CLERK UNITED STATES ENVIRONMENTAL RECE!VEED · 2018. 2. 21. · urr r.ctt hi4 c t,ilumt3a ufl...

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RECE!VEED IN THE UNITED STATES COURT OF APPEIFOR THE DISTRICT OF COLUMBIA CIRCI.

STFCT OF COLUMBIA CIRCUIT

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LSIT

NATIONAL BIODIESEL BOARD,

V

Petitioner,

UNITED STATES ENVIRONMENTALPROTECTION AGENCY,

Respondent.

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Case No.

_________

))))))

PETITION FOR REVIEW

Pursuant to Rule 15 of the Federal Rules of Appellate Procedure and Section

307(b) of the Clean Air Act, 42 U.S.C. §7607(b), the National Biodiesel Board

hereby petitions the Court for review of a final action of the U.S. Environmental

Protection Agency (“EPA”) entitled “Renewable Fuel Standard Program:

Standards for 201$ and Biomass-Based Diesel Volume for 2019,” published at $2

Fed. Reg. 5$,4$6 (Dec. 12, 2017).

CLERK

A copy of the Federal Register notice is attached to this Petition.

USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 1 of 48

Respectfully submitted,

/s/ Bryan li Killian

Bryan M. KiffianDouglas A. HastingsMorgan, Lewis & Bockius LLP1111 Pennsylvania Ave., NWWashington, D.C. 20004(202) 739-3000 (telephone)(202) 739-3001 (facsimile)

Counselfor the National Biodiesel Board

Dated: February 9, 2018

2


58486 Federal Register / Vol. 82, No. 237/ Tuesday, December 12, 2017 / Rules and Regulations

ENVIRONMENTAL PROTECTIONAGENCY

40 CFR Part 80

tEPA—HQ—OAR—2077-0091; FRL—9971—73—OAR]

RIN 2060—ATO4

Renewable Fuel Standard Program:Standards for 2018 and BiomassBased Diesel Volume for 2019

AGENCY: Environmental ProtectionAgency (EPA).ACTION: Final rule.

SUMMARY: Under section 211 of theClean Air Act, the EnvironmentalProtection Agency (EPA) is required toset renewable fuel percentage standardsevery year. This action establishes theannual percentage standards forcellulosic biofuel, biomass-based diesel,advanced biofuel, and total renewablefuel that apply to gasoline and diesel

transportation fuel produced orimported in the year 2018. Relying onstatutory waiver authority that isavailable when projected cellulosicbiofuel production volumes are lessthan the applicable volume specified inthe statute, the EPA is establishingvolume requirements for cellulosicbiofuel, advanced biofuel, and totalrenewable fuel that are below thestatutory volume targets. In this action,we are also establishing the applicablevolume of biomass-based diesel for2019.

DATES: This final rule is effective onFebruary 12, 2018.

ADDRESSES: The EPA has established adocket for this action under Docket IDNo. EPA—HQ—OAR—2017—0091. Alldocuments in the docket are listed onthe http://www.regulotions.gov Website. Although listed in the index, someinformation is not publicly available,e.g., CBI or other information whose

disclosure is restricted by statute.Certain other material, such ascopyrighted material, is not placed onthe internet and will be publiclyavailable only in hard copy form.Publicly available docket materials areavailable electronically through http://wwwregulations.gov.

FOR FURTHER INFORMATION CONTACT: JuliaMacAllister, Office of Transportationand Air Quality, Assessment andStandards Division, EnvironmentalProtection Agency, 2000 TraverwoodDrive, Ann Arbor, MI 48105; telephonenumber: 734—214—4131; email address:[email protected].

SUPPLEMENTARY INFORMATION: Entitiespotentially affected by this final rule arethose involved with the production,distribution, and sale of transportationfuels, including gasoline and diesel fuelor renewable fuels such as ethanol,biodiesel, renewable diesel, and biogas.Potentially regulated categories include:

This table is not intended to beexhaustive, but rather provides a guidefor readers regarding entities likely to beregulated by this action. This table liststhe types of entities that EPA is nowaware could potentially be regulated bythis action. Other types of entities notlisted in the table could also beregulated. To determine whether yourentity would be regulated by this action,you should carefully examine theapplicability criteria in 40 CFR part 80.If you have any questions regarding theapplicability of this action to aparticular entity, consult the personlisted in the FOR FURTHER tNFORMATIONCONTACT section.

Outline of This Preamble

I. Executive SummaryA. Purpose of This ActionB. Summary of Major Provisions in This

Action1. Approach to Setting Volume

Requirements2. Cellulosic Biofuel3. Advanced Biofuel4. Total Renewable Fuel6. 2019 Biomass-Based Diesel7. Annual Percentage Standards

II. Authority and Need for Waiver ofStatutory Applicable Volumes

A. Statutory Authorities for ReducingVolume Targets

1. Cellulosic Waiver Authority2. General Waiver AuthorityB. Treatment of Carryover RINs1. Updated Projection of Carryover RIN

Volume2. EPA’s Decision Regarding the Treatment

of Carryover RINsIII. Cellulosic Biofuel Volume for 2018

A. Statutory RequirementsB. Cellulosic Biofuel Industry Assessment1. Potential Domestic Producers2. Potential Foreign Sources of Cellulosic

Biofuel3. Summary of Volume Projections for

Individual CompaniesC. Projection from the Energy Information

AdministrationD. Cellulosic Biofuel Volume for 20181. Liquid Cellulosic Biofuel2. CNG/LNG Derived From Biogas3. Total Cellulosic Biofuel in 2018

IV. Advanced Biofuel and Total RenewableFuel Volumes for 2018

A. Volumetric Limitation on Use of theCellulosic Waiver Authority

B. Reasonably Attainable Volumes ofAdvanced Biofuel

1. Imported Sugarcane Ethanol2. Biodiesel and Renewable Diesel

3. Other Advanced Biofuel4. Total Advanced BiofuelC. Exercise of Cellulosic Waiver Authority

for Advanced BiofuelD. Exercise of Cellulosic Waiver Authority

for Total Renewable FuelE. Impacts of 2018 Standards on Costs1. Illustrative Cost Savings Associated

With Reducing Statutory CellulosicVolumes

2. Illustrative Cost Analysis of AdvancedBiofuels Using 2017 as the Baseline

V. Consideration of Additional ReductionsUsing Other Waiver Authorities

A. Inadequate Domestic SupplyB. Severe Economic HarmC. Severe Environmental HarmD. Biomass-Based Diesel Waiver Authority

VI. Final Biomass-Based Diesel Volume for2019

A. Statutory RequirementsB. Determination of the 2019 Applicable

Volume of Biomass-Based DieselC. Consideration of Statutory Factors set

forth in CAA Section 211(o)(2](B)(ii)(I)—(VI) for 2019

VII. Percentage Standards for 2018A. Calculation of Percentage StandardsB. Small Refineries and Small RefinersC. Final Standards

VIII. Administrative ActionsA. Assessment of the Domestic Aggregate

Compliance Approach

Category NAICS1 codes SIC2 codes Examples of potentially regulated entities

Industry 324110 2911 Petroleum Refineries.Industry 325193 2869 Ethyl alcohol manufacturing.Industry 325199 2869 Other basic organic chemical manufacturing.Industry 424690 5169 Chemical and allied products merchant wholesalers.Industry 424710 5171 Petroleum bulk stations and terminals.Industry 424720 5172 Petroleum and petroleum products merchant wholesalers.Industry 221210 4925 Manufactured gas production and distribution.Industry 454319 5989 Other fuel dealers.

1 North American Industry Classification System (NAICS).25tandard Industrial Classification (SIC) system code.


Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58487

B. Assessment of the Canadian AggregateCompliance Approach

C. RIN Market OperationIX. Public ParticipationX. Statutory and Executive Order Reviews

A. Executive Order 12866: RegulatoryPlanning and Review and ExecutiveOrder 13563: Improving Regulation andRegulatory Review

B. Executive Order 13771: ReducingRegulations and Controlling RegulatoryCosts

C. Paperwork Reduction Act (PRA)U. Regulatory Flexibility Act (RPA)B. Unfunded Mandates Reform Act

(UMRA)F. Executive Order 13132: FederalismG. Executive Order 13175: Consultation

and Coordination With Indian TribalGovernments

H. Executive Order 13045: Protection ofChildren From Environmental HealthRisks and Safety Risks

I. Executive Order 13211: ActionsConcerning Regulations ThatSignificantly Affect Energy Supply,Distribution, or Use

J. National Technology Transfer andAdvancement Act (NTTAA)

K. Executive Order 12898: Federal ActionsTo Address Environmental Justice inMinority Populations and Low-incomePopulations

L. Congressional Review Act (CRA)XI. Statutory Authority

I. Executive Summary

The Renewable Fuel Standard (RFS)program began in 2006 pursuant to therequirements in Clean Air Act (CAA)section 2 11(o) that were added throughthe Energy Policy Act of 2005 (EPAct).The statutory requirements for the RFSprogram were subsequently modifiedthrough the Energy Independence andSecurity Act of 2007 (EISA), leading tothe publication of major revisions to theregulatory requirements on March 26,2010.1 EISA’s stated goals includemoving the United States (US) toward“greater energy independence andsecurity (and] to increase the productionof clean renewable fuels.” Today, nearlyall gasoline used for transportationpurposes contains 10 percent ethanol(Eio), and on average diesel fuel

contains more than 4 percent biodieseland/or renewable diesel.2

The statute includes annual volumetargets, and requires EPA to translatethose volume targets (or alternativevolume requirements established byEPA in accordance with statutorywaiver authorities) into complianceobligations that obligated parties mustmeet every year. In this action, we areestablishing the annual percentagestandards for cellulosic biofuel,biomass-based diesel (BBD), advancedbiofuel, and total renewable fuel thatwould apply to all gasoline and dieselproduced or imported in 2018. We arealso establishing the applicable volumeof BBD for 2019.

Real-world challenges, in particularthe slower-than-expected developmentof the cellulosic biofuel industry, hasslowed progress towards meetingCongressional goals for renewable fuels.Given the nested nature of thestandards, the shortfall in cellulosicbiofuels has made the volume targetsestablished by Congress for 2018 foradvanced biofuels and total renewablefuels beyond reach. On July 21, 2017,EPA published a proposed rulemaking,containing proposed volumerequirements for the RFS Program’s fourcategories of renewable fuels that wouldapply in 2018 (and 2019 for BBD). OnAugust 1, EPA hosted a public hearingon the proposed rule, and EPA receivedover 235,000 written comments on theproposed rule as well. On October 4,2017 (82 FR 46174), EPA published an“Availability of SupplementalInformation; Request for FurtherComment,” (hereinafter, “October 4document”) seeking further comment onthe possible use of other waiverauthorities in the final rule. Transcriptsof the public hearing, along with all thecomments received on the proposedrule and the October 4 document areavailable in the docket. After carefulreview of the information before us weare finalizing volume requirements for2018 for cellulosic biofuel, advancedbiofuel and total renewable fuel that are

lower than the statutory targets, butnevertheless will ensure theserenewable fuels will continue to play acritical role as a complement to ourpetroleum-based fuels. The final rulemodifies the volume requirementsslightly relative to the proposed rule,and in this notice we explain where andwhy such modifications were made.

In this action, we are finalizingvolume requirements for cellulosicbiofuel at the level we project to beavailable for 2018. We are using the“cellulosic waiver authority” providedby the statute to finalize volumerequirements for advanced biofuel andtotal renewable fuel that are lower thanthe statutory targets by the samemagnitude as the reduction in thecellulosic biofuel reduction (i.e., thevolumes we are finalizing for cellulosicbiofuel, advanced biofuel, and totalrenewable fuel are all 6.71 billiongallons lower than the statutoryvolumes). We are not reducing volumesthrough use of the general waiverauthority or the biomass-based dieselwaiver authority. We note that whilewe are reducing the required volume oftotal renewable fuel, advanced biofueland cellulosic biofuel below statutorylevels, the required volumes in this rulewould achieve the implied statutoryvolumes for conventional biofuel5 andnon-cellulosic advanced biofuel6 for2018.

The final volume requirements for2018 are shown in Table I—i below.Relative to the levels finalized for 2017,the 2018 volume requirements foradvanced biofuel and total renewablefuel are higher by 10 million gallons.EPA is reducing the advanced biofueland total renewable fuel statutoryvolumes by the same amount as we arereducing the cellulosic biofuel volume.These reductions effectively preservethe implied statutory volumes forconventional renewable fuel and noncellulosic advanced biofuels. We areestablishing the volume requirement forBBD for 2019 at the proposed volume of2.1 billion gallons.

TABLE I—i—FINAL VOLUME REQUIREMENTS a

Cellulosic biofuel (million gallons)Biomass-based diesel (billion gallons)Advanced biofuel (billion gallons)

‘75 FR 14670, March 26, 2010.2 biodiesel and/or renewable diesel blend

percentages based on ElKs October 2017 ShortTerm Energy Outlook (SF501,

82 FR 34206, July 21, 2017.

See 42 u.s.c. 7545(ol(7l(Al(i—iil. See also thediscussion of the general waiver authority inSection ll.A.2. below.

Throughout this final rule conventional biofoelrefers to biofuel that qualifies as renewable fuel, butdoes not qualify as an advanced biofoel. RThJs

generated for conventional biofuels have a D codeof 6.

6Throughout this final rule non-cellulosicadvanced biofuel refers to biofuel that qualifies asadvanced biofoel, but does not qualify as cellulosicbiofuel. RINs generated for non-cellulosic advancedbiofuela have aD code of 4 or 5.

2018 2019

288b 2.14.29

n/a2.1n/a


58488 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations

TABLE I—i—FINAL VOLUME REQUIREMENTS aS_COntinued

2018 2019

Renewable fuel (billion gallons) 1929 n/aa All values are ethanol-equivalent on an energy content basis, except for BBD which is biodiesel-equivalent.bThe 2018 BBD volume requirement was established in the 2017 final rule (81 FR 89746, December 12, 2016).

A. Purpose of This Action 211(o)(2). The statutory volume targets fuel category. This means, for example,for 2018 are shown in Table IA—i, along that each gallon of cellulosic biofuel or

The national volume targets of with the 2017 targets for comparison. BBD that is used to satisfy therenewable fuel that are intended to be The cellulosic biofuel and BBD individual volume requirements forachieved under the RFS program each categories are nested within the those fuel types can also be used toyear (absent an adjustment or waiver by advanced biofuel category, which is satisfy the requirements for advancedEPA) are specified in CAA section itself nested within the total renewable biofuel and total renewable fuel.

TABLE l.A—i—APPLICABLE VOLUME TARGETS SPECIFIED IN THE CLEAN AIR ACT[Billion gallons] a

2017 2018

Cellulosic biofuel 5.5 7.0Biomass-based diesel 1 .0 1 .0Advanced biofuel 9.0 11.0Renewable fuel 24.0 26.0

a All values are ethanol-equivalent on an energy content basis, except values for BBD which are given in actual gallons.

Under the RFS program, EPA is (generally, producers and importers of (RINs) of each renewable fuel type thatrequired to determine and publish gasoline and diesel fuel) to calculate each obligated party must acquire andannual percentage standards for each their individual compliance obligations, retire to demonstrate compliance.compliance year. The percentage Each of the four percentage standards is EPA is establishing the annualstandards are calculated to ensure use in applied to the volume of non-renewable applicable volume requirements fortransportation fuel of the national gasoline and diesel that each obligated cellulosic biofuel, advanced biofuel, and“applicable volumes” of the four types party produces or imports during the total renewable fuel for 2018, and forof biofuel (cellulosic biofuel, BBD, specified calendar year to determine BBD for 2019. Table I.A—2 lists theadvanced biofuel, and total renewable their individual volume obligations statutory provisions and associatedfuel) that are set forth in the statute or with respect to the four renewable fuel criteria relevant to determining theestablished by EPA in accordance with types. The individual volume national applicable volumes used to setthe Act’s requirements. The percentage obligations determine the number of the percentage standards in this finalstandards are used by obligated parties Renewable Identification Numbers rule.

TABLE I.A—2—STATUTORY PROVISIONS FOR DETERMINATION OF APPLICABLE VOLUMES

Applicable volumes Clean Air Act reference Criteria provided in statute for determination of applicable volume

Cellulosic biofuel 21 1(o)(7)(D)(i) Required volume must be lesser of volume specified in CAA21 1(o)(2)(B)(i)(lll) or EPA’s projected volume.

211 (o)(7)(A) EPA in consultation with other federal agencies may waive the statutory volume in whole or in part if implementation would severelyharm the economy or environment of a State, region, or the UnitedStates, or if there is an inadequate domestic supply.

Biomass-based diesel 21 1(o)(2)(B)(ii) and (v) Required volume for years after 2012 must be at least 1.0 billion gallons, and must be based on a review of implementation of the program, coordination with other federal agencies, and an analysis ofspecified factors.

21 1(o)(7)(A) EPA in consultation with other federal agencies may waive the statutory volume in whole or in part if implementation would severelyharm the economy or environment of a State, region, or the UnitedStates, or if there is an inadequate domestic supply.

21 1(o)(7)(E) EPA in consultation with other federal agencies shall issue a temporary waiver of applicable volumes of BBD where there is a significant feedstock disruption or other market circumstance thatwould make the price of BBD fuel increase significantly. When exercising this authority, EPA is also authorized to reduce the applicable volumes of advanced and total renewable fuel by the sameor a lesser volume.

7The 2018 BBD volume requirement wasestablished in the 2017 final rule.


Federal Register / Vol. 82, No. 237/ Tuesday, December 12, 2017 / Rules and Regulations 58489

TABLE I.A—2—STATUTORY PROVISIONS FOR DETERMINATION OF APPLICABLE VOLUMES—Continued

Applicable volumes Clean Air Act reference Criteria provided in statute for determination of applicable volume

Advanced biofuel 21 1(o)(7)(D)fi) If applicable volume of cellulosic biofuel is reduced below the statutory volume to the projected volume, EPA may reduce the advanced biofuel and total renewable fuel volumes in CAA211 (o)(2)(B)(i)(l) and (II) by the same or lesser volume. No criteriaspecified.

21 lfo)(7)(A) EPA in consultation with other federal agencies may waive the statutory volume in whole or in part if implementation would severelyharm the economy or environment of a State, region, or the UnitedStates, or if there is an inadequate domestic supply.

211(o)(7)(E) If applicable volume of biomass-based diesel is reduced, EPA mayreduce the advanced biofuel and total renewable fuel volumes inCAA 211(o)(2)(B)(i)(l) and (II) by the same or lesser volume.

Total renewable fuel 211 (o)(7)(D)(i) If applicable volume of cellulosic biofuel is reduced below the statutory volume to the projected volume, EPA may reduce the advanced biofuel and total renewable fuel volumes in CAA211(o)(2)(B)(i)(l) and (II) by the same or lesser volume. No criteriaspecified.

211 (o)(7)(A) EPA in consultation with other federal agencies may waive the statutory volume in whole or in part if implementation would severelyharm the economy or environment of a State, region, or the UnitedStates, or if there is an inadequate domestic supply.

211(o)f7)(E) If applicable volume of biomass-based diesel is reduced, EPA mayreduce the advanced biofuel and total renewable fuel volumes inCAA 21 1(o)(2)(B)(i)(l) and f II) by the same or lesser volume.

As shown in Table I.A—2, thestatutoTy authorities allowing EPA tomodify or set the applicable volumesdiffer for the four categories ofrenewable fuel. Under the statute, EPAmust annually determine the projectedvolume of cellulosic biofuel productionfor the following year. If the projectedvolume of cellulosic biofuel productionis less than the applicable volumespecified in CAA section211(o)(2)(B)(i)(III] of the statute, EPAmust lower the applicable volume usedto set the annual cellulosic biofuelpercentage standard to the projectedproduction volume. In Section III of thisfinal rule, we present our analysis ofcellulosic hiofuel production and theapplicable volume for 2018. Thisanalysis is based primarily on theestimate of cellulosic hiofuel productionfor 2018 conducted by the EnergyInformation Administration (EIA),8information reported to EPA throughour Electronic Moderated TransactionSystem (EMTS), comments received onour proposed rule, and an evaluation ofproducers’ production plans andprogress to date following discussionswith cellulosic biofuel producers.

With regard to BBD, CAA section211(o)(2)(B) specifies the applicablevolumes of BBD to he used in the RFSprogram only through year 2012. Forsubsequent years the statute sets aminimum volume of I billion gallons,and directs EPA, in coordination with

““Letter from ETA to EPA on 2018 projectedvolumes” available in docket EPA—HQ—OAR—2017—0091.

the U.S. Departments of Agriculture(USDA] and Energy (DOE), to determinethe required volume after review ofimplementation of the renewable fuelsprogram and consideration of a numberof factors. The BBD volume requirementmust be established 14 months beforethe year in which it will apply. In the2017 final rule we established the BBDvolume for 2018. In Section VI of thispreamble we discuss our assessment ofstatutory and other relevant factors andour final volume requirement for BBDfor 2019, which has been developed incoordination with USDA and DOE. Weare establishing an applicable volume of2.1 billion gallons of BBD for use inderiving the BBD percentage standard in2019. This volume is equal to theapplicable volume of BBD established ina prior rulemaking for 2018, and wouldprovide continued support to anindustry that is a significant contributorto the pool of advanced biofuel, whileat the same time setting the volumerequirement in a manner anticipated toprovide a continued incentive for thedevelopment of other types of advancedhiofuel.

Regarding advanced biofuel and totalrenewable fuel, Congress providedseveral mechanisms through which thestatutory targets could be reduced ifnecessary. If we reduce the applicablevolume of cellulosic biofuel below thevolume specified in CAA section211(o)(2)(B)(i) (III], we also have theauthority to reduce the applicablevolumes of advanced biofuel and totalrenewable fuel by the same or a lesser

amount. We refer to this as the“cellulosic waiver authority.” We mayalso reduce the applicable volumes ofany of the four renewable fuel typesusing the “general waiver authority”provided in CAA section 211(o)(7)(A) ifEPA, in consultation with USDA andDOE, finds that implementation of thestatutory volumes would severely harmthe economy or environment of a State,region, or the U.S., or if there isinadequate domestic supply. We arealso authorized under CAA section211(o)(7](E] to reduce the applicablevolume of BBD established for 2018,and to make equal or lesser reductionsin the 2018 applicable volumes ofadvanced biofuel and total renewablefuel, if we determine that there is asignificant renewable feedstockdisruption or other market circumstancethat would make the price of BBDincrease significantly. Sections II and TVof this final rule describe our use of thecellulosic waiver authority alone toderive the volumes of advanced biofueland total renewable fuel that are belowthe statutory target volumes, and ourassessment that the resulting volumescan be met. We believe that reductionsin the statutory targets for cellulosicbiofuel, advanced biofuel and totalrenewable fuel for 2018 are necessary.However, in light of our review ofavailable information, we are makingthose reductions under the cellulosicwaiver authority alone and are notreducing them further under otherwaiver authorities. Thus, the reductionsin both the advanced and total


58490 Federal Register/Vol. 82,No. 237 / Tuesday, December 12, 2017 / Rules and Regulations

renewable fuel standards are directlyattributable to the significant shortfall incellulosic biofuel production, ascompared to the statutory targets. Adiscussion of our consideration of thegeneral waiver authority and biomassbased diesel waiver authority to furtherreduce the required biofuel volumes in2018 can be found in Section V.

B. Summary of Major Provisions in ThisAction

This section briefly summarizes themajor provisions of this final rule. Weare establishing applicable volumerequirements and associated percentagestandards for cellulosic biofuel,advanced biofuel, and total renewablefuel for 2018; for BBD we areestablishing the percentage standard for2018 and the applicable volumerequirement for 2019.

1. Approach to Selling VolumeRequirements

The approach we have taken in thisfinal rule of using the cellulosic waiverauthority to reduce advanced biofueland total renewable fuel by the sameamount as the reduction in the requiredvolume of cellulosic biofuel is the sameapproach as in our proposed rule, but isa departure from our approach to usingthe cellulosic biofuel waiver authorityin previous years. In previous years wehave used the cellulosic waiverauthority to reduce the advanced biofueland total renewable fuel volumerequirements by a lesser amount thanthe reduction in the cellulosic biofuelvolume requirement to allow reasonablyattainable volumes of advanced biofuelsto partially backfill for missingcellulosic biofuel volumes. However,the approach we have taken for 2018does not result in a reduction in thevolume requirement for non-cellulosicadvanced biofuel. While the impliedstatutory volume for non-cellulosicadvanced biofuel increased by 500million gallons from 2017 to 2018,through our 2017 action we effectivelyrequired early use of approximately 0.5billion gallons of non-cellulosicadvanced volume that Congressenvisioned would be first used in 2018.Therefore, despite using the cellulosic

The statutory advanced biofuel and cellulosicbiofoel requirements for 2018 are 11.0 and 7.0billion gallons respectively. This implies a noncellulosic advanced biofuel statutory volume of 4.0billion gallons. The statutory advanced biofuel andcellulosic biofuel requirements for 2017 are 9.0 and5.5 billion gallons respectively. This implies a noncellulosic advanced biofliel statutory volume of 3.5billion gallons. hi 2017 EPA established requiredvolumes of advanced biofuel and celluloaic biofoelof 4.28 billion and 311 million gallons respectively,implying a non-celluloaic advanced biofuel volumeof 3.97 billion gallons.

waiver authority to reduce the volumeof advanced biofuel by the same amountas cellulosic biofuel, the advancedbiofuel volume requirement for 2018 is10 million gallons higher than theadvanced biofuel volume requirementin 2017. In this rule we are reducing allthree volume requirements by the sameamount after considering thegreenhouse gas (GHG), energy securitybenefits, and anticipated costs ofadvanced biofuels that would occur atlevels beyond those being finalizedtoday.

Section II provides a generaldescription of our approach to sellingvolume requirements in today’s rule,including a review of the statutorywaiver authorities and ourconsideration of carryover RINs. SectionIII provides our assessment of the 2018cellulosic biofuel volume, based on aprojection of production that reflects aneutral aim at accuracy. Sections IV andV describe our assessments of advancedbiofuel and total renewable fuel, andconsideration of the general andbiomass-based diesel waiver authorities.Finally, Section VI provides ourdetermination regarding the 2019 BBDvolume requirement, and reflects ananalysis of a set of factors stipulated inCAA section 211(o)(2)(B)(ii).

2. Cellulosic BiofuelIn the past several years the cellulosic

biofuel industry has continued to makeprogress towards increased commercialscale production. Cellulosic biofuelproduction reached record levels in2016 and has continued to growthroughout 2017, driven largely bycompressed natural gas (CNG) andliquefied natural gas (LNC) derived frombiogas. Liquid cellulosic biofuels, whileproduced in much smaller quantitiesthan CNG/LNG derived from biogas,have been produced at steady butrelatively small volumes throughout2017. In this rule we are establishing acellulosic biofuel volume requirementof 288 million ethanol-equivalentgallons for 2018 based on ourproduction projection. Our projectionreflects consideration of a productionestimate from EIA, MN generation dataavailable to EPA through EMTS,comments we received on the proposedrule, the information we have receivedregarding individual facilities’capacities, production start dates andbiofuel production plans, a review ofcellulosic biofuel production relative toEPA’s projections in previous annualrules, and EPA’s own engineeringjudgment. To project cellulosic biofuelproduction for 2018 we used the samebasic methodology described in theproposed rule. However, we have used

updated data to derive percentile valuesused in our production projection forliquid cellulosic biofuels and to derivethe year-over-year change in the rate ofproduction of CNG/LNG derived frombiogas that is used in the projection forCNG/LNG. (See Section III for furtherdetail on the methodology used toproject cellulosic biofuel production.)

In estimating the volume of liquidcellulosic biofuel that will be madeavailable in the U.S. in 2018, weconsidered all potential productionsources by company and facility. Thisincluded facilities still in thecommissioning or start-up phases, aswell as facilities already producingsome volume of cellulosic biofuel.1°From this universe of potential liquidcellulosic biofuel sources, we identifiedthe subset that is expected to producecommercial volumes of qualifyingliquid cellulosic biofuel for use astransportation fuel, heating oil, or jetfuel by the end of 2018. To arrive atprojected volumes, we collectedrelevant information on each facility.We then developed projectedproduction ranges based on factors suchas progress towards construction andproduction goals, facility registrationstatus, production volumes achieved,and other significant factors that couldpotentially impact fuel production orthe ability of the produced fuel toqualify for cellulosic biofuel RINs. Wealso used this information to groupthese companies based on productionhistory and to select a value within theaggregated projected production rangesthat we believe best represents the mostlikely production volume from eachgroup of companies in 2018.

For 2018, we are using an industrywide, rather than a facility-by-facilityapproach to project the production ofCNG/LNG derived from biogas. Webelieve this approach is appropriate dueto the mature state of this technology,the large number of facilities that areregistered to produce cellulosic biofuelRINs for these fuels, and the fact thattheir volumes are likely to be affectedmore by market wide factors thanindividual company situations. Furtherdiscussion on our projection ofcellulosic biofuel production in 2018,including the factors considered and theway these factors were used todetermine our final cellulosic biofuelprojection, can be found in Section III.

laracilifies primarily focused on research anddevelopment (R&Dl were not the focus of ouraaaeaament, as production from these facilitiearepresents very small volumes of cellulosic biofuel,and these facilities typically have not generatedRINs for the fuel they have produced.


federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58491

3. Advanced Biofuel

We are finalizing required advancedbiofuel requirements using the sameapproach used in the July proposedrulemaking. As was the case at the timeof proposal, the conditions thatcompelled us to reduce the 2017 volumerequirement for advanced biofuel belowthe statutory target remain relevant in2018. As for 2017, we investigated theability of volumes of non-cellulosicadvanced biofuels to backfillunavailable volumes of cellulosicbiofuel in 2018. We took into accountthe various constraints on the ability ofthe market to make advanced biofuelsavailable, the ability of the standards weset to bring about market changes in thetime available, the potential impactsassociated with diverting biofuels and!or biofuel feedstocks from current use tothe production of advanced biofuel usedin the U.S., the fact that the biodieseltax credit is currently not available for2018, the proposed countervailingduties on imports of biodiesel fromArgentina and Indonesia, as well as thecost of advanced biofuels. Based onthese considerations we have decided toreduce the applicable volume ofadvanced biofuel by the same amount aswe are reducing the applicable volumeof cellulosic biofuels. This results in anadvanced biofuel volume for 2018 thatis 10 million gallons higher than theadvanced biofuel volume for 2017.Although we determined that a smallamount of reasonably attainablevolumes of advanced biofuel could beused to backfill a portion of the missingcellulosic biofuel, for reasons describedin Section IV, we are not exercising thediscretion provided under the cellulosicwaiver authority in a manner that wouldlead to that result.

As mentioned above, we areexercising our cellulosic waiverauthority to reduce the statutoryapplicable volume of advanced biofuelto a volume requirement of 4.29 billiongallons for 2018. This applicablevolume for 2018 is 10 million gallonshigher than the applicable volume foradvanced biofuel for 2017.

