______urr r.ctt hi4 USCAC t,iLuMt3ACase #18-1041ufl Document #1718085 Filed: 02/09/2018 Page 1 of 48 STFCTOFCOLUMBIACIRCUIT

FtLED

RECE!VEEDIN THE UNITED STATES COURT OF APPEI LS FOR THE DISTRICT OF COLUMBIA CIRCI. IT CLERK

) NATIONAL BIODIESEL BOARD, ) ) Petitioner, ) ) 18:1041 V ) Case No. ) UNITED STATES ENVIRONMENTAL ) PROTECTION AGENCY, ) ) Respondent. ) )

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).

A copy of the Federal Register notice is attached to this Petition. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 2 of 48 Dated: February 9, 2018 /s/ Respectfully Bryan Morgan, Douglas (202) (202) Washington, Counsel 1111 2 Bryan Pennsylvania 739-3001 739-3000 M. for A. Lewis li Kiffian Hastings the Killian submitted, D.C. & National (facsimile) (telephone) Bockius 20004 Ave., Biodiesel NW LLP Board USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 3 of 48

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ENVIRONMENTAL PROTECTION transportation fuel produced or disclosure is restricted by statute. AGENCY imported in the year 2018. Relying on Certain other material, such as statutory waiver authority that is copyrighted material, is not placed on 40 CFR Part 80 available when projected cellulosic the internet and will be publicly tEPA—HQ—OAR—2077-0091;FRL—9971—73— biofuel production volumes are less available only in hard copy form. OAR] than the applicable volume specified in Publicly available docket materials are the statute, the EPA is establishing available electronically through http:// RIN2060—ATO4 volume requirements for cellulosic wwwregulations.gov. Renewable Fuel Standard Program: biofuel, advanced biofuel, and total renewable fuel that are below the FOR FURTHERINFORMATIONCONTACT:Julia Standards for 2018 and Biomass MacAllister, Office of Transportation Based Diesel Volume for 2019 statutory volume targets. In this action, we are also establishing the applicable and Air Quality, Assessment and AGENCY:Environmental Protection volume of biomass-based diesel for Standards Division, Environmental Agency (EPA). 2019. Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; telephone ACTION:Final rule. DATES:This final rule is effective on number: 734—214—4131; email address: SUMMARY:Under section 211 of the February 12, 2018. [email protected]. Clean Air Act, the Environmental ADDRESSES:The EPA has established a SUPPLEMENTARYINFORMATION:Entities Protection Agency (EPA) is required to docket for this action under Docket ID potentially affected by this final rule are set renewable fuel percentage standards No. EPA—HQ—OAR—2017—0091.All those involved with the production, every year. This action establishes the documents in the docket are listed on distribution, and sale of transportation annual percentage standards for the http://www.regulotions.gov Web fuels, including gasoline and diesel fuel cellulosic biofuel, biomass-based diesel, site. Although listed in the index, some or renewable fuels such as ethanol, advanced biofuel, and total renewable information is not publicly available, biodiesel, renewable diesel, and biogas. fuel that apply to gasoline and diesel e.g., CBI or other information whose Potentially regulated categories include:

Category NAICS1codes SIC2 codes Examples of potentiallyregulated entities

Industry 324110 2911 Petroleum Refineries. Industry 325193 2869 Ethylalcohol manufacturing. Industry 325199 2869 Other basic organicchemical manufacturing. Industry 424690 5169 Chemical and allied products merchant wholesalers. Industry 424710 5171 Petroleum bulkstations and terminals. Industry 424720 5172 Petroleum and petroleum products merchant wholesalers. Industry 221210 4925 Manufacturedgas productionand distribution. Industry 454319 5989 Other fuel dealers. 1 North American Industry Classification System (NAICS). 25tandard IndustrialClassification(SIC)system code.

This table is not intended to be II. Authority and Need for Waiver of 3. Other Advanced Biofuel exhaustive, but rather provides a guide Statutory Applicable Volumes 4. Total Advanced Biofuel for readers regarding entities likely to be A. Statutory Authorities for Reducing C. Exercise of Cellulosic Waiver Authority regulated by this action. This table lists Volume Targets for Advanced Biofuel 1. Cellulosic Waiver Authority the types of entities that EPA is D. Exercise of Cellulosic Waiver Authority now 2. General Waiver Authority aware could potentially for Total Renewable Fuel be regulated by B. Treatment of Carryover RINs E. Impacts of 2018 Standards on Costs this action. Other types of entities not 1. Updated Projection of Carryover RIN 1. Illustrative Cost Savings Associated listed in the table could also be Volume With Reducing Statutory Cellulosic regulated. To determine whether your 2. EPA’s Decision Regarding the Treatment Volumes entity would be regulated by this action, of Carryover RINs 2. Illustrative Cost Analysis of Advanced you should carefully examine the III. Cellulosic Biofuel Volume for 2018 Biofuels Using 2017 as the Baseline applicability criteria in 40 CFR part 80. A. Statutory Requirements V. Consideration of Additional Reductions B. Cellulosic If you have any questions regarding the Biofuel Industry Assessment Using Other Waiver Authorities 1. Potential Domestic Producers A. Inadequate Domestic Supply applicability of this a action to 2. Potential Foreign Sources of Cellulosic B. Severe Economic Harm particular entity, consult the person Biofuel C. Severe Environmental Harm listed in the FOR FURTHERtNFORMATION 3. Summary of Volume Projections for D. Biomass-Based Diesel Waiver Authority CONTACTsection. Individual Companies VI. Final Biomass-Based Diesel Volume for C. Projection from the Energy Information 2019 Outline of This Preamble Administration A. Statutory Requirements I. Executive Summary D. Cellulosic Biofuel Volume for 2018 B. Determination of the 2019 Applicable A. Purpose of This Action 1. Liquid Cellulosic Biofuel Volume of Biomass-Based Diesel 2. CNG/LNG Derived From Biogas C. Consideration B. Summary of Major Provisions in This of Statutory Factors set 3. Total Cellulosic Action Biofuel in 2018 forth in CAA Section 211(o)(2](B)(ii)(I)— IV. Advanced Biofuel and Total Renewable (VI) for 2019 1. Approach to Setting Volume Fuel Volumes for 2018 VII. Percentage Standards Requirements for 2018 A. Volumetric Limitation on Use of the A. Calculation of Percentage Standards 2. Cellulosic Biofuel Cellulosic Waiver Authority B. Small Refineries and Small Refiners 3. Advanced Biofuel B. Reasonably Attainable Volumes of C. Final Standards 4. Total Renewable Fuel Advanced Biofuel VIII. Administrative Actions 6. 2019 Biomass-Based Diesel 1. Imported Sugarcane Ethanol A. Assessment of the Domestic Aggregate 7. Annual Percentage Standards 2. Biodiesel and Renewable Diesel Compliance Approach USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 4 of 48

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B. Assessment of the Canadian Aggregate contains more than 4 percent biodiesel lower than the statutory targets, but Compliance Approach and/or renewable diesel.2 nevertheless will ensure these C. RIN Market Operation The statute includes annual volume renewable fuels will continue to play a IX. Public Participation targets, and requires EPA to translate critical role as a complement to our X. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory those volume targets (or alternative petroleum-based fuels. The final rule Planning and Review and Executive volume requirements established by modifies the volume requirements Order 13563: Improving Regulation and EPA in accordance with statutory slightly relative to the proposed rule, Regulatory Review waiver authorities) into compliance and in this notice we explain where and B. Executive Order 13771: Reducing obligations that obligated parties must why such modifications were made. Regulations and Controlling Regulatory meet every year. In this action, we are In this action, we are finalizing Costs establishing the annual percentage volume requirements for cellulosic C. Paperwork Reduction Act (PRA) standards for cellulosic biofuel, biofuel at the level we project to be U. Regulatory Flexibility Act (RPA) biomass-based diesel (BBD), advanced available for 2018. We are using the B. Unfunded Mandates Reform Act biofuel, and total renewable fuel that “cellulosic waiver authority” provided (UMRA) to all gasoline F. Executive Order 13132: Federalism would apply and diesel by the statute to finalize volume G. Executive Order 13175: Consultation produced or imported in 2018. We are requirements for advanced biofuel and and Coordination With Indian Tribal also establishing the applicable volume total renewable fuel that are lower than Governments of BBD for 2019. the statutory targets by the same H. Executive Order 13045: Protection of Real-world challenges, in particular magnitude as the reduction in the Children From Environmental Health the slower-than-expected development cellulosic biofuel reduction (i.e., the Risks and Safety Risks of the cellulosic biofuel industry, has volumes we are finalizing for cellulosic I. Executive Order 13211: Actions slowed progress towards meeting biofuel, advanced biofuel, and total Concerning Regulations That Congressional goals for renewable fuels. renewable fuel are all 6.71 billion Significantly Affect Energy Supply, Given the nested nature of the gallons lower than Distribution, or Use the statutory standards, the shortfall in cellulosic volumes). We are not reducing volumes J. National Technology Transfer and Advancement Act (NTTAA) biofuels has made the volume targets through use of the general waiver K. Executive Order 12898: Federal Actions established by Congress for 2018 for authority or the biomass-based diesel To Address Environmental Justice in advanced biofuels and total renewable waiver authority. We note that while Minority Populations and Low-income fuels beyond reach. On July 21, 2017, we are reducing the required volume of Populations EPA published a proposed rulemaking, total renewable fuel, advanced biofuel L. Congressional Review Act (CRA) containing proposed volume and cellulosic biofuel below statutory XI. Statutory Authority requirements for the RFS Program’s four levels, the required volumes in this rule I. Executive Summary categories of renewable fuels that would would achieve the implied statutory apply in 2018 (and 2019 for BBD). On volumes for conventional biofuel5 and The Renewable Fuel Standard (RFS) August 1, EPA hosted a public hearing non-cellulosic advanced biofuel6 for program began in 2006 pursuant to the on the proposed rule, and EPA received 2018. requirements in Clean Air Act (CAA) over 235,000 written comments on the The final volume requirements for section 2 11(o) that were added through proposed rule as well. On October 4, 2018 are shown in Table I—i below. the Energy Policy Act of 2005 (EPAct). 2017 (82 FR 46174), EPA published an Relative to the levels finalized for 2017, The statutory requirements for the RFS “Availability of Supplemental the 2018 volume requirements for program were subsequently modified Information; Request for Further advanced biofuel and total renewable through the Energy Independence and Comment,” (hereinafter, “October 4 fuel are higher by 10 million gallons. Security Act of 2007 (EISA), leading to document”) seeking further comment on EPA is reducing the advanced biofuel the publication of major revisions to the the possible use of other waiver and total renewable fuel statutory regulatory requirements on March 26, authorities in the final rule. Transcripts volumes by the same amount as we are 2010.1 EISA’s stated goals include of the public hearing, along with all the reducing the cellulosic biofuel volume. moving the United States (US) toward comments received on the proposed These reductions effectively preserve “greater energy independence and rule and the October 4 document are the implied statutory volumes for security (and] to increase the production available in the docket. After careful conventional renewable fuel and non of clean renewable fuels.” Today, nearly review of the information before us we cellulosic advanced biofuels. We are all gasoline used for transportation are finalizing volume requirements for establishing the volume requirement for purposes contains 10 percent ethanol 2018 for cellulosic biofuel, advanced BBD for 2019 at the proposed volume of (Eio), and on average diesel fuel biofuel and total renewable fuel that are 2.1 billion gallons.

TABLE I—i—FINAL VOLUME REQUIREMENTS a

2018 2019

Cellulosic biofuel (milliongallons) 288 n/a Biomass-based diesel (billiongallons) b 2.1 2.1 Advanced biofuel (billiongallons) 4.29 n/a

‘75 FR 14670, March 26, 2010. See 42 u.s.c. 7545(ol(7l(Al(i—iil. See also the generated for conventional biofuels have a D code 2 biodiesel and/or renewable diesel blend discussion of the general waiver authority in of 6. percentages based on ElKs October 2017 Short Section ll.A.2. below. 6Throughout this final rule non-cellulosic Term Energy Outlook (SF501, Throughout this final rule conventional biofoel advanced biofuel refers to biofuel that qualifies as advanced biofoel, does 82 FR 34206, July 21, 2017. refers to biofuel that qualifies as renewable fuel, but but not qualify as cellulosic biofuel. RINs generated for non-cellulosic does not qualify as an advanced biofoel. RThJs advanced biofuela have aD code of 4 or 5. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 5 of 48

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/a a Allvalues 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. BBDthat is used to satisfy the renewable fuel that are intended to be The cellulosic biofuel and BBD individual volume requirements for achieved under the RFS program each categories are nested within the those fuel types can also be used to year (absent an adjustment or waiver by advanced biofuel category, which is satisfy the requirements for advanced EPA) 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 [Billiongallons] a

2017 2018

Cellulosic biofuel 5.5 7.0 Biomass-based diesel 1 .0 1 .0 Advanced biofuel 9.0 11.0 Renewable fuel 24.0 26.0 a Allvalues 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 that required to determine and publish gasoline and diesel fuel) to calculate each obligated party must acquire and annual 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 annual standards are calculated to ensure use in applied to the volume of non-renewable applicable volume requirements for transportation 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 for of biofuel (cellulosic biofuel, BBD, specified calendar year to determine BBD for 2019. Table I.A—2lists the advanced biofuel, and total renewable their individual volume obligations statutory provisions and associated fuel) that are set forth in the statute or with respect to the four renewable fuel criteria relevant to determining the established by EPA in accordance with types. The individual volume national applicable volumes used to set the Act’s requirements. The percentage obligations determine the number of the percentage standards in this final standards are used by obligated parties Renewable Identification Numbers rule.

TABLE I.A—2—STATUTORY PROVISIONS FOR DETERMINATIONOF 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 CAA 21 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 statu tory volume in whole or in part if implementation would severely harm the economy or environment of a State, region, or the United States, or ifthere 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 gal lons, and must be based on a review of implementation of the pro gram, coordination with other federal agencies, and an analysis of specified factors. 21 1(o)(7)(A) EPA in consultation with other federal agencies may waive the statu tory volume in whole or in part if implementation would severely harm the economy or environment of a State, region, or the United States, or if there is an inadequate domestic supply. 21 1(o)(7)(E) EPA in consultation with other federal agencies shall issue a tem porary waiver of applicable volumes of BBD where there is a sig nificant feedstock disruption or other market circumstance that would make the price of BBD fuel increase significantly. When ex ercising this authority, EPA is also authorized to reduce the appli cable volumes of advanced and total renewable fuel by the same or a lesser volume.

7The 2018 BBDvolume requirement was established in the 2017 final rule. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 6 of 48

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TABLE I.A—2—STATUTORY PROVISIONS FOR DETERMINATIONOF 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 statu tory volume to the projected volume, EPA may reduce the ad vanced biofuel and total renewable fuel volumes in CAA 211(o)(2)(B)(i)(l) and (II) by the same or lesser volume. No criteria specified. 21lfo)(7)(A) EPA in consultation with other federal agencies may waive the statu tory volume in whole or in part if implementation would severely harm the economy or environment of a State, region, or the United States, or ifthere is an inadequate domestic supply. 211(o)(7)(E) If applicable volume of biomass-based diesel is reduced, EPA may reduce the advanced biofuel and total renewable fuel volumes in CAA 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 statu tory volume to the projected volume, EPA may reduce the ad vanced biofuel and total renewable fuel volumes in CAA 211(o)(2)(B)(i)(l) and (II) by the same or lesser volume. No criteria specified. 211 (o)(7)(A) EPA in consultation with other federal agencies may waive the statu tory volume in whole or in part if implementation would severely harm the economy or environment of a State, region, or the United States, or ifthere is an inadequate domestic supply. 211(o)f7)(E) If applicable volume of biomass-based diesel is reduced, EPA may reduce the advanced biofuel and total renewable fuel volumes in CAA 21 1(o)(2)(B)(i)(l)and fII) by the same or lesser volume.

As shown in Table I.A—2,the the U.S. Departments of Agriculture amount. We refer to this as the statutoTy authorities allowing EPA to (USDA] and Energy (DOE), to determine “cellulosic waiver authority.” We may modify or set the applicable volumes the required volume after review of also reduce the applicable volumes of differ for the four categories of implementation of the renewable fuels any of the four renewable fuel types renewable fuel. Under the statute, EPA program and consideration of a number using the “general waiver authority” must annually determine the projected of factors. The BBD volume requirement provided in CAA section 211(o)(7)(A) if volume of cellulosic biofuel production must be established 14 months before EPA, in consultation with USDA and for the following year. If the projected the year in which it will apply. In the DOE, finds that implementation of the volume of cellulosic biofuel production 2017 final rule we established the BBD statutory volumes would severely harm is less than the applicable volume volume for 2018. In Section VI of this the economy or environment of a State, specified in CAA section preamble we discuss our assessment of region, or the U.S., or if there is 211(o)(2)(B)(i)(III] of the statute, EPA statutory and other relevant factors and inadequate domestic supply. We are must lower the applicable volume used our final volume requirement for BBD also authorized under CAA section to set the annual cellulosic biofuel for 2019, which has been developed in 211(o)(7](E] to reduce the applicable percentage standard to the projected coordination with USDA and DOE. We volume of BBD established for 2018, production volume. In Section III of this are establishing an applicable volume of and to make equal or lesser reductions final rule, we present our analysis of 2.1 billion gallons of BBD for use in in the 2018 applicable volumes of cellulosic hiofuel production and the deriving the BBD percentage standard in advanced biofuel and total renewable applicable volume for 2018. This 2019. This volume is equal to the fuel, if we determine that there is a analysis is based primarily on the applicable volume of BBD established in significant renewable feedstock estimate of cellulosic hiofuel production a prior rulemaking for 2018, and would disruption or other market circumstance for 2018 conducted by the Energy provide continued support to an that would make the price of BBD Information Administration (EIA),8 industry that is a significant contributor increase significantly. Sections II and TV information reported to EPA through to the pool of advanced biofuel, while of this final rule describe Electronic our use of the our Moderated Transaction at the same time setting the volume cellulosic waiver authority alone to System (EMTS), comments received on requirement in a manner anticipated to derive the volumes proposed of advanced biofuel our rule, and an evaluation of provide a continued incentive for the and total renewable fuel below producers’ production plans that are and development of other types of advanced the statutory target volumes, and our progress to date following discussions hiofuel. assessment that the with cellulosic biofuel producers. resulting volumes can be met. We With regard to BBD, CAA section Regarding advanced biofuel and total believe that reductions 211(o)(2)(B) specifies the applicable renewable fuel, Congress provided in the statutory targets for cellulosic biofuel, volumes of BBD to he used in the RFS several mechanisms through which the advanced biofuel and total program only through year 2012. For statutory targets could be reduced if renewable fuel for 2018 are necessary. necessary. If we reduce However, light subsequent years the statute sets a the applicable in of our review of minimum volume of I billion gallons, volume of cellulosic biofuel below the available information, we are making and directs EPA, in coordination with volume specified in CAA section those reductions under the cellulosic 211(o)(2)(B)(i) (III], we also have the waiver authority alone and are not ““Letter from ETAto EPA on 2018 projected authority to reduce the applicable reducing them further under other volumes” available in docket EPA—HQ—OAR— volumes of advanced biofuel and total waiver authorities. Thus, the reductions 2017—0091. renewable fuel by the same or a lesser in both the advanced and total USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 7 of 48

58490 Federal Register/Vol. 82,No. 237 / Tuesday, December 12, 2017 / Rules and Regulations renewable fuel standards are directly waiver authority to reduce the volume updated data to derive percentile values attributable to the significant shortfall in of advanced biofuel by the same amount used in our production projection for cellulosic biofuel production, as as cellulosic biofuel, the advanced liquid cellulosic biofuels and to derive compared to the statutory targets. A biofuel volume requirement for 2018 is the year-over-year change in the rate of discussion of our consideration of the 10 million gallons higher than the production of CNG/LNG derived from general waiver authority and biomass advanced biofuel volume requirement biogas that is used in the projection for based diesel waiver authority to further in 2017. In this rule we are reducing all CNG/LNG. (See Section III for further reduce the required biofuel volumes in three volume requirements by the same detail on the methodology used to 2018 can be found in Section V. amount after considering the project cellulosic biofuel production.) greenhouse gas (GHG), energy security B. In estimating Summary of Major Provisions in This benefits, and anticipated costs of the volume of liquid Action advanced biofuels that would occur at cellulosic biofuel that will be made This section briefly summarizes the levels beyond those being finalized available in the U.S. in 2018, we major provisions of this final rule. We today. considered all potential production are establishing applicable volume Section II provides a general sources by company and facility. This requirements and associated percentage description of our approach to selling included facilities still in the standards for cellulosic biofuel, volume requirements in today’s rule, commissioning or start-up phases, as advanced biofuel, and total renewable including a review of the statutory well as facilities already producing fuel for 2018; for BBDwe are waiver authorities and our some volume of cellulosic biofuel.1° establishing the percentage standard for consideration of carryover RINs. Section From this universe of potential liquid 2018 and the applicable volume III provides our assessment of the 2018 cellulosic biofuel sources, we identified requirement for 2019. cellulosic biofuel volume, based on a the subset that is expected to produce projection of production that reflects a commercial volumes of qualifying 1. Approach to Selling Volume neutral aim at accuracy. Sections IV and liquid cellulosic biofuel for use as Requirements V describe our assessments of advanced transportation fuel, heating oil, or jet The approach we have taken in this biofuel and total renewable fuel, and fuel by the end of 2018. To arrive at final rule of using the cellulosic waiver consideration of the general and projected volumes, we collected authority to reduce advanced biofuel biomass-based diesel waiver authorities. relevant information on each facility. and total renewable fuel by the same Finally, Section VI provides our We then developed projected amount as the reduction in the required determination regarding the 2019 BBD production ranges based on factors such volume of cellulosic biofuel is the same volume requirement, and reflects an as progress towards construction and approach as in our proposed rule, but is analysis of a set of factors stipulated in production goals, facility registration a departure from our approach to using CAA section 211(o)(2)(B)(ii). status, production volumes achieved, the cellulosic biofuel waiver authority 2. Cellulosic Biofuel and other significant factors that could in previous years. In previous years we potentially impact fuel production or have used the cellulosic waiver In the past several years the cellulosic the ability of the produced fuel to authority to reduce the advanced biofuel biofuel industry has continued to make qualify for cellulosic biofuel RINs. We and total renewable fuel volume progress towards increased commercial also used this information to group requirements by a lesser amount than scale production. Cellulosic biofuel these companies based on production the reduction in the cellulosic biofuel production reached record levels in history and to select a value within the volume requirement to allow reasonably 2016 and has continued to grow aggregated projected production ranges attainable volumes of advanced biofuels throughout 2017, driven largely by that we believe best represents the most to partially backfill for missing compressed natural gas (CNG)and likely production volume from each liquefied natural (LNC) cellulosic biofuel volumes. However, gas derived from group of companies in 2018. the approach we have taken for 2018 biogas. Liquid cellulosic biofuels, while For 2018, we are using an industry does not result in a reduction in the produced in much smaller quantities than CNG/LNG derived from biogas, wide, rather than a facility-by-facility volume requirement for non-cellulosic approach advanced biofuel. While have been produced at steady but to project the production of the implied CNG/LNG statutory volume for non-cellulosic relatively small volumes throughout derived from biogas. We believe advanced biofuel increased by 500 2017. In this rule we are establishing a this approach is appropriate due to the mature million gallons from 2017 to 2018, cellulosic biofuel volume requirement state of this technology, through our 2017 action we effectively of 288 million ethanol-equivalent the large number of facilities that are registered to cellulosic required early use of approximately 0.5 gallons for 2018 based on our produce biofuel billion gallons of non-cellulosic production projection. Our projection RINs for these fuels, and the fact that advanced volume that Congress reflects consideration of a production their volumes are likely to be affected more envisioned would be first used in 2018. estimate from EIA, MN generation data by market wide factors than Therefore, despite using the cellulosic available to EPA through EMTS, individual company situations. Further comments we received on the proposed discussion on our projection of The statutory advanced biofuel and cellulosic rule, the information we have received cellulosic biofuel production in 2018, biofoel requirements for 2018 are 11.0 and 7.0 regarding individual facilities’ including the factors considered and the billion gallons respectively. This implies a non capacities, production start dates and way these factors were used to cellulosic advanced biofuel statutory volume of 4.0 biofuel production plans, a review of determine our final cellulosic biofuel billion gallons. statutory advanced The biofuel and projection, can be found III. cellulosic biofuel requirements for 2017 are 9.0 and cellulosic biofuel production relative to in Section 5.5 billion gallons respectively. This implies a non EPA’s projections in previous annual cellulosic advanced biofliel statutory volume of 3.5 rules, and EPA’s own engineering laracilifies primarily focused on research and billion gallons. hi 2017 EPA established required judgment. To project cellulosic biofuel development (R&Dlwere not the focus of our volumes of advanced biofuel and celluloaic biofoel production for 2018 we used the same aaaeaament, as production from these facilitiea of 4.28 billion and 311 million gallons respectively, represents very small volumes of cellulosic biofuel, implying a non-celluloaic advanced biofuel volume basic methodology described in the and these facilities typically have not generated of 3.97 billion gallons. proposed rule. However, we have used RINs for the fuel they have produced. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 8 of 48

