) ....................................................................................... 1.13 1.98 0.86
Total Cost Excluding Subsidies (c/gal of gasoline) .............................................................. 0.50 1.06 0.56
Our analysis shows that when fuel costs by 0.50 to 1.1 cents per gallon into gasoline. The state tax subsidies
considering all the costs associated with of gasoline. apply in 5 states and range from 1.6 to
these fuel changes resulting from the b. Gasoline Costs Including Ethanol 29 cents per gallon. The cost reduction
expanded use of subsidized ethanol that Consumption Tax Subsidies to the fuel industry and consumers is
these various possible gasoline use estimated by multiplying the subsidy
scenarios will increase fuel costs by Table VII.C.3.b–1 expresses the total times the volume of new ethanol
and per-gallon gasoline costs for the two
$820 million or $1,740 million in the estimated to be used in the state. The
control scenarios with the federal and
year 2012 for the RFS and EIA cases, per-gallon costs are derived by dividing
state ethanol subsidies included. The
respectively. Expressed as per-gallon federal tax subsidy is 51 cents per gallon the total costs over all U.S. gasoline
costs, these fuel changes would increase for each gallon of new ethanol blended projected to be consumed in 2012.
TABLE VII.C.3.B–1.—ESTIMATED COST INCLUDING ETHANOL CONSUMPTION SUBSIDIES

[Million dollars and cents per gallon; 7% ROI and 2006 dollars]
RFS case 6.8 EIA case 9.6 EIA case 9.6

billion gals in- billion gals in- billion gals in-
cremental to cremental to cremental to
reference case reference case RFS case
Total Cost ($MM/yr) ..................................................................................................................... 823 1739 915

Federal Subsidy ($MM/yr) ........................................................................................................... ¥1376 ¥2865 ¥1489
State Subsidies ($MM/yr) ............................................................................................................ ¥5 ¥31 ¥26
Revised Total Cost ($MM/yr) ............................................................................................... ¥558 ¥1158 ¥600
Per-Gallon Cost Excluding Subsidies (c/gal of gasoline) ............................................................ 0.50 1.06 0.56
Federal Subsidy (c/gal of gasoline) ............................................................................................. ¥0.84 ¥1.74 ¥0.90
State Subsidies (c/gal of gasoline) .............................................................................................. ¥0.003 ¥0.02 ¥0.02
Total Cost Including Subsidies (c/gal of gasoline) ............................................................... ¥0.34 ¥0.71 ¥0.37
The cost including subsidies better and biodiesel. In performing these emissions or air quality. This is because,
represents gasoline’s production cost as analyses, we compare the emissions strictly speaking, if the same volume
reflected to the fuel industry as a whole which would have occurred in the and types of renewable fuels are
and to consumers ‘‘at the pump’’ future if fuel quality had remained produced and used with and without
because the federal and state subsidies unchanged from pre-Act levels to those the RFS program, the RFS program has
tend to hide a portion of the actual which will be either required under the no impact on fuel quality and thus, no
costs. Our analysis estimates that the Energy Policy Act of 2005 (Energy Act impact on emissions or air quality.
fuel industry and consumers will see a or the Act) or exist due to market forces. However, levels of renewable fuel use
0.34 and 0.71 cent per gallon decrease This approach differs from that are increasing dramatically relative to
in the apparent cost of producing traditionally taken in EPA regulatory both today and the recent past, with
gasoline for the RFS and EIA cases, impact analyses. Traditionally, we corresponding impacts on emissions
respectively. would have compared future emissions and air quality. We believe that it is
with and without the requirement of the appropriate to evaluate these changes
VIII. What Are the Impacts of Increased
Energy Act. However, as described in here, regardless of whether they are
Ethanol Use on Emissions and Air
Section II, we expect that total occurring due to economic forces or
Quality?
renewable fuel use in the U.S. in 2012 Energy Act requirements.

In this section, we evaluate the impact to exceed the Act’s requirements even in In the process of estimating the
of increased production and use of the absence of the RFS program. Thus, impact of increased renewable fuel use,
renewable fuels on emissions and air a traditional regulatory impact analysis we also include the impact of reduced
quality in the U.S., particularly ethanol would have shown no impact on use of MTBE in gasoline. It is the
increased production and use of ethanol quality impacts of U.S. fuel programs performance specifications, which limit
which is facilitating the continued required by the Act.101 the range of feasible fuel quality values.
production of RFG which meets both The remainder of this sub-section is Thus, oxygenate type or level does not
commercial and EPA regulatory divided into three parts. The first consistently affect the RVP level and
specifications without the use of MTBE. evaluates the impact of increased aromatic and benzene contents of RFG.
Because of this connection, we found it ethanol use and decreased MTBE use on Table VIII.A.1.a–1 shows the fuel
impractical to isolate the impact of gasoline quality. The second evaluates quality of a typical summertime, non-
increased ethanol use from the removal the impact of increased ethanol use and oxygenated conventional gasoline and
of MTBE. decreased MTBE use on motor vehicle how these qualities change with the
A. Effect of Renewable Fuel Use on emissions. The third evaluates the addition of 10 volume percent ethanol.
Emissions impact of increased ethanol use and Similarly, the table shows the fuel
decreased MTBE use on nonroad quality of a typical MTBE RFG blend
1. Emissions From Gasoline Fueled equipment emissions. and how fuel quality might change with
Motor Vehicles and Equipment either ethanol use or simply MTBE
a. Gasoline Fuel Quality
Several models of the impact of removal. All of these fuels are based, in
gasoline quality on motor vehicle For the final rulemaking, we estimate whole or in part, on projections made by
emissions have been developed since the impact of increased ethanol use and Jacobs in their recent refinery modeling
the early 1990’s. We evaluated these decreased MTBE use on gasoline quality performed for EPA and therefore,
models and selected those which were using refinery modeling conducted represent improvements over the
based on the most comprehensive set of specifically for the RFS rulemaking.102 projections made for the NPRM. Please
emissions data and developed using the In general, adding ethanol to gasoline see Chapter 2 of the RIA for a detailed
most advanced statistical tools for this reduces the aromatic content of description of the methodologies used
analysis. Still, as will be described conventional gasoline and the mid- and to determine the specific changes in
below, significant uncertainty exists as high-distillation temperatures (e.g., T50 projected fuel quality. As discussed
to the effect of these gasoline and T90). RVP increases except in areas there, we use the Jacobs model
components on emissions from both where ethanol blends are not provided projections of RFG fuel quality directly
motor vehicle and nonroad equipment, a 1.0 RVP waiver of the applicable RVP in our emission modeling. For
particularly from the latest vehicle and standards in the summer. With the conventional gasoline, we use the Jacobs
engine models equipped with the most exception of RVP, adding MTBE modeling described in Section VII to
advanced emission controls. Pending directionally produces the same determine the change in fuel quality due
adequate funding, we plan to conduct impacts. Thus, the effect of removing to ethanol use and apply this change to
significant vehicle and equipment MTBE results in essentially the opposite base fuel quality estimates contained in
testing over the next several years to impacts. Neither oxygenate is expected EPA’s NMIM emission inventory model.
improve our estimates of the impact of to affect sulfur levels, as refiners control Sulfur is not shown in Table VIII.A.1.a–
these additives and other gasoline sulfur independently in order to meet 1, as it is held constant at 30 ppm,
properties on emissions. We hope that the Tier 2 sulfur standards. which is the average Tier 2 sulfur
the results from these test programs will The impacts of oxygenate use are standard applicable to all gasoline sold
be available for reference in the future smaller with respect to RFG. This is due in the U.S. in the timeframe of our
evaluations of the emission and air to RFG’s VOC and toxics emission emission analyses.
TABLE VIII.A.1.A–1.—TYPICAL SUMMERTIME FUEL QUALITY

Conventional gasoline Reformulated gasoline a
Fuel parameter Non-

Typical 9 Ethanol Ethanol
MTBE blend oxygenated
RVP blend blend blend
RVP (psi) ................................................................................................. 8.7 9.7 7.0 7.0 7.0

T50 ........................................................................................................... 218 205 179 184 175
T90 ........................................................................................................... 332 329 303 335 309
E200 ......................................................................................................... 41 50 60 58 52
E300 ......................................................................................................... 82 82 89 82 88
Aromatics (vol%) ...................................................................................... 32 27 20 20 20
Olefins (vol%) ........................................................................................... 7.7 7.7 4 14 15
Oxygen (wt%) .......................................................................................... 0 3.5 2.1 3.5 0
Benzene (vol%) ....................................................................................... 1.0 1.0 0.74 0.70 0.72
a MTBE blend—Reference Case PADD 1 South, Ethanol blend—RFS Case PADD 1 North, Non-oxy blend. ¥RFS Case PADD 1 South.
b. Emissions From Motor Vehicles support of EPA’s response to vehicles (roughly equivalent to 1990
California’s request for a waiver of the model year vehicles). We based our
We use the EPA Predictive Models to
estimate the impact of gasoline fuel RFG oxygen mandate. These models estimates of the impact of fuel quality
quality on exhaust VOC and NOX represent a significant update of the on CO emissions on the EPA
emissions from motor vehicles. These EPA Complex Model. However, they are MOBILE6.2 model. We base our
models were developed in 2000, in still based on emission data from Tier 0 estimates of the impact of fuel quality
101 Subject to funding. 102 Refinery modeling performed in support of the
original RFG rulemaking is also used to help

separate the effects of the two oxygenates.
on exhaust toxic emissions (benzene, programs indicate that emissions from We base our estimates of fuel quality
formaldehyde, acetaldehyde, and 1,3- these late model year vehicles are likely on non-exhaust VOC and benzene
butadiene) primarily on the MOBILE6.2 sensitive to changes in fuel properties. emissions on the EPA MOBILE6.2
model, updated to reflect the effect of However, both the size and direction of model. The one exception to this is the
fuel quality on exhaust VOC emissions the effects are not consistent between effect of ethanol on permeation
per the EPA Predictive Models. Very the various studies. More testing is still emissions through plastic fuel tanks and
limited data are available on the effect needed before confident predictions of elastomers used in fuel line
of gasoline quality on PM emissions. the effect of fuel quality on emissions connections. Recent testing has shown
Therefore, the effect of increased from these vehicles can be made. that ethanol increases permeation
ethanol use on PM emissions can only In the NPRM, we developed two sets emissions, both by permeating itself and
be qualitatively discussed. of assumptions regarding the effect of increasing the permeation of other
In responding to California’s request fuel quality on emissions from Tier 1 gasoline components. This effect was
for a waiver of the RFG oxygen mandate and later vehicles to reflect this included in EPA’s analysis of
in 2000, we found that both very limited uncertainty. A primary analysis California’s most recent request for a
and conflicting data were available on assumed that exhaust emissions from waiver of the RFG oxygen requirement,
the effect of fuel quality on exhaust Tier 1 and later vehicles are not but is not in MOBILE6.2.105 Therefore,
emissions from Tier 1 and later sensitive to fuel quality. This is we have added the effect of ethanol on
vehicles.103 Thus, we assumed at the consistent with our analysis of permeation emissions to MOBILE6.2’s
time that changes to gasoline quality California’s request for a waiver of the estimate of non-exhaust VOC emissions
would not affect VOC, CO and NOX RFG oxygen mandate. A sensitivity in assessing the impact of gasoline
exhaust emissions from these analysis assumed that the NMHC and quality on these emissions.
vehicles.104 Very little additional data NOX emissions from Tier 1 and later No models are available which
have been collected since that time on vehicles were as sensitive to fuel quality address the impact of gasoline quality
which to modify this assumption. as Tier 0 vehicles. Only one effect of on PM emissions. Very limited data
Consequently, for our primary analysis fuel quality on CO emissions was indicate that ethanol blending might
for today’s final rule we have assumed, that contained in EPA’s reduce exhaust PM emissions under
maintained the assumption that changes MOBILE6.2 emission inventory model. very cold weather conditions (e.g.,
to gasoline do not affect exhaust The five available studies of Tier 1 ¥20 °F to 0 °F). Very limited testing at
emissions from Tier 1 and later and later vehicles support continuing warmer temperatures (e.g., 20 °F to
technology vehicles. this approach for exhaust NMHC and 75 °F) shows no definite trend in PM
For the NPRM, we evaluated one NOX emissions. The assumptions emissions with oxygen content. Thus,
recent study by the Coordinating supporting both our primary and for now, no quantitative estimates can
Research Council (CRC) which assessed sensitivity analyses reasonably bracket be made regarding the effect of ethanol
the impact of ethanol and two other fuel the results of the five studies. However, use on direct PM emissions.
properties on emissions from twelve we have decided to perform a sensitivity Table VIII.A.1.b–1 presents the
2000–2004 model year vehicles (CRC analysis for CO emissions, as well. In average per vehicle (2012 fleet) emission
study E–67). Based on comments this case, we apply the fuel-emission impacts of three types of RFG: Non-
received on the NPRM, we evaluated effects from MOBILE6.2 for Tier 0 oxygenated, a typical MTBE RFG as has
four additional studies of the fuel- vehicles to Tier 1 and later vehicles. been marketed in the Gulf Coast, and a
emission effects of recent model year This is analogous to the approach taken typical ethanol RFG which has been
vehicles. The results of these test for exhaust NMHC and NOX emissions. marketed in the Midwest.
TABLE VIII.A.1.B–1.—EFFECT OF RFG ON PER MILE EMISSIONS FROM TIER 0 VEHICLES RELATIVE TO A TYPICAL 9PSI
RVP CONVENTIONAL GASOLINE a
Non-Oxy 11 Volume 10 Volume
Pollutant Source RFG percent percent
(percent) MTBE ethanol
Exhaust Emissions
VOC ...................................................................... EPA Predictive Models ......................................... ¥13.4 ¥15.3 ¥9.7

NOX ...................................................................... ¥2.4 ¥1.7 7.3
CO ......................................................................... MOBILE6.2 ........................................................... ¥22 ¥31 ¥36
Exhaust Benzene .................................................. EPA Predictive and Complex Models .................. ¥21.2 ¥29.7 ¥38.9
Formaldehyde ....................................................... ¥5.9 19.4 2.3
Acetaldehyde ........................................................ ¥0.2 ¥9.5 173.7
1,3-Butadiene ........................................................ 20.9 ¥29.2 6.1
Non-Exhaust Emissions
VOC ...................................................................... MOBILE6.2 & CRC E–65 ..................................... ¥30 ¥30 ¥18
Benzene ................................................................ MOBILE6.2 & Complex Models ........................... ¥40 ¥43 ¥32
a Average per vehicle effects for the 2012 fleet during summer conditions.
103 The one exception was the impact of sulfur on 104 An exception is that MOBILE6.2 applies the 105 For more information on California’s request
emissions from these later vehicles, which is not an effect of oxygenate on CO emissions to Tier 1 and for a waiver of the RFG oxygen mandate and the
issue here due to the fact that renewable fuel use later vehicles which are expected to be high Decision Document for EPA’s response, see http://
is not expected to change sulfur levels significantly. emitters based on their age and mileage. www.epa.gov/otaq/rfg_regs.htm#waiver.
As can be seen, all three types of RFG It should be noted that these lieu of MTBE or no oxygenate can be
produce significantly lower emissions of comparisons assume that all gasoline seen from comparing the relative
VOC, CO and benzene than blends meet EPA’s Tier 2 gasoline sulfur impacts of the various RFG blends
conventional gasoline. The impact of standard of 30 ppm. Prior to the Tier 2 shown in Table VIII.A.1.b–1.
ethanol RFG on non-exhaust VOC program, RFG contained less sulfur than Blending RFG with ethanol instead of
emissions is lower than the other two conventional gasoline and reduced NOX MTBE or no oxygenate will increase
types of RFG due to the impact of emissions to a greater degree compared VOC and NOX emissions and decrease
ethanol on permeation emissions. The to conventional gasoline. CO emissions. Exhaust benzene and
impact of RFG on emissions of NOX and Historically, no non-oxygenated RFG formaldehyde emissions will decrease,
the other air toxics depends on the type was sold, due to the requirement that but non-exhaust benzene, acetaldehyde,
of RFG blend. The most notable effect RFG contain at least 2.0 weight percent and 1,3-butadiene emissions will
on toxic emissions in percentage terms oxygen. However, with the Energy Act’s increase. All of these impacts are on a
removal of this requirement, all three per vehicle basis and apply to Tier 0
is the 173 percent increase in
types of RFG blends can be sold today. vehicles only. The overall impact of
acetaldehyde with the use of ethanol.
Increased use of ethanol in RFG would increased ethanol use on total emissions
However, as will be seen below, base therefore either replace MTBE RFG or of these various pollutants is described
acetaldehyde emissions are low relative non-oxygenated RFG. The former has below.
to the other toxics. While not shown, already occurred in many areas, as Table VIII.A.1.b–2 presents the effect
the total mass emissions of the four MTBE was essentially removed from the of blending either MTBE or ethanol into
toxic pollutants always decreases, as U.S. gasoline market by the end of 2006. conventional gasoline while matching
benzene is by far the largest constituent. The impact of using ethanol in RFG in octane.
TABLE VIII.A.1.B–2.—EFFECT OF MTBE AND ETHANOL IN CONVENTIONAL GASOLINE ON TIER 0 VEHICLE EMISSIONS
RELATIVE TO A TYPICAL NON-OXYGENATED CONVENTIONAL GASOLINE a
11 Volume 10 Volume
Pollutant Source percent percent
MTBE ethanol b
Exhaust VOC .................................................................... EPA Predictive Models .................................................... ¥9.2 ¥7.4

NOX ................................................................................... ¥2.6 7.7
CO c .................................................................................. MOBILE6.2 ....................................................................... ¥6/¥11 ¥11/¥19
Exhaust Benzene .............................................................. EPA Predictive and Complex Models .............................. ¥22.8 ¥24.9
Formaldehyde ................................................................... +21.3 +6.7
Acetaldehyde .................................................................... +0.8 +156.8
1,3-Butadiene .................................................................... ¥3.7 ¥13.2
Non-Exhaust VOC ............................................................ MOBILE6.2 ....................................................................... Zero +30
Non-Exhaust Benzene ...................................................... MOBILE6.2 & Complex Models ....................................... ¥9.5 +15.8
a Average per vehicle effects for the 2012 fleet during summer conditions.
b Assumes a 1.0 psi RVP waiver for ethanol blends.
c The first figure shown applies to normal emitters; the second applies to high emitters.
Use of either oxygenate reduces The exhaust emission effects shown expanded discussion might be generally
exhaust VOC and CO emissions, but above for VOC and NOX emissions only desirable, the lack of relevant emission
increases NOX emissions. The ethanol apply to Tier 0 vehicles in our primary data from late model vehicles and
blend increases non-exhaust VOC analysis. For example, MOBILE6.2 equipment prevents this. We believe
emissions due to the commonly granted estimates that 34 of exhaust VOC that we have adequately described the
1.0 psi waiver of the RVP standard, as emissions and 16 of NOX emissions uncertainty in the emission estimates
well as increased permeation emissions. from gasoline vehicles in 2012 come presented below and our plans to obtain
Both oxygenated blends reduce exhaust from Tier 0 vehicles. In the sensitivity more data in order to improve these
benzene and 1,3-butadiene emissions. analysis, these effects are extended to all estimates in the near future.
As above, ethanol increases non-exhaust gasoline vehicles. The effect of RVP and
c. Nonroad Equipment
benzene and acetaldehyde emissions. permeation on non-exhaust VOC
emissions is temperature dependent. To estimate the effect of gasoline
While small amounts of MTBE may
The figures shown above are based on quality on emissions from nonroad
have still been used in CG in 2004, for
the distribution of temperatures equipment, we used EPA’s NONROAD
our reference case we have assumed that
occurring across the U.S. in July. emission model. We used the 2005
all MTBE use was in RFG. Therefore, we version of this model, NONROAD2005,
We received several comments related
are not predicting any emissions impact which includes the effect of ethanol on
to the effect of ethanol on emissions
related to removing MTBE from from onroad vehicles. None of the permeation emissions from most
conventional gasoline. Increased use of comments led us to change the basic nonroad equipment.
conventional ethanol blends will be in approach taken to estimating the impact Only sulfur and oxygen content affect
lieu of non-oxygenated conventional of changing fuel quality described exhaust VOC, CO and NOX emissions in
gasoline. Thus, the more relevant above. Several comments suggested that NONROAD. Since sulfur level is
column in Table VII.A.1.b–2 for our we expand our discussion of the assumed to remain constant, the only
modeling is the last column, which uncertainty in these fuel effects (as well difference in exhaust emissions between
shows the emission impact of a 10 as the effects of fuel quality on conventional and reformulated gasoline
volume percent ethanol blend relative to emissions from nonroad equipment and is due to oxygen content. Table
non-oxygenated gasoline. diesels described below). While such an VIII.A.1.c–1 shows the effect of adding
11 volume percent MTBE or 10 volume percent ethanol to non-oxygenated

gasoline on these emissions.
TABLE VIII.A.1.C–1.—EFFECT MTBE AND ETHANOL ON NONROAD EXHAUST EMISSIONS RELATIVE TO A TYPICAL NON-
OXYGENATED GASOLINE
4-Stroke engines 2-Stroke engines
Base fuel 11 Volume 10 Volume 11 Volume 10 Volume

percent percent percent percent
MTBE ethanol MTBE ethanol
Exhaust VOC ................................................................................................................... ¥9 ¥16 ¥1 ¥2

Non-Exhaust VOC ........................................................................................................... 0 26 0 26
CO .................................................................................................................................... ¥13 ¥22 ¥13 ¥23
NOX .................................................................................................................................. +23 +40 +37 +65
As can be seen, higher oxygen content oxygenate type (none, MTBE or the impact of biodiesel on NOX and
reduces exhaust VOC and CO emissions ethanol). However, estimates for other exhaust emissions from the in-use
significantly, but also increases NOX nonroad gasoline engines running on fleet of diesel engines. We hope to
emissions. However, NOX emissions different fuel types are limited, making incorporate the data from such
from these engines tend to be fairly low it difficult to accurately model the additional testing into the analyses for
to start with, given the fact that these impacts of changes in fuel quality. In other studies required by the Energy Act
engines run much richer than the recent final rule addressing mobile in 2008 and 2009, and into a subsequent
stoichiometric. Thus, a large percentage air toxic emissions, EPA replaced the rule to set the RFS program standard for
increase of a relative low base value can toxic-related fuel effects contained in 2013 and later.
be a relatively small increase in absolute NMIM with those from MOBILE6.2 for
terms. onroad vehicles.106 We follow the same 3. Renewable Fuel Production and
methodology here. Future testing could Distribution
Evaporative emissions from nonroad
equipment are impacted by only RVP, significantly alter these emission impact
Areas experiencing increased
and permeation by ethanol content. estimates.
renewable production will experience
Both the RVP increase due to blending 2. Diesel Fuel Quality: Biodiesel the corresponding emission increases
of ethanol and its permeation effect EPA assessed the impact of biodiesel associated with their production. The
cause non-exhaust VOC emissions to fuel on emissions in 2002 and published primary impact of renewable fuel
increase with the use of ethanol in a draft report summarizing the production and distribution regards
nonroad equipment. The 26 percent results.107 This report included a ethanol, since it is expected to be the
effect represents the average impact technical analysis of biodiesel effects on predominant renewable fuel used in the
across the U.S. in July for both 2-stroke regulated and unregulated pollutants foreseeable future. We approximate the
and 4-stroke equipment. We updated from diesel powered vehicles and impact of increased ethanol and
the NONROAD2005 hose permeation concluded that biodiesel fuels improved biodiesel production, including corn
emission factors for small spark-ignition PM, HC and CO emissions of diesel and soy farming, on emissions based on
engines and recreational marine engines while slightly increasing their DOE’s GREET model, version 1.7. In
watercraft to reflect the use of ethanol. NOX emissions. addition, we develop a second estimate
For nonroad toxics emissions, we base While the conclusions reached in the of emissions from ethanol production
our estimates of the impact of fuel 2002 EPA report relative to biodiesel facilities using estimates of emissions
quality on the fraction of exhaust VOC effects on VOC, CO and PM emissions from current ethanol plants obtained
emissions represented by each toxic on have been generally accepted, the from the States. We also include
MOBILE6.2 (i.e., the same effects magnitude of the B20 effect on NOX emissions effects resulting from the
predicted for onroad vehicles). The remains controversial due to conflicting transport of increased volumes of
National Mobile Inventory Model results from different studies. renewable fuels and decreased volumes
(NMIM) contains estimates of the Significant new testing is being planned of gasoline and diesel fuel. These
fraction of VOC emissions represented with broad stakeholder participation emissions are summarized in Table
by the various air toxics based on and support in order to better estimate VIII.A.3–1.
TABLE VIII.A.3–1.—WELL-TO-PUMP EMISSIONS FOR PRODUCING AND DISTRIBUTING RENEWABLE FUELS

[Grams per gallon ethanol or biodiesel] a
GREET1.7 GREET1.7 + state data

Biodiesel—
Pollutant Current eth- Future eth- Current eth- Future eth- GREET1.7
anol plants anol plants anol plants anol plants
VOC ......................................................................................................... 1.8 1.8 3.6 3.2 37.6

CO ............................................................................................................ 4.0 4.1 4.4 4.3 12.7
NOX .......................................................................................................... 11.4 11.4 10.8 13.0 25.1

PM10 ........................................................................................................ 4.9 4.9 6.1 2.8 4.8
106 71, Federal Register, 15804, March 29, 2006. 107 ‘‘A Comprehensive Analysis of Biodiesel Report, U.S. EPA, EPA420–P–02–001, October
Impacts on Exhaust Emissions,’’ Draft Technical 2002. http://www.epa.gov/otaq/models/biodsl.htm.
TABLE VIII.A.3–1.—WELL-TO-PUMP EMISSIONS FOR PRODUCING AND DISTRIBUTING RENEWABLE FUELS—Continued

[Grams per gallon ethanol or biodiesel] a
GREET1.7 GREET1.7 + state data

Biodiesel—
Pollutant Current eth- Future eth- Current eth- Future eth- GREET1.7
anol plants anol plants anol plants anol plants
SOX .......................................................................................................... 6.4 6.4 7.2 9.7 21.8

a Includes credit for reduced distribution of gasoline and diesel fuel.
At the same time, areas with refineries B. Impact on Emission Inventories VOC and NOX emissions from Tier 0
might experience reduced emissions, vehicles. In a sensitivity case, we
not necessarily relative to current We use the NMIM to estimate applied them to exhaust VOC and NOX
emissions under the various ethanol emissions from all vehicles. Regarding
emission levels, but relative to those
scenarios on a county by county basis. the effect of fuel quality on emissions of
which would have occurred in the
NMIM basically runs MOBILE6.2 and four air toxics from nonroad equipment
future had renewable fuel use not risen.
NONROAD2005 with county-specific (in terms of their fraction of VOC
However, to the degree that increased inputs pertaining to fuel quality,
renewable fuel use reduces imports of emissions), in all cases we replaced the
ambient conditions, levels of onroad fuel effects contained in NMIM with
gasoline and diesel fuel, as opposed to vehicle VMT and nonroad equipment
the domestic production of these fuels, those for motor vehicles contained in
usage, etc. We ran NMIM for two MOBILE6.2. The projected emission
these reduced refinery emissions will months, July and January. We estimate
occur overseas and not in the U.S. inventories for the primary analysis are
annual emission inventories by presented first, followed by those for the
Similarly, areas with MTBE summing the two monthly inventories sensitivity analysis.
production facilities might experience and multiplying by six.
reduced emissions from these plants as As described above, we removed the 1. Primary Analysis
they cease producing MTBE. However, effect of gasoline fuel quality on exhaust The national emission inventories for
many of these plants may be converted VOC and NOX emissions from the VOC, CO and NOX in 2012 with current
to produce other gasoline blendstocks, onroad motor vehicle inventories which fuels (i.e., ‘‘reference fuel’’) are
such as iso-octane or alkylate. In this are embedded in MOBILE6.2. We then summarized in Table VIII.B.1–1. Also
case, their emissions are not likely to applied the exhaust emission effects shown are the changes in emissions
change substantially. from the EPA Predictive Models. In our projected for the two levels of ethanol
primary analysis, we only applied these use (i.e., ‘‘control cases’’) described in
EPA Predictive Model effects to exhaust Section VI.
TABLE VIII.B.1–1.—2012 EMISSIONS NATIONWIDE FROM GASOLINE VEHICLES AND EQUIPMENT UNDER SEVERAL ETHANOL
USE SCENARIOS—PRIMARY ANALYSIS
[Tons per year] 108
Inventory Change in inventory in

control cases
Pollutant Reference
case RFS case EIA case
VOC ......................................................................................................................................................... 5,882,000 18,000 43,000

NOX .......................................................................................................................................................... 2,487,000 23,000 40,000
CO ............................................................................................................................................................ 55,022,000 ¥483,000 ¥1,366,000
Benzene ................................................................................................................................................... 178,000 ¥3,200 ¥7,200
Formaldehyde .......................................................................................................................................... 40,400 ¥600 ¥200
Acetaldehyde ........................................................................................................................................... 19,900 3,400 7,100
1,3-Butadiene ........................................................................................................................................... 18,900 ¥200 ¥300
Both VOC and NOX emissions are projected to decrease by about 1.1 to 1.6 the effect of ethanol use on CO
projected to increase with increased use percent. The largest change is in emissions is inconsistent with that for
of ethanol. However, the increases are acetaldehyde emissions, an increase of exhaust VOC and NOX emissions. Thus,
small, generally less than 2 percent. CO 17.1 to 35.7 percent, as acetaldehyde is comparisons between changes in VOC
emissions are projected to decrease by a partial combustion product of ethanol. and CO emissions are particularly
about 0.9 to 2.5 percent. Benzene CO also participates in forming ozone, uncertain.
emissions are projected to decrease by much like VOCs. Generally, CO is 15– There will also be some increases in
1.8 to 4.0 percent. Formaldehyde 50 times less reactive than typical VOC. emissions due to ethanol and biodiesel
emissions are projected to decrease Still, the reduction in CO emissions is production. Table VIII.B.1–2 shows
slightly, on the order of 0.5 to 1.5 roughly 27–32 times the increase in estimates of annual emissions expected
percent. 1,3-butadiene emissions are VOC emissions in the two scenarios. to occur nationwide due to increased
Thus, the projected reduction in CO production of ethanol. These estimates
108 These emission estimates do not include the emissions is important from an ozone include a reduction in emissions related
impact of the recent mobile source air toxic perspective. However, as described to the distribution of the displaced
standards (72 FR 8428, February 26, 2007). above, the methodology for projecting gasoline. The table reflects the use of
emissions factors from DOE’s GREET from the States. It should be noted that facilities. New plants (and thus, the
model, version 1.7, as well as estimates emissions in the base case assume an emission increases) assume 100% dry
of ethanol plant emissions obtained 80/20 mix of dry mill and wet mill mill facilities.
TABLE VIII.B.1–2.—ANNUAL EMISSIONS NATIONWIDE FROM ETHANOL PRODUCTION AND TRANSPORTATION: 2012
[Tons per year]
GREET1.7 GREET1.7 + State data
Base case RFS case EIA case Base case RFS case EIA case
Emissions Increase in emissions Emissions Increase in emissions
VOC ................................................................................. 8,000 5,000 11,000 14,000 10,000 20,000

NOX .................................................................................. 17,000 13,000 26,000 18,000 14,000 27,000
CO .................................................................................... 49,000 35,000 72,000 56,000 40,000 81,000
PM10 ................................................................................. 21,000 15,000 30,000 12,000 9,000 18,000
SOX .................................................................................. 27,000 20,000 41,000 42,000 30,000 61,000
As can be seen, the potential increases are about 35% less when using the TABLE VIII.B.1–3.—ANNUAL EMIS-
in emissions from ethanol production GREET 1.7 emission factors. SIONS NATIONWIDE FROM BIODIESEL
and transportation are of the same order Table VIII.B.1–3 shows estimates of PRODUCTION AND TRANSPOR-
of magnitude as those from ethanol use, annual emissions expected to occur
TATION—Continued
with the exception of CO emissions. The nationwide due to increased production
of biodiesel. These estimates include a [Tons per year]
vast majority of these emissions are
related to farming and ethanol reduction in emissions related to the
distribution of the displaced diesel fuel. 2012 Emis-
production. Both farms and ethanol Reference sions inven-
Again, these emissions are generally inventory:
plants are generally located in ozone Pollutant 30 mill gal tory: 300
attainment areas. expected to be in ozone attainment biodiesel mill gal
areas. biodiesel
per year
Where counties are constructing new per year
ethanol plants, expanding existing TABLE VIII.B.1–3.—ANNUAL EMIS-
plants, or planning construction for PM10 .................. 50 500
SIONS NATIONWIDE FROM BIODIESEL SOX ................... 250 2,500
future plants, the average increase in
VOC and NOX emissions from plants
PRODUCTION AND TRANSPORTATION
alone are about 26 tons/month VOC and [Tons per year] 2. Sensitivity Analysis
35 tons/month NOX using state data The national emission inventories for
2012 Emis-
(about 17 tons/month VOC and 25 tons/ Reference sions inven- VOC and NOX in 2012 with current
month NOX using GREET 1.7 emission inventory: fuels are summarized in Table VIII.B.2–
tory: 300
Pollutant 30 mill gal
factors). Average VOC and NOX biodiesel mill gal 1. Here, the emission effects contained
emissions increase to about 61 tons/ biodiesel in the EPA Predictive Models are
per year per year
month and 83 tons/month, respectively, assumed to apply to all vehicles, not
in the 10% of counties expecting largest VOC .................. 1,400 14,000 just Tier 0 vehicles. Also shown are the
increases in ethanol production. For NOX .................. 1,500 15,000 changes in emissions projected for the
both VOC and NOX, emissions estimates CO .................... 800 8,000 two cases for future ethanol volume.
TABLE VIII.B.2–1.—2012 EMISSIONS NATIONWIDE FROM GASOLINE VEHICLES AND EQUIPMENT UNDER TWO FUTURE
ETHANOL USE SCENARIOS—SENSITIVITY ANALYSIS
[Tons per year]
Inventory Change in inventory in

control cases
Pollutant Reference
case RFS case EIA case
VOC ......................................................................................................................................................... 5,834,000 ¥20,000 ¥4,000

NOX .......................................................................................................................................................... 2,519,000 68,000 106,000
CO ............................................................................................................................................................ 54,315,000 ¥692,000 ¥1,975,000
Benzene ................................................................................................................................................... 175,700 ¥5,000 ¥9,400
Formaldehyde .......................................................................................................................................... 39,600 ¥1,100 ¥700
Acetaldehyde ........................................................................................................................................... 19,500 3,000 6,600
1,3-Butadiene ........................................................................................................................................... 18,600 ¥400 ¥600
The overall VOC and NOX emission net decrease due to a greater reduction generally decrease slightly, due to the
impacts of the various ethanol use in exhaust VOC emissions from onroad greater reduction in exhaust VOC
scenarios change to some degree when vehicles. However, the increase in NOX emissions.
all motor vehicles are assumed to be emissions gets larger, as more vehicles
sensitive to fuel ethanol content. The are assumed to be affected by ethanol.
increase in VOC emissions turns into a Emissions of the four air toxics
3. Local and Regional VOC and NOX summertime emissions, as these are use in those areas where emission
Emission Impacts in July most relevant to ozone formation. control is most important.
Finally, we developed separately Table VIII.B.3–1 presents our primary
We also estimate the percentage estimates for: (1) RFG areas, including estimates of the percentage change in
change in VOC, NOX, and CO emissions the state of California and the portions VOC, NOX, and CO emission inventories
from gasoline fueled motor vehicles and of Arizona where their CBG fuel for these three types of areas. Note that
equipment in those areas which actually programs apply, (2) low RVP areas (i.e., the analyses here are very similar to
experienced a significant change in RVP standards less than 9.0 RVP, and those described in Section 5.1 of the
ethanol use. Specifically, we focused on (3) areas with a 9.0 RVP standard. This RIA, with the exception that Table
areas where the market share of ethanol set of groupings helps to highlight the VIII.B.3–1 below reflects 50 states
blends was projected to change by 50 emissions impact of increased ethanol (instead of 37 eastern states) and
percent or more. We also focused on excludes diesel emissions.
TABLE VIII.B.3–1.—JULY 2015 CHANGE IN EMISSIONS FROM GASOLINE VEHICLES AND EQUIPMENT IN COUNTIES WHERE
ETHANOL USE CHANGED SIGNIFICANTLY—PRIMARY ANALYSIS
Ethanol use RFS case EIA case
RFG Areas
Ethanol Use ....................................................... Down ................................................................ Up.