4. Total Renewable Fuel

Following our determination of theappropriate volume reduction foradvanced biofuel for 2018 using thecellulosic waiver authority, wecalculated what the total renewable fuelvolume would be if we provide thesame level of reduction using thecellulosic waiver authority. Theresulting volume is 19.29 billiongallons.

5. Other Waiver Authorities

We have evaluated whetheradditional reductions in cellulosicbiofuel, biomass-based diesel, advancedbiofuel, or total renewable fuel arewarranted for 2018 using either thegeneral waiver authority or the BBDwaiver authority and have determinedthat additional reductions are notwarranted at this time.

6. 2019 Biomass-Based Diesel

In EISA, Congress specified increasingapplicable volumes of BBD through2012. Beyond 2012 Congress stipulatedthat EPA, in coordination with DOE andUSDA, was to establish the BBD volumetaking into considerationimplementation of the program to dateand various specified factors, providingthat the required volume for BBD couldnot be less than 1.0 billion gallons. For2013, EPA established an applicablevolume of 1.28 billion gallons. For 2014and 2015 we established the BBDvolume requirement to reflect the actualvolume for each of these years of 1.63and 1.73 billion gallons.h1 For 2016 and2017, we set the BBD volumerequirements at 1.9 and 2.0 billiongallons respectively. Finally, for 2018the BBD volume requirement was set at2.1 billion gallons. We proposed tomaintain this level for 2019.

Given current and recent marketconditions, the advanced biofuelvolume requirement is driving theproduction and use of biodiesel andrenewable diesel volumes over andabove volumes required through theseparate BBD standard, and we expectthis to continue. For 2019, EPAcontinues to believe that it would stillbe appropriate to provide a floor abovethe statutory minimum of 1 billiongallons to provide a guaranteed level ofsupport for the continued productionand use of BBD. However, we alsobelieve that the volume of BBD suppliedin previous years demonstrates that theadvanced biofuel standard is capable ofincentivizing additional supply of thesefuels above the volume required by theBBD standard. Thus, based on a reviewof the implementation of the program todate and all the factors required underthe statute, and in coordination withUSDA and DOE, we are finalizing anapplicable volume of BBD for 2019 atthe proposed volume of 2.1 billiongallons.

The 2015 BBD standard was based on actualdata for the first 9 months of 2015 and onprojections for the latter part of the year for whichdata on actual use was not available at the time.

7. Annual Percentage StandardsThe renewable fuel standards are

expressed as a volume percentage andare used by each producer and importerof fossil-based gasoline or diesel todetermine their renewable fuel volumeobligations.

Four separate percentage standardsare required under the RFS program,corresponding to the four separaterenewable fuel categories shown inTable IA—I. The specific formulas weuse in calculating the renewable fuelpercentage standards are contained inthe regulations at 40 CFR 80.1405. Thepercentage standards represent the ratioof the national applicable volume ofrenewable fuel volume to the nationalprojected non-renewable gasoline anddiesel volume less any gasoline anddiesel attributable to small refineriesgranted an exemption prior to the datethat the standards are set. The volumeof transportation gasoline and dieselused to calculate the percentagestandards was based on a letterprovided to the EPA by EIA, as requiredby statute.’2 The percentage standardsfor 2018 are shown in Table I.B.7—1.Detailed calculations can be found inSection VII, including the projectedgasoline and diesel volumes used.

TABLE I.B.7—1 —FINAL 2018PERCENTAGE STANDARDS

Cellulosic biofuel 0.159%Biomass-based diesel 1.74%Advanced biofuel 2.37%Renewable fuel 10.67%

8. Assessment of Aggregate ComplianceBy November 30 of each year we are

required to assess the status of theaggregate compliance approach to landuse restrictions under the definition ofrenewable hiomass for both the U.S. andCanada. In today’s action we areproviding the final announcements forthese administrative actions. Asdescribed in Section VillA, based ondata provided by the USDA and usingthe methodology in place since 2014,we have estimated that U.S. agriculturalland totaled approximately 376 millionacres in 2017 and thus did not exceedthe 2007 baseline acreage. Thisassessment means that the aggregatecompliance provision can continue tobe used in the U.S. for calendar year2018.

On September 29, 2011, EPAapproved the use of a similar aggregatecompliance approach for planted cropsand crop residue grown in Canada. As

‘2”Letter from EIA to EPA on 2018 projectedvolumes,” available in docket EPA—HQ—OAR—2017—0091.


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described in Section VIII.B, based ondata provided by Canada, we haveestimated that Canadian agriculturalland totaled approximately 117.8million acres in 2017 and thus did notexceed the 2007 baseline acreage. Thisassessment means that the aggregatecompliance provision can continue tobe used in Canada for calendar year2018.

H. Authority and Need for Waiver ofStatutory Applicable Volumes

The CAA provides EPA with theauthority to enact volume requirementsbelow the applicable volume targetsspecified in the statute under specificcircumstances. This section discussesthose authorities.

A. Statutory Authorities for ReducingVolume Targets

In CAA section 211(o)(2), Congressspecified increasing annual volumetargets for total renewable fuel,advanced biofuel, and cellulosic biofuelfor each year through 2022, and for BBDthrough 2012, and authorized EPA to setvolume requirements for subsequentyears in coordination with USDA andDOE, and after consideration ofspecified factors. However, Congressalso recognized that under certaincircumstances it would be appropriatefor EPA to set volume requirements ata lower level than reflected in thestatutory volume targets, and thusprovided waiver provisions in CAAsection 211(o)(7).

1. Cellulosic Waiver Authority

Section 211(o)(7)(D)(i) of the CAAprovides that if EPA determines that theprojected volume of cellulosic biofuelproduction for a given year is less thanthe applicable volume specified in thestatute, that EPA must reduce theapplicable volume of cellulosic biofuelrequired to the projected productionvolume for that calendar year. In makingthis projection, EPA may not “adopt amethodology in which the risk ofoverestimation is set deliberately tooutweigh the risk of underestimation”and must make a projection that “aimsat accuracy.” APJv. EPA, 706 F.3d 474,479 (D.C. Cir. 2013). Pursuant to thisprovision, EPA has set the cellulosicbiofuel requirement lower than thestatutory volumes for each year since2010. As described in Section hID, theprojected volume of cellulosic biofuelproduction for 2018 is less than the 7.0billion gallon volume target in thestatute. Therefore, for 2018, we aresetting the cellulosic biofuel volumerequirement at a level lower than thestatutory applicable volume, inaccordance with this provision.

CAA section 211(o)(7)(D)(i) alsoprovides EPA with the authority toreduce the applicable volume of totalrenewable fuel and advanced biofuel inyears when it reduces the applicablevolume of cellulosic biofuel under thatprovision. The reduction must be lessthan or equal to the reduction incellulosic biofuel. For 2018, we are alsoreducing the applicable volumes ofadvanced biofuel and total renewablefuel under this authority.

The cellulosic waiver authority isdiscussed in detail in the preamble tothe 2017 final rule and that discussionis incorporated by reference.13 See also,APIv. EPA, 706 F.3d 474 (D.C. Cir.2013) (requiring that EPA’s cellulosicbiofuel projections reflect a neutral aimat accuracy), Monroe Energyv. EPA, 750F.3d 909 (D.C. Cir. 2014) (affirmingEPA’s broad discretion under thecellulosic waiver authority to reducevolumes of advanced biofuel and totalrenewable fuel), and Americans forClean Energyv. EPA (“ACE’), 864 F.3d691 (D.C. Cir. 2017) (discussed below).

In ACE, the court evaluated EPA’s useof the cellulosic waiver authority in the2014—2016 annual rulemaking to reducethe advanced biofuel and totalrenewable fuel volumes for 2014, 2015,and 2016. There, EPA used thecellulosic waiver authority to reduce thestandard for advanced biofuel to avolume that was reasonably attainable,and then provided a comparablereduction under this authority for totalrenewable fuel.14 The Court of Appealsfor the District of Columbia, relying onthe analysis in Monroe Energy,reaffirmed that EPA enjoys “broaddiscretion” under the cellulosic waiverauthority “to consider a variety offactors—including demand-sideconstraints in the advanced biofuels

15 The Court noted that theonly textual limitation on the use of thecellulosic waiver authority is that itcannot exceed the amount of thereduction in cellulosic biofuel.’ TheCourt contrasted the general waiverauthority under CAA section211(o)(7)(A) and the biomass baseddiesel waiver authority under CAAsection 211(o)(7)(E), which “detail theconsiderations and procedural steps thatEPA must take before waiving fuelrequirements,” with the cellulosicwaiver authority, which identifies nofactors regarding reductions inadvanced and total renewable fuel otherthan the limitation that any suchreductions may not exceed the

13 See ai FR 89752—89753 (December 12, 2016).“See ao FR 77433—34 (December 14, 2015).“ACE at 730.“Id. at 733.

reduction in cellulosic biofuelvolumes. The Court also concludedthat the scope of EPA’s discretionaryauthority to reduce advanced and totalvolumes is the same under thecellulosic waiver provision whetherEPA is declining to exercise itsauthority to waive volumes, or choosingto do 50ie

In this action we are reducing thestatutory volume targets for advancedbiofuels and total renewable fuel byequal amounts, as was our approach inusing the cellulosic waiver authority insetting the 2014—2017 standards. EPA’sreasoning for an equal reduction isexplained in the 2017 final rule.’° Wehave made a determination, asdescribed in Section IV, that theapplicable volume for advanced biofuelsspecified in the statute for 2018 cannotbe achieved and we are exercising ourcellulosic waiver authority to lower theapplicable volume of advanced biofuel,and to provide an equal reduction in theapplicable volume of total renewablefuel. In addition, we have determinedthat there is likely to be adequate supplyto satisfy the total renewable fuelvolume derived through applying anequal volume reduction as for advancedbiofuel as discussed in Section V.Therefore, we have determined that nofurther reductions of the total renewablefuel volume requirement are necessaryto address supply concerns.20 Theresulting volumes of advanced and totalrenewable fuel resulting from thisexercise of the cellulosic waiverauthority provide for an implied volumeallowance for conventional biofuel offifteen billion gallons, equal to thatenvisioned by Congress for 2018.

2. General Waiver Authority

Section 211(o)(7)(A) of the CAAprovides that EPA, in consultation withthe Secretary of Agriculture and theSecretary of Energy, may waive theapplicable volumes specified in the Actin whole or in part based on a petitionby one or more States, by any personsubject to the requirements of the Act,or by the EPA Administrator on his ownmotion. Such a waiver must be based ona determination by the Administrator,after public notice and opportunity forcomment that: (1) Implementation of therequirement would severely harm the

17 Id.Id.

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

described in the Response to conunentsdocument accompanythg this action, we have alsodetermined that additional waivers are notappropriate to address either severe economic orsevere environmental harm.



economy or the environment of a State,a region, or the United States; or (2)there is an inadequate domestic supply.

In the October 4 document, EPAsought comment on the possible use ofthe general waiver authority to reducevolumes of advanced biofuel and totalrenewable fuel for the 2018 standardsbelow the levels proposed in the 2018J’.Jfl{J421 The October 4 documentprovided information on historicdomestic production, imports, andexports of advanced biofuel, as well asadditional information, and soughtcomment on how that information couldinform a potential determination ofinadequate domestic supply or severeeconomic harm.

Based on an evaluation of supply andpotential economic impact of thevolumes of advanced and totalrenewable fuel that result after use ofthe cellulosic waiver authority,comments from stakeholders, and asfurther discussed in Section V, EPA isnot using the general waiver authorityon the basis of severe economic orenvironmental harm or inadequatedomestic supply to further reduce thosevolumes for 2018. EPA’s response tocomments addressing possible use ofthe general waiver authority areprovided in a memorandum to thedocket 22 and in the Response toComments (RTC) documentaccompanying this action.

3. Biomass-Based Diesel WaiverAuthority

Section 211(o)(7)(E)(ii) of the CAAprovides that if EPA determines thatthere is a significant renewablefeedstock disruption or other marketcircumstance that would make the priceof BBD increase significantly, EPA shall,in consultation with the Secretary ofEnergy, and the Secretary ofAgriculture, issue an order to reduce, forup to a 60-day period, the annualvolume requirement for BBD by anappropriate quantity that does notexceed 15 percent. The statute alsostipulates that EPA is authorized toreduce applicable volumes of advancedbiofuel and total renewable fuel by thesame or a lesser volume than thereduction in BBD.

In the October 4 document, EPAsought comment on potentialinterpretations of this authority, as wellas the potential use of the BBD waiverauthority to reduce the 2018 volumerequirement for BBD by as much as 315million gallons, and to concurrently

21 See 82 FR 46174 (October 4, 2017).22 ‘Assessment of wsivers for severe economic

harm or BBD prices for 2018,” memorandum fromDavid Korothey to docket EPA—HQ—OAR—2017—0091.

reduce the advanced biofuel and totalrenewable fuel volume requirements byas much as 473 million gallons. Thenotice provided information on theprice of biodiesel in light of theexpiration of the federal tax credit, andthe potential imposition of new dutieson imports of biodiesel from Argentinaand Indonesia.

As described in the RTC document,EPA has determined that it would notbe appropriate at this time to use theBBD waiver authority. Based oninformation provided in comments, aswell its own analysis discussed inSection V, EPA believes that there is aninsufficient basis to support a findingthat the biomass based diesel pricescurrently in the marketplace, orreasonably anticipated in the immediatefuture, represent a “significant” increasein prices that would justify use of thiswaiver authority.

B. Treatment of Carryover BINs

Consistent with our approach in the2013, 2014—16, and 2017 final rules, wehave also considered the availabilityand role of carryover RINs in evaluatingwhether we should exercise ourdiscretion to use the cellulosic waiverauthority in setting the cellulosic,advanced, and total volumerequirements for 2018. Neither thestatute nor EPA regulations specify howor whether EPA should consider theavailability of carryover RINs inexercising the cellulosic waiverauthority.23 As noted in the context ofthe rules establishing the 2 014—16 and2017 RFS standards, we believe that abank of carryover RINs is extremelyimportant in providing obligated partiescompliance flexibility in the face ofsubstantial uncertainties in thetransportation fuel marketplace, and inproviding a liquid and well-functioningRIN market upon which success of the

21 AA section 211(o)(5) requires that EPAestablish a credit program as part of its RFSregulations, and that the credits be valid to showcompliance for 12 months as of the date ofgeneration. EPA implemented this requirementthough the use of RINs, which can be used todemonstrate compliance for the year in which theyare generated or the subsequent compliance year.Obligated parties can obtain more RINs than theyneed in a given compliance year, allowing them to“carry over” these excess RINs for use in thesubsequent compliance year. although use of thesecarryover RJNs is limited to 20% of the obligatedparty’s two. For the bank of carryover RINs to bepreserved from one year to the next, individualcarryover RINs are used for compliance before theyexpire and are essentially replaced with newervintage ifiNa that are then held for use in the nextyear. For example, if the volume of the collectivecarryover RIN bank is to remain unchanged from2017 to 2018, then all of the vintage 2017 carryoverRThJa must be used for compliance in 2018, or theywill expire. However, the same volume of 2018RINa can then be “banked” for use in the next year.

entire program depends.24 CarryoverRINs provide flexibility in the face of avariety of circumstances that could limitthe availability of RINs, includingweather-related damage to renewablefuel feedstocks and other circumstancespotentially affecting the production anddistribution of renewable fuel.25 On theother hand, carryover RINs can be usedfor compliance purposes, and in thecontext of the 2013 RFS rulemaking wenoted that an abundance of carryoverRINs available in that year, togetherwith possible increases in renewablefuel production and import, justifiedmaintaining the advanced and totalrenewable fuel volume requirements forthat year at the levels specified in thestatute.26 EPA’s approach to theconsideration of carryover RINs inexercising our cellulosic waiverauthority was affirmed in MonroeEnergy and ACE.27

In the 2018 NPRM, EPA estimatedthat the size of the carryover RIN bankwas then approximately 2.06 billioncarryover RINs (including all D codes).28We proposed that in light of thisrelatively limited volume and theimportant functions provided by theMN bank, that we would not set thevolume requirements for 2018 in amanner that would intentionally lead toa drawdown in the bank of carryoverRINs. In their comments on the 2018NPRM, parties generally expressed twoopposing points of view. Commentersrepresenting obligated parties supportedEPA’s proposed decision to not assumea drawdown in the bank of carryoverRINs in determining the appropriatevolume requirements. Thesecommenters reiterated the importance ofmaintaining the carryover RIN bank inorder to provide obligated parties withnecessary compliance flexibilities,better market trading liquidity, and acushion against future programuncertainty. Commenters representingrenewable fuel producers, however,contended that carryover RINs representactual supply and should be accounted

24 See 80 FR 77482—87 (December 14, 2015) andal FR 89754—55 (December 12, 2016).

25 See id., and 72 FR 23900 (May 1, 2007).26 See 79 FR 49794 (Augiiat 15, 2013).27Monroe Energyv. EPA, 750 F.3d 909 (D.c. cir.

2014), AE at 713.saTins was an increase of 520 million RINa from

the previous estimate of 1.54 billion carryover RINsin the 2017 final rule. This increase in the carryoverRJN bank compared to that projected in the 2017final rule was not due to an underestimate by EPAin the amount of gasoline, diesel fuel, or ethanolthat waa consumed in 2016, but rather was drivenalmost entirely by a combination of over-compliance by biodiesel producers facing anexpiring biodiesel tax credit at the end of 2016 andapproximately 390 million RINs that smallrefineries granted a hardship exemption for 2016were not required to retire.


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for when establishing the annualvolume standards. These commentersstated that not accounting for carryoverRINs goes against Congressional intentof the RFS program, deters investmentin next-generation biofuels, and ignoresother programmatic buffers andflexibilities such as carry-forwarddeficits and small refinery hardshipexemptions. 2

1. Updated Projection of Carryover RNVolume

Based on currently availableinformation, our estimate of thecarryover RIN bank has increased to2.22 billion RINs, an increase of 160million RINs from the previous estimateof 2.06 billion carryover PINs in the2018 NPRM.3° Part of the updateconsiders small refinery hardshipexemptions for 2016 that were grantedsince the 2018 NPRM was issued. Theseadditional small refinery hardshipexemptions led to the return to the RThlmarketplace of approximately 125million 2016 RINs that would otherwisehave been required for compliance bythe small refineries granted anexemption for 2016.

The carryover PIN volume is 11.5percent of the total renewable fuelvolume requirement that EPA isfinalizing for 2018, which is less thanthe 20 percent maximum limitpermitted by the regulations to becarried over for use in complying withthe 2018 standards.1 However, thereremains considerable uncertaintysurrounding this number for a numberof reasons, including the possibleimpact of an action to address theremand in ACE, the possibility ofadditional small refinery exemptions,and the impact of 2017 RFS complianceon the bank of carryover RINs. Inaddition, we note that there have beenenforcement actions in past years thathave resulted in the retirement ofcarryover RlNs to make up for thegeneration and use of invalid RINs and/or the failure to retire RINs for exportedrenewable fuel. Future enforcementactions could have similar results, andrequire that obligated parties and/orrenewable fuel exporters settle pastenforcement-related obligations inaddition to the annual standards,thereby potentially creating demand forRINs greater than can be accommodated

2A full description of comments received, andour detailed responses to them, is available in theResponse to counoents document in the docket,

The calculations performed to estimate thenumber of carryover RINs currently available can befound in the memorandum, “caover RIN Bankcalcalations for 2018 Final Rule,” available in thedocket.‘ See 40 FR 80.1427(al(5l.

through actual renewable fuel blendingin 2018. Collectively, the result ofsatisfying RFS obligations in 2017 andsettling enforcement-related accountscould be an effective reduction in thesize of the collective bank of carryoverRINs. In light of these uncertainties, itis possible that the net result would bea bank of carryover RINs larger orsmaller than 11.5 percent of the final2018 total renewable fuel volumerequirement.

2. EPA’s Decision Regarding theTreatment of Carryover RINs

EPA has decided to maintain theproposed approach, and not set thevolume requirements in the final rulewith the intention or expectation ofdrawing down the current bank ofcarryover RThJs. In addition, we do notbelieve that the availability of carryoverRINs, together with the potential supplyof renewable fuel in volumes higherthan we are requiring though this finalnile, should lead us to increase thevolume requirements. In finalizing thisapproach, we carefully considered thecomments received, including on therole of carryover RINs under our waiverauthorities and the policy implicationsof our decision. While we have notassumed an intentional drawdown inthe overall bank of carryover RINsowned by obligated parties collectivelyin establishing the volume requirementsfor 2018, we understand that someobligated parties may choose to sell oruse all or part of their individual banksof carryover RINs. To the extent thatthey do, other obligated parties wouldbe in a position to bank carryover PINsby using available renewable fuel orpurchasing RINs representing such fuel,with the expected net result that thestandards adopted in this action willhave no effect on the size of the overallbank of carryover RINs that is ownedcollectively by obligated parties.32

We believe that a balancedconsideration of the possible role ofcarryover RINs in achieving thestatutory volume objectives foradvanced and total renewable fuels,versus maintaining an adequate bank ofcarryover RINs for importantprogrammatic functions, is appropriatewhen EPA exercises its discretion underthe cellulosic waiver authority, and thatthe statute does not specify the extent towhich EPA should require a drawdownin the bank of carryover RINs when itexercises this authority.

32We expect that any renewable fuel produced inthe U.S. that is not used to satisfy the 2018renewable fuel standards will be exported, therebynot leading to an increase in the bank of 2018 RINsor carryover RIN5.

An adequate PIN bank serves to makethe PIN market liquid. Just as theeconomy as a whole functions bestwhen individuals and businessesprudently plan for unforeseen events bymaintaining inventories and reservemoney accounts, we believe that theRFS program functions best whensufficient carryover PINs are held inreserve for potential use by the PINholders themselves, or for possible saleto others that may not have establishedtheir own carryover RN reserves. Werethere to be no PINs in reserve, then evenminor disruptions causing shortfalls inrenewable fuel production ordistribution, or higher than expectedtransportation fuel demand (requiringgreater volumes of renewable fuel tocomply with the percentage standardsthat apply to all volumes oftransportation fuel, including theunexpected volumes) could lead to theneed for a new waiver of the standards,undermining the market certainty socritical to the RFS program. However, asignificant drawdown of the carryoverRN bank leading to a scarcity of PINsmay stop the market from functioning inan efficient manner (i.e., one in whichthere are a sufficient number ofreasonably available PINs for obligatedparties seeking to purchase them), evenwhere the market overall could satisfythe standards. For all of these reasons,the collective carryover RN bankprovides a needed programmatic bufferthat both facilitates individualcompliance and provides for smoothoverall functioning of the program.33We have evaluated the volume ofcarryover PINs likely available for 2018,and we believe it is prudent not tointentionally draw down this volume ofcarryover PINs in establishing the 2018standards. In addition, we haveconsidered whether the current bank ofcarryover PINs, together with theadditional supply of renewable fuelavailable in 2018 above the levels weare requiring be used, would justifyreduced use of the cellulosic waiverauthority. For the reasons describedabove and in Sections W.C and D, wedo not believe this to be the case.

Therefore, for the reasons notedabove, and consistent with the approachwe took in the 2014—2016 and 2017final rules, we are making adetermination that, under currentcircumstances, an intentionaldrawdown of the carryover PIN bankshould not be assumed in establishingthe 2018 volume requirements. Inaddition, we do not believe that the

ia Here we use the term “buffer” as shorthandreference to all of the benefits that are provided bya sufficient bank of carryover RINs.


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presence of the current bank ofcarryover RINs, together with additionalpotential supplies of renewable fuel in2018, justifies reduced use of thecellulosic waiver authority in setting the2018 advanced biofuel and totalrenewable fuel volumes. However, wenote that we may or may not take asimilar approach in future years; wewill assess the situation on a case-by-case basis going forward, and take intoaccount the size of the carryover RINbank in the future and any lessonslearned from implementing past rules.

III. Cellulosic Biofuel Volume for 2018

In the past several years the cellulosicbiofuel industry has continued to makeprogress towards increased commercial-scale production. Cellulosic biofuelproduction reached record levels in2016, driven largely by CNG and LNCderived from biogas. Productionvolumes have continued to increase in2017. While multiple large cellulosicethanol facilities struggled to achieveproduction rates consistent with theirnameplate capacity, several facilitiesconsistently produced cellulosic ethanolfrom corn kernel fiber at a smaller scaleduring 2016 and 2017. This sectiondescribes our assessment of the volumeof cellulosic biofuel that we project willbe produced or imported into the U.S.in 2018, and some of the uncertaintiesassociated with those volumes.

In the July NPRM, EPA proposedcellulosic volumes based on amethodology that differed in a couple ofimportant ways from the approach weused in 2017. We proposed changes tothe percentile values used to projectliquid cellulosic biofuel production anda new industry-wide methodology forprojecting the production of CNG/LNGderived from biogas. For this action, weare finalizing volumes for 2018 based onan approach that is similar, but notidentical, to what we proposed. Wediscuss the changes we made fromproposal to final below. In our RTCdocument, we respond to the multiplecomments EPA received on the changesto the cellulosic projection methodologywe proposed in July.

In order to project the volume ofcellulosic biofuel production in 2018 weconsidered ETA’s projection of cellulosicbiofuel production,35 comments

34 The majority of the cellulosic RINs generatedfor CNG/LNG are sourced from biogas fromlandfills; however, the biogas may come from avariety of sources including municipal wastewatertreatment facility digesters, agricultural digesters,separated MSW digesters, and the cellulosiccomponents of biomass processed in other wastedigesters.

35”Letter from EIA to EPA on 2018 projectedvolumes,” available in docket EPA—HQ—OAR—2017—0091.

received on the 2018 NPRM, datareported to EPA through EMTS, andinformation we collected throughmeetings with representatives offacilities that have produced or have thepotential to produce qualifying volumesof cellulosic biofuel for consumption astransportation fuel, heating oil, or jetfuel in the U.S. in 2018. There are twomain parts to this projection. To projectthe range of potential productionvolumes of liquid cellulosic biofuel weused the same methodology as themethodology used in the 2017 final rule.However, we have adjusted thepercentile values used to select a pointestimate within a projected productionrange for each group of companies basedon recent information, and with theobjective of improving the accuracy ofthe projections. To project theproduction of cellulosic biofuel RINs forCNG/LNC derived from biogas we usethe methodology discussed in theproposed rule with updated data. Thismethodology reflects the mature statusof this industry, the large number offacilities registered to generatecellulosic biofuel RINs from these fuels,and EPA’s continued attempts to refineits methodology to yield estimates thatare as accurate as possible. Thismethodology is an improvement on themethodology that EPA used to projectcellulosic biofuel production for CNGILNG derived from biogas in the 2017final rule. EPA has updated the list ofpotential cellulosic biofuel producers,projected facility start-up dates, facilitycapacities, production volumes, andother relevant information with themost recent information available. Themethodologies used to project theproduction of liquid cellulosic biofuelsand cellulosic CNG/LNG derived frombiogas are described in more detail inSections hID—I and IH,D—2 below.

After a brief description of thestatutory requirements in Section ffl.A,we discuss the companies the EPAreviewed in the process of projectingqualifying cellulosic biofuel productionin the U.S. in 2018 in Section 111.3.Section III.C discusses the projection ofcellulosic biofuel production providedto EPA by EIA, and Section HIDdiscusses the methodologies used byEPA to project cellulosic biofuelproduction in 2018 and the resultingprojection of 288 million ethanol-equivalent gallons.

A. Statutory Requirements

The volumes of renewable fuel to beproduced and used as transportationfuel under the RFS program each year(absent an adjustment or waiver by EPA)are specified in CAA section211(o)(2)(B)(i](III). The volume of

cellulosic biofuel specified in the statutefor 2018 is 7.0 billion gallons. Thestatute provides that if EPA determines,based on a letter provided to the EPA byEIA, that the projected volume ofcellulosic biofuel production in a givenyear is less than the statutory volume,then EPA shall reduce the applicablevolume of cellulosic biofuel to theprojected volume available during thatcalendar year.36

In addition, if EPA reduces therequired volume of cellulosic biofuelbelow the level specified in the statute,the Act also indicates that we mayreduce the applicable volumes ofadvanced biofuels and total renewablefuel by the same or a lesser volume, andwe are required to make cellulosicwaiver credits available. Ourconsideration of the 2018 volumerequirements for advanced biofuel andtotal renewable fuel is presented inSection IV.

B. Cellulosic Biofuel IndustryAssessment

In order to project cellulosic biofuelproduction for 2018, we have trackedthe progress of several dozen potentialcellulosic biofuel production facilities.As we have done in previous years, wehave focused on facilities with thepotential to produce commercial-scalevolumes of cellulosic biofuel rather thansmall research and development (R&D)or pilot-scale facilities. Largercommercial-scale facilities are muchmore likely to generate RINs for the fuelthey produce and the volumes theyproduce will have a far greater impacton the cellulosic biofuel standard for2018. The volume of cellulosic biofuelproduced from R&D and pilot-scalefacilities is quite small in relation to thatexpected from the commercial-scalefacilities. R&D and demonstration-scalefacilities have also generally notgenerated RINs for the fuel they haveproduced in the past. Their focus is ondeveloping and demonstrating thetechnology, not producing commercialvolumes. RIN generation from R&D andpilot-scale facilities in previous yearshas not contributed significantly to theoverall number of cellulosic RINsgenerated.36 We have therefore not

is The US, Court of Appeals for the District ofColumbia circuit evaluated this requirement in APIv, EPA 706 f.3d 474, 479—480 (D.C. cir, 2013), inthe context of a challenge to the 2012 cellulosicbiofuel standard, The Court stated that in projectingpotentially available volumes of cellulosic biofuelEPA must apply an outcome-neutralmethodology” aimed at providing a prediction of“what will actually happen.”

‘ See 40 CFR 80.1456,is While a few small R&D and pilot scale facilities

have registered as cellulosic RIN generators, totalContinued



considered production from R&D andpilot-scale facilities in our projection ofcellulosic biofuel production for 2018.

From this list of commercial-scalefacilities we used information fromEMTS, publicly available information(including press releases and newsreports), comments on the 2018 NPRM,information from ETA, and informationprovided by representatives of potentialcellulosic biofuel producers, to make adetermination of which facilities aremost likely to produce liquid cellulosicbiofuel and generate cellulosic biofuelRINs in 2018. Each of these companieswas investigated further in order todetermine the current status of itsfacilities and its likely cellulosic biofuelproduction and MN generation volumesfor 2018. Both in our discussions withrepresentatives of individual companiesand as part of our internal evaluationprocess we gathered and analyzedinformation including, but not limitedto, the funding status of these facilities,current status of the productiontechnologies, anticipated constructionand production ramp-up periods,facility registration status, and annualfuel production and MN generationtargets.