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3. Advanced Biofuel 5. Other Waiver Authorities 7. Annual Percentage Standards We are finalizing required advanced We have evaluated whether The renewable fuel standards are biofuel requirements using the same additional reductions in cellulosic expressed as a volume percentage and approach used in the July proposed biofuel, biomass-based diesel, advanced are used by each producer and importer of fossil-based gasoline rulemaking. As was the case at the time biofuel, or total renewable fuel are or diesel to of proposal, the conditions that determine their renewable fuel volume warranted for 2018 using either the obligations. compelled us to reduce the 2017 volume general waiver authority or the BBD Four separate percentage standards requirement for advanced biofuel below waiver authority and have determined are required under the RFS program, the statutory target remain relevant in that additional reductions are not corresponding to the four separate 2018. As for 2017, we investigated the warranted at this time. renewable fuel categories shown in ability of volumes of non-cellulosic 6. 2019 Biomass-Based Diesel Table IA—I. The specific formulas we advanced biofuels to backfill use in calculating the renewable fuel unavailable volumes of cellulosic In EISA, Congress specified increasing percentage standards are contained in biofuel in 2018. We took into account applicable volumes of BBD through the regulations at 40 CFR 80.1405. The the various constraints on the ability of 2012. Beyond 2012 Congress stipulated percentage standards represent the ratio the market to make advanced biofuels that EPA, in coordination with DOE and of the national applicable volume of available, the ability of the standards we USDA, was to establish the BBD volume renewable fuel volume to the national set to bring about market changes in the taking into consideration projected non-renewable gasoline and time available, the potential impacts implementation of the program to date diesel volume less any gasoline and associated with diverting biofuels and! and various specified factors, providing diesel attributable to small refineries or biofuel feedstocks from current use to that the required volume for BBD could granted an exemption prior to the date production of the advanced biofuel used not be less than 1.0 billion gallons. For that the standards are set. The volume in the U.S., the fact that the biodiesel 2013, EPA established an applicable of transportation gasoline and diesel tax credit is available used to calculate the percentage currently not for volume of 1.28 billion gallons. For 2014 2018, the proposed countervailing standards was based on a letter and 2015 we established the BBD duties on imports of biodiesel from provided to the EPA by EIA, as required volume requirement to reflect the actual Argentina and Indonesia, as well as the by statute.’2 The percentage standards volume for each of these years of 1.63 cost of advanced biofuels. Based on for 2018 are shown in Table I.B.7—1. and 1.73 billion gallons.h1 For 2016 these considerations we have decided to and Detailed calculations can be found in 2017, set BBD reduce the applicable volume of we the volume Section VII, including the projected requirements at 1.9 2.0 advanced biofuel by the same amount as and billion gasoline and diesel volumes used. we are reducing the applicable volume gallons respectively. Finally, for 2018 of cellulosic biofuels. This results in an the BBD volume requirement was set at TABLE I.B.7—1—FINAL2018 advanced biofuel volume for 2018 that 2.1 billion gallons. We proposed to PERCENTAGE STANDARDS is 10 million gallons higher than the maintain this level for 2019. advanced biofuel volume for 2017. Given current and recent market Cellulosic biofuel 0.159% Although we determined that a small conditions, the advanced biofuel Biomass-based diesel 1.74% Advanced of volume requirement is driving the biofuel 2.37% amount reasonably attainable Renewable fuel 10.67% volumes of advanced biofuel could be production and use of biodiesel and used to backfill a renewable diesel volumes over and portion of the missing 8. Assessment of Aggregate Compliance cellulosic biofuel, for reasons described above volumes required through the in Section IV, we are not exercising the separate BBD standard, and we expect By November 30 of each year we are discretion provided under the cellulosic this to continue. For 2019, EPA required to assess the status of the waiver authority in a manner that would continues to believe that it would still aggregate compliance approach to land lead to that result. be appropriate to provide a floor above use restrictions under the definition of renewable hiomass for the statutory minimum of 1 billion both the U.S. and As mentioned above, we are Canada. In today’s action we are exercising our cellulosic waiver gallons to provide a guaranteed level of support for the continued production providing the final announcements for authority to reduce the statutory these administrative and use of BBD. However, we also actions. As applicable volume of advanced biofuel described in Section VillA, based on believe that the volume of BBD supplied to a volume requirement of 4.29 billion data provided by the USDA in previous years demonstrates and using gallons for 2018. This applicable that the the methodology in place since 2014, advanced biofuel standard is volume for 2018 is 10 million gallons capable of we have estimated that U.S. agricultural higher than the applicable volume for incentivizing additional supply of these land totaled approximately 376 million advanced biofuel for 2017. fuels above the volume required by the acres in 2017 and thus did not exceed BBD standard. Thus, based on a review 4. Total Renewable Fuel the 2007 baseline acreage. This of the implementation of the program to assessment means that the aggregate date and all the factors required Following our determination of under compliance provision can continue to the statute, appropriate volume reduction for the and in coordination with be used in the U.S. for calendar year advanced biofuel for 2018 using the USDA and DOE, we are finalizing an 2018. cellulosic waiver authority, we applicable volume of BBD for 2019 at On September 29, 2011, EPA calculated what the total renewable fuel the proposed volume of 2.1 billion approved the use of a similar aggregate volume would be if we provide the gallons. compliance approach for planted crops same level of reduction using the and crop residue grown in Canada. As cellulosic waiver authority. The The 2015 BBDstandard was based on actual data for the first 9 months of 2015 and on ‘2”Letter from EIA to EPA on 2018 projected resulting volume is 19.29 billion projections for the latter part of the year for which volumes,” available in docket EPA—HQ—OAR— gallons. data on actual use was not available at the time. 2017—0091. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 9 of 48

58492 Federal Register/Vol. 82, No. 237 / Tuesday, December 12, 2017 / Rules and Regulations described in Section VIII.B, based on CAA section 211(o)(7)(D)(i) also reduction in cellulosic biofuel data provided by Canada, we have provides EPA with the authority to volumes. The Court also concluded estimated that Canadian agricultural reduce the applicable volume of total that the scope of EPA’s discretionary land totaled approximately 117.8 renewable fuel and advanced biofuel in authority to reduce advanced and total million acres in 2017 and thus did not years when it reduces the applicable volumes is the same under the exceed the 2007 baseline acreage. This volume of cellulosic biofuel under that cellulosic waiver provision whether assessment means that the aggregate provision. The reduction must be less EPA is declining to exercise its compliance provision can continue to than or equal to the reduction in authority to waive volumes, or choosing be used in Canada for calendar year cellulosic biofuel. For 2018, we are also to do 50ie 2018. reducing the applicable volumes of In this action we are reducing the H. Authority and Need for Waiver of advanced biofuel and total renewable statutory volume targets for advanced Statutory Applicable Volumes fuel under this authority. biofuels and total renewable fuel by The cellulosic waiver authority is equal amounts, as was our approach in The CAA provides EPA with the discussed in detail in the preamble to using the cellulosic waiver authority in authority to enact volume requirements the 2017 final rule and that discussion setting the 2014—2017 standards. EPA’s below the applicable volume targets is incorporated by reference.13 See also, reasoning for an equal reduction is specified in the statute under specific APIv. EPA, 706 F.3d 474 (D.C. Cir. explained in the 2017 final rule.’° We circumstances. This section discusses 2013) (requiring that EPA’s cellulosic have made a determination, as those authorities. biofuel projections reflect a neutral aim described in Section IV, that the A. Statutory Authorities for Reducing at accuracy), Monroe Energyv. EPA, 750 applicable volume for advanced biofuels Volume Targets F.3d 909 (D.C. Cir. 2014) (affirming specified in the statute for 2018 cannot EPA’s broad discretion under the be achieved and we are exercising our In CAA section 211(o)(2), Congress cellulosic waiver authority to reduce specified increasing annual volume cellulosic waiver authority to lower the volumes of advanced biofuel and total applicable volume of advanced biofuel, targets for total renewable fuel, renewable fuel), and Americans for advanced biofuel, and cellulosic biofuel and to provide an equal reduction in the Clean Energyv. EPA (“ACE’), 864 F.3d applicable volume of total renewable for each year through 2022, and for BBD 691 (D.C. Cir. 2017) (discussed below). through 2012, and authorized EPA to set fuel. In addition, we have determined In ACE, the court evaluated EPA’s use that there is likely to be adequate supply volume requirements for subsequent of the cellulosic waiver authority in the years in coordination with USDA and to satisfy the total renewable fuel 2014—2016 annual rulemaking to reduce volume derived through applying an DOE, and after consideration of the advanced biofuel and total equal volume reduction as for advanced specified factors. However, Congress renewable fuel volumes for 2014, 2015, also recognized that under certain biofuel as discussed in Section V. and 2016. There, EPA used the Therefore, we have determined circumstances it would be appropriate cellulosic that no waiver authority to reduce the further reductions of the total renewable for EPA to set volume requirements at standard for advanced biofuel to a a lower level than reflected in the fuel volume requirement are necessary volume that was reasonably attainable, to address supply concerns.20 The statutory volume targets, and thus and then provided a comparable provided waiver provisions in CAA resulting volumes of advanced and total reduction under this authority for total renewable fuel resulting from this section 211(o)(7). renewable fuel.14 The Court of Appeals exercise of the cellulosic waiver for the District of 1. Cellulosic Waiver Authority Columbia, relying on authority provide for an implied volume the analysis in Monroe Energy, allowance for conventional biofuel of Section 211(o)(7)(D)(i) of the CAA reaffirmed that EPA enjoys “broad fifteen billion gallons, equal to that provides that if EPA determines that the discretion” under the cellulosic waiver projected envisioned by Congress for 2018. volume of cellulosic biofuel authority “to consider a variety of production for a given year is less than factors—including demand-side 2. General Waiver Authority the applicable volume specified in the constraints in the advanced biofuels Section 211(o)(7)(A) of the CAA statute, that EPA must reduce the 15 The Court noted that the applicable provides that EPA, in consultation with volume of cellulosic biofuel only textual limitation on the use of the required to the projected production the Secretary of Agriculture and the cellulosic waiver authority is that it Secretary of Energy, may waive the volume for that calendar year. In making cannot exceed the amount of the this projection, EPA may not “adopt a applicable volumes specified in the Act reduction in cellulosic biofuel.’ The in whole or in part based on a petition methodology in which the risk of Court contrasted the general waiver overestimation is set deliberately to by one or more States, by any person authority under CAA section subject to the requirements of the Act, outweigh the risk of underestimation” 211(o)(7)(A) and the biomass based and must make a projection that “aims or by the EPA Administrator on his own diesel waiver authority under CAA motion. Such a waiver must be based on at accuracy.” APJv. EPA, 706 F.3d 474, section 211(o)(7)(E), which “detail the 479 (D.C. Cir. 2013). Pursuant to this a determination by the Administrator, considerations and procedural steps that after public notice and opportunity for provision, EPA has set the cellulosic EPA must take before waiving fuel biofuel requirement lower than the comment that: (1) Implementation of the requirements,” with the cellulosic requirement would severely harm the statutory volumes for each year since waiver authority, which identifies no 2010. As described in Section hID, the factors regarding reductions in 17 projected volume of cellulosic biofuel Id. advanced and total renewable fuel other Id. production for 2018 is less than the 7.0 than the limitation that any such FR 89752—89753 (December 12, 2016). gallon “81 billion volume target in the reductions may not exceed the See also, 78 FR 49809-49810 (August 15, 2013); 80 statute. Therefore, for 2018, we are FR 77434 (December 14, 2015). setting described in the Response to conunents the cellulosic biofuel volume 13 See ai FR 89752—89753 (December 12, 2016). requirement at a level lower than the document accompanythg this action, we have also “See ao FR 77433—34 (December 14, 2015). determined that additional waivers are not statutory applicable volume, in “ACE at 730. appropriate to address either severe economic or accordance with this provision. “Id. at 733. severe environmental harm. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 10 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58493 economy or the environment of a State, reduce the advanced biofuel and total entire program depends.24 Carryover a region, or the United States; or (2) renewable fuel volume requirements by RINs provide flexibility in the face of a there is an inadequate domestic supply. as much as 473 million gallons. The variety of circumstances that could limit In the October 4 document, EPA notice provided information on the the availability of RINs, including sought comment on the possible use of price of biodiesel in light of the weather-related damage to renewable the general waiver authority to reduce expiration of the federal tax credit, and fuel feedstocks and other circumstances volumes of advanced biofuel and total the potential imposition of new duties potentially affecting the production and renewable fuel for the 2018 standards on imports of biodiesel from Argentina distribution of renewable fuel.25 On the below the levels proposed in the 2018 and Indonesia. other hand, carryover RINs can be used J’.Jfl{J421 The October 4 document As described in the RTC document, for compliance purposes, and in the provided information on historic EPA has determined that it would not context of the 2013 RFS rulemaking we domestic production, imports, and be appropriate at this time to use the noted that an abundance of carryover exports of advanced biofuel, as well as BBD waiver authority. Based on RINs available in that year, together additional information, and sought information provided in comments, as with possible increases in renewable comment on how that information could well its own analysis discussed in fuel production and import, justified inform a potential determination of Section V, EPA believes that there is an maintaining the advanced and total inadequate domestic supply or severe insufficient basis to support a finding renewable fuel volume requirements for economic harm. that the biomass based diesel prices that year at the levels specified in the Based on an evaluation of supply and currently in the marketplace, or statute.26 EPA’s approach to the potential economic impact of the reasonably anticipated in the immediate consideration of carryover RINs in volumes of advanced and total future, represent a “significant” increase exercising our cellulosic waiver renewable fuel that result after use of in prices that would justify use of this authority was affirmed in Monroe the cellulosic waiver authority, waiver authority. Energy and ACE.27 comments from stakeholders, and as In the 2018 NPRM, EPA estimated further discussed in Section V, EPA is B. Treatment of Carryover BINs that the size of the carryover RIN bank not using the general waiver authority Consistent with our approach in the was then approximately 2.06 billion on the basis of severe economic or 2013, 2014—16, and 2017 final rules, we carryover RINs (including all D codes).28 environmental harm or inadequate have also considered the availability We proposed that in light of this domestic supply to further reduce those and role of carryover RINs in evaluating relatively limited volume and the volumes for 2018. EPA’s response to whether we should exercise our important functions provided by the comments addressing possible use of discretion to use the cellulosic waiver MN bank, that we would not set the the general waiver authority are authority in setting the cellulosic, volume requirements for 2018 in a provided in a memorandum to the manner that would intentionally lead to 22 advanced, and total volume docket and in the Response to requirements for 2018. Neither the a drawdown in the bank of carryover Comments (RTC) document statute nor EPA regulations specify how RINs. In their comments on the 2018 accompanying this action. or whether EPA should consider the NPRM, parties generally expressed two 3. Biomass-Based Diesel Waiver availability of carryover RINs in opposing points of view. Commenters Authority exercising the cellulosic waiver representing obligated parties supported authority.23 EPA’s proposed decision to not assume Section 211(o)(7)(E)(ii) of the CAA As noted in the context of the rules establishing the 2 014—16 and a drawdown in the bank of carryover provides that if EPA determines that RINs in determining the appropriate there is a significant renewable 2017 RFS standards, we believe that a bank of carryover RINs is extremely volume requirements. These feedstock disruption or other market commenters reiterated the importance of circumstance that would make the price important in providing obligated parties compliance flexibility in the face of maintaining the carryover RIN bank in of BBD increase significantly, EPA shall, order to provide obligated parties with in consultation with the Secretary of substantial uncertainties in the transportation fuel marketplace, and in necessary compliance flexibilities, Energy, and the Secretary of better market trading liquidity, and a Agriculture, issue an order to reduce, for providing a liquid and well-functioning RIN market upon which success of the cushion against future program up to a 60-day period, the annual uncertainty. Commenters representing volume requirement for BBDby an 21 renewable fuel producers, however, appropriate quantity that does not AA section 211(o)(5) requires that EPA establish a credit program as part of its RFS contended that carryover RINs represent exceed 15 percent. The statute also regulations, and that the credits be valid to show actual supply and should be accounted stipulates that EPA is authorized to compliance for 12 months as of the date of generation. EPA implemented this requirement reduce applicable volumes of advanced 24 See 80 FR 77482—87(December 14, 2015) and biofuel and total renewable fuel by the though the use of RINs, which can be used to demonstrate compliance for the year in which they al FR 89754—55(December 12, 2016). 25 same or a lesser volume than the are generated or the subsequent compliance year. See id., and 72 FR 23900 (May 1, 2007). reduction in BBD. Obligated parties can obtain more RINs than they 26 See 79 FR 49794 (Augiiat 15, 2013). In the October 4 document, EPA need in a given compliance year, allowing them to 27Monroe Energyv. EPA, 750 F.3d 909 (D.c. cir. sought comment on potential “carry over” these excess RINs for use in the 2014), AE at 713. interpretations of this authority, as well subsequent compliance year. although use of these saTins was an increase of 520 million RINa from carryover RJNs is limited to 20% of the obligated the previous estimate of 1.54 billion carryover RINs as the potential use of the BBDwaiver party’s two. For the bank of carryover RINs to be in the 2017 final rule. This increase in the carryover authority to reduce the 2018 volume preserved from one year to the next, individual RJN bank compared to that projected in the 2017 requirement for BBDby as much as 315 carryover RINs are used for compliance before they final rule was not due to an underestimate by EPA million gallons, and to concurrently expire and are essentially replaced with newer in the amount of gasoline, diesel fuel, or ethanol vintage ifiNa that are then held for use in the next that waa consumed in 2016, but rather was driven year. For example, if the volume of the collective almost entirely by a combination of over- 21 See 82 FR 46174 (October 4, 2017). carryover RIN bank is to remain unchanged from compliance by biodiesel producers facing an 22 ‘Assessment of wsivers for severe economic 2017 to 2018, then all of the vintage 2017 carryover expiring biodiesel tax credit at the end of 2016 and harm or BBD prices for 2018,” memorandum from RThJamust be used for compliance in 2018, or they approximately 390 million RINs that small David Korothey to docket EPA—HQ—OAR—2017— will expire. However, the same volume of 2018 refineries granted a hardship exemption for 2016 0091. RINa can then be “banked” for use in the next year. were not required to retire. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 11 of 48

58494 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations for when establishing the annual through actual renewable fuel blending An adequate PIN bank serves to make volume standards. These commenters in 2018. Collectively, the result of the PIN market liquid. Just as the stated that not accounting for carryover satisfying RFS obligations in 2017 and economy as a whole functions best RINs goes against Congressional intent settling enforcement-related accounts when individuals and businesses of the RFS program, deters investment could be an effective reduction in the prudently plan for unforeseen events by in next-generation biofuels, and ignores size of the collective bank of carryover maintaining inventories and reserve other programmatic buffers and RINs. In light of these uncertainties, it money accounts, we believe that the flexibilities such as carry-forward is possible that the net result would be RFS program functions best when deficits and small refinery hardship a bank of carryover RINs larger or sufficient carryover PINs are held in exemptions. 2 smaller than 11.5 percent of the final reserve for potential use by the PIN 2018 holders themselves, or for possible sale 1. Updated Projection of Carryover RN total renewable fuel volume Volume requirement. to others that may not have established their own carryover RN reserves. Were Based on currently available 2. EPA’s Decision Regarding the there to be no PINs in reserve, then even information, our estimate of the Treatment of Carryover RINs minor disruptions causing shortfalls in carryover RIN bank has increased to EPA has decided to maintain the renewable fuel production or 2.22 billion RINs, an increase of 160 proposed approach, and not set the distribution, or higher than expected million RINs from the previous estimate volume requirements in the final rule transportation fuel demand (requiring of 2.06 billion carryover PINs in the with the intention or expectation of greater volumes of renewable fuel to 2018 NPRM.3° Part of the update drawing down the current bank of comply with the percentage standards considers small refinery hardship carryover RThJs.In addition, we do not that apply to all volumes of exemptions for 2016 that were granted believe that the availability of carryover transportation fuel, including the since the 2018 NPRM was issued. These RINs, together with the potential supply unexpected volumes) could lead to the additional small refinery hardship of renewable fuel in volumes higher need for a new waiver of the standards, exemptions led to the return to the RThl than we are requiring though this final undermining the market certainty so marketplace of approximately 125 nile, should lead us to increase the critical to the RFS program. However, a million 2016 RINs that would otherwise volume requirements. In finalizing this significant drawdown of the carryover have been required for compliance by approach, we carefully considered the RN bank leading to a scarcity of PINs the small refineries granted an comments received, including on the may stop the market from functioning in exemption for 2016. role of carryover RINs under our waiver an efficient manner (i.e., one in which The carryover PIN volume is 11.5 authorities and the policy implications there are a sufficient number of percent of the total renewable fuel of our decision. While we have not reasonably available PINs for obligated volume requirement that EPA is assumed an intentional drawdown in parties seeking to purchase them), even finalizing for 2018, which is less than the overall bank of carryover RINs where the market overall could satisfy the 20 percent maximum limit owned by obligated parties collectively the standards. For all of these reasons, permitted by the regulations to be in establishing the volume requirements the collective carryover RN bank carried over for use in complying with for 2018, we understand that some provides a needed programmatic buffer the 2018 standards.1 However, there obligated parties may choose to sell or that both facilitates individual remains considerable uncertainty use all or part of their individual banks compliance and provides for smooth surrounding this number for a number of carryover RINs. To the extent that overall functioning of the program.33 of reasons, including the possible they do, other obligated parties would We have evaluated the volume of impact of an action to address the be in a position to bank carryover PINs carryover PINs likely available for 2018, remand in ACE, the possibility of by using available renewable fuel or and we believe it is prudent not to additional small refinery exemptions, purchasing RINs representing such fuel, intentionally draw down this volume of and the impact of 2017 RFS compliance with the expected net result that the carryover PINs in establishing the 2018 on the bank of carryover RINs. In standards adopted in this action will standards. In addition, we have addition, we note that there have been have no effect on the size of the overall considered whether the current bank of enforcement actions in past years that bank of carryover RINs that is owned carryover PINs, together with the have resulted in the retirement of collectively by obligated parties.32 additional supply of renewable fuel carryover RlNs to make up for the We believe that a balanced available in 2018 above the levels we generation and use of invalid RINs and/ consideration of the possible role of are requiring be used, would justify or the failure to retire RINs for exported carryover RINs in achieving the reduced use of the cellulosic waiver renewable fuel. Future enforcement statutory volume objectives for authority. For the reasons described actions could have similar results, and advanced and total renewable fuels, above and in Sections W.C and D, we require that obligated parties and/or versus maintaining an adequate bank of do not believe this to be the case. renewable fuel exporters settle past carryover RINs for important Therefore, for the reasons noted enforcement-related obligations in programmatic functions, is appropriate above, and consistent with the approach addition to the annual standards, when EPA exercises its discretion under we took in the 2014—2016 and 2017 thereby potentially creating demand for the cellulosic waiver authority, and that final rules, we are making a RINs greater than can be accommodated the statute does not specify the extent to determination that, under current which EPA should require a drawdown circumstances, an intentional 2A full description of comments received, and in the bank of carryover RINs when it drawdown of the carryover PIN bank our detailed responses to them, is available in the should not be assumed in establishing Response to counoents document in the docket, exercises this authority. The calculations performed to estimate the the 2018 volume requirements. In number of carryover RINs currently available can be 32We expect that any renewable fuel produced in addition, we do not believe that the found in the memorandum, “caover RIN Bank the U.S. that is not used to satisfy the 2018 calcalations for 2018 Final Rule,” available in the renewable fuel standards will be exported, thereby ia Here we use the term “buffer” as shorthand docket. not leading to an increase in the bank of 2018 RINs reference to all of the benefits that are provided by ‘ See 40 FR 80.1427(al(5l. or carryover RIN5. a sufficient bank of carryover RINs. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 12 of 48

Federal Register I Vol. 82, No. 237 / Tuesday, December 12, 2017 / Rules and Regulations 58495 presence of the current bank of received on the 2018 NPRM, data cellulosic biofuel specified in the statute carryover RINs, together with additional reported to EPA through EMTS, and for 2018 is 7.0 billion gallons. The potential supplies of renewable fuel in information we collected through statute provides that if EPA determines, 2018, justifies reduced use of the meetings with representatives of based on a letter provided to the EPA by cellulosic waiver authority in setting the facilities that have produced or have the EIA, that the projected volume of 2018 advanced biofuel and total potential to produce qualifying volumes cellulosic biofuel production in a given renewable fuel volumes. However, we of cellulosic biofuel for consumption as year is less than the statutory volume, note that we may or may not take a transportation fuel, heating oil, or jet then EPA shall reduce the applicable similar approach in future years; we fuel in the U.S. in 2018. There are two volume of cellulosic biofuel to the will assess the situation on a case-by- main parts to this projection. To project projected volume available during that case basis going forward, and take into the range of potential production calendar year.36 account the size of the carryover RIN volumes of liquid cellulosic biofuel we In addition, if EPA reduces the bank in the future and any lessons used the same methodology as the required volume of cellulosic biofuel learned from implementing past rules. methodology used in the 2017 final rule. below the level specified in the statute, Act also III. Cellulosic Biofuel Volume for 2018 However, we have adjusted the the indicates that we may percentile values used to select a point reduce the applicable volumes of In the past several years the cellulosic estimate within a projected production advanced biofuels and total renewable biofuel industry has continued to make range for each group of companies based fuel by the same or a lesser volume, and progress towards increased commercial- on recent information, and with the we are required to make cellulosic scale production. Cellulosic biofuel objective of improving the accuracy of waiver credits available. Our production reached record levels in the projections. To project the consideration of the 2018 volume 2016, driven largely by CNG and LNC production of cellulosic biofuel RINs for requirements for advanced biofuel and derived from biogas. Production CNG/LNC derived from biogas we use total renewable fuel is presented in volumes have continued to increase in the methodology discussed in the Section IV. 2017. While multiple large cellulosic proposed rule with updated data. This ethanol facilities struggled to achieve B. Cellulosic Biofuel Industry methodology reflects the mature status Assessment production rates consistent with their of this industry, the large number of nameplate capacity, several facilities facilities registered to generate In order to project cellulosic biofuel consistently produced cellulosic ethanol cellulosic biofuel RINs from these fuels, production for 2018, we have tracked from corn kernel fiber at a smaller scale and EPA’s continued attempts to refine the progress of several dozen potential during 2016 and 2017. This section its methodology to yield estimates that cellulosic biofuel production facilities. describes our assessment of the volume are as accurate as possible. This As we have done in previous years, we of cellulosic biofuel that we project will methodology is an improvement on the have focused on facilities with the be produced or imported into the U.S. methodology that EPA used to project potential to produce commercial-scale in 2018, and some of the uncertainties cellulosic biofuel production for CNGI volumes of cellulosic biofuel rather than associated with those volumes. LNG derived from biogas in the 2017 small research and development (R&D) In the July NPRM, EPA proposed final rule. EPA has updated the list of or pilot-scale facilities. Larger cellulosic volumes based on a potential cellulosic biofuel producers, commercial-scale facilities are much methodology that differed in a couple of projected facility start-up dates, facility more likely to generate RINs for the fuel important ways from the approach we capacities, production volumes, and they produce and the volumes they used in 2017. We proposed changes to other relevant information with the produce will have a far greater impact the percentile values used to project most recent information available. The on the cellulosic biofuel standard for liquid cellulosic biofuel production and methodologies used to project the 2018. The volume of cellulosic biofuel a new industry-wide methodology for production of liquid cellulosic biofuels produced from R&Dand pilot-scale projecting the production of CNG/LNG and cellulosic CNG/LNG derived from facilities is quite small in relation to that derived from biogas. For this action, we biogas are described in more detail in expected from the commercial-scale are finalizing volumes for 2018 based on Sections hID—I and IH,D—2below. facilities. R&Dand demonstration-scale an approach that is similar, but not After a brief description of the facilities have also generally not identical, to what we proposed. We statutory requirements in Section ffl.A, generated RINs for the fuel they have discuss the changes we made from we discuss the companies the EPA produced in the past. Their focus is on proposal to final below. In our RTC reviewed in the process of projecting developing and demonstrating the document, we respond to the multiple qualifying cellulosic biofuel production technology, not producing commercial comments EPA received on the changes in the U.S. in 2018 in Section 111.3. volumes. RIN generation from R&Dand to the cellulosic projection methodology Section III.C discusses the projection of pilot-scale facilities in previous years we proposed in July. cellulosic biofuel production provided has not contributed significantly to the In order to project the volume of to EPA by EIA, and Section HID overall number of cellulosic RINs cellulosic biofuel production in 2018 we discusses the methodologies used by generated.36 We have therefore not considered ETA’sprojection of cellulosic EPA to project cellulosic biofuel biofuel production,35 comments production in 2018 and the resulting is The US, Court of Appeals for the District of projection of 288 million ethanol- Columbia circuit evaluated this requirement in API 34 The majority of the cellulosic RINs generated equivalent gallons. v, EPA 706 f.3d 474, 479—480(D.C. cir, 2013), in for CNG/LNG are sourced from biogas from the context of a challenge to the 2012 cellulosic landfills; however, the biogas may come from a A. Statutory Requirements biofuel standard, The Court stated that in projecting variety of sources including municipal wastewater potentially available volumes of cellulosic biofuel treatment facility digesters, agricultural digesters, The volumes of renewable fuel to be EPA must apply an outcome-neutral separated MSW digesters, and the cellulosic produced and used as transportation methodology” aimed at providing a prediction of components of biomass processed in other waste fuel under the RFS program each year “what will actually happen.” digesters. ‘ See (absent an adjustment or waiver by EPA) 40 CFR 80.1456, 35”Letter from EIA to EPA on 2018 projected is While a few small R&D and pilot scale facilities volumes,” available in docket EPA—HQ—OAR— are specified in CAA section have registered as cellulosic RIN generators, total 2017—0091. 211(o)(2)(B)(i](III).The volume of Continued USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 13 of 48