VOC ................................................................... 0.8% ................................................................. 2.3%.
NOX ................................................................... ¥3.4% .............................................................. 1.6%.
CO ..................................................................... 6.1% ................................................................. ¥2.6%.
Low RVP Areas
Ethanol Use ....................................................... Up ..................................................................... Up.

VOC ................................................................... 4.2% ................................................................. 4.6%.
NOX ................................................................... 6.2% ................................................................. 5.7%.
CO ..................................................................... ¥12.5% ............................................................ ¥13.7%.
Other Areas (9.0 RVP)
Ethanol Use ....................................................... Up ..................................................................... Up.

VOC ................................................................... 3.6% ................................................................. 4.6%.
NOX ................................................................... 7.3% ................................................................. 7.0%.
CO ..................................................................... ¥6.4% .............................................................. ¥6.0%.
As expected, increased ethanol use increase in non-exhaust VOC emissions for discussion of how ethanol levels will
tends to increase NOX emissions. The exceeds the reduction in exhaust VOC change at the state-level.
increase in low RVP and other areas is emissions. This effect is muted with Table VIII.B.3–2 presents the
greater than in RFG areas, since the RFG RFG due to the absence of an RVP percentage change in VOC, NOX, and
in the RFG areas included in this waiver for ethanol blends. We would CO emission inventories under our
analysis all contained MTBE. Also, expect very similar results for 2012. The sensitivity case (i.e., when we apply the
increased ethanol use tends to increase reader is referred to Chapter 2 of the RIA emission effects of the EPA Predictive
VOC emissions, indicating that the Models to all motor vehicles).
ETHANOL USE CHANGED SIGNIFICANTLY—SENSITIVITY ANALYSIS
RFG Areas
Ethanol Use ....................................................... Down ................................................................ Up.

VOC ................................................................... ¥1.0% .............................................................. 1.0%.
NOX ................................................................... ¥0.9% .............................................................. 5.6%.
CO ..................................................................... 7.3% ................................................................. ¥3.0%.
Low RVP Areas
Ethanol Use ....................................................... Up ..................................................................... Up.

VOC ................................................................... 3.4% ................................................................. 3.7%.
NOX ................................................................... 10.4% ............................................................... 10.8%.
CO ..................................................................... ¥15.0% ............................................................ ¥16.4%.
Other Areas (9.0 RVP)
Ethanol Use ....................................................... Up ..................................................................... Up.

VOC ................................................................... 3.0% ................................................................. 3.9%.
NOX ................................................................... 10.8% ............................................................... 11.0%.
ETHANOL USE CHANGED SIGNIFICANTLY—SENSITIVITY ANALYSIS—Continued
CO ..................................................................... ¥9.0% .............................................................. ¥8.9%.
Directionally, the changes in VOC and vehicles and equipment for the RFS and and NOX emissions which can be
NOX emissions in the various areas are EIA cases. We included the estimated simulated. As a result, we could not
consistent with those from our primary changes in emissions from renewable apply distinct changes in emissions for
analysis. The main difference is that the fuel production and distribution. each county. Therefore, two separate
increases in VOC emissions are smaller, Because of limitations in the Ozone runs were made with different VOC and
due to more vehicles experiencing a RSM, we could not easily assign these NOX emissions reductions. We then
reduction in exhaust VOC emissions, emissions to the specific counties where selected the ozone impacts from the
and the increases in NOX emissions are the plants are or are expected to be various runs which best matched the
larger. located. Instead, we assigned all of the VOC and NOX emission reductions for
C. Impact on Air Quality emissions related to renewable fuel that county. This models the impact of
production and distribution to the set of local emissions reasonably well, but
We estimate the impact of increased states expected to contain most of the loses some accuracy with respect to
ethanol use on the ambient production facilities. ozone transport. No ozone impact was
concentrations of two pollutants: Ozone
The Ozone RSM was created using assumed for areas which did not
and PM. Quantitative estimates are
multiple runs of the Comprehensive Air experience a significant change in
made for ozone, while only qualitative
Quality Model with Extensions (CAMX). ethanol use. The predicted ozone
estimates can be made currently for
Base and proposed control CAMX impacts of increased ethanol use for
ambient PM. These impacts are
described below. metamodeling was completed for the those areas where ethanol use is
year 2015 over a modeling domain that projected to change by more than a 50%
1. Impact of Increased Ethanol Use on includes all or part of 37 Eastern U.S. market share are summarized in Table
Ozone states, plus the District of Columbia. For VIII.C.1–1. As shown in the Table 5.1–
We use a metamodeling tool more information on the Ozone RSM, 2 of the RIA, national average impacts
developed at EPA, the ozone response please see Chapter 5 of the RIA for this (based on the 37-state area modeled)
surface metamodel (Ozone RSM), to final rule. which include those areas where no
estimate the effects of the projected The Ozone RSM limits the number of change in ethanol use is occurring are
changes in emissions from gasoline geographically distinct changes in VOC considerably smaller.
TABLE VIII.C.1–1.—IMPACT ON 8-HOUR DESIGN VALUE EQUIVALENT OZONE LEVELS (PPB) a

Primary analysis Sensitivity analysis
RFS case EIA case RFS case EIA case
Minimum Change ............................................................................................................. ¥0.015 0.000 ¥0.115 0.028

Maximum Change ............................................................................................................ 0.329 0.337 0.624 0.549
Average Change b ............................................................................................................ 0.153 0.181 0.300 0.325
Population-Weighted Change b ........................................................................................ 0.154 0.183 0.272 0.315
a In comparison to the 80 ppb 8-hour ozone standards.
b Only for those areas experiencing a change in ethanol blend market share of at least 50 percent.
As can be seen, ozone levels generally to ethanol like Tier 0 vehicles, the affected by a change in CO emissions.)
increase to a small degree with population-weighted increase in The Ozone RSM also does not account
increased ethanol use. This is likely due ambient ozone levels is slightly less for changes in VOC reactivity. With
to the projected increases in both VOC than twice as high, or 0.272–0.315 ppb. additional ethanol use, the ethanol
and NOX emissions. Some areas do see This increase represents about 0.35 content of VOC should increase. Ethanol
a small decrease in ozone levels. In our percent of the standard. is less reactive than the average VOC.
primary analysis, where exhaust There are a number of important Therefore, this change should also
emissions from Tier 1 and later onroad caveats concerning these estimates. reduce ambient ozone levels in a way
vehicles are assumed to be unaffected First, the emission effects of adding not addressed by the Ozone RSM, again
by ethanol use, the population-weighted ethanol to gasoline are based on in those areas where ozone formation is
increase in ambient ozone levels in extremely limited data for recent predominantly VOC-limited. Because of
those areas where ethanol use changed vehicles and equipment. Second, the these limitations, anyone interested in
significantly is 0.154–0.183 ppb. Since Ozone RSM does not account for the impact of increased ethanol use on
the 8-hour ambient ozone standard is 85 changes in CO emissions. As shown ozone in any particular area should
ppb, this increase represents about 0.2 above, ethanol use should reduce CO utilize more comprehensive dispersion
percent of the standard, a very small emissions significantly, directionally modeling which accounts for these and
percentage. reducing ambient ozone levels in those other important factors.
In our sensitivity analysis, where areas where ozone formation is VOC- We received several requests in
exhaust emissions from Tier 1 and later limited. (Ozone levels in areas which comments on the proposal to quantify
onroad vehicles are assumed to respond are NOX-limited are less likely to be the impact of the reduced CO emissions
and VOC reactivity on ozone. As PM. VOC emissions contribute to lower concentrations of aromatics in
discussed in the S&A document, this is ambient organic PM. Increased ethanol gasoline. Thus, emissions of gaseous
not possible without running more use is not expected to change gasoline aromatic VOCs could decrease for both
sophisticated ambient dispersion sulfur levels, so emissions of sulfur reasons.
models. The impact of CO emissions dioxide and any resultant ambient Overall, we expect that the decrease
and VOC reactivity on ozone vary concentrations of sulfate PM are not in secondary organic PM is likely to
significantly depending on ambient expected to change. Increased ethanol exceed the increase in secondary nitrate
conditions and the relative amount of use is expected to increase NOX PM. In 1999, NOX emissions from
VOC and NOX in the atmosphere. emissions, so the possibility exists that gasoline-fueled vehicles and equipment
Therefore, general rules of thumb ambient nitrate PM levels could comprised about 20% of national NOX
cannot be applied. increase. Increased ethanol is generally emissions from all sources. In contrast,
Moving to health effects, exposure to expected to increase total VOC gasoline-fueled vehicles and equipment
ozone has been linked to lung function emissions, which could also impact the comprised over 60% of all national
decrements, respiratory symptoms, formation of secondary organic PM. gaseous aromatic VOC emissions. The
aggravation of asthma, increased However, while non-exhaust VOC percentage increase in national NOX
hospital and emergency room visits, emissions are expected to increase, emissions due to increased ethanol use
increased asthma medication usage, exhaust VOC emissions are expected to should be smaller than the percentage
inflammation of the lungs, and a variety decrease. Generally, the higher the decrease in national emissions of
of other respiratory effects and molecular weight of the specific VOC gaseous aromatics. Finally, in most
cardiovascular effects including emitted, the greater the likelihood it will urban areas, ambient levels of secondary
premature mortality. Ozone can also form PM in the atmosphere. Non- organic PM exceed those of secondary
adversely affect the agricultural and exhaust VOC is predominantly low in nitrate PM. Thus, directionally, we
forestry sectors by decreasing yields of molecular weight, as much of it is due expect a net reduction in ambient PM
crops and forests. Although the health to fuel evaporating. Thus, emissions of levels due to increased ethanol use.
and welfare impacts of changes in VOCs likely to form PM in the However, we are unable to quantify this
ambient ozone levels are typically atmosphere are likely decreasing with reduction at this time.
quantified in regulatory impact ethanol use. EPA currently utilizes the CMAQ
analyses, we do not evaluate them for The formation of secondary organic model to predict ambient levels of PM
this analysis. On average, the changes in PM is very complex, due in part to the as a function of gaseous and PM
ambient ozone levels shown above are wide variety of VOCs emitted into the emissions. This model includes
small and would be even smaller if atmosphere. The degree to which a mechanisms to predict the formation of
changes in CO emissions and VOC specific gaseous VOC reacts to form PM nitrate PM from NOX emissions.
reactivity were taken into account. The in the atmosphere depends on the types However, it does not currently include
increase in ozone would likely lead to of reactions that specific VOC undergoes any mechanisms addressing the
negligible monetized impacts. We and the products of those reactions. formation of secondary organic PM. EPA
therefore do not estimate and monetize Both of these factors depend on other is currently developing a model of
ozone health impacts for the changes in pollutants present, such as the hydroxyl secondary organic PM from gaseous
renewable use due to the small radical, ozone, NOX and other reactive toluene emissions. We plan to
magnitude of this change, and the compounds. The relative mass of incorporate this mechanism into the
uncertainty present in the air quality secondary PM formed per mass of CMAQ model in 2007. The impact of
modeling conducted here, as well as the gaseous VOC emitted can also depend other aromatic compounds will be
uncertainty in the underlying emission on the total concentration of gaseous added as further research clarifies their
effects themselves discussed earlier. VOC and organic PM in the atmosphere. role in secondary organic PM formation.
Most of the secondary organic PM exists Therefore, we expect to be able to
2. Particulate Matter quantitatively estimate the impact of
in a continually changing equilibrium
Ambient PM can come from two between the gaseous and PM phases. decreased toluene emissions and
distinct sources. First, PM can be Both the rates of these reactions and the increased NOX emissions due to
directly emitted into the atmosphere. gaseous-PM equilibria depend on increased ethanol use as part of future
Second, PM can be formed in the temperature, so seasonal differences can analyses of U.S. fuel requirements
atmosphere from gaseous pollutants. be expected. required by the Act.
Gasoline-fueled vehicles and equipment Recent smog chamber studies have
IX. Impacts on Fossil Fuel Consumption
contribute to ambient PM indicated that gaseous aromatic VOCs
and Related Implications
concentrations in both ways. can form secondary PM under certain
As described above, we are not conditions. These compounds comprise Renewable fuels have been of
currently able to predict the impact of a greater fraction of exhaust VOC significant interest for many years due
fuel quality on direct PM emissions emissions than non-exhaust VOC to their potential to displace fossil fuels,
from gasoline-fueled vehicles or emissions, as non-exhaust VOC which have often been targeted as
equipment. Therefore, we are unable at emissions are dominated by VOCs with primary contributors to emissions of
this time to project the effect that relatively high vapor pressures. greenhouse gases such as carbon
increased ethanol use will have on Aromatic VOCs tend to have lower dioxide, and national energy concerns
levels of directly emitted PM in the vapor pressures. As increased ethanol primarily due to an increasing
atmosphere. use is expected to reduce exhaust VOC dependence on foreign sources of
PM can also be formed in the emissions, emissions of aromatic VOCs petroleum. In the Notice of Proposed
atmosphere (termed secondary PM here) should also decrease. In addition, Rulemaking, we provided a preliminary
from several gaseous pollutants emitted refiners are expected to reduce the assessment of the greenhouse gas
by gasoline-fueled vehicles and aromatic content of gasoline by 5 emission and energy impacts of
equipment. Sulfur dioxide emissions volume percentage points as ethanol is renewable fuel and an initial assessment
contribute to ambient sulfate PM. NOX blended into gasoline. Emissions of of the economic value of renewable fuel
emissions contribute to ambient nitrate aromatic VOCs should decrease with displacing petroleum-based fuels. We
also indicated that we would be GHG emissions and fossil fuel assumptions remain the subject of
updating an analysis of energy security consumption for the two renewable fuel debate among researchers. Lifecycle
impacts that had been prepared by volume scenarios considered in this analyses must also contend with the fact
analysts at the Oak Ridge National final rulemaking relative to the that the inputs and assumptions
Laboratory (ORNL) of the Department of reference case. As described later in this generally represent industry-wide
Energy. We present some discussion of section, the results in Table IX–1 are averages even though energy consumed
that analysis here. based on a number of input assumptions and emissions generated can vary
We also performed a full lifecycle or including coal being used as process widely from one facility or process to
well-to-wheel analysis for this final rule fuel in 14% of ethanol facilities. another.
to estimate the GHG and fossil energy As noted in Section III, although we
reductions from replacing petroleum have chosen to base our lifecycle There currently exists no organized,
based fuels with renewable fuels. analyses on Argonne National comprehensive dialogue among
Argonne National Laboratory’s (ANL) Laboratory’s GREET model there are a stakeholders about the appropriate tools
GREET 109 model was utilized for this variety of other lifecycle models and and assumptions behind any lifecycle
lifecycle analysis. Table IX–1 analyses available. The choice of model analyses. We will be initiating more
summarizes this model’s estimated inputs and assumptions all have a comprehensive discussions about
impact that increases in the use of bearing on the results of lifecycle lifecycle analyses with stakeholders in
renewable fuels are projected to have on analyses, and many of these the near future.
TABLE IX–1.—GREET MODEL LIFECYCLE REDUCTIONS FROM INCREASED RENEWABLE FUEL USE RELATIVE TO THE 2012
REFERENCE CASE
RFS case EIA case
% of trans. % of trans.
Reduction Reduction
sector sector
Fossil Energy (QBtu) ................................................................................................... 0.15 0.48 0.27 0.85

Petroleum Energy (Bgal) ............................................................................................. 2.0 0.82 3.9 1.60
GHG Emissions (MMT CO2-eq.) ................................................................................. 8.0 0.36 13.1 0.59
CO2 Emissions (MMT CO2) ........................................................................................ 11.0 0.52 19.5 0.93
We used the petroleum energy A. Impacts on Lifecycle GHG Emissions reductions from the increased use of
reductions shown in Table IX–1 to and Fossil Energy Use renewable fuels.
determine implications on imports of This lifecycle assessment approach
petroleum products. Our analysis found Although the use of renewable fuels
in the transportation sector directly and rationale were highlighted in the
that calculated petroleum energy proposal. Comments received focused
reductions come almost entirely from displaces some petroleum consumed as
mainly on improving the process, for
imports of finished products in this motor vehicle fuel, this displacement of
example the choice of lifecycle model
2012 case and amount to the equivalent petroleum is in fact only one aspect of
used and initiating a stakeholder
of 123,000 barrels of transportation fuel the overall impact of renewable fuels on
dialogue to build consensus around the
under the RFS case and 240,000 barrels fossil fuel use. Fossil fuels are also used
assumptions and approach. In general
of transportation fuel for the EIA case. in producing and transporting comments were supportive of using a
Another effect of increased use of renewable feedstocks such as plants or full lifecycle assessment approach, but
renewable fuels in the U.S. is that it animal byproducts, in converting the differed on the appropriate model and
diversifies the energy sources in making renewable feedstocks into renewable associated assumptions EPA should use
transportation fuel. Diverse sources of fuel, and in transporting and blending in its analysis.
fuel energy reduce both financial and the renewable fuels for consumption as
strategic risks associated with a motor vehicle fuel. To estimate the true 1. Time Frame and Volumes Considered
potential disruption in supply or a spike impacts of increases in renewable fuels
on fossil fuel use, modelers attempt to The results presented in this analysis
in cost of a particular energy source. represent a snapshot in time. They
This reduction in risks is a measure of take many or all these steps into
represent annual GHG and fossil fuel
improved energy security. The ORNL account.
savings in the year considered, in this
report used an ‘‘oil premium’’ approach Similarly, energy is used and GHGs case 2012. Consistent with the
to identify those energy-security related emitted in the pumping of oil, emissions modeling described in
impacts which are not reflected in the transporting the oil to the refinery, Section VII, our analysis of the GHG and
market price of oil, and which are refining the crude oil into finished fossil fuel consumption impacts of
expected to change in response to an transportation fuel, transporting the renewable fuel use was conducted using
incremental change in the level of U.S. refined gasoline or diesel fuel to the three volume scenarios. The first
oil imports. consumer and then burning the fuel in scenario was the same reference case
The following sections provide a more the vehicle. Such analyses are termed used elsewhere in this final rulemaking.
complete description of our analyses of lifecycle or well-to-wheels analyses. We The reference case scenario provided
the GHG emissions, fossil fuel, oil performed a full lifecycle analysis as the point of comparison for the other
imports, and energy security impacts of part of this final rulemaking to two scenarios. The other two renewable
this final rule. determine the GHG and fossil energy fuel scenarios for 2012 represented the
109 Greenhouse gases, Regulated Emissions, and
Energy use in Transportation.
RFS program requirements and the land use change are well understood GREET model 110, with a few
volume projected by EIA. and are included in our lifecycle modifications to its input assumptions.
In both the RFS and EIA scenarios, we analysis, we did not include the These changes since the NPRM are
assumed that the biodiesel production potential impact on international land described below.
volume would be 0.303 billion gallons use and any emissions that might The two main comments we received
based on EIA AEO2006 projections. directly result. Our currently modeling on our lifecycle modeling were that we
Furthermore, for both scenarios we capability does not allow us to assess should initiate a public dialogue on
assume that 250 million gallons of what international land use changes lifecycle analyses, models and
ethanol that qualify for cellulosic would occur or how these changes assumptions, and that our sole reliance
biomass ethanol credit will be produced would affect greenhouse gas emissions. on the GREET model should be avoided,
in 2012 from corn using biomass as the For example, we would need to know given other models are available. We
process energy source. The remaining how international cropping patterns have begun a public dialogue in that we
renewable fuel volumes in each scenario would change as well as farming inputs identify the assumptions in the GREET
would be ethanol made from corn and model that were examined and modified
and practices that might affect
imports. The import volume is based on for this final rulemaking. Furthermore,
emissions assessment.
EIA’s projections for the percent of total we will be initiating more
ethanol volume supplied by imports in The second case where we have not comprehensive discussions about
2012. The total volumes for all three quantified the international impacts lifecycle analysis with stakeholders
scenarios are shown in Table II.A.1–1. results from any reduction in world oil which could lead to an increased use of
For the purposes of calculating this prices would tend to result from lifecycle analysis in future actions.
difference or the amount of decreased demand in the U.S. as In terms of our sole reliance on the
conventional fuel no longer consumed— renewable fuels replace oil. It is GREET model, several other models
that is, displaced—as a result of the use commonly presumed in economic have been developed for conducting
of the replacement renewable fuel, we analyses that all else being equal renewable fuels lifecycle analysis. For
assumed the ethanol volumes shown in quantity demanded of a valuable good example, researchers at the Energy and
Table II.A.1–1 are 5% denatured. The (i.e., oil) will increase as price Resources Group (ERG) of the
ethanol volumes were adjusted down to decreases. A world wide reduction of oil University of California Berkeley have
represent pure (100%) ethanol, price would tend to reduce the cost of developed the ERG Biofuel Analysis
biodiesel volumes were not adjusted. producing transportation fuel which in Meta-Model (EBAMM) and Mark
The adjusted volumes were then turn would tend to reduce the price Delucchi at the Institute of
converted to total Btu using the consumers internationally would have Transportation Studies of the University
appropriate volumetric energy content to pay for this fuel. of California Davis has developed the
values (76,000 Btu/gal for ethanol, Lifecycle Emissions Model (LEM). Other
115,000 Btu/gal for gasoline, 118,000 To the extent fuel prices are non-fuel specific lifecycle modeling
Btu/gal for biodiesel, and 130,000 Btu/ decreased, demand and consumption tools could also be used to perform
gal for diesel fuel). We make the would tend to increase; this impact of renewable fuel lifecycle analysis.
assumption that vehicle energy reduced cost of driving is sometimes Several studies have been released
efficiency will not be affected by the referred to as a ‘‘rebound effect.’’ Such recently making use of these other
presence of renewable fuels (i.e., a greater consumption internationally models and showing different results
efficiency of combusting one Btu of would presumably result in an increase than we find in the analysis done for
ethanol is equal to the efficiency of in greenhouse gas emissions as this rule. For example, whereas GREET
combusting one Btu of gasoline). consumers in the rest of the world drive estimates a net GHG reduction of about
This lifecycle analysis is conducted more. These increased emissions would 22% for corn ethanol compared to
without any regard to the geographic in part offset the emission impacts gasoline, the previously cited works by
attributes of where emissions or energy otherwise described in this preamble. Farrell et al. utilizing the EBAMM show
use occurs; the model represents global While such international impacts of around a 13% reduction. The main
reductions in GHG emissions and U.S. actions are important to difference in results is not due to the
energy use, not just those occurring in understand, we have not have fully model used but assumptions on scope
the U.S. For example, under a full considered and quantified the and input data.
lifecycle assessment approach, the international rebound effects of this For example, most studies focus on
savings associated with reducing renewable fuel standard. Nevertheless, average or current ethanol production
overseas crude oil extraction and such impacts remain an important which uses a current mix of wet and dry
refining are included, as are the consideration for future analysis. mill ethanol production and use of coal
international emissions associated with and natural gas as process energy. In
producing imported ethanol. There were 2. GREET Model contrast, for this rulemaking we
two exceptions to this, both dealing consider future increases in renewable
with secondary impacts that may result As in the analyses for the proposal,
for this final rulemaking we used the fuel production so we focus on new
internationally due to the expanded use production capacity which will rely
of renewable fuels within the United GREET fuel-cycle model. GREET has
more heavily on more efficient dry mill
States. been under development for several
production than the current mix of wet
The first exception is the emissions years and has undergone extensive peer
and dry mill capacities. Other studies
associated with international land use review through multiple updates. Of the
also typically base ethanol and farm
change. Due to decreasing corn exports available sources of information on
energy use on historic data while we are
some changes to international land use lifecycle analyses of energy consumed
assuming future capacity increases will
may occur, for example, as more crops and emissions generated, we believe
use a state of the art dry milling plant
are planted in other regions to that GREET offers the most
and most current farming energy use
compensate for the decrease in crop comprehensive treatment of the
exports from the U.S. While the transportation sector. For this final rule, 110 GREET version 1.7, released November 10,
emissions associated with domestic we used an updated version of the 2006.
data. Varying assumptions concerning b. Modifications to GREET (CRP) land into crop production for use
how land use change impact CO2 Since the analysis done for the NPRM, in producing renewable fuels is an
emissions and agriculture related GHG we have updated the GREET model with important factor to consider when
emissions could also have an impact on the following changes: determining the overall sustainability of
overall results. Other studies also differ —Included CO2 emissions from corn renewable fuel use. While the analysis
in the environmental flows considered. farming lime use. described above is indicating that the
For example, GREET uses the —Updated the corn farming fertilizer volumes of renewable fuel analyzed in
internationally accepted set of use inputs. this rulemaking will not cause a
greenhouse gases while Delucchi uses —Added cellulosic biomass ethanol significant change in land use, this is an
additional types of greenhouse gases. production from corn stover and area we will continue to research for
We have not had an opportunity to forest waste. any future analysis.
develop comparable analyses of the —Modeled biomass as a process fuel Corn Ethanol Wet-Mill Versus Dry
GHG and energy impacts of this rule source in corn ethanol dry milling. Mill Plants: For this analysis, we expect
using these other models. However, as In addition to the changes listed most new ethanol plants will be dry
discussed in chapters 6.1.1 and 6.2.3 of above we also examined and updated mill operations. That has been the trend
the RIA, we believe the scope of the other GREET input assumptions for corn in the last few years as the demand for
GREET model and the assumptions we ethanol and biodiesel production. ethanol has grown, and our analysis of
have used in running the model tend We also examined several other ethanol plants under construction and
toward the middle of the range. GREET input values, but determined planned for the near future has verified
Therefore we believe these results that the default GREET values should this. Our analysis of production plans,
provide a reasonable assessment of the not be changed for a variety of reasons. as outlined in Section VI, indicates that
energy and GHG impacts of the These included, corn and ethanol essentially all new ethanol production
expanded use of renewable fuels. transport distances and modes and will be from dry mill plants (99%).
byproduct allocation methods. Our Corn Ethanol Dry Mill Plant Energy
a. Renewable Fuel Pathways Considered investigation of these other GREET
Use and Fuel Mix: Our review of plants
input values are discussed more fully in
The feedstocks and processes used to under construction and those planned
Chapter 6 of the RIA. The current
model renewable fuel production were for the near future as outlined in Section
GREET default factors for these other
those which our analysis in Chapter 1 VI, indicates that coal will be used as
inputs were included in the analysis for
of the RIA shows will primarily be used process fuel for approximately 14% of
this final rule.
through 2012. However, other pathways We did not investigate the input the new under construction and
for producing renewable fuels may values associated with the production of planned ethanol production volume
become popular such as producing petroleum-based gasoline or diesel fuel capacity. The energy use at a dry mill
cellulosic biomass ethanol from in the GREET model for this final rule. plant using natural gas was based on the
municipal solid waste as well as However, the refinery modeling model developed by USDA and
different process for the feedstocks discussed in Section VII provides some modified by EPA for use in the cost
considered, like gasification of additional information on the process analysis of this rulemaking described in
switchgrass and production of energy requirements associated with the Section VII. For this analysis, we
‘‘renewable’’ diesel fuel through production of gasoline and diesel under assumed that a coal plant would require
hydrotreating vegetable oils. a renewable fuels mandate. We will use 15% 111 more electricity demand due to
information from this refinery modeling coal handling and have a 13% increase
Furthermore, the lifecycle analysis in thermal demand for steam dryers as
used for this rulemaking is based on in future analysis to determine if any
GREET input values should be changed. compared to the natural gas fueled
averages of the different renewable fuels plant. We also considered a case where
modeled. For example, the GHG A summary of the GREET input
values we investigated and modified for a corn ethanol plant utilized biomass as
emission and fossil energy savings a fuel source. For this case we assumed
associated with increased use of corn the final rule analysis is given below.
Corn Farming Energy Use: Corn the same amount of fuel and purchased
ethanol are calculated based on a mix of electricity energy per gallon as a coal
corn wet and dry milling, assuming a farming energy use was updated based
on the most recent USDA Agricultural powered plant. This assumption is
certain projected mix of each process. based on the biomass plant having more
Resource Management Survey (ARMS)
While this method may not exactly fuel handling than a natural gas plant
data.
represent the reductions associated with and producing steam for DDGS drying.
CO2 from Land Use Change: The
a given gallon of renewable fuel, it is
GREET model has a default factor for Corn Ethanol Dry Mill Plant
accurate for the purpose of this analysis
CO2 from land use change that was Production Yield: Modern ethanol
which is to determine the impact of the included in the NPRM analysis. This plants are now able to produce more
total increased volume of renewable factor was updated based on the results than 2.7 gallons of ethanol per bushel of
fuels used. of the agricultural sector modeling corn compared with less than 2.4
We recognize that different feedstocks outlined in Section X. The CO2 gallons of ethanol per bushel of corn in
and processes will each have unique emissions from land use change used in 1980. The development of new enzymes
characteristics when it comes to the final rulemaking represents continues to increase the potential
lifecycle GHG emissions and energy use. approximately 1% of total corn ethanol ethanol yield. We used a value of
However, we understand that other lifecycle GHG emissions. However, this
feedstocks and processes as well as value could be more significant if 111 Baseline Energy Consumption Estimates for
differences in other parts of the increased amounts of renewable fuels Natural Gas and Coal-based Ethanol Plants—The
renewable fuel lifecycle will impact the are used in the transportation sector. Potential Impact of Combined Heat and Power
(CHP), Prepared for: U.S. Environmental Protection
savings associated with their use and The issue of CO2 emissions from land Agency Combined Heat & Power Partnership,
this is the focus of ongoing work at the use change associated with converting Prepared by: Energy and Environmental Analysis,
agency. forest or Conservation Reserve Program Inc., July 2006.
2.71 112 gal/bu in our analysis, which was assumed to be 1.72 times the energy but also to each of the by-products.
may underestimate actual future yields. used for soybean oil biodiesel. There are a number of methods that can
For additional information on our yield Biodiesel Transportation: Biodiesel be used to estimate by-product
analysis, see the cost modeling of corn transportation was based on the allocations. The displacement method
ethanol discussed in Section VII. distribution infrastructure modeling for for by-product allocation, described in
Corn Ethanol Co-Products: We based this rulemaking which indicates Section 6.1.2.10 of the RIA, is the
the amount of DDGS produced by an pipelines are not currently used to default for the GREET model and is the
ethanol dry mill plant on the USDA transport biodiesel and are not projected method used by EPA. However, we
model used in the cost analysis work of to play a role in biodiesel transport in evaluated another method, the process
this rulemaking, described in Section the future time frame considered. energy approach, to determine the
VII. Based on the agricultural sector Therefore, GREET default factors for impact this assumption has on the
modeling outlined in Section X, we biodiesel transportation from plant to overall results of the analysis.
assumed that one ton of DDGS displaces terminal were modified to remove Use of the process energy based
0.5 tons of corn and 0.5 tons of soybean pipeline transport. allocation method reduces ethanol
meal. We also assume for corn ethanol c. Sensitivity Analysis lifecycle energy use and GHG emissions
wet milling that one ton of corn gluten by approximately 30 percent compared
As mentioned above, the results of
meal substitutes for one ton of soybean to the displacement allocation
lifecycle analysis are highly dependent
meal, one ton of corn gluten feed approach. This indicates that ethanol
on the input data assumptions used.
substitutes for 0.5 tons of corn, and one lifecycle analysis results are extremely
Section IX.A.1.b outlined changes made
ton of corn oil substitutes for one ton of sensitive to the choice of allocation
to the GREET model inputs to better
soybean oil. represent the scope and purpose of our method used. (See the RIA, Chapter 6
Biodiesel Production: Two scenarios analysis for this rulemaking. However, for more information on these two by-
for biodiesel production were we also performed several sensitivity product allocation methods) The
considered, one utilizing soybean oil as analyses on some key assumptions to displacement allocation method is the
a feedstock and one using yellow grease. see how varying them would impact method supported by international
For the soybean oil scenario, the energy overall results. lifecycle assessment standards 113 and
use and inputs for the biodiesel We performed a sensitivity analysis therefore EPA feels that it is the most
production process were based on a on expanding the lifecycle fuel accurate and preferred method to use.
model developed by NREL and used by production system boundaries to This does however highlight the
EPA in the cost modeling of soybean oil include farm equipment production sensitivity of lifecycle analysis results to
biodiesel, as discussed in Section VII. (e.g., emissions and energy use choice of input parameters and
The GREET model does not have a associated with producing steel, rubber, assumptions.
specific case of biodiesel production etc. used to make farming equipment). 3. Displacement Indexes (DI)
from yellow grease. Therefore, as a It was found that including farm
surrogate we used the soybean oil based equipment production energy use and The displacement index (DI)
model with several adjustments. For the emissions increases ethanol lifecycle represents the percent reduction in GHG
yellow grease case, we did not include energy use and GHG emissions by emissions or fossil fuel energy brought
soybean agriculture emissions or energy approximately 1 percent. Therefore, the about by the use of a renewable fuel in
use. Soybean crushing was still lifecycle results are not changed comparison to the conventional gasoline
included as a surrogate for yellow grease significantly due to this expansion of or diesel that the renewable fuel
processing (purification, water removal, system boundaries. replaces. The formula for calculating the
etc.). Also, due to additional processing We also performed a sensitivity displacement index depends on which
requirements, the energy use associated analysis on the allocation method used fuel is being displaced (i.e. gasoline or
with producing biodiesel from yellow in ethanol production. A number of by- diesel), and which endpoint is of
grease is higher than for soybean oil products are made during the interest (e.g. petroleum energy, GHG).
biodiesel production. As per the cost production of ethanol. In lifecycle For instance, when investigating the
modeling of yellow grease biodiesel analyses, the energy consumed and CO2 impacts of ethanol used in gasoline,
discussed in Section VII, the energy use emissions generated by an ethanol plant the displacement index is calculated as
for yellow grease biodiesel production must be allocated not only to ethanol, follows:
lifecycle CO 2 emitted for ethanol in g/Btu