As an initial matter, it is useful toreview the success of EPA’s recentcellulosic biofuel projections. EPA useda consistent methodology to projectcellulosic biofuel production in the finalthree months of 2015 and in 2016 and2017. The record of actual productionindicates that EPA’s projection waslower than the actual number ofcellulosic RINs made available in2015,° and higher than the actualnumber of PiNs made available in2016.41 While we currently only havedata available through September 2017,it appears likely that the number ofcellulosic ifiNs made available in 2017will fall short of EPA’s projection in our

production from each of these facilities from 2011through September 2017 has been less than 150,000RINs. This is approximately 1% of all liquidcellulosic biofuel production through September2017.

This methodology is most recentiy described inthe 2017 final rule. See 81 FR 89746, 89755(December 12, 2016).

4° EPA only projected cellulosic biofoelproduction for the final three months of 2015, sincedata on the availability of cellulosic biofuel RINs(D3÷07) for the first nine months of the year wereavailable at the time the analyses were completedfor the final rule.

EPA projected that 123 million and 230 millioncellulosic R1Ns would be generated in 2015 and2016, respectively. The number of availablecellulosic RINs in these years (RINs geoeratedminus R1Ns retired for non-compliance reasons)was 140 and 190 million R1Ns. See “Assessment ofthe Accuracy of cellulosic Biofuel ProductionProjections in 2015 and 2016 (June 2017 Update),”memorandum from Dallas Burkholder to EPA AirDocket EPA—HQ—OAR—2017—0091 for more detail.

2017 final rule.42 The fact that theprojections made using thismethodology have been somewhatinaccurate, under-estimating the actualnumber of PINs made available in 2015and over-estimating in 2016 and (mostlikely) 2017, reflects the inherentdifficulty with projecting cellulosicbiofuel production. It also emphasizesthe importance of continuing to makerefinements to our projectionmethodology in an effort to produceaccurate projections.

EPA’s projections of liquid cellulosicbiofuel were higher than the actualvolume of liquid cellulosic biofuelproduced in both 2015 and 2016, andappear likely to be higher than actualliquid cellulosic biofuel production in2017. We believe this recent datawarrants a change to the percentilevalues used to project liquid cellulosicbiofuel from the percentile values usedin prior years in an effort to take intoaccount the most recent data availableand make the projections for 2018 moreaccurate. We are therefore adjusting thepercentile values used to project liquidcellulosic biofuel production based onactual liquid cellulosic biofuelproduction in 2016 and thoughSeptember 2017. Use of this updateddata also results in different percentilevalues than we proposed to use for2018. We believe that the use of themethodology (described in the 2018NPRM and in Section III.D.1 below),with the adjusted approach todeveloping the percentile values used toproject production volumes for liquidcellulosic biofuels, results in aprojection that reflects a neutral aim ataccuracy since it accounts for expectedgrowth in the near future by usinghistorical data that is free of anysubjective bias.

In previous years, we used the samegeneral methodology for CNGILNGderived from biogas as for liquidcellulosic biofuel, but used differentpercentile values to project CNG/LNGderived from biogas and liquidcellulosic biofuels, reflecting the moreestablished nature of the CNG/LNGindustry relative to liquid cellulosicbiofuel production. For 2018, EPAproposed using an industry-wideapproach, rather than an approach thatprojects volumes for individualcompanies or facilities, to project theproduction of CNG/LNG derived frombiogas. This updated approach reflectsthe fact that this industry is far more

42Additional information on our currentprojection of cellulosic biofuel production for 2017can be found in “calculating the Percentile ValuesUsed to Project Liquid cellulosic BiofoelProduction,” memorandum from Dallas Burkholderto EPA Air Docket EPA—HQ—OAR—2017—0091.

mature than the liquid cellulosic biofuelindustry, and that there are a largenumber of facilities registered togenerate cellulosic biofuel RINs frombiogas, rendering a facility-by-facilityanalysis difficult and unnecessary forpurposes of accuracy.43 As described inSection III.D.2 below, EPA is insteadcalculating a year-over-year rate ofgrowth in the renewable CNG/LNGindustry by comparing MN generationfor CNG/LNG derived from biogas fromOctober 2015—September 2016 to theMN generation for these same fuels fromOctober 2016—September 2017 (the mostrecent month for which data areavailable. We then apply this year-over-year growth rate to the total number ofcellulosic RNs available for compliancefrom CNG/LNG in 2016 (the most recentyear for which complete data areavailable), to estimate the production ofGNGILNG derived from biogas in2018.

The remainder of this sectiondiscusses the companies and facilitiesEPA expects to be in a position toproduce commercial-scale volumes ofcellulosic biofuel by the end of 2018and describes in more detail themethodology EPA is using to projectcellulosic biofuel production in 2018(including a review of cellulosic biofuelproduction and the accuracy of theprojection methodology in previousyears).

1. Potential Domestic ProducersThere are a number of companies and

45 located in the U.S. that haveeither already begun producingcellulosic biofuel for use astransportation fuel, heating oil, or jetfuel at a commercial scale, or areanticipated to be in a position to do so

EPA received a large number of affidavits fromcompanies that produce (or intend to produce)CNGILNG derived from biogas as comments on ourproposed rule. These affidavits are publiclyavailable as part of the comments submitted by thecoalition for Renewable Natural Gas. EPA reviewedand considered the information contained in theseaffidavits in establishing the required volume ofcellulosic biofuel for 2018. These affidavitsconfirmed that it was reasonable to believe that therelatively high year-over-year rate of growth used toproject volumes of NG)LNG derived from biogasfor 2018 could be achieved based on a number ofproject expansions and new projects expected tobegin producing cNG/LNG derived from biogas in2018.

RIN generation for cNG)LNGderived from biogas has increased each year. It ispossible, however, that RThJ generation for thesefuels in the most recent 12 months for which dataare available could be lower than the preceding 12months. We believe our methodology accounts forthis possibility. In such a case, the calculated rateof growth would be negative.

volume projection from CNG/LNGproducers does not represent production from asingle company or facility, but rather a group offacilities utilizing the same production technology.


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at some time during 2018. The financialincentive provided by cellulosic biofuelRINs,46 combined with the facts that todate nearly all cellulosic biofuelproduced in the U.S. has been useddomestically47 and all the domesticfacilities we have contacted in derivingour projections intend to produce fuelon a commercial scale for domesticconsumption and plan to use approvedpathways, gives us a high degree ofconfidence that cellulosic biofuel RINswill be generated for any fuel producedby domestic commercial scale facilities.In order to generate RINs, each of thesefacilities must be registered with EPAunder the RFS program and complywith all the regulatory requirements.This includes using an approved RINgenerating pathway and verifying thattheir feedstocks meet the definition ofrenewable biomass. Most of thedomestic companies and facilitiesconsidered in our assessment ofpotential cellulosic biofuel producers in2018 have already successfullycompleted facility registration, andmany have successfully generatedRINs.48 A brief description of each ofthe domestic companies (or group ofcompanies for cellulosic CNG/LNGproducers) that EPA believes mayproduce commercial-scale volumes ofRIN generating cellulosic biofuel by theend of 2018 can be found in amemorandum to the docket for this finalnle. General information on each ofthese companies or group of companiesconsidered in our projection of thepotentially available volume ofcellulosic biofuel in 2018 is summarizedin Table III.B.3—1 below.

2. Potential Foreign Sources ofCellulosic Biofuel

In addition to the potential sources ofcellulosic biofuel located in the U.S.,there are several foreign cellulosic

°Accorthng to data from Argus Media, the pricefor 2017 cellulosic biofuel PINs averaged $2.73 in2017 (through September 2017). Alternatively,obligated parties can obtain a PIN value equivalentto a cellulosic biofuel RIN by purchasing anadvanced (or biomaaa-based diesel) PIN and acellulosic waiver credit. The price for 2017advanced biofuel PINs averaged $1.00 in 2017(through September 2017) while the price for a 2017cellulosic waiver credit is $2.00.

only known exception was a small volumeof fuel produced at a demonstration scale facilityexported to be used for promotional purposes.

45Many of the facilities listed in Table ID.B.3—1are registered to produce cellulosic (D3 or D7) RINswith the exception of several of the producers ofCNG/LNG derived from biogas, many of thefacilities projected to produce cellulosic ethanolusing Edeniq’s technology, Enerkem’s Edmontonfacility, and Ensyn’s Port-cartier, Quebec facility.

“cellulosic Biofoel Producer companyDesctiptions (Novemher 2017),” memorandum fromDallas Burkholder to EPA Mr Docket EPA—HQ—OAR—2017—0091.

biofuel companies that may producecellulosic biofuel in 2018. Theseinclude facilities owned and operatedby Beta Renewables, Enerkem, Ensyn,GranBio, and Raizen. All of thesefacilities use fuel production pathwaysthat have been approved by EPA forcellulosic RII’J generation providedeligible sources of renewable feedstockare used and other regulatoryrequirements are satisfied. Thesecompanies would therefore be eligibleto register their facilities under the RFSprogram and generate RINs for anyqualifying fuel imported into the U.S.While these facilities may be able togenerate RINs for any volumes ofcellulosic biofuel they import into theU.S., demand for the cellulosic biofuelsthey produce is expected to be high intheir own local markets.

EPA is charged with projecting thevolume of cellulosic biofuel that will beproduced or imported into the U.S.a0For the purposes of this final rule wehave considered all of the registeredforeign facilities under the RFS programto be potential sources of cellulosicbiofuel in 2018. We believe that due tothe strong demand for cellulosic biofuelin local markets, the significanttechnical challenges associated with theoperation of cellulosic biofuel facilities,and the time necessary for potentialforeign cellulosic biofuel producers toregister under the RFS program andarrange for the importation of cellulosicbiofuel to the U.S., cellulosic biofuelimports from foreign facilities notcurrently registered to generatecellulosic biofuel FiNs are generallyhighly unlikely in 2018. For purposes ofour 2018 cellulosic biofue) projectionwe have, with two exceptions(described below), excluded potentialvolumes from foreign cellulosic biofuelproduction facilities that are notcurrently registered under the RFSprogram.

Cellulosic biofuel produced at fourforeign facilities (Ensyn’s Renfrewfacility, GranBio’s Brazilian facility, andthe CNG/LNG facilities ComplexeEnviro Progressive Ltee and Saint-Thomas Biomethane Plant) generated

50EPA has consistently interpreted the “projectedvolume of cellulosic biofuel production” requiredin CAA section 211(o)(7)(D) to include volumes ofcellulosic biofuel likely to be made available in theUnited States, including from both domesticproduction and imports (see ao FR 77420(December 14, 2015) and 81 FR 89746 (December12, 2016)). We do not believe it would bereasonable to include in the projection all cellulosicbiofuel produced throughout the world, regardlessof likelihood of import to the United States, sincevolumes that are not imported would not beavailable to obligated parties for compliance andincluding them in the projection would render theresulting volume requirement and percentagestandards unachievable.

cellulosic biofuel RINs for fuel exportedto the U.S. in 2017; projected volumesfrom each of these facilities are includedin our projection of available volumesfor 2018. EPA has also includedprojected volume from two foreignfacilities (Enerkem’s Canadian facilityand Ensyn’s Port-Cartier, Quebecfacility) that are not currently registeredto generate cellulosic biofuel RINsunder the FYS program. We believe thatit is appropriate to include volume fromthese facilities in light of their proximityto the U.S., the proven technology usedby these facilities, the volumes ofcel)ulosic biofuel exported to the U.S.by the company in previous years (inthe case of Ensyn), and the company’sstated intentions to market fuelproduced at these facilities to qualifyingmarkets in the U.S. One additionalforeign facility (Raizen’s Costa Pinto)has registered as a cellulosic biofuelproducer, but has not yet generated anycellulosic RINs. EPA attempted tocontact representatives from this facilityto inquire about their intentions toexport cellulosic biofuel to the U.S. in2018, but received no response. Wehave therefore not projected anycellulosic biofuel exports from thisfacility to the U.S. in 2018. All of thefacilities included in EPA’s cellulosicbiofuel projection for 2018 are listed inTable III.B.3—1 below.

3. Summary of Volume Projections forIndividual Companies

General information on each of thecellulosic biofuel producers (or group ofproducers in the case of producers ofCNG/LNG derived from biogas andliquid cellulosic biofuel facilities usingEdeniq’s technology) that factored intoour projection of cellulosic biofuelproduction for 2018 is shown in TableIII.B.3—1. This table includes bothfacilities that have already generatedcellulosic RINs, as well as those thathave not yet generated cellulosic RINs,but are projected to do so by the end of2018. As discussed above, we havefocused on commercial-scale cellulosicbiofuel production facilities. Each ofthese facilities (or group of facilities) isdiscussed further in a memorandum tothe docket.51 In addition to the facilities(or groups of facilities) discussed inTable III.B.3—1 below, EPA is aware ofan additional technology that may beused to produce qualifying cellulosicbiofuel in 2018. Multiple companies, inaddition to Edeniq and Quad CountyCorn Processors, are working to

“cllui liD Biofoel Producer companyDesctiptions (November 2017),” memorandum fromDallas Burkholder to EPA Mr Docket EPA—HQ—0AR—2017—0091.



commercialize technology to convert accurately and reliably determining the cases where the facilities intend to usecorn kernel fiber to cellulosic ethanol at conversion of cellulosic feedstocks to a technology with a methodology forexisting corn ethanol facilities. At this biofuel in processes that simultaneously quantifying the volume of ethanolpoint, however, none of these other convert both cellulosic and non- produced form the cellulosic fraction ofcompanies have successfully registered cellulosic feedstocks, EPA has included corn fiber that has been approved bya facility to generate cellulosic RINs volumes of cellulosic biofuel associated EPA (Quad County Corn Processors andusing their technology.52 In light of the with the simultaneous conversion of facilities using Edeniq’s technology).significant challenges associated with corn kernel fiber and corn starch only in

TABLE 111.6.3—1—PROJECTED PRODUCERS OF CELLULOSIC BIOFUEL BY 2018

FacilityCompany name Location Feedstock Fuel capaty (miNion Constrction start First M

year)53

CNG/LNG Pro- Various Biogas CNG/LNG Various N/A August 2014.ducers .

Edeniq Various Corn Kernel Fiber Ethanol Various Various October 2016.Enerkem Edmonton, AL, Separated MSW.. Ethanol 1056 2012 September

Canada 2017.Ensyn Rentrew, ON, Wood Waste Heating Oil 3 N/A 2014.

Canada.Ensyn Port-Cartier, QC, Wood Waste Heating Oil 10.5 June 2016 January 2018.

Canada.GranBio São Miguel dos Sugarcane ba- Ethanol 21 Mid 2012 September 2014.

Campos, Brazil gasse.Poet-DSM Emmetsburg, IA Corn Stover Ethanol 20 March 2012 4Q 2015.QCCP Galva, IA Corn Kernel Fiber Ethanol 4 Late 2013 October 2014.

C. Projection From the EnergyInformation Administration

Section 211(o)(3)(A) of the CAArequires ETA to “. . . provide to theAdministrator of the EnvironmentalProtection Agency an estimate, withrespect to the following calendar year,of the volumes of transportation fuel,biomass-based diesel, and cellulosicbiofuel projected to be sold orintroduced into commerce in the U.S.”ETA provided these estimates to EPA onOctober 11, 2017.56 With regard tocellulosic biofuel, the ETA estimatedthat the available volume in 2018 wouldbe 13 million gallons.

In their letter, EIA did not identify thefacilities on which their estimate ofcellulosic biofuel production was based.ETA did, however, indicate in their letterthat they included neither estimates ofcellulosic biofuel produced by foreign

52 A significant issue that must be resolved toregister a facility to produce cellulosic biofuel fromcorn kernel fiber at an existing ethanol productionfacility is the quantification of the volume ofethanol produced from cellulosic feedstocks ratherthan non-cellulosic feedstocks such as starch. Untilthese companies develop a methodology forquantifying cellulosic binfuel production that isapproved by EPA we do not believe it is appropriateto include an estimate of celluloaic biofuelproduction from these facilities in our projection ofcellulosic biofoel production in 2018.

53 Facility capacity is generally equal to thenameplate capacity provided to EPA by companyrepresentatives or found in publicly availableinfonnation. if the facility has completedregistration and the total permitted capacity islower than the nameplate capacity then this lowervolume is used as the facility capacity. For

entities and imported into the U.S., norestimates of cellulosic heating oil orCNG/LNG produced from biogas, whichtogether represent approximately 96percent of our projected cellulosicbiofuel volume for 2017. When limitingthe scope of our projection to thecompanies assessed by ETA, we notethat while our volume projections arenot identical, they are very similar. EPAprojects approximately TO milliongallons of liquid cellulosic biofuel willbe produced domestically in 2017(when excluding heating oil, as ETA didin their estimate of cellulosic biofuelproduction). ETA did not provide detailon the basis of their projections, so wecannot say precisely why EPA and ETA’sprojections differ. We further note thatif we used ETA’s projections fordomestic liquid cellulosic biofuelproduction without modification in

companies generating RThJa for cNG/LNG derivedfrom biogaa the Facility capacity is equal to thelower of the annualized rate of production of CNGILNG from the facility at the time of facilityregistration or the sum of the volume of contractsin place for the sale of cNG/LNG for use astransportation fuel (reported as the actual peakcapacity for these producers).

Where a quarter is listed for the first productiondate EPA has assumed production begins in themiddle month of the quarter (i.e., August for the 3rdquarter) for the purposes of projecting volumes.

55For more information on these facilities see“November 2017 Assessment of celluloaic BiofuelProduction from Biogaa (2018),” memorandum fromOallas Burkholder to EPA Air Docket EPA—HQ—OAR—2017—0091.

55The oameplate capacity of Enerkem’s facility is10 million gallons per year. However, we anticipate

place of our own assessment of thesefacilities the impact on the cellulosicbiofuel standard overall for 2018 wouldbe approximately 1% .59

D. Cellulosic Biofuel Volume for 2018

1. Liquid Cellulosic Biofuel

For our 2018 liquid cellulosic biofuelprojection, we use the same generalapproach as we have in projecting thesevolumes in previous years. We begin byfirst categorizing potential liquidcellulosic biofuel producers in 2018according to whether or not they haveachieved consistent commercial scaleproduction of cellulosic biofuel to date.Next we define a range of likelyproduction volumes for 2018 for eachgroup of companies. Finally, we use apercentile value to project from theestablished range a single projectedproduction volume for each group of

that a portion of their feedatock will be nonbiogenic MSW. mIca cannot be generated for theportion of the fuel produced from non-biogenicfeedatocks. We have taken this into account in ourproduction projection for this facility.

7This date reflects the first production of ethanolfrom this facility. The facility began production ofmethanol in 2015.

5”Lefter from EIA to EPA on 2018 projectedvolumes,” available in docket EPA—HQ—OAR—2017—0091.

If EPA increased our projection of liquidcellulosic biofoel produced in the United States in2018 (excluding heating oil) to 13 million gallonsto be consistent with Em’s projection our totalprojected volume of cellulosic biofuel wouldincrease by 3 million gallons. This is approximately1% of the total volume of cellulosic biofuelprojected to be produced in 2018 (3/288 = 0.01).


Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations 58499

companies in 2018. As explained below,however, we are using a differentapproach to selection of the appropriatepercentile values for purposes of thisrule than we have used in prior years.In this final rule we have used the mostrecent data available to determinewhich facilities are likely to produceliquid cellulosic biofuel in 2018,categorize the companies according towhether or not they have consistentlyproduced commercial scale volumes ofliquid cellulosic biofuels, adjust theprojected production range for eachgroup of companies, and adjust thepercentile values used for each group of

TABLE III.D.1—1—2018 PRODUCTION

companies. This methodology is brieflydescribed here, and is described indetail in memos to the docket.6°

Consistent with our approach inprevious years, we separated the list ofpotential producers of cellulosic biofuel(listed in Table III.B.3—1) into twogroups according to whether or not thefacilities have achieved consistentcommercial-scale production andcellulosic biofuel R1N generation. Wenext defined a range of likelyproduction volumes for each group ofpotential cellulosic biofuel producers.The low end of the range for each groupof producers reflects actual RINgeneration data over the last 12 months

for which data are available at the timeour technical assessment was completed(October 2016—September 2017). Forpotential producers that have not yetgenerated any cellulosic RINs, the lowend of the range is zero. For the highend of the range of production volumesfor companies expected to produceliquid cellulosic biofuel we considereda variety of factors, including theexpected start-up date and ramp-upperiod,61 facility capacity. The projectedrange for the groups of companiesconsidered in our 2018 cellulosicbiofuel projection are shown in TablesIII.D.1—1 and hID. 1—2 below. 62

Low end of the High end ofCompanies included range the range a

Facilities using Edeniq’s technology (new facilities), Enerkem, Ensyn (Port Cartier facility) 0 47a Rounded to the nearest million gallons.

TABLE III.D.1—2—2018 PRODUCTION RANGES FOR LIQUID CELLULOSIC BIOFUEL PRODUCERS WITH CONSISTENTCOMMERCIAL SCALE PRODUCTION

[Million gallons]

Com anies included Low end of the High end ofrange a the range a

Facilities using Edeniq’s technology (active facilities), Ensyn (Renfrew facility), Poet-DSM, GranBio, QuadCounty Corn Processors 7 24a Rounded to the nearest million gallons.

After defining likely productionranges for each group of companies wenext considered the percentile values touse in projecting a production volumefor each group of companies. In theproposed rule, we used the 1st and 43rdpercentile to project production fromfacilities that had not yet achievedconsistent commercial scale productionof liquid cellulosic biofuels and thosethat had, respectively, based on dataindicating what percentile of productionfrom within the 2016 projected rangefacilities included in our 2016 cellulosicbiofuel projection actually achieved.

66 “November 2017 Liquid cellulosic BiofuelProlections for 2018 cm” and “calculating thePercentile values Used to Project Liquid cellulosicBiofoel Production,” memorandums from DallasBurkholder to EPA Air Docket EPA—HQ—OAR—2017—0091.

61As in our 2015—2017 projections, EPAcalculated a high end of the range for each facility(or group of facilities) based on the expected startup date and a six-month straight line ramp-upperiod. The high end of the range for each facility(or group of facilities) is equal to the valuecalculated by EPA using this methodology, or thenumber of RINs the producer expects to generate in2018, whichever is lower.

However, for this final rule we areadjusting the percentile values used toproject liquid cellulosic biofuelproduction from within the range ofprojected production values, by usingdata on actual liquid cellulosic biofuelproduction from both 2016 and 2017(through September). We believe anadjustment to the percentile values usedto generate a projected productionvolume from the range of potentialproduction volumes for each group offacilities is warranted. EPA’s estimatesfor liquid cellulosic biofuel exceededactual production of liquid cellulosic

62More information on the data and methods EPAused to calculate each of the ranges in these tablesin contained in “November 2017 Liquid cellulosicBinfuel Projections for 2018 cBI” memorandumfrom Dallas Burkhnlder to EPA Air Docket EPA—HQ—OAR—2017—0091. Unlike in previous years, wehave not shown the projected ranges for eachindividual company. This is because the high endof the range for some of these companies are basedon the company’s production projections, whichthey consider confidential business information(Rfl. Additionally, the low end of the range forfacilities that have achieved consistent commercialscale production is based on actual RN generationdata in the most recent 12 months, with is also

biofuel in both 2015 and 2016.63

Further, as discussed in the NPRM weare considering additional MNgeneration data from 2017 that was notavailable for the NPRM in this final rule.While we currently only have cellulosicbiofuel production data throughSeptember 2017, additional dataavailable from months after the releaseof our proposed rule suggests thatfurther changes to the percentile valuesused in the NPRM are likely to result inmore accurate projections of cellulosicbiofuel production in 2018. We believethat the adjusted percentile values used

claimed as Cifi. EPA has included additionalinformation on the calculations used to define theproduction ranges, including the production rangesfor each individual company or facility, in a memoto the docket.

63EPA notes that once standards are set based onthese projections, cellulosic biofuel RINs can begenerated for either type of cellulosic biofuel.Cellulosic biofuel RINs generated for liquid biofuelsand cNG/LNG derived from biogas can be used tosatisfy an obligated party’s cellulosic biofuelobligation. There are no separate standards forliquid and gaseous cellulosic biofuels.

RANGES FOR LIQUID CELLULOSIC BIOFUEL PRODUCERS WITHOUT CONSISTENTCOMMERCIAL SCALE PRODUCTION

[Million gallons]



in this final rule will improve the The projected ranges for liquid are available for compliance, and theaccuracy of the production projection cellulosic biofuel production in 2016, percentile values that would haveand will further EPA’s objective to along with the percentile values used to resulted in a projection equal to theproject volumes with a ‘ ‘neutral aim at project a production volume within the actual production volume are shown inaccuracy.” calculated ranges the actual number of Table llI.D.1—3 below.

cellulosic RINs generated in 2016 that

TABLE IILD.1—3—PROJECTED AND ACTUAL LIQUID CELLULOSIC BIOFUEL PRODUCTION IN 2016[Million gallons)

Low end of the High end of Percentile Projected Actual Actualrange the range (2016 FRM) I production production64 percentile

New Facilities 0 76 25th 19 1.06 1stConsistent Producers65 2 5 50th 4 3.28 43rd

Since the actual production in 2016 EPA currently only has data on cellulosic biofuel production in the firstwas lower than the projected production cellulosic biofuel production in 2017 3 quarters (3.09 million gallons). Wefor both new facilities and consistent through the end of September. While we then used this factor, together withproducers, we determined that for the believe that any final assessment of the actual production data from the first 3purposes of our proposed rule it would accuracy of a projection method cannot quarters of 2017 to project cellulosicbe appropriate to adjust the percentiles be made until complete data for the year biofuel production in the 4th quarter ofto attempt to make them more accurate. are available, we nevertheless believe it 2017.67 The projected ranges for liquidTo this end, EPA calculated the is appropriate to consider data from cellulosic biofuel production in 2017,percentile values that would have 2017 and adjust the percentile values along with the percentile values used toresulted in accurate production used in the final rule as appropriate. To project a production volume within theprojections in 2016 based on the actual calculate the percentile values that calculated ranges, the actual number ofnumber of cellulosic biofuel RINs would have resulted in a projection cellulosic RINs generated in 2017 thatgenerated for liquid cellulosic biofuels equal to the actual production volume are available for compliance, and theand available for compliance in 2016. for 2017 we first need to project theThese calculated percentile values are volume of cellulosic biofuel that will be percentile values that would have

the 1st percentile for new facilities produced in the 4th quarter of 2017 for resulted in a projection equal to the

(replacing in the NPRM the 25th each group of facilities.66 EPA projected actual production volume are shown in

percentile used for 2016 and 2017) and cellulosic biofuel production in the 4th Table III.D.1—4 below. Note that thethe 43rd percentile for consistent quarter of 2017 by first comparing percentile value that would haveproducers (replacing in the NPRM the cellulosic biofuel production in the 4th resulted in the projected volume of50th percentile used for 2016 and 2017). quarter of 2016 to the cellulosic biofuel cellulosic biofuel in 2017 is negative, as

These percentile values, however, do production in the first 3 quarters of the projected volume is lower than thenot reflect the updated production data 2016. In 2016, cellulosic biofuel low end of the range from the 2017 finalEPA has from liquid cellulosic biofuel production in the 4th quarter (1.25 rule.producers in 2017. million gallons) was 40 percent of

TABLE III.D.1—4—PROJECTED AND ACTUAL LIQUID CELLULOSIC BIOFUEL PRODUCTION IN 2017[Million gallons through September]

Low end of the High end of Percentile Projected Projected Actualrange the range I (2017 FRM) production production

(2017 FRM) (2018 FRM)69 percentile

New Facilities 0 33 25th 8 6.07 18thConsistent Producers69 3.5 7 50th 5 2.85 —18th

The liquid cellulosic biofuelproduction data from 2017 indicates

°4Acffial production is calculated by subtractingRINs retired for arsy reason other than compliancewith the RFS standards from the total number ofcellulosic RINs generated.

the 2014—2016 Annual Rule EPA categorizedEnsyn and Quad county corn Processors asconsistent cellulosic biofuel producers for 2016. Allother companies were categorized as new facilities.This is in contrast to 2018, for which EPA hascategorized additional facilities as consistentcellulosic biofuel producers.

in the case of CNG/LNG derived frombiogas, discussed in Section Ifl.D.2 below, EPA canonly use calendar years, rather than consecutive 12month periods to evaluate the accuracy of the

percentile values used in our projections inprevious years. This is because the percentilevalues are used in conjunction with the calculatedranges to produce production estimates. The rangeswere defined for the purpose of projectingcellulosic biofuel production in the context of ourannual rules and therefore are specific to calendaryears. Since production in any calendar year is notexpected to be consistent (i.e., with equalproduction volumes each month) it is not possibleto use the projected ranges from two calendar yearsto generate a range for a 12 month period that spanstwo calendar years.

67More detall on these calculations can be foundin “November 2017 Liquid cellulosic Biofuel

Projections for 2018 cm” memorandum from DallasBurkholder to EPA Air Docket EPA—HQ—OAR—2017—0091.

68 This number includes an updated projection ofcellulosic biofuel production for each group offacilities in the 4th quarter of 2017 as described inthe preceding paragraph. Note that the low end ofthe potential production range for companies thathave achieved consistent commercial scaleproduction (7 million gallons) is based on the mostrecent 12 months for which data is avallable(October 2016—September 2017) while theprojected production number in this table is our



that adjustments to the percentile valuesused to project cellulosic biofuelproduction within the calculated rangeare appropriate. For this final rule EPAhas projected cellulosic biofuelproduction from facilities that have notyet achieved consistent commercialscale production at the 10th percentileof the calculated range and projectedcellulosic biofuel production fromfacilities that have achieved commercialscale production at the 12thpercentile.° These percentiles arecalculated by averaging the percentilesthat would have produced cellulosicbiofuel projections equal to the volumesproduced by each group of companies

in 2016 and 2017, as shown in TableIII.D.1—5 below. We have not considereddata from years prior to 2016, as priorto 2016 a different methodology wasused to project available volumes ofcellulosic biofuel. In determining thepercentile values to use for 2018 wehave decided to weight the observedactual percentile values from 2016 and2017 equally. While the percentile valuefrom 2017 represents the most recentdata available, it is also dependent on aprojection of the volume of cellulosicbiofuel that will be produced in the 4thquarter of 2017. Conversely, thepercentile values from 2016 arecalculated using actual data for the full

year, however this data is older and maynot reflect the current state of cellulosicbiofuel production technologies andcommercial scale facilities as data from2017. We believe that an average ofthese percentile values appropriatelyincorporate the data available to EPA atthe time of this rulemaking to projectliquid cellulosic biofuel productionwith a neutral aim at accuracy. We willcontinue to monitor the accuracy of ourprojection methodology and will useupdated data to adjust the percentilevalues and/or other elements of ourmethodology as appropriate.7’

TABLE III.D.1—5—PERcENTILE VALUES THAT WOULD HAVE PRODUCED ACCURATE PROJECTION IN 2016 AND 2017

Average

2016 2017 (Used toproject volume

in 2018)

New Facilities 1st 18th 10thConsistent Producers 43rd — 18th 12th

Finally, we used these percentile discussed above, to project a volume for calculations are summarized in Tablevalues, together with the ranges each group of companies in 2018. These III.D.1—6 below.determined for each group of companies

TABLE III.D.1—6—PR0JECTED VOLUME OF LIQUID CELLULOSIC BIOFUEL IN 2018[Million gallons]

Low end of the High end of Projectedrange a the range a ercen i e volume a

Liquid Cellulosic Biofuel Producers; Producers without Consistent Commercial Scale Production 0 47 10th

Liquid Cellulosic Biofuel Producers; Producers with Consistent CommercialScale Production 7 24 12th

Total N/A N/A N/A

5

9

14a Volumes rounded to the nearest million gallons.