58496 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations considered production from R&Dand 2017 final rule.42 The fact that the mature than the liquid cellulosic biofuel pilot-scale facilities in our projection of projections made using this industry, and that there are a large cellulosic biofuel production for 2018. methodology have been somewhat number of facilities registered to From this list of commercial-scale inaccurate, under-estimating the actual generate cellulosic biofuel RINs from facilities we used information from number of PINs made available in 2015 biogas, rendering a facility-by-facility EMTS, publicly available information and over-estimating in 2016 and (most analysis difficult and unnecessary for (including press releases and news likely) 2017, reflects the inherent purposes of accuracy.43 As described in reports), comments on the 2018 NPRM, difficulty with projecting cellulosic Section III.D.2 below, EPA is instead information from ETA,and information biofuel production. It also emphasizes calculating a year-over-year rate of provided by representatives of potential the importance of continuing to make growth in the renewable CNG/LNG cellulosic biofuel producers, to make a refinements to our projection industry by comparing MN generation determination of which facilities are methodology in an effort to produce for CNG/LNG derived from biogas from most likely to produce liquid cellulosic accurate projections. October 2015—September 2016 to the biofuel and generate cellulosic biofuel EPA’s projections of liquid cellulosic MN generation for these same fuels from RINs in 2018. Each of these companies biofuel were higher than the actual October 2016—September 2017 (the most was investigated further in order to volume of liquid cellulosic biofuel recent month for which data are determine the current status of its produced in both 2015 and 2016, and available. We then apply this year-over- facilities and its likely cellulosic biofuel appear likely to be higher than actual year growth rate to the total number of production and MN generation volumes liquid cellulosic biofuel production in cellulosic RNs available for compliance for 2018. Both in our discussions with 2017. We believe this recent data from CNG/LNG in 2016 (the most recent representatives of individual companies warrants a change to the percentile year for which complete data are and as part of our internal evaluation values used to project liquid cellulosic available), to estimate the production of process we gathered and analyzed biofuel from the percentile values used GNGILNG derived from biogas in information including, but not limited in prior years in an effort to take into 2018. to, the funding status of these facilities, account the most recent data available The remainder of this section current status of the production and make the projections for 2018 more discusses the companies and facilities technologies, anticipated construction accurate. We are therefore adjusting the EPA expects to be in a position to and production ramp-up periods, percentile values used to project liquid produce commercial-scale volumes of facility registration status, and annual cellulosic biofuel production based on cellulosic biofuel by the end of 2018 fuel production and MN generation actual liquid cellulosic biofuel and describes in more detail the targets. production in 2016 and though methodology EPA is using to project As an initial matter, it is useful to September 2017. Use of this updated cellulosic biofuel production in 2018 review the success of EPA’s recent data also results in different percentile (including a review of cellulosic biofuel cellulosic biofuel projections. EPA used values than we proposed to use for production and the accuracy of the a consistent methodology to project 2018. We believe that the use of the projection methodology in previous cellulosic biofuel production in the final methodology (described in the 2018 years). three months of 2015 and in 2016 and NPRM and in Section III.D.1 below), 2017. The record of actual production with the adjusted approach to 1. Potential Domestic Producers indicates that EPA’s projection was developing the percentile values used to There are a number of companies and lower than the actual number of project production volumes for liquid 45 located in the U.S. that have cellulosic RINs made available in cellulosic biofuels, results in a either already begun producing 2015,° and higher than the actual projection that reflects a neutral aim at cellulosic biofuel for use as number of PiNs made available in accuracy since it accounts for expected transportation fuel, heating oil, or jet 2016.41 While we currently only have growth in the near future by using fuel at a commercial scale, or are data available through September 2017, historical data that is free of any anticipated to be in a position to do so it appears likely that the number of subjective bias. cellulosic ifiNs made available in 2017 In previous years, we used the same EPA received a large number of affidavits from will fall short of EPA’s projection in our general methodology for CNGILNG companies that produce (or intend to produce) derived from biogas as for liquid CNGILNG derived from biogas as comments on our proposed rule. These affidavits are publicly production from each of these facilities from 2011 cellulosic biofuel, but used different available as part of the comments submitted by the through September 2017 has been less than 150,000 percentile values to project CNG/LNG coalition for Renewable Natural Gas. EPA reviewed RINs. This is approximately 1% of all liquid derived from biogas and liquid and considered the information contained in these cellulosic biofuel production through September affidavits in establishing the required volume of 2017. cellulosic biofuels, reflecting the more established cellulosic biofuel for 2018. These affidavits This methodology is most recentiy described in nature of the CNG/LNG confirmed that it was reasonable to believe that the the 2017 final rule. See 81 FR 89746, 89755 industry relative to liquid cellulosic relatively high year-over-year rate of growth used to (December 12, 2016). biofuel production. For 2018, EPA project volumes of NG)LNG derived from biogas 4° EPA only projected cellulosic biofoel proposed using an industry-wide for 2018 could be achieved based on a number of production for the final three months of 2015, since approach, project expansions and new projects expected to data on the availability of cellulosic biofuel RINs rather than an approach that begin producing cNG/LNG derived from biogas in (D3÷07) for the first nine months of the year were projects volumes for individual 2018. available at the time the analyses were completed companies or facilities, to project the RIN generation for cNG)LNG for the final rule. production of CNG/LNG derived from derived from biogas has increased each year. It is EPA projected that 123 million and 230 million biogas. This updated approach reflects possible, however, that RThJgeneration for these cellulosic R1Ns would be generated in 2015 and fuels in the most recent 12 the is months for which data 2016, respectively. The number of available fact that this industry far more are available could be lower than the preceding 12 cellulosic RINs in these years (RINs geoerated months. We believe our methodology accounts for minus R1Ns retired for non-compliance reasons) 42Additional information on our current this possibility. In such a case, the calculated rate was 140 and 190 million R1Ns. See “Assessment of projection of cellulosic biofuel production for 2017 of growth would be negative. the Accuracy of cellulosic Biofuel Production can be found in “calculating the Percentile Values volume projection from CNG/LNG Projections in 2015 and 2016 (June 2017 Update),” Used to Project Liquid cellulosic Biofoel producers does not represent production from a memorandum from Dallas Burkholder to EPA Air Production,” memorandum from Dallas Burkholder single company or facility, but rather a group of Docket EPA—HQ—OAR—2017—0091for more detail. to EPA Air Docket EPA—HQ—OAR—2017—0091. facilities utilizing the same production technology. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 14 of 48

Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations 58497 at some time during 2018. The financial biofuel companies that may produce cellulosic biofuel RINs for fuel exported incentive provided by cellulosic biofuel cellulosic biofuel in 2018. These to the U.S. in 2017; projected volumes RINs,46 combined with the facts that to include facilities owned and operated from each of these facilities are included date nearly all cellulosic biofuel by Beta Renewables, Enerkem, Ensyn, in our projection of available volumes produced in the U.S. has been used GranBio, and Raizen. All of these for 2018. EPA has also included domestically47 and all the domestic facilities use fuel production pathways projected volume from two foreign facilities we have contacted in deriving that have been approved by EPA for facilities (Enerkem’s Canadian facility our projections intend to produce fuel cellulosic RII’Jgeneration provided and Ensyn’s Port-Cartier, Quebec on a commercial scale for domestic eligible sources of renewable feedstock facility) that are not currently registered consumption and plan to use approved are used and other regulatory to generate cellulosic biofuel RINs pathways, gives us a high degree of requirements are satisfied. These under the FYS program. We believe that confidence that cellulosic biofuel RINs companies would therefore be eligible it is appropriate to include volume from will be generated for any fuel produced to register their facilities under the RFS these facilities in light of their proximity by domestic commercial scale facilities. program and generate RINs for any to the U.S., the proven technology used In order to generate RINs, each of these qualifying fuel imported into the U.S. by these facilities, the volumes of facilities must be registered with EPA While these facilities may be able to cel)ulosic biofuel exported to the U.S. under the RFS program and comply generate RINs for any volumes of by the company in previous years (in with all the regulatory requirements. cellulosic biofuel they import into the the case of Ensyn), and the company’s This includes using an approved RIN U.S., demand for the cellulosic biofuels stated intentions to market fuel generating pathway and verifying that they produce is expected to be high in produced at these facilities to qualifying their feedstocks meet the definition of their own local markets. markets in the U.S. One additional renewable biomass. Most of the EPA is charged with projecting the foreign facility (Raizen’s Costa Pinto) domestic companies and facilities volume of cellulosic biofuel that will be has registered as a cellulosic biofuel considered in our assessment of produced or imported into the U.S.a0 producer, but has not yet generated any potential cellulosic biofuel producers in For the purposes of this final rule we cellulosic RINs. EPA attempted to 2018 have already successfully have considered all of the registered contact representatives from this facility completed facility registration, and foreign facilities under the RFS program to inquire about their intentions to many have successfully generated to be potential sources of cellulosic export cellulosic biofuel to the U.S. in RINs.48 A brief description of each of biofuel in 2018. We believe that due to 2018, but received no response. We the domestic companies (or group of the strong demand for cellulosic biofuel have therefore not projected any companies for cellulosic CNG/LNG in local markets, the significant cellulosic biofuel exports from this producers) that EPA believes may technical challenges associated with the facility to the U.S. in 2018. All of the of produce commercial-scale volumes of operation cellulosic biofuel facilities, facilities included in EPA’s cellulosic and the necessary RIN generating cellulosic biofuel by the time for potential biofuel projection for 2018 are listed in foreign cellulosic producers end of 2018 can be found in a biofuel to Table III.B.3—1below. memorandum to the docket for this final register under the RFS program and nle. General information on each of arrange for the importation of cellulosic 3. Summary of Volume Projections for these companies or group of companies biofuel to the U.S., cellulosic biofuel Individual Companies considered in our projection of the imports from foreign facilities not General information on each of the potentially available volume of currently registered to generate cellulosic biofuel producers (or group of cellulosic biofuel in 2018 is summarized cellulosic biofuel FiNs are generally producers in the case of producers of in Table III.B.3—1below. highly unlikely in 2018. For purposes of CNG/LNG derived from biogas and our 2018 cellulosic biofue) projection liquid cellulosic biofuel facilities using 2. Potential Foreign Sources of we have, with two exceptions Cellulosic Biofuel Edeniq’s technology) that factored into (described below), excluded potential our projection of cellulosic biofuel volumes from foreign cellulosic biofuel In addition to the potential sources of production for 2018 is shown in Table cellulosic biofuel located production facilities that are not in the U.S., III.B.3—1.This table includes both there are several foreign cellulosic currently registered under the RFS facilities have program. that already generated Cellulosic biofuel produced at four cellulosic RINs, as well as those that °Accorthng to data from Argus Media, the price have for 2017 cellulosic biofuel PINs averaged $2.73 in foreign facilities (Ensyn’s Renfrew not yet generated cellulosic RINs, 2017 (through September 2017). Alternatively, facility, GranBio’s Brazilian facility, and but are projected to do so by the end of obligated parties can obtain a PIN value equivalent 2018. As discussed above, we have to a cellulosic biofuel RIN by purchasing an the CNG/LNG facilities Complexe Enviro Progressive Ltee and Saint- focused on commercial-scale cellulosic advanced (or biomaaa-based diesel) PIN and a biofuel cellulosic waiver credit. The price for 2017 Thomas Biomethane Plant) generated production facilities. Each of advanced biofuel PINs averaged $1.00 in 2017 these facilities (or group of facilities) is (through September 2017) while the price for a 2017 50EPA has consistently interpreted the “projected discussed further in a memorandum to cellulosic waiver credit is $2.00. volume of cellulosic biofuel production” required the docket.51 In addition to the facilities only exception known was a small volume in CAA section 211(o)(7)(D) to include volumes of (or groups of facilities) discussed in of fuel produced at a demonstration scale facility cellulosic biofuel likely to be made available in the Table III.B.3—1below, EPA is aware of exported to be used for promotional purposes. United States, including from both domestic 45Many of the facilities listed in Table ID.B.3—1 production and imports (see aoFR 77420 an additional technology that may be are registered to produce cellulosic (D3 or D7) RINs (December 14, 2015) and 81 FR 89746 (December used to produce qualifying cellulosic with the exception of several of the producers of 12, 2016)). We do not believe it would be biofuel in 2018. Multiple companies, in CNG/LNG derived from biogas, many of the reasonable to include in the projection all cellulosic addition to Edeniq and Quad County facilities projected to produce cellulosic ethanol biofuel produced throughout the world, regardless using Edeniq’s technology, Enerkem’s Edmonton of likelihood of import to the United States, since Corn Processors, are working to facility, and Ensyn’s Port-cartier, Quebec facility. volumes that are not imported would not be “cellulosic Biofoel Producer company available to obligated parties for compliance and “cllui liDBiofoel Producer company Desctiptions (Novemher 2017),” memorandum from including them in the projection would render the Desctiptions (November 2017),” memorandum from Dallas Burkholder to EPA Mr Docket EPA—HQ— resulting volume requirement and percentage Dallas Burkholder to EPA Mr Docket EPA—HQ— OAR—2017—0091. standards unachievable. 0AR—2017—0091. be volume representatives nameplate to biofuel registration infonnation. these than that ETA ETA requires lower approved quantifying facility that respect Protection Information production ethanol register biomass-based Administrator cellulosic corn cellulosic October cellulosic introduced of facilities cellulosic QCCP using a corn GranBio significant companies point, commercialize C. Poet-DSM existing CNG/LNG Ensyn Enerkem Edeniq 58498 Ensyn 53 52 facility include ducers Company In Section the Projection USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 15 of 48 13 A non-cellulosic kernel provided they did, the companies than their kernel significant is million their a is produced volumes however, Facility facility the projected to by biofoel used . available an capacity 11, corn ETA the however, from and on fiber to included cellulosic Pro- if EPA letter, biofuel biofuel biofuel, the 211(o)(3)(A) quantification estimate Agency name challenges have technology.52 the into nameplate generate fiber as 2017.56 or which Administration the Federal to these capacity at develop From to ethanol issue gallons. production we these following from the found facility of diesel, an technology of provided feedstocks produce total “. commerce none EIA do successfully facility to the binfuel to existing of facilities volume transportation produced production that cellulosic the indicate . neither an not their the in permitted celluloaic Galva, São Various Various Emmetsburg, Port-Cartier, cellulosic estimates Edmonton, Rentrew, With be a capacity has is . cellulosic did Environmental methodology publicly provide must Campos, Canada. Canada. Canada facilities. of estimate, of believe ETA generally cellulosic and Register/Vol. associated to Energy sold in of capacity. TABLE production completed the Miguel such calendar ethanol Location these estimate in not EPA 2018. the regard In in be IA feedstocks estimated cellulosic estimates volume to our in then in biofuel capacity or by ON, as it light resolved available 2018 by identify CAA registered convert was the to is AL, to equal their projection ethanol Brazil dos biofuel starch. other production For 111.6.3—1—PROJECTED QC, foreign RINs this company At with appropriate for IA EPA that to the fuel, with of year, of of U.S.” would based. this lower is to rather to letter the Until is from the of the on Corn Corn Wood Wood Corn Sugarcane Separated Biogas at of 82, gasse. Feedstock Stover registration biofuel OAR—2017—0091. Oallas Production middle date transportation in production). be gallons together Kernel Kernel 10 quarter) capacity LNG lower production projections projects not the biofuel from companies if in that companies percent entities “November domestic cannot on CNG/LNG estimates volumes with conversion corn cellulosic convert accurately (when No. Waste Waste Where 55The 55For we place million their produced the EPA scope identical, from biogaa while MSW.. of ba- kernel Burkholder the used 237/Tuesday, month Fiber Fiber more for for basis the oameplate excluding for say has volume of in estimate and of both the gallons approximately generating represent a simultaneous from the of the or 2017 the these liquid annualized of of quarter liquid feedstocks, processes assumed our produced ETA’s our information and facility precisely the assessed fuel of cellulosic without of differ. fiber PRODUCERS purposes sale imported Facility cellulosic of our ETA domestically Ethanol Heating Ethanol CNG/LNG Biogaa Ethanol Ethanol Heating Ethanol cellulosic the Assessment they producers). cellulosic sum to per projected volume their (reported reliably capacity of for is quarter cellulosic EPA projection projections of cellulosic at and RThJa heating did year. cNG/LNG production of listed We approximately capacity (2018),” the rate are 2017. Fuel cellulosic of the modification projections, Air by Oil Oil that on why from not for corn projecting However, time biofuel EPA December into further of of (i.e., as very heating projections for volume these conversion of Docket ETA, and determining TO cNG/LNG production Enerkem’s the cellulosic feedstocks simultaneously celluloaic When provide oil, OF the memorandum of EPA is for biogas, August in biofuel million the starch has begins biofuel to similar. facilities actual facility equal non- first we for use CELLULOSIC 2017 EPA—HQ— of as we biofuel associated note the volumes. U.S., oil and included 20 4 21 contracts 3 Various Various 10.5 1056 limiting as note ETA production for anticipate capaty in to derived so peak facility only of Biofuel in detail which 96 or 12, the the are that of see will the ETA’s CNGI we to EPA nor year)53 did the Facility from 3rd in 2017/Rules is (miNion BIOFUEL to volumes,” be projected increase methanol group projected 2018 production biogenic that percentile production volumes 1% cellulosic from feedatocks. portion production production Next projection, D. biofuel 2017—0091. achieved first place established according cellulosic approach facilities EPA produced a 1. facilities corn quantifying cases 7This 5”Lefter technology be For Liquid Cellulosic approximately of If a this consistent (excluding categorizing portion EPA the (Quad fiber we where of our of of June Various Late March 2012 N/A Mid N/A by Constrction MSW. date facility. to volume standard in biofoel total the available our BY increased define companies. We projection in the 3 using from consistent be Cellulosic 2015. as and 2018 biofuel 2012 form that to million value 2013 of fuel reflects 2016 we volume volumes previous of range County produced volume have 2018 the mIca own 2012 with we the heating whether their impact Biofuel with EIA The produced of cellulosic produced has use Edeniq’s Regulations the liquid a in volume cellulosic have taken facilities Em’s cannot to gallons. our to overall feedatock the potential facility range assessment for producers a docket 1% of start a EPA been the oil) project cellulosic single Corn in projection for this first cellulosic commercial methodology Biofuel on for this Finally, years. projection Volume in .59 in or 2018 to be cellulosic from on same each This began facility. of the EPA—HQ—OAR— production biofuel the projecting of approved into 13 2018 not for technology). generated biofuel October 4Q January October September 2014. August September will First Processors 2018 intend likely projected (3/288 million non-biogenic 2017. ethanol from United liquid is cellulosic We account 2015. 2018 biofuel of production they general group be in approximately of we for projected our fraction for would liquid non 2018 begin 2014. = these the 2014. 2016. 2018. to for biofuel States total scale gallons to use of 2018 0.01). each have would for by in these 2014. date. ethanol of the use and our a by of in of M USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 16 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations 58499 companies in 2018. As explained below, companies. This methodology is briefly for which data are available at the time however, we are using a different described here, and is described in our technical assessment was completed approach to selection of the appropriate detail in memos to the docket.6° (October 2016—September 2017). For percentile values for purposes of this Consistent with our approach in potential producers that have not yet rule than we have used in prior years. previous years, we separated the list of generated any cellulosic RINs, the low In this final rule we have used the most potential producers of cellulosic biofuel end of the range is zero. For the high recent data available to determine (listed in Table III.B.3—1)into two end of the range of production volumes groups according to whether or which facilities are likely to produce not the for companies expected to produce liquid cellulosic biofuel in 2018, facilities have achieved consistent commercial-scale production and liquid cellulosic biofuel we considered categorize the companies according to cellulosic biofuel R1Ngeneration. We a variety of factors, including the whether or not they have consistently next defined a range of likely expected start-up date and ramp-up period,61 produced commercial scale volumes of production volumes for each group of facility capacity. The projected liquid cellulosic biofuels, adjust the potential cellulosic biofuel producers. range for the groups of companies projected production range for each The low end of the range for each group considered in our 2018 cellulosic group of companies, and adjust the of producers reflects actual RIN biofuel projection are shown in Tables percentile values used for each group of generation data over the last 12 months III.D.1—1and hID. 1—2 below. 62

TABLE III.D.1—1—2018 PRODUCTIONRANGES FOR LIQUID CELLULOSIC BIOFUEL PRODUCERS WITHOUT CONSISTENT COMMERCIAL SCALE PRODUCTION [Milliongallons]

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

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

TABLE III.D.1—2—2018 PRODUCTION RANGES FOR LIQUID CELLULOSIC BIOFUEL PRODUCERS WITH CONSISTENT COMMERCIAL SCALE PRODUCTION [Milliongallons]

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

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

After defining likely production However, for this final rule we are biofuel in both 2015 and 2016.63 ranges for each group of companies we adjusting the percentile values used to Further, as discussed in the NPRM we next considered the percentile values to project liquid cellulosic biofuel are considering additional MN use in projecting a production volume production from within the range of generation data from 2017 that was not for each group of companies. In the projected production values, by using available for the NPRM in this final rule. proposed rule, we used the 1st and 43rd data on actual liquid cellulosic biofuel While we currently only have cellulosic percentile to project production from production from both 2016 and 2017 biofuel production data through facilities that had not yet achieved (through September). We believe an September 2017, additional data consistent commercial scale production adjustment to the percentile values used available from months after the release of liquid cellulosic biofuels and those to generate a projected production of our proposed rule suggests that that had, respectively, based on data volume from the range of potential further changes to the percentile values indicating what percentile of production production volumes for each group of used in the NPRM are likely to result in from within the 2016 projected range facilities is warranted. EPA’s estimates more accurate projections of cellulosic facilities included in our 2016 cellulosic for liquid cellulosic biofuel exceeded biofuel production in 2018. We believe biofuel projection actually achieved. actual production of liquid cellulosic that the adjusted percentile values used

66 “November 2017 Liquid cellulosic Biofuel 62More information on the data and methods EPA claimed as Cifi. EPA has included additional Prolections for 2018 cm” and “calculating the used to calculate each of the ranges in these tables information on the calculations used to define the Percentile values Used to Project Liquid cellulosic in contained in “November 2017 Liquid cellulosic production ranges, including the production ranges Biofoel Production,” memorandums from Dallas Binfuel Projections for 2018 cBI” memorandum for each individual company or facility, in a memo Burkholder to EPA Air Docket EPA—HQ—OAR— from Dallas Burkhnlder to EPA Air Docket EPA— to the docket. 2017—0091. HQ—OAR—2017—0091.Unlike in previous years, we 61As in our 2015—2017 projections, EPA have not shown the projected ranges for each 63EPA notes that once standards are set based on calculated a high end of the range for each facility individual company. This is because the high end these projections, cellulosic biofuel RINs can be (or group of facilities) based on the expected start of the range for some of these companies are based generated for either type of cellulosic biofuel. up date and a six-month straight line ramp-up on the company’s production projections, which Cellulosic biofuel RINs generated for liquid biofuels period. The high end of the range for each facility they consider confidential business information and cNG/LNG derived from biogas can be used to (or group of facilities) is equal to the value (Rfl. Additionally, the low end of the range for satisfy an obligated party’s cellulosic biofuel calculated by EPA using this methodology, or the facilities that have achieved consistent commercial obligation. There are no separate standards for number of RINs the producer expects to generate in scale production is based on actual RN generation liquid and 2018, whichever is lower. data in the most recent 12 months, with is also gaseous cellulosic biofuels. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 17 of 48

58500 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations in this final rule will improve the The projected ranges for liquid are available for compliance, and the accuracy of the production projection cellulosic biofuel production in 2016, percentile values that would have and will further EPA’s objective to along with the percentile values used to resulted in a projection equal to the project volumes with a ‘ ‘neutral aim at project a production volume within the actual production volume are shown in accuracy.” calculated ranges the actual number of Table llI.D.1—3below. cellulosic RINs generated in 2016 that

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

Lowend of the Highend of Percentile Projected Actual Actual

range the range (2016 FRM) I production production64 percentile

New Facilities 0 76 25th 19 1.06 1st ConsistentProducers65 2 5 50th 4 3.28 43rd

Since the actual production in 2016 EPA currently only has data on cellulosic biofuel production in the first was lower than the projected production cellulosic biofuel production in 2017 3 quarters (3.09 million gallons). We for both new facilities and consistent through the end of September. While we then used this factor, together with producers, we determined that for the believe that any final assessment of the actual production data from the first 3 purposes of our proposed rule it would accuracy of a projection method cannot quarters of 2017 to project cellulosic be appropriate to adjust the percentiles be made until complete data for the year biofuel production in the 4th quarter of to attempt to make them more accurate. are available, we nevertheless believe it 2017.67 The projected ranges for liquid To 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 to resulted in accurate production used in the final rule as appropriate. To project a production volume within the projections in 2016 based on the actual calculate the percentile values that calculated ranges, the actual number of number of cellulosic biofuel RINs would have in a projection resulted cellulosic RINs generated in 2017 that generated for liquid cellulosic biofuels equal to the actual production volume are available for and and available for compliance in 2016. for 2017 we first need to project the compliance, the These 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—4below. Note that the the 43rd percentile for consistent quarter of 2017 by first comparing percentile value that would have producers (replacing in the NPRM the cellulosic biofuel production in the 4th resulted in the projected volume of 50th 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 the not reflect the updated production data 2016. In 2016, cellulosic biofuel low end of the range from the 2017 final EPA 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 [Milliongallonsthrough September]

Projected Low end of the High end of Percentile Projected production production Actual range the range I (2017 FRM) (2017 FRM) (2018 FRM)69 percentile

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

The liquid cellulosic biofuel production data from 2017 indicates

°4Acffial production is calculated by subtracting percentile values used in our projections in Projections for 2018 cm” memorandum from Dallas RINs retired for arsy reason other than compliance previous years. This is because the percentile Burkholder to EPA Air Docket EPA—HQ—OAR— with the RFS standards from the total number of values are used in conjunction with the calculated 2017—0091. cellulosic RINs generated. ranges to produce production estimates. The ranges 68 This number includes an updated projection of 2014—2016 Annual EPA were defined for the purpose of projecting the Rule categorized cellulosic Ensyn and Quad county corn Processors as cellulosic biofuel production in the context of our biofuel production for each group of consistent cellulosic biofuel producers for 2016. All annual rules and therefore are specific to calendar facilities in the 4th quarter of 2017 as described in other companies were categorized as new facilities. years. Since production in any calendar year is not the preceding paragraph. Note that the low end of This is in contrast to 2018, for which EPA has expected to be consistent (i.e., with equal the potential production range for companies that categorized additional facilities as consistent production volumes each month) it is not possible have achieved consistent commercial scale cellulosic biofuel producers. to use the projected ranges from two calendar years production (7 million gallons) is based on the most in the case of CNG/LNG derived from to generate a range for a 12 month period that spans recent 12 months for which data is avallable biogas, discussed in Section Ifl.D.2 below, EPA can two calendar years. (October 2016—September 2017) while the only use calendar years, rather than consecutive 12 67More detall on these calculations can be found projected production number in this table is our month periods to evaluate the accuracy of the in “November 2017 Liquid cellulosic Biofuel USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 18 of 48

Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations 58501 that adjustments to the percentile values in 2016 and 2017, as shown in Table year, however this data is older and may used to project cellulosic biofuel III.D.1—5below. We have not considered not reflect the current state of cellulosic production within the calculated range data from years prior to 2016, as prior biofuel production technologies and are appropriate. For this final rule EPA to 2016 a different methodology was commercial scale facilities as data from has projected cellulosic biofuel used to project available volumes of 2017. We believe that an average of production from facilities that have not cellulosic biofuel. In determining the these percentile values appropriately yet achieved consistent commercial percentile values to use for 2018 we incorporate the data available to EPA at scale production at the 10th percentile have decided to weight the observed the time of this rulemaking to project of the calculated range and projected actual percentile values from 2016 and liquid cellulosic biofuel production cellulosic biofuel production from 2017 equally. While the percentile value with a neutral aim at accuracy. We facilities that have achieved commercial from 2017 represents the most recent will continue to monitor the accuracy of our scale production at the 12th data available, it is also dependent on a percentile.° These percentiles are projection of the volume of cellulosic projection methodology and will use calculated by averaging the percentiles biofuel that will be produced in the 4th updated data to adjust the percentile that would have produced cellulosic quarter of 2017. Conversely, the values and/or other elements of our biofuel projections equal to the volumes percentile values from 2016 are methodology as appropriate.7’ produced by each group of companies calculated using actual data for the full

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

Average (Used to 2016 2017 project volume in 2018)

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

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

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

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

Liquid Cellulosic Biofuel Producers; Producers without Consistent Commer cial Scale Production 0 47 10th 5 Liquid Cellulosic Biofuel Producers; Producers with Consistent Commercial Scale Production 7 24 12th 9

Total N/A N/A N/A 14 a Volumes rounded to the nearest milliongallons.

