Renewable Fuel Standard Program -
Standards for 2018 and Biomass-Based
Diesel Volume for 2019:
Response to Comments
United States
Environmental Protection
tl Agency
-------
Renewable Fuel Standard Program -
Standards for 2018 and Biomass-Based
Diesel Volume for 2019:
Response to Comments
Assessment and Standards Division
Office of Transportation and Air Quality
U.S. Environmental Protection Agency
£% United States
Environmental Protection
^1 Agency
EPA-420-R-17-007
December 2017
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Table of Contents
List of Acronyms and Abbreviations iv
List of Organizations Submitting Comments v
1. Policy Objectives of the RFS Program 1
1.1 Broad Policy Issues Including Congressional Intent and Program Goals 1
1.2 Biofuel Imports and Impacts on Energy Security 4
1.3 RFS Program Changes, RIN Trading, and Market Oversight 13
2. Waiver Authorities 15
2.1 General Waiver Authority 15
2.1.1 Inadequate Domestic Supply 17
2.1.2 Severe Economic Harm 21
2.1.3 Severe Environmental Harm 25
2.2 Cellulosic Waiver Authority 31
2.3 Biomass-Based Diesel Waiver Authority 37
2.4 Carryover RINs 40
3. Cellulosic Biofuel Standard 45
3.1 General Comments on Cellulosic Biofuels 45
3.2 Methodology for Projecting Volumes 51
3.2.1 Methodology for Projecting Liquid Cellulosic Biofuel Volumes 56
3.2.2 Methodology for Projecting Cellulosic Biogas Volumes 62
3.3 Proposed Cellulosic Biofuel Standard 69
4. Advanced Biofuel 75
4.1 Inability to Meet Statutory Targets 75
4.2 Reasonably Attainable Volumes of Advanced Biofuel 76
4.2.1 Imported Sugarcane Ethanol 79
4.2.2 Biodiesel and Renewable Diesel (Domestic and Imports) 81
4.2.3 Other Advanced Biofuel 97
4.3 Advanced Volume Achievable 98
4.4 Proposed Advanced Biofuel Requirement 99
5. Total Renewable Fuel and Conventional Renewable Fuel 109
5.1 Ethanol 109
5.1.1 E10 Blendwall and Total Gasoline Demand 109
5.1.2 Exceeding the El0 Blendwall Ill
5.1.3 Domestic Production Capacity 115
5.1.4 Refiner Responsibilities to Expand Ethanol Use 116
5.1.5 E0 118
l
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5.1.6 E15 123
5.1.7 E85 128
5.1.8 Other Comments Related to Ethanol 134
5.2 Biodiesel and Renewable Diesel 136
5.2.1 Infrastructure for Distributing, Blending, and Dispensing 136
5.2.2 Vehicles That Can Use It 137
5.2.3 Cold Temperature Impacts 138
5.2.4 Production Capacity 139
5.2.5 Feedstock Availability 142
5.2.6 Imports of Conventional Biodiesel and Renewable Diesel 148
5.2.7 Total Volume Achievable 151
5.2.8 Consumer Response 155
5.3 Determination of Standards 156
5.3.1 Total Renewable Fuel Volume 156
5.3.2 Conventional Renewable Fuel / Corn-Ethanol "Mandate" 159
5.3.3 Other Comments Related to the Determination of Standards 162
6. BBD Standard for 2019 163
6.1 General 163
6.2 Supporting the BBD Industry 167
6.3 Ensuring Opportunities for Other Advanced 169
6.4 Comments on Consideration of Statutory Factors (BBD) 171
6.4.1 General Comments on the Consideration of Statutory Factors 171
6.4.2 Consideration of the Review of the Program to Date 174
6.4.3 Environmental Impacts (Air Quality, Climate Change, Conversion of Wetlands,
Ecosystems, Wildlife Habitat, Water Quality, Water Supply) 177
6.4.4 Energy Security Impacts 181
6.4.5 Expected Rate of Production of Biofuels 184
6.4.6 Impact of Renewable Fuels on Infrastructure in the U.S. (Deliverability of Materials,
Goods, Renewable Fuels, and Other Products) and Sufficiency of Infrastructure to Deliver
and Use Renewable Fuel 187
6.4.7 Impact on Transportation Fuel Prices and the Cost to Transport Goods 188
6.4.8 Impacts on Other Factors (Jobs, Price and Supply of Agricultural Goods, Rural
Economic Development, Food Prices) 190
7. Economic and Environmental Impacts 193
7.1 Economic Impacts and Considerations 193
7.1.1 Illustrative Costs of the Program 193
7.1.2 Energy Security 196
7.1.3 Impacts of Standards on RIN Prices 198
7.1.4 Impacts of Standards on Retail Fuel Prices 199
7.1.5 Price and Supply of Agricultural Commodities and Farm Income 201
7.1.6 Rural Economies 204
7.1.7 Jobs and Profitability of Biofuel Producers 206
li
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7.2 Environmental Impacts and Considerations 207
7.2.1 (il IG Impacts 207
7.2.2 Air Quality 209
7.2.3 Water Quality and Quantity 211
7.2.4 Ecosystems, Wildlife Habitat, and Conversion of Wetlands 213
8. Percentage Standards 215
8.1 General Comments on the Percentage Standards 215
8.2 Accounting for Small Refinery Hardship Exemptions 216
9. Other Comments 218
9.1 Dates/Deadlines 218
9.2 Statutory and Executive Order Reviews 219
9.3 Annual Point of Obligation Evaluation 222
9.4 Beyond the Scope 223
in
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List of Acronyms and Abbreviations
Numerous acronyms and abbreviations are included in this document. While this may not be an
exhaustive list, to ease the reading of this document and for reference purposes, the following
acronyms and abbreviations are defined here:
ACE
Americans for Clean Energy v. EPA, 864 F.3d 691 (D.C. Cir. 2017)
AEO
Annual Energy Outlook
BBD
Biomass-Based Diesel
BIP
Biofuels Infrastructure Partnership
CAA
Clean Air Act
CFTC
U.S. Commodity Futures Trading Commission
CNG
Compressed Natural Gas
EIA
U.S. Energy Information Administration
EISA
Energy Independence and Security Act of 2007
EMTS
EPA Moderated Transaction System
EPA
U.S. Environmental Protection Agency
FTC
U.S. Federal Trade Commission
GHG
Greenhouse Gas
GREET
Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model
LCFS
Low Carbon Fuel Standard
LNG
Liquified Natural Gas
LPG
Liquified Petroleum Gas
NPRM
Notice of Proposed Rulemaking
RFS
Renewable Fuel Standard
RIN
Renewable Identification Number
RVO
Renewable Volume Obligation
SBREFA
Small Business Regulatory Enforcement Fairness Act
STEO
Short-Term Energy Outlook
USD A
U.S. Department of Agriculture
iv
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List of Organizations Submitting Comments
Commenter or Organization Name
Docket Item Number"
25x'25 Alliance
0446, 0447, 4415
60 Plus Association
Comment is testimony
9th District, Ohio, United States House of Representatives
4882
Ace Ethanol
0197
ActionAid USA
3575
ActionAid USA, Clean Air Task Force, Earthjustice, National
3306
Wildlife Federation, Oxfam America, and Sierra Club
Advanced Biofuels Association (ABFA)
2542, 4501
Advanced Biofuels Business Council
3242
Advanced Economic Solutions
1500, 4856
AER Biofuels
1502
AG Processing Inc.
1777
Ag Valley Cooperative
4719
Air Liquide
3327
America Center for Democracy
Comment is testimony
0849, 1136, 1137,
1138, 1139, 1168,
1333, 1341, 1348,
American Biogas Council
1501, 1755, 3179,
3186, 3239, 3243,
3303, 3305, 3326,
3577, 3654, 3926,
3927, 3651
American Cleaning Institute
3578
American Coalition for Ethanol
3178, 4495
American Farm Bureau Federation
3155, 4629
American Fuel and Petrochemical Manufacturers (AFPM)
3646, 4703
American Fuel & Petrochemical Manufacturers (AFPM) and
3645
American Petroleum Institute (API)
American Gas Association
Comment is testimony
American Motorcyclist Association
0122
American Petroleum Institute (API)
3647, 4676
American Soybean Association (ASA)
1775, 3432, 4653
American Trucking Associations (ATA)
4636
AMP Americas LLC
Comment is testimony
Anchor Bank
0809
Andersons Inc., The
0370
APC, Inc.
4493
Archer Daniels Midland (ADM)
1638, 3319, 4662
V
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Aria Energy
Comment is testimony
Association of Equipment Manufacturers
3304
Aurora Cooperative
3952
Baker Commodities, Inc.