EPA also considered whether it wouldbe appropriate to modify otherindividual components of the pastmethodology for projecting liquidcellulosic biofuel based on a narrowconsideration of each factor, but we donot believe that such changes arewarranted. Making the adjustment to thepercentile values used in themethodology while keeping othercomponents of the methodologyconstant should, we believe, provide anappropriate refinement of themethodology that reflects recent

current projection for calendar year 2017 based onRIN generation data through September 2017.

591n the 2014—2016 Annual Rule, EPAcategorized Ensyn and Quad comty cornProcessors as consistent cellulosic biofuelproducers for 2016. All other companies werecategorized as new facilities. This is in contrast to2018, for which EPA has categorized additionalfacilities as consistent cellulosic biofuel producers.

experience. We acknowledge, however,that using the calculated percentilevalues from previous years to projectliquid cellulosic biofuel production infuture years does not eliminate thepossibility that actual production willdiffer from our projections. This isespecially true for the liquid cellulosicbiofuel industry, which is currently inthe early stages of commercialization.Nevertheless, based on the record beforeus, we believe the ranges of projectedproduction volumes for each company(or group of companies for those using

7°The percentile value for 2018 for facilities thathave not yet achieved consistent commercial scaleproduction (10th percentile) is higher than thepercentile used in the proposed rule (1st percentile)but lower than the percentile used in the 2017 rule(25th percentile). The percentile value for 2018 forfacilities that have achieved consistent commercialscale production (12th percentile) is lower thanboth the percentile used in both the proposed rule

the Edeniq technology) are reasonable,and that projecting overall productionin 2018 in the manner described aboveresults in a neutral estimate (neitherbiased to produce a projection that istoo high or too low) of likely liquidcellulosic biofuel production in 2018(14 million gallons).

2. CNG/LNC Derived From Biogas

For 2018, EPA is using a newmethodology to project production ofCNG/LNG derived from biogas used astransportation fuel. We believe a new

(43rd percentile) and the percentile used in the2017 rule (50th percentile).

71Additional information on the calculation ofthe percentile values for 2016 and 2017 can befound in “calculating the Percentile values Used toProject Liquid cellulosic Biofuel Production,”memorandum from Dallas Burkholder to EPA MrDocket EPA—HQ—OAR—2017—0091.



methodology is warranted for purposesof this rule for two primary reasons: theover-projection of CNG/LNG derivedfrom biogas in 2016 (and the likely over-projection of CNG/LNG derived frombiogas in 2017), and the relativematurity of the CNG/LNG industryrelative to the liquid cellulosic biofuelindustry. EPA’s projection of theproduction of CNG/LNG derived frombiogas in 2016 was 207 million ethanol-equivalent gallons. Actual production ofcellulosic biofuel RINs for CNG/LNGderived from biogas that were availablefor compliance in 2016 was 185 milliongallons, indicating that the approach wetook to projecting CNG/LNG derivedfrom biogas in 2016 resulted in anoverestimate by 22 million ethanol-equivalent gallons (12 percent).Similarly, EPA’s projection of theproduction of CNG/LNO derived frombiogas in 2017 was 298 million ethanol-equivalent gallons. Actual production ofcellulosic biofuel RThJs for CNG/LNGderived from biogas that has beenproduced in 2017 (through the end ofSeptember, the most recent month forwhich data are available) is 151 milliongallons. While data for all of 2017 arenot available at this time, and despitethe observed historical pattern of higherMN generation for CNG/LNG derivedfrom biogas in the latter months of theyear relative to the earlier months of theyear, the available data strongly suggeststhat actual RIN generation from CNG/LNG derived from biogas in 2017 islikely to fall short of our projections inthe 2017 final nile. MN generation of

CNG/LNG derived from biogas fromJanuary 2017—September 2017 is 22percent higher than MN generation inthe same months in 2016. In order tomeet the projected volume for 2017 (298million gallons), however, MNgeneration in the remainder of 2017would need to be 58 percent higher in2017 than the total MN generation fromthese fuels in 2016.

EPA received many comments on ourproposed approach to projectingproduction of CNG/LNG derived frombiogas in 2018. Some commenterscritiqued EPA’s calculation of a year-over-year rate of growth based onproduction during the first five monthsof 2017 (relative to production in thefirst five months of 2016) and suggestedthat EPA use updated production datain the final rule, or that EPA calculatethe annual rate of growth based oncomparisons of time periods no lessthan 12 months. Many commenterscharacterized EPA’s proposed approachas inappropriately “backwards looking,”and claimed that while this approachmay adequately project production fromfacilities that are currently producingCNG/LNG derived from biogas it did notadequately consider the new facilitiesthe industry expects will beginproduction in 2018. Many of thesecommenters provided facility specificinformation on facilities capable ofproducing CNG/LNG derived frombiogas in 2018 for both facilities that arecurrently producing CNG/LNG andthose that expect to begin producing in2018.72 Many of these commenters

requested that EPA use the facility byfacility approach used by EPA in our2017 final rule to project the productionof CNG/LNG derived from biogas in2018.

In this final rule EPA has usedupdated data in projecting theproduction of CNG/LNG derived frombiogas, consistent with our statedintentions in the proposed rule and asrequested by several commenters. At thetime the analyses were performed forthis final rule, EPA had data availablethough the end of September 2017.EPA has adjusted our calculated year-over-year rate of growth based on thisnew data. EPA also agrees withcommenters who stated that it is moreappropriate to calculate a year-over-yearrate of growth using a full year’s (12months) worth of data, as this capturesany seasonality and would (in futureyears) minimize the opportunity forproducers of CNGILNG derived frombiogas to attempt to influence theprojected growth rate for the next yearby intentionally shifting production toparticular months of the year.

For this final rule, EPA has calculatedthe year-over-year growth rate in CNG/LNG derived from biogas by comparingRIN generation from October 2016—September 2017 (the most recent 12months for which data are available) toMN generation in the 12 months thatimmediately precede this time period(October 2015—September 2016). TheseMN generation volumes are shown inTable III.C.2—1 below.

TABLE III.D.2—1—GENERATI0N OF CELLULOSIC BIOFUEL RIN5 FOR CNG/LNG DERIVED FROM BIOGAS[Million gallonsl

RIN generation (October 2015—September I RIN generation (October 2016—September Year-over-year increase2016) 2017)

177.28 215.52 21.6%

EPA then applied this 21.6 percentyear-over-year growth rate to the totalnumber of 2016 cellulosic MNsgenerated for CNG/LNG that wereavailable for compliance (185.14million) to project the production ofcellulosic MNs from these fuels in 2017,and then repeated the calculation toarrive at a projection for 2018. Thismethodology results in a projection of273.6 million gallons of CNG/LNG

72The coalition for Renewable Natural Gascollected and submitted a large number of affidavitsfrom project owners and operators of facilities thatare currently producing NG/LNG derived frombiogas, as well as those that anticipate beginningproduction in 2018. Many of these affidavits arepublicly available in the docket, while others have

derived from biogas in 2018. Webelieve that projecting the production ofCNG/LNG derived from biogas in thismanner appropriately takes intoconsideration the actual recent rate ofgrowth of this industry, and that thisgrowth rate accounts for both thepotential for future growth and thechallenges associated with increasingRIN generation from these fuels infuture years. While this methodology

claimed these submissions as confidential businessinformation.

calculate this value, EPA multiplied thetotal number of 2016 RINa generated for NG/LNGderived from biogas and available for complianceby 1.216 (representing a 21.6% year-over-yearincrease), and then multiplied the product by 1.216a second time (to project the annual production

may not be appropriate to use once theprojected volume of CNG/LNG derivedfrom biogas approaches the total volumeof CNG/LNG that is used astransportation fuel, this is not currentiya constraint as our projection for 2018is well below the total volume of CNG/LNG that is currently used astransportation fuel.74 The comments

volume in 2018, rather than 2017). The number2016 of RINs generated for cNG/LNG derived frombiogas and available for compliance (185.14) isbased on EMT5 data.

74EPA projects that 580 million ethanolequivalent gallons of NG/LNG will be used astransportation fuel in 2018 based on EIA’s October2017 short Term Energy Outlook (5TEO). To


Federal Register / Vol. 82, No. 237/ Tuesday, December 12, 2017 / Rules and Regulations 58503

submitted to EPA cm OUT proposed rulecontained information related to anumber of production facilitiesexpected to begin producing CNG/LNGderived from biogas in 2018 (and thefinal few months of 2017). Althoughcommenters generally believed that thisinformation supported a differentapproach for projecting production ofCNG/LNG derived from biogas in 2018,we believe that these commentsgenerally support our projection ofCNG/LNG for 2018, insofar as theydemonstrate that there is reason toexpect that the significant rate of growthobserved in the production of CNG/LNGderived from biogas in recent years willcontinue throughout 2018.

EPA disagrees with commenters whoclaimed that a facility-by-facilityapproach to projecting cellulosic RINgeneration for CNG/LNG derived frombiogas would necessarily result in amore accurate projection than anindustry-wide projection methodology.We continue to believe that in case ofnascent industries with a small numberof participants, such as the liquidcellulosic biofuel industry, industrywide projection methodologies may beinappropriate as they do not capture thespecific circumstances that may impacteach participant. In industries where thenumber of participants is small, failingto adequately assess each individualparticipant can have a significantimpact on the overall accuracy ofindustry projections. However, as thenumber of market participants grows theimpact of any single participant on theoverall performance of the industrydecreases. In these cases, industry-wideprojection methods are more accuratethan a more individualized approach,especially as macro market andeconomic factors become moreinfluential on total production than thesuccess or challenges at any singlefacility.

Further, the accuracy of a facility byfacility approach to projectingproduction is heavily dependent on theaccuracy of the information available toEPA on the projected RIN generationvolumes of each of the potentialproduction facilities for 2018.Conversely, the market wide approachused by EPA in this final rule relies onactual RIN generation data, rather than

individual company projections for2018, to calculate a demonstrated rate ofgrowth. As the number of potentialproduction facilities increases, EPA’sability to verify the accuracy of theinformation we receive, and make adetermination about the likelihood thatthe producers will produce CNG/LNGderived from biogas at the projectedlevels decreases. This is especiallychallenging in situations where thereare a large number of potentialproducers that have previouslyoverestimated the actual productionfrom their facilities. In our 2017 finalrule, EPA projected that 26 newfacilities would begin producing CNG/LNG derived from biogas in 2017,largely based on information wereceived from the renewable CNG/LNGindustry through the Coalition forRenewable Natural Gas. While wecurrently only have data available forthe first 9 months of 2017, to date onlytwo new facilities have generatedcellulosic RINs for CNG/LNG derivedfrom biogas in 2017. While additionalnew facilities may generate cellulosicRINs for CNG/LNG derived from biogasin the final 3 months of 2017, manyprojected that they would be producingcellulosic RINs by this point in the year,and ft is highly unlikely that all 26 ofthese facilities will successfullygenerate cellulosic RINs by the end of2017. The failure of these new facilitiesto generate cellulosic RINs in 2017,together with the over-projection bymany of the facilities that havegenerated cellulosic RINs in 2017resulted in the facility specific approachrecommended by many commentersappearing to have significantly overestimated the production of CNG/LNGin 2017. EPA has therefore used analternative methodology based on actualproduction data in previous years,rather than production projections byindividual facilities, to projectproduction of CNG/LNG derived frombiogas in this final rule. We believe theproduction of CNG/LNG derived frombiogas has matured to a point where anindustry wide projection methodologyis more appropriate than a facility byfacility approach, and is likely to resultin a more accurate projection. We willmonitor the success of this newapproach, and will make appropriatemodifications in the future if warranted.

We also disagree with commenterswho claim that our proposed projectionmethodology does not appropriatelyaccount for new facilities expected tobegin producing CNG/LNG derived frombiogas in 2018. The methodology usedby EPA in this final rule compared thetotal projection of CNG/LNG derived

from biogas from October 2016—September 2017 to production in the 12months that immediately precede thistime period (October 2015—September2016). The production increasesobserved in October 2016—September2017, as compared to the preceding 12months, were the result of bothincreased production from facilities thathad previously produced CNG/LNGderived from biogas as well asproduction from facilities that had notpreviously produced this fuel. Forexample, from October 2015—September2016 a total of 34 facilities generatedcellulosic RINs for CNG/LNG derivedfrom biogas. From October 2 016—September 2017 the number of facilitiesthat produced cellulosic RINs for CNG/LNG derived from biogas increased to41. We believe, therefore, that while ourprojection methodology uses a growthrate based on historical data itadequately anticipates higherproduction volumes in future years,including both increased productionfrom existing facilities as well asproduction from new facilities. In thisway it is a forward, rather thanbackward looking methodology thatsatisfies our charge to project futurecellulosic biofuel production in areasonable manner, and with neutrality.

3. Total Cellulosic Biofuel in 2018

After projecting production ofcellulosic biofuel from liquid cellulosicbiofuel production facilities andproducers of CNG/LNG derived frombiogas, EPA combined these projectionsto project total cellulosic biofuelproduction for 2018. These projectionsare shown in Table III.D.3—1. Using themethodologies described in this section,we project that 288 million ethanol-equivalent gallons of cellulosic biofuelwill be produced in 2018. We believethat projecting overall production in2018 in the manner described aboveresults in a neutral estimate (neitherbiased to produce a projection that istoo high nor too low) of likely cellulosicbiofuel production in 2018.

TABLE III.D.3—1—PR0JEcTED VOLUMEOF CELLULOSIC BIOFUEL IN 2018

[Million gallonsJ

calculate this estimate, EPA used the Natural GasVehicle Use from the STEO Custom Table Builder(0.12 billion cubic feet/day in 2018). This projectionincludes all CNG/LNG used as transportation fuelfrom both renewable and non-renewable sources.EIA does not project the amount of CNG/LNG frombiogas used as transportation fuel. To convertbillion cubic feet/day to ethanol-equivalent gallonsEPA used conversion factors of 1020 BTU per cubicfoot of natural gas and 77,000 BTU of natural gasper ethanol-equivalent gallon.

Projectedvolume a

Liquid Cellulosic Biotuel Producers; Producers withoutConsistent CommercialScale Production

Liquid Cellulosic Biofuel Producers; Producers withConsistent CommercialScale Production

5

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58504 Federal Register / Vol. 82, No. 237/ Tuesday, December 12, 2017/ Rules and Regulations

TABLE III.D.3—1—PR0JEcTED VOLUMEOF CELLULOSIC BIOFUEL IN 2018—Continued

[Million gallons]

CNG/LNG Derived fromBiogas 274

Total 288

a Volumes rounded to the nearest milliongallons.

Further discussion of the individualcompanies we believe will producecellulosic biofuel and make itcommercially available in 2018 can befound in a memorandum to thedocket. 5

IV. Advanced Biofuel and TotalRenewable Fuel Volumes for 2018

The national volume targets foradvanced biofuel and total renewablefuel to be used under the RFS programeach year through 2022 are specified inCAA section 211(o)(2](B)(i](I) and (II).Congress set annual renewable fuelvolume targets that envisioned growthat a pace that far exceeded historicalgrowth and, for years after 2011,prioritized that growth as occurringprincipally in advanced biofuels(contrary to previous growth patternswhere most growth was in conventionalrenewable fuel, principally corn-ethanol]. Congressional intent is evidentin the fact that the portion of the totalrenewable fuel volume target in thestatutory volume tables that is notrequired to be advanced biofuel is 15billion gallons for all years after 2014,while the advanced volumes, driven bygrowth in cellulosic volumes, continueto grow through 2022 to a total of 21billion gallons.

In this Section we discuss our use ofthe discretion afforded by the cellulosicwaiver authority at CAA section211(o)(7](D)(i) to reduce volumes ofadvanced biofuel and total renewablefuel. We first discuss our assessment ofadvanced biofuel and theconsiderations, including commentsreceived in response to the proposal andOctober 4 document, which have led usto conclude that the advanced biofuelvolume target in the statute should bereduced by the full amount permittedunder the cellulosic waiver authority.

cellulosic Biofuel Producer companyDescriptions (November 2017),” memoraiidum fromDallas Burkholder to EPA Mr Docket EPA—HQ—OAR—2017—0091. In the case of cellulosic biofuelproduced from CNG/LNG and facilities usingEdeniq’s technology we have discussed theproduction potential from these facilities as a grouprather than individually.

We then address total renewable fuel inthe context of our interpretation,articulated in previous annualrulemakings, that advanced biofuel andtotal renewable fuel should be reduced

Projected by the same amount under the cellulosicvolume a waiver authority. In Section V we

discuss our consideration of additionalreductions for both advanced biofueland total renewable fuel beyond thosepermitted under the cellulosic waiverauthority, using other waiver authoritiesprovided by the statute.

To begin, we have evaluated thecapabilities of the market and aremaking a finding that the 11.0 billiongallons specified in the statute foradvanced biofuel cannot be reached in2018. This is primarily due to theexpected continued shortfall incellulosic biofuel; production of thisfuel type has consistently fallen short ofthe statutory targets by 95 percent ormore, and as described in Section III, weproject that it will fall far short of thestatutory target of 7.0 billion gallonsagain in 2018. In addition, although forthe 2016 and 2017 standards wedetermined that the projectedreasonably attainable supply of noncellulosic advanced biofuel and otherconsiderations justified establishingstandards that included a partial backfillof the shortfall in cellulosic biofuel withadvanced biofuel, for reasons describedin this section we are reducing theadvanced biofuel applicable volume bythe full amount of the shortfall incellulosic biofuel for 2018.

In previous years when exercising thecellulosic waiver authority to determinethe required volume of advancedbiofuel, we have taken into account theavailability of advanced biofuels, theirenergy security and GHG impacts, andthe apparent intent of Congress asreflected in the statutory volumes tablesto substantially increase the use ofadvanced biofuels over time, as well asfactors such as increased costsassociated with the use of advancedbiofuels and the environmental andfood competition concerns raised bysome commenters. In considering thesefactors, in those years, we haveconcluded that it was appropriate to setthe advanced biofuel standard in amanner that would allow the partialbackfihling of missing cellulosicvolumes with non-cellulosic advancedbiofuels. For purposes of this final rulewe have again taken these factors intoconsideration, but rely more heavily onconsideration of cost as a result of astronger policy focus on the economicimpacts of the RFS program to concludethat such backfilling with non-cellulosicadvanced biofuel volumes should not berequired in 2018. In other words, we are

reducing the statutory volume target foradvanced biofuel by the same amount asthe reduction in cellulosic biofuel. Thisresults in the non-cellulosic componentof the advanced biofuel volumerequirement being equal to the impliedstatutory volume of 4.00 billion gallons.We believe this new approach tobalancing relevant considerations andexercising our discretion under thecellulosic waiver authority ispermissible under the statute, andconsistent with the principlesarticulated in FCC v. Fox TV Stations(556 US. 502, 514—15 (2009]], regardingcircumstances when an agency mayappropriately depart from prior policy.In making this final determination for2018, we have considered comments onthe appropriate balancing of factorsunder the cellulosic waiver authoritythat were provided by stakeholders inresponse to the proposal and theOctober 4 document, as discussed in theaccompanying RTC document.

We note that the predominant noncellulosic advanced biofuels available inthe near term are advanced biodieseland renewable diesel.76 We expect adecreasing rate of growth in theavailability of feedstocks used toproduce these fuel types. In addition,we expect diminishing GHG benefitsand higher per gallon costs as therequired volumes of advanced biodieseland renewable diesel increase. Theseoutcomes are a result of the fact that thelowest cost and most easily availablefeedstocks are typically used first, andeach additional increment of advancedbiodiesel and renewable diesel requiresthe use of feedstocks that areincrementally more costly and/or moredifficult to obtain. Moreover, to theextent that higher advanced biofuelrequirements cannot be satisfiedthrough growth in the production ofadvanced biofuel feedstocks, theywould instead be satisfied through a redirection of such feedstocks fromcompeting uses. Parties that wereformerly using these feedstocks arelikely to replace the advanced biofuelfeedstocks with the lowest costalternatives, likely derived from palm orpetroleum sources, leading to loweroverall GHG emission benefits. Therewould also likely be market disruptionsand increased burden associated withshifting feedstocks among the widerange of companies that are relying onthem today and which have optimizedtheir processes to use them. Higher

7Whi1e sugarcane ethanol can also contribute tothe supply of advanced biofuel, in recent years,supply of sugarcane ethanol has been considerablylower than supply of advanced biodiesel orrenewable diesel.



advanced biofuel standards could alsobe satisfied by diversion of foreignadvanced biofuel from foreign markets,and there would likely be diminishedbenefits associated with suchdiversions. Taking these considerationsinto account, we believe, as discussed inmore detail below, that we should notexercise our discretion under thecellulosic waiver authority to set theadvanced biofuel volume requirement ata level that would lead to suchdiversions.

Furthermore, two other factors haveadded uncertainty regarding advancedbiofuel volumes that are reasonablyattainable and appropriate. The first isthe fact that the tax credit for biodieselhas not been renewed, and if renewedcould be in the form of a producer’s taxcredit rather than a blender’s taxcredit.77 The second is the preliminarydetermination by the Department ofCommerce that countervailing dutiesshould be imposed on biodiesel importsfrom Argentina and Indonesia.

We believe that the factors andconsiderations noted above are allappropriately considered in our exerciseof the broad discretion provided underthe cellulosic waiver authority, and thata comprehensive consideration of thesefactors supports our use of the authority.Some of the considerations discussed inthis final rule are related to theavailability of non-cellulosic advancedbiofuels (e.g., historic data on domesticsupply, expiration of the biodieselblenders’ tax credit, potential imports ofbiodiesel in light of the CommerceDepartments preliminary determinationon countervailing duties on biodieselimports from Argentina and Indonesia,

potential imports of sugarcane ethanol,and anticipated decreasing growth inproduction of feedstocks for advancedbiodiesel and renewable diesel), whileothers focus on the potential benefitsand costs of requiring use of availablevolumes (e.g., relative cost of advancedbiofuels to the petroleum fuels theydisplace, CHO reduction benefits andenergy security benefits). Havingdetermined that we should not exercisethe discretion afforded EPA under thecellulosic waiver authority so as torequire the use of advanced biofuelvolumes that would lead to diversion ofadvanced feedstocks from other uses ordiversion of advanced biofuels fromforeign sources, our analytical approachto identifying the appropriate volumerequirement is to first identify volumesthat we believe would be reasonablyattainable in 2018 without suchfeedstock or fuel diversions, and thendiscuss whether or not otherconsiderations, such as cost and OHOimpacts, indicate that it would beappropriate to set the advanced biofuelvolume requirement so as to require useof such volumes to partially backfill formissing cellulosic volumes.

The net impact of our exercise of thecellulosic waiver authority is that afterwaiving the cellulosic biofuel volumedown to the projected available level,and applying the same volumereduction to the statutory volume targetfor advanced biofuel, the resultingvolume requirement for advancedbiofuel for 2018 is 10 million gallonsmore than the applicable volume usedto derive the 2017 percentage standard.Furthermore, after applying the samereduction to the statutory volume target

for total renewable fuel, the volumerequirement for total renewable fuel isalso 10 million gallons more than theapplicable volume used to derive the2017 percentage standard. Theremainder of this section provides ourjustification for this approach to thedetermination of the volumerequirements for advanced biofuel andtotal renewable fuel. Section Vdiscusses our consideration of furtherreductions in either advanced biofuel ortotal renewable fuel using either thegeneral waiver authority or the BBDwaiver authority, and our justificationfor not applying such furtherreductions.

A. Volumetric Limitation on Use of theCellulosic Waiver Authority

As described in Section II.A, whenmaking reductions in advanced biofueland total renewable fuel under thecellulosic waiver authority, the statutelimits those reductions to no more thanthe reduction in cellulosic biofuel. Asdescribed in Section III.D, we areestablishing a 2018 applicable volumefor cellulosic biofuel of 288 milliongallons, representing a reduction of6,712 million gallons from the statutorytarget of 7,000 million gallons. As aresult, 6,711 million gallons is themaximum volume reduction foradvanced biofuel and total renewablefuel that is permissible using thecellulosic waiver authority. Use of thecellulosic waiver authority to thismaximum extent would result involumes of 4.29 and 19.29 billiongallons for advanced biofuel and totalrenewable fuel, respectively.°

TABLE IV.A—1 —LOWEST PERMISSIBLE VOLUMES USING ONLY THE CELLULOSIC WAIVER AUTHORITY[million gallons]

Advanced rertblebiofuel fuel

Statutory target 11,000 26,000Maximum reduction permitted under the cellulosic waiver authority 6,712 6,712Lowest 2018 volume requirement permitted using only the cellulosic waiver authority 4,288 19,288

We are authorized under thecellulosic waiver authority to reduce theadvanced biofuel and total renewablefuel volumes “by the same or a lesser”amount as the reduction in thecellulosic biofuel volume. As discussedin Section II.A, EPA has broaddiscretion in using the cellulosic waiver

775ee American Renewable Fuel and Job creationAct of 2017, S.944, iisth cong. (2017).

Finds countervailableSubsidization of Imports of Biodiesel from

authority in instances where its use isauthorized under the statute, sinceCongress did not specify factors thatEPA must consider in determiningwhether to use the authority or what theappropriate volume reductions (withinthe range permitted by statute) shouldbe. This broad discretion was affirmed

Argentina and Indonesia,” available in EPA docketnumber EPA—HQ-OAR—2017—0091.

expressing volumes in billion gallons.we use standard rounding methods to two decimalplaces, as done in previous annual standard-setting

in both Monroe and ACE.50 Thus, EPAcould potentially set the 2018 advancedbiofuel standard at a level that isdesigned to partially backfill for theshortfall in cellulosic biofuel. Asdiscussed below, doing so would resultin perhaps an additional 110 milliongallons of advanced biofuel. However,

rulemaldngs. Volumes are sometimes shown inmillion gallons for clarity, but it is volumes inbillion gallons that are used to calculate theapplicable percentage standards.

55 See ACE at 730—35.


58506 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations

based on our consideration of the factorsdescribed in more detail below, we areusing the full extent of the cellulosicwaiver authority in deriving volumerequirements for 2018.81

B. Reasonably Attainable Volumes ofAdvanced Biofuel

It is appropriate to consider theavailability of advanced biofuel, both toinform our exercise of the cellulosicwaiver authority and to ascertainwhether there might be an “inadequatedomestic supply” justifying use of thegeneral waiver authority. As the Courtnoted in ACE, EPA may considerdemand-side considerations in additionto supply-side considerations when itassesses “reasonably attainable”volumes for purposes of its cellulosicwaiver assessment. However, EPA maynot consider demand-side factors inassessing whether there is an“inadequate domestic supply” thatwould justify use of the general waiverauthority.82 Our assessment ofreasonably attainable volumes ofadvanced biofuel is described below.

In ACE, the Court noted that inassessing what volumes are “reasonablyattainable,” EPA had considered theavailability of feedstocks, domesticproduction capacity, imports, andmarket capacity to produce, distribute,and consume renewable fuel.83 We aretaking a similar approach for 2018, withthe added consideration of thepossibility that higher volumerequirements would lead to “feedstockswitching” or diversion of advanced

81We specify the volume requirements as billiongallons with two decimal places to be consistentwith the volume targets as given in the statute. Theonly exception is for cellulosic biofuel wblch wespacify in million gallons due to the substantialreduction from the statutory target. However,calculations are typically shown in million gallonsfor all four standards for clarity.

52 ACE at 734 and 696.83ACEat 735—36.

biofuels from use in other countries,which we took into account in settingthe 2017 volume requirements and, webelieve, are appropriate considerationsunder the broad discretion provided bythe cellulosic waiver authority.

As noted above, a higher advancedbiofuel volume requirement has agreater potential to increase theincentive for switching advancedbiofuel feedstocks from existing uses tobiofuel production. Such marketreactions could cause disruptionsand/or price increases in the nonbiofuel markets that currently use thesefeedstocks. Increasing the requiredvolumes of advanced biofuels withoutgiving the market adequate time toadjust by increasing supplies could alsoresult in diversion of advanced biofuelsfrom foreign countries to the U.S.without increasing total global volumes.We believe it is likely that the partiesthat formerly used advanced biofuelfeedstocks would seek to replace theadvanced biofuel feedstocks with thecheapest alternatives, likely productsderived from palm oil or petroleum,rather than forgoing the use of oil-basedproducts. Increasing volumes ofadvanced biofuels used in the U.S. inthis way (by shifting the end use ofadvanced feedstocks to biofuelproduction and satisfying the currentmarkets for these advanced feedstockswith non-qualifying or petroleum basedfeedstocks, or by simply shiftingadvanced biodiesel or renewable dieselfrom foreign to domestic use—referredto for simplicity as “feedstock/fueldiversions”) would therefore likely notproduce the GHG benefits that wouldotherwise be expected. We have decidednot to set the advanced biofuel volumerequirement at a level that wouldrequire such feedstock/fuel diversions.Our individual assessments ofreasonably attainable volumes ofadvanced biofuels reflect this approach.

That is, while we refer to them as“reasonably attainable” volumes forconvenience, they represent thosevolumes that are not likely to lead tofeedstock/fuel diversions. Greatervolumes could likely be made availableif such diversions were not of concern.

1. Imported Sugarcane Ethanol

The predominant available source ofadvanced biofuel other than cellulosicbiofuel and BBD is imported sugarcaneethanol. In setting both the 2016 and2017 standards, we determined that 200million gallons of imported sugarcaneethanol would be reasonably attainable.In deriving this estimate of sugarcaneethanol, we attempted to balanceindications of lower potential importsfrom recent data with indications thathigher volumes were possible based onolder data. We also pointed to the highvariability in ethanol import volumes inthe past (including of Braziliansugarcane ethanol, the predominantform of imported ethanol, and the onlysignificant source of imported advancedethanol), increasing gasolineconsumption in Brazil, and variabilityin Brazilian production of sugar asreasons that it would be inappropriateto assume that sugarcane ethanolimports would reach the much higherlevels suggested by some stakeholders.