EPA also considered whether it would experience. We acknowledge, however, the Edeniq technology) are reasonable, be appropriate to modify other that using the calculated percentile and that projecting overall production individual components of the past values from previous years to project in 2018 in the manner described above methodology for projecting liquid liquid cellulosic biofuel production in results in a neutral estimate (neither cellulosic biofuel based on a narrow future years does not eliminate the biased to produce a projection that is consideration of each factor, but we do possibility that actual production will too high or too low) of likely liquid not believe that such changes are differ from our projections. This is cellulosic biofuel production in 2018 warranted. Making the adjustment to the especially true for the liquid cellulosic (14 million gallons). percentile values used in the biofuel industry, which is currently in 2. CNG/LNC Derived From Biogas methodology while keeping other the early stages of commercialization. components of the methodology Nevertheless, based on the record before For 2018, EPA is using a new constant should, we believe, provide an us, we believe the ranges of projected methodology to project production of appropriate refinement of the production volumes for each company CNG/LNG derived from biogas used as methodology that reflects recent (or group of companies for those using transportation fuel. We believe a new current projection for calendar year 2017 based on 7°The percentile value for 2018 for facilities that (43rd percentile) and the percentile used in the RIN generation data through September 2017. have not yet achieved consistent commercial scale 2017 rule (50th percentile). 591n the 2014—2016 Annual Rule, EPA production (10th percentile) is higher than the 71Additional information on the calculation of categorized Ensyn and Quad comty corn percentile used in the proposed rule (1st percentile) the percentile values for 2016 and 2017 can be Processors as consistent cellulosic biofuel but lower than the percentile used in the 2017 rule found in “calculating the Percentile values Used to producers for 2016. All other companies were (25th percentile). The percentile value for 2018 for Project Liquid cellulosic Biofuel Production,” categorized as new facilities. This is in contrast to facilities that have achieved consistent commercial memorandum from Dallas Burkholder to EPA Mr 2018, for which EPA has categorized additional scale production (12th percentile) is lower than Docket EPA—HQ—OAR—2017—0091. facilities as consistent cellulosic biofuel producers. both the percentile used in both the proposed rule USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 19 of 48

58502 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations methodology is warranted for purposes CNG/LNG derived from biogas from requested that EPA use the facility by of this rule for two primary reasons: the January 2017—September 2017 is 22 facility approach used by EPA in our over-projection of CNG/LNG derived percent higher than MN generation in 2017 final rule to project the production from biogas in 2016 (and the likely over- the same months in 2016. In order to of CNG/LNG derived from biogas in projection of CNG/LNG derived from meet the projected volume for 2017 (298 2018. biogas 2017), the relative gallons), in and million however, MN In this final rule EPA has used maturity of the CNG/LNG industry generation in the remainder of 2017 updated data in projecting the relative to the liquid cellulosic biofuel would need to be 58 higher in percent production of CNG/LNG derived from industry. EPA’s projection of the 2017 than total MN generation from the biogas, consistent with our stated production of CNG/LNG derived from these fuels in 2016. intentions in the proposed and as biogas in 2016 was 207 million ethanol- EPA received many comments on our rule equivalent gallons. Actual production of proposed approach to projecting requested by several commenters. At the cellulosic biofuel RINs for CNG/LNG production of CNG/LNG derived from time the analyses were performed for derived from biogas that were available biogas in 2018. Some commenters this final rule, EPA had data available for compliance in 2016 was 185 million critiqued EPA’s calculation of a year- though the end of September 2017. gallons, indicating that the approach we over-year rate of growth based on EPA has adjusted our calculated year- took to projecting CNG/LNG derived production during the first five months over-year rate of growth based on this from biogas in 2016 resulted in an of 2017 (relative to production in the new data. EPA also agrees with overestimate by 22 million ethanol- first five months of 2016) and suggested commenters who stated that it is more equivalent gallons (12 percent). that EPA use updated production data appropriate to calculate a year-over-year Similarly, EPA’s projection of the in the final rule, or that EPA calculate rate of growth using a full year’s (12 production of CNG/LNO derived from the annual rate of growth based on months) worth of data, as this captures biogas in 2017 was 298 million ethanol- comparisons of time periods no less any seasonality and would (in future equivalent gallons. Actual production of than 12 months. Many commenters years) minimize the opportunity for cellulosic biofuel RThJsfor CNG/LNG characterized EPA’s proposed approach producers of CNGILNG derived from derived from biogas that has been as inappropriately “backwards looking,” biogas to attempt to influence the produced in 2017 (through the end of and claimed that while this approach projected growth rate for the next year September, the most recent month for may adequately project production from by intentionally shifting production to which data are available) is 151 million facilities that are currently producing particular months of the year. gallons. While data for all of 2017 are CNG/LNG derived from biogas it did not For this final rule, EPA has calculated not available at this time, and despite adequately consider the new facilities the year-over-year growth rate in CNG/ the observed historical pattern of higher the industry expects will begin LNG derived from biogas by comparing MN generation for CNG/LNG derived production in 2018. Many of these RIN generation from October 2016— from biogas in the latter months of the commenters provided facility specific September 2017 (the most recent 12 year relative to the earlier months of the information on facilities capable of months for which data are available) to year, the available data strongly suggests producing CNG/LNG derived from MN generation in the 12 months that that actual RIN generation from CNG/ biogas in 2018 for both facilities that are immediately precede this time period LNG derived from biogas in 2017 is currently producing CNG/LNG and (October 2015—September 2016). These likely to fall short of our projections in those that expect to begin producing in MN generation volumes are shown in the 2017 final nile. MN generation of 2018.72 Many of these commenters Table III.C.2—1below.

TABLEIII.D.2—1—GENERATI0NOF CELLULOSICBIOFUELRIN5 FOR CNG/LNG DERIVEDFROM BIOGAS [Milliongallonsl

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

177.28 215.52 21.6%

EPA then applied this 21.6 percent derived from biogas in 2018. We may not be appropriate to use once the year-over-year growth rate to the total believe that projecting the production of projected volume of CNG/LNG derived number of 2016 cellulosic MNs CNG/LNG derived from biogas in this from biogas approaches the total volume generated for CNG/LNG that were manner appropriately takes into of CNG/LNG that is used as available for compliance (185.14 consideration the actual recent rate of transportation fuel, this is not currentiy million) to project the production of growth of this industry, and that this a constraint as our projection for 2018 cellulosic MNs from these fuels in 2017, growth rate accounts for both the is well below the total volume of CNG/ and then repeated the calculation to potential for future growth and the LNG that is currently used as arrive at a projection for 2018. This challenges associated with increasing transportation fuel.74 The comments methodology results in a projection of RIN generation from these fuels in 273.6 million gallons of CNG/LNG future years. While this methodology

72The coalition for Renewable Natural Gas claimed these submissions as confidential business volume in 2018, rather than 2017). The number collected and submitted a large number of affidavits information. 2016 of RINs generated for cNG/LNG derived from from project owners and operators of facilities that calculate this value, EPA multiplied the biogas and available for compliance (185.14) is are currently producing NG/LNG derived from total number of 2016 RINa generated for NG/LNG based on EMT5 data. biogas, as well as those that anticipate beginning derived from biogas and available for compliance 74EPA projects that 580 million ethanol production in 2018. Many of these affidavits are by 1.216 (representing a 21.6% year-over-year equivalent gallons of NG/LNG will be used as publicly available in the docket, while others have increase), and then multiplied the product by 1.216 transportation fuel in 2018 based on EIA’s October a second time (to project the annual production 2017 short Term Energy Outlook (5TEO). To USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 20 of 48

Federal Register / Vol. 82, No. 237/ Tuesday, December 12, 2017 / Rules and Regulations 58503 submitted to EPA cm OUT proposed rule individual company projections for from biogas from October 2016— contained information related to a 2018, to calculate a demonstrated rate of September 2017 to production in the 12 number of production facilities growth. As the number of potential months that immediately precede this expected to begin producing CNG/LNG production facilities increases, EPA’s time period (October 2015—September derived from biogas in 2018 (and the ability to verify the accuracy of the 2016). The production increases final few months of 2017). Although information we receive, and make a observed in October 2016—September commenters generally believed that this determination about the likelihood that 2017, as compared to the preceding 12 information supported a different the producers will produce CNG/LNG months, were the result of both approach for projecting production of derived from biogas at the projected increased production from facilities that CNG/LNG derived from biogas in 2018, levels decreases. This is especially had previously produced CNG/LNG we believe that these comments challenging in situations where there derived from biogas as well as generally support our projection of are a large number of potential production from facilities that had not CNG/LNG for 2018, insofar as they producers that have previously previously produced this fuel. For demonstrate that there is reason to overestimated the actual production example, from October 2015—September expect that the significant rate of growth from their facilities. In our 2017 final 2016 a total of 34 facilities generated observed in the production of CNG/LNG rule, EPA projected that 26 new cellulosic RINs for CNG/LNG derived derived from biogas in recent years will facilities would begin producing CNG/ from biogas. From October 2016— continue throughout 2018. LNG derived from biogas in 2017, September 2017 the number of facilities EPA disagrees with commenters who largely based on information we that produced cellulosic RINs for CNG/ claimed that a facility-by-facility received from the renewable CNG/LNG LNG derived from biogas increased to approach to projecting cellulosic RIN industry through the Coalition for 41. We believe, therefore, that while our generation for CNG/LNG derived from Renewable Natural Gas. While we projection methodology uses a growth biogas would necessarily result in a currently only have data available for rate based on historical data it more accurate projection than an the first 9 months of 2017, to date only adequately anticipates higher industry-wide projection methodology. two new facilities have generated production volumes in future years, We continue to believe that in case of cellulosic RINs for CNG/LNG derived including both increased production nascent industries with a small number from biogas in 2017. While additional from existing facilities as well as of participants, such as the liquid new facilities may generate cellulosic production from new facilities. In this cellulosic biofuel industry, industry RINs for CNG/LNG derived from biogas way it is a forward, rather than wide projection methodologies may be in the final 3 months of 2017, many backward looking methodology that inappropriate as they do not capture the projected that they would be producing satisfies our charge to project future specific circumstances that may impact cellulosic RINs by this point in the year, cellulosic biofuel production in a In each participant. industries where the and ft is highly unlikely that all 26 of reasonable manner, and with neutrality. number of participants is small, failing these facilities will successfully 3. Total Cellulosic Biofuel in 2018 to adequately assess each individual generate cellulosic RINs by the end of participant can have a significant 2017. The failure of these new facilities impact on the overall accuracy of After projecting production of to generate cellulosic RINs in 2017, cellulosic biofuel from liquid cellulosic industry projections. However, as the together with the over-projection by number of market participants grows biofuel production facilities and the many of the facilities that have impact of any single participant on the producers of CNG/LNG derived from generated cellulosic RINs in 2017 overall performance of the industry biogas, EPA combined these projections resulted in the facility specific approach to project total cellulosic biofuel decreases. In these cases, industry-wide recommended projection methods are more accurate by many commenters production for 2018. These projections appearing to have significantly over than a more individualized approach, are shown in Table III.D.3—1.Using the estimated of CNG/LNG especially as macro market and the production methodologies described in this section, economic factors become more in 2017. EPA has therefore used an we project that 288 million ethanol- influential on total production than the alternative methodology based on actual equivalent gallons of cellulosic biofuel data in success or challenges at any single production previous years, will be produced in 2018. We believe facility. rather than production projections by that projecting overall production in Further, the accuracy of a facility by individual facilities, to project 2018 in the manner described above facility approach to projecting production of CNG/LNG derived from results in a neutral estimate (neither production is heavily dependent on the biogas in this final rule. We believe the biased to produce a projection that is accuracy of the information available to production of CNG/LNG derived from too high nor too low) of likely cellulosic EPA on the projected RIN generation biogas has matured to a point where an biofuel production in 2018. volumes of each of the potential industry wide projection methodology production facilities for 2018. is more appropriate than a facility by TABLE III.D.3—1—PR0JEcTED VOLUME Conversely, the market wide approach facility approach, and is likely to result OF CELLULOSICBIOFUEL IN 2018 in a more accurate projection. We will used by EPA in this final rule relies on [MilliongallonsJ actual RIN generation data, rather than monitor the success of this new approach, and will make appropriate Projected calculate this estimate, EPA used the Natural Gas modifications in the future if warranted. volume a Vehicle Use from the STEO Custom Table Builder We also disagree with commenters (0.12 billion cubic feet/day in 2018). This projection Liquid Cellulosic Biotuel Pro includes all CNG/LNG used as transportation fuel who claim that our proposed projection methodology does not appropriately ducers; Producers without from both renewable and non-renewable sources. Consistent Commercial EIA does not project the amount of CNG/LNG from account for new facilities expected to Scale Production 5 biogas used as transportation fuel. To convert begin producing CNG/LNG derived from billion cubic feet/day to ethanol-equivalent gallons Liquid Cellulosic Biofuel Pro EPA used conversion factors of 1020 BTU per cubic biogas in 2018. The methodology used ducers; Producers with foot of natural gas and 77,000 BTU of natural gas by EPA in this final rule compared the Consistent Commercial per ethanol-equivalent gallon. total projection of CNG/LNG derived Scale Production 9 USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 21 of 48

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

TABLE III.D.3—1—PR0JEcTED VOLUME We then address total renewable fuel in reducing the statutory volume target for OF CELLULOSIC BIOFUEL IN 2018— the context of our interpretation, advanced biofuel by the same amount as Continued articulated in previous annual the reduction in cellulosic biofuel. This rulemakings, that advanced biofuel and results in the non-cellulosic component [Milliongallons] total renewable fuel should be reduced of the advanced biofuel volume Projected by the same amount under the cellulosic requirement being equal to the implied volumea waiver authority. In Section V we statutory volume of 4.00 billion gallons. discuss our consideration of additional We believe this new approach to CNG/LNG Derived from reductions for both advanced biofuel balancing relevant considerations and Biogas 274 and total renewable fuel beyond those exercising our discretion under the permitted under the cellulosic waiver cellulosic waiver authority is Total 288 authority, using other waiver authorities permissible under the statute, and a Volumes rounded to the nearest million provided by the statute. consistent with the principles gallons. To begin, we have evaluated the articulated in FCC v. Fox TV Stations Further discussion of the individual capabilities of the market and are (556 US. 502, 514—15 (2009]], regarding companies we believe will produce making a finding that the 11.0 billion circumstances when an agency may cellulosic biofuel and make it gallons specified in the statute for appropriately depart from prior policy. commercially available in 2018 can be advanced biofuel cannot be reached in In making this final determination for found in a memorandum to the 2018. This is primarily due to the 2018, we have considered comments on docket. 5 expected continued shortfall in the appropriate balancing of factors cellulosic biofuel; production of this under the cellulosic waiver authority IV. Advanced Biofuel and Total fuel type has consistently fallen short of Renewable Fuel Volumes for 2018 that were provided by stakeholders in the statutory targets by 95 percent or response to the proposal and the The national volume targets for more, and as described in Section III, we October 4 document, as discussed in the advanced biofuel and total renewable project that it will fall far short of the accompanying RTC document. fuel to be used under the RFS program statutory target of 7.0 billion gallons We note that the predominant non each year through 2022 are specified in again in 2018. In addition, although for cellulosic advanced biofuels available in CAA section 211(o)(2](B)(i](I) and (II). the 2016 and 2017 standards we the near term are advanced biodiesel Congress set annual renewable fuel determined that the projected and renewable diesel.76 We expect a volume targets that envisioned growth reasonably attainable supply of non decreasing rate of growth in the at a pace that far exceeded historical cellulosic advanced biofuel and other availability of feedstocks used to growth and, for years after 2011, considerations justified establishing produce these fuel types. In addition, prioritized that growth as occurring standards that included a partial backfill we expect diminishing GHG benefits principally in advanced biofuels of the shortfall in cellulosic biofuel with and higher per gallon costs as the biofuel, (contrary to previous growth patterns advanced for reasons described required volumes of advanced biodiesel where most growth was in conventional in this section we are reducing the and renewable diesel increase. These advanced biofuel applicable volume by renewable fuel, principally corn- outcomes are a result of the fact that the ethanol]. Congressional intent is evident the full amount of the shortfall in lowest cost and most easily available in the fact that the portion of the total cellulosic biofuel for 2018. In previous years when exercising the feedstocks are typically used first, and renewable fuel volume target in the each additional increment of advanced statutory volume tables that is not cellulosic waiver authority to determine the required volume of advanced biodiesel and renewable diesel requires required to be advanced biofuel is 15 the use of feedstocks that are billion gallons for all years after 2014, biofuel, we have taken into account the availability of advanced biofuels, their incrementally more costly and/or more while the advanced volumes, driven by difficult to obtain. Moreover, to the growth in cellulosic volumes, continue energy security and GHG impacts, and the apparent intent of Congress as extent that higher advanced biofuel to grow through 2022 to a total of 21 requirements cannot be satisfied billion gallons. reflected in the statutory volumes tables to substantially increase the use of through growth in the production of In this Section we discuss our use of advanced biofuel feedstocks, they the discretion afforded by the cellulosic advanced biofuels over time, as well as factors such as increased costs would instead be satisfied through a re waiver authority at CAA section direction of such feedstocks from 211(o)(7](D)(i) to reduce volumes of associated with the use of advanced biofuels and the environmental and competing uses. Parties that were advanced biofuel and total renewable formerly using these feedstocks are fuel. We first discuss our assessment of food competition concerns raised by some commenters. In considering these likely to replace the advanced biofuel advanced biofuel and the feedstocks with the lowest cost considerations, including comments factors, in those years, we have concluded that it was appropriate to set alternatives, likely derived from palm or received in response to the proposal and petroleum sources, leading to lower October 4 document, which have led us the advanced biofuel standard in a manner that would allow the partial overall GHG emission benefits. There to conclude that the advanced biofuel would also likely be market disruptions volume target in the statute should be backfihling of missing cellulosic volumes with non-cellulosic advanced and increased burden associated with reduced by the full amount permitted shifting feedstocks among the wide under the cellulosic waiver authority. biofuels. For purposes of this final rule we have again taken these factors into range of companies that are relying on them today and which have optimized cellulosic Biofuel Producer company consideration, but rely more heavily on Descriptions (November 2017),” memoraiidum from consideration of cost as a result of a their processes to use them. Higher Dallas Burkholder to EPA Mr DocketEPA—HQ— stronger policy focus on the economic OAR—2017—0091.In the case of cellulosic biofuel impacts of the RFS program to conclude 7Whi1e sugarcane ethanol can also contribute to produced from CNG/LNG and facilities using that such backfilling with non-cellulosic the supply of advanced biofuel, in recent years, Edeniq’s technology we have discussed the supply of sugarcane ethanol has been considerably production potential from these facilities as a group advanced biofuel volumes should not be lower than supply of advanced biodiesel or rather than individually. required in 2018. In other words, we are renewable diesel. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 22 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58505 advanced biofuel standards could also potential imports of sugarcane ethanol, for total renewable fuel, the volume be satisfied by diversion of foreign and anticipated decreasing growth in requirement for total renewable fuel is advanced biofuel from foreign markets, production of feedstocks for advanced also 10 million gallons more than the and there would likely be diminished biodiesel and renewable diesel), while applicable volume used to derive the benefits associated with such others focus on the potential benefits 2017 percentage standard. The diversions. Taking these considerations and costs of requiring use of available remainder of this section provides our into account, we believe, as discussed in volumes (e.g., relative cost of advanced justification for this approach to the more detail below, that we should not biofuels to the petroleum fuels they determination of the volume exercise our discretion under the displace, CHO reduction benefits and requirements for advanced biofuel and cellulosic waiver authority to set the energy security benefits). Having total renewable fuel. Section V advanced biofuel volume requirement at determined that we should not exercise discusses our consideration of further a level that would lead to such the discretion afforded EPA under the reductions in either advanced biofuel or diversions. cellulosic waiver authority so as to total renewable fuel using either the Furthermore, two other factors have require the use of advanced biofuel general waiver authority or the BBD added uncertainty regarding advanced volumes that would lead to diversion of waiver authority, and our justification biofuel volumes that are reasonably advanced feedstocks from other uses or for not applying such further attainable and appropriate. The first is diversion of advanced biofuels from reductions. the fact that the tax credit for biodiesel foreign sources, our analytical approach has not been renewed, and if renewed to identifying the appropriate volume A. Volumetric Limitation on Use of the could be in the form of a producer’s tax requirement is to first identify volumes Cellulosic Waiver Authority credit rather than a blender’s tax that we believe would be reasonably credit.77 The second is the preliminary attainable in 2018 without such As described in Section II.A, when determination by the Department of feedstock or fuel diversions, and then making reductions in advanced biofuel Commerce that countervailing duties discuss whether or not other and total renewable fuel under the should be imposed on biodiesel imports considerations, such as cost and OHO cellulosic waiver authority, the statute from Argentina and Indonesia. impacts, indicate that it would be limits those reductions to no more than We believe that the factors and appropriate to set the advanced biofuel the reduction in cellulosic biofuel. As considerations noted above are all volume requirement so as to require use described in Section III.D, we are appropriately considered in our exercise of such volumes to partially backfill for establishing a 2018 applicable volume of the broad discretion provided under missing cellulosic volumes. for cellulosic biofuel of 288 million the cellulosic waiver authority, and that The net impact of our exercise of the gallons, representing a reduction of a comprehensive consideration of these cellulosic waiver authority is that after 6,712 million gallons from the statutory factors supports our use of the authority. waiving the cellulosic biofuel volume target of 7,000 million gallons. As a Some of the considerations discussed in down to the projected available level, result, 6,711 million gallons is the this final rule are related to the and applying the same volume maximum volume reduction for availability of non-cellulosic advanced reduction to the statutory volume target advanced biofuel and total renewable biofuels (e.g., historic data on domestic for advanced biofuel, the resulting fuel that is permissible using the supply, expiration of the biodiesel volume requirement for advanced cellulosic waiver authority. Use of the blenders’ tax credit, potential imports of biofuel for 2018 is 10 million gallons cellulosic waiver authority to this biodiesel in light of the Commerce more than the applicable volume used maximum extent would result in Departments preliminary determination to derive the 2017 percentage standard. volumes of 4.29 and 19.29 billion on countervailing duties on biodiesel Furthermore, after applying the same gallons for advanced biofuel and total imports from Argentina and Indonesia, reduction to the statutory volume target renewable fuel, respectively.°

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

Advanced rertble biofuel fuel

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

We are authorized under the authority in instances where its use is in both Monroe and ACE.50 Thus, EPA cellulosic waiver authority to reduce the authorized under the statute, since could potentially set the 2018 advanced advanced biofuel and total renewable Congress did not specify factors that biofuel standard at a level that is fuel volumes “by the same or a lesser” EPA must consider in determining designed to partially backfill for the amount as the reduction in the whether to use the authority or what the shortfall in cellulosic biofuel. As cellulosic biofuel volume. As discussed appropriate volume reductions (within discussed below, doing so would result in Section II.A, EPA has broad the range permitted by statute) should in perhaps an additional 110 million discretion in using the cellulosic waiver be. This broad discretion was affirmed gallons of advanced biofuel. However,

775ee American Renewable Fuel and Job creation Argentina and Indonesia,” available in EPA docket rulemaldngs. Volumes are sometimes shown in Act of 2017, S.944, iisth cong. (2017). number EPA—HQ-OAR—2017—0091. million gallons for clarity, but it is volumes in Finds countervailable expressing volumes in billion gallons. billion gallons that are used to calculate the Subsidization of Imports of Biodiesel from we use standard rounding methods to two decimal applicable percentage standards. places, as done in previous annual standard-setting 55See ACE at 730—35. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 23 of 48

58506 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations based on our consideration of the factors biofuels from use in other countries, That is, while we refer to them as described in more detail below, we are which we took into account in setting “reasonably attainable” volumes for using the full extent of the cellulosic the 2017 volume requirements and, we convenience, they represent those waiver authority in deriving volume believe, are appropriate considerations volumes that are not likely to lead to requirements for 2018.81 under the broad discretion provided by feedstock/fuel diversions. Greater the cellulosic waiver authority. B. Volumes volumes could likely be made available Reasonably Attainable of As noted above, a higher advanced Advanced if such diversions were not of concern. Biofuel biofuel volume requirement has a It is appropriate to consider the greater potential to increase the 1. Imported Sugarcane Ethanol availability of advanced biofuel, both to incentive for switching advanced inform our exercise of the cellulosic biofuel feedstocks from existing uses to The predominant available source of waiver authority and to ascertain biofuel production. Such market advanced biofuel other than cellulosic whether there might be an “inadequate reactions could cause disruptions biofuel and BBD is imported sugarcane domestic supply” justifying use of the and/or price increases in the non ethanol. In setting both the 2016 and general waiver authority. As the Court biofuel markets that currently use these 2017 standards, we determined that 200 noted in ACE, EPA may consider feedstocks. Increasing the required million gallons of imported sugarcane demand-side considerations in addition volumes of advanced biofuels without ethanol would be reasonably attainable. to supply-side considerations when it giving the market adequate time to In deriving this estimate of sugarcane assesses “reasonably attainable” adjust by increasing supplies could also ethanol, we attempted to balance volumes for purposes of its cellulosic result in diversion of advanced biofuels indications of lower potential imports waiver assessment. However, EPA may from foreign countries to the U.S. from recent data with indications that not consider demand-side factors in without increasing total global volumes. higher volumes were possible based on assessing whether there is an We believe it is likely that the parties older data. We also pointed to the high “inadequate domestic supply” that that formerly used advanced biofuel variability in ethanol import volumes in would justify use of the general waiver feedstocks would seek to replace the the past (including of Brazilian authority.82 Our assessment of advanced biofuel feedstocks with the sugarcane ethanol, the predominant reasonably attainable volumes of cheapest alternatives, likely products form of imported ethanol, and the only advanced biofuel is described below. derived from palm oil or petroleum, significant source of imported advanced In ACE, the Court noted that in rather than forgoing the use of oil-based ethanol), increasing gasoline assessing what volumes are “reasonably products. Increasing volumes of consumption in Brazil, and variability attainable,” EPA had considered the advanced biofuels used in the U.S. in as availability of feedstocks, domestic in Brazilian production of sugar this way (by shifting the end use of reasons that it would be inappropriate production capacity, imports, and advanced feedstocks to biofuel market capacity to produce, distribute, to assume that sugarcane ethanol production and satisfying the current imports would reach the much higher and consume renewable fuel.83 We are for feedstocks markets these advanced levels suggested by some stakeholders. taking a similar approach for 2018, with with non-qualifying or petroleum based the added consideration of the feedstocks, or by simply shifting The data on 2016 ethanol imports possibility that higher volume advanced biodiesel or renewable diesel suggests that we overestimated the requirements would lead to “feedstock from foreign to domestic use—referred volume of sugarcane ethanol imports for switching” or diversion of advanced to for simplicity as “feedstock/fuel that year. Despite the fact that the diversions”) would therefore likely not applicable standards for 2016 were set 81We specify the volume requirements as billion produce the GHG benefits that would prior to the beginning of 2016, and gallons with two decimal places to be consistent with the volume targets as given in the statute. The otherwise be expected. We have decided despite suggestions from UNICA84 that only exception is for cellulosic biofuel wblch we not to set the advanced biofuel volume 2016 imports could reach as high as 2 spacify in million gallons due to the substantial requirement at a level that would billion gallons, total ethanol imports reduction from the statutory target. However, require such feedstock/fuel diversions. calculations are typically shown in million gallons only reached 34 million gallons. for all four standards for clarity. Our individual assessments of 52 ACE at 734 and 696. reasonably attainable volumes of 4UMCA is the Brazilian Sugarcane Industry 83ACEat 735—36. advanced biofuels reflect this approach. Association. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 24 of 48

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

Figure IV.B.1-l Historical Ethanol Irnportsa

800 Allother (non-advanced) 700 • Brazil (advanced) 600

500 0 400 0 300

200

100

0 8 rJ 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 produced from sugarcane. Imports from other countries are typically not produced from sugarcane and do not qualify as advanced biofliel.