1640, 3430, 4860
Bakst, Daren
Comment is testimony
Battle Creek Farmer's Cooperative, N/S
4862
Big Ox Energy
3325, 4858
Big River Resources, LLC
0517, 0518, 0519, 0520
Biomass Power Association
3324
Biotechnology Innovation Organization (BIO)
3680
Birmingham Hide & Tallow Company, Inc.
4857
Boat Owners Association of The United States (BoatU.S.)
2546
Boeing Company, The
3317
BP Products North America Inc.
3953, 4505
Brazilian Sugarcane Industry Association (UNICA)
3110, 3960
Bridge To Renewables ("BTR")
3956, 4887
Business Council for Sustainable Energy
3929
California Association of Sanitation Agencies
1773
California Biodiesel Alliance
2540, 3107
California Department of Resources Recycling and Recovery
(CalRecycle)
3873
California Energy Commission (Energy Commission), California
Air Resources Board (CARB), and California Department of
Resources Recycling and Recovery (CalRecycle)
3658, 4497
California Natural Gas Vehicle Coalition
Comment is testimony
Campaign for Liberty
Comment is testimony
Capital Research Center
Comment is testimony
Cargill, Inc.
3377
Chevron
3478
Citizens for the Republic
Comment is testimony
City of Roseville, California
3931
Clean Air Task Force
2539, 4689
Clean Air Task Force, National Wildlife Federation, ActionAid
USA, Rainforest Action Network, Friends of the Earth, Sierra Club,
4498
and Mighty Earth
Clean Energy
4129
Clean Energy Consultants
4399, 4477
Clean Energy Fuels
Comment is testimony
Coalition for Renewable Natural Gas
3650, 4705
Coalition for Renewable Natural Gas, Natural Gas Vehicles for
America, National Waste & Recycling Association, Solid Waste
3650
Association of North America, and Energy Vision
vi
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Coffeyville Resources Refining and Marketing LLC and
Wynnewood Refining Company LLC.
3106, 4888
Commercial Energy Working Group, The
3653
Commonwealth Agri-Energy, LLC
3251
Competitive Enterprise Institute
4506
Cooperative Farmers Elevator
4720
Corn Producers Association of Texas (CPAT)
3237, 4494
CountryMark Cooperative
3177, 4674
Crimson Renewable Energy, LP
3108, 3879, 4859
Dabney, Austin
0131
Darling Ingredients Inc.
1643, 4671, 3930
DC Water
3494
Deere & Company
4721
Delaware Nature Society
0236, 0259
DMT Clear Gas Solutions
Comment is testimony
DriveGreen, LLC
1132
DTE Biomass Energy
3594
Dupont
3878
Earle Company
3916
Earthstar Builders
Comment is testimony
East Bay Municipal Utility District
1760
Edeniq, Inc.
3955, 4699
Element Markets LLC
Comment is testimony
Enerdyne Power Systems
Comment is testimony
Energy Vision
Comment is testimony
Enerkem
1177, 1704, 4492
Environmental Advocates of New York
1759
Erie Lackawanna Company
Comment is testimony
Exxon Mobil Corporation
3678
Farmers Cooperative
4724
Farmers Cooperative Elevator Co.
4723
Five Energies Resources, LLC
3935
Florida Fish and Wildlife Conservation Commission (FWC)
1336
FreedomWorks Foundation
3659
Frontiers of Freedom
Comment is testimony
Furey, Denise
Comment is testimony
Georgia Oilmen's Association
4398
Global Alternative Fuels and Rio Valley Biofuels
Comment is testimony
Global Renewable Strategies and Consulting, LLC
3684
Gottbrath, David
Comment is testimony
Governor Kim Reynolds
Comment is testimony
vii
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Governor Pete Ricketts
3936
Governors of Iowa, Missouri, Kansas, and South Dakota
4690
Grain Processing Corporation
3914
Greater Washington Region Clean Cities
Comment is testimony
Green Plains Inc.
3957
Growth Energy
3681, 3683, 3684, 3963
Growth Energy, Archer Daniels Midland Company, and
Biotechnology Innovation Organization
4886
Guay, Peter
1335
Gundersen Health System Envision
1210
Heartland Institute
Comment is testimony
HollyFrontier Corporation
0221, 2547, 4713
Honeywell UOP
3493, 4673
Honstein Oil & Distributing, LLC
1011
Hurtt, Eric S.
4396
Illinois Farm Bureau
4883
Independent Fuel Terminal Operators Association (IFTOA)
3241, 4696
Indiana Corn Growers Association (ICGA)
4667
Indiana House of Representatives, Rep. Greg Beumer
2899
Indiana House of Representatives, Rep. Melanie Wright
3928
Indiana Soybean Alliance
4700
Institute for Energy Research
4502, 4688
International Council on Clean Transportation (ICCT)
3934, 4490
Iogen Corporation
1778
Iowa Biodiesel Board
3877, 4704
Iowa Biotechnology Association
0205
Iowa Corn Growers Association
3174, 4642
Iowa Farm Bureau
1641, 4634
Iowa Renewable Fuels Association
3497, 4496, 4701, 4706
Iowa Soybean Association
2282, 4851
Iowa Soybean Association and Iowa Biodiesel Board
1646
Jacobs, John
Comment is testimony
Johns, Michael R.
0369
Kaluzny Bros., Inc.
4523
Kansas Corn Growers Association
3944, 4707
Kentucky Corn Growers Association
1131
Kentucky Farm Bureau Federation
1329
Kiefer, Todd
4397
Kinetrex Energy
Comment is testimony
King County Department of Natural Resources and Parks, King
County, WA
3244
King County Metro Transit (Metro)
3875
viii
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Klickitat Public Utility District
Comment is testimony
Kolmar Americas, Inc.
4891
Kolmar Americas and American GreenFuels
1648
KPMG
Comment is testimony
Krupp, Matt
Comment is testimony
Lakeview Biodiesel
3496, 4801
Lakeview Energy
Comment is testimony
LanzaTech
3954
Little Sioux Corn Processors (Board of Directors)
1175
Little Sioux Corn Processors (Employees)
0235
Loris, Nick
Comment is testimony
Louisiana Farm Bureau Federation
4647
Louisiana House of Representatives. Rep. Clay Schexnayder
3912, 3923
Magellan Midstream Partners, LP
3238
Mahoney Environmental
0371, 4811
MAPCO
4638
Marathon Petroleum Corporation
3175
MARC IV
1649
Martens Farm Ltd.