The data on 2016 ethanol importssuggests that we overestimated thevolume of sugarcane ethanol imports forthat year. Despite the fact that theapplicable standards for 2016 were setprior to the beginning of 2016, anddespite suggestions from UNICA84 that2016 imports could reach as high as 2billion gallons, total ethanol importsonly reached 34 million gallons.

4UMCA is the Brazilian Sugarcane IndustryAssociation.


federal Register! Vol. 82, No. 237 / Tuesday, December 12, 2017 / Rules and Regulations 58507

5000

4000

300

100

0

8rJ

Available data for imports in 2017similarly suggests that imports are againlikely to fall well below the 200 milliongallons that we assumed when settingthe 2017 standards; for January throughAugust of 2017, total imports ofsugarcane ethanol were 75 milliongallons; by the end of 2017, totalimports of sugarcane ethanol might beabout 100 million gallons.85 Thecombined experience for 2016 and 2017suggests that 200 million gallons is toohigh for the purposes of projectingreasonably attainable volumes ofadvanced biofuel for 2018. At the sametime, higher import volumes than thosewhich occurred in 2016 are clearlypossible, as reflected by imports seen inprior years. Taking all of theseconsiderations into account, we areusing 100 million gallons of importedsugarcane ethanol for the purposes ofprojecting reasonably attainablevolumes of advanced biofuel for 2018.This level reflects a balancing of theinformation available to EPA at thistime; both the lower import volumesthat have occurred more recently withthe higher volumes that are possiblebased on earlier years.

We note that the future projection ofimports of sugarcane ethanol isinherently imprecise, and that actualimports in 2018 could be lower or

55”lmports of ethanol 2011—2017,” available indocket EPA—HQ—OAR—2017—0091.

higher than 100 million gallons. Factorsthat could result in import volumesbelow 100 million gallons includeweather and harvests in Brazil, worldethanol demand and prices, andconstraints associated with the ElOblendwall in the U.S. Also, global sugarconsumption has continued to increasesteadily, while production hasdecreased. If the trend continues,Brazilian production of sugar couldincrease, with a concurrent reduction inproduction of ethanol.86 On the otherhand, the world average price of sugarhas been projected to remain relativelyflat between 2016 and 2018, suggestinglittle change in sugar production andimplying that ethanol production inBrazil might likewise remainunchanged.87 After considering thesefactors, and in light of the high degreeof variability in historical imports ofsugarcane ethanol, we believe that 100million gallons is a reasonableprojection for 2018.

2. Biodiesel and Renewable DieselWith regard to biodiesel and

renewable diesel, there are manydifferent factors that could potentiallyinfluence the total reasonably attainablevolume of these fuels (including bothadvanced and non-advanced forms)

86 “SugarWorld Markets and Trade,” USDA,November 2016.

87”conodity Markets Outlook,” World BankGroup, January 2017.

used as transportation fuel or heating oilin the U.S.88 These factors couldinclude the availability of qualifyingbiodiesel and renewable dieselfeedstocks, and the production capacityof biodiesel and renewable dieselfacilities (both in the U.S. andinternationally). The degree to whichthese and other factors may affect thetotal supply of both advanced andconventional forms of biodiesel andrenewable diesel in 2018, is discussedin a memo to the docket.89

However, the primary considerationsin our determination of the reasonablyattainable volumes of advancedbiodiesel and renewable diesel for 2018are data on the use of advancedbiodiesel and renewable diesel inprevious years, the uncertain impact ofthe continued absence of the biodieseltax credit and proposed tariffs onbiodiesel from certain countries onbiodiesel production and importation,the projected growth in production ofadvanced biodiesel and renewable

For a further discussion of the factors thatinfluence the availability of biodiesel andrenewable diesel see Section V.B.2 of the preambleand a further discussion of these factors from the2017 final nile (81 FR 89781—89789, December 12,2016],

8”Market impacts of biofuels,” memorandumfrom David Korotney to docket EPA—HQ—OAR—2017—0091.

800

700

600

200

Figure IV.B.1-lHistorical Ethanol Irnportsa

All other (non-advanced)

• Brazil (advanced)

Source: “US Imports of Fuel Ethanol from EJA,” docket EPA-HQ-OAR-2017-0091.Imports from Brazil include those that are transmitted through the Caribbean Basin

Initiative (CBI) and Central America Free Trade Agreement (CAFTA), and are producedfrom sugarcane. Imports from other countries are typically not produced from sugarcaneand do not qualify as advanced biofliel.



diesel feedstocks in 2018.90 A review ofthe volumes of advanced biodiesel andrenewable diesel used in previous yearsis especially useful in projecting thepotential for growth in the productionand use of such fuels, since for thesefuels there are a number of complex andinter-related factors beyond simply thetotal production capacity for biodieseland renewable diesel and ability todistribute these fuels (including theavailability of advanced feedstocks, theexpiration of the biodiesel tax credit,and other market-based factors) that arelikely to affect the total supply. We alsobelieve the likely growth in productionof feedstocks used to produce thesefuels is an important factor to consider.This is because the energy security andGHG reduction value associated withthe growth in the use of advancedbiofuels is greater when that growth isassociated with an increase in advancedfeedstock production, rather than aswitching of existing advancedfeedstocks from other uses or thediversion of advanced biodiesel andrenewable diesel from foreign markets ifthe parties that previously used theadvanced biofuel or feedstocks replace

these oils with low cost palm orpetroleum derived products, as webelieve would likely be the case in 2018.

Such feedstock switching or fueldiversion could result in unintendednegative consequences, such as marketdisruption in other markets where suchoils are used, which could offset someof the anticipated benefits of theproduction and use of advancedbiofuels.

The volume of advanced biodieseland renewable diesel projected to beavailable based on a consideration ofthese factors is less than the maximumvolume of biodiesel and renewablediesel we believe could be produced(based solely on an assessment of theavailable production capacity) orconsumed (based on an assessment ofthe ability of the market to distributeand use biodiesel and renewable diesel).Production capacity and the ability forthe market to distribute and usebiodiesel and renewable diesel aretherefore not constraining factors in ourassessment of the reasonably attainablevolume of advanced biodiesel andrenewable diesel in 2018.

Before considering the projectedgrowth in the production of qualifyingfeedstocks that could be used toproduce advanced biodiesel andrenewable diesel, it is helpful to reviewthe volumes of biodiesel and renewablediesel that have been used in the U.S.in recent years. While historic data andtrends alone are insufficient to projectthe volumes of biodiesel and renewablediesel that could be provided in futureyears, historic data can serve as a usefulframe of reference in considering futurevolumes. Past experience suggests that ahigh percentage of the biodiesel andrenewable diesel used in the U.S. (fromboth domestic production and imports)qualifies as advanced biofuel.°’ Inprevious years, biodiesel and renewablediesel produced in the U.S. has beenalmost exclusively advanced biofuel.92Imports of advanced biodiesel haveincreased in recent years, however, asseen in Table IV.B.2—1. Volumes ofimported advanced biodiesel andrenewable diesel have variedsignificantly from year to year, as theyare impacted both by domestic andforeign policies, as well as economicfactors.

TABLE IV.B.2—1—ADvANcED (D4 AND D5) BIODIE5EL AND RENEWABLE DIESEL FROM 2011 TO 2016[Million gallons] a

2011 2012 2013 2014b 2015b 2016

Domestic Biodiesel (Annual Change) 967 (N/A) 1,014 (+47) 1,376 (+362) 1,303 (—73) 1,253 (—50) 1,633 (+380)Domestic Renewable Diesel (Annual

Change) 58 (N/A) 11 (—47) 92 (+81) 155 (+63) 175 (+20) 221 (+46)Imported Biodiesel (Annual Change) 44 (N/A) 40 (—4) 156 (+116) 130 (—26) 261 (+131) 561 (+300)Imported Renewable Diesel (Annual

Change) 0 (N/A) 28 (+28) 145 (+117) 129 (—16) 121 (—8) 170 (+49)Exported Biodiesel and Renewable Die

sel (Annual Change) 48 (N/A) 102 (+54) 125 (+23) 134 (+9) 133 (—1) 129 (—4)

Total (Annual Change) 1021 (N/A) 991 (—30) 1,644 (+653) 1,583 (—61) 1,677 (+94) 2,456 (+779)

aAlI data for 2011—2016 from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above tocalculate the supply in each year.

b RFS required volumes for these years were not established until December 2015.

TABLE IV.B.2—2—CONVENTIONAL (D6) BIODIESEL AND RENEWABLE DIESEL FROM 2011 TO 2016[Million gallons]

Domestic Biodiesel (Annual Change)Domestic Renewable Diesel (Annual

Change)Imported Biodiesel (Annual Change)

sa Tbroughout this section we refer to advancedbiodiesel and renewable diesel as well as advancedbiodiesel and renewable diesel feedstocks. In thiscontext, advanced biodiesel and renewable dieselrefer to any biodiesel or renewable diesel for whichRINs can be generated that satisfy an obligatedparty’s advanced biofoel obligation (i.e., 04 or DSRJNs). An advanced biodiesel or renewablefeedstock refers to any of the biodiesel, renewablediesel, iet foel, and heating oil feedatocks listed inTable 1 to § 80.1426 or in petition approvals issued

pursuant to § 80.1416, that can be used to producefuel that qualifies for 04 or D5 RINs. Thesefeedstocks include, for example, soy bean oil; oilfrom annual cover crops; oil from algae grownphotosynthetically; biogenic waste oils/fats/greases;non-food grade corn oil; camelina sativa oil; andcanola/rapeseed oil (See pathways F, 0, and H ofTable 1 to § 80.1426).

2011 through 2016 over 95% of allbiodiesel and renewable diesel supplied to the U.S.(including domestically-produced and imported

biodiesel and renewable diesel) qualified asadvanced biodiesel and renewable diesel (9,372million gallons of the 9,850 million gallons)according to EMTS data.

92From 2011 tbrough 2016 over 99.9% of all thedomestically produced biodiesel and renewablediesel supplied to the U.S. qualified as advancedbiodiesel and renewable diesel (8,258 milliongallons of the 8,265 million gallons) according toEMTS data.

2011 2012 2013 2014b 2015b 2016

0 (N/A) 0 (+0) 6 (+6) 1 (—5) 0 (+0) 0 (+0)

0 (N/A) 0 (+0) 0 (+0) 0 (+0) 0 (+0) 0 (+0)0 (N/A) 0 (+0) 31 (+31) 52 (+21) 74 (+22) 113 (+39)


Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58509

TABLE IV.B.2—2—CONVENTIONAL (D6) BIODIESEL AND RENEWABLE DIESEL FROM 2011 TO 2016—Continued[Million gallons] a

2011 2012 2013 2014b 2015b 2016

Imported Renewable Diesel (AnnualChange) 0 (N/A) 0 (+0) 53 (+53) 0 (—53) 106 (+106) 43 (—63)

Exported Biodiesel and Renewable Diesel (Annual Change) 0 (N/A) 0 (+0) 0 (+0) 0 (+0) 0 (+0) 1 (+1)

Total (Annual Change) 0 (N/A) 0 (+0) 90 (+90) 53 ( — 37) 180 (+127) 155 (— 25)

GAll data for 201 1—2016 from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RIN5 retired for reasons other than demonstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above tocalculate the supply in each year.

b RFS required volumes for these years were not established until December 2015.

Since 2011 the year-over-year changesin the volume of advanced biodiesel andrenewable diesel in the U.S. have variedgreatly, from a low of negative 61million gallons from 2011 to 2012 to ahigh of 779 million gallons from 2015 to2016. These changes were likelyinfluenced by a number of factors suchas the cost of biodiesel feedstocks andpetroleum diesel, the status of thebiodiesel blenders tax credit, growth inmarketing of biodiesel at high volumetruck stops and centrally fueled fleetlocations, demand for biodiesel andrenewable diesel in other countries,biofuel policies in both the U.S. andforeign countries, and the volumes ofrenewable fuels (particularly advancedbiofuels) required by the RFS. Thishistorical information does not indicatethat the maximum previously observedincrease of 779 million gallons ofadvanced biodiesel and renewablediesel would be reasonable to expectfrom 2017 to 2018, nor does it indicatethat the low growth rates observed inother years represent the limit ofpotential growth in 2018. Rather, thesedata illustrate both the magnitude of theincreases in advanced biodiesel andrenewable diesel in previous years andthe significant variability in theseincreases.

The historic data indicates that thebiodiesel tax policy in the U.S. can havea significant impact on the supply ofbiodiesel and renewable diesel in anygiven year. While the biodiesel blenderstax credit has applied in each year from2010—2016, it has only been in effectduring the calendar year in 2011, 2013and 2016, while other years it has beenapplied retroactively. The biodieselblenders tax credit expired at the end of2009 and was re-instated in December2010 to apply retroactively in 2010 andextend through the end of 2011.Similarly, after expiring at the end of2011, 2013, and 2014 the tax credit wasre-instated in January 2013 (for 2012and 2013), December 2014 (for 2014),and December 2015 (for 2015 and 2016).

Each of the years in which the biodieselblenders tax credit was in effect duringthe calendar year (2013 and 2016)resulted in significant increases in thesupply of advanced biodiesel andrenewable diesel over the previous year(653 million gallons and 779 milliongallons respectively). However,following this large increase in 2013, theincrease in the supply of advancedbiodiesel and renewable diesel in 2014and 2015 was minimal, only 33 milliongallons from 2013 to 2015. This patternis likely the result of both acceleratedproduction and/or importation ofbiodiesel and renewable diesel in thefinal few months of 2013 to takeadvantage of the expiring tax credit aswell as relatively lower volumes ofbiodiesel and renewable dieselproduction and import in 2014 and2015 than would have occurred if thetax credit had been in place.°

We believe it is reasonable toanticipate a similar production patternin 2016 through 2018 as observed in2013 through 2015; that increases in thevolumes of advanced biodiesel andrenewable diesel will be modest in 2017and 2018, following the significantincrease in 2016. In 2013 the tax creditwas in place through the entire year.This was followed by two years (2014and 2015) in which the tax credit wasnot in place, but was eventuallyreinstated retroactively. Similarly, thetax credit in place through 2016, but atthe time of this rulemaking notapplicable to 2017 or 2018.° AvailableRThJ generation data further supportsthis pattern. Very high volumes ofadvanced biodiesel and renewablediesel were supplied in the last quarter

93We also acknowledge that the fact that EPA didnot finalize the required volumes of renewable fuelunder the RF5 program for 2014 and 2015 untilDecember 2015 likely had an impact on the volumeof advanced biodiesel and renewable dieselsupplied in these years.

94 At this time, it is uncertain whether the taxcredit would be retroactively applied to 2017 orapplied in any manner (prospectively orretroactively) in 2018.

of 2016, likely driven by a desire tocapture the expiring tax credit, whilesignificantly smaller volumes of thesefuels were supplied in the first quarterof 2017. Data on advanced biodieseland renewable diesel MN generation in2017 was available through Septemberat the time the analyses were performedfor this rulemaking. Our review of thisdata suggests that the generation of RINsfor advanced biodiesel and renewablediesel in 2017 (through September) isslightly higher than RIN generation forthese fuels during the same time periodin 2016 (see Figure IV.B.2—1 below).Total 2016 MN generation for advancedbiodiesel and renewable diesel throughSeptember 2016 was 2.76 billion RINs,while total 2017 RIN generation forthese fuels through September 2017 was2.82 billion BiNs. Total supply ofadvanced biodiesel and renewablediesel in 2016 was 2.46 billion gallons,suggesting that a total supply ofapproximately 2.5 billion gallons in2017 (slightly higher than the volumesupplied in 2016) is likely.° This isconsistent with our projection ofadvanced biodiesel and renewablediesel in the 2017 rule (2.4 billiongallons) and expectations based on RINgeneration patterns in previous years ofmodest increases in the supply ofadvanced biodiesel and renewablediesel in the years following the

to data on EPA’s public Web site,RINs were generated for 823 million gallons ofbiomass-based diesel in the last quarter of 2016while PINs were generated for 444 million gallonsof biomass-based diesel in the first quarter of 2017.The vast majority of advanced biodiesel andrenewable diesel qualifies as biomass-based diesel.

supply of advanced biodiesel andrenewable diesel in 201e accounts for all RINgeneration, as well as all PIN retirements forreasons other than compliance with the annualstandards. At this time, we do not have sufficientdata to compare PIN retirements for reasons otherthan compliance with the annual standards in 2017to those in 2016, as this data often lags PINgeneration by several months. However, at this timewe have no reason to believe PINs retired forreasons other than compliance with the annualstandards in 2017 would be significantly differentthat retirements for the same reasons in 2017.



expiration of the biodiesel tax credit.This data also supports our expectationthat the reasonably attainable volume ofadvanced biodiesel and renewablediesel in 2018 will reflect modest

increases from the reasonably attainablevolumes of these fuels in 2016 and2017. It is not clear from this datawhether or not higher RFS volumerequirements alone would be sufficient

to drive significant increases in thesupply of advanced biodiesel andrenewable diesel in the absence of a taxcredit.

Figure IV.B.2-1Cumulative RIN Generation for Advanced Biodiesel and Renewable Diesel (2016-2017)

4,500,000,000

4,000,000,000

3,500,000,000

3,000,000,000

2,500,000,000z

2,000,000,000

1,500,000,000

1,000,000,000

500,000,000

—2016 —2017

After reviewing the historical supplyof advanced biodiesel and renewablediesel and consideration of the possibleimpact of the expiration of the biodieseltax credit (discussed above), EPA nextconsidered the expected increase in theavailability of advanced biodiesel andrenewable diesel feedstocks in 2018. Weacknowledge that an increase in therequired use of advanced biodiesel andrenewable diesel could be realizedthrough a diversion of advancedfeedstocks from other uses, or adiversion of advanced biodiesel andrenewable diesel from existing marketsin other countries. We perceive the netbenefits associated with such increasedadvanced hiofuel and renewable fuelvolumes to be significantly less than thenet benefits associated with theproduction of additional advancedbiodiesel and renewable diesel with theuse of newly-available advancedfeedstocks due to the likelihood thatparties that previously used advancedhiofuel feedstocks will replace themwith low cost palm or petroleumderived products. This is both becauseof the potential disruption andassociated cost impacts to otherindustries resulting from feedstockswitching, and a reduced GHGreduction benefit related to use offeedstocks for biofuel production thatwould have been used for other

purposes and which must then bebackfilled with other feedstocks withpotentially greater GHG emissions.Similarly, increasing the supply ofhiodiesel and renewable diesel to theU.S. by diverting fuel that wouldotherwise have been used in othercountries results in lesser GHG benefitsthan if the supply of these fuels wasincreased through additional biofuelproduction, especially if this diversionresults in increased consumption ofpetroleum fuels in the countries thatwould have otherwise consumed thebiodiesel or renewable diesel. Byfocusing our assessment of the potentialgrowth in the reasonably attainablevolume of biodiesel and renewablediesel on the expected growth in theproduction of advanced feedstocks(rather than the total supply of thesefeedstocks in 2018, which wouldinclude feedstocks currently being usedfor non-biofuel purposes], we areattempting to minimize the incentivesfor the EPS program to increase thesupply of advanced biodiesel andrenewable diesel through feedstockswitching or diverting hiodiesel andrenewable diesel from foreign market tothe U.S.

Advanced biodiesel and renewablediesel feedstocks include both wasteoils, fats and greases and oils fromplanted crops. While we believe a small

increase in supply of waste oils, fats,and greases may be possible in 2018, webelieve this increase is limited as mostof these oils, fats, and greases arealready being recovered and used inhiodiesel and renewable dieselproduction or for other purposes. Manyof the planted crops that supplyvegetable oil for advanced biodiesel andrenewable diesel production areprimarily grown for purposes other thanproviding feedstocks for hiodiesel andrenewable diesel, such as for livestockfeed with the oil that is used asfeedstock for renewable fuel productiona co-product or by-product.97 This istrue for soy beans and corn, which arethe two largest sources of feedstock fromplanted crops used for biodieselproduction in the U.S.98 We do notbelieve that the increased demand forsoybean oil or corn oil will result in an

“For example, corn oil is a co-product of corngrown primariiy for feed or ethanol production,while soy and canola oil are primarily grown aslivestock feed.

‘“According to EIA data 6,096 million pounds ofsoy bean oil and 1,306 million pounds of corn oilwere used to produce biodiesel in the U.S. in 2016.Other significant sources of feedstock were yellowgrease (1,389 million pounds), canola oil (1,130million pounds), white grease (578 million pounds),tallow (332 million pounds), and poultry fat (220million pounds). Numbers from EIA’s February2017 Monthly Biodiesel Production Report.Available at httpsil/www.eia.gov/biofoe]s/biodiesei/production/orchive/201 6/201 6_12/biodiesel.pdf

— I I d,/ /s’ c’-, -



increase in soybean or corn prices largeenough to induce significant changes inagricultural activity, at least for therelatively modest changes in advancedbiodiesel and renewable dieselfeedstock demand that we envision as aresult of the RVOs we are finalizing inthis nile. The vegetable oils producedare not the primary source of revenuefor these crops, meaning that theplanted acres of these crops are likely tobe based on broader economic factors,rather than on demand for vegetable oilto produce biofuels or for other markets.

Increasing the demand for advancedbiodiesel and renewable diesel beyondthe volumes that could be made fromthe projected increase in the feedstocksused to produce these fuels would likelyrequire diverting volumes of advancedbiodiesel and renewable diesel (or thefeedstocks used to produce these fuels)from existing markets to be used toproduce biofuels supplied to the U.S.Increasing the short-term supply ofadvanced biodiesel and renewablediesel to the U.S. in this manner (simplyshifting the end use of advancedfeedstocks to biodiesel and renewablediesel production and meeting nonbiofuel demand for these feedstockswith conventional renewable and/orpetroleum based feedstocks or divertingadvanced biodiesel and renewablediesel from foreign markets to the U.S.)may not advance the full GHG or energysecurity goals of the RFS program. In aworst case scenario, higher standardscould cause supply disruptions to anumber of markets as biodiesel andrenewable diesel producers seekadditional supplies of advancedfeedstocks and the parties thatpreviously used these feedstocks, bothwithin and outside of the fuelsmarketplace, seek out alternativefeedstocks. Similarly, advancedbiodiesel and renewable diesel could bediverted to the U.S. from foreigncountries and displaced with petroleumfuels. These actions could result insignificant cost increases, for bothbiodiesel and renewable diesel as wellas other products produced fromrenewable oils, with reduced CHGbenefits.

We believe the most reliable sourcefor projecting the expected increase invegetable oils in the U.S. is USDA’sWorld Agricultural Supply and DemandEstimates (WASDE). According to theSeptember 2017 WASDE report,domestic vegetable oil production isexpected to increase by 0.33 millionmetric tons in 2018, from 11.42 millionmetric tons in the 2016/2017agricultural marketing year to 11.75million metric tons in the 2017/2018

agricultural marketing year.99 Thisquantity of vegetable oils (0.33 millionmetric tons) could be used to produceapproximately 94 million gallons ofadvanced biodiesel or renewablediesel. 100

In addition to virgin vegetable oils, wealso expect increasing volumes ofdistillers corn oil 101 to be available foruse in 2018. The WASDE report doesnot project distillers corn oilproduction, so EPA must use analternative source to project the growthin the production of this feedstock. EPAis using the results of the WorldAgricultural Economic andEnvironmental Services (WAEES) modelto project the growth in the productionof distillers corn oil.102 In assessing thelikely increase in the availability ofdistillers corn oil from 2017 to 2018, theauthors of the WAEES modelconsidered the impacts of an increasingadoption rate of distillers corn oilextraction technologies at domesticethanol production facilities, as well asincreased corn oil extraction ratesenabled by advances in this technology.The WAEES model projects thatproduction of distillers corn oil in 2018will increase by 316 million pounds,from 2,299 million pounds inagricultural marketing year 2016/2017to 2,615 million pounds in agriculturalmarketing year 2017/2018. According tothe WAEES model, this projectedincrease in the production of distillerscorn oil, if devoted entirely to biofuelproduction, could be used to produceapproximately 39 million gallons ofbiodiesel or renewable diesel in 2018.We believe that this is a reasonableprojection. While the vast majority ofthe increase in advanced biodiesel andrenewable diesel feedstocks produced inthe U.S. from 2016 to 2017 is expectedto come from virgin vegetable oils anddistillers corn oil, increases in the

this assessment we have assumed thevegetable oils produced in the 201 7/2018agricultural marketing year are the feedstocks mostlikely to be used to produce biodiesel andrenewable diesel in 2018.

‘°5To calculate this volume we have used aconversion of 7.7 pounds of feedstock per gallon ofbiodiesel. This is based on the expected conversionof soy oil (http://extension.missoori.edo/p/G1 990),which is the largest source of feedstock used toproduce advanced biodiesel and renewable diesel.We believe that it is also a reasonable conversionfactor to use for all virgin vegetable oils.

Distillers corn oil is non-food grade corn oilproduced by ethanol production facilities

the purposes of this final rule, EPA reliedon WAEES modeling results submitted ascomments by the National Biodiesel Board on the2018 final rule (Kruse, J., ‘Implications of anAlternative Advanced and Biomass Based Dieselvolume Obligation for Global Agriculture andBiofuels”, August 21, 2017, World AgriculturalEconomic and Environmental Services (WAEES),EPA—HQ—OAR—201 7—0091—3880).

supply of other sources of advancedbiodiesel and renewable dieselfeedstocks, such as biogenic waste oils,fats, and greases, may also occur. Theseincreases, however, are expected to bemodest, as many of these feedstocks thatcan be recovered economically arealready being used for the production ofbiodiesel or renewable diesel, or inother markets. In total, we expect thatincreases in feedstocks produced in theU.S. are sufficient to produceapproximately 150 million more gallonsof advanced biodiesel and renewablediesel in 2018 relative to 2017.’°

We have also considered the expectedincrease in the imports of advancedbiodiesel and renewable dieselproduced in other countries. In previousyears, significant volumes of foreignproduced advanced biodiesel andrenewable diesel have been supplied tomarkets in the U.S. (see Table IV.B.2—1above). These significant imports werelikely the result of a strong U.S. demandfor advanced biodiesel and renewablediesel, supported by the RFS standards,the LCFS in California, the biodieselblenders tax credit, and the opportunityfor imported biodiesel and renewablediesel to realize these incentives. At thistime the impact of the expiration of thebiodiesel blenders tax credit on thevolumes of foreign-produced biodieseland renewable diesel imported into theU.S., is highly uncertain. Additionally,in August 2017 the Department ofCommerce announced a preliminarydetermination that it would beappropriate to place countervailingduties of 41 percent to 68 percent onbiodiesel imported from Argentina andIndonesia. According to data from EIA,biodiesel imports from Argentina were10,679 thousand barrels in 2016(approximately 449 million gallons) and5,601 billion barrels (approximately 235

103 This projection includes a projected increasein the avallability fats and oils other than virginvegetable oils and distillers corn oil sufficient toproduce approximately 15 miDion gallons ofbiodiesel. The WAEES model projects an increasein the quantity of “other fats and oils” (includinginedible tallow, lard & white grease, yellow grease,brown grease, poultry fat, and other) sufficient toproduce 31 million gallons of biodiesel. It is notclear from the WAEES model, however, if theprojected increased use of other fats and oils asfeedstock for biodiesel production is the result ofincreased production/collection of these feedstocksor diverting them from other uses. We thereforethink our slightiy more conservative projectedincrease in these feedstocks sufficient to produce 15million gallons of biodiesel (without divertingfeedstocks from existing uses) is appropriate. Wenote, however, using the slightly higher projectionfrom the WAEES model (feedstock increasesufficient to produce 31 million gallons ofbiodiesel) has a very minimal impact on ourassessment of the reasonably attalnable volume ofadvanced biodiesel and renewable diesel in 2018,and would have no impact on the required volumeof advanced biofuel for 2018.



million gallons) through July 2017 (themost recent month for which data wereavailable at the time of this assessment).Biodiesel imports from Indonesia were2,554 thousand barrels in 2016(approximately 107 million gallons),with no biodiesel imported in 2017through July 2017. At this time, it isuncertain whether or not thepreliminary determination by theDepartment of Commerce will befinalized, and it is uncertain whatimpact the finalization of these dutieswould have on overall imports ofadvanced biodiesel and renewablediesel to the U.S. In recent years importsof advanced biodiesel and renewablediesel have increased year-over-year,and absent these actions it may bereasonable to anticipate continuedincreases in the imported volume ofthese fuels. In light of this uncertainty,however, we do not believe it would bereasonable at this point to eitherincrease or decrease our projection ofthe reasonably attainable volume ofbiodiesel and renewable diesel for 2018

as compared to the levels we projectedfor 2017.104

After a careful consideration of thefactors discussed above, EPA hasdetermined, for the purposes of thisfinal nile, that approximately 2.55billion gallons of advanced biodieseland renewable diesel is reasonablyattainable for use in our determinationof the appropriate applicable volume ofadvanced biofuel to require for 2018.This volume is 150 million gallonshigher than the volume of advancedbiodiesel and renewable dieseldetermined to be reasonably attainableand appropriate for the purposes ofderiving the advanced biofuel standardin 2017.

The 150 million gallon increase inadvanced biodiesel and renewablediesel that we project will be reasonablyattainable for 2018 represents a smallerannual increase in advanced biodieseland renewable diesel than we assumedin deriving the 2017 advanced biofuelstandard (approximately 300 milliongallons over 2016 levels). We believe

that this reflects that the circumstancespresented with respect to 2018 aredifferent from those we anticipated for2017. The primary differences are asmaller projected increase in advancedfeedstock production in the U.S., thecontinued absence of the biodiesel taxcredit, and the preliminarydetermination placing duties onbiodiesel imported from Argentina andIndonesia.

3. Other Advanced Biofuel

In addition to cellulosic biofuel,imported sugarcane ethanol, andadvanced biodiesel and renewablediesel, there are other advanced biofuelsthat can be counted in thedetermination of reasonably attainablevolumes of advanced biofuel for 2018.These other advanced biofuels includebiogas, naphtha, heating oil, butanol, jetfuel, and domestically-producedadvanced ethanol.105 However, thesupply of these fuels has been relativelylow in the last several years.

TABLE IV.B.3—1—HI5T0RIcAL SUPPLY OF OTHER ADVANCED BIOFUELS[Million ethanol-equivalent gallonsl

CNG Heating oil Naphtha Rej:w1ble Dc,es9c Total

2013 26 0 3 64 23 1162014 20 0 18 15 26 792015 0 1 24 8 25 582016 0 2 26 8 27 63

a Some renewable diesel generates D5 rather than D4 RIN5 as a result of being produced through co-processing with petroleum or being produced from the non-cellulosic portions of separated food waste or annual cover crops.