Available data for imports in 2017 higher than 100 million gallons. Factors used as transportation fuel or heating oil similarly suggests that imports are again that could result in import volumes in the U.S.88 These factors could likely to fall well below the 200 million below 100 million gallons include include the availability of qualifying gallons that we assumed when setting weather and harvests in Brazil, world biodiesel and renewable diesel the 2017 standards; for January through ethanol demand and prices, and feedstocks, and the production capacity August of 2017, total imports of constraints associated with the ElO of biodiesel and renewable diesel sugarcane ethanol were 75 million blendwall in the U.S. Also, global sugar facilities (both in the U.S. and gallons; by the end of 2017, total consumption has continued to increase internationally). The degree to which imports of sugarcane ethanol might be steadily, while production has these and other factors may affect the gallons.85 decreased. If trend continues, about 100 million The the total supply of both advanced and Brazilian production of sugar could combined experience for 2016 and 2017 conventional forms of biodiesel and suggests 200 million gallons is too increase, with a concurrent reduction in that renewable diesel in 2018, is discussed high for the purposes of projecting production of ethanol.86 On the other in a memo to the docket.89 reasonably attainable volumes of hand, the world average price of sugar advanced biofuel for 2018. At the same has been projected to remain relatively However, the primary considerations time, higher import volumes than those flat between 2016 and 2018, suggesting in our determination of the reasonably which occurred in 2016 are clearly little change in sugar production and attainable volumes of advanced possible, as reflected by imports seen in implying that ethanol production in biodiesel and renewable diesel for 2018 prior years. Taking all of these Brazil might likewise remain are data on the use of advanced considerations into account, we are unchanged.87 After considering these biodiesel and renewable diesel in using 100 million gallons of imported factors, and in light of the high degree previous years, the uncertain impact of sugarcane ethanol for the purposes of of variability in historical imports of the continued absence of the biodiesel projecting reasonably attainable sugarcane ethanol, we believe that 100 tax credit and proposed tariffs on volumes of advanced biofuel for 2018. million gallons is a reasonable biodiesel from certain countries on This level reflects a balancing of the projection for 2018. biodiesel production and importation, information available to EPA at this 2. Biodiesel and Renewable Diesel the projected growth in production of time; both the lower import volumes advanced biodiesel and renewable that have occurred more recently with With regard to biodiesel and the higher volumes that are possible renewable diesel, there are many based on earlier years. different factors that could potentially For a further discussion of the factors that influence reasonably attainable We note that the future projection of the total influence the availability of biodiesel and volume of fuels (including both renewable diesel see Section V.B.2 of the preamble imports of sugarcane ethanol is these advanced and non-advanced forms) and a further discussion of these factors from the inherently imprecise, and that actual 2017 final nile (81 FR 89781—89789, December 12, imports in 2018 could be lower or 86 “SugarWorld Markets and Trade,” USDA, 2016], November 2016. 8”Market impacts of biofuels,” memorandum 55”lmports of ethanol 2011—2017,” available in 87”conodity Markets Outlook,” World Bank from David Korotney to docket EPA—HQ—OAR— docket EPA—HQ—OAR—2017—0091. Group, January 2017. 2017—0091. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 25 of 48

58508 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations diesel feedstocks in 2018.90A review of these oils with low cost palm or Before considering the projected the volumes of advanced biodiesel and petroleum derived products, as we growth in the production of qualifying renewable diesel used in previous years believe would likely be the case in 2018. feedstocks that could be used to is especially useful in projecting the Such feedstock switching or fuel produce advanced biodiesel and potential for growth in the production diversion could result in unintended renewable diesel, it is helpful to review and use of such fuels, since for these negative consequences, such as market the volumes of biodiesel and renewable fuels there are a number of complex and disruption in other markets where such diesel that have been used in the U.S. inter-related factors beyond simply the oils are used, which could offset some in recent years. While historic data and total production capacity for biodiesel of the anticipated benefits of the trends alone are insufficient to project and renewable diesel and ability to production and use of advanced the volumes of biodiesel and renewable distribute these fuels (including the biofuels. diesel that could be provided in future availability of advanced feedstocks, the years, historic data can serve as a useful expiration of the biodiesel tax credit, The volume of advanced biodiesel frame of reference in considering future and other market-based factors) that are and renewable diesel projected to be volumes. Past experience suggests that a likely to affect the total supply. We also available based on a consideration of high percentage of the biodiesel and believe the likely growth in production these factors is less than the maximum renewable diesel used in the U.S. (from of feedstocks used to produce these volume of biodiesel and renewable both domestic production and imports) fuels is an important factor to consider. diesel we believe could be produced qualifies as advanced biofuel.°’ In This is because the energy security and (based solely on an assessment of the previous years, biodiesel and renewable GHG reduction value associated with available production capacity) or diesel produced in the U.S. has been the growth in the use of advanced consumed (based on an assessment of almost exclusively advanced biofuel.92 biofuels is greater when that growth is the ability of the market to distribute Imports of advanced biodiesel have associated with an increase in advanced and use biodiesel and renewable diesel). increased in recent years, however, as feedstock production, rather than a Production capacity and the ability for seen in Table IV.B.2—1.Volumes of switching of existing advanced the market to distribute and use imported advanced biodiesel and feedstocks from other uses or the biodiesel and renewable diesel are renewable diesel have varied diversion of advanced biodiesel and therefore not constraining factors in our significantly from year to year, as they renewable diesel from foreign markets if assessment of the reasonably attainable are impacted both by domestic and the parties that previously used the volume of advanced biodiesel and foreign policies, as well as economic advanced biofuel or feedstocks replace renewable diesel in 2018. factors.

TABLE IV.B.2—1—ADvANcED (D4 AND D5) BIODIE5EL AND RENEWABLEDIESEL FROM 2011 TO 2016 [Milliongallons] 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 dem onstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate 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) BIODIESELAND RENEWABLEDIESEL FROM 2011 TO 2016 [Milliongallons]

2011 2012 2013 2014b 2015b 2016

Domestic Biodiesel (Annual Change) 0 (N/A) 0 (+0) 6 (+6) 1 (—5) 0 (+0) 0 (+0) Domestic Renewable Diesel (Annual Change) 0 (N/A) 0 (+0) 0 (+0) 0 (+0) 0 (+0) 0 (+0) Imported Biodiesel (Annual Change) 0 (N/A) 0 (+0) 31 (+31) 52 (+21) 74 (+22) 113 (+39)

sa Tbroughout this section we refer to advanced pursuant to § 80.1416, that can be used to produce biodiesel and renewable diesel) qualified as biodiesel and renewable diesel as well as advanced fuel that qualifies for 04 or D5 RINs. These advanced biodiesel and renewable diesel (9,372 biodiesel and renewable diesel feedstocks. In this feedstocks include, for example, soy bean oil; oil million gallons of the 9,850 million gallons) context, advanced biodiesel and renewable diesel from annual cover crops; oil from algae grown according to EMTS data. refer to any biodiesel or renewable diesel for which photosynthetically; biogenic waste oils/fats/greases; RINs can be generated that satisfy an obligated non-food grade corn oil; camelina sativa oil; and 92From 2011 tbrough 2016 over 99.9% of all the party’s advanced biofoel obligation (i.e., 04 or DS canola/rapeseed oil (See pathways F, 0, and H of domestically produced biodiesel and renewable RJNs). An advanced biodiesel or renewable Table 1 to § 80.1426). diesel supplied to the U.S. qualified as advanced feedstock refers to any of the biodiesel, renewable 2011 through 2016 over 95% of all biodiesel and renewable diesel (8,258 million diesel, iet foel, and heating oil feedatocks listed in biodiesel and renewable diesel supplied to the U.S. gallons of the 8,265 million gallons) according to Table 1 to § 80.1426 or in petition approvals issued (including domestically-produced and imported EMTS data. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 26 of 48

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

TABLE IV.B.2—2—CONVENTIONAL(D6) BIODIESELAND RENEWABLEDIESEL FROM 2011 TO 2016—Continued [Milliongallons] a

2011 2012 2013 2014b 2015b 2016

Imported Renewable Diesel (Annual Change) 0 (N/A) 0 (+0) 53 (+53) 0 (—53) 106 (+106) 43 (—63) Exported Biodiesel and Renewable Die sel (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) GAlldata for 201 1—2016from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RIN5 retired for reasons other than dem onstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the supply in each year. b RFS required volumes for these years were not established until December 2015.

Since 2011 the year-over-year changes Each of the years in which the biodiesel of 2016, likely driven by a desire to in the volume of advanced biodiesel and blenders tax credit was in effect during capture the expiring tax credit, while renewable diesel in the U.S. have varied the calendar year (2013 and 2016) significantly smaller volumes of these greatly, from a low of negative 61 resulted in significant increases in the fuels were supplied in the first quarter million gallons from 2011 to 2012 to a supply of advanced biodiesel and of 2017. Data on advanced biodiesel high of 779 million gallons from 2015 to renewable diesel over the previous year and renewable diesel MN generation in 2016. These changes were likely (653 million gallons and 779 million 2017 was available through September influenced by a number of factors such gallons respectively). However, at the time the analyses were performed as the cost of biodiesel feedstocks and following this large increase in 2013, the for this rulemaking. Our review of this petroleum diesel, the status of the increase in the supply of advanced data suggests that the generation of RINs biodiesel blenders tax credit, growth in biodiesel and renewable diesel in 2014 for advanced biodiesel and renewable marketing of biodiesel at high volume and 2015 was minimal, only 33 million diesel in 2017 (through September) is truck stops and centrally fueled fleet gallons from 2013 to 2015. This pattern slightly higher than RIN generation for locations, demand for biodiesel and is likely the result of both accelerated these fuels during the same time period renewable diesel in other countries, production and/or importation of in 2016 (see Figure IV.B.2—1below). biofuel policies in both the U.S. and biodiesel and renewable diesel in the Total 2016 MN generation for advanced foreign countries, and the volumes of final few months of 2013 to take biodiesel and renewable diesel through renewable fuels (particularly advanced advantage of the expiring tax credit as September 2016 was 2.76 billion RINs, biofuels) required by the RFS. This well as relatively lower volumes of while total 2017 RIN generation for historical information does not indicate biodiesel and renewable diesel these fuels through September 2017 was that the maximum previously observed production and import in 2014 and 2.82 billion BiNs. Total supply of increase of 779 million gallons of 2015 than would have occurred if the advanced biodiesel and renewable advanced biodiesel and renewable tax credit had been in place.° diesel in 2016 was 2.46 billion gallons, diesel would be reasonable to expect We believe it is reasonable to suggesting that a total supply of from 2017 to 2018, nor does it indicate anticipate a similar production pattern approximately 2.5 billion gallons in that the low growth rates observed in in 2016 through 2018 as observed in 2017 (slightly higher than the volume other years represent the limit of 2013 through 2015; that increases in the supplied in 2016) is likely.° This is potential growth in 2018. Rather, these volumes of advanced biodiesel and consistent with our projection of data illustrate both the magnitude of the renewable diesel will be modest in 2017 advanced biodiesel and renewable increases in advanced biodiesel and and 2018, following the significant diesel in the 2017 rule (2.4 billion renewable diesel in previous years and increase in 2016. In 2013 the tax credit gallons) and expectations based on RIN the significant variability in these was in place through the entire year. generation patterns in previous years of increases. This was followed by two years (2014 modest increases in the supply of The historic data indicates that the and 2015) in which the tax credit was advanced biodiesel and renewable biodiesel tax policy in the U.S. can have not in place, but was eventually diesel in the years following the a significant impact on the supply of reinstated retroactively. Similarly, the biodiesel and renewable diesel in any tax credit in place through 2016, but at to data on EPA’s public Web site, the time of this rulemaking not RINs were generated for 823 million gallons of given year. While the biodiesel blenders biomass-based diesel in the last quarter of 2016 tax credit has applied in each year from applicable to 2017 or 2018.° Available while PINs were generated for 444 million gallons 2010—2016, it has only been in effect RThJgeneration data further supports of biomass-based diesel in the first quarter of 2017. during the calendar year in 2011, 2013 this pattern. Very high volumes of The vast majority of advanced biodiesel and and 2016, while other years it has been advanced biodiesel and renewable renewable diesel qualifies as biomass-based diesel. diesel were supplied in the last quarter supply of advanced biodiesel and applied retroactively. The biodiesel renewable diesel in 201e accounts for all RIN blenders tax credit expired at the end of generation, as well as all PIN retirements for 2009 and was re-instated in December 93We also acknowledge that the fact that EPA did reasons other than compliance with the annual renewable 2010 to apply retroactively in 2010 and not finalize the required volumes of fuel standards. At this time, we do not have sufficient under the RF5 program for 2014 and 2015 until data to compare PIN retirements for reasons other extend through the end of 2011. December 2015 likely had an impact on the volume than compliance with the annual standards in 2017 Similarly, after expiring at the end of of advanced biodiesel and renewable diesel to those in 2016, as this data often lags PIN 2011, 2013, and 2014 the tax credit was supplied in these years. generation by several months. However, at this time 94 re-instated in January 2013 (for 2012 At this time, it is uncertain whether the tax we have no reason to believe PINs retired for credit would be retroactively applied to 2017 or reasons other than compliance with the annual and 2013), December 2014 (for 2014), applied in any manner (prospectively or standards in 2017 would be significantly different and December 2015 (for 2015 and 2016). retroactively) in 2018. that retirements for the same reasons in 2017. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 27 of 48

58510 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations expiration of the biodiesel tax credit. increases from the reasonably attainable to drive significant increases in the This data also supports our expectation volumes of these fuels in 2016 and supply of advanced biodiesel and that the reasonably attainable volume of 2017. It is not clear from this data renewable diesel in the absence of a tax advanced biodiesel and renewable whether or not higher RFS volume credit. diesel in 2018 will reflect modest requirements alone would be sufficient

Figure IV.B.2-1 Cumulative 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 z 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000

—I d,/ I s’ c’-, - /

—2016 —2017

After reviewing the historical supply purposes and which must then be increase in supply of waste oils, fats, of advanced biodiesel and renewable backfilled with other feedstocks with and greases may be possible in 2018, we diesel and consideration of the possible potentially greater GHG emissions. believe this increase is limited as most impact of the expiration of the biodiesel Similarly, increasing the supply of of these oils, fats, and greases are tax credit (discussed above), EPA next hiodiesel and renewable diesel to the already being recovered and used in considered the expected increase in the U.S. by diverting fuel that would hiodiesel and renewable diesel availability of advanced biodiesel and otherwise have been used in other production or for other purposes. Many renewable diesel feedstocks in 2018. We countries results in lesser GHG benefits of the planted crops that supply acknowledge that an increase in the than if the supply of these fuels was vegetable oil for advanced biodiesel and required use of advanced biodiesel and increased through additional biofuel renewable diesel production are renewable diesel could be realized production, especially if this diversion primarily grown for purposes other than through a diversion of advanced results in increased consumption of providing feedstocks for hiodiesel and feedstocks from other uses, or a petroleum fuels in the countries that renewable diesel, such as for livestock diversion of advanced biodiesel and would have otherwise consumed the feed with the oil that is used as renewable diesel from existing markets biodiesel or renewable diesel. By feedstock for renewable fuel production in other countries. We perceive the net focusing our assessment of the potential a co-product or by-product.97 This is benefits associated with such increased growth in the reasonably attainable true for soy beans and corn, which are advanced hiofuel and renewable fuel volume of biodiesel and renewable the two largest sources of feedstock from volumes to be significantly less than the diesel on the expected growth in the planted crops used for biodiesel net benefits associated with the production of advanced feedstocks production in the U.S.98 We do not production of additional advanced (rather than the total supply of these believe that the increased demand for biodiesel and renewable diesel with the feedstocks in 2018, which would soybean oil or corn oil will result in an use of newly-available advanced include feedstocks currently being used feedstocks due to the likelihood that for non-biofuel purposes], we are “For example, corn oil is a co-product of corn parties that previously used advanced attempting to minimize the incentives grown primariiy for feed or ethanol production, for the EPS program to increase while soy and canola oil are primarily grown as hiofuel feedstocks will replace them the livestock feed. with low cost palm or petroleum supply of advanced biodiesel and ‘“According to EIA data 6,096 million pounds of derived products. This is both because renewable diesel through feedstock soy bean oil and 1,306 million pounds of corn oil of the potential disruption and switching or diverting hiodiesel and were used to produce biodiesel in the U.S. in 2016. renewable diesel from foreign market to Other significant sources of feedstock were yellow associated cost impacts to other grease (1,389 million pounds), canola oil (1,130 industries resulting from feedstock the U.S. million pounds), white grease (578 million pounds), switching, and a reduced GHG Advanced biodiesel and renewable tallow (332 million pounds), and poultry fat (220 reduction benefit related to use of diesel feedstocks waste million pounds). Numbers from EIA’s February include both 2017 Monthly Biodiesel Production Report. feedstocks for biofuel production that oils, fats and greases and oils from Available at httpsil/www.eia.gov/biofoe]s/biodiesei/ would have been used for other planted crops. While we believe a small production/orchive/201 6/201 6_12/biodiesel.pdf USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 28 of 48

Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations 58511 increase in soybean or corn prices large agricultural marketing year.99 This supply of other sources of advanced enough to induce significant changes in quantity of vegetable oils (0.33 million biodiesel and renewable diesel agricultural activity, at least for the metric tons) could be used to produce feedstocks, such as biogenic waste oils, relatively modest changes in advanced approximately 94 million gallons of fats, and greases, may also occur. These biodiesel and renewable diesel advanced biodiesel or renewable increases, however, are expected to be feedstock demand that we envision as a diesel. 100 modest, as many of these feedstocks that result of the RVOs we are finalizing in In addition to virgin vegetable oils, we can be recovered economically are this nile. The vegetable oils produced also expect increasing volumes of already being used for the production of are not the primary source of revenue distillers corn oil 101 to be available for biodiesel or renewable diesel, or in for these crops, meaning that the use in 2018. The WASDE report does other markets. In total, we expect that planted acres of these crops are likely to not project distillers corn oil increases in feedstocks produced in the be based on broader economic factors, production, so EPA must use an U.S. are sufficient to produce rather than on demand for vegetable oil alternative source to project the growth approximately 150 million more gallons to produce biofuels or for other markets. in the production of this feedstock. EPA of advanced biodiesel and renewable Increasing the demand for advanced is using the results of the World diesel in 2018 relative to 2017.’° biodiesel and renewable diesel beyond Agricultural Economic and We have also considered the expected the volumes that could be made from Environmental Services (WAEES) model increase in the imports of advanced the projected increase in the feedstocks to project the growth in the production biodiesel and renewable diesel used to produce these fuels would likely of distillers corn oil.102 In assessing the produced in other countries. In previous require diverting volumes of advanced likely increase in the availability of years, significant volumes of foreign biodiesel and renewable diesel (or the distillers corn oil from 2017 to 2018, the produced advanced biodiesel and feedstocks used to produce these fuels) authors of the WAEES model renewable diesel have been supplied to from existing markets to be used to considered the impacts of an increasing markets in the U.S. (see Table IV.B.2—1 produce biofuels supplied to the U.S. adoption rate of distillers corn oil above). These significant imports were Increasing the short-term supply of extraction technologies at domestic likely the result of a strong U.S. demand advanced biodiesel and renewable ethanol production facilities, as well as for advanced biodiesel and renewable diesel to the U.S. in this manner (simply increased corn oil extraction rates diesel, supported by the RFS standards, shifting the end use of advanced enabled by advances in this technology. the LCFS in California, the biodiesel feedstocks to biodiesel and renewable The WAEES model projects that blenders tax credit, and the opportunity diesel production and meeting non production of distillers corn oil in 2018 for imported biodiesel and renewable biofuel demand for these feedstocks will increase by 316 million pounds, diesel to realize these incentives. At this with conventional renewable and/or from 2,299 million pounds in time the impact of the expiration of the petroleum based feedstocks or diverting agricultural marketing year 2016/2017 biodiesel blenders tax credit on the advanced biodiesel and renewable to 2,615 million pounds in agricultural volumes of foreign-produced biodiesel diesel from foreign markets to the U.S.) marketing year 2017/2018. According to and renewable diesel imported into the may not advance the full GHG or energy the WAEES model, this projected U.S., is highly uncertain. Additionally, of security goals of the RFS program. In a increase in the production distillers in August 2017 the Department of worst case scenario, higher standards corn oil, if devoted entirely to biofuel Commerce announced a preliminary to could cause supply disruptions to a production, could be used produce determination that it would be 39 of number of markets as biodiesel and approximately million gallons appropriate to place countervailing renewable diesel producers seek biodiesel or renewable diesel in 2018. duties of 41 percent to 68 percent on additional supplies of advanced We believe that this is a reasonable biodiesel imported from Argentina and parties that projection. While the vast majority of Indonesia. According to data from EIA, feedstocks and the biodiesel previously used these feedstocks, both the increase in advanced biodiesel and imports from Argentina were 10,679 thousand barrels in 2016 within and outside of the fuels renewable diesel feedstocks produced in (approximately 449 gallons) and marketplace, seek out alternative the U.S. from 2016 to 2017 is expected million 5,601 billion 235 feedstocks. Similarly, advanced to come from virgin vegetable oils and barrels (approximately biodiesel and renewable diesel could be distillers corn oil, increases in the 103 This projection includes a projected increase diverted to the U.S. from foreign this assessment we have assumed the in the avallability fats and oils other than virgin countries and displaced with petroleum vegetable oils produced in the 201 7/2018 vegetable oils and distillers corn oil sufficient to fuels. These actions could result in agricultural marketing year are the feedstocks most produce approximately 15 miDion gallons of significant cost increases, for both likely to be used to produce biodiesel and biodiesel. The WAEES model projects an increase renewable diesel in 2018. in the quantity of “other fats and oils” (including biodiesel and renewable diesel as well inedible tallow, lard & white grease, yellow grease, ‘°5To calculate this volume we have used a as other produced from brown grease, poultry fat, and other) sufficient to products conversion of 7.7 pounds of feedstock per gallon of produce 31 million gallons of biodiesel. It is not renewable oils, with reduced CHG biodiesel. is conversion This based on the expected clear from the WAEES model, however, if the soy benefits. of oil (http://extension.missoori.edo/p/G1 990), projected increased use of other fats and oils as We believe the most reliable source which is the largest source of feedstock used to feedstock for biodiesel production is the result of produce advanced renewable diesel. for expected increase in biodiesel and increased production/collection of these feedstocks projecting the We believe that it is also a reasonable conversion vegetable oils in the U.S. is USDA’s or diverting them from other uses. We therefore factor to use for all virgin vegetable oils. think our slightiy more conservative projected World Agricultural Supply and Demand Distillers corn oil is non-food grade corn oil increase in these feedstocks sufficient to produce 15 Estimates (WASDE).According to the produced by ethanol production facilities million gallons of biodiesel (without diverting September 2017 WASDE report, the purposes of this final rule, EPA relied feedstocks from existing uses) is appropriate. We domestic vegetable oil production is on WAEES modeling results submitted as note, however, using the slightly higher projection comments by the National Biodiesel Board on the from the WAEES model (feedstock increase expected to increase by 0.33 million 2018 final rule (Kruse, J.,‘Implications of an sufficient to produce 31 million gallons of metric tons in 2018, from 11.42 million Alternative Advanced and Biomass Based Diesel biodiesel) has a very minimal impact on our metric tons in the 2016/2017 volume Obligation for Global Agriculture and assessment of the reasonably attalnable volume of year to 11.75 Biofuels”, August 21, 2017, World Agricultural advanced biodiesel and renewable diesel in 2018, agricultural marketing Economic and Environmental Services (WAEES), and would have no impact on the required volume million metric tons in the 2017/2018 EPA—HQ—OAR—2017—0091—3880). of advanced biofuel for 2018. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 29 of 48

58512 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations million gallons) through July 2017 (the as compared to the levels we projected that this reflects that the circumstances most recent month for which data were for 2017.104 presented with respect to 2018 are available at the time of this assessment). After a careful consideration of the different from those we anticipated for Biodiesel imports from Indonesia were factors discussed above, EPA has 2017. The primary differences are a 2,554 thousand barrels in 2016 determined, for the purposes of this smaller projected increase in advanced (approximately 107 million gallons), final nile, that approximately 2.55 feedstock production in the U.S., the with no biodiesel imported in 2017 billion gallons of advanced biodiesel continued absence of the biodiesel tax through July 2017. At this time, it is and renewable diesel is reasonably credit, and the preliminary uncertain whether or not the attainable for use in our determination determination placing duties on preliminary determination by the of the appropriate applicable volume of biodiesel imported from Argentina and Department of Commerce will be advanced biofuel to require for 2018. Indonesia. finalized, and it is uncertain what This volume is 150 million gallons impact the finalization of these duties higher than the volume of advanced 3. Other Advanced Biofuel would have on overall imports of biodiesel and renewable diesel advanced biodiesel and renewable determined to be reasonably attainable In addition to cellulosic biofuel, diesel to the U.S. In recent years imports and appropriate for the purposes of imported sugarcane ethanol, and of advanced biodiesel and renewable deriving the advanced biofuel standard advanced biodiesel and renewable diesel have increased year-over-year, in 2017. diesel, there are other advanced biofuels and absent these actions it may be The 150 million gallon increase in that can be counted in the reasonable to anticipate continued advanced biodiesel and renewable determination of reasonably attainable increases in the imported volume of diesel that we project will be reasonably volumes of advanced biofuel for 2018. these fuels. In light of this uncertainty, attainable for 2018 represents a smaller These other advanced biofuels include however, we do not believe it would be annual increase in advanced biodiesel biogas, naphtha, heating oil, butanol, jet reasonable at this point to either and renewable diesel than we assumed fuel, and domestically-produced increase or decrease our projection of in deriving the 2017 advanced biofuel advanced ethanol.105 However, the the reasonably attainable volume of standard (approximately 300 million supply of these fuels has been relatively biodiesel and renewable diesel for 2018 gallons over 2016 levels). We believe low in the last several years.

TABLE IV.B.3—1—HI5T0RIcAL SUPPLY OF OTHER ADVANCEDBIOFUELS [Millionethanol-equivalent gallonsl

Rej:w1ble CNG Heating oil Naphtha Dc,es9c Total

2013 26 0 3 64 23 116 2014 20 0 18 15 26 79 2015 0 1 24 8 25 58 2016 0 2 26 8 27 63 a Some renewablediesel generates D5 ratherthan D4 RIN5 as a resultof being producedthroughco-processingwithpetroleumor being pro duced fromthe non-cellulosicportionsofseparated foodwaste or annualcovercrops.