DICO2 = 1 −
lifecycle CO 2 emitted for gasoline in g/Btu
The units of g/Btu ensure that the during its manufacturer and in the long run the CO2 emitted from
comparison between the renewable fuel distribution. The numerator, in contrast, biomass-based fuels combustion does
and the conventional fuel is made on a includes only the CO2 emitted during not increase atmospheric CO2
common basis, and that differences in the manufacturer and distribution of concentrations, assuming the biogenic
the volumetric energy content of the ethanol, not the CO2 emitted during carbon emitted is offset by the uptake of
fuels is taken into account. The combustion of the ethanol. CO2 resulting from the growth of new
denominator includes the CO2 emitted The combustion of biomass-based biomass. Thus ethanol’s carbon can be
through combustion of the gasoline fuels, such as ethanol from corn and thought of as cycling from the
itself in addition to all the CO2 emitted woody crops, generates CO2. However, environment into the plant material
112 All yield values presented represent pure 113 ISO 14044:2006(E), ‘‘Environmental Organization for Standardization (ISO), First
ethanol production (i.e. no denaturant). Management—Life Cycle Assessment— edition, 2006–07–01, Switzerland.
ER01MY07.058</MATH>
Requirements and Guidelines’’, International
used to make ethanol and, upon index calculations shown above. Net and GHGs produced for corn-ethanol,
combustion of the ethanol, back into the carbon fluxes from changes in biogenic cellulosic ethanol, and soybean-based
environment from which it came. As a carbon reservoirs in wooded or crop biodiesel. These values were in turn
result, CO2 emissions from biomass- lands are accounted for separately in the used to calculate the displacement
based fuels combustion are not included GREET model. indexes. The results are shown in Table
in their lifecycle emissions results and Using GREET, we calculated the IX.A.3–1. Details of these calculations
are not used in the CO2 displacement lifecycle values for energy consumed can be found in Chapter 6 of the RIA.
TABLE IX.A.3–1.—DISPLACEMENT INDEXES DERIVED FROM GREET

[In percent]
Corn ethanol
Corn ethanol Cellulosic ethanol Imported ethanol Biodiesel
(biomass fuel)
DIFossil Fuel ............................................... 39.4 76.3 92.7 69.0 61.5

DIPetroleum ................................................ 91.8 92.0 91.7 92.0 91.2
DIGHG ..................................................... 21.8 54.1 90.9 56.0 67.7
DICO2 ...................................................... 40.3 72.3 100.1 71.0 69.8
The displacement indexes in this The GHG emissions when producing Considering all of the differences
table represent the impact of replacing sugarcane ethanol differs from corn between imported and domestic
a Btu of gasoline or diesel with a Btu of ethanol in that the GHG emissions from ethanol, for this rulemaking, we
renewable fuel. Thus, for instance, for growing sugarcane is likely different assumed imported ethanol would be
every Btu of gasoline which is replaced than for growing a equivalent amount of predominately from sugarcane and have
by corn ethanol, the total lifecycle GHG corn to make a gallon of ethanol. Also, estimated DI’s approximately mid-way
emissions that would have been the process of turning sugar into ethanol between the DI’s for corn ethanol and
produced from that Btu of gasoline is easier than when starting with starch DI’s for cellulosic ethanol. We are
would be reduced by 21.8 percent. For and therefore less energy intensive continuing to develop a better
every Btu of diesel which is replaced by (which typically translates into lower understanding of the lifecycle energy
biodiesel, the total lifecycle petroleum GHG). Importantly, we understand that and GHG impacts of producing ethanol
energy that would have been consumed at least some of the ethanol produced in from sugarcane and other likely
as a result of burning that Btu of diesel Brazil uses the bagasse from the feedstock sources of imported ethanol
fuel would be reduced by 91.2 percent. sugarcane itself as a process fuel source. for any future analysis.
Consistent with the cost modeling We know from our analysis that using
4. Impacts of Increased Renewable Fuel
done for this rule, for the 2012 cases we a biomass source for process energy
Use
assume the ‘‘cellulosic’’ ethanol volume greatly improves the GHG benefit of the
is actually produced from corn utilizing renewable fuel. These factors would We used the methodology described
a biomass fuel source at the ethanol result in sugarcane ethanol having a above to evaluate impacts of increased
production plant. The displacement greater GHG benefit per gallon than corn use of renewable fuels on consumption
index for that fuel as shown in Table ethanol, certainly where natural gas or of petroleum and fossil fuels and also on
IX.A.3–1 is used in the calculation of coal is the typical process fuel source emissions of CO2 and GHGs. This
reductions. We have included the used. section describes our results.
column for cellulosic ethanol for Conversely, sugarcane ethanol a. Greenhouse Gases and Carbon
comparison, indicating that a move production does not result in a co- Dioxide
toward cellulosic ethanol will not product such as distillers grain as in the
displace petroleum much differently case of corn ethanol. In our analyses, We estimated the reduction associated
than other renewable fuels but will have accounting for co-products significantly with the increased use of renewable
a positive impact on GHG emissions improved the GHG displacement index fuels on lifecycle emissions of CO2 and
reductions. for corn ethanol. Furthermore, there total GHG. Since total GHG emission
For imported ethanol, it is more would be additional transportation reductions are lower than CO2
difficult to estimate the lifecycle energy emissions associated with transporting reductions, this indicates that lifecycle
and GHG displacement indexes since the imported ethanol to the U.S. as emissions of CH4 and N2O are higher for
we know much less about how the crops compared to domestically produced renewable fuels than for the
used to make the ethanol are grown and ethanol. Developing a technically conventional fuels replaced. These
what energy is used in the ethanol rigorous lifecycle estimate for energy values are then compared to the U.S.
production facility. While not needs and GHG impacts for imported transportation sector emissions to get a
exclusively, we anticipate much ethanol is not a simple task and was not percent reduction. The estimates for the
imported ethanol to be primarily available in the timeframe of this 2012 cases are presented in Table
sugarcane based ethanol. rulemaking. IX.A.4.a–1.
TABLE IX.A.4.A–1.—ESTIMATED CO2 AND GHG EMISSION IMPACTS OF INCREASED USE OF RENEWABLE FUELS IN THE
TRANSPORTATION SECTOR IN 2012, RELATIVE TO THE 2012 REFERENCE CASE
RFS case EIA case
CO2 Reduction (million metric tons CO2) ................................................................................................................ 11.0 19.5

Percent reduction in Transportation Sector CO Emissions .................................................................................... 0.52 0.93
GHG Reduction (million metric tons CO2-eq.) ........................................................................................................ 8.0 13.1
Percent reduction in Transportation Sector GHG Emissions .................................................................................. 0.36 0.59
b. Fossil Fuel and Petroleum fuels on lifecycle fossil fuels and sector emissions to get a percent
We estimated the reduction associated petroleum. These values are then reduction. The estimates for the 2012
with the increased use of renewable compared to the U.S. transportation cases are presented in Table IX.A.4.b–1.
TABLE IX.A.4.B–1.—ESTIMATED FOSSIL FUEL AND PETROLEUM IMPACTS OF INCREASED USE OF RENEWABLE FUELS IN
THE TRANSPORTATION SECTOR IN 2012, RELATIVE TO THE 2012 REFERENCE CASE
RFS case EIA case
Fossil Fuel Reduction (quadrillion Btu) ................................................................................................................... 0.15 0.27

Percent reduction in Transportation Sector Fossil Fuel Use .................................................................................. 0.48 0.85
Petroleum Energy Reduction (billion gal.) ............................................................................................................... 2.0 3.9
Percent reduction in Transportation Sector Petroleum Use ................................................................................... 0.82 1.60
B. Implications of Reduced Imports of that of imported petroleum products. TABLE IX.B–1.—NET REDUCTIONS IN
Petroleum Products However, the next section does discuss IMPORTS IN 2012
In the proposal, we estimated the some of the energy security implications
impact of expanded renewable fuel use unique to petroleum imports. RFS case EIA case
on the importation of oil and finished To assess the impact of the RFS Reduction in finished
transportation fuel. No comments were program on petroleum imports, we products* (barrels
received suggesting alternative estimate the fraction of domestic per day) ................. 123,000 240,000
methodologies should be used. consumption derived from foreign Percent reduction** ... 0.89% 1.73%
Therefore, we have incorporated that sources using results from the AEO
calculation in this final rule without * Net reductions relative to 2012 reference
2006. We compared the levels and mix case.
change. of imports in the AEO reference case ** Compared to AEO 2006 projections for
In 2005, the United States imported with those in the low macroeconomic 2012 reference case.
almost 60 percent of the oil it growth case and high oil price case. In We also calculate the change in
consumed. This compares to just over Section 6.4.1 of the RIA we describe in expenditures in both petroleum and
35 percent of oil from imports in greater detail how fuel producers may ethanol imports and compare these with
1975.114 Transportation accounts for 70
change their levels and mix of imports the U.S. trade position measured as U.S.
percent of the U.S. oil consumption. It
in response to a decrease in fuel net exports of all goods and services
is clear that oil imports have a
demand. For the purposes of this economy-wide. The decreased
significant impact on the U.S. economy.
rulemaking, we show values for the low expenditures were calculated by
Expanded production of renewable fuel
macroeconomic growth comparison, multiplying the changes in gasoline,
is expected to contribute to energy
where import reductions come almost diesel, and ethanol imports by the
diversification and the development of
entirely from imports of finished respective AEO 2006 wholesale
domestic sources of energy. We consider
products as shown below in Table IX.B– gasoline, distillate, and ethanol price
whether the RFS will reduce U.S.
1. The reductions in imports are forecasts for the specific analysis years.
dependence on imported oil by
compared to the AEO projected levels of In Table IX.B–2, the net expenditures in
calculating avoided expenditures on
net petroleum imports. The range of reduced petroleum imports, increased
petroleum imports. Note that we do not
reductions in net petroleum imports are ethanol imports, and decreased corn
calculate whether this reduction is on
exports are compared to the total value
the net, socially beneficial, which estimated to be between 0.9 to 1.7
of U.S. net exports of goods and services
would depend on the scarcity value of percent, as shown in Table IX.B–1.
for the whole economy for 2012.
domestically produced ethanol versus
114 Davis, Stacy C.; Diegel, Susan W.,
Relative to the 2012 projection, the
Transportation Energy Data Book: 25th Edition, Oak
avoided expenditures due to the RFS
Ridge National Laboratory, U.S. Department of would represent 0.4 to 0.7% of
Energy, ORNL–6974, 2006. economy-wide net exports.
TABLE IX.B–2.—AVOIDED IMPORT EXPENDITURES ($2004 BILLION)

Expendi- Expendi- Net expend- Percent of
tures on tures on Decreased
Cases AEO total net exports itures on total net
petroleum ethanol corn exports imports exports
imports imports
RFS Case ..................................... ¥$383 (year 2012) ...................... ¥$2.6 +$0.7 +$0.6 ¥$1.4 0.4%
EIA Case ...................................... ....................................................... ¥$5.1 +$1.0 +$1.3 ¥$2.8 0.7%
C. Energy Security Implications of this update as a draft report, include it U.S. import demand on the world oil
Increases in Renewable Fuels as part of the record of this rulemaking price over the long-run. Because the
One of the effects of increased use of and invite further public analysis and U.S. is a sufficiently large purchaser of
renewable fuels in the U.S. from the consideration of both this particular foreign oil supplies, its purchases can
RFS is that it diversifies the energy draft report but also other perspectives affect the world oil price. This
sources in making transportation fuel. A on how to best quantify energy security monopsony power means that increases
potential disruption in supply reflected benefits. To facilitate that additional in U.S. petroleum demand can cause the
in the price volatility of a particular consideration, we highlight below some world price of crude oil to rise, and
energy source carries with it both of the key aspects of this particular draft conversely, that reduced U.S. petroleum
financial as well as strategic risks. These analysis. demand can reduce the world price of
risks can be reduced to the extent that The approach developed by ORNL crude oil. Thus, one consequence of
diverse sources of fuel energy reduce estimates the incremental benefits to decreasing U.S. oil purchases due to
the dependence on any one source. This society, in dollars per barrel, of reducing increased use of renewable fuel is the
reduction in risks is a measure of U.S. oil imports, called ‘‘oil premium.’’ potential decrease in the crude oil price
improved energy security. Since the 1997 publication of this paid for all crude oil purchased.
At the time of the proposal, EPA report, changes in oil market conditions, 2. Short-Run Disruption Premium From
stated that an analysis would be both current and projected, suggest that Expected Costs of Sudden Supply
completed and estimates provided in the magnitude of the oil premium has Disruptions
support of this rule. In order to changed. Significant driving factors that
understand the energy security have been revised include: Oil prices, The second component of the external
implications of the RFS, EPA has current and anticipated levels of OPEC economic costs resulting from U.S. oil
worked with Oak Ridge National production, U.S. import levels, the imports arises from the vulnerability of
Laboratory (ORNL), which has estimated responsiveness of regional oil the U.S. economy to oil shocks. The cost
developed approaches for evaluating the supplies and demands to price, and the of shocks depends on their likelihood,
social costs and energy security likelihood of oil supply disruptions. For size, and length, the capabilities of the
implications of oil use. In a new study this analysis, oil prices from the EIA’s market and U.S. Strategic Petroleum
produced for the RFS, entitled ‘‘The AEO 2006 were used. Using the ‘‘oil Reserve (SPR), the largest stockpile of
Energy Security Benefits of Reduced Oil premium’’ approach, estimates of government-owned emergency crude oil
Use, 2006–2015,’’ ORNL has updated benefits of improved energy security in the world, to respond, and the
and applied the method used in the from reduced U.S. oil imports from sensitivity of the U.S. economy to
1997 report ‘‘Oil Imports: An increased use of renewable fuels are sudden price increases. While the total
Assessment of Benefits and Costs’’, by calculated. vulnerability of the U.S. economy to oil
Leiby, Jones, Curlee and Lee.115 116 In conducting this analysis, ORNL price shocks depends on the levels of
While the 1997 report including a considered the full economic cost of both U.S. petroleum consumption and
description of methodology and results importing petroleum into the U.S. The imports, variation in import levels or
at that time has been used or cited on full economic cost of importing demand flexibility can affect the
a number of occasions, this updated petroleum into the U.S. is defined for magnitude of potential increases in oil
analysis and results have not been this analysis to include two components price due to supply disruptions.
available for full public consideration. in addition to the purchase price of Disruptions are uncertain events, so the
Since energy security will be a key petroleum itself. These are: (1) The costs of alternative possible disruptions
consideration in future actions aimed at higher costs for oil imports resulting are weighted by disruption
reducing our dependence on oil, it is from the effect of U.S. import demand probabilities. The probabilities used by
important to assure estimates of energy on the world oil price and OPEC market the ORNL study are based on a 2005
security impacts have been thoroughly power (i.e., the so called ‘‘demand’’ or Energy Modeling Forum117 synthesis of
examined in a full and open public ‘‘monoposony’’ costs); and (2) the risk of expert judgment and are used to
forum. Since the updated analysis was reductions in U.S. economic output and determine an expected value of
only recently available, such a thorough disruption of the U.S. economy caused disruption costs, and the change in
analysis has not been possible. by sudden disruptions in the supply of those expected costs given reduced U.S.
Therefore, EPA has decided to consider imported oil to the U.S. (i.e., oil imports.
macroeconomic disruption/adjustment 3. Costs of Existing U.S. Energy Security
115 Leiby, Paul N., Donald W. Jones, T. Randall
costs). Policies
Curlee, and Russell Lee, Oil Imports: An
Assessment of Benefits and Costs, ORNL–6851, Oak 1. Effect of Oil Use on Long-Run Oil The last often-identified component
Ridge National Laboratory, November, 1997.
Price, U.S. Import Costs, and Economic of the full economic costs of U.S. oil
116 The 1997 ORNL paper was cited and its
results used in DOT/NHTSA’s rules establishing Output

CAFE standards for 2008 through 2011 model year 117 Stanford Energy Modeling Forum, Phillip C.
light trucks. See DOT/NHTSA, Final Regulatory