The downward trend over time inbiogas as advanced biofuel with a Dcode of 5 is due to the re-categorizationin 2014 of landfill biogas from advanced(D code 5) to cellulosic (D code 3)106

Apart from biogas, total supply ofadvanced biofuel other than importedsugarcane ethanol has been relativelyconstant during 2014—2016. Based onthis historical record, we find that 60million gallons would be reasonablyattainable in 2 018.107 This representsthe approximate average of the two mostrecent years (2015 and 2016) for whichcomplete data are available.

We recognize that the potential existsfor additional volumes of advancedbiofuel from sources such as jet fuel,liquefied petroleum gas (LPG), andliquefied natural gas (as distinct from

164 We further note that there have been recentefforta to reinstate the biodiesel tax credit as aproducers’ tax credit, rather than a blenders taxcredit. If the biodiesel tax credit were reinstated asa producers’ tax credit it would not apply to foreignbiodiesel producers, further limiting the likely

compressed natural gas), as well as noncellulosic biogas such as from digesters.However, since they have beenproduced in only de minimis andsporadic amounts in the past, we do nothave a basis for projecting substantialvolumes from these sources in 20l8.10a

4. Total Advanced Biofuel

The total volume of advanced biofuelthat we believe is reasonably attainablein 2018 is the combination of cellulosicbiofuel and the sources described above:imported sugarcane ethanol, biodieseland renewable diesel which qualifies asBBD, and other advanced biofuels suchas advanced biogas that does not qualifyas cellulosic biofuel, heating oil,naphtha, domestic advanced ethanol,and advanced renewable diesel that

supply of imported advanced biodiesel andrenewable diesel.

106 Advanced biofuel with a U code of 5.10679 FR 42128, July 18, 2014.1e7 For the purposes of determining the

availability of total renewable fuel, we are using a

does not qualify as BBD. Our assessmentof the reasonably attainable volumes ofthese sources, discussed in thepreceding sections, is summarizedbelow. We note that the reasonablyattainable volumes of each of theseadvanced biofuels cannot themselves beviewed as volume requirements. Thevolumes for each advanced biofuel typerepresent one significant factor that isconsidered in the analysis used todetermine the reasonably attainablevolumes of advanced biofuel. Asdiscussed in more detail in amemorandum to the docket, there aremany ways that the market couldrespond to the percentage standards weestablish, including use of higher orlower volumes of these fuel types than

volume of 40 million gallons of non-ethanol otheradvanced biofuel and 20 million gallons ofadvanced domestic ethanol (see discussion inSection v.B.2l.

be For instance, no RIN-generating volumes ofthese other advanced biofuels were produced in2016, and less than 1 mill gal total in prior years.


Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017/ Rules and Regulations 58513

discussed in this section.109 In addition,as discussed below, we do not believeit would be appropriate to require useof all volumes we have determined to bereasonably attainable.

TABLE IV.B.4—1—REASONABLY ATTAINABLE VOLUMES OF ADVANCEDBIOFUEL IN 2018

[Million ethanol-equivalent gallons except asnoted)

Cellulosic biofuel 288Advanced biodiesel and re

newable diesel (ethanolequivalent volume/physicalvolume) 3,953/2,550

Imported sugarcane ethanol 100Other advanced 60

Total advanced biofuel 4,401

C. Exercise of Cellulosic WaiverAuthorityfor Advanced Biofuel

Based on the information presentedabove, we believe that 4.40 billiongallons of advanced biofuel would bereasonably attainable in 2018. Thisvolume is 110 million gallons higherthan the 4.29 billion gallons that wouldresult from reducing the applicablevolume of advanced biofuel by the sameamount as the reduction to the statutoryapplicable volume of cellulosic biofuel(see Section III for a discussion of thecellulosic biofuel volume requirementfor 2018). In exercising the cellulosicwaiver authority in past years, wedetermined it was appropriate to requirea partial backfihling of missing cellulosicvolumes with volumes of non-cellulosicadvanced biofuel we determined to bereasonably attainable and appropriate,notwithstanding the increase in costsassociated with this decision.110However, this year we are balancing thevarious considerations in a differentmanner in setting the 2018 standards,placing a greater emphasis on costconsiderations.

In Section IV.E we present illustrativecost projections for sugarcane ethanol

“Market impacts of biofuels,” memorandumfrom David Korotney to docket EPA—HQ—OAR—2017—0091.

‘1°See, e.g., Response to comments Document forthe 2014—16 Rule, pages 628—631, available athttps://www.epo.gov/sftes/production/fiies/201 5-12/docoments/420r1 5024.pdf.

notes that while the factors consideredunder the cellulosic waiver authority to reducevolumes could apply to volumes beyond thereduction in cellulosic biofuel, EPA is limited inthe exercise of its cellulosic waiver authority toreductions up to the amount of the reduction incellulosic biofuel. Any further reductions wouldrequire a determination under the general waiverauthority that the volumes would result tn severeeconomic or environmental barm, or that there isan inadequate domestic supply, as discussed inSection v below.

and soybean biodiesel in 2018, the twoadvanced biofuels that would be mostlikely to provide the marginal increasein volumes of advanced biofuel in 2018in comparison to 2017. Sugarcaneethanol results in a cost increasecompared to gasoline that ranges fromS0.61—$1.56 per ethanol-equivalentgallon.112 Soybean biodiesel results in acost increase compared to diesel fuelthat ranges from S0.95—$1.30 perethanol-equivalent gallon.’13 The cost ofthese renewable fuels is high ascompared to the petroleum fuels theydisplace. In light of these comparativecosts, we believe it is reasonable to forgothe marginal benefit that might beachieved by establishing the advancedbiofuel standard to require an additional110 million gallons. See Section IV.E fora further discussion of the projected costof this final rule.

Based on consideration of thevolumes that may be reasonablyattainable in 2018, along with abalancing of the costs and benefitsassociated with the option of setting theadvanced biofuel standard at a level thatwould require use of all volumes thatwe have estimated could be reasonablyattainable, we are exercising ourcellulosic waiver authority to reduceadvanced biofuel volumes to 4.29billion gallons for 2018.114 Thisadvanced biofuel volume requirementfor 2018 is similar to the requirement for2017 when we allowed a portion of theshortfall in cellulosic biofuel to bebackfilled with other advanced biofuel.

It should be noted that by exercisingthe full cellulosic waiver authority foradvanced biofuel, the implied statutoryvolume target for non-cellulosicadvanced biofuel of 4.0 billion gallonsin 2018 is maintained. Although theimplied volume for non-cellulosicadvanced biofuel in the statute increasesfrom 3.5 billion gallons in 2017 to 4.0billion gallons in 2018, the applicablevolume requirements for 2017 asfinalized by EPA included an allowancefor 4.0 billion gallons of non-cellulosicadvanced biofuel, one year beforeenvisioned by the statute. Tbrough our

Sugarcane ethanol results in a projected costincrease of $0.92—$2.34 per gasoline-equivalentgallon. The projected cost of gasoline in 2018 is$1.64 per gallon based on sm Short-Term EnergyOutlook, October 2017, custom Table Builder,“Refiner Wholesale Gasoline Price.”

113 Soybean biodiesel results in a projected costincrease of $1.62—$2.22 per diesel-equivalentgallon. The projected cost of diesel in 2018 is $1.74per gallon based on E Short-Term EnergyOutlook, October 2017, custom Table Builder,“Diesel Fuel Refiner Wholesale Price.”

‘14EPA also considered the availability ofadvanced carryover RINs in determining whetherreduced use of the cellulosic waiver authoritywould be warranted. For the reasons described inSection E.B, we do not believe this to be the case.

2017 action, we effectively requiredearly use of the 0.5 billion gallonincrement of non-cellulosic advancedvolume that Congress envisioned wouldbe first used in 2018. The net result ofour action for 2018, after deciding thatno further reductions beyond thoseobtained by exercise of the cellulosicwaiver authority are appropriate (seeSection V), is that the advanced biofuelvolume requirement for 2018 is 10million gallons higher than theadvanced biofuel volume requirementfor 2017, but the portion of this volumerequirement that may be satisfied withnon-cellulosic biofuels remainsconstant.

D. Exercise of Cellulosic WaiverAuthority for Total Renewable Fuel

As discussed in Section II.A.1, webelieve that the cellulosic waiverprovision is best interpreted to provideequal reductions in advanced biofueland total renewable fuel. We haveconsistently articulated thisinterpretation.115 We believe thisinterpretation is consistent with thestatutory language and best effectuatesthe objectives of the statute. If EPA wereto reduce the total renewable fuelvolume requirement by a lesser amountthan the advanced biofuel volumerequirement, we would effectivelyincrease the opportunity forconventional biofuels to participate inthe RFS program beyond the impliedstatutory cap of 15 billion gallons.h16

Applying an equal reduction of 6.71billion gallons to both the statutorytarget for advanced biofuel and thestatutory target for total renewable fuelresults in a total renewable fuel volumeof 19.29 billion gallons as shown inTable IV.A—1.117 If we were todetermine that there is a basis toexercise the general waiver authority or

“5For instance, see discussion in the final rulesselling the 2013, 2014—2016, and 2017 standards: 78FR 49809—49810, August 15, 2013; 80 FR 77434,December 14, 2015; 81 FR 89752—89753, December12, 2016. We incorporate by reference the rationalefor this interpretation that was articulated in theseprior rules.

the advanced biofuel volumerequirement is nested within the total renewablefuel volume requirement, the statutory impliedvolume for conventional renewable fuel in thestatutory tables can be discerned by subtracting theapplicable volume of advanced biofuel from that oftotal renewable fuel. Performing this calculationwith respect to the tables in CAA section211(o)(2)IB) indicates a congressional expectationthat in the time period 2015—2022, advancedbiofuel volumes would grow from 5.5 to 21 billiongallons, while the implied volume for conventionalrenewable fuel would remain constant at 15 billiongallons.

117 EPA also considered the availability ofcarryover RINs in determining whether reduced useof the cellulosic waiver authority would bewarranted. For the reasons described in Sectionll.B, we do oot believe this to be the case.



the biomass-based diesel waiverauthority, we could provide furtherreductions to the total renewable fuelvolume. However, as described in moredetail below in Section V, we believethat there is not sufficient justificationfor such further reductions in 2018.

E. Impacts of 2018 Standards on Costs

In this section, EPA presents itsassessment of the illustrative costs ofthe final 2018 RFS rule. It is importantto note that these illustrative costs donot attempt to capture the full impactsof this final rule. These estimates areprovided solely for the purpose ofshowing how the cost to produce agallon of a “representative” renewablefuel compares to the cost of petroleumfuel. There are a significant number ofcaveats that must be considered wheninterpreting these cost estimates. Thereare a number of different feedstocks thatcould be used to produce biofuels, andthere is a significant amount ofheterogeneity in the costs associatedwith these different feedstocks andfuels. Some renewable fuels may be costcompetitive with the petroleum fuelthey replace; however, we do not havecost data on every type of feedstock andevery type of fuel. Therefore, we do notattempt to capture this range ofpotential costs in our illustrativeestimates.

The annual standard-setting processencourages consideration of the RFSprogram on a piecemeal (i.e., year-to-year) basis, which may not reflect thefull, long-term costs and benefits of theprogram. For the purposes of this finalrule, other than the estimates of costs ofproducing a “representative” renewablefuel compared to cost of petroleum fuel,EPA did not quantitatively assess otherdirect and indirect costs or benefits ofchanges in renewable fuel volumes.These direct and indirect costs andbenefits include infrastructure costs,investment, GHG emissions and airquality impacts, or energy securitybenefits, which all are to some degreeaffected by the annual standards. Whilesome of these impacts were analyzed inthe 2010 final rulemaking thatestablished the current RFS program,’18we have not analyzed these impacts forthe 2018 volume requirements. Weframed the analyses we have performedfor this final rule as “illustrative” so asnot to give the impression ofcomprehensive estimates.

“8RF52 Regulatory Impact Analysis (RIA). U.s.EPA 2010, Renewable Fuel standard Program(RF52) Regulatory Impact Analyais. EPA—420—R—10—006. February 2010. Docket EPA—HQ—OAR—2009—0472—11332.

1. Illustrative Cost Savings AssociatedWith Reducing Statutory CellulosicVolumes

To provide an illustrative estimate ofthe cost of the 2018 cellulosic biofuelrequirements, EPA has compared the2018 cellulosic biofuel volumerequirements to the statutory volumethat would be required absent theexercise of our cellulosic waiverauthority under CAA section211(o)(7)(D)(i).” As described in othersections of this final rule, we believethat the additional 6.71 billion gallonsof cellulosic biofuel envisioned by thestatute will not be produced in 2018.Therefore, estimating costs of thisvolume reduction is inherentlychallenging. However, we have takenthe relatively straightforwardmethodology of multiplying the per-gallon costs associated with the volumesthat would be required under this finalrule by the amount of cellulosicrenewable fuel that is being waived.This comparison results in a costsavings estimated to be $53415.9billion.

To estimate the overall cost savingsfrom waiving the cellulosic biofuelvolumes, EPA has taken the followingsteps. First, EPA determined themagnitude of the volume reduction ofcellulosic biofuel we are establishing inthis rule, relative to the statutoryvolume. In this rule we are reducing therequired volume of cellulosic biofuel by6.71 billion gallons, with correspondingreductions in the advanced biofuel andtotal renewable fuel standards. Second,we estimated the per-gallon costs ofproducing cellulosic ethanol derivedfrom corn kernel fiber that would beexpected in complying with thestandards. Third, the per-gallon costs ofcellulosic biofuel from corn fiber weremultiplied by 6.71 billion gallons.

While there may be growth in othercellulosic biofuel sources, for thisexercise we believe it is appropriate touse corn kernel fiber as therepresentative cellulosic biofuel. Themajority of liquid cellulosic biofuel in2018 is expected to be produced usingthis technology, and application of thistechnology in the future could result insignificant incremental volumes ofcellulosic biofuel. In addition, asexplained in Section Ill.D.2, we believethat production of the major alternativecellulosic biofuel—CNC/LNC derivedfrom biogas—is limited to

119 EPA is also using its discretion to reduce theadvanced biofuel and total renewable fuelrequirements using the cellulosic waiver authority.This discretionary action is based partially on thecoats of advanced biofoels and provides additionalcost savings.

approximately 580 million gallons dueto a limitation in the number of vehiclescapable of using this form of fuel.’2°

EPA uses a “bottom-up” engineeringcost analysis to quantify the costs ofproducing a gallon of cellulosic ethanolderived from corn kernel fiber. Thereare multiple processes that could yieldcellulosic ethanol from corn kernelfiber. EPA assumes a cellulosic ethanolproduction process that generatesbiofuel using distiller’s grains, a coproduct of generating corn starchethanol that is commonly dried and soldinto the feed market as distillers driedgrains with solubles (DDGS), as therenewable biomass feedstock. Weassume an enzymatic hydrolysis processwith cellulosic enzymes to break downthe cellulosic components of thedistiller’s grains. This process forgenerating cellulosic ethanol is similarto approaches currently used byindustry to generate cellulosic ethanolat a commercial scale, and we believethese costs estimates are likelyrepresentative of the range of differenttechnology options being developed toproduce ethanol from corn kernel fiber.We then compare the per-gallonwholesale costs of the cellulosic ethanolto the petroleum fuels that would bereplaced.

These cost estimates do not considertaxes, retail margins, or other costs ortransfers that occur at or after the pointof blending (transfers are paymentswithin society and are not additionalcosts). We do not attempt to estimatepotential cost savings related to avoidedinfrastructure costs (e.g., the costsavings of not having to provide pumpsand storage tanks associated withhigher-level ethanol blends). Whenestimating per-gallon costs, we considerthe costs of gasoline on an energyequivalent basis as compared to ethanol,since more ethanol gallons must beconsumed to go the same distance asgasoline due to the ethanol’s lowerenergy content.

Table IV.E.1—1 below presents thecost savings associated with this finalrule that are estimated using thisapproach.l21 The statutory cellulosic

l2OTo calculate this estimate, EPA used theNatural Gas vehicle Use from the 5TEO customTable Builder (0.12 billion cubic feet/day in 2018).This projection thcludes all cNG/LNG used astransportation fuel from both renewable and nonrenewable sources. RIA does not project the amountof NG/LNG from biogas used as transportationfuel. To convert billion cubic feet/day to ethanol-equivalent gallons, EPA used conversion factors of1020 BTU per cubic foot of natural gas and 77,000BTU of natural gas per ethanol-equivalent gallon.

121Detalls of the data and assumptions used canbe found in a Memorandum available in the docketentitied • ‘cost Impacts of the Final 2018 AnnualRenewable Fuel 5tandards”, Memorandum from


Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017 /Rules and Regulations 58515

biofuel target in EISA for 2018 is sevenbillion gallons (ethanol equivalent). Thecellulosic biofuel volume used in thisrule to establish the 2018 cellulosicbiofuel percentage standard is 288million gallons. The amount ofcellulosic biofuel being waived is 6.71

billion gallons. The per-gallon costdifference estimates for cellulosicethanol ranges from 50.79—52.37 perethanol equivalent gallon.122 Given thatcellulosic ethanol production is juststarting to become commerciallyavailable, the cost estimates have a

125 costs are rounded to the firstdecimal place.

125 There is also an increase of 10 million gallonsin the 2018 applicable volume of total renewablefoel as compared to the 2017 volume. However, in

significant range. Multiplying those per-gallon cost differences by the amount ofcellulosic biofuel waived in this finalrule, 6.71 billion gallons, results inapproximately 55.3—515.9 billion in costsavings.

TABLE lyE—i —IMPACTS OF THE DIFFERENCE BETWEEN EISA VOLUMES FOR THE CELLULOSIC BIOFUEL STANDARD ANDFINAL CELLULOSIC VOLUME IN 2018

2018 EISA 2018 Finalcellulosic cellulosicvolume volumestandard

Cellulosic Volume Required (Million Ethanol-Equivalent Gallons) 123 7,000 288Change in Required Cellulosic Biotuels (Million Gallons as Ethanol) (6,712)Cost Difference Between Cellulosic Com Fiber-Derived Ethanol and Gasoline Per Gallon ($IEGE)124 $0.79—$2.37Estimated Cost Difference in Meeting Cellulosic Biotuel Volume (Billion $) 125 $(5.3)—$(15.9)

2. Illustrative Cost Analysis of sugarcane ethanol from Brazil. Showing As described earlier, we are focusingAdvanced Biofuels Using 2017 as the the illustrative costs of soybean oil BBD on the wholesale level in our costBaseline and sugarcane ethanol is consistent with scenarios, and do not consider taxes,

We recognize that for the purpose of the methodology EPA developed for retail margins, additional infrastructure,estimating the cost of the 2018 pj?5 previous rulemakings. However, this or other costs or transfers that occur atvolume requirements that a number of discussion should not be interpreted as or after the point of blending. Moredifferent scenarios using different suggesting that the various renewable background information on this section,‘ ‘baselines” would be of interest to fuel types discussed are necessarily including details of the data sourcesstakeholders. Therefore, in this section, available in the marketplace. The used and assumptions made for each ofwe are also providing an illustrative cost availability of different types of the scenarios, can be found in aanalysis that shows the costs of the renewable fuel is discussed in other memorandum available in the docket.127advanced biofuel standard as compared sections of this preamble; in this sectionto those associated with the preceding we assess costs as if the different fuel Table IV.E.2—1 below presents

year’s standard, which as discussed in types are available, without intending to estimates of per energy-equivalent

section IV.C. will lead to an increase of suggest that they are. gallon costs for producing soybean

10 million gallons of advanced biofuel In previous annual RFS rules, EPA biodiesel, Brazilian sugarcane ethanol,

in 2018 in comoarison to 2017.126 provided an illustrative cost estimate for CNG/LNG derived from landfill biogas,EPA is proviing an illustrative cost the entire change in the total renewable and cellulosic ethanol derived from

analysis for the increase in the overall fuel volume standard assuming it was corn fiber relative to the petroleum fuelsadvanced biofuel volume of 10 million satisfied with conventional (i.e., non- they replace at the wholesale level. Forethanol equivalent gallons (as compared advanced) corn ethanol. As there is no each of the four scenarios, these per-to 2017 volumes) using four different change in the 2018 implied gallon costs are then multiplied by thescenarios, assuming this increase in conventional volume relative to the 10 million ethanol-equivalent gallonadvanced biofuel volumes is comprised 2017 volume, all of the changes in both increase in the 2018 advanced standardof: (1) cellulosic biofuel from CNG/LNG, the advanced and total renewable fuel relative to the previous 2017 standard to(2) cellulosic biofuel from corn kernel volumes are properly attributed to obtain an overall cost estimate.fiber, (3) soybean oil BBD, or (4) advanced biofuel.

TABLE IV.E.2—1 —ILLUSTRATIVE COSTS OF THE 10 MILLION GALLON INCREASE IN THE ADVANCED BIOFUEL VOLUMEREQUIREMENT IN 2018 RELATIVE TO THE 2017 VOLUME REQUIREMENT

Soybean Blodlesel Scenario

Cost Difference Between Soybean Biodiesel and Petroleum Diesel Per Gallon (SIEGE)128 $0.89—Si .22Annual Change in Overall Costs (Million $) 129 $9—$12

Brazilian Sugarcane Ethanol Scenario

Cost Difference Between Sugarcane Ethanol and Gasoline Per Gallon (SIEGE)

Michael Shelby, Dallas Burtholder, and AaronSobel to EPA Docket EPA—HQ—OAR—2017—0091.

122 For the purposes of the cost estimates in thissection, EPA has not attempted to adjust the priceof the petroleum foels to account for the impact ofthe RFS program, since the changes in therenewable fuel volume are relatively modest.Rather, we have simply used the wholesale priceprojections for gasoline and diesel as reported inEIA’s October 2017 STEO.

121 Overall fuel volumes may not match due to light of the nested standards, that increase isrounding. entirely attributable to the increase in the advanced

Approximate coats are rounded to the cents volume.place.

$0.61—Si .56

127”cost Impacts of the Final 2018 AnnualRenewable Fuel Standards”, Memorandum fromMichael Shelby, Dallas Burkholder, and AaronSobel to EPA Docket EPA—HQ—OAR—2017—0091.



TABLE IV.E.2—1 —ILLUSTRATIVE COSTS OF THE 10 MILLION GALLON INCREASE IN THE ADVANCED BIOFUEL VOLUMEREQUIREMENT IN 2018 RELATIVE TO THE 2017 VOLUME REQUIREMENT—Continued

Annual Change in Overall Costs (Million $) $6—$16

CNGILNG Derived from Landfill Biogas Scenario

Cost Difference Between CNG/LNG Derived from Biogas and Natural Gas ($/EGE) 130 $(O.04)—$O.07Annual Change in Overall Costs (Million $) $(0.4)—$0.7

Corn Fiber-Derived Ethanol Scenario

Cost Difference Between Cellulosic Com Fiber-Derived Ethanol and Gasoline Per Gallon ($/EGE) $O.79—$2.37Annual Change in Overall Costs (Million $) $8—$24

Based on this illustrative analysis offour separate hypothetical scenarios,EPA estimates that the costs for changesin the advanced fuel volumes comparedto 2017 could range from $(0,4)—$24million in 2018. It is important to notethat these illustrative costs do not takeinto consideration the benefits of theprogram.131 For the purpose of thisannual rulemaking, we have notquantified benefits for the 2018standards. For example, we do not havea quantified estimate of the GHG orenergy security benefits for a single year(e.g., 2018). Also, there are impacts thatare difficult to quantify, such as ruraleconomic development andemployment changes from morediversified fuel sources, that are notquantified in this rulemaking.

V. Consideration of AdditionalReductions Using Other WaiverAuthorities

As discussed in previous sections, weare reducing the statutory volume targetfor cellulosic biofuel to reflect theprojected production volume of that fueltype in 2018, and we are reducing bothadvanced biofuel and total renewablefuel by the maximum permissibleamount authorized under the cellulosicwaiver authority in CAA section211(o)(7)(D)(i).

We have also considered whether itwould be appropriate to provide furtherreductions for these renewable fuelcategories pursuant to the generalwaiver authority in CAA section211(o)(7)(A), or for these renewable fuel

128 Per-gallon cost differences compareillustrative biofoela to their petroleum fuelcounterparts on an ethanol gallon equivalent (EGE)basis, accounting for the differences in energycontent between fuels, and then multiplied by thetotal RINs needed to meet the change in volumeobligations.

329 Overall costs may not match per-gallon coatstimes volumes due to rounding.

°cNG/LNG derived from biogas and natural gascoats are compared on an ethanol gallon equivalent(EGE) energy content basis.

The small negative coat estimate is likely aresult of the methodology undertaken for theseillustrative coats.

categories and the 2018 BBD using theBBD waiver authority in CAA section211(o)(7)(E). We have concluded thatfurther reductions in volumes using anyof these other waiver authorities are notwarranted. We note that in the October4 Federal Register document wesolicited comment on possible newinterpretations of the general waiverauthority for inadequate domesticsupply and severe economic harm andof the biomass-based diesel waiverauthority.132 We find it unnecessary toresolve whether to adopt suchinterpretations at this point in timebecause under any approach we wouldfind exercise of these waiver authoritiesnot appropriate based on the recordbefore us.

As a result, we are finalizingadvanced biofuel and total renewablefuel volume requirements resulting fromthe exercise of the cellulosic biofuelwaiver authority alone, and we are notmodifying the 2018 BBD applicablevolume of 2.1 billion gallons establishedthrough a prior rulemaking. The impliedvolume for conventional renewable fuel(calculated by subtracting the advancedvolume from the total volume) will be15.0 billion gallons, consistent with thestatutory target provided in the statutefor 2018.

A. Inadequate Domestic Supply

On July 21, 2017, we proposed toreduce the 2018 statutory volume targetsfor advanced biofuel and totalrenewable fuel by the maximumpermissible amount using the cellulosicwaiver authority, and not to reducethese volumes further using otherauthorities. However, we requestedcomment on the possible additional useof the general waiver authority or otherauthorities to provide further reductionsin the proposed volumerequirements.133 To evaluate thepossibility for using the general waiverauthority on the basis of a finding ofinadequate domestic supply, we

132 FR 46174, October 4, 2017.133 FR 34206 at 34213, October 4, 2017.

considered the projected volumes ofrenewable fuel that can be supplied torefiners, importers, and blenders in2018 from both domestic productionand imports. In addition, consistentwith the approach identified forconsideration in the October 4

document, we considered the projectedvolumes of renewable fuel that can besupplied to refiners and blenders solelyfrom domestic production. Under eitherapproach we conclude a waiver is notwarranted.

In Section III we discussed ourprojection that 288 million gallons ofcellulosic biofuel will be made availablein 2018. In Section IV we described ourassessment that about 4.40 billiongallons of advanced biofuel would bereasonably attainable in 2018 from bothdomestic production and imports butthat, after considering a number offactors, such as the potential forfeedstock/fuel diversions and cost ofadvanced biofuel, we would exerciseour discretion to use the full cellulosicwaiver authority to reduce theapplicable volume to 4.29 billiongallons.134 As a result, we do notanticipate an inadequate domesticsupply of advanced biofuels to meet avolume requirement of 4.29 billiongallons for advanced biofuel, when bothdomestic production and imports areconsidered.

Having determined that there will notbe an inadequate domestic supply ofadvanced biofuel, we further consideredwhether there may be an inadequatedomestic supply to satisfy the portion ofthe total renewable fuel volumerequirement that can be satisfied withnon-advanced (conventional) renewablefuel. After application of the fullcellulosic waiver authority to theadvanced biofuel and total renewable

134 Because EPA’s authority under the celluloaicwaiver authority affords EPA more discretion toreduce volumes of advanced and total renewablefuel than the general waiver authority under anevaluation of inadequate domestic supply, EPA baaevaluated the supply of advanced biofuel forpurposes of a determination on the adequacy ofsupply without consideration of these factors.



fuel statutory volume targets, theimplied statutory volume forconventional renewable fuel is 15.0billion gallons. The total domesticproduction capacity of corn ethanol inthe U.S. is about 16 billion gallons, andtotal production of denatured andundenatured ethanol from thesefacilities in 2016 exceeded 15 billiongallons.135 As a result, there does notappear to be an inadequate domesticsupply of renewable fuel to satisfy theimplied 15 billion gallon conventionalrenewable fuel volume that results fromfull application of the cellulosic waiverauthority to reduce statutory volumetargets for advanced biofuel and totalrenewable fuel. We note that thisassessment does not include importedvolumes of fuel, such as conventionalbiodiesel, which could also be used tosatisfy the volume requirements. In lightof this finding, we conclude that thereis not an inadequate domestic supply ofvolumes than can be used to meet the15 billion gallon implied volume forconventional renewable fuel, and thusthat further reductions of the 19.29billion gallon total renewable fuelvolume requirement derived throughuse of the cellulosic waiver authoritywould not appropriate when taking intoaccount both domestic production andimports.

In the October 4 document, wediscussed comments on the proposalsuggesting that EPA should interpret theundefined term “domestic” in thephrase “inadequate domestic supply” toaccount for only volumes of renewablefuel that are produced domestically. IfEPA were to adopt this interpretation,we could exclude potential imports ofrenewable fuel in our assessment ofdomestic supply but, even if we founddomestic supply to be inadequate, couldtake factors such as potential importsand the availability of carryover RINsinto account in determining the extentto which we should exercise ourdiscretion to grant a waiver on the basisof inadequate domestic supply.136 Asdescribed in more detail in the RTCdocument, stakeholders who addressedthis issue provided varying perspectives

135 “2017 Ethanol Industry Outlook” by theRenewable Fuels Association indicates that 2017nationwide production capacity is 16.0 bill gal andactual production in 2016 was 15.25 bill gal. “UsFuel Ethanol Plant Production capacity from EIA,”estimates 2017 nameplate production capacity at15.51 bill gal. In “Ethanol Production in 2016 fromEIA,” EIA indicates that 2016 actual productionwas 15.45 bill gal. All documents are available indocket EPA—HQ—OAR—2017—0091.

135 EPA’s current regulations provide thatqualifying imported biofuel may be used forcompliance with the RFS standards; EPA’s responseto comments on this approach to imported biofuelsis provided in the RTC document.

on the extent to which such aninterpretation would have a relevantimpact on renewable fuel supply.

In light of the fact that the domesticproduction capacity of conventionalbiofuel volumes is in excess of 15billion gallons, whether we were toexclude imported biofuels from ourconsideration of domestic supply wouldprimarily impact our assessment of thesupply of cellulosic biofuel andadvanced biofuel volumes, notconventional renewable fuel. Withrespect to cellulosic biofuel, we notethat the vast majority of the supply in2018 is expected to come from domesticsources. In fact, if EPA excludedconsideration of projected cellulosicbiofuel imports, our projection of theavailable volume of cellulosic biofuel in2018 would be reduced by only 2million gallons or less than 1 percent ofour projection that 288 millioncellulosic biofuel gallons will be madeavailable in 2018. Given the importancethat Congress placed on the growth ofcellulosic biofuel volumes, ourprojection that compliance with a 288million gallon requirement is feasibleusing RINs generated in 2018, and theavailability of carryover cellulosicbiofuel RINs and cellulosic waivercredits for additional complianceflexibility, EPA would not exercise itsdiscretion to lower the 288 milliongallon projected cellulosic biofuelvolume by 2 million gallons even if EPAwere to interpret the term “domesticsupply” to exclude imported volumes.