4028
Mass Comment Campaign sponsored by ACE Ethanol (email) - 25
1790
Mass Comment Campaign sponsored by ActionAid (web) - 1232
3575
Mass Comment Campaign sponsored by American Soybean
Association (web) - 58
0252
Mass Comment Campaign sponsored by American Soybean
Association 2 (web) - 14
4458
Mass Comment Campaign sponsored by Anonymous (email) - 405
2212
Mass Comment Campaign sponsored by Anonymous 1 (email) -
359
2213
Mass Comment Campaign sponsored by Anonymous 10 (web) - 419
0135
Mass Comment Campaign sponsored by Anonymous 11 (web) -
2,468
0109
Mass Comment Campaign sponsored by Anonymous 12 (web) - 823
0134
Mass Comment Campaign sponsored by Anonymous 13 (web) - 312
0136
Mass Comment Campaign sponsored by Anonymous 14 (web) -
2,024
0240
Mass Comment Campaign sponsored by Anonymous 15 (web) -
1,648
0241
Mass Comment Campaign sponsored by Anonymous 16 (web) - 745
0242
Mass Comment Campaign sponsored by Anonymous 17 (web) - 339
0244
Mass Comment Campaign sponsored by Anonymous 18 (web) - 105
0245
Mass Comment Campaign sponsored by Anonymous 19 (web) - 117
0247
Mass Comment Campaign sponsored by Anonymous 2 (email) -
225
2214
IX
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Mass Comment Campaign sponsored by Anonymous 20 (web) - 101
0248
Mass Comment Campaign sponsored by Anonymous 22 (web) - 82
0249
Mass Comment Campaign sponsored by Anonymous 23 (web) - 75
0250
Mass Comment Campaign sponsored by Anonymous 24 (web) - 149
1630
Mass Comment Campaign sponsored by Anonymous 25 (web) - 36
1631
Mass Comment Campaign sponsored by Anonymous 26 (web) - 12
1632
Mass Comment Campaign sponsored by Anonymous 27 (paper) -
4,514
1786
Mass Comment Campaign sponsored by Anonymous 28 (web) -
1,734
4139
Mass Comment Campaign sponsored by Anonymous 28 (web) - 607
4138
Mass Comment Campaign sponsored by Anonymous 29 (web) -
2,049
4456
Mass Comment Campaign sponsored by Anonymous 3 (email) -
197
2215
Mass Comment Campaign sponsored by Anonymous 4 (email) -
134
2216
0373, 0374, 0375,
Mass Comment Campaign sponsored by Anonymous 5 (paper/web)
-866
0377, 0381, 0421,
0238, 0243, 3909,
3920, 3925, 1788,
2217, 3974
0376, 0379, 0380,
Mass Comment Campaign sponsored by Anonymous 6 (paper/web)
- 152
0523, 0524, 0786,
3133, 3134, 0246,
3910, 1789, 3938,
4090, 4088
Mass Comment Campaign sponsored by Anonymous 7 (USB drive)
- 100,966
2209
Mass Comment Campaign sponsored by Anonymous 8 (web) - 50
0525, 0251
Mass Comment Campaign sponsored by Anonymous 9 (web) -
1,650
0132, 0133
Mass Comment Campaign sponsored by Friends of the Earth (web)
- 6,646
4728
Mass Comment Campaign sponsored by Golden Grain Energy
Employees (web) - 30
3144
Mass Comment Campaign sponsored by Illinois Corn Growers
Association (web) - 483
1781, 1782, 1783, 1784
Mass Comment Campaign sponsored by Iowa Renewable Fuels
Association (web) - 11,003
1780, 1785,2210
Mass Comment Campaign sponsored by Iowa Renewable Fuels
Association 2 (web) - 1,131
4727
Mass Comment Campaign sponsored by Mighty Earth (web) -
39,672
3574
X
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Mass Comment Campaign sponsored by National Wildlife
Federation Action Fund (web) - 19,265
3573
Mass Comment Campaign sponsored by Plymouth Energy
Employees (web) - 30
1787
Mass Comment Campaign sponsored by Plymouth Energy
Employees 2 (web) - 38
3145
Mass Comment Campaign sponsored by Sierra Club (web) - 12,503
2211, 3576
Mass comment campaign sponsored by Waxman Strategies (web) -
39,000
4460
Mass Comment Campaign sponsored by Western Iowa Energy, LLC
Employees (web) - 29
3143
Mass comment campaign submitted by Co-op Power and Northeast
4459
Biodiesel (web) - 10
Mass comment campaign submitted by Illinois soybean farmers
(web) - 37
4457
Mayberg, Louis
4511
Mayor of Toledo
0237
Mendota Agri-Products
4483
Methanol Institute
1339
Michigan Corn Growers Association (MCGA)
4668
Midwest AgEnergy Group
4410
Midwest AgEnergy Group, LLC
1913
Mighty Earth, Friends of the Earth, Rainforest Action Network,
3320
Amazon Watch, and Biofuelwatch
Minnesota Bio-Fuels Association
3652
Minnesota Corn Growers Association
3199, 4637
Minnesota Farm Bureau Federation
4669
Minnesota Soybean Processors
1388, 3252
Minnesota Soybean Processors, Owensboro Grain Company,
Western Dubuque Biodiesel, LLC, Community Fuels, Biodico, Iowa
Renewable Energy, BIOX USA Limited, Rio Valley Biofuels,
4504
AltAir Fuels, AMERIgreen Energy, Franco Environmental Law, and
Playmaker Strategies, LLC
Minnesota Soybean Processors, Western Dubuque Biodiesel,
American GreenFuels, LLC, Biodico and Zero Net Energy Farms,
3679
Community Fuels, Iowa Renewable Energy, and Newport Biodiesel
Minnesota Soybean Producers
3958
Minsk, Ronald E.
4507
Missouri Corn Growers Association (MCGA)
3323, 4675
Missouri Farmers Union
1692
Missouri Soybean Association
4416
Monroe Energy
3649, 4645, 4894
Montauk Energy
1135
Morrow Renewables
Comment is testimony
XI
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Moving Parts, LLC
2380
Murphy Oil USA, Inc.
3874
Musket Corporation
Comment is testimony
N1 Energy
Comment is testimony
National Association of Clean Water Agencies (NACWA)
2999
National Association of Convenience Stores (NACS) and Society of
Independent Gasoline Marketers of America (SIGMA)
2545, 4503
National Association of Truck Stop Operators (NATSO)
3248, 4101
National Biodiesel Board (NBB)
1633, 1645, 1650,
1651, 3880, 4697
National Chicken Council (NCC)
1754, 4631
National Corn Growers Association (NCGA)
1756, 4651
National Corn to Ethanol Research Center
4089
National Council of Chain Restaurants (NCCR)
4663
National Farmers Union
3184, 4491
National Marine Manufacturers Association (NMMA)
1301
National Oilseed Processors Association (NOPA)
4658
National Renderers Association (NRA)
3959, 4508
National Renderers Association, the California Biodiesel
Association, and Baker Commodities
Comment is testimony
National Taxpayers Union
Comment is testimony
National Waste and Recycling Association
Comment is testimony
National Wildlife Federation
Comment is testimony
Nebraska Corn Growers Association
3937
Nebraska Farm Bureau Federation (NEFB)
3376, 4712
Neste US, Inc.
4635
New Energy Investors
Comment is testimony
New England Fuel Institute
4711
New Leaf Biofuel
3870
New Mexico Wildlife Federation
0792
Newport Biodiesel
1652
NGV America
Comment is testimony
North Carolina Petroleum & Convenience Marketers (NCPCM)
3318
North Dakota Ethanol Council (NDEC)
1344, 4455
North Dakota Farmers Union (NDFU)
3431
North Dakota Petroleum Marketers Association
Comment is testimony
Northeast Biodiesel Company, LLC
4489, 4602, 4616, 4657
Northwest Gas Association (NWGA)
0731
Novozymes
1774
NYC Department of Citywide Administrative Services
4628
Ohio Com & Wheat Growers Association, Ohio Ethanol Producers
Association, and Ohio Farmers Union
4725
Xll
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Ohio Corn & Wheat Growers Association (OCWGA)
4670
Ohio House of Representatives, Rep. Michael Ashford
3911
Ohio House of Representatives, Rep. Michael P. Sheehy
3913
Ohio Soybean Association
0787, 4485
Oklahoma Office of the Secretary of Energy & Environment
4487, 4861
Outdoor Power Equipment Institute (OPEI)
1349
Pacific Ethanol
3475
PBF Energy
Comment is testimony
PBF Energy, Inc.
3429, 3924, 4702
Petroleum Marketers Association of America (PMAA)
3962
Philadelphia Energy Solutions Refining and Marketing, LLC (PES)
3887, 4884
Phillips 66 Company
3249, 4682
Playmaker Strategies
Comment is testimony
POET-DSM Advanced Biofuels
3236
Port of Grays Harbor
3939
Preferred Oil
4486
Process Combustion Corporation
Comment is testimony
Progressive Rail Inc., and Iowa Traction Railway
3129, 3131, 3132, 3136
Progressive Rail, Inc.
3130
R. W. Beckett Corporation
4855
R&S Block Partnership
3287
Reaching America
Comment is testimony
REG Grays Harbor
3932
Remsen Farmers Coop
4722
Renew Kansas
1223, 4394
Renewable Biofuels, LLC
3250, 3593, 4693
Renewable Energy Group (REG)
0382, 1644, 3961, 4500
Renewable Fuels Association (RFA)
1776, 3109, 3711, 4499
Republic Services, Inc.
3655
Ribic, Robert
Comment is testimony
Rio Valley Biofuels
3245
River Birch
Comment is testimony
Roeslein Alternative Energy
1642
RPMG, Inc.
3240
Schutte, Jay
Comment is testimony
Secure America Alliance
Comment is testimony
Sensenig, Andrea
Comment is testimony
SeQuential
1133
Shell Oil Products
3142, 3933, 4451
Sinclair Oil Corp.
3657
Xlll
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1134, 1169, 1170,
1337, 1345, 1350,
Small Retailers Coalition
1351, 3105, 3156,
3710, 3572, 3648,
4687, 4709
South Dakota Corn Growers Association
4639
South Dakota, Michigan, Tennessee, and Missouri Soybean
Associations
3181, 3182, 3183, 3872
Syngenta
3247
Taxpayers for Common Sense
3322
Trillium Transportation
Comment is testimony
Tyburn Railroad, LLC
3135
U.S. Canola Association (USCA)
3321, 4641
U.S. Gain
Comment is testimony
U.S. House of Representatives, Congressman David Young
3433
U.S. Senate, Senator Edward Price
4136
U.S. Senate, Senator Patrick J. Toomey
4137
U.S. Senate, Senator Robert P. Casey, Jr
3437
U.S. Senator Joni Ernst
4452
U.S. Senator Mike Rounds
4453
Union of Concerned Scientists
3428, 4650
United Steelworkers
4640
United Steelworkers Local 10-234
1761
University of Illinois at Urbana-Champaign
4633
University of Illinois at Chicago
1338
Unverferth Manufacturing Company, Inc.