The first component of the full Beccue and Hillard G. Huntington, ‘‘An Assessment
Impacts Analysis: Corporate Average Fuel Economy economic costs of importing petroleum of Oil Market Disruption Risks,’’ Final Report, EMF
and CAFE Reform MY 2008–2011, March 2006. into the U.S. follows from the effect of SR 8, October, 2005.
imports is the costs to the U.S. taxpayers intent to have the analysis completed in 19 percent by 2012 for the RFS Case and
of existing U.S. energy security policies. time for the Final Rulemaking (FRM). In by roughly 38 percent in the EIA Case.
The two primary examples are the proposal we described our plan to In value terms, U.S. exports of corn fall
maintaining a military presence to help evaluate the effect of increasing by $573 million in the RFS Case and by
secure stable oil supply from potentially renewable fuels volumes on U.S. $1.29 billion in the EIA Case in 2012.
vulnerable regions of the world and commodity prices, renewable fuel The impact on domestic livestock
maintaining the SPR to provide buffer byproduct prices, livestock feed sources, feed due to higher corn prices and
supplies and help protect the U.S. land use, exports, and farm income. The higher U.S. demand for corn in ethanol
economy from the consequences of results of this analysis are summarized is also partially offset by decreasing the
global oil supply disruptions. in this section. Additional details are use of corn for U.S. livestock feed.
U.S. military costs are excluded from included in the Regulatory Impact Substitutes are available for corn as a
the analysis performed by ORNL Analysis (RIA). feedstock, and this market is price
because their attribution to particular FASOM is a long-term economic sensitive. One alternate feedstock is
missions or activities is difficult. Most model of the U.S. agriculture sector that distillers dried grains with solubles
military forces serve a broad range of attempts to maximize total revenues for (DDGS), a byproduct associated with the
security and foreign policy objectives. producers while meeting the demands dry milling of ethanol production. Since
Attempts to attribute some share of U.S. of consumers. Using a number of inputs, FASOM predicts relatively flat prices
military costs to oil imports are further FASOM estimates which crops, for DDGS across all ethanol volume
challenged by the need to estimate how livestock, and processed agricultural scenarios, the result is a significant
those costs might vary with incremental products will be produced in the U.S. increase in the use of DDGS as a feed
variations in U.S. oil imports. Similarly, The cost of these and other inputs are source. We estimate DDGS in feed for
while the costs for building and used to determine the price and level of the RFS case will almost double by
maintaining the SPR are more clearly production of commodities (e.g., field 2012, increasing from 8.5 million tons to
related to U.S. oil use and imports, crops, livestock, and biofuel products). 15.2 million tons. Under the EIA Case,
historically these costs have not varied FASOM does not capture short-term we expect DDGS to increase to 22.2
in response to changes in U.S. oil fluctuations (i.e., month-to-month, million tons by 2012.
import levels. Thus, while SPR is annual) in prices and production, The increase in soybean prices is
factored into the ORNL analysis, the however, as it is designed to identify estimated to cause a decline in U.S.
cost of maintaining the SPR is excluded. long-term trends (i.e., five to ten years). soybean exports. In terms of export
As stated earlier, we have placed the FASOM predicts that as renewable earnings, U.S. exports of soybeans fall
draft report in the docket of this fuel volumes increase, corn prices will by $220 million in the RFS Case and by
rulemaking for the purposes of inviting rise by about 18 cents (RFS Case) and 39 $194 million in the EIA Case in 2012.
further consideration. However, the cents (EIA Case) above the Reference
The increase in renewable fuel
draft results of that report have not been Case price of $2.32 per bushel. For
production provides a significant
used in quantifying the impacts of this consistency, all of the dollar estimates
increase in net farm income to the U.S.
rule. are presented in 2004 dollars. Soybean
agricultural sector. FASOM predicts that
prices will rise by about 18 cents (RFS
X. Agricultural Sector Economic in 2012, net U.S. farm income will
Case) and 21 cents (EIA Case) above the
Impacts increase by $2.6 billion dollars in the
Reference Case price of $5.26 per bushel
RFS renewable fuel volumes case (RFS
As described in the Notice of by 2012. Since biodiesel volumes will
Case) and $5.4 billion in the EIA
Proposed Rulemaking (NPRM), we used not increase significantly in either the
renewable fuel volumes case (EIA Case).
the Forest and Agricultural Sector RFS or EIA scenarios, FASOM does not
predict significant changes in the The RFS and EIA farm revenue
Optimization Model (FASOM) increases represent roughly a 5 and 10
developed by Professor Bruce McCarl of soybean related markets with respect to
usage changes, or most other variables percent increase, respectively, in U.S.
Texas A&M University and others, to net farm income from the sale of farm
estimate the agricultural sector impacts of interest for this rulemaking. The one
exception is U.S. soybean exports, commodities over the Reference Case of
of increasing renewable fuel volumes roughly $53 billion.
required by the RFS and for those which are affected modestly.
Changes in corn use can be seen by Higher corn prices will have a direct
volumes anticipated by EIA for 2012. impact on the value of U.S. agricultural
Although current renewable fuel the changing percentage of corn used for
ethanol. In 2005, approximately 12 land. As demand for corn and farm
volume predictions are higher than the products increases, the price of U.S.
scenarios described in this rulemaking, percent of the corn supply was used for
ethanol production, however we farm land will also increase. Our
we based our analysis on assumptions analysis shows that in 2012, higher
developed during the NPRM process. estimate the amount of corn used for
ethanol in 2012 will increase to 20 renewable fuel volumes increase land
Our agricultural sector analysis prices by about 8 percent (RFS Case)
considered the impacts of the domestic percent (RFS Case) and 26 percent (EIA
Case). and 17 percent (EIA Case). Much of the
production of renewable fuels. high quality, suitable land in the U.S. is
The rising price of corn and soybeans
Therefore, when we refer to either the already being used to produce corn.
has a direct impact on how corn is used.
RFS Case or the EIA Case, we include FASOM estimates an increase of 1.6
Higher domestic corn prices lead to
only renewable fuels produced from million acres (RFS Case) and 2.6 million
lower U.S. exports as the world markets
feedstocks grown in the U.S.118 acres (EIA Case) above the 78.5 million
shift to other sources of these products
At the time the NPRM was published, corn acres harvested in the Reference
or expand the use of substitute grains.
we had not yet finished our analysis of Case in 2012. Due to this higher value
FASOM estimates that U.S. corn exports
the agricultural impacts associated with
will drop from about 2 billion bushels of land, we are predicting that farms
the RFS. In the NPRM, we stated our will withdraw a portion of the land
in our Reference Case, to 1.6 billion
118 The RIA contains additional information on bushels (RFS Case) and 1.3 billion currently in the Conservation Reserve
the renewable fuels volumes analyzed for this bushels (EIA Case) by 2012. U.S. exports Program (CRP), about 2.3 million acres
rulemaking. of corn are estimated to drop by about (RFS Case) and 2.5 million acres (EIA
Case) out of the approximately 40 following the proposal that we amount of renewable fuel is used each
million acres in CRP.119 published on September 22, 2006 (71 FR year. The credit trading program
FASOM estimates U.S. annual 55552). We considered these comments required by the Energy Policy Act will
wholesale food costs will increase by in developing the final rule. In addition, be satisfied through a program utilizing
approximately $2.2 billion with the RFS we held a public hearing on the Renewable Identification Numbers
renewable volumes and $3.7 billion proposed rulemaking on October 13, (RINs), which are assigned when
with the EIA renewable volumes by 2006, and we have considered renewable fuel is produced in or
2012. These costs translate to comments presented at the hearing. imported to geographic areas covered by
approximately $7 per person per year Throughout the rulemaking process, the rule. Production and importation of
(RFS case) and $12 per person per year EPA met with stakeholders including renewable fuel will serve as a surrogate
(EIA case). representatives from the refining measure of renewable fuel consumption.
In the proposal, we noted that industry, renewable fuels production, Our final RIN-based program will fulfill
expansion in the use of renewable fuels and marketers and distributors, and all the functions of a credit trading
also raises the issue of whether water others. The program we are finalizing program, and thus will meet the Energy
quality and rural ecosystems in general today was developed as a collaborative Policy Act’s requirements. For each
could be affected due to increased effort with these stakeholders. calendar year, each obligated party will
production of agricultural feedstocks We have prepared a detailed be required to submit a report to the
used to produce greater volumes of Summary and Analysis of Comments Agency documenting the RINs it
renewable fuels. We received one document, which describes comments acquired, and showing that the sum of
comment from Marathon asserting that we received on the proposal and our all RINs acquired is equal to or greater
our environmental assessment was response to each of these comments. than its renewable volume obligation.
incomplete and did not address water The Summary and Analysis of The Agency could then verify that the
quality issues. In the time frame to Comments is available in the docket for RINs used for compliance purposes
complete this rulemaking, we were not this rule at the Internet address listed were valid by simply comparing RINs
able to conduct a comprehensive under ADDRESSES, as well as on the reported by producers to RINs claimed
assessment of the environmental Office of Transportation and Air Quality by obligated parties.
impacts in the agricultural sector of the Web site (http://www.epa.gov/otaq/ For fuel standards, Section 208(a) of
wider use of renewable fuels. However, renewablefuels/index.htm). In addition, the Clean Air Act requires that
we have considered two indicators— comments and responses for key issues manufacturers provide information the
fertilizer use on agricultural crops and are included throughout this preamble. Administrator may reasonably require to
Conservation Resource Program (CRP) determine compliance with the
lands—that may relate to environmental XII. Administrative Requirements regulations; submission of the
quality and water quality from the A. Executive Order 12866: Regulatory information is therefore mandatory. We
production of renewable fuels. The CRP Planning and Review will consider confidential all
is a voluntary program administered by information meeting the requirements of
the U.S. Department of Agriculture that Under Executive Order (EO) 12866, Section 208(c) of the Clean Air Act.
helps defray the costs to farmers of (58 FR 51735, October 4, 1993) this The annual public reporting and
taking agricultural lands out of action is a ‘‘significant regulatory recordkeeping burden for this collection
production and placing them in CRP to action’’ because of the policy of information is estimated to be 3.3
provide environmental protection. implications of the final rule. Even hours per response. A document
As discussed in Section X, FASOM though EPA has estimated that entitled ‘‘Information Collection
predicts the total amount of nitrogen renewable fuel use through 2012 will be Request (ICR); OMB–83 Supporting
applied on all farms will increase by 1.2 sufficient through the operation of Statement, Environmental Protection
percent in the RFS Case and by 2 market forces to meet the levels required Agency, Office of Air and Radiation,’’
percent in the EIA Case, relative to the in the standard, the final rule reflects has been placed in the public docket.
Reference Case in 2012. The total the first renewable fuel mandate at the The supporting statement provides a
amount of phosphorous applied on all federal level. Accordingly, EPA detailed explanation of the Agency’s
farms increases by 0.7 percent in the submitted this action to the Office of estimates by collection activity and
RFS Case and 1.2 percent in the EIA Management and Budget (OMB) for explains how comments may be
Case, relative to the Reference Case in review under EO 12866 and any submitted by interested parties. The
2012. Currently, there are approximately changes made in response to OMB estimates contained in the docket are
40 million acres in the CRP. FASOM recommendations have been briefly summarized here:
predicts 2.3 million acres (RFS Case) documented in the docket for this Estimated total number of potential
and 2.5 million acres (EIA Case) of land action. respondents: 6,425.
would be withdrawn from the CRP due B. Paperwork Reduction Act Estimated total number of responses:
to higher land values. 13,380.
The information collection Estimated total annual burden hours:
XI. Public Participation requirements in this final rule have been 43,030.
Many interested parties participated submitted for approval to the Office of Estimated total respondent cost
in the rulemaking process that Management and Budget (OMB) under (estimated at $71 per hour): $3,055,130.
culminates with this final rule. This the Paperwork Reduction Act, 44 U.S.C. Estimated total non-postage
process provided opportunity for 3501 et seq. The Information Collection purchased services (estimated at $142
submitting written public comments Request (ICR) prepared by EPA has been per hour): $5,219,920.
assigned EPA ICR number 2242.02. The EPA received various comments on
119 Since much of the CRP land is ill suited for information collection requirements are the rulemaking provisions covered by
corn or soybean production, it is unlikely this land not enforceable until OMB approves the proposed ICR. All comments that
will go directly into corn or soybean production but
instead will more likely be used to replace other
them. were submitted to EPA are considered
agricultural land uses displaced by expanded corn The information is planned to be in the Summary and Analysis of
and soybean production. collected to ensure that the required Comments, which can be found in the
docket. In response to comments, we population of less than 50,000; and (3) Act defines the term ‘‘small refinery’’ as
have increased the frequency of a small organization that is any not-for- ‘‘* * * a refinery for which the average
reporting for transaction and summary profit enterprise which is independently aggregate daily crude oil throughput for
reports from annually to quarterly. We owned and operated and is not a calendar year * * * does not exceed
have also removed a burden for small dominant in its field. The following 75,000 barrels.’’ As shown in the table
refiners that was associated with table provides an overview of the above, this term is different than SBA’s
applying for small-refiner flexibilities. primary SBA small business categories small business category for gasoline
The burdens and costs shown above potentially affected by this regulation: refiners, which is what the Regulatory
account for these changes. Flexibility Act is concerned with. EPA
Burden means the total time, effort, or Defined as NAICS is required under the RFA to consider
financial resources expended by persons Industry small entity by impacts on small entities meeting SBA’s
codes a
SBA if
to generate, maintain, retain, or disclose small business definition; these entities
or provide information to or for a Gasoline refin- ≤1,500 em- 324110 are referred to as ‘‘small refiners’’ for
Federal agency. This includes the time ers. ployees.120. our regulatory flexibility analysis under
needed to review instructions; develop, SBREFA.
a North American Industrial Classification
acquire, install, and utilize technology A small refinery, per the Energy
System. Policy Act, is a refinery where the
and systems for the purposes of
collecting, validating, and verifying EPA has determined that it is not annual crude throughput is less than or
information, processing and necessary to prepare a regulatory equal to 75,000 barrels (i.e., a small-
maintaining information, and disclosing flexibility analysis in connection with capacity refinery), and could be owned
and providing information; adjust the this final rule. by a larger refiner that exceeds SBA’s
existing ways to comply with any small entity size standards. The small
2. Background
previously applicable instructions and business employee criteria were
requirements; train personnel to be able Since the vast majority of crude oil established for SBA’s small business
to respond to a collection of produced in or imported into the U.S. definition to set apart those companies
information; search data sources; is consumed as gasoline or diesel fuel, which are most likely to be at an
complete and review the collection of concerns about our dependence on inherent economic disadvantage relative
information; and transmit or otherwise foreign sources of crude oil has renewed to larger businesses.
disclose the information. interest in renewable transportation
fuels. The passage of the Energy Policy 4. Summary of Potentially Affected
An agency may not conduct or Small Entities
sponsor, and a person is not required to Act of 2005 demonstrated a strong
commitment on the part of U.S. The refiners that are potentially
respond to a collection of information
policymakers to consider additional affected by this rule are those that
unless it displays a currently valid OMB
means of supporting renewable fuels as produce gasoline. For our recent final
control number. The OMB control
a supplement to petroleum-based fuels rule ‘‘Control of Hazardous Air
numbers for EPA’s regulations in 40
in the transportation sector. Section Pollutants From Mobile Sources’’ (72 FR
CFR are listed in 40 CFR part 9. When
1501 of the Energy Policy Act, which 8428, February 26, 2007), we performed
this ICR is approved by OMB, the
Agency will publish a technical was added to the CAA as Section 211(o), an industry characterization of
requires EPA to establish the RFS potentially affected gasoline refiners.
amendment to 40 CFR part 9 in the
program to ensure that the pool of We used that industry characterization
Federal Register to display the OMB
control number for the approved gasoline sold in the contiguous 48 states to determine which refiners would also
contains specific volumes of renewable meet the SBA definition of a small
information collection requirements
contained in this final rule. fuel for each calendar year starting with entity. From that industry
2006. The Agency is required to set a characterization, and further analysis
C. Regulatory Flexibility Act standard for each year representing the following the Notice of Proposed
1. Overview amount of renewable fuel that obligated Rulemaking (71 FR 55552, September
parties (e.g., refiners, blenders, and 22, 2006), we have determined that
The Regulatory Flexibility Act (RFA) importers) must use as a percentage of there are 15 gasoline refiners who own
generally requires an agency to prepare gasoline sold or introduced into 16 refineries (14 refiners own one
a regulatory flexibility analysis of any commerce, and the Agency is required refinery each, the remaining refiner
rule subject to notice and comment to promulgate a credit trading program owns two refineries) that meet the
rulemaking requirements under the for the RFS program. definition of a small refiner. Of the 16
Administrative Procedure Act or any refineries, 13 also meet the Energy
other statute unless the agency certifies 3. Small Refineries Versus Small Policy Act’s definition of a small
that the rule will not have a significant Refiners refinery.
economic impact on a substantial Title XV (Ethanol and Motor Fuels) of
number of small entities. Small entities 5. Impact of the Regulations on Small
the Energy Policy Act provides, at
include small businesses, small Entities
Section 1501(a)(2) [42 U.S.C.
organizations, and small governmental 7545(o)(9)(A)–(D)], special provisions As previously stated, many aspects of
jurisdictions. for ‘‘small refineries’’, such as a the RFS program, such as the required
For purposes of assessing the impacts temporary exemption from the amount of annual renewable fuel
of today’s rule on small entities, small standards until calendar year 2011. The volumes, are specified in the Energy
entity is defined as: (1) A small business Policy Act. As discussed above in
as defined by the Small Business 120 In the NPRM, we also referred to a 125,000 Section II.A.1, the annual projections of
Administration’s (SBA) regulations at 13 barrels of crude per day (bpcd) crude capacity limit. ethanol production to satisfy market
CFR 121.201 (see table below); (2) a This criterion was inadvertently used and is not demand exceed the required annual
applicable for this program (as it only applies in
small governmental jurisdiction that is a cases of government procurement). We note that the
renewable fuel volumes. When the
government of a city, county, town, number of small entities remains the same whether small refinery exemption ends, it is
school district or special district with a this criterion is used or not. anticipated that there will be over one
billion gallons in excess RINs available. the definition of a small refiner, but reduce the reporting burden on
We believe that this large volume of their refineries did not meet the Act’s regulated parties. Records related to RIN
excess RINs will also lower the costs of definition of a small refinery; which transactions may be kept in any format
this program. Thus, with the short-term naturally concerned the small refiners. and the period of record retention by
relief provided under the Energy Policy Another concern that the small refiners reporting parties is five years, similar to
Act for small refineries, and the had was that if this rule were to have other fuel programs. Records to be
anticipated low cost of RINs when the a significant economic impact on a retained include copies of all
exemption expires, we believe that this substantial number of small entities a compliance reports submitted to EPA
program will not impose a significant lengthy SBREFA process would ensue and copies of product transfer
economic burden on small refineries, (which would delay the promulgation of documents (PTDs). Sections IV and V,
small refiners, or any other obligated the RFS rulemaking) and thus provide above, contain more detailed
party. Therefore, we have determined less lead time for these small entities discussions on the registration,
that this rule will not have a significant prior to the RFS program start date. recordkeeping, reporting, and
economic impact on a substantial Following our discussions with the compliance requirements of this final
number of small entities. small refiners, they provided three rule.
When the Agency certifies that a rule suggested regulatory flexibility options
that they believed could further assist 8. Related Federal Rules
will not have a significant economic
impact on a substantial number of small affected small entities in complying We are aware of a few other current
entities, EPA’s policy is to make an with the RFS program standard: (1) That or proposed Federal rules that are
assessment of the rule’s impact on any all small refiners be afforded the Act’s related to this rule. The primary related
small entities and to engage the small refinery temporary exemption, (2) federal rules are the Mobile Source Air
potentially regulated entities in a dialog that small refiners be allowed to Toxics (MSAT2) rule (72 FR 8428,
regarding the rule, and minimize the generate credits if they elect to comply February 26, 2007), the Tier 2 Vehicle/
impact to the extent feasible. The with the RFS program standard prior to Gasoline Sulfur rulemaking (65 FR
following sections discuss our outreach the 2011 small refinery compliance 6698, February 10, 2000), and the fuel
with the potentially affected small date, and (3) relieve small refiners who sulfur rules for highway diesel (66 FR
entities and regulatory flexibilities to generate blending credits of the RFS 5002, January 18, 2001) and nonroad
decrease the burden on these entities in program compliance requirements. diesel (69 FR 38958, June 29, 2004).
compliance with the requirements of the We agreed with the small refiners’
9. Conclusions
RFS program. suggestion that small refiners be
afforded the same temporary exemption As stated above, based on the
6. Small Refiner Outreach that the Act specifies for small statutory relief provided by the Energy
We do not believe that the RFS refineries. This relief would apply to Policy Act for small refineries, we are
program would have a significant refiners who meet the 1,500 employee certifying that this rule will not have a
economic impact on a substantial count criteria, as well as the crude significant economic impact on a
number of small entities, however we capacity criteria that we have used in substantial number of small entities.
have still tried to reduce the impact of previous fuels programs when providing Additionally, we believe that extending
this rule on small entities. Prior to relief for small refiners. Regarding the the small refinery exemption to small
issuing the proposed rule, we held small refiners’ second and third refiners would further reduce the
meetings with small refiners to discuss suggestions regarding credits, we note economic impacts on small entities. We
the requirements of the RFS program that the RIN-based program will believe that small refiners generally lack
and the special provisions offered by the automatically provide them with credit the resources available to larger
Energy Policy Act for small refineries. for any renewables that they blend into companies, and therefore find it
The Energy Policy Act set out the their motor fuels. Until 2011, small appropriate to extend this exemption to
following provisions for small refiners will essentially be treated as all small refiners. Thus, we are
refineries: oxygenate blenders and may separate extending the small refinery temporary
• A temporary exemption from the RINs from batches and trade or sell exemption to all qualified small
Renewable Fuels Standard requirement these RINs, unless they choose to opt- refiners. Small refiners will also be
until 2011; in to the program. permitted to separate RINs from batches
• An extension of the temporary 7. Reporting, Recordkeeping, and
and trade or sell these RINs prior to
exemption period for at least two years 2011 if the small refiner operates as an
Compliance Requirements
for any small refinery where it is ethanol blender.
determined that the refinery would be Registration, recordkeeping and Past fuels rulemakings have included
subject to a disproportionate economic reporting are necessary to track a provision that, for the purposes of the
hardship if required to comply; compliance with the renewable fuels regulatory flexibility provisions for
• Any small refinery may petition, at standard and transactions involving small entities, a refiner must also have
any time, for an exemption based on RINs, and these compliance an average crude capacity of no more
disproportionate economic hardship; requirements will be similar to those than 155,000 barrels of crude per day
and, required under our previous and current (bpcd). To be consistent with these
• A small refinery may waive its 40 CFR part 80 fuel compliance previous rules, we are finalizing in this
temporary exemption to participate in programs. We will use the same basic rule that refiners that meet this criterion
the credit generation program, or it may forms for RFS program registration that (in addition to having no more than
also ‘‘opt-in’’, by waiving its temporary we use under the reformulated gasoline 1,500 total corporate employees) will be
exemption, to be subject to the RFS (RFG) and anti-dumping program, as considered small refiners for the
requirement. these forms are well known in the purposes of the regulatory flexibility
During these meetings with the small regulated community and are simple to provisions for this rulemaking.
refiners we also discussed the impacts fill out. We will use a simplified method Since the RFS program would have no
of these provisions being offered to of reporting via the Agency’s Central significant economic impact on a
small refineries only. Three refiners met Data Exchange (CDX), which will substantial number of small entities
with only the relief required in the rule obligations through normal market- will apply to refiners, blenders, and
Energy Policy Act for small refineries, it driven incentives. Thus, today’s rule is importers. Tribal governments will be
also follows that the rule will have no not subject to the requirements of affected only to the extent they purchase
significant economic impact on a Sections 202 and 205 of the UMRA. and use regulated fuels. Thus, Executive
substantial number of small entities EPA has determined that this rule Order 13175 does not apply to this rule.
with the additional relief this final rule contains no regulatory requirements that
might significantly or uniquely affect G. Executive Order 13045: Protection of
provides for small refiners.
small governments. Compliance with Children From Environmental Health
D. Unfunded Mandates Reform Act the mandates of the RFS rule, including and Safety Risks
Title II of the Unfunded Mandates the reporting and recordkeeping Executive Order 13045: ‘‘Protection of
Reform Act of 1995 (UMRA), Public requirements, are the responsibility of Children from Environmental Health
Law 104–4, establishes requirements for exporters, producers, and importers of Risks and Safety Risks’’ (62 FR 19885,
Federal agencies to assess the effects of renewable fuel and gasoline, and not April 23, 1997) applies to any rule that:
their regulatory actions on State, local, small governments. (1) Is determined to be ‘‘economically
and tribal governments and the private significant’’ as defined under Executive
sector. Under section 202 of the UMRA, E. Executive Order 13132: Federalism
Order 12866, and (2) concerns an
EPA generally must prepare a written Executive Order 13132, entitled environmental health or safety risk that
statement, including a cost-benefit ‘‘Federalism’’ (64 FR 43255, August 10, EPA has reason to believe may have a
analysis, for proposed and final rules 1999), requires EPA to develop an disproportionate effect on children. If
with ‘‘Federal mandates’’ that may accountable process to ensure the regulatory action meets both criteria,
result in expenditures to State, local, ‘‘meaningful and timely input by State the Agency must evaluate the
and tribal governments, in the aggregate, and local officials in the development of environmental health or safety effects of
or to the private sector, of $100 million regulatory policies that have federalism the planned rule on children, and
or more in any one year. Before implications.’’ ‘‘Policies that have explain why the planned regulation is
promulgating an EPA rule for which a federalism implications’’ is defined in preferable to other potentially effective
written statement is needed, section 205 the Executive Order to include and reasonably feasible alternatives
of the UMRA generally requires EPA to regulations that have ‘‘substantial direct considered by the Agency.
identify and consider a reasonable effects on the States, on the relationship EPA interprets EO 13045 as applying
number of regulatory alternatives and between the national government and only to those regulatory actions that
adopt the least costly, most cost- the States, or on the distribution of concern health or safety risks, such that
effective or least burdensome alternative power and responsibilities among the the analysis required under section 5–
that achieves the objectives of the rule. various levels of government.’’ 501 of the EO has the potential to
The provisions of section 205 do not This final rule does not have influence the regulation. This final rule
apply when they are inconsistent with federalism implications. It will not have is not subject to EO 13045 because it
applicable law. Moreover, section 205 substantial direct effects on the States, does not establish an environmental
allows EPA to adopt an alternative other on the relationship between the national standard intended to mitigate health or
than the least costly, most cost-effective government and the States, or on the safety risks and because it implements
or least burdensome alternative if the distribution of power and specific standards established by
Administrator publishes with the final responsibilities among the various Congress in statutes.
rule an explanation why that alternative levels of government, as specified in
was not adopted. Executive Order 13132. Thus, Executive H. Executive Order 13211: Actions
Before EPA establishes any regulatory Order 13132 does not apply to this rule. Concerning Regulations That
requirements that may significantly or In the spirit of Executive Order 13132, Significantly Affect Energy Supply,
uniquely affect small governments, and consistent with EPA policy to Distribution, or Use
including tribal governments, it must promote communications between EPA This rule is not a ‘‘significant energy
have developed under Section 203 of and State and local governments, EPA action’’ as defined in Executive Order
the UMRA a small government agency specifically solicited comment on the 13211, ‘‘Actions Concerning Regulations
plan. The plan must provide for proposed rule from State and local That Significantly Affect Energy Supply,
notifying potentially affected small officials. A number of states commented Distribution, or Use’’ (66 FR 28355 (May
governments, enabling officials of on the proposed rule. These comments 22, 2001)) because it is not likely to
affected small governments to have are available in the rulemaking docket, have a significant adverse effect on the
meaningful and timely input in the and are summarized and addressed in supply, distribution, or use of energy.
development of EPA regulatory the Summary and Analysis document. EPA expects the provisions to have
programs with significant Federal very little effect on the national fuel
intergovernmental mandates, and F. Executive Order 13175: Consultation
supply since normal market forces alone
informing, educating, and advising and Coordination With Indian Tribal
are promoting greater renewable fuel
small governments on compliance with Governments
use than required by the RFS mandate.
the regulatory requirements. Executive Order 13175, entitled We discuss our analysis of the energy
EPA has determined that this rule ‘‘Consultation and Coordination with and supply effects of the increased use
does not contain a Federal mandate that Indian Tribal Governments’’ (65 FR of renewable fuels in Sections VI and X
may result in expenditures of $100 67249, November 9, 2000), requires EPA of this preamble.
million or more for State, local, and to develop an accountable process to
tribal governments, in the aggregate, or ensure ‘‘meaningful and timely input by I. National Technology Transfer
the private sector in any one year. EPA tribal officials in the development of Advancement Act
has estimated that renewable fuel use regulatory policies that have tribal As noted in the proposed rule,
through 2012 will be sufficient to meet implications.’’ This final rule does not Section 12(d) of the National
the required levels. Therefore, have tribal implications, as specified in Technology Transfer and Advancement
individual refiners, blenders, and Executive Order 13175. This rule will be Act of 1995 (‘‘NTTAA’’), Public Law No.
importers are already on track to meet implemented at the Federal level and 104–113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus Fairness Act of 1996, generally provides reference, Labeling, Motor vehicle
standards in its regulatory activities that before a rule may take effect, the pollution, Penalties, Reporting and
unless to do so would be inconsistent agency promulgating the rule must recordkeeping requirements.
with applicable law or otherwise submit a rule report, which includes a Dated: April 10, 2007.
impractical. Voluntary consensus copy of the rule, to each House of the Stephen L. Johnson,
standards are technical standards (e.g., Congress and to the Comptroller General
Administrator.
materials specifications, test methods, of the United States. EPA will submit a
sampling procedures, and business report containing this rule and other ■ 40 CFR part 80 is amended as follows:
practices) that are developed or adopted required information to the U.S. Senate,
by voluntary consensus standards the U.S. House of Representatives, and PART 80—REGULATION OF FUEL
bodies. The NTTAA directs EPA to the Comptroller General of the United AND FUEL ADDITIVES
provide Congress, through OMB, States prior to publication of the rule in ■ 1. The authority citation for part 80
explanations when the Agency decides the Federal Register. A Major rule continues to read as follows:
not to use available and applicable cannot take effect until 60 days after it
Authority: 42 U.S.C. 7414, 7542, 7545, and
voluntary consensus standards. is published in the Federal Register. 7601(a).
This rulemaking involves technical This action is not a ‘‘major rule’’ as
standards. EPA has decided to use defined by 5 U.S.C. 804(2). The effective ■ 2. Section 80.1100 is revised to read
ASTM D6751–06a ‘‘Standard date of the rule is September 1, 2007. as follows:
Specification for Biodiesel Fuel Blend
Stock (B100) for Middle Distillate L. Clean Air Act Section 307(d) § 80.1100 How is the statutory default
Fuels’’. This standard was developed by This rule is subject to Section 307(d) requirement for 2006 implemented?
ASTM International (originally known of the CAA. Section 307(d)(7)(B) (a) Definitions. For calendar year
as the American Society for Testing and provides that ‘‘[o]nly an objection to a 2006, the definitions of section 80.2 and
Materials), Subcommittee D02.E0, and rule or procedure which was raised with the following additional definitions
was approved in August 2006. The reasonable specificity during the period apply to this section.
standard may be obtained through the for public comment (including any (1) Renewable fuel. (i) Renewable fuel
ASTM Web site (www.astm.org) or by public hearing) may be raised during means motor vehicle fuel that is used to
calling ASTM at (610) 832–9585. ASTM judicial review.’’ This section also replace or reduce the quantity of fossil
D6751–06a meets the objectives of this provides a mechanism for the EPA to fuel present in a fuel mixture used to
final rule because it establishes one of convene a proceeding for operate a motor vehicle, and which:
the criteria by which biodiesel is reconsideration, ‘‘[i]f the person raising (A) Is produced from grain, starch, oil
defined. an objection can demonstrate to the EPA seeds, vegetable, animal, or fish
that it was impracticable to raise such materials including fats, greases, and
J. Executive Order 12898: Federal objection within [the period for public oils, sugarcane, sugar beets, sugar
Actions to Address Environmental comment] or if the grounds for such components, tobacco, potatoes, or other
Justice in Minority Populations and objection arose after the period for biomass; or
Low-Income Populations public comment (but within the time (B) Is natural gas produced from a
Executive Order (EO) 12898 (59 FR specified for judicial review) and if such biogas source, including a landfill,
7629 (Feb. 16, 1994)) establishes federal objection is of central relevance to the sewage waste treatment plant, feedlot,
executive policy on environmental outcome of the rule.’’ Any person or other place where decaying organic
justice. Its main provision directs seeking to make such a demonstration to material is found.
federal agencies, to the greatest extent the EPA should submit a Petition for (ii) The term ‘‘renewable fuel’’
practicable and permitted by law, to Reconsideration to the Office of the includes cellulosic biomass ethanol,
make environmental justice part of their Administrator, U.S. EPA, Room 3000, waste derived ethanol, biodiesel, and
mission by identifying and addressing, Ariel Rios Building, 1200 Pennsylvania any blending components derived from
as appropriate, disproportionately high Ave., NW., Washington, DC 20460, with renewable fuel.
and adverse human health or a copy to both the person(s) listed in the (2) Cellulosic biomass ethanol means
environmental effects of their programs, preceding FOR FURTHER INFORMATION ethanol derived from any lignocellulosic
policies, and activities on minority CONTACT section, and the Director of the or hemicellulosic matter that is
populations and low-income Air and Radiation Law Office, Office of available on a renewable or recurring
populations in the United States. General Counsel (Mail Code 2344A), basis, including dedicated energy crops
EPA lacks the discretionary authority U.S. EPA, 1200 Pennsylvania Ave., and trees, wood and wood residues,
to address environmental justice in this NW., Washington, DC 20460. plants, grasses, agricultural residues,
final rulemaking since the Agency is fibers, animal wastes and other waste
implementing specific standards XIII. Statutory Authority materials, and municipal solid waste.
established by Congress in statutes. Statutory authority for the rules The term also includes any ethanol
Although EPA lacks authority to modify finalized today can be found in section produced in facilities where animal
today’s regulatory decision on the basis 211 of the Clean Air Act, 42 U.S.C. wastes or other waste materials are
of environmental justice considerations, 7545. Additional support for the digested or otherwise used to displace
EPA nevertheless determined that this procedural and compliance related 90 percent or more of the fossil fuel
final rule does not have a aspects of today’s rule, including the normally used in the production of
disproportionately high and adverse recordkeeping requirements, come from ethanol.
human health or environmental impact Sections 114, 208, and 301(a) of the (3) Waste derived ethanol means
on minority or low-income populations. CAA, 42 U.S.C. 7414, 7542, and 7601(a). ethanol derived from animal wastes,
including poultry fats and poultry

K. Congressional Review Act List of Subjects in 40 CFR Part 80 wastes, and other waste materials, or
The Congressional Review Act, 5 Environmental protection, Air municipal solid waste.
U.S.C. 801 et seq., as added by the Small pollution control, Fuel additives, (4) Small refinery means a refinery for
Business Regulatory Enforcement Gasoline, Imports, Incorporation by which the average aggregate daily crude
oil throughput for a calendar year (as (e) Consequence of nonattainment in (ii) The use of waste heat captured
determined by dividing the aggregate 2006. In the event that EPA determines from an off-site combustion process as
throughput for the calendar year by the that the requirement in paragraph (b) of a source of thermal energy.
number of days in the calendar year) this section has not been attained in (b) Waste derived ethanol means
does not exceed 75,000 barrels. 2006, a deficit carryover volume shall be ethanol derived from either of the
(5) Biodiesel means a diesel fuel added to the renewable fuel volume following:
substitute produced from nonpetroleum obligation for 2007 for use in calculating (1) Animal wastes, including poultry
renewable resources that meets the the standard applicable to gasoline in fats and poultry wastes, and other waste
registration requirements for fuels and 2007. materials.
fuel additives established by the (1) The deficit carryover volume shall (2) Municipal solid waste.
Environmental Protection Agency under be calculated as follows: (c) Biogas means methane or other
section 211 of the Clean Air Act. It hydrocarbon gas produced from
DC = Vgas * (Rs¥Ra) decaying organic material, including
includes biodiesel derived from animal
Where: landfills, sewage waste treatment plants,
wastes (including poultry fats and
poultry wastes) and other waste DC = Deficit carryover, in gallons, of and animal feedlots.
renewable fuel. (d) Renewable fuel. (1) Renewable fuel
materials, or biodiesel derived from
Vgas = Volume of gasoline sold or dispensed is any motor vehicle fuel that is used to
municipal solid waste and sludges and to U.S. consumers in 2006, in gallons.
oils derived from wastewater and the replace or reduce the quantity of fossil
Rs = 0.0278.
treatment of wastewater. Ra = Ratio of renewable fuel volume divided fuel present in a fuel mixture used to
(b) Renewable Fuel Standard for 2006. by total gasoline volume determined in fuel a motor vehicle, and is produced
The percentage of renewable fuel in the accordance with paragraph (d)(2) of this from any of the following:
total volume of gasoline sold or section. (i) Grain.
dispensed to consumers in 2006 in the (ii) Starch.
(2) There shall be no other (iii) Oilseeds.
United States shall be a minimum of consequence of failure to attain the
2.78 percent on an annual average (iv) Vegetable, animal, or fish
standard in paragraph (b) of this section materials including fats, greases, and
volume basis. in 2006 for any of the parties in
(c) Responsible parties. Parties oils.
paragraph (c) of this section. (v) Sugarcane.
collectively responsible for attainment
■ 3. Section 80.1101 is added to read as (vi) Sugar beets.
of the standard in paragraph (b) of this (vii) Sugar components.
section are refiners (including blenders) follows:
(viii) Tobacco.
and importers of gasoline. However, a (ix) Potatoes.
§ 80.1101 Definitions.
party that is a refiner only because he (x) Other biomass.
owns or operates a small refinery is The definitions of § 80.2 and the
following additional definitions apply (xi) Natural gas produced from a
exempt from this responsibility. biogas source, including a landfill,
(d) EPA determination of attainment. for the purposes of this subpart. For
calendar year 2007 and beyond, the sewage waste treatment plant, feedlot,
EPA will determine after the close of or other place where there is decaying
2006 whether or not the requirement in definitions in this section § 80.1101
supplant those in § 80.1100. organic material.
paragraph (b) of this section has been (2) The term ‘‘Renewable fuel’’
met. EPA will base this determination (a) Cellulosic biomass ethanol means
includes cellulosic biomass ethanol,
on information routinely published by either of the following:
waste derived ethanol, biodiesel (mono-
the Energy Information Administration (1) Ethanol derived from any
alky ester), non-ester renewable diesel,
on the annual domestic volume of lignocellulosic or hemicellulosic matter
and blending components derived from
gasoline sold or dispensed to U.S. that is available on a renewable or
renewable fuel.
consumers and of ethanol produced for recurring basis and includes any of the
(3) Ethanol covered by this definition
use in such gasoline, supplemented by following:
shall be denatured as required and
readily available information (i) Dedicated energy crops and trees. defined in 27 CFR parts 20 and 21.
concerning the use in motor fuel of (ii) Wood and wood residues. (4) Small volume additives (excluding
other renewable fuels such as cellulosic (iii) Plants. denaturants) less than 1.0 percent of the
biomass ethanol, waste derived ethanol, (iv) Grasses. total volume of a renewable fuel shall be
biodiesel, and other non-ethanol (v) Agricultural residues. counted as part of the total renewable
renewable fuels. (vi) Animal wastes and other waste fuel volume.
(1) The renewable fuel volume will materials, the latter of which may (5) A fuel produced by a renewable
equal the sum of all renewable fuel include waste materials that are fuel producer that is used in boilers or
volumes used in motor fuel, provided residues (e.g., residual tops, branches, heaters is not a motor vehicle fuel and
that: and limbs from a tree farm). therefore is not a renewable fuel.
(i) One gallon of cellulosic biomass (vii) Municipal solid waste. (e) Blending component has the same
ethanol or waste derived ethanol shall (2) Ethanol made at facilities at which meaning as ‘‘Gasoline blending stock,
be considered to be the equivalent of 2.5 animal wastes or other waste materials blendstock, or component’’ as defined at
gallons of renewable fuel; and are digested or otherwise used onsite to § 80.2(s), for which the portion that can
(ii) Only the renewable fuel portion of displace 90 percent or more of the fossil be counted as renewable fuel is
blending components derived from fuel that is combusted to produce calculated as set forth in § 80.1115(a).
renewable fuel shall be counted towards thermal energy integral to the process of (f) Motor vehicle has the meaning
the renewable fuel volume. making ethanol, by: given in Section 216(2) of the Clean Air
(2) If the nationwide average volume (i) The direct combustion of the waste Act (42 U.S.C. 7550).
percent of renewable fuel in gasoline in materials or a byproduct resulting from (g) Small refinery means a refinery for
2006 is equal to or greater than the digestion of such waste materials (e.g., which the average aggregate daily crude
standard in paragraph (b) of this section, methane from animal wastes) to make oil throughput for the calendar year
the standard has been met. thermal energy; and/or 2004 (as determined by dividing the
aggregate throughput for the calendar make gasoline or diesel fuels at (p) Neat renewable fuel is a renewable
year by the number of days in the production units as specified in fuel to which only de minimus amounts
calendar year) does not exceed 75,000 paragraph (k) of this section. of conventional gasoline or diesel have
barrels. (k) Renewable crude-based fuels are been added.
(h) Biodiesel (mono-alkyl ester) means renewable fuels that are gasoline or
a motor vehicle fuel or fuel additive diesel products resulting from the §§ 80.1102 through 80.1103 [Reserved]
which is all the following: processing of renewable crudes in ■ 4. Sections 80.1102 and 80.1103 are
(1) Registered as a motor vehicle fuel production units within refineries or at reserved.
or fuel additive under 40 CFR part 79. dedicated facilities within refineries, ■ 5. Sections 80.1104 through 80.1107
(2) A mono-alkyl ester. that process petroleum based feedstocks
(3) Meets ASTM D–6751–07, entitled are added to read as follows:
and which make gasoline and diesel
‘‘Standard Specification for Biodiesel fuel. Subpart K—Renewable Fuel Standard
Fuel Blendstock (B100) for Middle (l) Importers. For the purposes of this
Distillate Fuels.’’ ASTM D–6751–07 is subpart only, an importer of gasoline or * * * * *
incorporated by reference. This renewable fuel is: Sec.
incorporation by reference was (1) Any person who brings gasoline or 80.1104 What are the implementation dates
approved by the Director of the Federal renewable fuel into the 48 contiguous for the Renewable Fuel Standard
Register in accordance with 5 U.S.C. Program?
states of the United States from a foreign
80.1105 What is the Renewable Fuel
552(a) and 1 CFR part 51. A copy may country or from an area that has not Standard?
be obtained from the American Society opted in to the program requirements of 80.1106 To whom does the Renewable
for Testing and Materials, 100 Barr this subpart pursuant to § 80.1143; and Volume Obligation apply?
Harbor Drive, West Conshohocken, (2) Any person who brings gasoline or 80.1107 How is the Renewable Volume
Pennsylvania. A copy may be inspected renewable fuel into an area that has Obligation calculated?
at the EPA Docket Center, Docket No. opted in to the program requirements of * * * * *
EPA–HQ–OAR–2005–0161, EPA/DC, this subpart pursuant to § 80.1143.
EPA West, Room 3334, 1301 (m) Nonpetroleum renewable § 80.1104 What are the implementation
Constitution Ave., NW., Washington, resources include, but are not limited to dates for the Renewable Fuel Standard
DC, or at the National Archives and the following: Program?
Records Administration (NARA). For (1) Plant oils. The RFS standards and other
information on the availability of this (2) Animal fats and animal wastes, requirements of § 80.1101 and all
material at NARA, call 202–741–6030, including poultry fats and poultry sections following are effective
or go to: http://www.archives.gov/ wastes, and other waste materials. beginning on September 1, 2007.
federal-register/cfr/ibr-locations.html. (3) Municipal solid waste and sludges
(4) Intended for use in engines that and oils derived from wastewater and § 80.1105 What is the Renewable Fuel
are designed to run on conventional the treatment of wastewater. Standard?
diesel fuel. (n) Export of renewable fuel means: (a) The annual value of the renewable
(5) Derived from nonpetroleum (1) Transfer of a batch of renewable fuel standard for 2007 shall be 4.02
renewable resources (as defined in fuel to a location outside the United percent.
paragraph (m) of this section). States; and (b) Beginning with the 2008
(i) Non-ester renewable diesel means (2) Transfer of a batch of renewable
compliance period, EPA will calculate
a motor vehicle fuel or fuel additive fuel from a location in the contiguous 48
the value of the annual standard and
which is all the following: states to Alaska, Hawaii, or a United
publish this value in the Federal
(1) Registered as a motor vehicle fuel States territory, unless that state or
Register by November 30 of the year
or fuel additive under 40 CFR part 79. territory has received an approval from
preceding the compliance period.
(2) Not a mono-alkyl ester. the Administrator to opt-in to the
(3) Intended for use in engines that renewable fuel program pursuant to (c) EPA will base the calculation of
are designed to run on conventional § 80.1143. the standard on information provided
diesel fuel. (o) Renewable Identification Number by the Energy Information
(4) Derived from nonpetroleum (RIN), is a unique number generated to Administration regarding projected
renewable resources (as defined in represent a volume of renewable fuel gasoline volumes and projected volumes
paragraph (m) of this section). pursuant to §§ 80.1125 and 80.1126. of renewable fuel expected to be used in
(j) Renewable crude means (1) Gallon-RIN is a RIN that represents gasoline blending for the upcoming
biologically derived liquid feedstocks an individual gallon of renewable fuel; year.
including but not limited to poultry fats, and (d) EPA will calculate the annual
poultry wastes, vegetable oil, and (2) Batch-RIN is a RIN that represents renewable fuel standard using the
greases that are used as feedstocks to multiple gallon-RINs. following equation:
RFVi − Celli
RFStd i = 100 ∗
( i i ) + ( GSi − RSi ) − GEi
G − R
Where: Gi = Amount of gasoline projected to be used GSi = Amount of gasoline projected to be