With respect to the available supplyof advanced biofuel in 2018 in thecontext of an interpretation ofinadequate domestic supply thatexcludes imports, several commentersnoted the data provided by EPA in theOctober 4 document indicating that asignificant portion of the advancedbiofuel available in previous years hasbeen from imported biofuels,particularly imported biodiesel andrenewable diesel. Some commenterspointed to total domestic productioncapacity and feedstock availability toargue that domestic producers arecapable of compensating for volumesthat would not be provided throughimports, so that even under aninterpretation of “domestic supply” thatexcluded imports, EPA would not bejustified in reducing volumes on thebasis of inadequate domestic supply toa level below what was proposed.Others suggested that, without importedvolumes, the domestic industry couldnot ramp up production quickly enoughto compensate for the exclusion ofimports from our analysis and providea “domestic supply” equal to the

proposed 2018 volume requirements.l:37We believe, based on the record beforeus, that there is uncertainty regardingthe capability of the domestic advancedbiofuel industry to compensate in 2018for volumes that would not be providedthough imports. Taking thisuncertainty into account (including thedistinct possibility that the domesticindustry could compensate forexclusion of imports), as well as theavailability of imported volumes andcarryover RINs, EPA would not chooseto exercise its authority to grant awaiver on the basis of inadequatedomestic supply for 2018 even if itinterpreted the term “domestic supply”to exclude imports. In light of thisdetermination, we need not resolve atthis time the interpretive issue regardingwhether the term “domestic supply”should include consideration ofimports.

B. Severe Economic Harm

The proposal and October 4 documentrequested comment on the possibility offurther reductions in the proposedvolume requirements, including on thebasis of a severe economic harm. Wereceived comments from stakeholdersboth in support of, and opposed to,further reductions in the advancedbiofuel and/or total renewable fuelvolume requirements based on a findingof severe economic harm. For instance,several obligated parties stated that thepurchase of RINs to comply with theapplicable standards represents asignificant economic burden to theircompanies. Some also indicated thatthey are considering filing forbankruptcy. However, thesecommenters did not provide sufficientevidence that the purchase of RINs, asopposed to other market factors, isresponsible for the company’s difficulteconomic circumstances, or why theycannot recoup the cost of RINs thoughhigher prices of their products, or thearguments presented wereunconvincing.138 None of the

‘37The “domestic supply” of BBD for 2018 wouldlikely be adequate to meet the 2018 standard of 2.1billion gallons. Oomestic production of BBD wouldneed to increase by approximately 300 milliongallons as compared to the 2016 production. Asdiscussed above, EPA believes this increase ispossible and received comments suggesting thisvolume increase could be met by domesticproduction. Additionally, carryover RINs andimported volumes could still be used to meet thestandard. Therefore, EPA would not chose toexercise its authority to grant a waiver on the basisof inadequate domestic supply for BBD for 2018even if it interpreted the term “domestic supply”to exclude imports.

‘35we further note that before exercising thegeneral waiver authority on the basis of severeeconomic harm to a State, a Region or the U.S., EPA

cootthued



commenters provided compellingevidence that the proposed RFS volumerequirements for 2018 would be likelyto cause severe economic harm to aregion, State, or the Furtherdiscussion of these comments can hefound in the RTC document.

In addition to reviewing comments onthe proposed rule and the October 4document, EPA also reviewed marketdata from 2017 and previous years tosee if there was evidence that the RFSstandards are currently causing severeeconomic harm, or would be likely tocause severe economic harm in 2018.Given that the 2018 volumes generatedthrough the maximum reductionpermitted under the cellulosic waiverauthority are nearly the same as thevolume requirements for 2017, weconsidered:

1. Whether severe economic harm hasoccurred to date or is likely to occur in2017, and

2. whether the economic conditionsin 2018 might lie expected to besubstantially different than those in2017.

To determine whether severeeconomic harm has occurred to date oris likely to occur in in 2017, weinvestigated several possible indicators.These included RIN generation for 2017relative to 2016, refinery closures, retailfuel prices, and corn and soybeanprices. Based on our investigation, wedo not believe that severe economicharm has occurred thus far in 2017 toany State, region, or the U.S. as a resultof the 2017 standards, or is likely occurby the end of 2017. Details of thisinvestigation can be found in amemorandum to the docket.14°

To determine whether the economicconditions in 2018 might lie expected tohe substantially different than those in2017 in ways that could affect theeconomic impact of compliance withthe RFS program, we investigatedprojections of two primary drivers of thecost of compliance: Crop-based

would need to consider whether a waiver thatwould affect the standards applicable to allobligated parties, and would take into account anynegative economic impacts to farmers and biofuelproducers from a waiver, would be of significantbenefit to individual obligated parties facingfinancial difficulties.‘ In the October 4 document, we solicited

comment on EPA’s prior interpretation of the term“severe economic harm.’ As discussed in the RTCdocument accompanying this action, we believethat the evidence in the record would beinsufficient to support a finding of severe economicharm under any reasonable interpretation of thephrase advanced by commenters, so do not find itnecessary to assess changes to our interpretation ofthe phrase at this time.

“Assessment of waivers for severe economicharm or BBD prices for 2018,” memorandum fromDavid Korotney to docket EPA—HQ—OAR—2017—0091.

feedstock futures prices, and projectedgasoline demand. We also investigatedthe potential market impacts of the final2018 standards, most specifically interms of ethanol and biodieselconsumption. ‘‘

Based on the record before us, we donot believe that there is sufficientevidence to conclude that severeeconomic harm is occurring currently in2017 in any State, region, or the UnitedStates, and we do not believe thatmarket conditions in 2018 are likely tocause compliance with the applicablestandards to be more economicallychallenging than it is in 2017. Giventhat the 2018 standards are very similarto the 2017 standards, then, we do notbelieve that further reductions in the2018 volume requirements on the basisof severe economic harm are warranted.

C. Severe Environmental Harm

EPA received comments in responseto the proposal asserting that there arenegative environmental impacts thatmay be associated with the RFSprogram. A significant portion of theseconcerns center on feedstockproduction. Although we are authorizedto reduce the statutory volume targetson the basis of a finding that therequirements would “severely harm the

environment of a State, region, orthe United States,” commenters havenot presented evidence sufficient tosupport a determination to make areduction on this basis for 2018. EPA isnot making reductions on this basis for2018. EPA’s response to commentsrelated to perceived environmentalharms of the RFS program is set forth inthe RTC document accompanying thisrule.

D. Biomass-Based Diesel WaiverAuthority

The BBD waiver authority in CAAsection 211(o)(7)(E)(ii) provides that ifEPA determines that there is asignificant renewable feedstockdisruption or other market circumstancethat would make the price of BBDincrease significantly, then EPA shall, inconsultation with the Secretary ofEnergy and the Secretary of Agriculture,issue an order to reduce, for up to a 60-day period, the annual volumerequirement for BBD by an appropriatequantity that does not exceed 15percent. If EPA reduces the annualvolume requirement for BBD using thiswaiver authority, we may also reducethe applicable volume of advancedhiofuel and total renewable fuel by an

141 “Market impacts of biofuels,” memorandumfrom David Korotney to docket EPA—HQ—OAR—2017—0091.

equal or lesser volume than thereduction in BBD. In the October 4document we requested comment on theexpected impact on the price of BBD ofthe expiration of the biodiesel blenderstax credit, proposed import duties onhiodiesel from Argentina and Indonesia,or any other factors. We furtherrequested comment on whether anyexpected impacts should be consideredsignificant for the purposes of the BBDwaiver authority.

To investigate whether a reduction inthe 2018 BBD volume requirementwould be warranted under CAA section211(o)(7](E](ii), we considered currentand historical prices of unhiendedhiodiesel (Bi00), the price of blendedbiodiesel (in particular, B20], and BBD(D4) R1N prices. The results of thisinvestigation are described in amemorandum to the docket.142 EPAdiscussed in the October 4 documentthe fact that the Department ofCommerce had imposed preliminarytariffs on biodiesel imported fromArgentina and Indonesia, and that suchtariffs could impact the price of BBD.However, these tariffs have not yet beenfinalized, nor has EPA observed anysignificant impact of the announcementof the preliminary tariffs on the price ofbiomass-based diesel.’43

Based on the information before us,including the results of ourinvestigation and information andcomments submitted in response to theOctober 4 document, we haveconcluded that there is not sufficientevidence of a significant increase to theprice of BBD due to feedstockdisruption or other relevant marketcircumstances to justify reductions tothe 2018 BBD volume requirement usingthe biomass-based diesel waiverauthority.

VI. final Biomass-Based Diesel Volumefor 2019

In this section we discuss the BBDapplicable volume for 2019. We areestablishing this volume in advance ofthose for other renewable fuel categoriesin light of the statutory requirement inCAA section 211(o)(2)(B)(ii) to establishthe applicable volume of BBD for yearsafter 2012 no later than 14 monthsbefore the applicable volume will apply.We are not at this time establishing theBBD percentage standards that wouldapply to obligated parties in 2019 but

142 “Assessment of waivers for severe economicharm or BBD prices for 2018,” memorandum fromDavid Korothey to docket EPA—HQ—OAR—2o17—0091.

143 “Assessment of waivers for severe economicharm or BBD prices for 2018,” memorandum fromDavid Korothey to docket EPA—HQ-OAR—2o17—0091.



intend to do so in late 2018, afterreceiving EIA’s estimate of gasoline anddiesel consumption for 2019. Althoughthe BBD applicable volume sets a floorfor required BBD use, because the BBDvolume requirement is nested withinboth the advanced biofuel and the totalrenewable fuel volume requirements,any BBD produced beyond themandated 2019 BBD volume can beused to satisfy both of these otherapplicable volume requirements.

A. Statutory Requirements

The statute establishes applicablevolume targets for years through 2022for cellulosic biofuel, advanced biofuel,and total renewable fuel. For BBD,applicable volume targets are specifiedin the statute only through 2012. Foryears after those for which volumes arespecified in the statute, EPA is requiredunder CAA section 211(o)(2)(B)(ii) todetermine the applicable volume ofBBD, in coordination with the Secretaryof Energy and the Secretary ofAgriculture, based on a review of theimplementation of the program duringcalendar years for which the statutespecifies the volumes and an analysis ofthe following factors:

1. The impact of the production anduse of renewable fuels on theenvironment, including on air quality,climate change, conversion of wetlands,ecosystems, wildlife habitat, waterquality, and water supply;

2. The impact of renewable fuels onthe energy security of the United States;

3. The expected annual rate of futurecommercial production of renewablefuels, including advanced biofuels ineach category (cellulosic biofuel andBBD);

4. The impact of renewable fuels onthe infrastructure of the United States,including deliverability of materials,goods, and products other thanrenewable fuel, and the sufficiency ofinfrastructure to deliver and userenewable fuel;

5. The impact of the use of renewablefuels on the cost to consumers oftransportation fuel and on the cost totransport goods; and

6. The impact of the use of renewablefuels on other factors, including jobcreation, the price and supply ofagricultural commodities, ruraleconomic development, and food prices.

The statute also specifies that thevolume requirement for BBD cannot beless than the applicable volumespecified in the statute for calendar year2012, which is 1.0 billion gallons. Thestatute does not, however, establish anyother numeric criteria, or provide anyguidance on how the EPA should weighthe importance of the often competingfactors, and the overarching goals of thestatute when the EPA sets the applicablevolumes of BBD in years after those forwhich the statute specifies suchvolumes. In the period 2013—202 2, thestatute specifies increasing applicablevolumes of cellulosic biofuel, advancedhiofuel, and total renewable fuel, butprovides no guidance, beyond the 1.0

billion gallon minimum, on the level atwhich BBD volumes should be set.

In establishing the BBD and cellulosicstandards as nested within the advancedhiofuel standard, Congress clearlyintended to support development ofBBD and especially cellulosic biofuels,while also providing an incentive forthe growth of other non-specified typesof advanced biofuels. That is, theadvanced hiofuel standard provides anopportunity for other advanced biofuels(advanced biofuels that do not qualify ascellulosic hiofuel or BBD] to competewith cellulosic biofuel and BBD tosatisfy the advanced biofuel standardafter the cellulosic hiofuel and BBDstandards have been met.

B. Determination of the 2019 ApplicableVolume ofBiomass-Based Diesel

One of the primary considerations indetermining the BBD volume for 2019 isa review of the implementation of theprogram to date, as it affects BBD. Thisreview is required by the CAA, and alsoprovides insight into the capabilities ofthe industry to produce, import, export,and distribute BBD. It also helps us tounderstand what factors, beyond theBBD standard, may incentivize theproduction and import of BBD. Thenumber of BBD RINs generated, alongwith the number of RINs retired due toexport or for reasons other thancompliance with the annual BBDstandards from 2011—2018 are shown inTable VLB.1—1 below.

TABLE VI.B.1—1—BIOMASS-BASED (D4) RIN GENERATION AND STANDARDS IN 2011—2018[million RINs or gallons] 144

BBD RIN5

EBD RINs Exported BED n’ Ii Available BBD BED standard BED standardgenerated (RIN5) ance

RINsa (gallons) (RIN5)

reasons

2011 1,692 72 98 1,522 800 1,2002012 1,737 102 90 1,545 1,000 1,5002013 2,739 124 101 2,514 1,280 1,9202014 2,710 134 92 2,484 1,630 b2,49O2015 2,796 145 32 2,619 1,730 b2,6552016 4,008 203 96 3,709 1,900 2,8502017 N/A N/A N/A N/A 2,000 3,0002018 N/A N/A N/A N/A 2,100 3,150

a Available BED RINs may not be exactly equal to BED RIN5 Generated minus Exported RINs and BED RINs Retired, Non-Compliance Reasons, due to rounding.

bEach gallon of biodiesel qualifies for 1.5 RlNs due to its higher energy content per gallon than ethanol. Renewable diesel qualifies for between 1.5 and 1.7 RIN5 per gallon, but generally has an equivalence value of 1.7. In 2014 and 2015 the number of RIN5 in the BED Standardcolumn is not exactly equal to 1.5 times the BED volume standard as these standards were established based on actual RIN generation data for2014 and a combination of actual data and a projection of RIN generation for the last three months of the year for 2015. Some of the volumeused to meet the BBD standard was renewable diesel.

‘Avai1ah1e BBD RINs Generated, Exported BBDRINs, and BBD RINs Retired for Non-ComplianceReasons information from EMTS.


58520 Federal Register / Vol. 82, No. 237/ Tuesday, December 12, 2017/ Rules and Regulations

In reviewing historical BBD RINgeneration and use, we see that thenumber of RINs available forcompliance purposes exceeded thevolume required to meet the BBDstandard in 2011, 2012, 2013, and 2016.Additional production and use ofbiodiesel was likely driven by a numberof factors, including demand to satisfythe advanced biofuel and totalrenewable fuels standards, the biodieseltax credit,145 and favorable blendingeconomics. The number of RINsavailable in 2014 and 2015 wasapproximately equal to the numberrequired for compliance in those years,as the standards for these years werefinalized at the end of November 2015and EPA’s intent at that time was to setthe standards for 2014 and 2015 toreflect actual BBD use. In 2016, withRFS standards established prior to thebeginning of the year and the blenderstax credit in place, available BBD RINsexceeded the volume required by theBBD standard by 859 million RINs (30percent]. This indicates that inappropriate circumstances there isdemand for BBD beyond the requiredvolume of BBD.

The biodiesel tax credit was reauthorized inJanuary 2013. It applied retroactively for 2012 andfor the remainder of 2013. It was once againextended in December 2014 and appliedretroactively to all of 2014 as well as to theremaining weeks of 2014. In December 2015 thebiodiesel tax credit was authorized arid appliedretroactively for all of 2015 as well as through theend of 2016.

146 This is because when an obligated party retiresa BBD JUN to help satisfy their BBD obligation, thenested nature of the BBD standard means that thisRIN also counts towards satisfying their advancedand total renewable fuel obligations. AdvancedRINs count towards both the advanced and totalrenewable fuel obligations, while conventionalRINs (D6) count towards only the total renewablefuel obligation.

The prices paid for advanced biofueland BBD RINs beginning in early 2013through the end of 2016 also support theconclusion that advanced biofuel and/ortotal renewable fuel standards provide asufficient incentive for additionalbiodiesel volume beyond what isrequired by the BBD standard. Becausethe BBD standard is nested within theadvanced biofuel and total renewablefuel standards, and therefore can help tosatisfy three RVOs, we would expect theprice of BBD RINs to exceed that ofadvanced and conventional renewable1?H’.Js.146 If, however, BBD RINs arebeing used by obligated parties to satisfytheir advanced biofuel obligations,above and beyond the BBD standard, wewould expect the prices of advancedbiofuel and BBD RINs to converge.147Further, if BBD RINs are being used (orare expected to be used] to satisfyobligated parties’ total renewable fuelobligation, above and beyond their BBDand advanced biofuel requirements wewould expect the price for all three RINtypes to converge.

When examining RIN price data from2012 through September 2017, shown inFigure VI.B.2—1 below, we see thatbeginning in early 2013 and throughSeptember 2017 the advanced RIN priceand BBD RIN prices were approximatelyequal. Similarly, from early 2013through late 2016 the conventionalrenewable fuel and BBD RIN priceswere approximately equal. This suggeststhat the advanced biofuel standard and!or total renewable fuel standard are

‘47We would still expect D4 RINs to be valuedat a slight premium to US and D6 RINs in this case(and D5 RINs at a slight premium to 06 RINsI toreflect the greater flexibility of the 04 RINs to beused towards the BBD, advanced biofuel, and totalrenewable fuel standard. This pricing has beenobserved over the past several years.

capable of incentivizing increased BBDvolumes beyond the BBD standard, andoperated in this manner starting in2013.148 While final standards were notin place throughout 2014 and most of2015, EPA had issued proposed rules forboth of these years. In each year, themarket response was to supply volumesof BBD that exceeded the proposed BBDstandard in order to help satisfy theproposed advanced and total biofuelstandards.149 Additionally, the PINprices in these years strongly suggeststhat obligated parties and other marketparticipants anticipated the need forBBD RINs to meet their advanced andtotal biofuel obligations, and respondedby purchasing advanced biofuel andBBD RINs at approximately equalprices. We do note, however, that in2012 the BBD RIN price wassignificantly higher than both theadvanced biofuel and conventionalrenewable fuel RIN prices. In 2012 theElO blendwall had not yet been reached,and it was likely more cost effective formost obligated parties to satisfy theportion of the advanced biofuelrequirement that exceeded the BBD andcellulosic biofuel requirements withadvanced ethanol.

‘48Although we did not issue a nile establishingthe final 2013 standards until August of 2013, webelieve that the market anticipated the finalstandards, based on EPA’s July 2011 proposal andthe volume targets for advanced and total renewablefuel established in the statute. (76 FR 38844, 38843,July 1, 2011).

EPA proposed a BBD standard of 1.28 billiongallons (1.92 billion RJNs) for 2014 in ourNovember 2013 proposed rule. The number of BUDRJNs available in 2014 was 2.67 billion. EPAproposed a BBD standard of 1.70 billion gallons(2.55 billion RINs] for 20Th in our June 2015proposed nile. The number of BBD RINs availablein 2015 was 2.92 billion.



$1.80

$1.60

Figure VI.B.2-lD4, D5, and D6 RIN Prices (January 2012— September 2017)

06 RN Price 04 FIN Price 05 FIN Price

RENT Price Source: Argus Media Group

In raising the 2013 BBD volume abovethe 1 billion gallon minimum mandatedby Congress, the EPA sought to “creategreater certainty for both producers ofBBD and obligated parties” while alsoacknowledging that, “the potential forsomewhat increased costs is appropriatein light of the additional certainty ofGHG reductions and enhanced energysecurity provided by the advancedbiofuel volume requirement of 2.75billion gallons.” 150 Unknown at thattime was the degree to which therequired volumes of advanced biofueland total renewable fuel couldincentivize volumes of BBD thatexceeded the BBD standard. In 2012 theavailable supply of BBD RINs exceededthe required volume of BBD by a verysmall margin (1,545 million BBD RINswere made available for compliancetowards meeting the BBD requirementof 1,500 million BBD RINs). Theremainder of the 2.0 billion-gallonadvanced biofuel requirement wassatisfied with advanced ethanol, whichwas largely imported from Brazil. 151

From 2012 to 2013 the statutoryadvanced biofuel requirement increasedby 750 million gallons. If EPA had notincreased the required volume of BBDfor 2013, and the advanced biofuelstandard had proved insufficient toincrease the supply of BBD beyond thestatutory minimum of 1.0 billiongallons, an additional 750 milliongallons of non-BBD advanced biofuels

15077 FR 59456, 59462 (september 27, 2012).151 594 million advanced ethanol RINs were

generated in in 2012.

beyond the BBD standard would havebeen needed to meet the advancedbiofuel volume requirement.

The only advanced biofuel other thanBBD available in appreciable quantitiesin 2012 and 2013 was advanced ethanol,the vast majority of which was importedsugarcane ethanol. EPA had significantconcerns as to whether or not thesupply of advanced ethanol couldincrease this significantly (750 milliongallons) in a single year. These concernswere heightened by the approachingElO blendwall, which increased thechallenges associated with supplyingincreasing volumes of ethanol to theU.S. If neither BBD volumes noradvanced ethanol volumes increasedsufficiently, EPA was concerned thatsome obligated parties might be unableto acquire the advanced biofuel RINsnecessary to demonstrate compliancewith their RVOs in 2013. Therefore, asdiscussed above, EPA increased thevolume requirement for BBD in 2013 tohelp create greater certainty for BBDproducers (by ensuring demand for theirproduct above the 1.0 billion gallonstatutory minimum) and obligatedparties (by ensuring that sufficient RINswould be available to satisfy theiradvanced biofuel RVOs). Since 2013,however, EPA has gained significantexperience implementing the RFSprogram. As discussed above, RINgeneration data has consistentlydemonstrated that the advanced biofuelvolume requirement, and to a lesserdegree the total renewable fuel volumerequirement, are capable ofincentivizing the supply of BBD above

and beyond the BBD volumerequirement.

Finally, we note that the BBDindustry in the U.S and abroad hasmatured since EPA first increased therequired volume of BBD beyond thestatutory minimum in 2013. To assessthe maturity of the biodiesel industry,EPA compared information on BBD RINgeneration by company from 2012 and2016 (the most recent year for whichcomplete RIN generation is available). In2012, the annual average RIN generationper company producing BBD was about11 million RINs (about 7.3 milliongallons) with approximately 50 percentof companies producing less the 1million gallons of BBD a year. Theagency heard from multiple commentersduring the 2012 and 2013 rulemakingsthat higher volume requirements forBBD would provide greater certainty forthe emerging BBD industry andencourage further investment. Since thattime, the BBD industry has matured ina number of critical areas, includinggrowth in the size of companies, theconsolidation of the industry, and morestable funding and access to capital. In2012, the BBD industry wascharacterized by smaller companieswith dispersed market share. By 2016,the average BBD RIN generation percompany had climbed to almost 33million RINs (22 million gallons)annually, a 3-fold increase. Only 27percent of the companies produced lessthan 1 million gallons of BBD.

We are conscious of public commentsclaiming that BBD volume requirementsthat are a significant portion of the

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advanced volume requirementseffectively dis-incentivize the futuredevelopment of other promisingadvanced biofuel pathways. A variety ofdifferent types of advanced biofuels,rather than a single type such as BBD,would positively impact energy security(e.g., by increasing the diversity offeedstock sources used to make biofuels,thereby reducing the impacts associatedwith a shortfall in a particular type offeedstock) and increase the likelihood ofthe development of lower cost advancedbiofuels that meet the same GHGreduction threshold as BBD.12

With the considerations discussedabove and in Section W.B.2 in mind, aswell as our analysis of the factorsspecified in the statute, we are settingthe applicable volume of BBD at 2.1billion gallons for 2019. We believe thisvolume sets the appropriate floor forBBD, and that the volume of advancedhiodiesel and renewable diesel actuallyused in 2019 will be driven by the levelof the advanced biofuel and totalrenewable fuel standards that theAgency will establish for 2019. We haveconsidered the required statutory factorsin reaching our decision, as summarizedin Section C, below, and in amemorandum to the docket (the “2019BBD docket memorandum”).153

We believe our final 2019 BBDvolume requirement strikes theappropriate balance between providinga market environment where thedevelopment of other advanced biofuelsis incentivized, while also maintainingsupport for the BBD industry. Based onour review of the data, and the nestednature of the BBD standard within theadvanced standard, we conclude thatthe advance standard continues to drivethe ultimate volume of BBD supplied.Given the success of the industry in thepast few years, as well as the substantialincreases in the BBD volume beingdriven by the advanced standard, wehave determined that a volumerequirement greater than 2.1 billiongallons for BBD in 2019 is not necessaryto provide support for the BBD industry.Selling the BBD standard in this mannercontinues to allow a considerableportion of the advanced biofliel volumeto be satisfied by either additionalgallons of BBD or by other unspecifiedand potentially less costly types ofqualifying advanced biofuels.

152 All types of advanced biofuel, including 330,must achieve lifecycle GHG reductions of at least50 percent.

‘53”Memorsndum to docket: Draft statutoryFactors Assessment for the 2019 Biomass-BasedDiesel (BBD) Applicable Volumes. See DocketEPA—HQ—OAR—201 7—0091.

C. Consideration of Statutory FactorsSet Forth in CAA Section211 (o)(2)(B)(ii)(I)—(VI) for 2019

As noted earlier in Section IV.B., theBBD volume requirement is nestedwithin the advanced biofuelrequirement and the advanced biofuelrequirement is, in turn, nested withinthe total renewable fuel volumerequirement. This means that any BBDproduced beyond the mandated BBDvolume can be used to satisfy both theseother applicable volume requirements.The result is that in considering thestatutory factors we must consider thepotential impacts of increasing ordecreasing BBD in comparison to otheradvanced biofuels.154 For a givenadvanced biofuel standard, greater orlesser BBD volume requirements do notchange the amount of advanced biofuelused to displace petroleum fuels; rather,increasing the BBD requirement mayresult in the displacement of other typesof advanced biofuels that could havebeen used to meet the advanced biofuelsvolume requirement. While in recentyears EPA has annually increased theBBD volume requirement, EPA is, as weproposed, maintaining the 2.1 billiongallon standard for 2019 based on ourreview of the statutory factors and theconsiderations noted above and in the2018 BBD Docket Memorandum. Inparticular, as EPA noted above insection VI.B., the BBD industry is moremature, and we have increased BBDvolumes significantly in recent years sothat the BBD standard is now over twicethe minimum statutory volume requiredin CAA section 211(o)(2](B)(i). In thesecircumstances we do not believe that anadditional increase in the required BBDrequired volume is necessary to supportthe industry in 2019.

Consistent with our approach inselling the final BBD volumerequirement for 2018, EPA’s primaryassessment of the statutory factors forthe 2019 BBD applicable volume is thatbecause the BBD requirement is nestedwithin the advanced biofuel volumerequirement, we expect that the 2019advanced volume requirement, when setnext year, will determine the level ofBBD production and imports that occurin 2019.155 Therefore, EPA continues to

‘54While excess BBD production could alsodisplace conventional renewable fuel under thetotal renewable standard, as long as the BBDapplicable volume is significantly lower than theadvanced biofuel applicable volume our action inselling the BBD applicable volume is not expectedto displace conventional renewable fuel under thetotal renewable standard, but rather other advancedbiofuels.

155 Even though we are not setting the 2019advanced biofuel volume requirement as part of thisrulemaldng, we expect that the 2019 advanced

believe that the same overall volume ofBBD would likely be supplied in 2019even if we were to mandate a somewhatlower or higher BBD volume for 2019 inthis final rule. Thus, we do not expectour 2019 BBD volume requirement toresult in a difference in the factors weconsider pursuant to CAA section211(o)(2)(B)(ii)(I)—(VIJ.

As an additional supplementaryassessment, we have considered thepotential impacts of selecting anapplicable volume of BBD other than 2.1billion gallons in 2019. Selling arequirement higher or lower than 2.1billion gallons in 2019 would only beexpected to impact BBD volumes on themargin, protecting to a greater or lesserdegree BBD from competition with otherpotential advanced biofuels. In thissupplementary assessment we haveconsidered all of the statutory factorsfound in CAA section 211(2)(B)(ii), andas described in the 2019 BBD docketmemorandum, our assessment does notappear, based on available information,to provide a reasonable basis for settinga higher or lower volume requirementfor BBD than 2.1 billion gallons for2019.

Overall and as described in the 2019BBD docket memorandum, we havedetermined that both the primaryassessment and the supplementalassessment of the statutory factorsspecified in CAA section211(o)(2)(B)(ii)(I)—(VI) for the year 2019does not provide significant support forsetting the BBD standard at a levelhigher or lower than 2.1 billion gallonsin 2019.

VII. Percentage Standards faT 2018

The renewable fuel standards areexpressed as volume percentages andare used by each obligated party todetermine their Renewable VolumeObligations (RVOs). Since there are fourseparate standards under the RFSprogram, there are likewise fourseparate RVOs applicable to eachobligated party. Each standard appliesto the sum of all non-renewable gasolineand diesel produced or imported. Thepercentage standards are set so that ifevery obligated party meets thepercentages by acquiring and retiring anappropriate number of RINs, then theamount of renewable fuel, cellulosicbiofuel, BBD, and advanced biofuelused will meet the applicable volumerequirements on a nationwide basis.

volume requirement will be considerably higherthan the 2019 BBD requirement, consistent withpast practice and, therefore, that the BBD volumerequirement for 2019 would not be expected toimpact the volume of BBD that is actually producedand imported during the 2019-time period.



Sections III through V provide ourrationale and basis for the volumerequirements for 2018156 The volumesused to determine the percentagestandards are shown in Table Vu—i.

TABLE Vu—i—VOLUMES FOR USE INSETTING THE 2018 APPLICABLEPERCENTAGE STANDARDS

[Billion gallons]

Cellulosic biotuel 0.288Biomass-based diesels 2.10Advanced biotuel 4.29Renewable fuel 19.29

Represents physical volume.

For the purposes of converting thesevolumes into percentage standards, wegenerally use two decimal places to beconsistent with the volume targets asgiven in the statute, and similarly two

decimal places in the percentagestandards. However, for cellulosicbiofuel we use three decimal places inboth the volume requirement andpercentage standards to more preciselycapture the smaller volume projectionsand the unique methodology that insome cases results in estimates of onlya few million gallons for a singleproducer.