4085
Urban Air Initiative, Clean Fuels Development Coalition, 25x'25
Alliance, Nebraska Ethanol Board, and Nebraska Ethanol Industry
3964
Coalition
Valero Energy Corporation
3677, 3988, 4716, 4885
Valley Proteins, Inc.
4482
Vilter Manufacturing
1779
VNG.co, LLC
3871
Volvo Penta of the Americas, LLC
3185
W2Fuel, LLC
4481, 4512
WAEES
3253
Washington Suburban Sanitary Commission
2386
Waste Management
1503
Water Environment Federation
3950
Western Dubuque Biodiesel
3254
Western Dubuque Biodiesel and Western Iowa Energy
Comment is testimony
Western Iowa Energy
1647, 3255
xiv
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Western Plains Energy, LLC
0378
Willis, John
3656
Wisconsin BioFuels Association (WBFA)
1758, 4510
Wisconsin Corn Growers Association
1757, 4691
Wonderful Company LLC, The
0173
World Energy
3876, 4509
" Individual comments from the public (and attachments submitted with comments) submitted to Docket No. EPA-
HQ-OAR-2017-0091 are assigned a unique 4-digit docket number that follows the base docket number (i.e., XXXX,
where "XXXX" represents the unique 4-digit document docket number). For example, Docket Item No. EPA-HQ-
OAR-2017-0091-1500 is presented as 1500 in this table and within the text of this document.
xv
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1. Policy Objectives of the RFS Program
1.1 Broad Policy Issues Including Congressional Intent and Program Goals
Commenters that provided comment on this topic include, but are not limited to: 0446, 1223,
1692, 2539, 2540, 2542, 2545, 2547, 3108, 3242, 3430, 3496, 3497, 3593, 3679, 3680, 3876,
3878, 3880, and 3961.
Comment:
Some commenters stated that EPA must increase the 2018 standards relative to 2017 to comply
with Congressional intent to increase production of clean renewable fuels, and that EPA has a
statutory duty to drive growth. Other commenters stated that EPA should set higher standards to
increase production and use of renewable fuel, as this would promote the goals of the program.
Several commenters also stated that the proposed rule was inconsistent with Congress' intent to
provide consumers with greater access to renewable fuels.
Response:
EPA notes that the total renewable fuel and advanced biofuel final 2018 standards are higher
than the final 2017 standards. EPA is required to set the cellulosic biofuel standard at projected
production under CAA section 21 l(o)(7)(D), and therefore disagrees with commenters who
suggested that EPA must increase the 2018 cellulosic standard relative to 2017. EPA believes
that the volumes it is finalizing in this action fulfill the goals of the RFS program, including
promotion of renewable fuels. This comment is further addressed in the context of the cellulosic
waiver authority in Section 2.2 of this document.
Comment:
Several commenters stated that the standards should not result in increased demand for vegetable
oils for biodiesel or corn ethanol.
Response:
The RFS program allows for use of renewable fuels that meet the definitions articulated in the
statute. Additionally, in this action EPA is not requiring additional volumes of advanced biofuel
or total renewable fuel beyond what is required using the full extent of the cellulosic waiver
authority and has concluded that the use of other waiver authorities is not appropriate for 2018
(see Section V of the final rule).
Comment:
One commenter suggested that, in the context of defining "domestic" under the general waiver
authority's "inadequate domestic supply" finding, EISA's stated goal is to increase domestic
production of biofuel and to promote energy independence and security. This commenter also
suggested that the directive that EPA consider energy security in setting volumes for years
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beyond those specified in the statute in CAA section 21 l(o)(2)(B)(ii) is evidence of Congress'
intent to base the annual volumes on domestic production.
Response:
EISA's stated goals include "to move the United States toward greater energy independence and
security, [and] to increase the production of clean renewable fuels." Thus, the language does not
specify whether the production of clean renewable fuels is to come from domestic or foreign
production. EPA agrees with the commenter that "energy independence and security" is a stated
goal of the Act. While the statute does direct EPA to consider "energy security" in CAA section
21 l(o)(2)(B)(ii), that section applies when EPA is setting volumes for other calendar years. EPA
does not find any reason to conclude that consideration of "energy security" in CAA section
21 l(o)(2)(B)(ii) should be read to require EPA to interpret "domestic supply" to include only
domestic production.
Comment:
One commenter stated that low oil prices and uncertainty over the policy direction for the RFS
has hurt development of advanced fuels. The commenter also stated that higher standards
provide benefits to farmers and livestock producers, and provide jobs.
Response:
EPA believes that the finalized volumes, promulgated in accordance with the statutory deadline,
continue to support the goals of the program, as reflected in the statute.
Comment:
One commenter stated that Congress set statutory volumes so that cost would not inhibit their
use.
Response:
While Congress did set renewable fuel targets in the statute for each year, it also created
flexibility for EPA to modify those targets in specific circumstances through waiver provisions.
EPA believes the reductions of cellulosic biofuel in this final rule are required, in light of EPA's
projection of cellulosic biofuel production, and that it is also appropriate for EPA to use the
cellulosic waiver authority to lower the target volumes for advanced biofuel and total renewable
fuel below those in the statute.
Comment:
Several commenters stated that the proposed volumes will decrease the market for domestically
produced BBD, which is at odds with congressional intent to grow renewable fuel industry on an
annual basis.
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Response:
EPA does not believe that the volumes it is finalizing will decrease the market for domestic
BBD, as described in Section IV and VI of the final rule.
Comment:
One commenter suggested that the proposed rule did not fulfill EPA's statutory obligations for
advanced biofuels.
Response:
While the statutory target of "advanced biofuels" for 2018 is 11.0 billion gallons, nested within
that target is a statutory target of 7.0 billion gallons for cellulosic biofuel leaving 4.0 billion
gallons for non-cellulosic advanced biofuel. EPA was required to adjust the volume of cellulosic
biofuel and exercised its discretion to make corresponding reductions in the volume of advanced
biofuel. The resulting advanced biofuel standard is set at a level which represents 4.0 billion
gallons for non-cellulosic advanced biofuel.
Comment:
Several commenters stated that Congress did not intend for the RFS program to require ethanol
use beyond the blendwall.
Response:
Some comments cite EIA gasoline consumption projections at the time of EISA's enactment,
together with the conventional biofuel allowance reflected in the statutory volumes tables
(discerned by subtracting advanced biofuel volumes from total renewable fuel volume targets),
as indicative that Congress did not intend for the RFS program to exceed the E10 blendwall. We
note that Congress did not structure the program to achieve a certain percentage of ethanol in
gasoline or provide EPA with waiver authority based on that metric. Furthermore, we note that
there is no ethanol-specific standard for the RFS. Ethanol can be in either advanced (e.g.
sugarcane ethanol) or conventional (e.g., corn ethanol) forms, and conventional fuel can be
ethanol or not (e.g., conventional biodiesel). Therefore, the size of the conventional biofuel
allowance does not necessarily reflect Congressional assumptions regarding ethanol use.
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1.2 Biofuel Imports and Impacts on Energy Security
Commenters that provided comment on this topic include, but are not limited to: 1756, 1776,
2542, 2547, 3105, 3106, 3142, 3175, 3241, 3248, 3251, 3319, 3320, 3377, 3497, 3593, 3645,
3679, 3680, 3880, 3887, 3953, and 3961.
Comment:
One commenter stated that if EPA were to exclude imports in the determination of the 2018
volume requirements while continuing to allow qualifying imported renewable fuel to generate
RINs, the lower volume requirements would, result in lower RIN prices and thus decreased
demand for renewable fuel, which in turn would reduce the energy security benefits that the RFS
program was intended to achieve.
Response:
In the notice of availability of supplemental information1 we sought comment on making a
threshold determination that inadequate domestic supply might exist when considering only
domestic production, but noted that even if that condition was satisfied, EPA would still need to
make a determination of the appropriateness of a reduction to the applicable volume
requirements taking into consideration the fact that qualifying imports of renewable fuel could
still generate RINs:
"Having made the threshold finding that there was an inadequate domestic supply,
EPA could consider the availability of imports as one factor among others in
determining whether to exercise its discretion to use the waiver authority."