The downward trend over time in compressed natural gas), as well as non does not qualify as BBD. Our assessment biogas as advanced biofuel with a D cellulosic biogas such as from digesters. of the reasonably attainable volumes of code of 5 is due to the re-categorization However, since they have been these sources, discussed in the in 2014 of landfill biogas from advanced produced in only de minimis and preceding sections, is summarized (D code 5) to cellulosic (D code 3)106 sporadic amounts in the past, we do not below. We note that the reasonably Apart from biogas, total supply of have a basis for projecting substantial attainable volumes of each of these advanced biofuel other than imported volumes from these sources in 20l8.10a advanced biofuels cannot themselves be sugarcane ethanol has been relatively 4. Total Advanced Biofuel viewed as volume requirements. The constant during 2014—2016. Based on volumes for each advanced biofuel type this historical record, we find that 60 The total volume of advanced biofuel represent one significant factor that is million gallons would be reasonably that we believe is reasonably attainable considered in the analysis used to attainable in 2018.107 This represents in 2018 is the combination of cellulosic determine the reasonably attainable the approximate average of the two most biofuel and the sources described above: volumes of advanced biofuel. As recent years (2015 and 2016) for which imported sugarcane ethanol, biodiesel discussed in more detail in a complete data are available. and renewable diesel which qualifies as memorandum to the docket, there are We recognize that the potential exists BBD, and other advanced biofuels such many ways that the market could for additional volumes of advanced as advanced biogas that does not qualify respond to the percentage standards we biofuel from sources such as jet fuel, as cellulosic biofuel, heating oil, establish, including use of higher or liquefied petroleum gas (LPG),and naphtha, domestic advanced ethanol, lower volumes of these fuel types than liquefied natural gas (as distinct from and advanced renewable diesel that

164 We further note that there have been recent supply of imported advanced biodiesel and volume of 40 million gallons of non-ethanol other efforta to reinstate the biodiesel tax credit as a renewable diesel. advanced biofuel and 20 million gallons of producers’ tax credit, rather than a blenders tax 106 Advanced biofuel with a U code of 5. advanced domestic ethanol (see discussion in Section credit. If the biodiesel tax credit were reinstated as 10679 FR 42128, July 18, 2014. v.B.2l. be For instance, no RIN-generating volumes of a producers’ tax credit it would not apply to foreign 1e7 For the purposes of determining the producers, these other advanced biofuels were produced in biodiesel further limiting the likely availability of total renewable fuel, we are using a 2016, and less than 1 mill gal total in prior years. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 30 of 48

Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017/ Rules and Regulations 58513 discussed in this section.109 In addition, and soybean biodiesel in 2018, the two 2017 action, we effectively required as discussed below, we do not believe advanced biofuels that would be most early use of the 0.5 billion gallon it would be appropriate to require use likely to provide the marginal increase increment of non-cellulosic advanced of all volumes we have determined to be in volumes of advanced biofuel in 2018 volume that Congress envisioned would reasonably attainable. in comparison to 2017. Sugarcane be first used in 2018. The net result of ethanol results in a cost increase our action for 2018, after deciding that TABLE IV.B.4—1—REASONABLY AT compared to gasoline that ranges from no further reductions beyond those TAINABLE VOLUMES OF ADVANCED S0.61—$1.56 per ethanol-equivalent obtained by exercise of the cellulosic gallon.112 BIOFUEL IN 2018 Soybean biodiesel results in a waiver authority are appropriate (see cost increase compared to diesel fuel Section V), is that the advanced biofuel [Millionethanol-equivalent gallons except as noted) that ranges from S0.95—$1.30per volume requirement for 2018 is 10 ethanol-equivalent gallon.’13 The cost of million gallons higher than the Cellulosic biofuel 288 these renewable fuels is high as advanced biofuel volume requirement Advanced biodiesel and re compared to the petroleum fuels they for 2017, but the portion of this volume newable diesel (ethanol displace. In light of these comparative requirement that may be satisfied with equivalent volume/physical costs, we believe it is reasonable to forgo non-cellulosic biofuels remains volume) 3,953/2,550 the marginal benefit that might be constant. Imported sugarcane ethanol 100 achieved by establishing the advanced D. Exercise Other advanced 60 biofuel standard to require an additional of Cellulosic Waiver Authority for Total Renewable Fuel 110 million gallons. See Section IV.E for Total advanced biofuel 4,401 a further discussion of the projected cost As discussed in Section II.A.1, we of this final rule. believe that the cellulosic waiver C. Exercise of Cell ulosic Waiver Based on consideration of the provision is best interpreted to provide Authority for Advanced Biofuel volumes that may be reasonably equal reductions in advanced biofuel Based on the information presented attainable in 2018, along with a and total renewable fuel. We have above, we believe that 4.40 billion balancing of the costs and benefits consistently articulated this gallons of advanced biofuel would be associated with the option of setting the interpretation.115 We believe this reasonably attainable in 2018. This advanced biofuel standard at a level that interpretation is consistent with the volume is 110 million gallons higher would require use of all volumes that statutory language and best effectuates than the 4.29 billion gallons that would we have estimated could be reasonably the objectives of the statute. If EPA were result from reducing the applicable attainable, we are exercising our to reduce the total renewable fuel volume of advanced biofuel by the same cellulosic waiver authority to reduce volume requirement by a lesser amount amount as the reduction to the statutory advanced biofuel volumes to 4.29 than the advanced biofuel volume applicable volume of cellulosic biofuel billion gallons for 2018.114 This requirement, we would effectively (see Section III for a discussion of the advanced biofuel volume requirement increase the opportunity for cellulosic biofuel volume requirement for 2018 is similar to the requirement for conventional biofuels to participate in for 2018). In exercising the cellulosic 2017 when we allowed a portion of the the RFS program beyond the implied waiver authority in past years, we shortfall in cellulosic biofuel to be statutory cap of 15 billion gallons.h16 determined it was appropriate to require backfilled with other advanced biofuel. Applying an equal reduction of 6.71 a partial backfihling of missing cellulosic It should be noted that by exercising billion gallons to both the statutory volumes with volumes of non-cellulosic the full cellulosic waiver authority for target for advanced biofuel and the advanced biofuel we determined to be advanced biofuel, the implied statutory statutory target for total renewable fuel reasonably attainable and appropriate, volume target for non-cellulosic results in a total renewable fuel volume notwithstanding the increase in costs advanced biofuel of 4.0 billion gallons of 19.29 billion gallons as shown in associated with this decision.110 in 2018 is maintained. Although the Table IV.A—1.117If we were to However, this year we are balancing the implied volume for non-cellulosic determine that there is a basis to various considerations in a different advanced biofuel in the statute increases exercise the general waiver authority or manner in setting the 2018 standards, from 3.5 billion gallons in 2017 to 4.0 “5For instance, see discussion in the placing a greater emphasis on cost billion gallons in 2018, the applicable final rules volume requirements for 2017 as selling the 2013, 2014—2016, and 2017 standards: 78 considerations. FR 49809—49810, August 15, 2013; 80 FR 77434, In Section IV.E we present illustrative finalized by EPA included an allowance December 14, 2015; 81 FR 89752—89753,December cost projections for sugarcane ethanol for 4.0 billion gallons of non-cellulosic 12, 2016. We incorporate by reference the rationale advanced biofuel, one year before for this interpretation that was articulated in these envisioned by the statute. Tbrough our prior rules. “Market impacts of biofuels,” memorandum the advanced biofuel volume from David Korotney to docket EPA—HQ—OAR— requirement is nested within the total renewable 2017—0091. Sugarcane ethanol results in a projected cost fuel volume requirement, the statutory implied ‘1°See, e.g., Response to comments Document for increase of $0.92—$2.34per gasoline-equivalent volume for conventional renewable fuel in the the 2014—16Rule, pages 628—631,available at gallon. The projected cost of gasoline in 2018 is statutory tables can be discerned by subtracting the https://www.epo.gov/sftes/production/fiies/201 5- $1.64 per gallon based on sm Short-Term Energy applicable volume of advanced biofuel from that of 12/docoments/420r1 5024.pdf. Outlook, October 2017, custom Table Builder, total renewable fuel. Performing this calculation notes that while the factors considered “Refiner Wholesale Gasoline Price.” with respect to the tables in CAA section under the cellulosic waiver authority to reduce 113 Soybean biodiesel results in a projected cost 211(o)(2)IB) indicates a congressional expectation volumes could apply to volumes beyond the increase of $1.62—$2.22per diesel-equivalent that in the time period 2015—2022, advanced reduction in cellulosic biofuel, EPA is limited in gallon. The projected cost of diesel in 2018 is $1.74 biofuel volumes would grow from 5.5 to 21 billion the exercise of its cellulosic waiver authority to per gallon based on E Short-Term Energy gallons, while the implied volume for conventional reductions up to the amount of the reduction in Outlook, October 2017, custom Table Builder, renewable fuel would remain constant at 15 billion cellulosic biofuel. Any further reductions would “Diesel Fuel Refiner Wholesale Price.” gallons. require a determination under the general waiver ‘14EPA also considered the availability of 117EPA also considered the availability of authority that the volumes would result tn severe advanced carryover RINs in determining whether carryover RINs in determining whether reduced use economic or environmental barm, or that there is reduced use of the cellulosic waiver authority of the cellulosic waiver authority would be an inadequate domestic supply, as discussed in would be warranted. For the reasons described in warranted. For the reasons described in Section Section v below. Section E.B, we do not believe this to be the case. ll.B, we do oot believe this to be the case. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 31 of 48

58514 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations the biomass-based diesel waiver 1. Illustrative Cost Savings Associated approximately 580 million gallons due authority, we could provide further With Reducing Statutory Cellulosic to a limitation in the number of vehicles reductions to the total renewable fuel Volumes capable of using this form of fuel.’2° volume. However, as described in more To provide an illustrative estimate of EPA uses a “bottom-up” engineering detail below in Section V, we believe the cost of the 2018 cellulosic biofuel cost analysis to quantify the costs of that there is not sufficient justification requirements, EPA has compared the producing a gallon of cellulosic ethanol for such further reductions in 2018. 2018 cellulosic biofuel volume derived from corn kernel fiber. There are multiple processes that could yield E. Impacts of 2018 Standards on Costs requirements to the statutory volume that would be required absent the cellulosic ethanol from corn kernel In this section, EPA presents its exercise of our cellulosic waiver fiber. EPA assumes a cellulosic ethanol assessment of the illustrative costs of authority under CAA section production process that generates the final 2018 RFS rule. It is important 211(o)(7)(D)(i).” As described in other biofuel using distiller’s grains, a co to note that these illustrative costs do sections of this final rule, we believe product of generating corn starch not attempt to capture the full impacts that the additional 6.71 billion gallons ethanol that is commonly dried and sold of this final rule. These estimates are of cellulosic biofuel envisioned by the into the feed market as distillers dried provided solely for the purpose of statute will not be produced in 2018. grains with solubles (DDGS),as the showing how the cost to produce a Therefore, estimating costs of this renewable biomass feedstock. We gallon of a “representative” renewable volume reduction is inherently assume an enzymatic hydrolysis process fuel compares to the cost of petroleum challenging. However, we have taken with cellulosic enzymes to break down fuel. There are a significant number of the relatively straightforward the cellulosic components of the grains. caveats that must be considered when methodology of multiplying the per- distiller’s This process for interpreting these cost estimates. There gallon costs associated with the volumes generating cellulosic ethanol is similar to approaches are a number of different feedstocks that that would be required under this final currently used by could be used to produce biofuels, and rule by the amount of cellulosic industry to generate cellulosic ethanol at a commercial scale, and we believe there is a significant amount of renewable fuel that is being waived. these costs estimates heterogeneity in the costs associated This comparison results in a cost are likely with these different feedstocks and savings estimated to be $53415.9 representative of the range of different technology options being to fuels. Some fuels may be billion. developed renewable cost produce ethanol from corn kernel fiber. competitive with petroleum fuel To estimate the overall cost savings the We then compare the per-gallon replace; we do have from waiving the cellulosic biofuel they however, not wholesale costs of the cellulosic ethanol cost data on every type of feedstock and volumes, EPA has taken the following steps. First, EPA determined the to the petroleum fuels that would be every type of fuel. Therefore, we do not replaced. attempt to capture this range of magnitude of the volume reduction of cellulosic biofuel we are establishing in These cost estimates do not consider potential costs in our illustrative taxes, retail margins, or other costs or estimates. this rule, relative to the statutory volume. In this rule we are reducing the transfers that occur at or after the point The annual standard-setting process required volume of cellulosic biofuel by of blending (transfers are payments encourages consideration of the RFS 6.71 billion gallons, with corresponding within society and are not additional program on a piecemeal (i.e., year-to- reductions in the advanced biofuel and costs). We do not attempt to estimate year) basis, which may not reflect the total renewable fuel standards. Second, potential cost savings related to avoided full, long-term costs and benefits of the we estimated the per-gallon costs of infrastructure costs (e.g., the cost program. For the purposes of this final producing cellulosic ethanol derived savings of not having to provide pumps rule, other than the estimates of costs of from corn kernel fiber that would be and storage tanks associated with producing a “representative” renewable expected in complying with the higher-level ethanol blends). When fuel compared to cost of petroleum fuel, standards. Third, the per-gallon costs of estimating per-gallon costs, we consider EPA did not quantitatively assess other cellulosic biofuel from corn fiber were the costs of gasoline on an energy direct and indirect costs or benefits of multiplied by 6.71 billion gallons. equivalent basis as compared to ethanol, changes in renewable fuel volumes. While there may be growth in other since more ethanol gallons must be These direct and indirect costs and cellulosic biofuel sources, for this consumed to go the same distance as benefits include infrastructure costs, exercise we believe it is appropriate to gasoline due to the ethanol’s lower investment, GHG emissions and air use corn kernel fiber as the energy content. quality impacts, or energy security representative cellulosic biofuel. The Table IV.E.1—1below presents the benefits, which all are to some degree majority of liquid cellulosic biofuel in cost savings associated with this final affected by the annual standards. While 2018 is expected to be produced using rule that are estimated using this some of these impacts were analyzed in this technology, and application of this approach.l21 The statutory cellulosic the 2010 final rulemaking that technology in the future could result in established the current RFS program,’18 significant incremental volumes of l2OTo calculate this estimate, EPA used the Natural Gas vehicle Use from the 5TEO custom we have not analyzed these impacts for cellulosic biofuel. In addition, as the 2018 volume requirements. We Table Builder (0.12 billion cubic feet/day in 2018). explained in Section Ill.D.2, we believe This projection thcludes all cNG/LNG used as framed the analyses we have performed that production of the major alternative transportation fuel from both renewable and non for this final rule as “illustrative” so as cellulosic biofuel—CNC/LNC derived renewable sources. RIA does not project the amount of NG/LNG from as transportation not to give the impression of from biogas—is limited to biogas used comprehensive fuel. To convert billion cubic feet/day to ethanol- estimates. equivalent gallons, EPA used conversion factors of 119 EPA is also using its discretion to reduce the 1020 BTU per cubic foot of natural gas and 77,000 “8RF52 Regulatory Impact Analysis (RIA). U.s. advanced biofuel and total renewable fuel BTU of natural gas per ethanol-equivalent gallon. EPA 2010, Renewable Fuel standard Program requirements using the cellulosic waiver authority. 121Detalls of the data and assumptions used can (RF52) Regulatory Impact Analyais. EPA—420—R— This discretionary action is based partially on the be found in a Memorandum available in the docket

10—006.February 2010. Docket EPA—HQ—OAR— coats of advanced biofoels and provides additional entitied • ‘cost Impacts of the Final 2018 Annual 2009—0472—11332. cost savings. Renewable Fuel 5tandards”, Memorandum from USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 32 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017 /Rules and Regulations 58515 biofuel target in EISA for 2018 is seven billion gallons. The per-gallon cost significant range. Multiplying those per- billion gallons (ethanol equivalent). The difference estimates for cellulosic gallon cost differences by the amount of cellulosic biofuel volume used in this ethanol ranges from 50.79—52.37 per cellulosic biofuel waived in this final rule to establish the 2018 cellulosic ethanol equivalent gallon.122 Given that rule, 6.71 billion gallons, results in biofuel percentage standard is 288 cellulosic ethanol production is just approximately 55.3—515.9 billion in cost million gallons. The amount of starting to become commercially savings. cellulosic biofuel being waived is 6.71 available, the cost estimates have a

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

2018 EISA cellulosic 2018 Final volume cellulosic standard volume

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

2. Illustrative Cost Analysis of sugarcane ethanol from Brazil. Showing As described earlier, we are focusing Advanced Biofuels Using 2017 as the the illustrative costs of soybean oil BBD on the wholesale level in our cost Baseline 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 at volume requirements that a number of discussion should not be interpreted as or after the point of blending. More different scenarios using different suggesting that the various renewable background information on this section, fuel types discussed are necessarily ‘ ‘baselines” would be of interest to including details of the data sources stakeholders. Therefore, in this section, available in the marketplace. The used and assumptions made for each of we are also providing an illustrative cost availability of different types of the scenarios, can be found in a analysis that shows the costs of the renewable fuel is discussed in other memorandum available in the docket.127 advanced biofuel standard as compared sections of this preamble; in this section Table IV.E.2—1 to those associated with the preceding we assess costs as if the different fuel 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 fuels advanced biofuel volume of 10 million satisfied with conventional (i.e., non- they replace at the wholesale level. For ethanol 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 the scenarios, assuming this increase in conventional volume relative to the 10 million ethanol-equivalent gallon advanced biofuel volumes is comprised 2017 volume, all of the changes in both increase in the 2018 advanced standard of: (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.

TABLEIV.E.2—1—ILLUSTRATIVE COSTS OF THE 10 MILLIONGALLONINCREASEINTHE ADVANCEDBIOFUELVOLUME REQUIREMENTIN 2018 RELATIVETO THE 2017 VOLUMEREQUIREMENT

Soybean Blodlesel Scenario

Cost DifferenceBetween Soybean Biodieseland Petroleum Diesel Per Gallon (SIEGE)128 $0.89—Si .22 AnnualChange in OverallCosts (Million$) 129 $9—$12 Brazilian Sugarcane Ethanol Scenario

Cost DifferenceBetween Sugarcane Ethanoland Gasoline Per Gallon(SIEGE) $0.61—Si .56

Michael Shelby, Dallas Burtholder, and Aaron 121 Overall fuel volumes may not match due to light of the nested standards, that increase is Sobel to EPA Docket EPA—HQ—OAR—2017—0091. rounding. entirely attributable to the increase in the advanced 122 For the purposes of the cost estimates in this Approximate coats are rounded to the cents volume. section, EPA has not attempted to adjust the price place. 127”costImpacts of the Final 2018 Annual of the petroleum foels to account for the impact of 125 Renewable Fuel Standards”, the RFS program, since the changes in the costs are rounded to the first Memorandum from renewable fuel volume are relatively modest. decimal place. Michael Shelby, Dallas Burkholder, and Aaron Rather, we have simply used the wholesale price 125 There is also an increase of 10 million gallons Sobel to EPA Docket EPA—HQ—OAR—2017—0091. projections for gasoline and diesel as reported in in the 2018 applicable volume of total renewable EIA’s October 2017 STEO. foel as compared to the 2017 volume. However, in USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 33 of 48

58516 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations

TABLE IV.E.2—1—ILLUSTRATIVECOSTS OF THE 10 MILLIONGALLON INCREASE IN THE ADVANCEDBIOFUELVOLUME REQUIREMENTIN 2018 RELATIVETO 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.07 Annual 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—$2.37 Annual Change in Overall Costs (Million$) $8—$24

Based on this illustrative analysis of categories and the 2018 BBD using the considered the projected volumes of four separate hypothetical scenarios, BBD waiver authority in CAA section renewable fuel that can be supplied to EPA estimates that the costs for changes 211(o)(7)(E). We have concluded that refiners, importers, and blenders in in the advanced fuel volumes compared further reductions in volumes using any 2018 from both domestic production to 2017 could range from $(0,4)—$24 of these other waiver authorities are not and imports. In addition, consistent million in 2018. It is important to note warranted. We note that in the October with the approach identified for that these illustrative costs do not take 4 Federal Register document we consideration in the October 4 into consideration the benefits of the solicited comment on possible new document, we considered the projected program.131 For the purpose of this interpretations of the general waiver volumes of renewable fuel that can be annual rulemaking, we have not authority for inadequate domestic supplied to refiners and blenders solely quantified benefits for the 2018 supply and severe economic harm and from domestic production. Under either standards. For example, we do not have of the biomass-based diesel waiver approach we conclude a waiver is not a quantified estimate of the GHG or authority.132 We find it unnecessary to warranted. energy security benefits for a single year resolve whether to adopt such In Section III we discussed our (e.g., 2018). Also, there are impacts that interpretations at this point in time projection that 288 million gallons of are difficult to quantify, such as rural because under any approach we would cellulosic biofuel will be made available economic development and find exercise of these waiver authorities in 2018. In Section IV we described our employment changes from more not appropriate based on the record assessment that about 4.40 billion diversified fuel sources, that are not before us. gallons of advanced biofuel would be quantified in this rulemaking. As a result, we are finalizing reasonably attainable in 2018 from both advanced biofuel and total renewable domestic production and imports but V. Consideration of Additional fuel volume requirements resulting from that, after considering a number of Reductions Using Other Waiver the exercise of the cellulosic biofuel factors, such as the potential for Authorities waiver authority alone, and we are not feedstock/fuel diversions and cost of As discussed in previous sections, we modifying the 2018 BBDapplicable advanced biofuel, we would exercise are reducing the statutory volume target volume of 2.1 billion gallons established our discretion to use the full cellulosic for cellulosic biofuel to reflect the through a prior rulemaking. The implied waiver authority to reduce the projected production volume of that fuel volume for conventional renewable fuel applicable volume to 4.29 billion type in 2018, and we are reducing both (calculated by subtracting the advanced gallons.134 As a result, we do not advanced biofuel and total renewable volume from the total volume) will be anticipate an inadequate domestic fuel by the maximum permissible 15.0 billion gallons, consistent with the supply of advanced biofuels to meet a amount authorized under the cellulosic statutory target provided in the statute volume requirement of 4.29 billion waiver authority in CAA section for 2018. gallons for advanced biofuel, when both 211(o)(7)(D)(i). A. Inadequate Domestic Supply domestic production and imports are We have also considered whether it considered. would be appropriate to provide further On July 21, 2017, we proposed to Having determined that there will not reductions for these renewable fuel reduce the 2018 statutory volume targets be an inadequate domestic supply of categories pursuant to the general for advanced biofuel and total advanced biofuel, we further considered waiver authority in CAA section renewable fuel by the maximum whether there may be an inadequate 211(o)(7)(A), or for these renewable fuel permissible amount using the cellulosic domestic supply to satisfy the portion of waiver authority, and not to reduce the total renewable fuel volume 128 Per-gallon cost differences compare these volumes further using other requirement that can be satisfied with illustrative biofoela to their petroleum fuel authorities. However, we requested non-advanced (conventional) renewable counterparts on an ethanol gallon equivalent (EGE) comment on the possible additional use fuel. After application of the full basis, accounting for the differences in energy of the general waiver authority or other content between fuels, and then multiplied by the cellulosic waiver authority to the total RINs needed to meet the change in volume authorities to provide further reductions advanced biofuel and total renewable obligations. in the proposed volume 329 Overall costs may not match per-gallon coats requirements.133 To evaluate the 134 Because EPA’s authority under the celluloaic times volumes due to rounding. possibility for using the general waiver waiver authority affords EPA more discretion to °cNG/LNG derived from biogas and natural gas authority on the basis of a finding of reduce volumes of advanced and total renewable coats are compared on an ethanol gallon equivalent inadequate domestic supply, we fuel than the general waiver authority under an (EGE) energy content basis. evaluation of inadequate domestic supply, EPA baa The small negative coat estimate is likely a evaluated the supply of advanced biofuel for result of the methodology undertaken for these 132 FR 46174, October 4, 2017. purposes of a determination on the adequacy of illustrative coats. 133 FR 34206 at 34213, October 4, 2017. supply without consideration of these factors. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 34 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58517 fuel statutory volume targets, the on the extent to which such an proposed 2018 volume requirements.l:37 implied statutory volume for interpretation would have a relevant We believe, based on the record before conventional renewable fuel is 15.0 impact on renewable fuel supply. us, that there is uncertainty regarding billion gallons. The total domestic In light of the fact that the domestic the capability of the domestic advanced production capacity of corn ethanol in production capacity of conventional biofuel industry to compensate in 2018 the U.S. is about 16 billion gallons, and biofuel volumes is in excess of 15 for volumes that would not be provided total production of denatured and billion gallons, whether we were to though imports. Taking this undenatured ethanol from these exclude imported biofuels from our uncertainty into account (including the facilities in 2016 exceeded 15 billion consideration of domestic supply would distinct possibility that the domestic gallons.135 As a result, there does not primarily impact our assessment of the industry could compensate for appear to be an inadequate domestic supply of cellulosic biofuel and exclusion of imports), as well as the supply of renewable fuel to satisfy the advanced biofuel volumes, not availability of imported volumes and implied 15 billion gallon conventional conventional renewable fuel. With carryover RINs, EPA would not choose renewable fuel volume that results from respect to cellulosic biofuel, we note to exercise its authority to grant a full application of the cellulosic waiver that the vast majority of the supply in waiver on the basis of inadequate authority to reduce statutory volume 2018 is expected to come from domestic domestic supply for 2018 even if it targets for advanced biofuel and total sources. In fact, if EPA excluded interpreted the term “domestic supply” renewable fuel. We note that this consideration of projected cellulosic to exclude imports. In light of this assessment does not include imported biofuel imports, our projection of the determination, we need not resolve at volumes of fuel, such as conventional available volume of cellulosic biofuel in this time the interpretive issue regarding biodiesel, which could also be used to 2018 would be reduced by only 2 whether the term “domestic supply” satisfy the volume requirements. In light million gallons or less than 1 percent of should include consideration of of this finding, we conclude that there our projection that 288 million imports. is not an inadequate domestic supply of cellulosic biofuel gallons will be made B. Severe Economic Harm volumes than can be used to meet the available in 2018. Given the importance 15 billion gallon implied volume for that Congress placed on the growth of The proposal and October 4 document conventional renewable fuel, and thus cellulosic biofuel volumes, our requested comment on the possibility of that further reductions of the 19.29 projection that compliance with a 288 further reductions in the proposed billion gallon total renewable fuel million gallon requirement is feasible volume requirements, including on the volume requirement derived through using RINs generated in 2018, and the basis of a severe economic harm. We use of the cellulosic waiver authority availability of carryover cellulosic received comments from stakeholders would not appropriate when taking into biofuel RINs and cellulosic waiver both in support of, and opposed to, account both domestic production and credits for additional compliance further reductions in the advanced imports. flexibility, EPA would not exercise its biofuel and/or total renewable fuel In the October 4 document, we discretion to lower the 288 million volume requirements based on a finding discussed comments on the proposal gallon projected cellulosic biofuel of severe economic harm. For instance, suggesting that EPA should interpret the volume by 2 million gallons even if EPA several obligated parties stated that the undefined term “domestic” in the were to interpret the term “domestic purchase of RINs to comply with the phrase “inadequate domestic supply” to supply” to exclude imported volumes. applicable standards represents a account for only volumes of renewable With respect to the available supply significant economic burden to their fuel that are produced domestically. If of advanced biofuel in 2018 in the companies. Some also indicated that EPA were to adopt this interpretation, context of an interpretation of they are considering filing for we could exclude potential imports of inadequate domestic supply that bankruptcy. However, these renewable fuel in our assessment of excludes imports, several commenters commenters did not provide sufficient domestic supply but, even if we found noted the data provided by EPA in the evidence that the purchase of RINs, as domestic supply to be inadequate, could October 4 document indicating that a opposed to other market factors, is take factors such as potential imports significant portion of the advanced responsible for the company’s difficult and the availability of carryover RINs biofuel available in previous years has economic circumstances, or why they into account in determining the extent been from imported biofuels, cannot recoup the cost of RINs though to which we should exercise our particularly imported biodiesel and higher prices of their products, or the discretion to grant a waiver on the basis renewable diesel. Some commenters arguments presented were of inadequate domestic supply.136 As pointed to total domestic production unconvincing.138 None of the described in more detail in the RTC capacity and feedstock availability to document, stakeholders who addressed argue that domestic producers are ‘37The “domestic supply” of BBD for 2018 would likely be adequate to meet the 2018 standard of 2.1 this issue provided varying perspectives capable of compensating for volumes billion gallons. Oomestic production of BBD would that would not be provided through need to increase by approximately 300 million 135 “2017 Ethanol Industry Outlook” by the imports, so that even under an gallons as compared to the 2016 production. As Renewable Fuels Association indicates that 2017 interpretation of “domestic supply” that discussed above, EPA believes this increase is nationwide production capacity is 16.0 bill gal and possible and received comments suggesting this actual production in 2016 was 15.25 bill gal. “Us excluded imports, EPA would not be volume increase could be met by domestic Fuel Ethanol Plant Production capacity from EIA,” justified in reducing volumes on the production. Additionally, carryover RINs and estimates 2017 nameplate production capacity at basis of inadequate domestic supply to imported volumes could still be used to meet the 15.51 bill gal. In “Ethanol Production in 2016 from a level below what was proposed. standard. Therefore, EPA would not chose to EIA,” EIA indicates that 2016 actual production exercise its authority to grant a waiver on the basis was 15.45 bill gal. All documents are available in Others suggested that, without imported of inadequate domestic supply for BBD for 2018 docket EPA—HQ—OAR—2017—0091. volumes, the domestic industry could even if it interpreted the term “domestic supply” 135 EPA’s current regulations provide that not ramp up production quickly enough to exclude imports. qualifying imported biofuel may be used for to compensate for the exclusion of ‘35we further note that before exercising the compliance with the RFS standards; EPA’s response imports from our analysis and provide general waiver authority on the basis of severe to comments on this approach to imported biofuels economic harm to a State, a Region or the U.S., EPA is provided in the RTC document. a “domestic supply” equal to the cootthued USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 35 of 48