A. Calculation ofPercentage Standards

To calculate the percentage standards,we are following the same methodologyfor 2018 as we have in all prior years.The formulas used to calculate thepercentage standards applicable toproducers and importers of gasoline anddiesel are provided in 40 CFR 80.1405.The formulas rely on estimates of thevolumes of gasoline and diesel fuel, forboth highway and nonroad uses, whichare projected to be used in the year inwhich the standards will apply. Theprojected gasoline and diesel volumesare provided by EIA, and includeprojections of ethanol and biodieselused in transportation fuel. Since thepercentage standards apply only to thenon-renewable gasoline and dieselproduced or imported, the volumes ofethanol and biodiesel are subtracted outof the EIA projections of gasoline anddiesel.

Transportation fuels other thangasoline or diesel, such as natural gas,propane, and electricity from fossilfuels, are not currently subject to the

standards, and volumes of such fuels arenot used in calculating the annualpercentage standards. Since under theregulations the standards apply only toproducers and importers of gasoline anddiesel, these are the transportation fuelsused to set the percentage standards, aswell as to determine the annual volumeobligations of an individual gasoline ordiesel producer or importer.

As specified in the RFS2 final rule,157the percentage standards are based onenergy-equivalent gallons of renewablefuel, with the cellulosic biofuel,advanced biofuel, and total renewablefuel standards based on ethanolequivalence and the BBD standardbased on biodiesel equivalence.However, all RIN generation is based onethanol-equivalence. For example, theRFS regulations provide that productionor import of a gallon of qualifyingbiodiesel will lead to the generation of1.5 RINs. The formula specified in theregulations for calculation of the BBDpercentage standard is based onbiodiesel-equivalence, and thus assumesthat all BBD used to satisfy the BBDstandard is biodiesel and requires thatthe applicable volume requirement bemultiplied by 1.5. However, BBD oftencontains some renewable diesel, and agallon of renewable diesel typicallygenerates 1.7 RThJs.158 In addition, thereis often some renewable diesel in theconventional renewable fuel pool. As aresult, the actual number of RINsgenerated by biodiesel and renewablediesel is used in the context of ourassessing reasonably attainable volumesfor purposes of deriving the applicablevolume requirements and associatedpercentage standards for advancedbiofuel and total renewable fuel, andlikewise in obligated parties’determination of compliance with anyof the applicable standards. While thereis a difference in the treatment ofbiodiesel and renewable diesel in thecontext of determining the percentagestandard for BBD versus determiningthe percentage standard for advancedbiofuel and total renewable fuel, it is nota significant one given our approach todetermining the BBD volumerequirement. Our intent in setting theBBD applicable volume is to provide alevel of guaranteed volume for BBD, butas described in Section VI.B, we do not

expect the BBD standard to be binding.That is, we expect that actual supply ofBBD, as well as supply of conventionalbiodiesel and renewable diesel, will bedriven by the advanced biofuel and totalrenewable fuel standards.

B. Small Refineries and Small Refiners

In CAA section 211(o) (9), enacted aspart of the Energy Policy Act of 2005,and amended by the EnergyIndependence and Security Act of 2007,Congress provided a temporaryexemption to small refineriesthrough December 31, 2010. Congressprovided that small refineries couldreceive a temporary extension of theexemption beyond 2010 based either onthe results of a required DOE study, orbased on an EPA determination of“disproportionate economic hardship”on a case-by-case basis in response tosmall refinery petitions. In reviewingpetitions, EPA, in consultation with theDepartment of Energy, evaluateswhether the small refinery hasdemonstrated either disproportionateimpacts or viability impairment, andmay grant refineries exemptions upondemonstration of either criterion.

EPA has granted exemptions pursuantto this process in the past. However, atthis time no exemptions have beenapproved for 2018, and therefore wehave calculated the percentagestandards for 2018 without anyadjustment for exempted volumes. EPAis maintaining its approach that anyexemptions for 2018 that are grantedafter the final rule is released will notbe reflected in the percentage standardsthat apply to all gasoline and dieselproduced or imported in 2018.160

C. Final Standards

The formulas in 40 CFR 80.1405 forthe calculation of the percentagestandards require the specification of atotal of 14 variables covering factorssuch as the renewable fuel volumerequirements, projected gasoline anddiesel demand for all states andterritories where the RFS programapplies, renewable fuels projected byEIA to be included in the gasoline anddiesel demand, and exemptions forsmall refineries. The values of all thevariables used for this final rule areshown in Table Vll.C—1.’°1

‘56The 2018 volume requirement for BBD wasestablished in the 2017 final nile.

157 See 75 FR 14670 (March 26, 2010).155 Although in some cases a gallon of renewable

diesel generates either 1.5 or 1.6 R1Ns.

A small refiner that meets the requirements of40 crir 80.1442 may also be eligible for anexemption.

‘Further discussion of this issue can be foundin the Response to comments document in thedocket for this action.

determine the 49-state values for gasolineand diesel, the amounts of these fuels used inAlaska is subtracted from the totals provided byOOE because petroleum based fuels used in Alaskado not incur RFS obligations. The Alaska fractionsare determined from the June 29, 2016 EIA StateEnergy Oats System (SEOS), Energy consumptionEstimates.



TABLE VII.C—1—VALUES FOR TERMS IN CALCULATION OF THE 2018 STANDARDS162[Billion gallons]

Term Description Value

RFVCB Required volume of cellulosic biofuel 0.288RFVBBD Required volume of biomass-based diesel 2.70RFVAB Required volume of advanced biofuel 4.29RFVRF Required volume of renewable fuel 19.29G Projected volume of gasoline 143.22D Projected volume of diesel 54.76RG Projected volume of renewables in gasoline 14.77RD Projected volume of renewables in diesel 2.53GS Projected volume of gasoline for opt-in areas 0RGS Projected volume of renewables in gasoline for opt-in areas 0DS Projected volume of diesel for opt-in areas 0RDS Projected volume of renewables in diesel for opt-in areas 0GE Projected volume of gasoline for exempt small refineries 0.00DE Projected volume of diesel for exempt small refineries 0.00

Projected volumes of gasoline anddiesel, and the renewable fuelscontained within them, were providedby ETA on October 11, 2017, as requiredin the statute at CAA section211(o)(3)(A).

Using the volumes shown in TableVII.C—i, we have calculated thepercentage standards for 2018 as shownin Table VII.C—2.

TABLE VII.C—2—FINAL PERCENTAGESTANDARDS FOR 2018

Cellulosic biofuel 0.159Biomass-based diesel 1.74Advanced biofuel 2.37Renewable fuel 10.67

VIII. Administrative Actions

A. Assessment of the DomesticAggregate Compliance Approach

The RFS regulations specify an“aggregate compliance” approach fordemonstrating that planted crops andcrop residue from the U.S. complieswith the “renewable biomass”requirements that address lands fromwhich qualifying feedstocks may beharvested.l63 In the 2010 RFS2rulemaking, EPA established a baselinenumber of acres for U.S. agriculturalland in 2007 (the year of EISAenactment) and determined that as longas this baseline number of acres was notexceeded, it was unlikely that new landoutside of the 2007 baseline would bedevoted to crop production based onhistorical trends and economicconsiderations. The regulations specify,therefore, that renewable fuel producersusing planted crops or crop residuefrom the U.S. as feedstock in renewablefuel production need not undertake

162 “calculation of final ¾ standards for2018” in docket EPA—HQ—OAR—2017—0091.

16340 CFR 80.1454(g).

individual recordkeeping and reportingrelated to documenting that theirfeedstocks come from qualifying lands,unless EPA determines through one ofits annual evaluations that the 2007baseline acreage of 402 million acresagricultural land has been exceeded.

In the 2010 RFS2 rulemaking, EPAcommitted to make an annual findingconcerning whether the 2007 baselineamount of U.S. agricultural land hasbeen exceeded in a given year. If thebaseline is found to have beenexceeded, then producers using U.S.planted crops and crop residue asfeedstocks for renewable fuelproduction would be required tocomply with individual recordkeepingand reporting requirements to verifythat their feedstocks are renewablebiomass.

The Aggregate Compliancemethodology provided for the exclusionof acreage enrolled in the GrasslandReserve Program (GRP) and theWetlands Reserve Program (WRP) fromthe estimated total U.S. agriculturalland. However, the 2014 Farm Billterminated the GRP and WRP as of 2013and USDA established the AgricultureConservation Easement Program (ACEP)with wetlands and land easementcomponents. The ACEP is a voluntaryprogram that provides financial andtechnical assistance to help conserveagricultural lands and wetlands andtheir related benefits, Under theAgricultural Land Easements (ACEP—ALE) component, USDA helps Indiantribes, state and local governments, andnon-governmental organizations protectworking agricultural lands and limitnon-agricultural uses of the land. Underthe Wetlands Reserve Easements(ACEP—WRE) component, USDA helpsto restore, protect and enhance enrolledwetlands. The WRP was a voluntaryprogram that offered landowners the

opportunity to protect, restore, andenhance wetlands on their property.The GEP was a voluntary conservationprogram that emphasized support forworking grazing operations,enhancement of plant and animalbiodiversity, and protection of grasslandunder threat of conversion to other uses.

USDA and EPA concur that theACEP—WRE and ACEP—ALE represent acontinuation in basic objectives andgoals of the original WRP and GRF.Therefore, in preparing this year’sassessment of the total U.S. acres ofagricultural land, the acreage enrolled inthe ACEP-WRE and ACEP-ALE wasexcluded.

Based on data provided by the USDAFarm Service Agency (FSA) and NaturalResources Conservation Service (NRCS),we have estimated that U.S. agriculturalland reached approximately 376 millionacres in 2017, and thus did not exceedthe 2007 baseline acreage. This acreageestimate is based on the samemethodology used to set the 2007baseline acreage for U.S. agriculturalland in the RFS2 final rulemaking, withthe GRP and WRP substitution as notedabove. Specifically, we started with FSAcrop history data for 2017, from whichwe derived a total estimated acreage of379,220,752 acres. We then subtractedthe ACEP—ALE and ACEP—WREenrolled areas by the end of Fiscal Year2017, 2,777,887 acres, to yield anestimate of 376,442,865 acres orapproximately 376 million acres of U.S.agricultural land in 2017. The USDAdata used to make this derivation can befound in the docket to this rule.’

‘64As in 2016, USDA again provided EPA with2017 data from the discontinued GRP and WRPprograms. Given this data, EPA estimated the totalU.S. agricultural land both including and omittingthe GRP and WRP acreage. In 2017, combined landunder GRP and WRP totaled 349,146 acres.Subtracting the GRP, WRP, ACEP—WRE, and AcEP—ALE acreage yields an estimate of 376,093,719 acres



B. Assessment of the CanadianAggregate Compliance Approach

The RFS regulations specify a petitionprocess through which EPA mayapprove the use of an aggregatecompliance approach for planted cropsand crop residue from foreigncountries.165 On September 29, 2011,EPA approved such a petition from theGovernment of Canada.

The total agricultural land in Canadain 2017 is estimated at 117.8 millionacres. This total agricultural land areaincludes 95.5 million acres of croplandand summer fallow, 12.5 million acresof pastureland and 9.8 million acres ofagricultural land under conservationpractices. This acreage estimate is basedon the same methodology used to set the2007 baseline acreage for Canadianagricultural land in EPA’s response toCanada’s petition. The data used tomake this calculation can be found inthe docket to this rule.

C. BIN Market Operation

Some stakeholders have expressedconcerns that the current regulatoryprovisions related to MN trading renderthe RFS program vulnerable to marketmanipulation. The EPA takes suchissues seriously. The RIN system wasoriginally designed with an opentrading market in order to maximize itsliquidity and ensure a robustmarketplace for RINs, However, the EPAis interested in assessing whether andhow the current trading structureprovides an opportunity for marketmanipulation. To that effect, the EPAsought comment and input on thisissue, including on potential changes tothe MN trading system that might helpaddress these concerns. We receivedcomments from stakeholders suggestinga number changes to the RIM tradingsystem. While EPA received manycomments that are helpful to highlightopportunities for improvement to theMN system, we are not in a position tomake significant changes to the RIMsystem at this time. However, we intendto explore these suggested changes andare open to suggestions for makingchanges in the future that are within ourauthority and would help to improvethe function and liquidity of the RNsystem.

Separate from evaluating the RINtrading options in the RFS program, theEPA is working with appropriate marketregulators to analyze targeted concernsof some stakeholders. Although the EPA

or approximately 376 million total acres of U.s.agricultural land in 2017. Omitting the GRP andWRP data yields approximately the same 376million acres of U.s. agricultural land in 2017.

16540 CFR 60.1457.

has not seen evidence of manipulationin the MN market, the EPA is not acommodity market regulatory agency,and thus we do not have expertise inthis field. Claims of marketmanipulation prompted the EPA toexecute a memorandum ofunderstanding (MOU) with the U.S.Commodity Futures TradingCommission (CFTC), which has theauthority and expertise to investigatesuch claims.

In the meantime, the EPA hascontinued to explore additional ways toincrease program transparency in orderto support the program and share datawith all stakeholders. The EPA alreadypublishes RFS program data on our Website, including data related to RINgeneration, sales and holdings, andannual compliance.166 We are interestedin providing more information, to theextent consistent with our obligations toprotect confidential businessinformation (CBI). The EPA soughtcomment on specific data elements andposting frequency that stakeholdersbelieve would be useful to help withmarket transparency and liquidity. Wereceived comments from stakeholderssuggesting a number of different types ofdata that commenters suggested wouldbe useful to the industry and public.The EPA will need to further evaluateeach of these suggestions to determinewhich information we can be post and,if so, whether we can post it at thefrequency that was suggested by thecommenters. Our decisions with respectto these suggestions must necessarilystrike a balance between achieving thegreatest transparency possible, whileworking within the limitations of ourauthority and resources (includingtechnology systems), and protectinginformation that is claimed as CBI.

IX. Public Parficipafion

Many interested parties participatedin the rulemaking process thatculminates with this final rule. Thisprocess provided opportunity forsubmitting written public commentsfollowing the proposal that wepublished on July 21, 2017 (82 FR34206), and we also held a publichearing on August 1, 2017, at whichmany parties provided both verbal andwritten testimony. All commentsreceived, both verbal and written, areavailable in Docket ID No. EPA—HQ—OAR—2017—0091 and we consideredthese comments in developing the finalrule. Public comments and EPA

166 For public data on the RF5 and other EPA fuelprograms, refer to: https:Hwww.epo.gov/foelsregistrotion-reporting-ond-compiionce-help/poblicdoto-and-registrotion-iists-foel-progroms.

responses are discussed throughout thispreamble and in the accompanyingResponse to Comment document, whichis available in the docket for this action.

X. Statutory and Executive OrderReviews

A. Executive Order 12866: RegulatoryPlanning and Review and ExecutiveOrder 13563: Improving Regulation andRegulatory Review

This action is an economicallysignificant regulatory action that wassubmitted to the Office of Managementand Budget (0MB) for review. Anychanges made in response to 0MBrecommendations have beendocumented in the docket. The EPAprepared an analysis of illustrative costsassociated with this action. Thisanalysis is presented in Section IV.E ofthis preamble.

B. Executive Order 13771: ReducingRegulations and Controlling RegulatoryCosts

This action is considered anExecutive Order 13771 regulatoryaction. Details on the estimated costs ofthis final rule can be found in EPA’sanalysis of the illustrative costsassociated with this action. Thisanalysis is presented in Section IV.E ofthis preamble.

C. Paperwork Reduction Act (PRA)

This action does not impose any newinformation collection burden under thePRA. 0MB has previously approved theinformation collection activitiescontained in the existing regulationsand has assigned 0MB control numbers2060—063 7 and 2060—0640. The finalstandards will not impose new ordifferent reporting requirements onregulated parties than already exist forthe RFS program.

D. Regulatory Flexibility Act (RFA)

I certify that this action will not havea significant economic impact on asubstantial number of small entitiesunder the RFA. In making thisdetermination, the impact of concern isany significant adverse economicimpact on small entities. An agency maycertify that a rule will not have asignificant economic impact on asubstantial number of small entities ifthe rule relieves regulatory burden, hasno net burden, or otherwise has apositive economic effect on the smallentities subject to the rule.

The small entities directly regulatedby the RFS program are small refiners,which are defined at 13 CFR 121.201.We have evaluated the impacts of thisfinal rule on small entities from twoperspectives: As if the 2018 standards



were a standalone action or if they area part of the overall impacts of the RFSprogram as a whole.

When evaluating the standards as ifthey were a standalone action separateand apart from the original rulemakingwhich established the RFS2 program,then the standards could be viewed asincreasing the advanced and totalrenewable fuel volumes required ofobligated parties by 10 million gallonsbetween 2017 and 2018. To evaluate theimpacts of the volume requirements onsmall entities relative to 2017, EPA hasconducted a screening analysis 107 toassess whether it should make a findingthat this action would not have asignificant economic impact on asubstantial number of small entities.Currently available information showsthat the impact on small entities fromimplementation of this rule would notbe significant. EPA has reviewed andassessed the available information,which shows that obligated parties,including small entities, are generallyable to recover the cost of acquiring theifiNs necessary for compliance with theRFS standards through higher salesprices of the petroleum products theysell than would be expected in theabsence of the RFS program.’68 169 Thisis true whether they acquire RINs bypurchasing renewable fuels withattached RINs or purchase separatedRINs. The costs of the RFS program arethus generally being passed on toconsumers in the highly competitivemarketplace. Even if we were to assumethat the cost of acquiring RINs were notrecovered by obligated parties, and weused the maximum values of theillustrative costs discussed in SectionW.E of this preamble and the gasolineand diesel fuel volume projections andwholesale prices from the October 2017version of EIA’s Short-Term EnergyOutlook, and current wholesale fuelprices, a cost-to-sales ratio test showsthat the costs to small entities of theRFS standards are far less than 1 percentof the value of their sales.

“Screening Analysis for the Final RenewableFuel Standard Program Renewable VolumeObligations for 2018,” memorandum from DallasBurkholder, Nick Parsons, and Tia Sutton to EPAMr Docket EPA—HQ—OAR—2017—0091.

°“ For a further discussion of the ability ofobligated parties to recover the cost of RINs see “APreliminary Assessment of RIN Market Oynamics,RIN Prices, and Their Effects,’ Dallas aurtholder,Office of Transportation and Air Quality, US EPA.May 14, 2015, EPA Mr Docket EPA—HQ—OAR—2015—0111.

155 Knittel, christopher R., aen S. Meiselman, andJames H. Stock. “The Pass-Through of RIN Pricesto Wholesale and Retail Fuels under the RenewableFuel Standard.” Working Paper 21343. NBERWorking Paper Series. Available online at hup://www.nber.org/popera/w22343.pdf

While the screening analysisdescribed above supports a certificationthat this rule would not have asignificant economic impact on smallrefiners, we continue to believe that itis more appropriate to consider thestandards as a part of ongoingimplementation of the overall RFSprogram. When considered this way, theimpacts of the RFS program as a wholeon small entities were addressed in theRFS2 final rule (75 FR 14670, March 26,2010), which was the rule thatimplemented the entire programrequired by the Energy Independenceand Security Act of 2007 (EISA 2007).As such, the Small Business RegulatoryEnforcement Fairness Act (SBREFA)panel process that took place prior tothe 2010 rule was also for the entire RFSprogram and looked at impacts on smallrefiners through 2022.

For the SBREFA process for the RFS2final rule, EPA conducted outreach,fact-finding, and analysis of thepotential impacts of the program onsmall refiners, which are all describedin the Final Regulatory FlexibilityAnalysis, located in the rulemakingdocket (EPA—HQ—OAR—2005—0161).This analysis looked at impacts to allrefiners, including small refiners,through the year 2022 and found thatthe program would not have asignificant economic impact on asubstantial number of small entities,and that this impact was expected todecrease over time, even as thestandards increased. For gasoline and/ordiesel small refiners subject to thestandards, the analysis included a cost-to-sales ratio test, a ratio of theestimated annualized compliance coststo the value of sales per company. Fromthis test, it was estimated that alldirectly regulated small entities wouldhave compliance costs that are less thanone percent of their sales over the lifeof the program (75 FR 14862, March 26,2010).

We have determined that this finalrule will not impose any additionalrequirements on small entities beyondthose already analyzed, since theimpacts of this rule are not greater orfundamentally different than thosealready considered in the analysis forthe RFS2 final rule assuming fullimplementation of the RFS program.This rule establishes the 2018 advancedand total renewable fuel Volumerequirements at levels 10 milliongallons higher than the 2017 volumerequirements, and significantly belowthe statutory volume targets. Thisexercise of EPA’s waiver authorityreduces burdens on small entities, ascompared to the burdens that would beimposed under the volumes specified in

the Clean Air Act in the absence ofwaivers—which are the volumes that weassessed in the screening analysis thatwe prepared for implementation of thefull program. Regarding the BBDstandard, we are maintaining thevolume requirement for 2019 at thesame level as 2018. While this volumeis an increase over the statutoryminimum value of I billion gallons, theBBD standard is a nested standardwithin the advanced biofuel category,which we are significantly reducingfrom the statutory volume targets. Asdiscussed in Section VI, we are sellingthe 2019 BBD volume requirement at alevel below what is anticipated will beproduced and used to satisfy thereduced advanced biofuel requirement.The net result of the standards beingestablished in this action is a reductionin burden as compared toimplementation of the statutory volumetargets, as was assumed in the RFS2final rule analysis.

While the rule will not have asignificant economic impact on asubstantial number of small entities,there are compliance flexibilities in theprogram that can help to reduce impactson small entities. These flexibilitiesinclude being able to comply throughMN trading rather than renewable fuelblending, 20 percent RThJ rolloverallowance (up to 20 percent of anobligated party’s RVO can be met usingprevious-year RINs), and deficit carry-forward (the ability to carry over adeficit from a given year into thefollowing year, providing that the deficitis satisfied together with the next year’sRVO). In the RFS2 final rule, wediscussed other potential small entityflexibilities that had been suggested bythe SBREFA panel or thoughcomments, but we did not adopt them,in part because we had serious concernsregarding our authority to do so,

Additionally, as we realize that theremay be cases in which a small entitymay be in a difficult financial situationand the level of assistance afforded bythe program flexibilities is insufficient.For such circumstances, the programprovides hardship relief provisions forsmall entities (small refiners), as well asfor small refineries.170 As required bythe statute, the RFS regulations includea hardship relief provision (at 40 CFR80.1441(e)(2)) that allows for a smallrefinery to petition for an extension ofits small refinery exemption at any timebased on a showing that compliancewith the requirements of the RFSprogram would result in the refineryexperiencing a “disproportionateeconomic hardship.” EPA regulations

See CAA section 211(o)(9)(BJ.



provide similar relief to small refinersthat are not eligible for small refineryrelief (see 40 CFR 80. 1442(h)). EPAevaluates these petitions on a case-by-case basis and may approve suchpetitions if it finds that adisproportionate economic hardshipexists. In evaluating such petitions, EPAconsults with the U.S. Department ofEnergy, and takes the findings of DOE’s2011 Small Refinery Study and othereconomic factors into consideration.EPA successfully implemented theseprovisions by evaluating petitions forexemption from 14 small refineries forthe 2016 RFS standards.171

Given that this final rule would notimpose additional requirements onsmall entities, would decrease burdenvia a reduction in required volumes ascompared to statutory volume targets,would not change the complianceflexibilities currently offered to smallentities under the RFS program(including the small refinery hardshipprovisions we continue to successfullyimplement), and available informationshows that the impact on small entitiesfrom implementation of this rule wouldnot be significant viewed either from theperspective of it being a standaloneaction or a part of the overall RFSprogram, we have therefore concludedthat this action would have no netregulatory burden for directly regulatedsmall entities.

E. Unfunded Mandates Reform Act(UMRA)

This action does not contain anunfunded mandate of $100 million ormore as described in UMRA, 2 U.S.C.1531—1538, and does not significantly oruniquely affect small governments. Thisaction implements mandatesspecifically and explicitly set forth inCAA section 2 11(o) and we believe thatthis action represents the least costly,most cost-effective approach to achievethe statutory requirements of the rule.

F. Executive Order 13132: Federalism

This action does not have federalismimplications. It will not have substantialdirect effects on the states, on therelationship between the nationalgovernment and the states, or on thedistribution of power andresponsibilities among the variouslevels of government.

G. Executive Order 13175: Consultationand Coordination With Indian TribalGovernments

This action does not have tribalimplications as specified in Executive

is currently evaluating 2 additional 2016petitions, bringing the total number of petitions for2016 to 16.

Order 13175. This final rule will beimplemented at the Federal level andaffects transportation fuel refiners,blenders, marketers, distributors,importers, exporters, and renewable fuelproducers and importers. Tribalgovernments would be affected only tothe extent they produce, purchase, anduse regulated fuels. Thus, ExecutiveOrder 13175 does not apply to thisaction.

H. Executive Order 13045:Protection ofChildren From Environmental HealthRisks and Safety Risks

The EPA interprets Executive Order13045 as applying only to thoseregulatory actions that concernenvironmental health or safety risks thatthe EPA has reason to believe maydisproportionately affect children, perthe definition of “covered regulatoryaction” in section 2—2 02 of theExecutive Order. This action is notsubject to Executive Order 13045because it implements specificstandards established by Congress instatutes (CAA section 211(o)) and doesnot concern an environmental healthrisk or safety risk.

I. Executive Order 13211:ActionsConcerning Regulations ThatSignificantly Affect Energy Supply,Distribution, or Use

This action is not a “significantenergy action” because it is not likely tohave a significant adverse effect on thesupply, distribution, or use of energy.This action establishes the requiredrenewable fuel content of thetransportation fuel supply for 2018,consistent with the CAA and waiverauthorities provided therein. The RFSprogram and this rule are designed toachieve positive effects on the nation’stransportation fuel supply, by increasingenergy independence and loweringlifecycle GHG emissions oftransportation fuel.

J. National Technology Transfer andAdvancement Act (NTTAA)

This rulemaking does not involvetechnical standards.

K. Executive Order 12898: FederalActions To Address EnvironmentalJustice in Minority Populations andLow-Income Populations

The EPA believes that this action doesnot have disproportionately high andadverse human health or environmentaleffects on minority populations, low-income populations, and/or indigenouspeoples, as specified in Executive Order12898 (59 FR 7629, February 16, 1994).This final rule does not affect the levelof protection provided to human health

or the environment by applicable airquality standards. This action does notrelax the control measures on sourcesregulated by the RFS regulations andtherefore will not cause emissionsincreases from these sources.

L. Congressional Review Act (CRA)

This action is subject to the CRA, andthe EPA will submit a rule report toeach House of the Congress and to theComptroller General of the UnitedStates. This action is a “major rule” asdefined by 5 U.S.C. 804(2).

XI. Statutory Authority

Statutory authority for this actioncomes from section 211 of the Clean AirAct, 42 U.S.C. 7545. Additional supportfor the procedural and compliancerelated aspects of this final rule comesfrom sections 114, 208, and 301(a) of theClean Air Act, 42 U.S.C. 7414, 7542, and7601(a).

List of Subjects in 40 CFR Part 80

Environmental protection,Administrative practice and procedure,Air pollution control, Diesel fuel, Fueladditives, Gasoline, Imports, Oilimports, Petroleum, Renewable fuel.

Dated: November 30, 2017.

I. Scoff Pruift,Administrator.

For the reasons set forth in thepreamble, EPA amends 40 CFR part 80as follows:

PART 80—REGULATION OF FUELSAND FUEL ADDITIVES

• 1. The authority citation for part 80continues to read as follows:

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

Subpart M—Renewable Fuel Standard

• 2. Section 80.1405 is amended byadding paragraph (a)(9) to read asfollows:

§ 80.1405 What are the Renewable FuelStandards?

(a) * * *

(9) Renewable Fuel Standards for2018.

(i) The value of the cellulosic biofuelstandard for 2018 shall be 0.159 percent.

(ii) The value of the biomass-baseddiesel standard for 2018 shall be 1.74percent.

(iii) The value of the advanced biofuelstandard for 2018 shall be 2.37 percent.

(iv) The value of the renewable fuelstandard for 2018 shall be 10.67 percent.* * * * *

LFR Doc. 2017—26426 Filed 12—11—17; 8:45 am]BILLING CODE 6560—50—P


UNI1D -fATS LIF$+ 3t*A1I OR UtSItIK,T OF (1OLUMBIA

Jim 1ftjj OF IMiA

FILDf 9

RCEWtD IN THE UNITED STATES COURT OF APPEALS CLERKL FOR THE DISTRICT OF COLUMBIA CIRCUIT•

)NATIONAL BIODIESEL BOARD, )

)Petitioner, )

1%—iO. IV. ) Case No.

_________

)UNITED STATES ENVIRONMENTAL )PROTECTION AGENCY, )

)Respondent. )

RULE 26.1 CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1 and D.C. Circuit Rule

26.1, Petitioner National Biodiesel Board makes the following disclosures:

The National Biodiesel Board has no parent companies, and no publicly-held

company has a 10% or greater ownership interest. It has not issued shares or debt

securities to the public.

The National Biodiesel Board is a trade association as defined in D.C.

Circuit Rule 26.1(b). It is the national trade association for the biodiesel industry,

and its mission is to advance the interests of its members by creating sustainable

biodiesel industry growth.


Respectfully submitted,

/s/ Bryan li KillianBryan M. KillianDouglas A. HastingsMorgan, Lewis & Bockius LLP1111 Pennsylvania Ave., NWWashington, D.C. 20004(202) 739-3000 (telephone)(202) 739-3001 (facsimile)

Counsellor the National Biodiesel Board

Dated: February 9, 2018

2


Jefferson B. Sessions IIIAttorney GeneralU.S. Department of Justice950 Pennsylvania Avenue, NWWashington, DC 20530

Samara M. SpenceU.S. Department of JusticeEnvironmental Defense SectionP.O. Box 7611Washington, DC 20004

/s/ Bryan li KillianBryan M. Killian

2


FQR ViSI[IQT OF QOLUMBIA CIRCUITH DISTRn. r CQLAMB CIRUI1

F1LL ttM 9 Q1

IN THE UNITED STATES COURT OF APPEAI4SRECEIVED FOR THE DISTRICT OF COLUMBIA CIRCUItF CLERK

)NATIONAL BIODIESEL BOARD, )

)Petitioner, )

v. ) CaseNo. 18-104’)

UNITED STATES ENVIRONMENTAL )PROTECTION AGENCY, )

)Respondent. )

CERTIFICATE OF SERVICE

\) Pursuant to Rule 25(d) of the Federal Rules of Appellate Procedure, I hereby

certify that the foregoing Petition for Review and Rule 26.1 Statement have been

served by United States first-class mail this 9th day of February, 2018, upon each

of the following:

The Honorable Scott Pruitt Matthew Z. LeopoldAdministrator General CounselU.S. Environmental Protection Agency Office of General CounselWilliam Jefferson Clinton Building U.S. Environmental Protection Agency1200 Pennsylvania Avenue, NW 1200 Pennsylvania Avenue, NWMail Code: 11O1A Mail Code: 2310AWashington, DC 20460 Washington, DC 20460


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