As described in Section V of the final rule, EPA would not choose to exercise its authority to
grant a waiver on the basis of inadequate domestic supply for 2018 even if it interpreted the term
"domestic supply" to exclude imports, and thus need not determine whether and to what degree
imports should be considered in the calculation of the reduction(s). As a result, EPA need not
consider what the impacts on renewable fuel demand or energy security would be in that
situation.
Comment:
Multiple commenters stated that including imported biofuels in EPA's projection of the available
supply of biofuel would force obligated parties to rely on imported biofuels and would
undermine the statute's purpose of promoting energy security and/or independence. These
commenters generally requested that EPA still allow imported biofuels to generate RINs, with
some commenters suggesting that the statutory language explicitly contemplates imports of
renewable fuel being used for compliance with the RFS. One commenter stated that setting
standards in such a way as to promote imports of renewable fuel runs counter to the objectives of
the statute to promote domestic energy supplies. Other commenters stated that biodiesel imports
1 82 FR 46174 (October 4, 2017).
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increase energy security, which is one of the goals of the RFS program. One commenter stated
that EPA should focus on increasing energy security rather than increasing the U.S. trade
balance.
Response:
Under the RFS program, imports of renewable fuel qualify to generate RINs for compliance with
the applicable RFS standards. The statutory language suggests that imports can play a role in
meeting the volume targets that Congress set. For instance, CAA section 21 l(o)(5)(A) directs
EPA to issue regulations implementing the RFS program and specifies that
"The regulations ... shall provide ... for the generation of an appropriate amount of credits
by any person that refines, blends, or imports gasoline that contains a quantity of
renewable fuel..." (Emphasis added.)
See also CAA section 21 l(o)(5)(E) (providing for credits for persons who import additional
renewable fuel).
That said, it is within EPA's purview to consider all relevant factors that could affect supply,
both those related to domestically-produced renewable fuels and those related to imports.
Regarding imports of renewable fuels, there are a variety of factors that make the level of
potential supply considerably less certain than for domestically-produced renewable fuels. These
factors include but are not limited to:
High variability of imports into the U. S. in the past
Growing international demand for renewable fuel
Unpredictable policies in other nations regarding production, trade, taxes, and tariffs
for renewable fuels
Fluctuating demand for alternative uses of the feedstocks used to make renewable
fuels, such as sugar from sugarcane.
Thus while we did consider potential supply from imports in both the 2018 NPRM and the 2018
final rule, our estimates of their contributions to total supply have been tempered by the
uncertainty associated with them.
While energy independence was one of the goals of the RFS program, and imported biofuels do
not increase energy independence, the RFS program was also intended to increase energy
security and decrease GHG emissions from transportation fuel. EPA's lifecycle assessments
indicate that biofuels produced using qualifying pathways, whether produced domestically or
imported from foreign countries, result in GHG reductions relative to the petroleum based fuels
they displace. Imported biofuels also diversify the sources of transportation fuel in the U.S. and
can therefore increase energy security. Energy security is not limited to a consideration of
domestic energy sources to the exclusion of imports. Instead, energy security includes a measure
of the diversity of fuel sources as well as the geopolitical condition of the sources. Increasing
diversity (such as through use of biofuels from a variety of countries) reduces risks associated
with a potential disruption of supply. See also discussion of energy security vs energy
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independence in Section 7 of this document. We further note that while EPA currently projects
that imported biofuels will continue to contribute towards meeting the RFS standards in 2018,
we believe it would be possible for domestic biofuel producers to produce sufficient volumes of
biofuels to meet the volume standards in this final rule for 2018, without considering any
imported biofuels (see Section V of the final rule for a further discussion of this topic). The final
volume requirements that we have established for 2018 do take into account potential imports
subject to the uncertainty described above.
Comment:
Multiple commenters stated that any consideration of imports in the determination of applicable
volume requirements comes at the expense of domestic energy security, and thus runs counter to
the goals of the RFS program.
Response:
Energy security is not limited to a consideration of domestic energy sources to the exclusion of
imports. Instead, energy security includes a measure of the diversity of fuel sources as well as the
geopolitical condition of the sources. Increasing diversity (such as through use of biofuels from a
variety of countries) reduces risks associated with a potential disruption of supply. Thus, biofuel
imports contribute to energy security in the United States. This issue was discussed in the
original 2007 rulemaking establishing the RFS program. See also discussion of energy security
and energy independence in Section 7 of this document.
Comment:
Several commenters stated that EPA should not exclude imported volumes from our
consideration of available supply resulting in lower standards than if imported biofuels had been
considered. These commenters generally claimed that doing so would hurt domestic producers,
as imported biofuel would still be allowed to contribute towards the RFS obligations. Many
commenters stated that foreign produced biofuel can be cheaper than domestically produced
biofuels. Some commenters mentioned lower labor costs and/or production subsidies available in
some foreign countries as the reason that foreign produced biofuels could be cheaper than
domestically produced biofuels. These commenters generally requested that EPA increase the
advanced biofuel volume for 2018 to support the domestic biodiesel industry.
Response:
In this final rule EPA has not used our general waiver authority to further reduce the volumes for
advanced and/or total renewable fuel (after the reductions using the cellulosic waiver authority)
on the basis of an inadequate domestic supply of biofuel. EPA recognizes that lower volumes
would not necessarily result in decreased biofuel imports, especially if imported biofuels are
cheaper than domestically produced biofuels. The advanced biofuel volume for 2018 in this final
rule is slightly higher than the advanced biofuel volume for 2017, and is the result of reducing
the cellulosic biofuel, advanced biofuel, and total renewable fuel volumes from the statutory
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targets for 2018 by the same amount using the cellulosic waiver authority. See Section IV of the
final rule for a further discussion of the advanced biofuel volume.
Comment:
One commenter stated that EPA should let the Department of Commerce handle trade issues, and
should not seek to address imported biofuels through the RFS program.
Response:
EPA does not intend to address trade issues through the RFS program. Our discussion of
imported biofuels pertained to the impact of imported biofuels on energy independence and
security and whether imported biofuels should be considered as part of the available supply of
biofuel under the general waiver authority on the basis of inadequate domestic supply. See
Section V of the final rule for further discussion of EPA's general waiver authority.
Comment:
One commenter stated that significant volumes of BBD must be imported to reach the 2.9 billion
gallons EPA projected would be used to meet the total renewable fuel standards in 2018. The
commenter claimed that the domestic biodiesel and renewable industry cannot produce these
volumes, or could only produce these volumes at very high cost.
Response:
EPA notes that imported volumes qualify to be used for compliance with the standards.
Moreover, EPA has concluded that if there is sufficient demand for domestically produced
biofuels, the domestic biodiesel and renewable diesel industry may be capable of producing 2.9
billion gallons of these fuels in 2018. Production capacity and feedstock availability would not
appear to prevent the domestic biodiesel and renewable diesel industry from producing at this
level. Producing 2.9 billion gallons of biodiesel and renewable diesel domestically would require
significant increases in the production rate of existing biodiesel and renewable diesel production
facilities, however these increases may be possible in 2018. Increasing the production of
domestically produced biodiesel and renewable diesel to 2.9 billion gallons in 2018 may result in
higher costs for these fuels. EPA has determined that these potentially higher costs would not be
sufficient basis for further reductions to the advanced biofuel volume using the general waiver
authority on the basis of severe economic harm.
Comment:
One commenter stated that EPA cannot predict with precision the import of foreign biofuels.
Including imported biofuels would result in additional uncertainty in the program. The
commenter noted that year over year import volumes have varied significantly in past years.
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Response:
Projecting the supply of imported biofuels is inherently difficult, as the supply of imported
biofuels can be impacted by a variety of different factors both economic and political. While
EPA currently projects that imported biofuels will continue to contribute towards meeting the
RFS standards in 2018, we believe it could still be possible for domestic biofuel producers to
produce sufficient volumes of biofuels to meet the volume standards in this final rule for 2018,
without considering any imported biofuels (see Section V of the final rule for a further
discussion of this topic).
Comment:
One commenter stated that without the biodiesel tax credit (or if the biodiesel blenders tax credit
is changed to a producers' tax credit available only to domestic biodiesel and renewable diesel
producers) imported biodiesel is more likely to be replaced with petroleum diesel than
domestically produced biodiesel or renewable diesel.