RFStdi = Renewable Fuel Standard, in year in the 48 contiguous states, in year i, in used in noncontiguous states or
i, in percent. gallons. territories (if the state or territory opts-

RFVi = Nationwide annual volume of Ri = Amount of renewable fuel blended into in), in year i, in gallons.
renewable fuels required by section gasoline that is projected to be used in RSi = Amount of renewable fuel blended into
211(o)(2)(B) of the Act (42 U.S.C. 7545), the 48 contiguous states, in year i, in gasoline that is projected to be used in
ER01MY07.059</MATH>
for year i, in gallons. gallons. noncontiguous states or territories (if the
state or territory opts-in), in year i, in § 80.1127, that it has satisfied the n m

gallons. Renewable Volume Obligation for that GVi = ∑ G x − ∑ RBy
GEi = Amount of gasoline projected to be compliance period, as specified in x =1 y =1
produced by exempt small refineries and
§ 80.1107(a). Where:
small refiners, in year i, in gallons
(through 2010 only, except to the extent
(c) An obligated party may comply x = Individual batch of gasoline produced or
that a small refinery exemption is with the requirements of paragraph (b) imported in calendar year i.
extended pursuant to § 80.1141(e)). of this section for all of its refineries in n = Total number of batches of gasoline
Celli = Beginning in 2013, the amount of the aggregate, or for each refinery produced or imported in calendar year i.
renewable fuel that is required to come individually. Gx = Volume of batch x of gasoline produced
from cellulosic sources, in year i, in (d) An obligated party must comply or imported, in gallons.
gallons. with the requirements of paragraph (b) y = Individual batch of renewable fuel
of this section for all of its imported blended into gasoline in calendar year i.
(e) Beginning with the 2013 m = Total number of batches of renewable
compliance period, EPA will calculate gasoline in the aggregate.
fuel blended into gasoline in calendar
the value of the annual cellulosic (e) An obligated party that is both a year i.
standard and publish this value in the refiner and importer must comply with RBy = Volume of batch y of renewable fuel
Federal Register by November 30 of the the requirements of paragraph (b) of this blended into gasoline, in gallons.
year preceding the compliance period. section for its imported gasoline
separately from gasoline produced by its (c) All of the following products that
(f) EPA will calculate the annual
refinery or refineries. are produced or imported during a
cellulosic standard using the following
(f) Where a refinery or importer is compliance period, collectively called
equation:
jointly owned by two or more parties, ‘‘gasoline’’ for the purposes of this
the requirements of paragraph (b) of this section (unless otherwise specified), are
Celli
RFCelli = 100 ∗ section may be met by one of the joint to be included in the volume used to
( G i − R i ) + ( GSi − RSi ) owners for all of the gasoline produced calculate a party’s renewable volume
at the refinery, or all of the imported obligation under paragraph (a) of this
Where:
gasoline, in the aggregate, or each party section, except as provided in paragraph
RFCelli = Renewable Fuel Cellulosic (d) of this section:
Standard in year i, in percent. may meet the requirements of paragraph
Gi = Amount of gasoline projected to be used (b) of this section for the portion of the (1) Reformulated gasoline, whether or
in the 48 contiguous states, in year i, in gasoline that it owns, as long as all of not renewable fuel is later added to it.
gallons. the gasoline produced at the refinery, or (2) Conventional gasoline, whether or
Ri = Amount of renewable fuel blended into all of the imported gasoline, is not renewable fuel is later added to it.
gasoline that is projected to be used in accounted for in determining the (3) Reformulated gasoline blendstock
the 48 contiguous states, in year i, in that becomes finished reformulated
renewable fuels obligation under
gallons. gasoline upon the addition of oxygenate
GSi = Amount of gasoline projected to be § 80.1107.
(g) The requirements in paragraph (b) (‘‘RBOB’’).
used in noncontiguous states or (4) Conventional gasoline blendstock
territories (if the state or territory opts- of this section apply to the following
in), in year i, in gallons. compliance periods: that becomes finished conventional
RSi = Amount of renewable fuel blended into (1) For 2007, the compliance period is gasoline upon the addition of oxygenate
gasoline that is projected to be used in September 1 through December 31. (‘‘CBOB’’).
noncontiguous states or territories (if the (2) Beginning in 2008, and every year (5) Blendstock (including butane and
state or territory opts-in), in year i, in thereafter, the compliance period is gasoline treated as blendstock
gallons. January 1 through December 31. (‘‘GTAB’’)) that has been combined with
Celli = Amount of renewable fuel that is other blendstock and/or finished
required to come from cellulosic sources, § 80.1107 How is the Renewable Volume gasoline to produce gasoline.
in year i, in gallons. Obligation calculated? (6) Any gasoline, or any unfinished
§ 80.1106 To whom does the Renewable (a) The Renewable Volume Obligation gasoline that becomes finished gasoline
Volume Obligation apply? for an obligated party is determined upon the addition of oxygenate, that is
(a) (1) An obligated party is a refiner according to the following formula: produced or imported to comply with a
that produces gasoline within the 48 RVOi = (RFStdi * GVi) + Di¥1 state or local fuels program.
contiguous states, or an importer that Where: (d) The following products are not
imports gasoline into the 48 contiguous RVOi = The Renewable Volume Obligation included in the volume of gasoline
states. A party that simply adds for an obligated party for calendar year produced or imported used to calculate
renewable fuel to gasoline, as defined in i, in gallons of renewable fuel. a party’s renewable volume obligation
§ 80.1107(c), is not an obligated party. RFStdi = The renewable fuel standard for under paragraph (a) of this section:
(2) If the Administrator approves a calendar year i, determined by EPA (1) Any renewable fuel as defined in
pursuant to § 80.1105, in percent. § 80.1101(d).
petition of Alaska, Hawaii, or a United GVi = The non-renewable gasoline volume,
States territory to opt-in to the (2) Blendstock that has not been
determined in accordance with
renewable fuel program under the paragraphs (b), (c), and (d) of this combined with other blendstock or
provisions in § 80.1143, then ‘‘obligated section, which is produced or imported finished gasoline to produce gasoline.
party’’ shall also include any refiner that by the obligated party in calendar year i, (3) Gasoline produced or imported for
produces gasoline within that state or in gallons. use in Alaska, Hawaii, the
territory, or any importer that imports Di¥1 = Renewable fuel deficit carryover from Commonwealth of Puerto Rico, the U.S.
gasoline into that state or territory. the previous year, per § 80.1127(b), in Virgin Islands, Guam, American Samoa,
ER01MY07.061</MATH>
(3) For the purposes of this section, gallons. and the Commonwealth of the Northern
‘‘gasoline’’ refers to any and all of the (b) The non-renewable gasoline Marianas, unless the area has opted into
products specified at § 80.1107(c). volume for a refiner, blender, or the RFS program under § 80.1143.
(b) For each compliance period importer for a given year, GVi, specified (4) Gasoline produced by a small
starting with 2007, any obligated party in paragraph (a) of this section is refinery that has an exemption under
ER01MY07.060</MATH>
is required to demonstrate, pursuant to calculated as follows: § 80.1141 or an approved small refiner
that has an exemption under § 80.1142 equivalence value pursuant to KYYYYCCCCFFFFFBBBBBRRDSSS

until January 1, 2011 (or later, for small paragraph (d) of this section if the SSSSSEEEEEEEE
refineries, if their exemption is renewable fuel is listed in paragraph (b) (a) K is a number identifying the type
extended pursuant to § 80.1141(e)). of this section, but the producer or of RIN as follows:
(5) Gasoline exported for use outside importer has reason to believe that a (1) K has the value of 1 when the RIN
the 48 United States, and gasoline different equivalence value than that is assigned to a volume of renewable
exported for use outside Alaska, Hawaii, listed in paragraph (b) of this section is fuel pursuant to §§ 80.1126(e) and
the Commonwealth of Puerto Rico, the warranted. 80.1128(a).
U.S. Virgin Islands, Guam, American (d) Determination of equivalence (2) K has the value of 2 when the RIN
Samoa, and the Commonwealth of the values. (1) Except as provided in has been separated from a volume of
Northern Marianas, if the area has opted paragraph (d)(4) of this section, the renewable fuel pursuant to
into the RFS program under § 80.1143. equivalence value for renewable fuels § 80.1126(e)(4) or § 80.1129.
(6) For blenders, the volume of described in paragraph (c) of this (b) YYYY is the calendar year in
finished gasoline, RBOB, or CBOB to section shall be calculated using the which the batch of renewable fuel was
which a blender adds blendstocks. following formula: produced or imported. YYYY also
(7) The gasoline portion of transmix EV = (R / 0.931) * (EC / 77,550) represents the year in which the RIN
produced by a transmix processor, or Where: was originally generated.
the transmix blended into gasoline by a EV = Equivalence Value for the renewable (c) CCCC is the registration number
transmix blender, under 40 CFR 80.84. fuel, rounded to the nearest tenth. assigned according to § 80.1150 to the
R = Renewable content of the renewable fuel. producer or importer of the batch of
§§ 80.1108 through 80.1114 [Reserved] This is a measure of the portion of a renewable fuel.
■ 6. Sections 80.1108 through 80.1114 renewable fuel that came from a (d) FFFFF is the registration number
are reserved. renewable source, expressed as a assigned according to § 80.1150 to the
percent, on an energy basis. facility at which the batch of renewable
■ 7. Section 80.1115 is added to read as EC = Energy content of the renewable fuel,
follows: in Btu per gallon (lower heating value).
fuel was produced or imported.
(e) BBBBB is a serial number assigned
§ 80.1115 How are equivalence values (2) The application for an equivalence to the batch which is chosen by the
assigned to renewable fuel? value shall include a technical producer or importer of the batch such
(a)(1) Each gallon of a renewable fuel justification that includes a description that no two batches have the same value
shall be assigned an equivalence value of the renewable fuel, feedstock(s) used in a given calendar year.
by the producer or importer pursuant to to make it, and the production process. (f) RR is a number representing the
paragraph (b) or (c) of this section. (3) The Agency will review the equivalence value of the renewable fuel
(2) The equivalence value is a number technical justification and assign an as specified in § 80.1115 and multiplied
that is used to determine how many appropriate Equivalence Value to the by 10 to produce the value for RR.
gallon-RINs can be generated for a batch renewable fuel based on the procedure (g) D is a number identifying the type
of renewable fuel according to in this paragraph (d). of renewable fuel, as follows:
§ 80.1126. (4) For biogas, the Equivalence Value (1) D has the value of 1 if the
(b) Equivalence values shall be is 1.0, and 77,550 Btu of biogas is renewable fuel can be categorized as
assigned for certain renewable fuels as equivalent to 1 gallon of renewable fuel. cellulosic biomass ethanol as defined in
follows: § 80.1101(a).
§§ 80.1116 through 80.1124 [Reserved]
(1) Cellulosic biomass ethanol and (2) D has the value of 2 if the
waste derived ethanol produced on or ■ 8. Sections 80.1116 through 80.1124
are reserved. renewable fuel cannot be categorized as
before December 31, 2012 which is cellulosic biomass ethanol as defined in
■ 9. Sections 80.1125 through 80.1132
denatured shall have an equivalence § 80.1101(a).
are added to read as follows:
value of 2.5. (h) SSSSSSSS is a number
(2) Ethanol other than cellulosic Subpart K—Renewable Fuel Standard representing the first gallon-RIN
biomass ethanol or waste-derived associated with a batch of renewable
ethanol which is denatured shall have * * * * * fuel.
an equivalence value of 1.0. Sec. (i) EEEEEEEE is a number
(3) Biodiesel (mono-alkyl ester) shall 80.1125 Renewable Identification Numbers
(RINs). representing the last gallon-RIN
have an equivalence value of 1.5. associated with a batch of renewable
80.1126 How are RINs generated and
(4) Butanol shall have an equivalence assigned to batches of renewable fuel by fuel. EEEEEEEE will be identical to
value of 1.3. renewable fuel producers or importers? SSSSSSSS if the batch-RIN represents a
(5) Non-ester renewable diesel, 80.1127 How are RINs used to demonstrate single gallon-RIN. Assign the value of
including that produced from compliance? EEEEEEEE as described in § 80.1126.
coprocessing a renewable crude with 80.1128 General requirements for RIN
fossil fuels in a hydrotreater, shall have distribution. § 80.1126 How are RINs generated and
an equivalence value of 1.7. 80.1129 Requirements for separating RINs assigned to batches of renewable fuel by
(6) All other renewable crude-based from volumes of renewable fuel. renewable fuel producers or importers?
80.1130 Requirements for exporters of (a) Regional applicability. (1) Except
renewable fuels shall have an renewable fuels.
equivalence value of 1.0. 80.1131 Treatment of invalid RINs.
as provided in paragraph (b) of this
(c)(1) For renewable fuels not listed in 80.1132 Reported spillage of renewable section, a RIN must be assigned by a
paragraph (b) of this section, a producer fuel. renewable fuel producer or importer to
or importer shall submit an application * * * * * every batch of renewable fuel produced
to the Agency for an equivalence value by a facility located in the contiguous 48

following the provisions of paragraph § 80.1125 Renewable Identification states of the United States, or imported
(d) of this section. Numbers (RINs). into the contiguous 48 states.
(2) A producer or importer may also Each RIN is a 38 character numeric (2) If the Administrator approves a
submit an application for an alternative code of the following form: petition of Alaska, Hawaii, or a United
States territory to opt-in to the Vs = Standardized volume of the batch of (8) (i) A party is prohibited from
renewable fuel program under the renewable fuel at 60 °F, in gallons, generating RINs for a volume of
provisions in § 80.1143, then the calculated in accordance with paragraph renewable fuel that it produces if:
requirements of paragraph (a)(1) of this (d)(7) of this section. (A) The renewable fuel has been
section shall also apply to renewable (5) Multiple gallon-RINs generated to produced from a chemical conversion
fuel produced or imported into that represent a given volume of renewable process that uses another renewable fuel
state or territory beginning in the next fuel can be represented by a single as a feedstock; and
calendar year. batch-RIN through the appropriate (B) The renewable fuel used as a
(b) Volume threshold. Renewable fuel designation of the RIN volume codes feedstock was produced by another
producers located within the United SSSSSSSS and EEEEEEEE. party.
States that produce less than 10,000 (i) The value of SSSSSSSS in the (ii) Any RINs that the party acquired
gallons of renewable fuel each year, and batch-RIN shall be 00000001 to with renewable fuel used as a feedstock
importers that import less than 10,000 represent the first gallon-RIN associated shall be assigned to the new renewable
gallons of renewable fuel each year, are with the volume of renewable fuel. fuel that was made with that feedstock.
not required to generate and assign RINs (ii) The value of EEEEEEEE in the (e) Assignment of RINs to batches. (1)
to batches of renewable fuel. Such batch-RIN shall represent the last Except as provided in paragraph (e)(4)
producers and importers are also gallon-RIN associated with the volume of this section, the producer or importer
exempt from the registration, reporting, of renewable fuel, based on the RIN of renewable fuel must assign all RINs
and recordkeeping requirements of volume determined pursuant to generated to volumes of renewable fuel.
(2) A RIN is assigned to a volume of
§§ 80.1150–80.1152. However, for such paragraph (d)(4) of this section.
(6) (i) For renewable crude-based renewable fuel when ownership of the
producers and importers that
renewable fuels produced in a facility or RIN is transferred along with the
voluntarily generate and assign RINs, all
unit that coprocesses renewable crudes transfer of ownership of the volume of
the requirements of this subpart apply.
and fossil fuels, the number of gallon- renewable fuel, pursuant to § 80.1128(a).
(c) Definition of batch. For the (3) All assigned RINs shall have a K
purposes of this section and § 80.1125, RINs that shall be generated for a given
code value of 1.
a ‘‘batch of renewable fuel’’ is a volume batch of renewable fuel shall be equal to (4) RINs not assigned to batches. (i) If
of renewable fuel that has been assigned the gallons of renewable crude used a party produces or imports a batch of
a unique RIN code BBBBB within a rather than the gallons of renewable fuel cellulosic biomass ethanol or waste-
calendar year by the producer or produced. derived ethanol having an equivalence
importer of the renewable fuel in (ii) Parties that produce renewable value of 2.5, that party must assign at
accordance with the provisions of this crude-based renewable fuels in a facility least one gallon-RIN to each gallon of
section and § 80.1125. or unit that coprocesses renewable cellulosic biomass ethanol or waste-
(1) The number of gallon-RINs crudes and fossil fuels may submit a derived ethanol, representing the first
generated for a batch of renewable fuel petition to the Agency requesting the 1.0 portion of the Equivalence Value.
may not exceed 99,999,999. use of volumes of renewable fuel (ii) Any remaining gallon-RINs
(2) A batch of renewable fuel cannot produced as the basis for the number of generated for the cellulosic biomass
represent renewable fuel produced or gallon-RINs, pursuant to paragraph ethanol or waste-derived ethanol which
imported in excess of one calendar (d)(4) of this section. represent the remaining 1.5 portion of
month. (7) Standardization of volumes. In the Equivalence Value may remain
(d) Generation of RINs. (1) Except as determining the standardized volume of unassigned.
provided in paragraph (b) of this a batch of renewable fuel for purposes (iii) The producer or importer of
section, the producer or importer of a of generating RINs under this paragraph cellulosic biomass ethanol or waste-
batch of renewable fuel must generate (d), the batch volumes shall be adjusted derived ethanol shall designate the K
RINs for that batch, including any to a standard temperature of 60 °F. code as 2 for all unassigned RINs.
renewable fuel contained in imported (i) For ethanol, the following formula
gasoline. shall be used: § 80.1127 How are RINs used to
(2) A producer or importer of Vs,e = Va,e * (¥0.0006301 * T + 1.0378) demonstrate compliance?
renewable fuel may generate RINs for (a) Renewable volume obligations. (1)
Where:
volumes of renewable fuel that it owns Except as specified in paragraph (b) of
Vs,e = Standardized volume of ethanol at 60 this section, each party that is obligated
on September 1, 2007. °F, in gallons.
(3) A party generating a RIN shall to meet the Renewable Volume
Va,e = Actual volume of ethanol, in gallons.
specify the appropriate numerical T = Actual temperature of the batch, in °F. Obligation under § 80.1107, or each
values for each component of the RIN in party that is an exporter of renewable
(ii) For biodiesel (mono alkyl esters), fuels that is obligated to meet a
accordance with the provisions of
the following formula shall be used: Renewable Volume Obligation under
§ 80.1125 and this paragraph (d).
(4) Except as provided in paragraph Vs,b = Va,b * (¥0.0008008 * T + 1.0480) § 80.1130, must demonstrate pursuant to
(d)(6) of this section, the number of Where: § 80.1152(a)(1) that it has taken
gallon-RINs that shall be generated for a Vs,b = Standardized volume of biodiesel at 60 ownership of sufficient RINs to satisfy
given batch of renewable fuel shall be °F, in gallons. the following equation:
equal to a volume calculated according Va,b = Actual volume of biodiesel, in gallons. (∑RINNUM)i + (∑RINNUM)i¥1 = RVOi
to the following formula: T = Actual temperature of the batch, in °F. Where:
VRIN = EV * Vs (iii) For other renewable fuels, an (∑RINNUM)i = Sum of all owned gallon-RINs
appropriate formula commonly that were generated in year i and are
Where: being applied towards the RVOi, in
VRIN = RIN volume, in gallons, for use