58518 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations commenters provided compelling feedstock futures prices, and projected equal or lesser volume than the evidence that the proposed RFS volume gasoline demand. We also investigated reduction in BBD. In the October 4 requirements for 2018 would be likely the potential market impacts of the final document we requested comment on the to cause severe economic harm to a 2018 standards, most specifically in expected impact on the price of BBD of region, State, or the Further terms of ethanol and biodiesel the expiration of the biodiesel blenders discussion of these comments can he consumption. ‘‘ tax credit, proposed import duties on found in the RTC document. Based on the record before us, we do hiodiesel from Argentina and Indonesia, In addition to reviewing comments on not believe that there is sufficient or any other factors. We further the proposed rule and the October 4 evidence to conclude that severe requested comment on whether any document, EPA also reviewed market economic harm is occurring currently in expected impacts should be considered data from 2017 and previous years to 2017 in any State, region, or the United significant for the purposes of the BBD see if there was evidence that the RFS States, and we do not believe that waiver authority. standards are currently causing severe market conditions in 2018 are likely to To investigate whether a reduction in economic harm, or would be likely to cause compliance with the applicable the 2018 BBD volume requirement cause severe economic harm in 2018. standards to be more economically would be warranted under CAA section Given that the 2018 volumes generated challenging than it is in 2017. Given 211(o)(7](E](ii), we considered current through the maximum reduction that the 2018 standards are very similar and historical prices of unhiended permitted under the cellulosic waiver to the 2017 standards, then, we do not hiodiesel (Bi00), the price of blended authority are nearly the same as the believe that further reductions in the biodiesel (in particular, B20], and BBD volume requirements for 2017, we 2018 volume requirements on the basis (D4) R1Nprices. The results of this considered: of severe economic harm are warranted. investigation are described in a 1. Whether severe economic harm has memorandum to the docket.142 EPA occurred to date or is likely to occur in C. Severe Environmental Harm discussed in the October 4 document 2017, and EPA received comments in response the fact that the Department of 2. whether the economic conditions to the proposal asserting that there are Commerce had imposed preliminary in 2018 might lie expected to be negative environmental impacts that tariffs on biodiesel imported from substantially different than those in may be associated with the RFS Argentina and Indonesia, and that such 2017. program. A significant portion of these tariffs could impact the price of BBD. To determine whether severe concerns center on feedstock However, these tariffs have not yet been economic harm has occurred to date or production. Although we are authorized finalized, nor has EPA observed any is likely to occur in in 2017, we to reduce the statutory volume targets significant impact of the announcement investigated several possible indicators. on the basis of a finding that the of the preliminary tariffs on the price of These included RIN generation for 2017 requirements would “severely harm the biomass-based diesel.’43 relative to 2016, closures, refinery retail environment of a State, region, or Based on the information before us, fuel prices, and corn and soybean the United States,” commenters have including the results of our prices. Based on our investigation, we not presented evidence sufficient to investigation and information and do not believe that severe economic support a determination to make a comments submitted in response to the harm has occurred thus far in 2017 to reduction on this basis for 2018. EPA is October 4 document, we have any State, region, or the U.S. as a result not making reductions on this basis for concluded that there is not sufficient of the 2017 or is likely occur standards, 2018. EPA’s response to comments evidence of a significant increase to the by the end of 2017. Details of this related to perceived environmental price of BBD due to feedstock investigation can be found in a harms of the RFS program is set forth in disruption or other relevant market memorandum to the docket.14° To determine whether the economic the RTC document accompanying this circumstances to justify reductions to conditions in 2018 might lie expected to rule. the 2018 BBD volume requirement using he substantially different than those in the biomass-based diesel waiver D. Biomass-Based Diesel Waiver authority. 2017 in ways that could affect the Authority economic impact of compliance with The BBD waiver authority in CAA VI. final Biomass-Based Diesel Volume the RFS program, we investigated section 211(o)(7)(E)(ii) provides that if for 2019 projections of two primary drivers of the EPA is a In this section we discuss the BBD of compliance: determines that there cost Crop-based significant renewable feedstock applicable volume for 2019. We are disruption or other market circumstance establishing this volume in advance of would need to consider whether a waiver that would affect the standards applicable to all that would make the price of BBD those for other renewable fuel categories obligated parties, and would take into account any increase significantly, then EPA shall, in in light of the statutory requirement in negative economic impacts to farmers and biofuel consultation with the Secretary of CAA section 211(o)(2)(B)(ii) to establish producers from a waiver, would be of significant the applicable volume of BBDfor years benefit to individual obligated parties facing Energy and the Secretary of Agriculture, financial difficulties. issue an order to reduce, for up to a 60- after 2012 no later than 14 months ‘ In the October 4 document, we solicited day period, the annual volume before the applicable volume will apply. comment on EPA’s prior interpretation of the term requirement for BBD by an appropriate We are not at this time establishing the “severe economic harm.’ As discussed in the RTC quantity that does not exceed 15 BBDpercentage standards that would document accompanying this action, we believe that the evidence in the record would be percent. If EPA reduces the annual apply to obligated parties in 2019 but insufficient to support a finding of severe economic volume requirement for BBD using this harm under any reasonable interpretation of the waiver authority, we may also reduce 142 “Assessment of waivers for severe economic phrase advanced by commenters, so do not find it the applicable volume of advanced harm or BBD prices for 2018,” memorandum from necessary to assess changes to our interpretation of David Korothey to docket EPA—HQ—OAR—2o17— the phrase at this time. hiofuel and total renewable fuel by an 0091. “Assessment of waivers for severe economic 143 “Assessment of waivers for severe economic harm or BBD prices for 2018,” memorandum from 141 “Market impacts of biofuels,” memorandum harm or BBD prices for 2018,” memorandum from David Korotney to docket EPA—HQ—OAR—2017— from David Korotney to docket EPA—HQ—OAR— David Korothey to docket EPA—HQ-OAR—2o17— 0091. 2017—0091. 0091. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 36 of 48

Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations 58519 intend to do so in late 2018, after 3. The expected annual rate of future billion gallon minimum, on the level at receiving EIA’s estimate of gasoline and commercial production of renewable which BBDvolumes should be set. diesel consumption for 2019. Although fuels, including advanced biofuels in In establishing the BBD and cellulosic the BBD applicable volume sets a floor each category (cellulosic biofuel and standards as nested within the advanced for required BBD use, because the BBD BBD); hiofuel standard, Congress clearly volume requirement is nested within 4. The impact of renewable fuels on intended to support development of infrastructure of both the advanced biofuel and the total the the United States, BBD and especially cellulosic biofuels, renewable fuel volume requirements, including deliverability of materials, while also providing an incentive for and than any BBDproduced beyond the goods, products other the growth of other non-specified types renewable fuel, and the sufficiency of mandated 2019 BBD volume can be of advanced biofuels. That is, the used to satisfy both of these other infrastructure to deliver and use advanced hiofuel standard provides an applicable volume requirements. renewable fuel; opportunity for other advanced biofuels 5. The impact of the use of renewable (advanced biofuels A. Statutory Requirements fuels on the cost to consumers of that do not qualify as cellulosic hiofuel or BBD]to The statute establishes applicable transportation fuel and on the cost to compete cellulosic BBD volume targets for years through 2022 transport goods; and with biofuel and to satisfy the advanced biofuel standard for cellulosic biofuel, advanced biofuel, 6. The impact of the use of renewable after the cellulosic hiofuel and BBD and total renewable fuel. For BBD, fuels on other factors, including job standards met. applicable volume targets are specified creation, the price and supply of have been in the statute only through 2012. For agricultural commodities, rural B. Determination of the 2019 Applicable years after those for which volumes are economic development, and food prices. Volume of Biomass-Based Diesel specified in the statute, EPA is required The statute also specifies that the under CAA section 211(o)(2)(B)(ii) to volume requirement for BBD cannot be One of the primary considerations in determine the applicable volume of less than the applicable volume determining the BBD volume for 2019 is BBD, in coordination with the Secretary specified in the statute for calendar year a review of the implementation of the of Energy and the Secretary of 2012, which is 1.0 billion gallons. The program to date, as it affects BBD. This Agriculture, based on a review of the statute does not, however, establish any review is required by the CAA, and also implementation of the program during other numeric criteria, or provide any provides insight into the capabilities of calendar years for which the statute guidance on how the EPA should weigh the industry to produce, import, export, specifies the volumes and an analysis of the importance of the often competing and distribute BBD. It also helps us to the following factors: factors, and the overarching goals of the understand what factors, beyond the 1. The impact of the production and statute when the EPA sets the applicable BBD standard, may incentivize the use of renewable fuels on the volumes of BBD in years after those for production and import of BBD. The environment, including on air quality, which the statute specifies such number of BBD RINs generated, along climate change, conversion of wetlands, volumes. In the period 2013—202 2, the with the number of RINs retired due to ecosystems, wildlife habitat, water statute specifies increasing applicable export or for reasons other than quality, and water supply; volumes of cellulosic biofuel, advanced compliance with the annual BBD 2. The impact of renewable fuels on hiofuel, and total renewable fuel, but standards from 2011—2018 are shown in the energy security of the United States; provides no guidance, beyond the 1.0 Table VLB.1—1below.

TABLEVI.B.1—1—BIOMASS-BASED(D4) RIN GENERATIONANDSTANDARDSIN 2011—2018 [million RINs or gallons] 144

BBD RIN5 EBD RINs Exported BED Available BBD BED standard BED standard generated (RIN5) n’ ance Ii RINsa (gallons) (RIN5) reasons

2011 1,692 72 98 1,522 800 1,200 2012 1,737 102 90 1,545 1,000 1,500 2013 2,739 124 101 2,514 1,280 1,920 2014 2,710 134 92 2,484 1,630 b2,49O 2015 2,796 145 32 2,619 1,730 b2,655 2016 4,008 203 96 3,709 1,900 2,850 2017 N/A N/A N/A N/A 2,000 3,000 2018 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 Rea sons, 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 be tween 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 Standard column is not exactly equal to 1.5 times the BED volume standard as these standards were established based on actual RIN generation data for 2014 and a combination of actual data and a projection of RIN generation for the last three months of the year for 2015. Some of the volume used to meet the BBD standard was renewable diesel.

‘Avai1ah1e BBDRINs Generated, Exported BBD RINs, and BBDRINs Retired for Non-Compliance Reasons information from EMTS. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 37 of 48

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

In reviewing historical BBD RIN The prices paid for advanced biofuel capable of incentivizing increased BBD generation and use, we see that the and BBD RINs beginning in early 2013 volumes beyond the BBD standard, and number of RINs available for through the end of 2016 also support the operated in this manner starting in compliance purposes exceeded the conclusion that advanced biofuel and/or 2013.148 While final standards were not volume required to meet the BBD total renewable fuel standards provide a in place throughout 2014 and most of standard in 2011, 2012, 2013, and 2016. sufficient incentive for additional 2015, EPA had issued proposed rules for Additional production and use of biodiesel volume beyond what is both of these years. In each year, the biodiesel was likely driven by a number required by the BBD standard. Because market response was to supply volumes BBD is of factors, including demand to satisfy the standard nested within the of BBD that exceeded the proposed BBD the advanced biofuel and total advanced biofuel and total renewable standard in order to help satisfy the fuel standards, can renewable fuels standards, the biodiesel and therefore help to proposed advanced and total biofuel tax credit,145 favorable blending satisfy three RVOs, we would expect the and standards.149 Additionally, the PIN economics. The number of RINs price of BBDRINs to exceed that of prices in these years strongly suggests available in 2014 and 2015 was advanced and conventional renewable approximately equal to the number 1?H’.Js.146 If, however, BBD RINs are that obligated parties and other market required for compliance in those years, being used by obligated parties to satisfy participants anticipated the need for as the standards for these years were their advanced biofuel obligations, BBD RINs to meet their advanced and finalized at the end of November 2015 above and beyond the BBD standard, we total biofuel obligations, and responded and EPA’s intent at that time was to set would expect the prices of advanced by purchasing advanced biofuel and the standards for 2014 and 2015 to biofuel and BBD RINs to converge.147 BBD RINs at approximately equal reflect actual BBDuse. In 2016, with Further, if BBDRINs are being used (or prices. We do note, however, that in RFS standards established prior to the are expected to be used] to satisfy 2012 the BBD RIN price was beginning of the year and the blenders obligated parties’ total renewable fuel significantly higher than both the tax credit in place, available BBDRINs obligation, above and beyond their BBD advanced biofuel and conventional exceeded the volume required by the and advanced biofuel requirements we renewable fuel RIN prices. In 2012 the BBD standard by 859 million RINs (30 would expect the price for all three RIN ElO blendwall had not yet been reached, percent]. This indicates that in types to converge. and it was likely more cost effective for appropriate circumstances there is When examining RIN price data from most obligated parties to satisfy the demand for BBDbeyond the required 2012 through September 2017, shown in portion of the advanced biofuel volume of BBD. Figure VI.B.2—1below, we see that requirement that exceeded the BBD and beginning in early 2013 and through cellulosic biofuel requirements with The biodiesel tax credit was reauthorized in September 2017 the advanced RIN price advanced ethanol. January 2013. It applied retroactively for 2012 and and BBDRIN prices were approximately for the remainder of 2013. It was once again equal. Similarly, from early 2013 extended in December 2014 and applied ‘48Although we did not issue a nile establishing retroactively to all of 2014 as well as to the through late 2016 the conventional the final 2013 standards until August of 2013, we remaining weeks of 2014. In December 2015 the renewable fuel and BBD RIN prices believe that the market anticipated the final biodiesel tax credit was authorized arid applied were approximately equal. This suggests standards, based on EPA’s July 2011 proposal and retroactively for all of 2015 as well as through the that the advanced biofuel standard and! the volume targets for advanced and total renewable end of 2016. fuel established in the statute. (76 FR 38844, 38843, 146 This is because when an obligated party retires or total renewable fuel standard are July 1, 2011). a BBDJUNto help satisfy their BBDobligation, the EPA proposed a BBD standard of 1.28 billion nested nature of the BBD standard means that this ‘47We would still expect D4 RINs to be valued gallons (1.92 billion RJNs) for 2014 in our RIN also counts towards satisfying their advanced at a slight premium to US and D6 RINs in this case November 2013 proposed rule. The number of BUD and total renewable fuel obligations. Advanced (and D5 RINs at a slight premium to 06 RINsI to RJNs available in 2014 was 2.67 billion. EPA RINs count towards both the advanced and total reflect the greater flexibility of the 04 RINs to be proposed a BBDstandard of 1.70 billion gallons renewable fuel obligations, while conventional used towards the BBD, advanced biofuel, and total (2.55 billion RINs] for 20Th in our June 2015 RINs (D6) count towards only the total renewable renewable fuel standard. This pricing has been proposed nile. The number of BBD RINs available fuel obligation. observed over the past several years. in 2015 was 2.92 billion. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 38 of 48

Federal Register / Vol. 82, No. 237/Tuesday, December 12, 2017 / Rules and Regulations 58521

Figure VI.B.2-l D4, D5, and D6 RIN Prices (January 2012— September 2017) $1.80 $1.60 $1.40 $1.20 $1.00 $0.30 $0.60 $0.40 $0.20

(N no (N (N fl en en en sr In ..fl In In D N. -.. -40 0_-4 0_4 —40 0-4 0- —0 0— -40 0-4 0- 0-4 0-4 0- 0-4 -40 -4 0-4 0-4 0-4 0-4 0-4 -40 no no no no no no no no no no no no no no no no no0 no no no no no no C J5 t C C C C C Z—5 3 <— .E .-—5 < .L Z <0 rYS 00en en 000 en en en000 en en 000en en en 000en en 000en en en 06 RN Price 04 FIN Price 05 FIN Price

RENTPrice Source: Argus Media Group

In raising the 2013 BBD volume above beyond the BBD standard would have and beyond the BBD volume the 1 billion gallon minimum mandated been needed to meet the advanced requirement. by Congress, the EPA sought to “create biofuel volume requirement. Finally, we note that the BBD greater certainty for both producers of The only advanced biofuel other than industry in the U.S and abroad has BBD and obligated parties” while also BBD available in appreciable quantities matured since EPA first increased the acknowledging that, “the potential for in 2012 and 2013 was advanced ethanol, required volume of BBD beyond the somewhat increased costs is appropriate the vast majority of which was imported statutory minimum in 2013. To assess in light of the additional certainty of sugarcane ethanol. EPA had significant the maturity of the biodiesel industry, GHG reductions and enhanced energy concerns as to whether or not the EPA compared information on BBD RIN security provided by the advanced supply of advanced ethanol could generation by company from 2012 and biofuel volume requirement of 2.75 increase this significantly (750 million 2016 (the most recent year for which billion gallons.” 150 Unknown at that gallons) in a single year. These concerns complete RIN generation is available). In time was the degree to which the were heightened by the approaching 2012, the annual average RIN generation required volumes of advanced biofuel ElO blendwall, which increased the per company producing BBD was about and total renewable fuel could challenges associated with supplying 11 million RINs (about 7.3 million incentivize volumes of BBD that increasing volumes of ethanol to the gallons) with approximately 50 percent exceeded the BBD standard. In 2012 the U.S. If neither BBD volumes nor of companies producing less the 1 available supply of BBD RINs exceeded advanced ethanol volumes increased million gallons of BBD a year. The the required volume of BBD by a very sufficiently, EPA was concerned that agency heard from multiple commenters small margin (1,545 million BBD RINs some obligated parties might be unable during the 2012 and 2013 rulemakings were made available for compliance to acquire the advanced biofuel RINs that higher volume requirements for towards meeting the BBD requirement necessary to demonstrate compliance BBD would provide greater certainty for of 1,500 million BBD RINs). The with their RVOs in 2013. Therefore, as the emerging BBD industry and remainder of the 2.0 billion-gallon discussed above, EPA increased the encourage further investment. Since that advanced biofuel requirement was volume requirement for BBD in 2013 to time, the BBD industry has matured in satisfied with advanced ethanol, which help create greater certainty for BBD a number of critical areas, including was largely imported from Brazil. 151 producers (by ensuring demand for their growth in the size of companies, the From 2012 to 2013 the statutory product above the 1.0 billion gallon consolidation of the industry, and more advanced biofuel requirement increased statutory minimum) and obligated stable funding and access to capital. In by 750 million gallons. If EPA had not parties (by ensuring that sufficient RINs 2012, the BBD industry was increased the required volume of BBD would be available to satisfy their characterized by smaller companies for 2013, and the advanced biofuel advanced biofuel RVOs). Since 2013, with dispersed market share. By 2016, standard had proved insufficient to however, EPA has gained significant the average BBD RIN generation per increase the supply of BBD beyond the experience implementing the RFS company had climbed to almost 33 statutory minimum of 1.0 billion program. As discussed above, RIN million RINs (22 million gallons) gallons, an additional 750 million generation data has consistently annually, a 3-fold increase. Only 27 gallons of non-BBD advanced biofuels demonstrated that the advanced biofuel percent of the companies produced less volume requirement, and to a lesser than 1 million gallons of BBD. 15077 FR 59456, 59462 (september 27, 2012). degree the total renewable fuel volume We are conscious of public comments 151 594 million advanced ethanol RINs were requirement, are capable of claiming that BBD volume requirements generated in in 2012. incentivizing the supply of BBD above that are a significant portion of the USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 39 of 48

58522 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations advanced volume requirements C. Consideration of Statutory Factors believe that the same overall volume of effectively dis-incentivize the future Set Forth in CAA Section BBDwould likely be supplied in 2019 development of other promising 211 (o)(2)(B)(ii)(I)—(VI)for 2019 even if we were to mandate a somewhat advanced biofuel pathways. A variety of As noted earlier in Section IV.B., the lower or higher BBD volume for 2019 in different types of advanced biofuels, BBD volume requirement is nested this final rule. Thus, we do not expect rather than a single type such as BBD, within the advanced biofuel our 2019 BBDvolume requirement to would positively impact energy security requirement and the advanced biofuel result in a difference in the factors we (e.g., by increasing the diversity of requirement is, in turn, nested within consider pursuant to CAA section feedstock sources used to make biofuels, the total renewable fuel volume 211(o)(2)(B)(ii)(I)—(VIJ. thereby reducing the impacts associated requirement. This means that any BBD As an additional supplementary with a shortfall in a particular type of produced beyond the mandated BBD assessment, we have considered the feedstock) and increase the likelihood of volume can be used to satisfy both these potential impacts of selecting an the development of lower cost advanced other applicable volume requirements. applicable volume of BBD other than 2.1 biofuels that meet the same GHG The result is that in considering the billion gallons in 2019. Selling a reduction threshold as BBD.12 statutory factors we must consider the requirement higher or lower than 2.1 With the considerations discussed potential impacts of increasing or billion gallons in 2019 would only be above and in Section W.B.2 in mind, as decreasing BBD in comparison to other expected to impact BBDvolumes on the well as our analysis of the factors advanced biofuels.154 For a given margin, protecting to a greater or lesser specified in the statute, we are setting advanced biofuel standard, greater or degree BBD from competition with other the applicable volume of BBDat 2.1 lesser BBD volume requirements do not potential advanced biofuels. In this billion gallons for 2019. We believe this change the amount of advanced biofuel supplementary assessment we have volume sets the appropriate floor for used to displace petroleum fuels; rather, considered all of the statutory factors BBD, and that the volume of advanced increasing the BBDrequirement may found in CAA section 211(2)(B)(ii), and hiodiesel and renewable diesel actually result in the displacement of other types as described in the 2019 BBD docket used in 2019 will be driven by the level of advanced biofuels that could have memorandum, our assessment does not of the advanced biofuel and total been used to meet the advanced biofuels appear, based on available information, renewable fuel standards that the volume requirement. While in recent to provide a reasonable basis for setting Agency will establish for 2019. We have years EPA has annually increased the a higher or lower volume requirement for BBD considered the required statutory factors BBD volume requirement, EPA is, as we than 2.1 billion gallons for 2019. in reaching our decision, as summarized proposed, maintaining the 2.1 billion Overall in Section C, below, and in a gallon standard for 2019 based on our and as described in the 2019 memorandum to the docket (the “2019 review of the statutory factors and the BBD docket memorandum, we have BBD docket memorandum”).153 considerations noted above and in the determined that both the primary 2018 BBD Docket Memorandum. In assessment and the supplemental We believe final 2019 BBD our particular, as EPA noted above in assessment of the statutory factors volume requirement strikes the section VI.B., the BBD industry is more specified in CAA section appropriate balance between providing mature, and we have increased BBD 211(o)(2)(B)(ii)(I)—(VI)for the year 2019 a where market environment the volumes significantly in recent years so does not provide significant support for development other biofuels of advanced that the BBD standard is now over twice setting the BBD standard at a level is incentivized, while also maintaining the minimum statutory volume required higher or lower than 2.1 billion gallons support for the BBD industry. Based on in CAA section 211(o)(2](B)(i). In these in 2019. our review of the data, and the nested circumstances we do not believe that an VII. Percentage Standards faT 2018 nature of the BBD standard within the additional increase in the required BBD advanced standard, we conclude that required volume is necessary to support The renewable fuel standards are the advance standard continues to drive the industry in 2019. expressed as volume percentages and the ultimate volume of BBD supplied. Consistent with our approach in are used by each obligated party to Given the success of the industry in the selling the final BBDvolume determine their Renewable Volume past few years, as well as the substantial requirement for 2018, EPA’s primary Obligations (RVOs).Since there are four increases in the BBDvolume being assessment of the statutory factors for separate standards under the RFS driven by the advanced standard, we the 2019 BBDapplicable volume is that program, there are likewise four have determined that a volume because the BBDrequirement is nested separate RVOs applicable to each requirement greater than 2.1 billion within the advanced biofuel volume obligated party. Each standard applies gallons for BBD in 2019 is not necessary requirement, we expect that the 2019 to the sum of all non-renewable gasoline to provide support for the BBDindustry. advanced volume requirement, when set and diesel produced or imported. The Selling the BBD standard in this manner next year, will determine the level of percentage standards are set so that if continues to allow a considerable BBD production and imports that occur every obligated party meets the portion of the advanced biofliel volume in 2019.155 Therefore, EPA continues to percentages by acquiring and retiring an to be satisfied by either additional appropriate number of RINs, then the gallons of BBD or by other unspecified ‘54While excess BBD production could also amount of renewable fuel, cellulosic and potentially less costly types of displace conventional renewable fuel under the biofuel, BBD, and advanced biofuel qualifying advanced biofuels. total renewable standard, as long as the BBD used will meet the applicable volume applicable volume is significantly lower than the advanced biofuel applicable volume our action in requirements on a nationwide basis. 152 All types of advanced biofuel, including 330, selling the BBD applicable volume is not expected must achieve lifecycle GHG reductions of at least to displace conventional renewable fuel under the volume requirement will be considerably higher 50 percent. total renewable standard, but rather other advanced than the 2019 BBD requirement, consistent with ‘53”Memorsndum to docket: Draft statutory biofuels. past practice and, therefore, that the BBD volume Factors Assessment for the 2019 Biomass-Based 155 Even though we are not setting the 2019 requirement for 2019 would not be expected to Diesel (BBD) Applicable Volumes. See Docket advanced biofuel volume requirement as part of this impact the volume of BBD that is actually produced EPA—HQ—OAR—2017—0091. rulemaldng, we expect that the 2019 advanced and imported during the 2019-time period. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 40 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58523