Response:
The absence of the biodiesel blenders tax credit (or the change to a producers' tax credit
available only to domestic biofuel producers) may result in lower volumes of imported biofuel in
2018 than in previous years. If biofuel imports decrease, however, we do not believe that these
fuels will most likely be replaced with petroleum diesel. While EPA currently projects that
imported biofuels will continue to contribute towards meeting the RFS standards in 2018, we
believe it could still be possible for domestic biofuel producers to produce sufficient volumes of
biofuels to meet the volume standards in this final rule for 2018, without considering any
imported biofuels (see Section V of the final rule for a further discussion of this topic).
Comment:
Multiple commenters stated that imported biofuel reduces GHG emissions and reduces
petroleum imports from unstable regions. One commenter noted that imported biofuels are
usually from stable, friendly countries.
Response:
EPA's lifecycle assessments indicate that biofuels produced using qualifying pathways, whether
produced domestically or imported from foreign countries, result in GHG reductions relative to
the petroleum based fuels they displace. Imported biofuels also diversify the sources of
transportation fuel in the U.S. and can therefore increase energy security.
Comment:
Several commenters stated that imported biodiesel is cheaper than domestically produced
biodiesel, and that not allowing imported biodiesel to generate RINs would increase the cost of
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the RFS program. Another commenter claimed that competition from imported biofuels makes
domestic biofuel cheaper.
Response:
EPA did not propose to restrict the potential for imported biofuels to be used in the U.S. and
qualify towards meeting the RFS standards. EPA's current regulations allow the use of imported
and domestic biofuel for compliance. Competition among biofuel producers, including both
domestic and foreign biofuel producers, generally results in lower biofuel prices.
Comment:
One commenter stated that EPA does not have inherent authority to reduce the standards on the
basis of imported biofuels, and that any reductions must be based on EPA's statutory waiver
authorities.
Response:
The CAA provides EPA with a number of waiver authorities, including the cellulosic waiver
authority, general waiver authority, and biomass based diesel waiver authority to reduce the
statutory targets if certain conditions are met. See CAA section 21 l(o)(7). For a discussion of
EPA's waiver authorities, including the consideration of biofuel imports in deciding whether and
to what degree to exercise these waiver authorities, see Sections II, IV, and V of the final rule.
Comment:
One commenter stated that if EPA desires to reduce imported biofuel they should repeal the
CARB 10 approval. Another commenter stated that EPA should require that foreign producers of
biofuels meet the applicable feedstock requirements.
Response:
EPA currently requires that all foreign producers of RIN generating biofuels meet the applicable
feedstock requirements, including all producers that are satisfying these requirements using the
methods requested by CARBIO and approved by EPA. It would not be appropriate for EPA to
repeal the CARBIO approval in an effort to reduce biofuel imports since EPA has determined
that CARBIO's proposal satisfies the requirements of the RFS program.
Comment:
One commenter stated that in light of the high level of imports EPA should set increasing
volumes to encourage domestic production.
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Response:
In deciding to reduce the cellulosic biofuel, advanced biofuel, and total renewable fuel volumes
by the same amount from the statutory targets, EPA considered a number of factors, including
the production potential of the domestic biodiesel and renewable diesel industry, the potential for
imported volumes of these fuels, a desire to avoid feedstock switching and diverting biofuels
from foreign countries, and a recognition of the relatively high cost of advanced biofuels (see
Section IV of the final rule for a further discussion of this issue). In light of these considerations,
EPA has determined that it would not be appropriate to further increase the advanced biofuel
volume.
Comment:
One commenter stated that EPA must account for the expected level of biofuel imports in our
standards. The commenter stated that they estimate that biofuel imports in 2017 will be lower
than imported biofuel volumes in 2016, and that potential tariffs and countervailing duties on
biodiesel from Argentina and Indonesia will likely further reduce imported volumes of biodiesel
in 2018.
Response:
Projecting the supply of imported biofuels is inherently difficult, as the supply of imported
biofuels can be impacted by a variety of different factors both economic and political. It is
possible that biofuel imports could decrease in 2018, either as a result of the absence of the
biodiesel tax credit, tariffs and countervailing duties on biodiesel produced in Argentina or
Indonesia, or a number of other factors. For example, any reductions in imports from Argentina
or Indonesia could be made up with imports from other countries or through growth in domestic
production. While EPA currently projects that imported biofuels will continue to contribute
towards meeting the RFS standards in 2018, we believe it would be possible for domestic biofuel
producers to produce sufficient volumes of biofuels to meet the volume standards in this final
rule for 2018, without considering any imported biofuels (see Section V of the final rule for a
further discussion of this topic).
Comment:
One commenter claimed that it was inappropriate for EPA to try to curb biodiesel imports by
freezing or reducing BBD volumes. The commenter encouraged EPA to simply follow the law
and include imported biodiesel as either an advanced or conventional biofuel. The commenter
further stated that EPA should not be trying to put its finger on the scale to control the level of
imports by limiting growth in the RFS.
Response:
EPA did not propose to restrict the potential for imported biofuels to be used in the U.S. and
qualify towards meeting the RFS standards. EPA's current regulations allow the use of imported
and domestic biofuel for compliance. EPA considered a number of factors in the decision to use
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our cellulosic waiver authority to reduce the cellulosic biofuel, advanced biofuel, and total
renewable fuel volumes by the same amount from the statutory targets, including the production
potential of the domestic biodiesel and renewable diesel industry, the potential for imported
volumes of these fuels, a desire to avoid feedstock switching and diverting biofuels from foreign
countries, and a recognition of the relatively high cost of advanced biofuels (see Section IV of
the final rule for a further discussion of this issue).
Comment:
One commenter stated EPA should not take any action that discriminates against imported
biofuels, as such actions would violate international laws. Another commenter similarly stated
that EPA should not try to restrict the market for biofuel imports. If the U.S. tries to restrict
imports this could isolate the U.S. market and hurt U.S. consumers. One commenter stated that
EPA should not presume that imports will automatically be available to the U.S. since they are
driven by market factors.
Response:
EPA did not propose to discriminate against imported biofuels by restricting the potential for
imported biofuels to be used in the U.S. or for qualifying biofuels to contribute towards meeting
the RFS standards. While EPA currently projects that imported biofuels will continue to
contribute towards meeting the RFS standards in 2018, we believe it would be possible for
domestic biofuel producers to produce sufficient volumes of biofuels to meet the volume
standards in this final rule for 2018, without considering any imported biofuels (See Section V of
the final rule for a further discussion of this topic).
Comment:
One commenter stated that EPA must consider exported volumes of biofuels, not just imported
volumes, in setting the RFS standards. This commenter stated that EPA has provided no legal
case for severe economic harm to support reducing the RFS standards by the volume equal to the
volume of imported biofuels.
Response:
EPA has used our statutory authority to reduce the cellulosic biofuel, advanced biofuel, and total
renewable fuel volumes by the same amount from the statutory targets. As discussed in Section
V of the final rule, we have not made further reductions using the general waiver authority (on
the basis of severe economic harm or any other reason). We believe that the advanced biofuel
and total renewable fuel volumes that result from the full use of the cellulosic waiver authority
can be met. In making this decision EPA considered a number of factors, including the
production potential of the domestic biodiesel and renewable diesel industry (including biodiesel
and renewable diesel that is currently exported), the potential for imported volumes of these
fuels, a desire to avoid feedstock switching and diverting biofuels from foreign countries, and a
recognition of the relatively high cost of advanced biofuels (see Section IV of the final rule for a
further discussion of this issue).
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Comment:
Multiple commenters stated that even if EPA continues to include imported biofuels in our
consideration of the available supply we should still project no imported biodiesel in 2018 due to
the recent proposed tariffs and countervailing duties on biodiesel from Argentina and Indonesia.
Response:
EPA does not utilize any explicit assumption of volumes from Argentina and Indonesia in our
volume projections. EPA notes that the preliminary tariff determinations on biodiesel imported
from Argentina and Indonesia have not yet been finalized, and that even if these tariffs are
finalized the impact of these tariffs is uncertain. It is possible, for example, that other countries
unaffected by these tariffs could respond by increasing biodiesel imports to the U.S. It is also
possible that the U.S. could respond by increasing domestic production of biodiesel or renewable
diesel, or by decreasing exports of biodiesel and renewable diesel. While EPA currently projects
that imported biofuels will continue to contribute towards meeting the RFS standards in 2018,
we believe it would be possible for domestic biofuel producers to produce sufficient volumes of
biofuels to meet the volume standards in this final rule for 2018, without considering any
imported biofuels (see Section V of the final rule for a further discussion of this topic).
Comment:
One commenter stated that other countries are already sending additional volumes of biodiesel to
the U.S. to compensate for lower volumes of imported biodiesel from Argentina and Indonesia.