accepted by the industry shall be used
gallons.
determining the number of gallon-RINs to standardize the actual volume to 60 (∑RINNUM)i¥1 = Sum of all owned gallon-
that shall be generated. °F. Formulas used must be reported to RINs that were generated in year i¥1
EV = Equivalence value for the renewable the Agency, and may be reviewed for and are being applied towards the RVOi,
fuel per § 80.1115. appropriateness. in gallons.
RVOi = The Renewable Volume Obligation are being applied towards the RVOi, in must transfer ownership of a number of
for the obligated party or renewable fuel gallons. gallon-RINs with a K code of 1
exporter for calendar year i, in gallons, (∑RINNUM)i¥1 = Sum of all acquired gallon- whenever it transfers ownership of a
pursuant to § 80.1107 or § 80.1130. RINs that were generated in year i¥1 volume of renewable fuel such that the
and are being applied towards the RVOi,
(2) For compliance for calendar years ratio of gallon-RINs to gallons is equal
in gallons.
2008 and later, the value of to the equivalence value for the
(∑RINNUM)i¥1 may not exceed a value § 80.1128 General requirements for RIN renewable fuel.
determined by the following inequality: distribution. ∑(RIN) / Vs = EV
(∑RINNUM)i¥1 ≤ 0.20 × RVOi (a) RINs assigned to volumes of Where:
(3) RINs may only be used to renewable fuel. (1) Assigned RIN, for the ∑(RIN) = Sum of all gallon-RINs with a K
demonstrate compliance with the RVO purposes of this subpart, means a RIN code of 1 which are transferred along
for the calendar year in which they were assigned to a volume of renewable fuel with volume Vs.
generated or the following calendar pursuant to § 80.1126(e) with a K code Vs = A volume of renewable fuel transferred,
year. RINs used to demonstrate of 1. standardized to 60 °F, in gallons.
(2) Except as provided in EV = Equivalence value assigned to the
compliance in one year cannot be used
§ 80.1126(e)(4) and § 80.1129, no party renewable fuel being transferred.
to demonstrate compliance in any other
year. can separate a RIN that has been (ii) A producer or importer of
(4) A party may only use a RIN for assigned to a batch pursuant to renewable fuel can transfer ownership
purposes of meeting the requirements of § 80.1126(e). of a volume of renewable fuel without
paragraphs (a)(1) and (a)(2) of this (3) An assigned RIN cannot be simultaneously transferring ownership
section if that RIN is an unassigned RIN transferred to another party without of gallon-RINs having a K code of 1 if
with a K code of 2 obtained in simultaneously transferring a volume of it can demonstrate one of the following:
accordance with §§ 80.1126(e)(4), renewable fuel to that same party. (A) It is a small volume producer
80.1128, and 80.1129. (4) No more than 2.5 assigned gallon- exempt from the requirement to
(5) The number of gallon-RINs RINs with a K code of 1 can be generate RINs pursuant to § 80.1126(b);
associated with a given batch-RIN that transferred to another party with every or
can be used for compliance with the gallon of renewable fuel transferred to (B) The producer or importer received
RVO shall be calculated from the that same party. an equivalent volume of renewable fuel
following formula: (5) (i) On each of the dates listed in from another party without
RINNUM = EEEEEEEE¥SSSSSSSS + 1 paragraph (a)(5)(v) of this section in any accompanying RINs.
calendar year, the following equation (C) The producer or importer has
Where:
must be satisfied for assigned RINs and generated RINs for cellulosic biomass
RINNUM = Number of gallon-RINs associated volumes of renewable fuel owned by a ethanol or waste-derived ethanol having
with a batch-RIN, where each gallon-RIN
represents one gallon of renewable fuel
party: an equivalence value of 2.5, and has
for compliance purposes. ∑(RIN)D ≤ ∑(Vsi×EVi)D chosen to specify as unassigned a
EEEEEEEE = Batch-RIN component Where: number of gallon-RINs pursuant to
identifying the last gallon-RIN associated D = Applicable date. § 80.1126(e)(4).
with the batch-RIN. ∑(RIN)D = Sum of all assigned gallon-RINs (7) Any transfer of ownership of
SSSSSSSS = Batch-RIN component with a K code of 1 that are owned on assigned RINs must be documented on
identifying the first gallon-RIN date D. product transfer documents generated
associated with the batch-RIN. (Vsi)D = Volume i of renewable fuel owned on pursuant to § 80.1153.
(b) Deficit carryovers. (1) An obligated date D, standardized to 60 °F, in gallons. (i) The RIN must be recorded on the
party or an exporter of renewable fuel EVi = Equivalence value representing volume product transfer document used to
that fails to meet the requirements of i. transfer ownership of the RIN and the
∑(Vsi× EVi)D = Sum of all volumes of volume to another party; or
paragraphs (a)(1) or (a)(2) of this section renewable fuel owned on date D,
for calendar year i is permitted to carry (ii) The RIN must be recorded on a
multiplied by their respective separate product transfer document
a deficit into year i+1 under the equivalence values.
following conditions: transferred to the same party on the
(i) The party did not carry a deficit (ii) The equivalence value EVi for use same day as the product transfer
into calendar year i from calendar year in the equation in paragraph (a)(5)(i) of document used to transfer ownership of
i¥1. this section for any volume of ethanol the volume of renewable fuel.
(ii) The party subsequently meets the shall be 2.5. (b) RINs not assigned to volumes of
requirements of paragraph (a)(1) of this (iii) If the equivalence value for a renewable fuel. (1) Unassigned RIN, for
section for calendar year i+1 and carries volume of renewable fuel i can be the purposes of this subpart, means a
no deficit into year i+2. determined pursuant to § 80.1115 based RIN with a K code of 2 that has been
(2) A deficit is calculated according to on its composition, then the appropriate separated from a volume of renewable
the following formula: equivalence value shall be used for EVi. fuel pursuant to § 80.1126(e)(4) or
(iv) If the equivalence value for a § 80.1129.
Di RVOi¥1 (∑RINNUM)i∂1
volume of renewable fuel cannot be (2) Any party that has registered
(∑RINNUM)i¥1
determined based on its composition, pursuant to § 80.1150 can hold title to
Where:
the value of EVi shall be 1.0. an unassigned RIN.
Di = The deficit, in gallons, generated in (v) The applicable dates are March 31, (3) Unassigned RINs can be
calendar year i that must be carried over June 30, September 30, and December transferred from one party to another
to year i+1 if allowed to do so pursuant
to paragraph (b)(1)(i) of this section.
31. For 2007 only, the applicable dates any number of times.
RVOi = The Renewable Volume Obligation are September 30, and December 31. (4) An unassigned batch-RIN can be
for the obligated party or renewable fuel (6) Producers and importers of divided by its holder into multiple
exporter for calendar year i, in gallons. renewable fuel. (i) Except as provided in batch-RINs, each representing a smaller
(∑RINNUM)i¥1 = Sum of all acquired gallon- paragraph (a)(6)(ii) of this section, a number of gallon-RINs, if all of the
RINs that were generated in year i and producer or importer of renewable fuel following conditions are met:
(i) All RIN components other than (7) A producer or importer of on its composition, then the appropriate
SSSSSSSS and EEEEEEEE are identical cellulosic biomass ethanol or waste- equivalence value shall be used in the
for the original parent and newly derived ethanol can separate a portion calculation of the exporter’s Renewable
formed daughter RINs. of the RINs that it generates pursuant to Volume Obligation.
(ii) The sum of the gallon-RINs § 80.1126(e)(4). (ii) If the equivalence value for a
associated with the multiple daughter (c) The party responsible for volume of renewable fuel cannot be
batch-RINs is equal to the gallon-RINs separating a RIN from a volume of determined, the value of EVk shall be
associated with the parent batch-RIN. renewable fuel shall change the K code 1.0.
in the RIN from a value of 1 to a value (c) Each exporter of renewable fuel
§ 80.1129 Requirements for separating must demonstrate compliance with its
of 2 prior to transferring the RIN to any
RINs from volumes of renewable fuel. RVO using RINs it has acquired
other party.
(a)(1) Separation of a RIN from a (d) (1) Upon and after separation from pursuant to § 80.1127.
volume of renewable fuel means a renewable fuel volume, a RIN shall not
termination of the assignment of the RIN § 80.1131 Treatment of invalid RINs.
appear on documentation that is either:
to a volume of renewable fuel. (i) Used to identify title to the volume (a) Invalid RINs. An invalid RIN is a
(2) RINs that have been separated of renewable fuel; or RIN that is any of the following:
from volumes of renewable fuel become (1) Is a duplicate of a valid RIN.
(ii) Transferred with the volume of (2) Was based on volumes that have
unassigned RINs subject to the renewable fuel.
provisions of § 80.1128(b). not been standardized to 60 °F.
(2) Upon and after separation of a RIN (3) Has expired.
(b) A RIN that is assigned to a volume
from its associated volume, product (4) Was based on an incorrect
of renewable fuel is separated from that
transfer documents used to transfer equivalence value.
volume only under one of the following
ownership of the volume must continue (5) Is deemed invalid under
conditions:
to meet the requirements of § 80.1167(g).
(1) Except as provided in paragraph
§ 80.1153(a)(5)(iii). (6) Does not represent renewable fuel
(b)(6) of this section, a party that is an
(e) Any obligated party that uses a as it is defined in § 80.1101.
obligated party according to § 80.1106
renewable fuel in a boiler or heater must (7) Was otherwise improperly
must separate any RINs that have been
retire any RINs associated with that generated.
assigned to a volume of renewable fuel (b) In the case of RINs that are invalid,
volume of renewable fuel and report the
if they own that volume. the following provisions apply:
(2) Except as provided in paragraph retired RINs in the applicable reports
under § 80.1152. (1) Invalid RINs cannot be used to
(b)(5) of this section, any party that achieve compliance with the Renewable
owns a volume of renewable fuel must § 80.1130 Requirements for exporters of Volume Obligation of an obligated party
separate any RINs that have been renewable fuels. or exporter, regardless of the party’s
assigned to that volume once the (a) Any party that owns any amount good faith belief that the RINs were
volume is blended with gasoline or of renewable fuel (in its neat form or valid at the time they were acquired.
diesel to produce a motor vehicle fuel. blended with gasoline or diesel) that is (2) Upon determination by any party
(3) Any party that exports a volume of exported from the region described in that RINs owned are invalid, the party
renewable fuel must separate any RINs § 80.1126(a) shall acquire sufficient must adjust their records, reports, and
that have been assigned to the exported RINs to offset a Renewable Volume compliance calculations as necessary to
volume. Obligation representing the exported reflect the deletion of the invalid RINs.
(4) Any renewable fuel producer or renewable fuel. (3) Any valid RINs remaining after
importer that produces or imports a (b) Renewable Volume Obligations. deleting invalid RINs must first be
volume of renewable fuel shall have the An exporter of renewable fuel shall applied to correct the transfer of invalid
right to separate any RINs that have determine its Renewable Volume RINs to another party before applying
been assigned to that volume if the Obligation from the volumes of the the valid RINs to meet the party’s
producer or importer designates the renewable fuel exported. Renewable Volume Obligation at the
renewable fuel as motor vehicle fuel and (1) A renewable fuel exporter’s total end of the compliance year.
the renewable fuel is used as motor Renewable Volume Obligation shall be (4) In the event that the same RIN is
vehicle fuel. calculated according to the following transferred to two or more parties, all
(5) RINs assigned to a volume of formula: such RINs will be deemed to be invalid,
biodiesel (mono-alkyl ester) can only be unless EPA in its sole discretion
separated from that volume pursuant to RVOi = S(VOLk * EVk)i + Di-1
Where: determines that some portion of these
paragraph (b)(2) of this section if such RINs is valid.
biodiesel is blended into diesel fuel at RVOi = The Renewable Volume Obligation
a concentration of 80 volume percent for the exporter for calendar year i, in § 80.1132 Reported spillage of renewable
gallons of renewable fuel. fuel.
biodiesel (mono-alkyl ester) or less.
k = A discrete volume of renewable fuel.
(i) This paragraph (b)(5) shall not VOLk = The standardized volume of discrete
(a) A reported spillage under
apply to obligated parties or exporters of volume k of exported renewable fuel, in paragraph (d) of this section means a
renewable fuel. gallons, calculated in accordance with spillage of renewable fuel associated
(ii) This paragraph (b)(5) shall not § 80.1126(d)(7). with a requirement by a federal, state or
apply to renewable fuel producers EVk = The equivalence value associated with local authority to report the spillage.
meeting the requirements of paragraph discrete volume k. (b) Except as provided in paragraph
(b)(4) of this section. S = Sum involving all volumes of renewable (c) of this section, in the event of a
(6) For RINs that an obligated party fuel exported. reported spillage of any volume of
generates, the obligated party can only Di-1 = Renewable fuel deficit carryover renewable fuel, the owner of the
separate such RINs from volumes of from the previous year, in gallons. renewable fuel must retire a number of
renewable fuel if the number of gallon- (2)(i) If the equivalence value for a gallon-RINs corresponding to the
RINs separated is less than or equal to volume of renewable fuel can be volume of spilled renewable fuel
its annual RVO. determined pursuant to § 80.1115 based multiplied by its equivalence value.
(1) If the equivalence value for the owned the refinery as of January 1, waive that exemption upon notification
spilled volume may be determined 2004. to EPA.
pursuant to § 80.1115 based on its (iii) Name, address, phone number, (1) A refiner’s notice to EPA that it
composition, then the appropriate facsimile number, and e-mail address of intends to waive its small refinery
equivalence value shall be used. a corporate contact person. exemption must be received by
(2) If the equivalence value for a (3) Verification letters must be November 1 to be effective in the next
spilled volume of renewable fuel cannot submitted by August 31, 2007, to one of compliance year.
be determined, the equivalence value the addresses listed in paragraph (h) of (2) The waiver will be effective
shall be 1.0. this section. beginning on January 1 of the following
(c) If the owner of a volume of (4) For foreign refiners the small calendar year, at which point the
renewable fuel that is spilled and refinery exemption shall be effective gasoline produced at that refinery will
reported establishes that no RINs were upon approval, by EPA, of a small be subject to the renewable fuels
generated to represent the volume, then refinery application. The application standard of § 80.1105.
no gallon-RINs shall be retired. must contain all of the elements (3) The waiver must be sent to EPA
(d) A RIN that is retired under required for small refinery verification at one of the addresses listed in
paragraph (b) of this section: letters (as specified in paragraph (b)(2) paragraph (h) of this section.
(1) Must be reported as a retired RIN of this section), must satisfy the (g) A refiner that acquires a refinery
in the applicable reports under provisions of § 80.1165(f) through (h) from either an approved small refiner
§ 80.1152. and (o), and must be submitted by (as defined under § 80.1142(a)) or
(2) May not be transferred to another August 31, 2007 to one of the addresses another refiner with an approved small
party or used by any obligated party to listed in paragraph (h) of this section. refinery exemption under paragraph (a)
demonstrate compliance with the (c) If EPA finds that a refiner provided of this section shall notify EPA in
party’s Renewable Volume Obligation. false or inaccurate information writing no later than 20 days following
regarding a refinery’s crude throughput the acquisition.
§§ 80.1133 through 80.1140 [Reserved] (pursuant to paragraph (b)(2)(i) of this (h) Verification letters under
■ 10. Sections 80.1133 through 80.1140 section) in its small refinery verification paragraph (b) of this section, petitions
are reserved. letter, the exemption will be void as of for small refinery hardship extensions
the effective date of these regulations. under paragraph (e) of this section, and
■ 11. Sections 80.1141 through 80.1143 small refinery exemption waivers under
are added to read as follows: (d) If a refiner is complying on an
aggregate basis for multiple refineries, paragraph (f) of this section shall be sent
§ 80.1141 Small refinery exemption. any such refiner may exclude from the to one of the following addresses:
(a)(1) Gasoline produced at a refinery calculation of its Renewable Volume (1) For U.S. mail: U.S. EPA—Attn:
by a refiner, or foreign refiner (as Obligation (under § 80.1107(a)) gasoline RFS Program, 6406J, 1200 Pennsylvania
defined at § 80.1165(a)), is exempt from from any refinery receiving the small Avenue, NW., Washington, DC 20460.
the renewable fuel standards of refinery exemption under paragraph (a) (2) For overnight or courier services:
§ 80.1105 if that refinery meets the of this section. U.S. EPA, Attn: RFS Program, 6406J,
definition of a small refinery under (e)(1) The exemption period in 1310 L Street, NW., 6th floor,
§ 80.1101(g) for calendar year 20460. paragraph (a) of this section shall be Washington, DC 20005.
(2) This exemption shall apply extended by the Administrator for a § 80.1142 What are the provisions for
through December 31, 2010, unless a period of not less than two additional small refiners under the RFS program?
refiner chooses to waive this exemption years if a study by the Secretary of (a) (1) Gasoline produced by a refiner,
(as described in paragraph (f) of this Energy determines that compliance with or foreign refiner (as defined at
section), or the exemption is extended the requirements of this subpart would § 80.1165(a)), is exempt from the
(as described in paragraph (e) of this impose a disproportionate economic renewable fuel standards of § 80.1105 if
section). hardship on the small refinery. the refiner or foreign refiner does not
(3) For the purposes of this section, (i) A refiner may at any time petition meet the definition of a small refinery
the term ‘‘refiner’’ shall include foreign the Administrator for an extension of its under § 80.1101(g) but meets all of the
refiners. small refinery exemption under following criteria:
(b)(1) The small refinery exemption is paragraph (a) of this section for the (i) The refiner produced gasoline at its
effective immediately, except as reason of disproportionate economic refineries by processing crude oil
specified in paragraph (b)(4) of this hardship. through refinery processing units from
section. (ii) A petition for an extension of the January 1, 2004 through December 31,
(2) A refiner owning a small refinery small refinery exemption must specify 2004.
must submit a verification letter to EPA the factors that demonstrate a (ii) The refiner employed an average
containing all of the following disproportionate economic hardship of no more than 1,500 people, based on
information: and must provide a detailed discussion the average number of employees for all
(i) The annual average aggregate daily regarding the inability of the refinery to pay periods for calendar year 2004 for
crude oil throughput for the period produce gasoline meeting the all subsidiary companies, all parent
January 1, 2004, through December 31, requirements of § 80.1105 and the date companies, all subsidiaries of the parent
2004 (as determined by dividing the the refiner anticipates that compliance companies, and all joint venture
aggregate throughput for the calendar with the requirements can be achieved partners.
year by the number 365). at the small refinery. (iii) The refiner had a corporate-
(ii) A letter signed by the president, (2) The Administrator shall act on average crude oil capacity less than or
chief operating or chief executive officer such a petition not later than 90 days equal to 155,000 barrels per calendar
of the company, or his/her designee, after the date of receipt of the petition. day (bpcd) for 2004.
stating that the information contained in (f) At any time, a refiner with an (2) The small refiner exemption shall
the letter is true to the best of his/her approved small refinery exemption apply through December 31, 2010,
knowledge, and that the company under paragraph (a) of this section may unless a refiner chooses to waive the
exemption (pursuant to paragraph (h) of must contain all of the elements § 80.1143 What are the opt-in provisions
this section) prior to that date. required for small refiner verification for noncontiguous states and territories?
(3) For the purposes of this section, letters (as specified in paragraphs (b)(1), (a) A noncontiguous state or United
the term ‘‘refiner’’ shall include foreign (b)(3), and (b)(4) of this section), must States territory may petition the
refiners. demonstrate compliance with the crude Administrator to opt-in to the program
(b) The small refiner exemption is oil capacity criterion of paragraph requirements of this subpart.
effective immediately, except as (a)(1)(iii) of this section, must satisfy the (b) The Administrator will approve
provided in paragraph (d) of this provisions of § 80.1165(f) through (h) the petition if it meets the provisions of
section. Refiners who qualify for the and (o), and must be submitted by paragraphs (c) and (d) of this section.
small refiner exemption under September 1, 2007 to one of the (c) The petition must be signed by the
paragraph (a) of this section must addresses listed in paragraph (j) of this Governor of the state or his authorized
submit a verification letter (and any section. representative (or the equivalent official
other relevant information) to EPA (e) A refiner who qualifies as a small of the territory).
containing all of the following refiner under this section and (d)(1) A petition submitted under this
information for the refiner and for all subsequently fails to meet all of the section must be received by the Agency
subsidiary companies, all parent qualifying criteria as set out in by November 1 for the state or territory
companies, all subsidiaries of the parent paragraph (a) of this section will have to be included in the RFS program in
companies, and all joint venture its small refiner exemption terminated the next calendar year.
partners: effective January 1 of the next calendar (2) A petition submitted under this
(1)(i) A listing of the name and year; however, disqualification shall not section should be sent to either of the
address of each company location where apply in the case of a merger between following addresses:
any employee worked for the period two approved small refiners. (i) For U.S. Mail: U.S. EPA—Attn: RFS
January 1, 2004 through December 31, (f) If EPA finds that a refiner provided Program, 6406J, 1200 Pennsylvania
2004. false or inaccurate information in its Avenue, NW., Washington, DC 20460.
(ii) The average number of employees small refiner status verification letter (ii) For overnight or courier services:
at each location based on the number of under this subpart, the small refiner’s U.S. EPA, Attn: RFS Program, 6406J,
employees for each pay period for the exemption will be void as of the 1310 L Street, NW., 6th floor,
period January 1, 2004 through effective date of these regulations. Washington, DC 20005.
December 31, 2004. (g) If a small refiner is complying on (e) Upon approval of the petition by
(iii) The type of business activities an aggregate basis for multiple the Administrator:
carried out at each location. (1) EPA shall calculate the standard
refineries, the refiner may exempt the
(iv) For joint ventures, the total for the following year, including the
refineries from the calculation of its
number of employees includes the total gasoline volume for the State or
Renewable Volume Obligation under
combined employee count of all territory in question.
§ 80.1107.
corporate entities in the venture. (2) Beginning on January 1 of the next
(h) (1) A refiner may, at any time,
(v) For government-owned refiners, calendar year, all gasoline refiners and
waive the small refiner exemption
the total employee count includes all importers in the state or territory for
under paragraph (a) of this section upon
government employees. which a petition has been approved
notification to EPA.
(2) The total corporate crude oil (2) A refiner’s notice to EPA that it shall be obligated parties as defined in
capacity of each refinery as reported to intends to waive the small refiner § 80.1106.
the Energy Information Administration (3) Beginning on January 1 of the next
exemption must be received by
(EIA) of the U.S. Department of Energy calendar year, all renewable fuel
November 1 in order for the waiver to
(DOE), for the period January 1, 2004 producers in the State or territory for
be effective for the following calendar
through December 31, 2004. The which a petition has been approved
year. The waiver will be effective
information submitted to EIA is shall, pursuant to § 80.1126(a)(2), be
beginning on January 1 of the following
presumed to be correct. In cases where required to generate RINs and assign
calendar year, at which point the refiner
a company disagrees with this them to batches of renewable fuel.
will be subject to the renewable fuel
information, the company may petition standard of § 80.1105. §§ 80.1144 through 80.1149 [Reserved]
EPA with appropriate data to correct the (3) The waiver must be sent to EPA ■ 12. Sections 80.1144 through 80.1149
record when the company submits its at one of the addresses listed in are reserved.
verification letter. paragraph (j) of this section.
(3) The verification letter must be (i) Any refiner that acquires a refinery ■ 13. Sections 80.1150 through 80.1155
signed by the president, chief operating from another refiner with approved are added to read as follows:
or chief executive officer of the small refiner status under paragraph (a)
company, or his/her designee, stating of this section shall notify EPA in Subpart K—Renewable Fuel Standard
that the information is true to the best writing no later than 20 days following * * * * *
of his/her knowledge, and that the the acquisition. Sec.
company owned the refinery as of (j) Verification letters under paragraph 80.1150 What are the registration
December 31, 2004. (b) of this section and small refiner requirements under the RFS program?
(4) Name, address, phone number, exemption waivers under paragraph (h) 80.1151 What are the recordkeeping
facsimile number, and e-mail address of of this section shall be sent to one of the requirements under the RFS program?
a corporate contact person. following addresses: 80.1152 What are the reporting
(c) Verification letters under (1) For U.S. Mail: U.S. EPA—Attn: requirements under the RFS program?
80.1153 What are the product transfer
paragraph (b) of this section must be RFS Program, 6406J, 1200 Pennsylvania document (PTD) requirements for the
submitted by September 1, 2007. Avenue, NW., Washington, DC 20460. RFS program?

(d) For foreign refiners the small (2) For overnight or courier services: 80.1154 What are the provisions for
refiner exemption shall be effective U.S. EPA, Attn: RFS Program, 6406J, renewable fuel producers and importers
upon approval, by EPA, of a small 1310 L Street, NW., 6th floor, who produce or import less than 10,000
refiner application. The application Washington, DC 20005. gallons of renewable fuel per year?
80.1155 What are the additional (i) A list of the RINs owned, (1) The amount and type of fossil fuel
requirements for a producer of cellulosic purchased, sold, retired or expired. and waste material-derived fuel used in
biomass ethanol or waste derived (ii) The parties involved in each RIN producing on-site thermal energy
ethanol? transaction including the transferor, dedicated to the production of ethanol
* * * * * transferee, and any broker or agent. at plants producing cellulosic biomass
(iii) The date of the transfer of the ethanol through the displacement of 90
§ 80.1150 What are the registration
RIN(s). percent or more of the fossil fuel
requirements under the RFS program?
(iv) Additional information related to normally used in the production of
(a) Any obligated party described in details of the transaction and its terms. ethanol, as described at § 80.1101(a)(2).
§ 80.1106 and any exporter of renewable (4) Records related to the use of RINs (2) The amount and type of feedstocks
fuel described in § 80.1130 must (by facility, if applicable) for used in producing cellulosic biomass
provide EPA with the information compliance, which includes all the ethanol as defined in § 80.1101(a)(1).
specified for registration under § 80.76, following: (3) The equivalent amount of fossil
if such information has not already been (i) Methods and variables used to fuel (based on reasonable estimates)
provided under the provisions of this calculate the Renewable Volume associated with the use of off-site
part. An obligated party or an exporter Obligation pursuant to § 80.1107 or generated waste heat that is used in the
of renewable fuel must receive EPA- § 80.1130. production of ethanol at plants
issued identification numbers prior to (ii) List of RINs used to demonstrate producing cellulosic biomass ethanol
engaging in any transaction involving compliance. through the displacement of 90 percent
RINs. Registration information may be (iii) Additional information related to or more of the fossil fuel normally used
submitted to EPA at any time after details of RIN use for compliance. in the production of ethanol, as
promulgation of this rule in the Federal (b) Beginning September 1, 2007, any
described at § 80.1101(a)(2).
Register. producer or importer of a renewable fuel (4) The plot plan and process flow
(b) Any importer or producer of a as defined at § 80.1101(d) must keep all diagram for plants producing cellulosic
renewable fuel must provide EPA the of the following records: biomass and waste derived ethanol as
information specified under § 80.76, if (1) Product transfer documents
defined in § 80.1101(a) and (b),
such information has not already been consistent with § 80.1153 and associated
respectively.
provided under the provisions of this with the renewable fuel producer’s or (5) The independent third party
part, and must receive EPA-issued importer’s activity, if any, as transferor verification required under § 80.1155 for
company and facility identification or transferee of renewable fuel. producers of cellulosic biomass ethanol
numbers prior to generating or assigning (2) Copies of all reports submitted to
and waste derived ethanol.
any RINs. Registration information may EPA under § 80.1152(b). (d) Beginning September 1, 2007, any
be submitted to EPA at any time after (3) Records related to the generation
party, other than those parties covered
promulgation of this rule in the Federal and assignment of RINs for each facility,
in paragraphs (a) and (b) of this section,
Register. including all of the following:
(i) Batch volume in gallons. that owns RINs must keep all of the
(c) Any party who owns or intends to following records:
(ii) Batch number.
own RINs, but who is not covered by (1) Product transfer documents
(iii) RIN number as assigned under
paragraphs (a) and (b) of this section, consistent with § 80.1153 and associated
§ 80.1126.
must provide EPA the information (iv) Identification of batches meeting with the party’s activity, if any, as
specified under § 80.76, if such the definition of cellulosic biomass transferor or transferee of renewable
information has not already been ethanol. fuel.
provided under the provisions of this (v) Date of production or import. (2) Copies of all reports submitted to
part and must receive an EPA-issued (vi) Results of any laboratory analysis EPA under § 80.1152(c).
company identification number prior to of batch chemical composition or (3) Records related to each RIN
owning any RINs. Registration physical properties. transaction, including all of the
information may be submitted to EPA at (vii) Additional information related to following:
any time after promulgation of this rule details of RIN generation. (i) A list of the RINs owned,
in the Federal Register. (4) Records related to each RIN purchased, sold, retired or expired.
(d) Registration shall be on forms, and transaction, including all of the (ii) The parties involved in each RIN
following policies, established by the following: transaction including the transferor,
Administrator. (i) A list of the RINs owned, transferee, and any broker or agent.
purchased, sold, retired or expired. (iii) The date of the transfer of the
§ 80.1151 What are the recordkeeping (ii) The parties involved in each RIN(s).
requirements under the RFS program? (iv) Additional information related to
transaction including the transferor,
(a) Beginning September 1, 2007, any transferee, and any broker or agent. details of the transaction and its terms.
obligated party (as described at (iii) The date of the transfer of the (e) The records required under this
§ 80.1106) or exporter of renewable fuel RIN(s). section and under § 80.1153 shall be
(as described at § 80.1130) must keep all (iv) Additional information related to kept for five years from the date they
of the following records: details of the transaction and its terms. were created, except that records related
(1) Product transfer documents (5) Records related to the production to transactions involving RINs shall be
consistent with § 80.1153 and associated or importation of any volume of kept for five years from the date of
with the obligated party’s activity, if renewable fuel that the renewable fuel transfer.
any, as transferor or transferee of producer or importer designates as (f) On request by EPA, the records
renewable fuel. motor vehicle fuel and the use of the required under this section and under
(2) Copies of all reports submitted to fuel as motor vehicle fuel. § 80.1153 must be made available to the
EPA under § 80.1152(a). (c) Beginning September 1, 2007, any Administrator or the Administrator’s
(3) Records related to each RIN producer of a renewable fuel defined at authorized representative. For records
transaction, which includes all the § 80.1101(d) must keep verifiable that are electronically generated or
following: records of the following: maintained, the equipment or software
necessary to read the records shall be reports according to the schedule, and (iv) The applicable quarterly reporting
made available; or, if requested by EPA, containing the information, that is set period.
electronic records shall be converted to forth in this paragraph (b). (v) Transaction type (RIN purchase,
paper documents. (1) A quarterly RIN-generation report RIN sale, expired RIN, retired RIN).
for each facility owned by the renewable (vi) Transaction date.
§ 80.1152 What are the reporting fuel producer, and each importer, shall (vii) For a RIN purchase or sale, the
requirements under the RFS program? be submitted according to the schedule trading partner’s name.
(a) Any obligated party described in specified in paragraph (d) of this (viii) For a RIN purchase or sale, the
§ 80.1106 or exporter of renewable fuel section, and shall include for the trading partner’s EPA company
described in § 80.1130 must submit to reporting period all of the following registration number. For all other
EPA reports according to the schedule, information for each batch of renewable transactions, the submitting party’s EPA
and containing the information, that is fuel produced or imported, where company registration number.
set forth in this paragraph (a). ‘‘batch’’ means a discreet quantity of (ix) RIN subject to the transaction.
(1) An annual compliance renewable fuel produced or imported (x) For a retired RIN, the reason for
demonstration report for the previous and assigned a unique RIN: retiring the RIN (e.g., reportable spill
compliance period shall be submitted (i) The renewable fuel producer’s or under § 80.1132, import volume
every February 28, except as noted in importer’s name. correction under § 80.1166(k),
paragraph (a)(1)(x) of this section, and (ii) The EPA company registration renewable fuel used in boiler or heater
shall include all of the following number. under § 80.1129(e), enforcement
information: (iii) The EPA facility registration obligation).
(i) The obligated party’s name. number. (xi) Any additional information that
(ii) The EPA company registration (iv) The applicable quarterly reporting the Administrator may require.
number. period. (2) A quarterly gallon-RIN activity
(iii) Whether the party is complying (v) The RINs generated for each batch report shall be submitted to EPA
on a corporate (aggregate) or facility-by- according to § 80.1126. according to the schedule specified in
facility basis. (vi) The production date of each paragraph (d) of this section. Each
(iv) The EPA facility registration batch. report shall summarize gallon-RIN
number, if complying on a facility-by- (vii) The type of renewable fuel of
activities for the reporting period,
facility basis. each batch, as defined in § 80.1101(d).
(viii) Information related to the separately for RINs separated from a
(v) The production volume of all of renewable fuel volume and RINs
the products listed in § 80.1107(c) for volume of denaturant and applicable
equivalence value of each batch. assigned to a renewable fuel volume. A
the reporting year. RIN owner with more than one facility
(ix) The volume of each batch
(vi) The renewable volume obligation may submit the report required under
produced or imported.
(RVO), as defined in § 80.1127(a) for (x) Any additional information the this paragraph for each of its facilities
obligated parties and § 80.1130(b) for Administrator may require. individually, or for all of its facilities in
exporters of renewable fuel, for the (2) The RIN transaction reports the aggregate. The quarterly gallon-RIN
reporting year. required under paragraph (c)(1) of this activity report shall include all of the
(vii) Any deficit RVO carried over section. following information:
from the previous year. (3) The quarterly gallon-RIN activity (i) The submitting party’s name.
(viii) The total current-year gallon- report required under paragraph (c)(2) of (ii) The party’s EPA company
RINs used for compliance. this section. registration number.
(ix) The total prior-years gallon-RINs (4) Reports required under this (iii) Whether the party is submitting
used for compliance. paragraph (b) must be signed and the report required under this paragraph
(x) A list of all RINs used for certified as meeting all the applicable on a corporate (aggregate) or facility-by-
compliance in the reporting year. For requirements of this subpart by the facility basis.
compliance demonstrations covering owner or a responsible corporate officer (iv) The party’s EPA facility
calendar year 2007 only, this list shall of the renewable fuel producer. registration number, if the report
be reported by May 31, 2008. In all (c) Any party, including any party required under this paragraph is
subsequent years, this list shall be specified in paragraphs (a) and (b) of submitted on a facility-by-facility basis.
submitted by February 28. this section, that owns RINs during a (v) Number of current-year gallon-
(xi) Any deficit RVO carried into the reporting period must, beginning RINs owned at the start of the quarter.
subsequent year. November 30, 2007, submit reports to (vi) Number of prior-years gallon-RINs
(xii) Any additional information that EPA according to the schedule, and owned at the start of the quarter.
the Administrator may require. containing the information, that is set (vii) The total current-year gallon-
(2) The quarterly RIN transaction forth in this paragraph (c). RINs purchased.
reports required under paragraph (c)(1) (1) A RIN transaction report for each (viii) The total prior-years gallon-RINs
of this section. RIN transaction shall be submitted by purchased.
(3) The quarterly gallon-RIN activity the end of the quarter in which the (ix) The total current-year gallon-RINs
reports required under paragraph (c)(2) transaction occurred, according to the sold.
of this section. schedule specified in paragraph (d) of (x) The total prior-years gallon-RINs
(4) Reports required under this this section. Each report shall include sold.
paragraph (a) must be signed and all of the following: (xi) The total current-year gallon-RINs
certified as meeting all the applicable (i) The submitting party’s name. retired.
requirements of this subpart by the (ii) The party’s EPA company (xii) The total prior-years gallon-RINs
owner or a responsible corporate officer registration number. retired.