Sections III through V provide our standards, and volumes of such fuels are expect the BBD standard to be binding. rationale and basis for the volume not used in calculating the annual That is, we expect that actual supply of requirements for 2018156 The volumes percentage standards. Since under the BBD, as well as supply of conventional used to determine the percentage regulations the standards apply only to biodiesel and renewable diesel, will be standards are shown in Table Vu—i. producers and importers of gasoline and driven by the advanced biofuel and total diesel, these are the transportation fuels renewable fuel standards. TABLE Vu—i—VOLUMES FOR USE IN used to set the percentage standards, as B. Small Refineries and Small Refiners SETTING THE 2018 APPLICABLE well as to determine the annual volume PERCENTAGE STANDARDS obligations of an individual gasoline or In CAA section 211(o) (9), enacted as [Billiongallons] diesel producer or importer. part of the Energy Policy Act of 2005, As specified in the RFS2 final rule,157 and amended by the Energy Cellulosic biotuel 0.288 the percentage standards are based on Independence and Security Act of 2007, Biomass-based diesels 2.10 energy-equivalent gallons of renewable Congress provided a temporary Advanced biotuel 4.29 fuel, with the cellulosic biofuel, exemption to small refineries Renewable fuel 19.29 advanced biofuel, and total renewable through December 31, 2010. Congress Represents physical volume. fuel standards based on ethanol provided that small refineries could equivalence and the BBD receive a temporary extension of the For the purposes standard of converting these based on biodiesel equivalence. exemption beyond 2010 based either on volumes into percentage standards, we However, all RIN is based the results of a required DOE study, or generally use two decimal places generation on to be ethanol-equivalence. For example, the based on an EPA determination of consistent with the volume targets as “disproportionate economic hardship” given in the statute, and similarly two RFS regulations provide that production or import of a gallon of qualifying on a case-by-case basis in response to decimal places in the percentage small refinery petitions. In reviewing standards. However, for biodiesel will lead to the generation of cellulosic petitions, EPA, in consultation with the biofuel we use 1.5 RINs. The formula specified in the three decimal places in Department of Energy, evaluates both the volume requirement and regulations for calculation of the BBD percentage standard is based on whether the small refinery has percentage standards to more precisely demonstrated either disproportionate capture the smaller volume projections biodiesel-equivalence, and thus assumes the unique that all BBD used to satisfy the BBD impacts or viability impairment, and and methodology that in may grant refineries exemptions some cases results in estimates of only standard is biodiesel and requires that upon demonstration of either criterion. a few million gallons for a single the applicable volume requirement be producer. multiplied by 1.5. However, BBD often EPA has granted exemptions pursuant contains some renewable diesel, and a to this process in the past. However, at A. Calculation of Percentage Standards gallon of renewable diesel typically this time no exemptions have been To calculate the percentage standards, generates 1.7 RThJs.158 In addition, there approved for 2018, and therefore we we are following the same methodology is often some renewable diesel in the have calculated the percentage for 2018 as we have in all prior years. conventional renewable fuel pool. As a standards for 2018 without any The formulas used to calculate the result, the actual number of RINs adjustment for exempted volumes. EPA percentage standards applicable to generated by biodiesel and renewable is maintaining its approach that any producers and importers of gasoline and diesel is used in the context of our exemptions for 2018 that are granted diesel are provided in 40 CFR 80.1405. assessing reasonably attainable volumes after the final rule is released will not The formulas rely on estimates of the for purposes of deriving the applicable be reflected in the percentage standards volumes of gasoline and diesel fuel, for volume requirements and associated that apply to all gasoline and diesel both highway and nonroad uses, which percentage standards for advanced produced or imported in 2018.160 are projected to be used in the year in biofuel and total renewable fuel, and C. Final Standards which the standards will apply. The likewise in obligated parties’ projected gasoline and diesel volumes determination of compliance with any The formulas in 40 CFR 80.1405 for are provided by EIA, and include of the applicable standards. While there the calculation of the percentage projections of ethanol and biodiesel is a difference in the treatment of standards require the specification of a used in transportation fuel. Since the biodiesel and renewable diesel in the total of 14 variables covering factors percentage standards apply only to the context of determining the percentage such as the renewable fuel volume non-renewable gasoline and diesel standard for BBD versus determining requirements, projected gasoline and produced or imported, the volumes of the percentage standard for advanced diesel demand for all states and ethanol and biodiesel are subtracted out biofuel and total renewable fuel, it is not territories where the RFS program of the EIA projections of gasoline and a significant one given our approach to applies, renewable fuels projected by diesel. determining the BBDvolume EIA to be included in the gasoline and Transportation fuels other than requirement. Our intent in setting the diesel demand, and exemptions for gasoline or diesel, such as natural gas, BBD applicable volume is to provide a small refineries. The values of all the propane, and electricity from fossil level of guaranteed volume for BBD, but variables used for this final rule are fuels, are not currently subject to the as described in Section VI.B, we do not shown in Table Vll.C—1.’°1

‘56The 2018 volume requirement for BBD was A small refiner that meets the requirements of determine the 49-state values for gasoline established in the 2017 final nile. 40 crir 80.1442 may also be eligible for an and diesel, the amounts of these fuels used in 157 See 75 FR 14670 (March 26, 2010). exemption. Alaska is subtracted from the totals provided by 155 Although in some cases a gallon of renewable ‘Further discussion of this issue can be found OOE because petroleum based fuels used in Alaska do not incur RFS obligations. The Alaska fractions diesel generates either 1.5 or 1.6 R1Ns. in the Response to comments document in the are determined from the June 29, 2016 EIA State docket for this action. Energy Oats System (SEOS), Energy consumption Estimates. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 41 of 48

58524 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations

TABLE VII.C—1—VALUES FOR TERMS IN CALCULATIONOF THE 2018 STANDARDS162 [Billiongallons]

Term Description Value

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

Projected volumes of gasoline and individual recordkeeping and reporting opportunity to protect, restore, and diesel, and the renewable fuels related to documenting that their enhance wetlands on their property. contained within them, were provided feedstocks come from qualifying lands, The GEP was a voluntary conservation by ETAon October 11, 2017, as required unless EPA determines through one of program that emphasized support for in the statute at CAA section its annual evaluations that the 2007 working grazing operations, 211(o)(3)(A). baseline acreage of 402 million acres enhancement of plant and animal Using the volumes shown in Table agricultural land has been exceeded. biodiversity, and protection of grassland VII.C—i,we have calculated the In the 2010 RFS2 rulemaking, EPA under threat of conversion to other uses. percentage standards for 2018 as shown committed to make an annual finding USDA and EPA concur that the in Table VII.C—2. concerning whether the 2007 baseline ACEP—WREand ACEP—ALErepresent a amount of U.S. agricultural land has continuation in basic objectives and TABLE VII.C—2—FINAL PERCENTAGE been exceeded in a given year. If the goals of the original WRP and GRF. STANDARDS FOR 2018 baseline is found to have been Therefore, in preparing this year’s exceeded, then producers using U.S. assessment of the total U.S. acres of Cellulosic biofuel 0.159 planted crops and crop residue as agricultural land, the acreage enrolled in Biomass-based diesel 1.74 feedstocks for renewable fuel the ACEP-WRE and ACEP-ALE was Advanced biofuel 2.37 production would be required to excluded. Renewable fuel 10.67 comply with individual recordkeeping Based on data provided by the USDA and reporting requirements to verify Farm Service Agency (FSA) and Natural VIII. Administrative Actions that their feedstocks are renewable Resources Conservation Service (NRCS), we have A. Assessment of the Domestic biomass. estimated that U.S. agricultural land Aggregate Compliance Approach The Aggregate Compliance reached approximately 376 million acres in 2017, and thus did not methodology provided for the exclusion exceed The RFS regulations specify an the 2007 baseline acreage. This of acreage enrolled in the Grassland acreage “aggregate compliance” approach for estimate is based on the same Reserve Program (GRP) and the demonstrating that planted crops and methodology used to set the 2007 Wetlands Reserve Program (WRP) from crop residue from the U.S. complies baseline acreage for U.S. agricultural the estimated total U.S. agricultural with the “renewable biomass” land in RFS2 land. However, the 2014 Farm Bill the final rulemaking, with requirements that address lands from the GRP and WRP as terminated the GRP and WRP as of 2013 substitution noted which qualifying feedstocks may be above. Specifically, we and USDA established the Agriculture started with FSA harvested.l63 In the 2010 RFS2 crop history data for 2017, from which rulemaking, EPA established a baseline Conservation Easement Program (ACEP) with wetlands and land easement we derived a total estimated acreage of number of acres for U.S. agricultural 379,220,752 acres. We then subtracted land in 2007 (the year of EISA components. The ACEP is a voluntary program that provides financial and the ACEP—ALEand ACEP—WRE enactment) and determined that as long enrolled areas the end of Fiscal technical assistance to help conserve by Year as this baseline number of acres was not 2017, 2,777,887 acres, to yield an exceeded, it was unlikely that new land agricultural lands and wetlands and estimate their related benefits, Under the of 376,442,865 acres or outside of the 2007 baseline would be approximately 376 million acres of U.S. Agricultural Land Easements (ACEP— devoted to crop production based on agricultural land in 2017. The USDA historical trends and economic ALE) component, USDA helps Indian tribes, state and local governments, and data used to make this derivation can be considerations. The regulations specify, found in the docket to this rule.’ therefore, that renewable fuel producers non-governmental organizations protect working agricultural lands and limit using planted crops or crop residue ‘64As in 2016, USDA again provided EPA with from the U.S. as feedstock in renewable non-agricultural uses of the land. Under 2017 data from the discontinued GRP and WRP fuel production need not undertake the Wetlands Reserve Easements programs. Given this data, EPA estimated the total (ACEP—WRE)component, USDA helps U.S. agricultural land both including and omitting to restore, protect and enhance enrolled the GRP and WRP acreage. In 2017, combined land 162 “calculation of final ¾ standards for under GRP and WRP totaled 349,146 acres. 2018” in docket EPA—HQ—OAR—2017—0091. wetlands. The WRP was a voluntary Subtracting the GRP, WRP, ACEP—WRE,and AcEP— 16340 CFR 80.1454(g). program that offered landowners the ALE acreage yields an estimate of 376,093,719 acres USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 42 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58525

B. Assessment of the Canadian has not seen evidence of manipulation responses are discussed throughout this Aggregate Compliance Approach in the MN market, the EPA is not a preamble and in the accompanying The RFS regulations specify a petition commodity market regulatory agency, Response to Comment document, which process through which EPA may and thus we do not have expertise in is available in the docket for this action. this field. Claims of market approve the use of an aggregate X. Statutory and Executive Order compliance approach for planted crops manipulation prompted the EPA to Reviews and crop residue from foreign execute a memorandum of countries.165 On September 29, 2011, understanding (MOU) with the U.S. A. Executive Order 12866: Regulatory EPA approved such a petition from the Commodity Futures Trading Planning and Review and Executive Government of Canada. Commission (CFTC), which has the Order 13563: Improving Regulation and The total agricultural land in Canada authority and expertise to investigate Regulatory Review in 2017 is estimated at 117.8 million such claims. This action is an economically acres. This total agricultural land area In the meantime, the EPA has significant regulatory action that was includes 95.5 million acres of cropland continued to explore additional ways to submitted to the Office of Management and summer fallow, 12.5 million acres increase program transparency in order and Budget (0MB) for review. Any of pastureland and 9.8 million acres of to support the program and share data changes made in response to 0MB agricultural land under conservation with all stakeholders. The EPA already recommendations have been practices. This acreage estimate is based publishes RFS program data on our Web documented in the docket. The EPA on the same methodology used to set the site, including data related to RIN prepared an analysis of illustrative costs 2007 baseline acreage for Canadian generation, sales and holdings, and associated with this action. This agricultural land in EPA’s response to annual compliance.166 We are interested analysis is presented in Section IV.E of Canada’s petition. The data used to in providing more information, to the this preamble. be extent consistent with our obligations to make this calculation can found in B. Executive Order 13771: Reducing the docket to this rule. protect confidential business information (CBI). The EPA sought Regulations and Controlling Regulatory C. BIN Market Operation comment on specific data elements and Costs Some stakeholders have expressed posting frequency that stakeholders This action is considered an concerns that the current regulatory believe would be useful to help with Executive Order 13771 regulatory provisions related to MN trading render market transparency and liquidity. We action. Details on the estimated costs of the RFS program vulnerable to market received comments from stakeholders this final rule can be found in EPA’s manipulation. The EPA takes such suggesting a number of different types of analysis of the illustrative costs issues seriously. The RIN system was data that commenters suggested would associated with this action. This originally designed with an open be useful to the industry and public. analysis is presented in Section IV.E of trading market in order to maximize its The EPA will need to further evaluate this preamble. liquidity and ensure a robust each of these suggestions to determine C. Paperwork Reduction Act (PRA) marketplace for RINs, However, the EPA which information we can be post and, is interested in assessing whether and if so, whether we can post it at the This action does not impose any new how the current trading structure frequency that was suggested by the information collection burden under the provides an opportunity for market commenters. Our decisions with respect PRA. 0MB has previously approved the manipulation. To that effect, the EPA to these suggestions must necessarily information collection activities sought comment and input on this strike a balance between achieving the contained in the existing regulations issue, including on potential changes to greatest transparency possible, while and has assigned 0MB control numbers the MN trading system that might help working within the limitations of our 2060—0637 and 2060—0640. The final address these concerns. We received authority and resources (including standards will not impose new or comments from stakeholders suggesting technology systems), and protecting different reporting requirements on regulated parties than already exist for a number changes to the RIM trading information that is claimed as CBI. the RFS program. system. While EPA received many IX. Public Parficipafion comments that are helpful to highlight D. Regulatory Flexibility Act (RFA) Many interested parties participated opportunities for improvement to the I certify that this action will not have MN system, we are not in a position to in the rulemaking process that a significant economic impact on a make significant changes to the RIM culminates with this final rule. This substantial number of small entities system at this time. However, we intend process provided opportunity for under the RFA. In making this to explore these suggested changes and submitting written public comments determination, the impact of concern is are open to suggestions for making following the proposal that we any significant adverse economic changes in the future that are within our published on July 21, 2017 (82 FR impact on small entities. An agency may authority and would help to improve 34206), and we also held a public certify that a rule will not have a the function and liquidity of the RN hearing on August 1, 2017, at which significant economic impact on a system. many parties provided both verbal and substantial number of small entities if Separate from evaluating the RIN written testimony. All comments the rule relieves regulatory burden, has trading options in the RFS program, the received, both verbal and written, are no net burden, or otherwise has a EPA is working with appropriate market available in Docket ID No. EPA—HQ— positive economic effect on the small regulators to analyze targeted concerns OAR—2017—0091and we considered entities subject to the rule. of some stakeholders. Although the EPA these comments in developing the final The small entities directly regulated rule. Public comments and EPA by the RFS program are small refiners, or approximately 376 million total acres of U.s. which are defined at 13 CFR 121.201. agricultural land in 2017. Omitting the GRP and 166For public data on the RF5 and other EPA fuel WRP data yields approximately the same 376 programs, refer to: https:Hwww.epo.gov/foels We have evaluated the impacts of this million acres of U.s. agricultural land in 2017. registrotion-reporting-ond-compiionce-help/poblic final rule on small entities from two 16540 CFR 60.1457. doto-and-registrotion-iists-foel-progroms. perspectives: As if the 2018 standards USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 43 of 48

58526 Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations were a standalone action or if they are While the screening analysis the Clean Air Act in the absence of a part of the overall impacts of the RFS described above supports a certification waivers—which are the volumes that we program as a whole. that this rule would not have a assessed in the screening analysis that When evaluating the standards as if significant economic impact on small we prepared for implementation of the they were a standalone action separate refiners, we continue to believe that it full program. Regarding the BBD and apart from the original rulemaking is more appropriate to consider the standard, we are maintaining the which established the RFS2 program, standards as a part of ongoing volume requirement for 2019 at the then the standards could be viewed as implementation of the overall RFS same level as 2018. While this volume increasing the advanced and total program. When considered this way, the is an increase over the statutory renewable fuel volumes required of impacts of the RFS program as a whole minimum value of I billion gallons, the obligated parties by 10 million gallons on small entities were addressed in the BBD standard is a nested standard between 2017 and 2018. To evaluate the RFS2 final rule (75 FR 14670, March 26, within the advanced biofuel category, impacts of the volume requirements on 2010), which was the rule that which we are significantly reducing small entities relative to 2017, EPA has implemented the entire program from the statutory volume targets. As by Independence VI, conducted a screening analysis 107 to required the Energy discussed in Section we are selling (EISA 2007). assess whether it should make a finding and Security Act of 2007 the 2019 BBD volume requirement at a As such, Business Regulatory that this action would not have a the Small level below what is anticipated will be Enforcement Fairness Act (SBREFA) produced and to satisfy the significant economic impact on a used panel process that took place prior to reduced substantial number of small entities. advanced biofuel requirement. the 2010 for entire RFS Currently available information shows rule was also the The net result of the standards being program and looked at impacts on small established is a that the impact on small entities from in this action reduction refiners 2022. in burden as implementation of this rule would not through compared to For the SBREFA process for the RFS2 implementation of the statutory volume be significant. EPA has reviewed and final rule, EPA conducted outreach, targets, as was assumed in the RFS2 assessed the available information, fact-finding, and analysis of the final rule analysis. which shows that obligated parties, potential impacts of the program on While the rule will not have a including small entities, are generally small refiners, which are all described significant economic impact on a able to recover the cost of acquiring the in the Final Regulatory Flexibility substantial number of small entities, ifiNs necessary for compliance with the Analysis, located in the rulemaking there are compliance flexibilities in the RFS standards through higher sales docket (EPA—HQ—OAR—2005—0161). program that can help to reduce impacts prices of the petroleum products they This analysis looked at impacts to all on small entities. These flexibilities sell than would be expected in the refiners, including small refiners, include being able to comply through 169 absence of the RFS program.’68 This through the year 2022 and found that MN trading rather than renewable fuel is true whether they acquire RINs by the program would not have a blending, 20 percent RThJrollover purchasing renewable fuels with significant economic impact on a allowance (up to 20 percent of an attached RINs or purchase separated substantial number of small entities, obligated party’s RVO can be met using RINs. The costs of the RFS program are and that this impact was expected to previous-year RINs), and deficit carry- thus generally being passed on to decrease over time, even as the forward (the ability to carry over a consumers in the highly competitive standards increased. For gasoline and/or deficit from a given year into the marketplace. Even if we were to assume diesel small refiners subject to the following year, providing that the deficit that the cost of acquiring RINs were not standards, the analysis included a cost- is satisfied together with the next year’s recovered by obligated parties, and we to-sales ratio test, a ratio of the RVO). In the RFS2 final rule, we used the maximum values of the estimated annualized compliance costs discussed other potential small entity illustrative costs discussed in Section to the value of sales per company. From flexibilities that had been suggested by W.E of this preamble and the gasoline this test, it was estimated that all the SBREFA panel or though and diesel fuel volume projections and directly regulated small entities would comments, but we did not adopt them, wholesale prices from the October 2017 have compliance costs that are less than in part because we had serious concerns version of EIA’s Short-Term Energy one percent of their sales over the life regarding our authority to do so, Outlook, and current wholesale fuel of the program (75 FR 14862, March 26, Additionally, as we realize that there prices, a cost-to-sales ratio test shows 2010). may be cases in which a small entity that the costs to small entities of the We have determined that this final may be in a difficult financial situation RFS standards are far less than 1 percent rule will not impose any additional and the level of assistance afforded by of the value of their sales. requirements on small entities beyond the program flexibilities is insufficient. those already analyzed, since the For such circumstances, the program “Screening Analysis for the Final Renewable impacts of this rule are not greater or provides hardship relief provisions for Fuel Standard Program Renewable Volume fundamentally different than those small entities (small refiners), as well as Obligations for 2018,” memorandum from Dallas already considered in the analysis for for small refineries.170 As required by Burkholder, Nick Parsons, and Tia Sutton to EPA Mr Docket EPA—HQ—OAR—2017—0091. the RFS2 final rule assuming full the statute, the RFS regulations include °“ For a further discussion of the ability of implementation of the RFS program. a hardship relief provision (at 40 CFR obligated parties to recover the cost of RINs see “A This rule establishes the 2018 advanced 80.1441(e)(2)) that allows for a small Preliminary Assessment of RIN Market Oynamics, and total renewable fuel Volume refinery to petition for an extension of RIN Prices, and Their Effects,’ Dallas aurtholder, requirements at levels 10 million its small refinery exemption at any time Office of Transportation and Air Quality, US EPA. May 14, 2015, EPA Mr Docket EPA—HQ—OAR— gallons higher than the 2017 volume based on a showing that compliance 2015—0111. requirements, and significantly below with the requirements of the RFS 155 Knittel, christopher R., aen S. Meiselman, and the statutory volume targets. This program would result in the refinery James H. Stock. “The Pass-Through of RIN Prices exercise of EPA’s waiver authority experiencing a “disproportionate to Wholesale and Retail Fuels under the Renewable Fuel Standard.” Working Paper 21343. NBER reduces burdens on small entities, as economic hardship.” EPA regulations Working Paper Series. Available online at hup:// compared to the burdens that would be www.nber.org/popera/w22343.pdf imposed under the volumes specified in See CAA section 211(o)(9)(BJ. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 44 of 48

Federal Register/Vol. 82, No. 237/Tuesday, December 12, 2017/Rules and Regulations 58527 provide similar relief to small refiners Order 13175. This final rule will be or the environment by applicable air that are not eligible for small refinery implemented at the Federal level and quality standards. This action does not relief (see 40 CFR 80.1442(h)). EPA affects transportation fuel refiners, relax the control measures on sources evaluates these petitions on a case-by- blenders, marketers, distributors, regulated by the RFS regulations and case basis and may approve such importers, exporters, and renewable fuel therefore will not cause emissions petitions if it finds that a producers and importers. Tribal increases from these sources. disproportionate economic hardship governments would be affected only to L. Congressional (CRA) exists. In evaluating such petitions, EPA the extent they produce, purchase, and Review Act consults with the U.S. Department of use regulated fuels. Thus, Executive This action is subject to the CRA, and Energy, and takes the findings of DOE’s Order 13175 does not apply to this the EPA will submit a rule report to 2011 Small Refinery Study and other action. each House of the Congress and to the economic factors into consideration. Comptroller General of the United EPA successfully implemented these H. Executive Order 13045:Protection of States. This action is a “major rule” as From provisions by evaluating petitions for Children Environmental Health defined by 5 U.S.C. 804(2). exemption from 14 small refineries for Risks and Safety Risks XI. Statutory Authority the 2016 RFS standards.171 The EPA interprets Executive Order Given that this final rule would not 13045 as applying only to those Statutory authority for this action impose additional requirements on regulatory actions that concern comes from section 211 of the Clean Air small entities, would decrease burden environmental health or safety risks that Act, 42 U.S.C. 7545. Additional support via a reduction in required volumes as the EPA has reason to believe may for the procedural and compliance compared to statutory volume targets, disproportionately affect children, per related aspects of this final rule comes would not change the compliance the definition of “covered regulatory from sections 114, 208, and 301(a) of the flexibilities currently offered to small action” in section 2—202 of the Clean Air Act, 42 U.S.C. 7414, 7542, and entities under the RFS program Executive Order. This action is not 7601(a). (including the small refinery hardship subject to Executive Order 13045 List of Subjects in 40 CFR Part 80 provisions we continue to successfully because it implements specific implement), and available information standards established by Congress in Environmental protection, shows that the impact on small entities statutes (CAA section 211(o)) and does Administrative practice and procedure, from implementation of this rule would not concern an environmental health Air pollution control, Diesel fuel, Fuel not be significant viewed either from the risk or safety risk. additives, Gasoline, Imports, Oil perspective of it being a standalone imports, Petroleum, Renewable fuel. action or a part of the overall RFS I. Executive Order 13211:Actions Concerning Regulations That Dated:November30, 2017. program, we have therefore concluded I. Scoff Pruift, that this action would have no net Significantly Affect Energy Supply, Administrator. regulatory burden for directly regulated Distribution, or Use For reasons small entities. This action is not a “significant the set forth in the preamble, EPA 40 CFR 80 energy action” because it is not likely to amends part E. Unfunded Mandates Reform Act as follows: (UMRA) have a significant adverse effect on the supply, distribution, or use of energy. This action does not contain an PART 80—REGULATION OF FUELS This action establishes the required AND FUEL ADDITIVES unfunded mandate of $100 million or renewable fuel content of the more as UMRA, 2 U.S.C. described in transportation fuel supply for 2018, • 1. The authority citation for part 80 1531—1538, and does not significantly or consistent with the CAA and waiver continues to read as follows: uniquely affect small governments. This authorities provided therein. The RFS action implements mandates Authority: 42 U.S.C. 7414, 7521, 7542, program and this rule are designed to 7545, and 7601(a). specifically and explicitly set forth in achieve positive effects on the nation’s CAA section 211(o) and we believe that transportation fuel supply, by increasing Subpart M—Renewable Fuel Standard this action represents the least costly, energy independence and lowering most cost-effective approach to achieve lifecycle GHG emissions of • 2. Section 80.1405 is amended by the statutory requirements of the rule. transportation fuel. adding paragraph (a)(9) to read as F. Executive Order 13132: Federalism follows: J. National Technology Transfer and This action does not have federalism Advancement Act (NTTAA) § 80.1405 What are the Renewable Fuel implications. It will not have substantial This rulemaking does not involve Standards? direct effects on the states, on the technical standards. (a) * * * relationship between the national (9) Renewable Fuel Standards for government and the states, or on the K. Executive Order 12898: Federal 2018. distribution of power and Actions To Address Environmental (i) The value of the cellulosic biofuel responsibilities among the various Justice in Minority Populations and standard for 2018 shall be 0.159 percent. levels of government. Low-Income Populations (ii) The value of the biomass-based diesel for 2018 G. Executive Order 13175: Consultation The EPA believes that this action does standard shall be 1.74 and Coordination With Indian Tribal not have disproportionately high and percent. Governments adverse human health or environmental (iii) The value of the advanced biofuel effects on minority populations, low- standard for 2018 shall be 2.37 percent. This action does not have tribal income populations, and/or indigenous (iv) The value of the renewable fuel implications as specified in Executive peoples, as specified in Executive Order standard for 2018 shall be 10.67 percent. 12898 (59 FR 7629, February 16, 1994). * * * * * is currently evaluating 2 additional 2016 petitions, bringing the total number of petitions for This final rule does not affect the level LFRDoc. 2017—26426 Filed 12—11—17;8:45 am] 2016 to 16. of protection provided to human health BILLING CODE 6560—50—P ______UNI1D-fATS LIF$+ 3t*A1 USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 I OR PageUtSItIK,T 45OF (1OLUMBIAof 48 Jim 1ftjj OFIMiA FILDf 9

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

) NATIONAL BIODIESEL BOARD, ) ) Petitioner, ) 1%—iO.I V. ) 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. USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 46 of 48 Dated: February 9, 2018 /s/ Washington, Douglas Bryan Respectfully Morgan, (202) (202) Counsellor 1111 2 Bryan Pennsylvania 739-3001 739-3000 M. A. Lewis li Killian Hastings the Killian submitted, D.C. & National (facsimile) (telephone) Bockius 20004 Ave., Biodiesel NW LLP Board USCA Case #18-1041 Document #1718085 Filed: 02/09/2018 Page 47 of 48

Jefferson B. Sessions III Samara M. Spence Attorney General U.S. Department of Justice U.S. Department of Justice Environmental Defense Section 950 Pennsylvania Avenue, NW P.O. Box 7611 Washington, DC 20530 Washington, DC 20004

/s/ Bryan li Killian Bryan M. Killian

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each

OF

QOLUMBIA

9

Q1 CIRCUIT