Response:
EPA anticipates that the tariffs and countervailing duties on biodiesel imported from Argentina
and Indonesia, if finalized, will not necessarily result in lower supplies of biodiesel to the U.S. as
other countries may increase biodiesel exports to the U.S., as this commenter has indicated is
already taking place. Alternatively, domestic production of biodiesel and renewable diesel could
increase or exports of biodiesel from the U.S to other countries could decrease.
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1.3 RFS Program Changes, RIN Trading, and Market Oversight
Commenters that provided comment on this topic include, but are not limited to: 2545, 3105,
3106, 3142, 3242, 3248, 3319, 3429, 3497, 3645, 3649, 3653, 3677, 3679, 3680, 3681, 3684,
3887, 3953, 3961, and 3962.
Comment:
Numerous commenters suggested a number of changes to the RFS program structure, the RIN
trading system and strengthening oversight of the RIN market.
Comments received on RFS program changes included moving the point of obligation to
position holders at the rack, and suggested changes to how RINs are issued, held, reported, and
traded. These suggested changes include: mandating accurate reporting of prices and volumes of
RINs to EPA; limit RIN purchasing to obligated parties and in relative proportions to their
obligations; impose position limits, trading limits, and require position and trading disclosures;
set limitations on holding carry-over RINs by unobligated parties and RIN-long parties; set a
target RIN price and provide EPA-issued RINs when that target is exceeded; report daily the
aggregated number of RINs sold in each category as reported in EMTS, simplification of RIN
classifications to Kl, K2, and RIN separations; limit trades to no more than three; divulge the
market positions of all non-obligated participants in the market; and require all non-obligated
parties to report the benefits from RIN trading.
Comments received on strengthening RIN market oversight include encouragement of CFTC to
actively monitor the RIN market; engage FTC to take enforcement actions against uneconomic
trading; and change the RIN market structure to comply with the Commodity Exchange Act.
Response:
Comments on changes to the point of obligation and other changes to the structure of the RFS
program (such as the ability to carryover RINs, and to the process for issuing RINs) are beyond
the scope of this rulemaking, which establishes the annual volume requirements and percentage
standards. EPA notes that it recently considered petitions to alter the point of obligation in a
separate proceeding, and explained its rationale for denying the petitions.2
EPA did solicit comment on potential changes to the RIN trading system in light of the concern
expressed by some commenters that the current regulatory provisions related to RIN trading
render the RFS program vulnerable to market manipulation. EPA takes such issues seriously.
The RIN system was originally designed with an open trading market in order to maximize its
liquidity and ensure a robust marketplace for RINs. However, EPA is interested in assessing
whether and how the current trading structure provides an opportunity for market manipulation.
To that effect, EPA sought comment and input on this issue, including on potential changes to
the RIN trading system that might help address these concerns. While EPA received many
comments that are helpful to highlight opportunities for improvement to the RIN system, we did
2 See 82 FR 56779 (November 30, 2017).
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not propose and are not in a position to finalize any significant changes to the RIN system at this
time, particularly in light of the statutory deadline for issuing the annual standards. However, we
intend to explore these suggested changes and are open to suggestions for making changes in the
future that are within our authority if they would help to improve the function and liquidity of the
RIN system.
Separate from evaluating the RIN trading options in the RFS program, EPA is working with
appropriate market regulators to analyze targeted concerns of some commenters. EPA is not a
commodity market regulatory agency, and thus we do not have expertise in this field. Claims of
market manipulation prompted EPA to execute a memorandum of understanding (MOU) with
CFTC, which has the authority and expertise to investigate such claims. EPA intends to continue
to collaborate with CFTC under the MOU with respect claims of manipulation in the RIN
market.
In the meantime, EPA has continued to explore additional ways to increase program
transparency in order to support the program and share data with all stakeholders. EPA already
publishes RFS program data on our website, including data related to RIN generation, sales and
holdings, and annual compliance.3 We are interested in providing more information, to the extent
consistent with our obligations to protect confidential business information (CBI). EPA sought
comment on specific data elements and posting frequency that stakeholders believe would be
useful to help with market transparency and liquidity. Commenters suggested a number of
different types of data that commenters suggested would be useful to the industry and public.
EPA will need to further evaluate each of these suggestions to determine which information we
can be post and, if so, whether we can post it at the frequency that was suggested by the
commenters. Our decisions with respect to these suggestions must necessarily strike a balance
between achieving the greatest transparency possible, while working within the limitations of our
authority and resources (including technology systems), and protecting information that is
claimed as CBI.
3 For public data on the RFS and other EPA fuel programs, refer to: https://www.epa.gov/fuels-registration~
reporting-and-compliance-help/public-data-and-registration-lists-fiiel-pro grains
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2. Waiver Authorities
2.1 General Waiver Authority
Commenters that provided comment on this topic include, but are not limited to: 4394, 4410,
4415, 4451, 4481, 4489, 4491, 4495, 4497, 4499, 4500, 4501, 4504, 4505, 4508, 4509, 4633,
4635, 4641, 4651, 4653, 4662, 4671, 4673, 4693, 4697, 4699, 4701, 4704, 4858, 4859, 4886, and
4891.
Comment:
Many commenters stated that there is no justification for the use of the general waiver authority,
as the RFS is not creating severe economic or environmental harm, nor is there an inadequate
domestic supply of renewable fuel. Commenters generally stated that EPA has established a high
bar for determining that implementation of the RFS would result in severe economic or
environmental harm and there is currently no data to support that determination. Numerous
commenters also stated that it is inappropriate to interpret inadequate domestic supply to refer to
only fuel that is produced domestically. Other commenters stated that even if this were the case
and imports were ignored, there is adequate domestic production of biodiesel to achieve the BBD
volumes.
Response:
EPA is not using the general waiver authority to set the 2018 standards, as described, in Section
V of the final rule, a docket memo titled "Assessment of Waivers for Severe Economic Harm or
BBD Prices for 2018," and this section.
Comment:
Several commenters stated that EPA should use the general waiver authority to further reduce the
total renewable fuel volume so that the implied conventional volume would be lower, in
accordance with the goals of the statute. These comments also suggested that 19.24 billion
gallons, the proposed 2018 RVO for renewable fuel, was not "reasonably attainable."
Response:
The goals of the RFS program are discussed in Section 1 of this document. The final rule
includes an implied conventional volume of 15 billion gallons, which is consistent with the
implied volume that may be discerned form the table of applicable volumes in the statute. Thus,
EPA believes that the implied conventional volume in the final rule is in fact consistent with the
goals of the statute. EPA does not believe it would be appropriate at this time to lower the total
renewable fuel applicable volume to achieve a lower implied conventional volume since, as
noted elsewhere, there does not appear to be sufficient justification for use of an additional
waiver authority (beyond the cellulosic waiver authority) to achieve such a reduction. EPA also
believes that 19.29 billion, the total renewable fuel requirement that EPA is finalizing for 2018,
is reasonably attainable.
15
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Comment:
One commenter suggested that EPA should use its waiver authority to adjust the RVOs to
prevent damages caused by higher level ethanol blends.
Response:
EPA notes that the RFS program does not require higher level ethanol blends, and that the
standards it is finalizing for 2018 do not rely on the use of higher level ethanol blends to achieve
the standards promulgated.
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2.1.1 Inadequate Domestic Supply
Commenters that provided comment on this topic include, but are not limited to: 1692, 1756,
1776, 3105, 3177, 3178, 3497, 3645, 3677, 3679, 3680, 3878, 3961, 2547, 4503, 4631, 4645,
4674, 4682, 4696, 4702, 4703, 4713, 4885, and 4888.
Comment:
Many commenters suggested that EPA should interpret the undefined term "domestic" within the
phrase "inadequate domestic supply" to mean renewable fuel produced domestically. These
commenters suggested that this interpretation would "give meaning" to the use of the word
"domestic" and is the best reading of the statute. EPA sought further comment on this
interpretation in its notice of availability of supplemental information.4 Commenters suggested
that this interpretation is not precluded by the ACE decision, because the Court in ACE was
evaluating the interpretation presented by EPA in the 2014-2016 rule, and the issue of the
meaning of "domestic" was not before the Court. Most commenters suggested that imported
biofuels should only be excluded in determining the volume under a waiver due to inadequate
domestic supply, while still being eligible to be used for compliance with the standard. Some
commenters suggested that the difficulty in estimating biofuel imports in setting standards
further supports interpreting "inadequate domestic supply" to exclude imports. Some
commenters suggested that this interpretation is also consistent with the goals of the statute and
intent of Congress to increase energy independence and security and domestic fuel production.