of the obligated party. (iii) The party’s facility registration (xiii) The total current-year gallon-
(b) Any producer or importer of a number, if the report required under RINs expired (fourth quarter only).
renewable fuel must, beginning paragraph (c)(2) of this section is (xiv) The total prior-years gallon-RINs
November 30, 2007, submit to EPA submitted on a facility-by-facility basis. expired (fourth quarter only).
(xv) Number of current-year gallon- ownership of the renewable fuel shall Engineer who is based in the United
RINs owned at the end of the quarter. state ‘‘No RINs transferred’’. States and is licensed by the appropriate
(xvi) Number of prior-years gallon- (b) Except for transfers to truck state agency, unless the ethanol
RINs owned at the end of the quarter. carriers, retailers, or wholesale producer is a foreign producer subject to
(xvii) For parties reporting gallon-RIN purchaser-consumers, product codes § 80.1166.
activity under this paragraph for RINs may be used to convey the information (c) To be considered an independent
assigned to a volume of renewable fuel, required under paragraphs (a)(1) third party under paragraph (a) of this
the volume of renewable fuel (in through (a)(4) of this section if such section:
gallons) owned at the end of the quarter. codes are clearly understood by each (1) The third party shall not be
(xviii) Any additional information transferee. The RIN number required operated by the ethanol producer or any
that the Administrator may require. under paragraph (a)(5) of this section subsidiary of employee of the ethanol
(3) All reports required under this must always appear in its entirety. producer.
paragraph (c) must be signed and (2) The third party shall be free from
§ 80.1154 What are the provisions for any interest in the ethanol producer’s
certified as meeting all the applicable
renewable fuel producers and importers
requirements of this subpart by the RIN who produce or import less than 10,000
business.
owner or a responsible corporate officer gallons of renewable fuel per year? (3) The ethanol producer shall be free
of the RIN owner. from any interest in the third party’s
(a) Renewable fuel producers located
(d) Quarterly reports shall be business.
within the United States that produce (4) Use of a third party that is
submitted to EPA by: May 31st for the less than 10,000 gallons of renewable
first calendar quarter of January through debarred, suspended, or proposed for
fuel each year, and importers who debarment pursuant to the Government-
March; August 31st for the second import less than 10,000 gallons of
calendar quarter of April through June; wide Debarment and Suspension
renewable fuel each year, are not regulations, 40 CFR part 32, or the
November 30th for the third calendar required to generate RINs or to assign
quarter of July through September; and Debarment, Suspension and Ineligibility
RINs to batches of renewable fuel. Such provisions of the Federal Acquisition
February 28th for the fourth calendar producers and importers that do not
quarter of October through December. Regulations, 48 CFR, part 9, subpart 9.4,
generate and/or assign RINs to batches shall be deemed noncompliance with
For 2007, quarterly reports shall of renewable fuel are also exempt from
commence on November 30, 2007. the requirements of this section.
all the following requirements of this (d) The ethanol producer must obtain
(e) Reports required under this section subpart K, except as stated in paragraph
shall be submitted on forms and the written verification required under
(b) of this section: paragraph (a)(1) of this section by
following procedures as prescribed by (1) The registration requirements of
EPA. February 28 of the year following the
§ 80.1150.
first year in which the ethanol producer
§ 80.1153 What are the product transfer (2) The recordkeeping requirements of
claims to be producing cellulosic
document (PTD) requirements for the RFS § 80.1151.
(3) The reporting requirements of biomass ethanol or waste derived
program?
§ 80.1152. ethanol.
(a) Any time that a person transfers (e) The verification in paragraph (a)(2)
(b) Renewable fuel producers and
ownership of renewable fuels subject to of this section is required for each
importers who produce or import less
this subpart, the transferor must provide calendar year that the ethanol producer
than 10,000 gallons of renewable fuel
to the transferee documents identifying claims to be producing cellulosic
each year and that generate and/or
the renewable fuel and any assigned biomass ethanol or waste derived
assign RINs to batches of renewable fuel
RINs which include all of the following ethanol. The ethanol producer must
are subject to the provisions of
information as applicable: obtain the written verification required
(1) The name and address of the §§ 80.1150 through 80.1152.
under paragraph (a)(2) of this section by
transferor and transferee. § 80.1155 What are the additional February 28 for the previous calendar
(2) The transferor’s and transferee’s requirements for a producer of cellulosic year.
EPA company registration number. biomass ethanol or waste derived ethanol? (f) The ethanol producer must retain
(3) The volume of renewable fuel that (a) A producer of cellulosic biomass records of the verifications required
is being transferred. ethanol or waste derived ethanol under paragraph (a) of this section, as
(4) The date of the transfer. (hereinafter referred to as ‘‘ethanol required in § 80.1151(c)(5).
(5) Whether any RINs are assigned to producer’’ under this section) is (g) The independent third party shall
the volume, as follows: required to arrange for an independent retain all records pertaining to the
(i) If the assigned RINs are being third party to review the records verification required under this section
transferred on the same PTD used to required in § 80.1151(c) and provide the for a period of five years from the date
transfer ownership of the renewable ethanol producer with a written of creation and shall deliver such
fuel, then the assigned RINs shall be verification that the records support a records to the Administrator upon
listed on the PTD. claim that: request.
(ii) If the assigned RINs are being (1) The ethanol producer’s facility is
transferred on a separate PTD from that a facility that has the capability of §§ 80.1156 through 80.1159 [Reserved]
which is used to transfer ownership of producing cellulosic biomass ethanol as ■ 14. Sections 80.1156 through 80.1159
the renewable fuel, then the PTD which defined in § 80.1101(a) or waste derived are reserved.
is used to transfer ownership of the ethanol as defined in § 80.1101(b); and ■ 15. Sections 80.1160 and 80.1161 are
renewable fuel shall state the number of (2) The ethanol producer produces added to read as follows:
gallon-RINs being transferred as well as cellulosic biomass ethanol as defined in
a unique reference to the PTD which is § 80.1101(a) or waste derived ethanol as § 80.1160 What acts are prohibited under
transferring the assigned RINs. defined in § 80.1101(b). the RFS program?
(iii) If no assigned RINs are being (b) The verifications required under (a) Renewable fuels producer or
transferred with the renewable fuel, the paragraph (a) of this section must be importer violation. Except as provided
PTD which is used to transfer conducted by a Professional Chemical in § 80.1154, no person shall produce or
import a renewable fuel without liable for any violation of this subpart to the renewable fuel standard under
assigning the proper RIN value or that is committed by the joint venture § 80.1105:
identifying it by a RIN number as operation. (1) Annual compliance demonstration
required under § 80.1126. report. (i) Obtain and read a copy of the
(b) RIN generation and transfer § 80.1162 [Reserved] annual compliance demonstration
violations. No person shall do any of the ■ 16. Section 80.1162 is reserved. report required under § 80.1152(a)(1)
following: ■ 17. Sections 80.1163 through 80.1167 which contains information regarding
(1) Improperly generate a RIN (i.e., are added to read as follows: all the following:
generate a RIN for which the applicable (A) The obligated party’s volume of
renewable fuel volume was not Subpart K—Renewable Fuel Standard finished gasoline, reformulated gasoline
produced). blendstock for oxygenate blending
(2) Create or transfer to any person a * * * * * (RBOB), and conventional gasoline
RIN that is invalid under § 80.1131. Sec.
80.1163 What penalties apply under the blendstock that becomes finished
(3) Transfer to any person a RIN that conventional gasoline upon the addition
RFS program?
is not properly identified as required of oxygenate (CBOB) produced or
80.1164 What are the attest engagement
under § 80.1125. requirements under the RFS program? imported during the reporting year.
(4) Transfer to any person a RIN with 80.1165 What are the additional (B) Renewable volume obligation
a K code of 1 without transferring an requirements under this Subpart for a (RVO).
appropriate volume of renewable fuel to foreign small refiner? (C) RINs used for compliance.
the same person on the same day. 80.1166 What are the additional (ii) Obtain documentation of any
(c) RIN use violations. No person shall requirements under this subpart for a volumes of renewable fuel used in
do any of the following: foreign producer of cellulosic biomass gasoline during the reporting year;
(1) Fail to acquire sufficient RINs, or ethanol or waste derived ethanol? compute and report as a finding the
use invalid RINs, to meet the party’s 80.1167 What are the additional
requirements under this subpart for a
volumes of renewable fuel represented
renewable fuel volume obligation under in these documents.
§ 80.1127. foreign RIN owner?
(iii) Compare the volumes of gasoline
(2) Fail to acquire sufficient RINs to * * * * * reported to EPA in the report required
meet the party’s renewable fuel volume under § 80.1152(a)(1) with the volumes,
§ 80.1163 What penalties apply under the
obligation under § 80.1130. RFS program? excluding any renewable fuel volumes,
(3) Use a validly generated RIN to contained in the inventory
meet the party’s renewable fuel volume (a) Any person who is liable for a
violation under § 80.1161 is subject to a reconciliation analysis under § 80.133.
obligation under § 80.1127, or separate (iii) Verify that the production volume
and transfer a validly generated RIN, civil penalty of up to $32,500, as
specified in sections 205 and 211(d) of information in the obligated party’s
where the party ultimately uses the annual summary report required under
renewable fuel volume associated with the Clean Air Act, for every day of each
such violation and the amount of § 80.1152(a)(1) agrees with the volume
the RIN in a heater or boiler. information, excluding any renewable
(d) RIN retention violation. No person economic benefit or savings resulting
from each violation. fuel volumes, contained in the
shall retain RINs in violation of the inventory reconciliation analysis under
requirements in § 80.1128(a)(5). (b) Any person liable under
§ 80.1161(a) for a violation of § 80.133.
(e) Causing a violation. No person (iv) Compute and report as a finding
shall cause another person to commit an § 80.1160(c) for failure to meet a
renewable volume obligation, or the obligated party’s RVO, and any
act in violation of any prohibited act deficit RVO carried over from the
under this section. § 80.1160(e) for causing another party to
fail to meet a renewable volume previous year or carried into the
§ 80.1161 Who is liable for violations obligation, during any averaging period, subsequent year, and verify that the
under the RFS program? is subject to a separate day of violation values agree with the values reported to
(a) Persons liable for violations of for each day in the averaging period. EPA.
prohibited acts. (1) Any person who (c) Any person liable under (v) Obtain documentation for all RINs
violates a prohibition under § 80.1160(a) § 80.1161(b) for failure to meet, or used for compliance during the year
through (d) is liable for the violation of causing a failure to meet, a requirement being reviewed; compute and report as
that prohibition. of any provision of this subpart is liable a finding the RIN numbers and year of
(2) Any person who causes another for a separate day of violation for each generation of RINs represented in these
person to violate a prohibition under day such a requirement remains documents; and state whether this
§ 80.1160(a) through (d) is liable for a unfulfilled. information agrees with the report to
violation of § 80.1160(e). EPA.
(b) Persons liable for failure to meet § 80.1164 What are the attest engagement (2) RIN transaction reports. (i) Obtain
other provisions of this subpart. (1) Any requirements under the RFS program? and read copies of a representative
person who fails to meet a requirement The requirements regarding annual sample of all RIN transaction reports
of any provision of this subpart is liable attest engagements in §§ 80.125 through required under § 80.1152(a)(2) for the
for a violation of that provision. 80.127, and 80.130, also apply to any compliance year.
(2) Any person who causes another attest engagement procedures required (ii) Obtain contracts or other
person to fail to meet a requirement of under this subpart. In addition to any documents for the representative sample
any provision of this subpart is liable for other applicable attest engagement of RIN transactions; compute and report
causing a violation of that provision. procedures, the following annual attest as a finding the transaction types,
(c) Parent corporation liability. Any engagement procedures are required transaction dates, and RINs traded; and
parent corporation is liable for any under this subpart. state whether the information agrees
violation of this subpart that is (a) The following attest procedures with the party’s reports to EPA.
committed by any of its subsidiaries. shall be completed for any obligated (3) Gallon-RIN activity reports. (i)
(d) Joint venture liability. Each partner party as stated in § 80.1106(a) or Obtain and read copies of all quarterly
to a joint venture is jointly and severally exporter of renewable fuel that is subject gallon-RIN activity reports required
under § 80.1152(a)(3) for the compliance compliance, sold, expired and retired as (3) RFS–FRGAS is gasoline produced
year. represented in these documents; and at a foreign refinery that has received a
(ii) Obtain documentation of total state whether this information agrees small refinery exemption under
RINs (including current-year RINs and with the party’s reports to EPA. § 80.1141 or a small refiner exemption
previous-year RINs) owned at the start (c) The following attest procedures under § 80.1142 that is imported into
of the quarter, purchased, used for shall be completed for any party other the United States.
compliance, sold, expired and retired than an obligated party or renewable (4) Non-RFS–FRGAS is one of the
during the quarter being reviewed, and fuel producer or importer that owns any following:
owned at the end of the quarter; RINs during a calendar year. (i) Gasoline produced at a foreign
compute and report as a finding the (1) RIN transaction reports. (i) Obtain refinery that has received a small
total RINs owned at the start and end of and read copies of a representative refinery exemption under § 80.1141 or a
the quarter, purchased, used for sample of the RIN transaction reports small refiner exemption under § 80.1142
compliance, sold, expired and retired as required under § 80.1152(c)(1) for the that is not imported into the United
represented in these documents; and compliance year. States.
state whether this information agrees (ii) Obtain contracts or other (ii) Gasoline produced at a foreign
with the party’s reports to EPA. documents for the representative sample refinery that has not received a small
(b) The following attest procedures of RIN transactions; compute and report refinery exemption under § 80.1141 or
shall be completed for any renewable as a finding the transaction types, small refiner exemption under
fuel producer or importer: transaction dates, and the RINs traded; § 80.1142.
(1) RIN-generation reports. (i) Obtain and state whether this information (5) A foreign small refiner is a foreign
and read copies of the quarterly RIN agrees with the party’s reports to EPA. refiner that has received a small refinery
generation reports required under (2) Gallon-RIN activity reports. (i) exemption under § 80.1141 for one or
§ 80.1152(b)(1) for the compliance year. Obtain and read copies of the gallon- more of its refineries or a small refiner
(ii) Obtain production data for each RIN activity reports required under exemption under § 80.1142.
renewable fuel batch produced during § 80.1152(c)(2) for the compliance year. (b) General requirements for RFS–
the year being reviewed; compute and (ii) Obtain documentation of total FRGAS foreign small refineries and
report as a finding the RIN numbers, RINs (including current-year RINs and small refiners.
production dates, types, volumes of previous-year RINs) owned at the start (1) A foreign small refiner must
denaturant and applicable equivalence of the quarter, purchased, sold, expired designate, at the time of production,
values, and production volumes for and retired during the quarter being each batch of gasoline produced at the
each batch; and state whether this reviewed, and owned at the end of the foreign refinery that is exported for use
information agrees with the party’s quarter; compute and report as a finding in the United States as RFS–FRGAS;
reports to EPA. the total RINs owned at the start and and
(iii) Verify that the proper number of end of the quarter, purchased, used for (2) Meet all requirements that apply to
RINs were generated and assigned for compliance, sold, expired and retired as refiners who have received a small
each batch of renewable fuel produced, represented in these documents; and refinery or small refiner exemption
as required under § 80.1126. state whether this information agrees under this subpart.
(iv) Obtain product transfer with the party’s reports to EPA. (c) Designation, foreign refiner
documents for each renewable fuel (d) The following submission dates certification, and product transfer
batch produced during the year being apply to the attest engagements required documents. (1) Any foreign small refiner
reviewed; report as a finding any under this section. must designate each batch of RFS–
product transfer document that did not (1) For each compliance year, each
FRGAS as such at the time the gasoline
include the RIN for the batch. party subject to the attest engagement
is produced.
(2) RIN transaction reports. (i) Obtain requirements under this section shall (2) On each occasion when RFS–
and read copies of a representative cause the reports required under this FRGAS is loaded onto a vessel or other
sample of the RIN transaction reports section to be submitted to EPA by May transportation mode for transport to the
required under § 80.1152(b)(2) for the 31 of the year following the compliance
United States, the foreign refiner shall
compliance year. year.
prepare a certification for each batch of
(ii) Obtain contracts or other (2) For the 2007 compliance year
only, the attest engagement required RFS–FRGAS that meets all the following
documents for the representative sample requirements:
of RIN transactions; compute and report under paragraph (a) of this section may
(i) The certification shall include the
as a finding the transaction types, be submitted to EPA with the attest
report of the independent third party
transaction dates, and the RINs traded; engagement for the 2008 compliance
under paragraph (d) of this section, and
year.
and state whether this information all the following additional information:
agrees with the party’s reports to EPA. § 80.1165 What are the additional (A) The name and EPA registration
(3) Gallon-RIN activity reports. (i) requirements under this subpart for a number of the refinery that produced
Obtain and read copies of the quarterly foreign small refiner? the RFS–FRGAS.
gallon-RIN activity reports required (a) Definitions. The following (B) [Reserved]
under § 80.1152(b)(3) for the compliance definitions apply for this subpart: (ii) The identification of the gasoline
year. (1) Foreign refinery is a refinery that as RFS–FRGAS.
(ii) Obtain documentation of total is located outside the United States, the (iii) The volume of RFS–FRGAS being
RINs (including current-year RINs and Commonwealth of Puerto Rico, the U.S. transported, in gallons.
previous-year RINs) owned at the start Virgin Islands, Guam, American Samoa, (3) On each occasion when any
of the quarter, purchased, sold, expired and the Commonwealth of the Northern person transfers custody or title to any
and retired during the quarter being Mariana Islands (collectively referred to RFS–FRGAS prior to its being imported
reviewed, and owned at the end of the in this section as ‘‘the United States’’). into the United States, it must include
quarter; compute and report as a finding (2) Foreign refiner is a person that all the following information as part of
the total RINs owned at the start and meets the definition of refiner under the product transfer document
end of the quarter, purchased, used for § 80.2(i) for a foreign refinery. information:
(i) Designation of the gasoline as RFS– of this section with regard to activities, (v) Inspections and audits by EPA
FRGAS. facilities, and documents relevant to may include review and copying of any
(ii) The certification required under compliance with the requirements of documents related to all the following:
paragraph (c)(2) of this section. this paragraph (d). (A) The volume of RFS–FRGAS.
(d) Load port independent testing and (e) Comparison of load port and port (B) The proper classification of
refinery identification. (1) On each of entry testing. (1)(i) Any small foreign gasoline as being RFS–FRGAS or as not
occasion that RFS–FRGAS is loaded small refiner and any United States being RFS–FRGAS.
onto a vessel for transport to the United importer of RFS–FRGAS shall compare (C) Transfers of title or custody to
States the foreign small refiner shall the results from the load port testing RFS–FRGAS.
have an independent third party do all under paragraph (d) of this section, with (D) Testing of RFS–FRGAS.
the following: the port of entry testing as reported (E) Work performed and reports
(i) Inspect the vessel prior to loading under paragraph (k) of this section, for prepared by independent third parties
and determine the volume of any tank the volume of gasoline, except as and by independent auditors under the
bottoms. specified in paragraph (e)(1)(ii) of this requirements of this section, including
(ii) Determine the volume of RFS– section. work papers.
FRGAS loaded onto the vessel (ii) Where a vessel transporting RFS– (vi) Inspections and audits by EPA
(exclusive of any tank bottoms before FRGAS off loads this gasoline at more may include taking interviewing
loading). than one United States port of entry, the employees.
(iii) Obtain the EPA-assigned requirements of paragraph (e)(1)(i) of (vii) Any employee of the foreign
registration number of the foreign this section do not apply at subsequent refiner must be made available for
refinery. ports of entry if the United States interview by the EPA inspector or
(iv) Determine the name and country importer obtains a certification from the auditor, on request, within a reasonable
of registration of the vessel used to vessel owner that the requirements of time period.
transport the RFS–FRGAS to the United paragraph (e)(1)(i) of this section were (viii) English language translations of
States. met and that the vessel has not loaded any documents must be provided to an
(v) Determine the date and time the any gasoline or blendstock between the EPA inspector or auditor, on request,
vessel departs the port serving the first United States port of entry and the within 10 working days.
foreign refinery. subsequent port of entry. (ix) English language interpreters
(vi) Review original documents that (2) If the temperature-corrected must be provided to accompany EPA
reflect movement and storage of the volumes determined at the port of entry inspectors and auditors, on request.
RFS–FRGAS from the foreign refinery to and at the load port differ by more than (2) An agent for service of process
the load port, and from this review one percent, the United States importer located in the District of Columbia shall
determine: and the foreign small refiner shall not be named, and service on this agent
(A) The refinery at which the RFS– treat the gasoline as RFS–FRGAS and constitutes service on the foreign refiner
FRGAS was produced; and the importer shall include the volume of or any employee of the foreign refiner
(B) That the RFS–FRGAS remained gasoline in the importer’s RFS for any action by EPA or otherwise by
segregated from Non-RFS–FRGAS and compliance calculations. the United States related to the
other RFS–FRGAS produced at a (f) Foreign refiner commitments. Any requirements of this subpart.
different refinery. small foreign small refiner shall commit (3) The forum for any civil or criminal
(2) The independent third party shall to and comply with the provisions enforcement action related to the
submit a report to: contained in this paragraph (f) as a provisions of this section for violations
(i) The foreign small refiner condition to being approved for a small of the Clean Air Act or regulations
containing the information required refinery or small refiner exemption promulgated thereunder shall be
under paragraph (d)(1) of this section, to under this subpart. governed by the Clean Air Act,
accompany the product transfer (1) Any United States Environmental including the EPA administrative forum
documents for the vessel; and Protection Agency inspector or auditor where allowed under the Clean Air Act.
(ii) The Administrator containing the must be given full, complete and (4) United States substantive and
information required under paragraph immediate access to conduct procedural laws shall apply to any civil
(d)(1) of this section, within thirty days inspections and audits of the foreign or criminal enforcement action against
following the date of the independent refinery. the foreign refiner or any employee of
third party’s inspection. This report (i) Inspections and audits may be the foreign refiner related to the
shall include a description of the either announced in advance by EPA, or provisions of this section.
method used to determine the identity unannounced. (5) Submitting an application for a
of the refinery at which the gasoline was (ii) Access will be provided to any small refinery or small refiner
produced, assurance that the gasoline location where: exemption, or producing and exporting
remained segregated as specified in (A) Gasoline is produced; gasoline under such exemption, and all
paragraph (j)(1) of this section, and a (B) Documents related to refinery other actions to comply with the
description of the gasoline’s movement operations are kept; and requirements of this subpart relating to
and storage between production at the (C) RFS–FRGAS is stored or such exemption constitute actions or
source refinery and vessel loading. transported between the foreign refinery activities covered by and within the
(3) The independent third party must: and the United States, including storage meaning of the provisions of 28 U.S.C.
(i) Be approved in advance by EPA, tanks, vessels and pipelines. 1605(a)(2), but solely with respect to
based on a demonstration of ability to (iii) Inspections and audits may be by actions instituted against the foreign
perform the procedures required in this EPA employees or contractors to EPA. refiner, its agents and employees in any
paragraph (d); (iv) Any documents requested that are court or other tribunal in the United
(ii) Be independent under the criteria related to matters covered by States for conduct that violates the
specified in § 80.65(f)(2)(iii); and inspections and audits must be requirements applicable to the foreign
(iii) Sign a commitment that contains provided to an EPA inspector or auditor refiner under this subpart, including
the provisions specified in paragraph (f) on request. conduct that violates the False
Statements Accountability Act of 1996 recent of the following calendar years, combine RFS–FRGAS with any RFS–
(18 U.S.C. 1001) and section 113(c)(2) of up to a maximum of five calendar years: FRGAS produced at a different refinery,
the Clean Air Act (42 U.S.C. 7413). The calendar year immediately until the importer has met all the
(6) The foreign refiner, or its agents or preceding the date the refinery’s requirements of paragraph (k) of this
application is submitted, the calendar
employees, will not seek to detain or to section.
year the application is submitted, and
impose civil or criminal remedies each succeeding calendar year. (2) No foreign refiner or other person
against EPA inspectors or auditors, may cause another person to commit an
whether EPA employees or EPA (2) Bonds shall be posted by: action prohibited in paragraph (j)(1) of
contractors, for actions performed (i) Paying the amount of the bond to this section, or that otherwise violates
within the scope of EPA employment the Treasurer of the United States; the requirements of this section.
related to the provisions of this section. (ii) Obtaining a bond in the proper (k) United States importer
(7) The commitment required by this amount from a third party surety agent requirements. Any United States
paragraph (f) shall be signed by the that is payable to satisfy United States importer of RFS–FRGAS shall meet the
owner or president of the foreign refiner administrative or judicial judgments following requirements:
business. against the foreign refiner, provided (1) Each batch of imported RFS–
(8) In any case where RFS–FRGAS EPA agrees in advance as to the third FRGAS shall be classified by the
produced at a foreign refinery is stored party and the nature of the surety importer as being RFS–FRGAS.
or transported by another company agreement; or (2) Gasoline shall be classified as
between the refinery and the vessel that (iii) An alternative commitment that RFS–FRGAS according to the
transports the RFS–FRGAS to the results in assets of an appropriate designation by the foreign refiner if this
United States, the foreign refiner shall liquidity and value being readily designation is supported by product
obtain from each such other company a available to the United States, provided transfer documents prepared by the
commitment that meets the EPA agrees in advance as to the foreign refiner as required in paragraph
requirements specified in paragraphs alternative commitment. (c) of this section. Additionally, the
(f)(1) through (f)(7) of this section, and (3) Bonds posted under this paragraph importer shall comply with all
these commitments shall be included in (h) shall: requirements of this subpart applicable
the foreign refiner’s application for a (i) Be used to satisfy any judicial to importers.
small refinery or small refiner judgment that results from an (3) For each gasoline batch classified
exemption under this subpart. administrative or judicial enforcement as RFS–FRGAS, any United States
(g) Sovereign immunity. By action for conduct in violation of this importer shall have an independent
submitting an application for a small subpart, including where such conduct third party do all the following:
refinery or small refiner exemption violates the False Statements (i) Determine the volume of gasoline
under this subpart, or by producing and Accountability Act of 1996 (18 U.S.C. in the vessel.
exporting gasoline to the United States 1001) and section 113(c)(2) of the Clean (ii) Use the foreign refiner’s RFS–
under such exemption, the foreign Air Act (42 U.S.C. 7413); FRGAS certification to determine the
refiner, and its agents and employees, (ii) Be provided by a corporate surety name and EPA-assigned registration
without exception, become subject to that is listed in the United States number of the foreign refinery that
the full operation of the administrative Department of Treasury Circular 570 produced the RFS–FRGAS.
and judicial enforcement powers and ‘‘Companies Holding Certificates of (iii) Determine the name and country
provisions of the United States without Authority as Acceptable Sureties on of registration of the vessel used to
limitation based on sovereign immunity, Federal Bonds’’; and transport the RFS–FRGAS to the United
with respect to actions instituted against (iii) Include a commitment that the States.
the foreign refiner, its agents and bond will remain in effect for at least (iv) Determine the date and time the
employees in any court or other tribunal five years following the end of latest vessel arrives at the United States port
in the United States for conduct that annual reporting period that the foreign of entry.
violates the requirements applicable to refiner produces gasoline pursuant to (4) Any importer shall submit reports
the foreign refiner under this subpart, the requirements of this subpart. within 30 days following the date any
including conduct that violates the (4) On any occasion a foreign refiner vessel transporting RFS–FRGAS arrives
False Statements Accountability Act of bond is used to satisfy any judgment, at the United States port of entry to:
1996 (18 U.S.C. 1001) and section the foreign refiner shall increase the (i) The Administrator containing the
113(c)(2) of the Clean Air Act (42 U.S.C. bond to cover the amount used within information determined under
7413). 90 days of the date the bond is used. paragraph (k)(3) of this section; and
(h) Bond posting. Any foreign refiner (5) If the bond amount for a foreign (ii) The foreign refiner containing the
shall meet the requirements of this refiner increases, the foreign refiner information determined under
paragraph (h) as a condition to approval shall increase the bond to cover the paragraph (k)(3)(i) of this section, and
of a small foreign refinery or small shortfall within 90 days of the date the including identification of the port at
foreign refiner exemption under this bond amount changes. If the bond which the product was off loaded.
subpart. amount decreases, the foreign refiner (5) Any United States importer shall
(1) The foreign refiner shall post a may reduce the amount of the bond meet all other requirements of this
bond of the amount calculated using the beginning 90 days after the date the subpart for any imported gasoline that is
following equation: bond amount changes. not classified as RFS–FRGAS under
Bond = G * $0.01 (i) English language reports. Any paragraph (k)(2) of this section.
document submitted to EPA by a foreign (l) Truck imports of RFS–FRGAS
Where:
refiner shall be in English language, or produced at a foreign refinery. (1) Any
Bond = amount of the bond in United States
shall include an English language refiner whose RFS–FRGAS is

dollars.
G = the largest volume of gasoline produced translation. transported into the United States by
at the foreign refinery and exported to (j) Prohibitions. (1) No person may truck may petition EPA to use
the United States, in gallons, during a combine RFS–FRGAS with any Non- alternative procedures to meet all the
single calendar year among the most RFS–FRGAS, and no person may following requirements:
(i) Certification under paragraph (c)(2) (A) Agree the information in these (i) Be independent of the foreign
of this section. reports with regard to vessel refiner or importer;
(ii) Load port and port of entry testing identification and gasoline volume. (ii) Be licensed as a Certified Public
requirements under paragraphs (d) and (B) Identify, and report as a finding, Accountant in the United States and a
(e) of this section. each occasion the load port and port of citizen of the United States, or be
(iii) Importer testing requirements entry volume results differ by more than approved in advance by EPA based on
under paragraph (k)(3) of this section. the amount allowed in paragraph (e)(2) a demonstration of ability to perform the
(2) These alternative procedures must of this section, and determine whether procedures required in §§ 80.125
all of the requirements of paragraph through 80.127, 80.130, 80.1164, and
ensure RFS–FRGAS remains segregated
(e)(2) of this section have been met. this paragraph (m); and
from Non-RFS–FRGAS until it is
(ii) Obtain the documents used by the (iii) Sign a commitment that contains
imported into the United States. The
independent third party to determine the provisions specified in paragraph (f)
petition will be evaluated based on
transportation and storage of the RFS– of this section with regard to activities
whether it adequately addresses the
FRGAS from the refinery to the load and documents relevant to compliance
following:
port, under paragraph (d) of this section. with the requirements of §§ 80.125
(i) Provisions for monitoring pipeline Obtain tank activity records for any through 80.127, 80.130, 80.1164, and
shipments, if applicable, from the storage tank where the RFS–FRGAS is this paragraph (m).
refinery, that ensure segregation of RFS– stored, and pipeline activity records for (n) Withdrawal or suspension of
FRGAS from that refinery from all other any pipeline used to transport the RFS– foreign refiner status. EPA may
gasoline. FRGAS prior to being loaded onto the withdraw or suspend a foreign refiner’s
(ii) Contracts with any terminals and/ vessel. Use these records to determine small refinery or small refiner
or pipelines that receive and/or whether the RFS–FRGAS was produced exemption where:
transport RFS–FRGAS that prohibit the at the refinery that is the subject of the (1) A foreign refiner fails to meet any
commingling of RFS–FRGAS with Non- attest engagement, and whether the requirement of this section;
RFS–FRGAS or RFS–FRGAS from other RFS–FRGAS was mixed with any Non- (2) A foreign government fails to
foreign refineries. RFS–FRGAS or any RFS–FRGAS allow EPA inspections as provided in
(iii) Attest procedures to be conducted produced at a different refinery. paragraph (f)(1) of this section;
annually by an independent third party (4) Select a sample from the list of (3) A foreign refiner asserts a claim of,
that review loading records and import vessels identified in paragraph (m)(2) of or a right to claim, sovereign immunity
documents based on volume this section used to transport RFS– in an action to enforce the requirements
reconciliation, or other criteria, to FRGAS, in accordance with the in this subpart; or
confirm that all RFS–FRGAS remains guidelines in § 80.127, and for each (4) A foreign refiner fails to pay a civil
segregated throughout the distribution vessel selected perform the following: or criminal penalty that is not satisfied
system. (i) Obtain a commercial document of using the foreign refiner bond specified
(3) The petition described in this general circulation that lists vessel in paragraph (h) of this section.
section must be submitted to EPA along arrivals and departures, and that (o) Additional requirements for
with the application for a small refinery includes the port and date of departure applications, reports and certificates.
or small refiner exemption under this of the vessel, and the port of entry and Any application for a small refinery or
subpart. date of arrival of the vessel. small refiner exemption, alternative
(m) Additional attest requirements for (ii) Agree the vessel’s departure and procedures under paragraph (l) of this
importers of RFS–FRGAS. The following arrival locations and dates from the section, any report, certification, or
additional procedures shall be carried independent third party and United other submission required under this
out by any importer of RFS–FRGAS as States importer reports to the section shall be:
part of the attest engagement required information contained in the (1) Submitted in accordance with
for importers under this subpart K. commercial document. procedures specified by the
(5) Obtain separate listings of all Administrator, including use of any
(1) Obtain listings of all tenders of
tenders of RFS–FRGAS, and perform the forms that may be specified by the
RFS–FRGAS. Agree the total volume of
following: Administrator.
tenders from the listings to the gasoline
(i) Agree the volume of tenders from (2) Be signed by the president or
inventory reconciliation analysis
the listings to the gasoline inventory owner of the foreign refiner company, or
required in § 80.133(b), and to the
reconciliation analysis in § 80.133(b). by that person’s immediate designee,
volumes determined by the third party (ii) Obtain a separate listing of the
under paragraph (d) of this section. and shall contain the following
tenders under this paragraph (m)(5) declaration:
(2) For each tender under paragraph where the gasoline is loaded onto a
(m)(1) of this section, where the gasoline I hereby certify: (1) That I have actual
marine vessel. Select a sample from this authority to sign on behalf of and to bind
is loaded onto a marine vessel, report as listing in accordance with the
a finding the name and country of [NAME OF FOREIGN REFINER] with regard
guidelines in § 80.127, and obtain a to all statements contained herein; (2) that I
registration of each vessel, and the commercial document of general am aware that the information contained
volumes of RFS–FRGAS loaded onto circulation that lists vessel arrivals and herein is being Certified, or submitted to the
each vessel. departures, and that includes the port United States Environmental Protection
(3) Select a sample from the list of and date of departure and the ports and Agency, under the requirements of 40 CFR
vessels identified in paragraph (m)(2) of dates where the gasoline was off loaded part 80, subpart K, and that the information
this section used to transport RFS– for the selected vessels. Determine and is material for determining compliance under
FRGAS, in accordance with the these regulations; and (3) that I have read and
report as a finding the country where understand the information being Certified or
guidelines in § 80.127, and for each the gasoline was off loaded for each submitted, and this information is true,
vessel selected perform the following: vessel selected. complete and correct to the best of my
(i) Obtain the report of the (6) In order to complete the knowledge and belief after I have taken
independent third party, under requirements of this paragraph (m), an reasonable and appropriate steps to verify the
paragraph (d) of this section. auditor shall: accuracy thereof. I affirm that I have read and
understand the provisions of 40 CFR part 80, waste derived ethanol as ‘‘RFS–FRETH’’ paragraph (d)(1) of this section, to
subpart K, including 40 CFR 80.1165 apply at the time the ethanol is produced. accompany the product transfer
to [NAME OF FOREIGN REFINER]. Pursuant (2) On each occasion when RFS– documents for the vessel.
to Clean Air Act section 113(c) and 18 U.S.C. FRETH is loaded onto a vessel or other (ii) The Administrator containing the
1001, the penalty for furnishing false, information required under paragraph
transportation mode for transport to the
incomplete or misleading information in this
certification or submission is a fine of up to United States, the foreign producer shall (d)(1) of this section, within thirty days
$10,000 U.S., and/or imprisonment for up to prepare a certification for each batch of following the date of the independent
five years.’’ RFS–FRETH; the certification shall third party’s inspection. This report
include the report of the independent shall include a description of the
§ 80.1166 What are the additional third party under paragraph (d) of this method used to determine the identity
requirements under this subpart for a section, and all the following additional of the foreign producer facility at which
foreign producer of cellulosic biomass the ethanol was produced, assurance
information:
ethanol or waste derived ethanol?
(i) The name and EPA registration that the ethanol remained segregated as
(a) Foreign producer of cellulosic number of the company that produced specified in paragraph (j)(1) of this
biomass ethanol or waste derived the RFS–FRETH. section, and a description of the
ethanol. For purposes of this subpart, a (ii) The identification of the ethanol ethanol’s movement and storage
foreign producer of cellulosic biomass as RFS–FRETH. between production at the source
ethanol or waste derived ethanol is a (iii) The volume of RFS–FRETH being facility and vessel loading.
person located outside the United transported, in gallons. (3) The independent third party must:
States, the Commonwealth of Puerto (3) On each occasion when any (i) Be approved in advance by EPA,
Rico, the Virgin Islands, Guam, person transfers custody or title to any based on a demonstration of ability to
American Samoa, and the RFS–FRETH prior to its being imported perform the procedures required in this
Commonwealth of the Northern Mariana into the United States, it must include paragraph (d);
Islands (collectively referred to in this all the following information as part of (ii) Be independent under the criteria
section as ’’the United States’’) that has the product transfer document specified in § 80.65(e)(2)(iii); and
been approved by EPA to assign RINs to information: (iii) Sign a commitment that contains
cellulosic biomass ethanol or waste (i) Designation of the ethanol as RFS– the provisions specified in paragraph (f)
derived ethanol that the foreign FRETH. of this section with regard to activities,
producer produces and exports to the (ii) The certification required under facilities and documents relevant to
United States, hereinafter referred to as paragraph (c)(2) of this section. compliance with the requirements of
a ‘‘foreign producer’’ under this section. (d) Load port independent testing and this paragraph (d).
(b) General requirements. (1) An refinery identification. (1) On each (e) Comparison of load port and port
approved foreign producer under this occasion that RFS–FRETH is loaded of entry testing. (1)(i) Any foreign
section must meet all requirements that onto a vessel for transport to the United producer and any United States
apply to cellulosic biomass ethanol or States the foreign producer shall have importer of RFS–FRETH shall compare
waste derived ethanol producers under an independent third party do all the the results from the load port testing
this subpart, except to the extent following: under paragraph (d) of this section, with
otherwise specified in paragraph (b)(2) (i) Inspect the vessel prior to loading the port of entry testing as reported
of this section. and determine the volume of any tank under paragraph (k) of this section, for
(2)(i) The independent third party that bottoms. the volume of ethanol, except as
conducts the facility verification (ii) Determine the volume of RFS– specified in paragraph (e)(1)(ii) of this
required under § 80.1155(a) must FRETH loaded onto the vessel section.
(exclusive of any tank bottoms before (ii) Where a vessel transporting RFS–
inspect the foreign producer’s facility
loading). FRETH off loads the ethanol at more
and submit a report to EPA which
(iii) Obtain the EPA-assigned than one United States port of entry, the
describes in detail the physical plant
registration number of the foreign requirements of paragraph (e)(1)(i) of
and its operation.
producer. this section do not apply at subsequent
(ii) The independent third party that ports of entry if the United States
(iv) Determine the name and country
conducts the facility verification importer obtains a certification from the
of registration of the vessel used to
required under § 80.1155(a) must be a vessel owner that the requirements of
transport the RFS–FRETH to the United
licensed Professional Engineer in the paragraph (e)(1)(i) of this section were
States.
chemical engineering field, but need not (v) Determine the date and time the met and that the vessel has not loaded
be based in the United States. The vessel departs the port serving the any ethanol between the first United
independent third party must include foreign producer. States port of entry and the subsequent
documentation of its qualifications as a (vi) Review original documents that port of entry.
licensed Professional Engineer in the reflect movement and storage of the (2)(i) If the temperature-corrected
report required in paragraph (b)(2)(i) of RFS–FRETH from the foreign producer volumes determined at the port of entry
this section. to the load port, and from this review and at the load port differ by more than
(iii) The requirements of paragraphs determine the following: one percent, the number of RINs
(b)(2)(i) and (ii) of this section must be (A) The facility at which the RFS– associated with the ethanol shall be
met before a foreign entity may be FRETH was produced. calculated based on the lesser of the two
approved as a foreign producer under (B) That the RFS–FRETH remained volumes in paragraph (e)(1)(i) of this
this subpart. segregated from Non-RFS–FRETH and section.
(c) Designation, foreign producer other RFS–FRETH produced by a (ii) Where the port of entry volume is
certification, and product transfer different foreign producer. the lesser of the two volumes in
documents. (2) The independent third party shall paragraph (e)(1)(i) of this section, the
(1) Any approved foreign producer submit a report to the following: importer shall calculate the difference
under this section must designate each (i) The foreign producer containing between the number of RINs originally
batch of cellulosic biomass ethanol or the information required under assigned by the foreign producer and
the number of RINs calculated under producer for any action by EPA or agents and employees, without
§ 80.1126 for the volume of ethanol as otherwise by the United States related to exception, become subject to the full
measured at the port of entry, and retire the requirements of this subpart. operation of the administrative and
that amount of RINs in accordance with (3) The forum for any civil or criminal judicial enforcement powers and
paragraph (k)(4) of this section. enforcement action related to the provisions of the United States without
(f) Foreign producer commitments. provisions of this section for violations limitation based on sovereign immunity,
Any foreign producer shall commit to of the Clean Air Act or regulations with respect to actions instituted against
and comply with the provisions promulgated thereunder shall be the foreign producer, its agents and
contained in this paragraph (f) as a governed by the Clean Air Act, employees in any court or other tribunal
condition to being approved as a foreign including the EPA administrative forum in the United States for conduct that
producer under this subpart. where allowed under the Clean Air Act. violates the requirements applicable to
(1) Any United States Environmental (4) United States substantive and the foreign producer under this subpart,
Protection Agency inspector or auditor procedural laws shall apply to any civil including conduct that violates the
must be given full, complete and or criminal enforcement action against False Statements Accountability Act of
immediate access to conduct the foreign producer or any employee of 1996 (18 U.S.C. 1001) and section
inspections and audits of the foreign the foreign producer related to the 113(c)(2) of the Clean Air Act (42 U.S.C.
producer facility. provisions of this section. 7413).
(i) Inspections and audits may be (5) Applying to be an approved (h) Bond posting. Any foreign
either announced in advance by EPA, or foreign producer under this section, or producer shall meet the requirements of
unannounced. producing or exporting ethanol under this paragraph (h) as a condition to
(ii) Access will be provided to any such approval, and all other actions to approval as a foreign producer under
location where: comply with the requirements of this this subpart.
(A) Ethanol is produced; subpart relating to such approval (1) The foreign producer shall post a
(B) Documents related to ethanol constitute actions or activities covered bond of the amount calculated using the
producer operations are kept; and by and within the meaning of the following equation:
(C) RFS–FRETH is stored or provisions of 28 U.S.C. 1605(a)(2), but Bond = G * $ 0.01
transported between the foreign solely with respect to actions instituted Where:
producer and the United States, against the foreign producer, its agents Bond = amount of the bond in U.S. dollars.
including storage tanks, vessels and and employees in any court or other G = The largest volume of ethanol produced
pipelines. tribunal in the United States for conduct at the foreign producer’s facility and
(iii) Inspections and audits may be by that violates the requirements exported to the United States, in gallons,
EPA employees or contractors to EPA. applicable to the foreign producer under during a single calendar year among the
(iv) Any documents requested that are this subpart, including conduct that most recent of the following calendar
violates the False Statements years, up to a maximum of five calendar
related to matters covered by
years: The calendar year immediately
inspections and audits must be Accountability Act of 1996 (18 U.S.C. preceding the date the refinery’s
provided to an EPA inspector or auditor 1001) and section 113(c)(2) of the Clean application is submitted, the calendar
on request. Air Act (42 U.S.C. 7413). year the application is submitted, and
(v) Inspections and audits by EPA (6) The foreign producer, or its agents each succeeding calendar year.
may include review and copying of any or employees, will not seek to detain or
(2) Bonds shall be posted by any of
documents related to the following: to impose civil or criminal remedies
the following methods:
(A) The volume of RFS–FRETH. against EPA inspectors or auditors, (i) Paying the amount of the bond to
(B) The proper classification of whether EPA employees or EPA the Treasurer of the United States.
gasoline as being RFS–FRETH; contractors, for actions performed (ii) Obtaining a bond in the proper
(C) Transfers of title or custody to within the scope of EPA employment amount from a third party surety agent
RFS–FRETH. related to the provisions of this section. that is payable to satisfy United States
(D) Work performed and reports (7) The commitment required by this administrative or judicial judgments
prepared by independent third parties paragraph (f) shall be signed by the against the foreign producer, provided
and by independent auditors under the owner or president of the foreign EPA agrees in advance as to the third
requirements of this section, including producer company. party and the nature of the surety
work papers. (8) In any case where RFS–FRETH agreement.
(vi) Inspections and audits by EPA produced at a foreign producer facility (iii) An alternative commitment that
may include interviewing employees. is stored or transported by another results in assets of an appropriate
(vii) Any employee of the foreign company between the refinery and the liquidity and value being readily
producer must be made available for vessel that transports the RFS–FRETH to available to the United States provided
interview by the EPA inspector or the United States, the foreign producer EPA agrees in advance as to the
auditor, on request, within a reasonable shall obtain from each such other alternative commitment.
time period. company a commitment that meets the (3) Bonds posted under this paragraph
(viii) English language translations of requirements specified in paragraphs (h) shall:
any documents must be provided to an (f)(1) through (7) of this section, and (i) Be used to satisfy any judicial
EPA inspector or auditor, on request, these commitments shall be included in judgment that results from an
within 10 working days. the foreign producer’s application to be administrative or judicial enforcement
(ix) English language interpreters an approved foreign producer under this action for conduct in violation of this
must be provided to accompany EPA subpart. subpart, including where such conduct
inspectors and auditors, on request. (g) Sovereign immunity. By violates the False Statements
(2) An agent for service of process submitting an application to be an Accountability Act of 1996 (18 U.S.C.
located in the District of Columbia shall approved foreign producer under this 1001) and section 113(c)(2) of the Clean
be named, and service on this agent subpart, or by producing and exporting Air Act (42 U.S.C. 7413);
constitutes service on the foreign ethanol to the United States under such (ii) Be provided by a corporate surety
producer or any employee of the foreign approval, the foreign producer, and its that is listed in the United States
Department of Treasury Circular 570 (iii) Determine the name and country (m) Additional attest requirements for
’’Companies Holding Certificates of of registration of the vessel used to producers of RFS–FRETH. The
Authority as Acceptable Sureties on transport the RFS–FRETH to the United following additional procedures shall be
Federal Bonds’’; and States. carried out by any producer of RFS–
(iii) Include a commitment that the (iv) Determine the date and time the FRETH as part of the attest engagement
bond will remain in effect for at least vessel arrives at the United States port required for renewable fuel producers
five years following the end of the latest of entry. under this subpart K.
annual reporting period that the foreign (4) Where the importer is required to (1) Obtain listings of all tenders of
producer produces ethanol pursuant to retire RINs under paragraph (e)(2) of this RFS–FRETH. Agree the total volume of
the requirements of this subpart. section, the importer must report the tenders from the listings to the volumes
(4) On any occasion a foreign retired RINs in the applicable reports determined by the third party under
producer bond is used to satisfy any under § 80.1152. paragraph (d) of this section.
judgment, the foreign producer shall (5) Any importer shall submit reports (2) For each tender under paragraph
increase the bond to cover the amount within 30 days following the date any (m)(1) of this section, where the ethanol
used within 90 days of the date the vessel transporting RFS–FRETH arrives is loaded onto a marine vessel, report as
bond is used. at the United States port of entry to the a finding the name and country of
(5) If the bond amount for a foreign following: registration of each vessel, and the
producer increases, the foreign producer (i) The Administrator containing the volumes of RFS–FRETH loaded onto
shall increase the bond to cover the information determined under each vessel.
shortfall within 90 days of the date the paragraph (k)(3) of this section. (3) Select a sample from the list of
bond amount changes. If the bond (ii) The foreign producer containing vessels identified in paragraph (m)(2) of
amount decreases, the foreign refiner the information determined under this section used to transport RFS–
may reduce the amount of the bond paragraph (k)(3)(i) of this section, and FRETH, in accordance with the
beginning 90 days after the date the including identification of the port at guidelines in § 80.127, and for each
bond amount changes. which the product was off loaded, and vessel selected perform the following:
(i) English language reports. Any any RINs retired under paragraph (e)(2) (i) Obtain the report of the
document submitted to EPA by a foreign of this section. independent third party, under
producer shall be in English language, (6) Any United States importer shall paragraph (d) of this section, and of the
or shall include an English language meet all other requirements of this United States importer under paragraph
translation. subpart for any imported ethanol or (k) of this section.
(j) Prohibitions. (1) No person may other renewable fuel that is not (A) Agree the information in these
combine RFS–FRETH with any Non- classified as RFS–FRETH under reports with regard to vessel
RFS–FRETH, and no person may paragraph (k)(2) of this section. identification and ethanol volume.
combine RFS–FRETH with any RFS– (l) Truck imports of RFS–FRETH (B) Identify, and report as a finding,
FRETH produced at a different refinery, produced by a foreign producer. (1) Any each occasion the load port and port of
until the importer has met all the foreign producer whose RFS–FRETH is entry volume results differ by more than
requirements of paragraph (k) of this transported into the United States by the amount allowed in paragraph (e) of
section. truck may petition EPA to use this section, and determine whether the
(2) No foreign producer or other alternative procedures to meet all the importer retired the appropriate amount
person may cause another person to following requirements: of RINs as required under paragraph
commit an action prohibited in (i) Certification under paragraph (c)(2) (e)(2) of this section, and submitted the
paragraph (j)(1) of this section, or that of this section. applicable reports under § 80.1152 in
otherwise violates the requirements of (ii) Load port and port of entry testing accordance with paragraph (k)(4) of this
this section. under paragraphs (d) and (e) of this section.
(k) Requirements for United States section. (ii) Obtain the documents used by the
importers of RFS–FRETH. Any United (iii) Importer testing under paragraph independent third party to determine
States importer shall meet the following (k)(3) of this section. transportation and storage of the RFS–
requirements: (2) These alternative procedures must FRETH from the foreign producer’s
(1) Each batch of imported RFS– ensure RFS–FRETH remains segregated facility to the load port, under
FRETH shall be classified by the from Non-RFS–FRETH until it is paragraph (d) of this section. Obtain
importer as being RFS–FRETH. imported into the United States. The tank activity records for any storage tank
(2) Ethanol shall be classified as RFS– petition will be evaluated based on where the RFS–FRETH is stored, and
FRETH according to the designation by whether it adequately addresses the activity records for any mode of
the foreign producer if this designation following: transportation used to transport the
is supported by product transfer (i) Contracts with any facilities that RFS–FRGAS prior to being loaded onto
documents prepared by the foreign receive and/or transport RFS–FRETH the vessel. Use these records to
producer as required in paragraph (c) of that prohibit the commingling of RFS– determine whether the RFS–FRETH was
this section. FRETH with Non-RFS–FRETH or RFS– produced at the foreign producer’s
(3) For each ethanol batch classified FRETH from other foreign producers. facility that is the subject of the attest
as RFS–FRETH, any United States (ii) Attest procedures to be conducted engagement, and whether the RFS–
importer shall have an independent annually by an independent third party FRETH was mixed with any Non-RFS–
third party do all the following: that review loading records and import FRETH or any RFS–FRETH produced at
(i) Determine the volume of gasoline documents based on volume a different facility.
in the vessel. reconciliation to confirm that all RFS– (4) Select a sample from the list of
(ii) Use the foreign producer’s RFS– FRETH remains segregated. vessels identified in paragraph (m)(2) of
FRETH certification to determine the (3) The petition described in this this section used to transport RFS–
name and EPA-assigned registration section must be submitted to EPA along FRETH, in accordance with the
number of the foreign producer that with the application for approval as a guidelines in § 80.127, and for each
produced the RFS–FRETH. foreign producer under this subpart. vessel selected perform the following:
(i) Obtain a commercial document of foreign producer, alternative procedures (ii) Access will be provided to any
general circulation that lists vessel under paragraph (l) of this section, any location where documents related to
arrivals and departures, and that report, certification, or other submission RINs the foreign RIN owner has
includes the port and date of departure required under this section shall be: obtained, sold, transferred or held are
of the vessel, and the port of entry and (1) Submitted in accordance with kept.
date of arrival of the vessel. procedures specified by the (iii) Inspections and audits may be by
(ii) Agree the vessel’s departure and Administrator, including use of any EPA employees or contractors to EPA.
arrival locations and dates from the forms that may be specified by the (iv) Any documents requested that are
independent third party and United Administrator. related to matters covered by
States importer reports to the (2) Signed by the president or owner inspections and audits must be
information contained in the of the foreign producer company, or by provided to an EPA inspector or auditor
commercial document. that person’s immediate designee, and on request.
(5) Obtain a separate listing of the shall contain the following declaration: (v) Inspections and audits by EPA
tenders under this paragraph (m)(5) I hereby certify: (1) That I have actual may include review and copying of any
where the gasoline is loaded onto a authority to sign on behalf of and to bind documents related to the following:
marine vessel. Select a sample from this [insert name of foreign producer] with regard (A) Transfers of title to RINs.
listing in accordance with the to all statements contained herein; (2) that I (B) Work performed and reports
guidelines in § 80.127, and obtain a am aware that the information contained prepared by independent auditors under
herein is being Certified, or submitted to the the requirements of this section,
commercial document of general United States Environmental Protection
circulation that lists vessel arrivals and including work papers.
Agency, under the requirements of 40 CFR
departures, and that includes the port part 80, subpart K, and that the information
(vi) Inspections and audits by EPA
and date of departure and the ports and is material for determining compliance under may include interviewing employees.
dates where the ethanol was off loaded these regulations; and (3) that I have read and (vii) Any employee of the foreign RIN
for the selected vessels. Determine and understand the information being Certified or owner must be made available for
report as a finding the country where submitted, and this information is true, interview by the EPA inspector or
the ethanol was off loaded for each complete and correct to the best of my auditor, on request, within a reasonable
knowledge and belief after I have taken time period.
vessel selected. reasonable and appropriate steps to verify the
(6) In order to complete the (viii) English language translations of
accuracy thereof. I affirm that I have read and any documents must be provided to an
requirements of this paragraph (m) an understand the provisions of 40 CFR part 80,
auditor shall: subpart K, including 40 CFR 80.1165 apply EPA inspector or auditor, on request,
(i) Be independent of the foreign to [insert name of foreign producer]. Pursuant within 10 working days.
producer; to Clean Air Act section 113(c) and 18 U.S.C. (ix) English language interpreters
(ii) Be licensed as a Certified Public 1001, the penalty for furnishing false, must be provided to accompany EPA
Accountant in the United States and a incomplete or misleading information in this inspectors and auditors, on request.
citizen of the United States, or be certification or submission is a fine of up to (2) An agent for service of process
$10,000 U.S., and/or imprisonment for up to located in the District of Columbia shall
approved in advance by EPA based on five years.
a demonstration of ability to perform the be named, and service on this agent
procedures required in §§ 80.125 § 80.1167 What are the additional constitutes service on the foreign RIN
through 80.127, 80.130, 80.1164, and requirements under this subpart for a owner or any employee of the foreign
this paragraph (m); and foreign RIN owner? RIN owner for any action by EPA or
(iii) Sign a commitment that contains (a) Foreign RIN owner. For purposes otherwise by the United States related to
the provisions specified in paragraph (f) of this subpart, a foreign RIN owner is the requirements of this subpart.
of this section with regard to activities a person located outside the United (3) The forum for any civil or criminal
and documents relevant to compliance States, the Commonwealth of Puerto enforcement action related to the
with the requirements of §§ 80.125 Rico, the Virgin Islands, Guam, provisions of this section for violations
through 80.127, 80.130, 80.1164, and American Samoa, and the of the Clean Air Act or regulations
this paragraph (m). Commonwealth of the Northern Mariana promulgated thereunder shall be
(n) Withdrawal or suspension of Islands (collectively referred to in this governed by the Clean Air Act,
foreign producer approval. EPA may section as ‘‘the United States’’) that has including the EPA administrative forum
withdraw or suspend a foreign been approved by EPA to own RINs. where allowed under the Clean Air Act.
producer’s approval where any of the (b) General Requirement. An (4) United States substantive and
following occur: approved foreign RIN owner must meet procedural laws shall apply to any civil
(1) A foreign producer fails to meet all requirements that apply to persons or criminal enforcement action against
any requirement of this section. who own RINs under this subpart. the foreign RIN owner or any employee
(2) A foreign government fails to (c) Foreign RIN owner commitments. of the foreign RIN owner related to the
allow EPA inspections as provided in Any person shall commit to and comply provisions of this section.
paragraph (f)(1) of this section. with the provisions contained in this (5) Submitting an application to be a
(3) A foreign producer asserts a claim paragraph (c) as a condition to being foreign RIN owner, and all other actions
of, or a right to claim, sovereign approved as a foreign RIN owner under to comply with the requirements of this
immunity in an action to enforce the this subpart. subpart constitute actions or activities
requirements in this subpart. (1) Any United States Environmental covered by and within the meaning of
(4) A foreign producer fails to pay a Protection Agency inspector or auditor the provisions of 28 U.S.C. 1605(a)(2),
civil or criminal penalty that is not must be given full, complete and but solely with respect to actions
satisfied using the foreign producer immediate access to conduct instituted against the foreign RIN owner,
bond specified in paragraph (g) of this inspections and audits of the foreign its agents and employees in any court or
section. RIN owner’s place of business. other tribunal in the United States for
(o) Additional requirements for (i) Inspections and audits may be conduct that violates the requirements
applications, reports and certificates. either announced in advance by EPA, or applicable to the foreign RIN owner
Any application for approval as a unannounced; and under this subpart, including conduct
that violates the False Statements RINs sold or transferred during any section have been satisfied is an invalid
Accountability Act of 1996 (18 U.S.C. calendar year preceding the current RIN under § 80.1131.
1001) and section 113(c)(2) of the Clean calendar year, plus the number of gallon- (3) Any RIN that is obtained from a
RINs expected to be sold or transferred person located outside the United States
Air Act (42 U.S.C. 7413).
during subsequent calendar years, the
(6) The foreign RIN owner, or its that is not an approved foreign RIN
total number of years not to exceed four
agents or employees, will not seek to calendar years in addition to the current owner under this section is an invalid
detain or to impose civil or criminal calendar year. RIN under § 80.1131.
remedies against EPA inspectors or (4) No foreign RIN owner or other
auditors, whether EPA employees or (2) Bonds shall be posted by doing person may cause another person to
EPA contractors, for actions performed any of the following: commit an action prohibited in this
within the scope of EPA employment (i) Paying the amount of the bond to paragraph (g), or that otherwise violates
related to the provisions of this section. the Treasurer of the United States. the requirements of this section.
(7) The commitment required by this (ii) Obtaining a bond in the proper (h) Additional attest requirements for
paragraph (c) shall be signed by the amount from a third party surety agent foreign RIN owners. The following
owner or president of the foreign RIN that is payable to satisfy United States additional requirements apply to any
owner business. administrative or judicial judgments foreign RIN owner as part of the attest
(d) Sovereign immunity. By against the foreign RIN owner, provided engagement required for RIN owners
submitting an application to be a foreign EPA agrees in advance as to the third under this subpart K.
RIN owner under this subpart, the party and the nature of the surety (1) The attest auditor must be
foreign entity, and its agents and agreement. independent of the foreign RIN owner.
employees, without exception, become (iii) An alternative commitment that (2) The attest auditor must be licensed
subject to the full operation of the results in assets of an appropriate as a Certified Public Accountant in the
administrative and judicial enforcement liquidity and value being readily United States and a citizen of the United
powers and provisions of the United available to the United States, provided States, or be approved in advance by
States without limitation based on EPA agrees in advance as to the EPA based on a demonstration of ability
sovereign immunity, with respect to alternative commitment. to perform the procedures required in
actions instituted against the foreign (3) Bonds posted under this paragraph §§ 80.125 through 80.127, 80.130, and
RIN owner, its agents and employees in (e) shall: 80.1164.
any court or other tribunal in the United (i) Be used to satisfy any judicial (3) The attest auditor must sign a
States for conduct that violates the judgment that results from an commitment that contains the
requirements applicable to the foreign administrative or judicial enforcement provisions specified in paragraph (c) of
RIN owner under this subpart, including action for conduct in violation of this this section with regard to activities and
conduct that violates the False subpart, including where such conduct documents relevant to compliance with
Statements Accountability Act of 1996 violates the False Statements the requirements of §§ 80.125 through
(18 U.S.C. 1001) and section 113(c)(2) of Accountability Act of 1996 (18 U.S.C. 80.127, 80.130, and 80.1164.
the Clean Air Act (42 U.S.C. 7413). 1001) and section 113(c)(2) of the Clean (i) Withdrawal or suspension of
(e) Bond posting. Any foreign entity Air Act (42 U.S.C. 7413); foreign RIN owner status. EPA may
shall meet the requirements of this (ii) Be provided by a corporate surety withdraw or suspend its approval of a
paragraph (d) as a condition to approval that is listed in the United States foreign RIN owner where any of the
as a foreign RIN owner under this Department of Treasury Circular 570 following occur:
subpart. ‘‘Companies Holding Certificates of (1) A foreign RIN owner fails to meet
(1) The foreign entity shall post a Authority as Acceptable Sureties on any requirement of this section,
bond of the amount calculated using the Federal Bonds’’; and including, but not limited to, the bond
following equation: (iii) Include a commitment that the requirements.
Bond = G * $0.01 bond will remain in effect for at least (2) A foreign government fails to
five years following the end of latest allow EPA inspections as provided in
Where:
reporting period in which the foreign paragraph (c)(1) of this section.
Bond = amount of the bond in U.S. dollars.
G = The total of the number of gallon-RINs
RIN owner obtains, sells, transfers or (3) A foreign RIN owner asserts a
the foreign entity expects to sell or holds RINs. claim of, or a right to claim, sovereign
transfer during the first calendar year (4) On any occasion a foreign RIN immunity in an action to enforce the
that the foreign entity is a RIN owner, owner bond is used to satisfy any requirements in this subpart.
plus the number of gallon-RINs the judgment, the foreign RIN owner shall (4) A foreign RIN owner fails to pay
foreign entity expects to sell or transfer increase the bond to cover the amount a civil or criminal penalty that is not
during the next four calendar years. After used within 90 days of the date the satisfied using the foreign RIN owner
the first calendar year, the bond amount bond is used. bond specified in paragraph (e) of this
shall be based on the actual number of
(f) English language reports. Any section.
gallon-RINs sold or transferred during
the current calendar year and the document submitted to EPA by a foreign (j) Additional requirements for
number held at the conclusion of the RIN owner shall be in English language, applications, reports and certificates.
current averaging year, plus the number or shall include an English language Any application for approval as a
of gallon-RINs sold or transferred during translation. foreign RIN owner, any report,
the four most recent calendar years (g) Prohibitions. (1) A foreign RIN certification, or other submission
preceding the current calendar year. For owner is prohibited from obtaining, required under this section shall be:
any year for which there were fewer than selling, transferring or holding any RIN (1) Submitted in accordance with
four preceding years in which the foreign that is in excess of the number for procedures specified by the
entity sold or transferred RINs, the bond
shall be based on the total of the number

which the bond requirements of this Administrator, including use of any
of gallon-RINs sold or transferred during section have been satisfied. forms that may be specified by the
the current calendar year and the (2) Any RIN that is sold, transferred Administrator.
number held at the end of the current or held that is in excess of the number (2) Signed by the president or owner
calendar year, plus the number of gallon- for which the bond requirements of this of the foreign RIN owner company, or
that person’s immediate designee, and requirements of 40 CFR part 80, subpart K, subpart K, including 40 CFR 80.1167 apply
shall contain the following declaration: and that the information is material for to [insert name of foreign RIN owner].
determining compliance under these Pursuant to Clean Air Act section 113(c) and
I hereby certify: (1) That I have actual regulations; and (3) that I have read and 18 U.S.C. 1001, the penalty for furnishing
authority to sign on behalf of and to bind understand the information being Certified or false, incomplete or misleading information
[insert name of foreign RIN owner] with submitted, and this information is true, in this certification or submission is a fine of
regard to all statements contained herein; (2) complete and correct to the best of my up to $10,000 U.S., and/or imprisonment for
that I am aware that the information knowledge and belief after I have taken up to five years.
contained herein is being Certified, or reasonable and appropriate steps to verify the
submitted to the United States accuracy thereof. I affirm that I have read and [FR Doc. E7–7140 Filed 4–30–07; 8:45 am]
Environmental Protection Agency, under the understand the provisions of 40 CFR part 80, BILLING CODE 6560–50–P

Rule: Air Programs: Fuels and Fuel Additives&#8212 Renewable Fuel Standard Program

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Tuesday,

Industry ........................ 324110 2911 Petroleum Refineries.

and the existing regulations in 40 CFR

d. Deficit Carryovers Production/Consumption Use

TABLE II.A.1–1.—RENEWABLE FUEL VOLUME SCENARIOS (BILLION GALLONS)

Corn-ethanol ............................................................................................................................ 3.548 3.947 6.421 9.388

Total volume ..................................................................................................................... 3.573 3.977 6.974 9.941

the United States), should reduce our

impacts on total energy and greenhouse gas unfinished gasoline produced or

fuels, the president’s goal of 35 billion gallons by

TABLE III.A.2–1.—PROJECTED STANDARDS

2008 ................................................................... 4.63% ............................................................... Not applicable.

Appendix A, Thermal Conversion Factors). available in the fuel to produce work.

and other products resulting from

proposed in the NPRM have changed as III.B.4–1, or any others approved

compliance with the RFS. Although the volume of gasoline used to

small refineries, the gasoline produced emissions standards. Unforeseen

three biodiesel fuels at temperatures up to 300 °C,’’

such as the following: by a party could be higher than the

derivatives or is processed in a facility treatment of the RIN separation

TABLE IV.C.3–1.—INFORMATION CONTAINED IN REPORTS BY REGULATED PARTY *

enforce the RIN/inventory balance implementation and will contain

www.epa.gov/otaq/renewablefuels/ multiplied by its equivalence value. If cannot be summarized by a shorter

information required by obligated verification of the information given on

TABLE VI.A.1–1.—2006 U.S. ETHANOL PRODUCTION BY FEEDSTOCK

Cheese Whey .................................................................................................................................. 8 0.1 2 1.8

Total .......................................................................................................................................... 5,218 100.0 110 100.0

TABLE VI.A.1–2.—2006 U.S. ETHANOL PRODUCTION BY ENERGY SOURCE

Coal .............................................................................................................................. 1,042 20.0 7 6.3 2

Total ...................................................................................................................... 5,218 100.0 110 100.0 11

TABLE VI.A.1–3.—2006 U.S. ETHANOL PRODUCTION BY PADD

PADD 1 ............................................................................................................................................ 0.4 0.0 1 0.9

Total .......................................................................................................................................... 5,218 100.0 110 100.0

44 Facilities were assumed to burn natural gas if

the plant fuel type was not mentioned or

ethanol plants. to the proposed rulemaking, 71 FR 55552

TABLE VI.A.2–1.—UNDER CONSTRUCTION U.S. ETHANOL PRODUCTION CAPACITY

PADD 1 .......................................................................... 0.4 1 115 1 115 2

Total ........................................................................ 5,218 110 3,357 47 8,575 157

TABLE VI.A.2–2.—OTHER POTENTIAL U.S. ETHANOL PRODUCTION CAPACITY

PADD 1 .................................................................................................... 115 2 548.0 8 934 21

Subtotal ...................................................................................... 8,575 157 5,763 65 15,090 208

Total b ......................................................................................... ................ ................ 14,339 222 29,428 430

TABLE VI.A.2–3.—FORECASTED 2012 ETHANOL PRODUCTION BY PADD

PADD 1 ............................................................................................................................................ 663 4.6 10 4.5

Total .......................................................................................................................................... 14,339 100.0 222 100.0

Bagasse ........................................................................................................................................... 7 0.1 1 0.5

Total .......................................................................................................................................... 14,339 100.0 222 100.0

TABLE VI.A.2–5.—FORECASTED 2012 U.S. ETHANOL PRODUCTION BY ENERGY SOURCE

Biomass a ..................................................................................................................... 112 0.8 2 0.9 1

Total ...................................................................................................................... 14,339 100.0 222 100.0 18

gasoline and oxygenate consumption by PADD is found below in Table VI–A.3–

TABLE VI.A.3–1.—2004 U.S. GASOLINE & OXYGENATE CONSUMPTION BY PADD

PADD 1 .................................................................................................... 49,193 660 1.3 1,360 2.8

Total .................................................................................................. 135,893 3,500 2.6 1,878 1.4

59 In AEO 2007, EIA is forecasted an even higher

PADD 1 ................................................................................ 399 679 1,078 350 706 1,057 2,134

Total .............................................................................. 2,362 1,200 3,562 1,717 1,392 3,109 6,671

PADD1 ................................................................................. 610 630 1,240 267 973 1,240 2,481

Total .............................................................................. 3,584 1,298 4,882 2,908 1,809 4,718 9,600

TABLE VI.B.1–2.—U.S. PRODUCTION CAPACITY HISTORY a

TABLE VI.B.2–1.—PROJECTED BIODIESEL PRODUCTION CAPACITY

Number of plants ..................................................................................................................................................... 85 78