Other commenters suggested that reading "domestic supply" to exclude imports is not consistent
with the plain reading of the statute, because it refers to "supply" and not "production." One
commenter noted that interpreting the statute in this way could harm the ability to meet both the
total renewable fuel standard and the advanced biofuel standard. Another commenter noted that
Congress intended to reduce dependence on foreign petroleum, and not foreign renewable fuel.
Some commenters suggested that EPA should use the definition of "domestic supply" as
articulated by the ACE decision, that supply is what is available to refiners, blenders, and
importers and includes imports. Some commenters additionally stated that the goals of the RFS
program are best served by reading "domestic supply" to include imports.
Response:
EPA responds to comments about its interpretation of inadequate domestic supply, and whether
EPA would be justified in exercising the general waiver authority on the basis of a finding of
inadequate domestic supply in Section V. A of the final rule. EPA responds to comments about
the goals of the statute and consideration of imports in Section I of this document.
4 82 FR 46174 (October 4, 2017).
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Comment:
Several commenters stated that EPA should reduce the advanced biofuel and total renewable fuel
volumes by the quantity of fuel that was imported in the last year for which data are available.
Response:
We understand this commenter to suggest that EPA should interpret the inadequate domestic
supply waiver to exclude imports from the volume of the "domestic supply" and to further
suggest that it would be appropriate to exercise the inadequate domestic supply authority to
reduce required volumes by an amount equal to imports in the most recent calendar year for
which data are available. As discussed in Section V.A of the final rule, EPA has determined that
the record does not indicate an "inadequate domestic supply" of renewable fuel that would
justify use of the general waiver authority to further reduce volumes of renewable fuel below
levels finalized, whether or not imports are considered part of the "supply." Since EPA is not
exercising its authority to grant a waiver on the basis of inadequate domestic supply at this time,
it need not address what volume reduction would be appropriate if it were to do so.
Comment:
Some commenters suggested that EPA is permitted to consider costs when waiving volumes on
the basis of a finding of inadequate domestic supply. These commenters suggested that the ACE
decision's conclusion that supply be interpreted as the "supply available to refiners, blenders,
and importers to meet statutory requirements," means that EPA must consider the costs of
renewable fuel in determining whether it is "available." These commenters suggested that
"supply is not available if that supply is too costly."
Response:
EPA evaluated the costs of the program in Section IV of the final rule, as well as in the context
of evaluating whether the standards could lead to severe economic harm. EPA found the costs as
compared to 2017 to be between $(0.4) — $24 million in 2018, and determined that it was not
appropriate to reduce volumes on the basis of severe economic harm. EPA does not believe that
its assessment of the supply of renewable fuel "available" in 2018 would be different even if it
adopted the commenter's suggestion.
Comment:
One commenter stated that EPA continues to improperly rely on demand side factors when
considering what is "reasonably attainable."
Response:
EPA considers demand-side factors when it assesses what volumes may be "reasonably
attainable" for purposes of the exercise of its cellulosic waiver authority. The ACE decision
specifically approved this approach. However, EPA will no longer consider demand-side factors
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when exercising the "inadequate domestic supply" waiver authority, in accordance with the ACE
decision. This is not an issue for the final rule, as EPA is not exercising the inadequate domestic
supply waiver authority with respect to the 2018 standards or 2019 biomass-based diesel volume
requirement.
Comment:
One commenter suggested that lower imports are likely to result in an inadequate domestic
supply of advanced biofuels.
Response:
EPA does not believe that there will be an inadequate domestic supply of advanced biofuels to
satisfy the 2018 advanced biofuel percentage standard in the final rule, as described in Sections
IV and V of the final rule.
Comment:
Many commenters submitted comments relating to the availability of domestically produced
advanced biofuels in response to our request for comment on the potential interpretation of
"domestic supply" as including domestic production of renewable fuel only. Some suggested that
domestic feedstock availability in 2018 can only support 1.53 billion gallons of biodiesel without
causing cost increases or feedstock switching. Others suggested that domestic production would
be unable to ramp up fast enough to replace lost imports, with some citing to the fact that
domestic production has never exceeded a 70% utilization rate.
Response:
As described in Section V. A of the final rule, EPA believes that there is uncertainty regarding the
capability of the domestic advanced biofuel industry to compensate in 2018 for volumes that
would not be counted as part of the "domestic supply" under the interpretation favored by the
commenters. Taking this uncertainty into account (including the distinct possibility that the
domestic industry could compensate for the exclusion of imports), as well as the availability of
imported volumes and carryover RINs, EPA would not choose to exercise its authority to grant a
waiver on the basis of inadequate domestic supply for 2018 even if it interpreted the term
"domestic supply" to exclude imports. In light of this determination, we need not resolve at this
time the interpretive issue regarding whether the term "domestic supply" should include
consideration of imports.
Comment:
Many commenters, including obligated parties, suggested that EPA should not modify the 2018
BBD standard under the general waiver authority. Other commenters, however, suggested that
EPA should use the general waiver authority to reduce the 2018 BBD standard under a finding of
inadequate domestic supply, contending that EPA should interpret "domestic supply" to exclude
imported biodiesel, and that domestic production is likely to fall short of the 2018 BBD standard.
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Another commenter contended that excluding imports is appropriate due to impending duties,
and that supply is likely to be inadequate.
Response:
While EPA sought comment on the potential use of the general waiver authority to modify the
2018 BBD standard, EPA is not taking action to reduce the 2018 BBD standard under the
general waiver authority. EPA does not believe that such action would be justified based on the
information before it at this time. See further discussion in Section V of the final rule, and the
response to the previous comment.
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2.1.2 Severe Economic Harm
Commenters that provided comment on this topic include, but are not limited to: 1692, 1754,
1756, 1776, 2542, 2545, 3105, 3175, 3242, 3248, 3251, 3429, 3478, 3645, 3677, 3679, 3680,
3681, 3878, 3961, 2547, 4503, 4645, 4687, 4702, 4703, 4709, 4713, 4884, 4885, and 4888.
Comment:
Several commenters suggested both that EPA should exercise its general waiver authority under
a finding of severe economic harm and that EPA should not exercise its general waiver authority
under a finding of severe economic harm. Those commenters that suggested there is no basis to
use the general waiver authority to reduce the total or advanced renewable volume requirements
due to severe harm to the economy stated that, under the statute and under EPA's previous
interpretation, the severe economic harm provision sets a high bar that has not been met, and
only applies in narrow circumstances, which are not currently present.
Response:
EPA's response to these and similar comments can be found in the docket memo "Assessment of
Waivers for Severe Economic Harm or BBD Prices for 2018."
Comment:
Some commenters suggested that EPA should reduce the 2018 BBD standard, along with the
other 2018 standards, under a finding of severe economic harm. These commenters suggested
that severe economic harm is occurring due to the current point of obligation and harm to
refiners.
Response:
EPA does not believe severe economic harm is occurring due to the current point of obligation or
harm to refiners. This is further discussed in the docket memo "Assessment of Waivers for
Severe Economic Harm or BBD Prices for 2018," and in EPA's recent denial of petitions
seeking a change in the RFS point of obligation, available in this docket.5 Consequently, EPA is
not modifying the 2018 BBD standard, or other 2018 standards, on the basis of severe economic
harm.
Comment:
In EPA's notice of availability of supplemental information, EPA sought comment on its
interpretation of severe economic harm articulated in its decisions denying waiver request in
2008, and 2012.6 Some commenters pointed out that in those denial documents, EPA stated that
5 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
6 82 FR 46174 (October 4, 2017).
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its interpretation was guidance and non-binding, and therefore EPA had the ability to change that
interpretation.
Some commenters, who argued that a waiver under severe economic harm was justified as a
result of severe harm to a region that may occur as a result of a refinery shutdown, stated that to
find "severe economic harm," a shutdown need not occur prior to EPA issuing the waiver, and
that requiring shutdown prior to issuance would not allow EPA to alleviate the harm to the
region. Other commenters suggested that a waiver on the basis of severe economic harm should
not require "closure" of refineries and that the high compliance costs are enough to justify
waiver.
Response:
EPA agrees with commenters that EPA is not precluded from altering the interpretation of the
term "severe economic harm" that it articulated in prior waiver decisions.
Commenters did not provide concrete information regarding a possible refinery shut-down or a
particular refinery's compliance costs, and EPA does not wish to opine on hypothetical
situations. When and if EPA receives a petition for a waiver on the basis of possible refinery
shut-down or high compliance costs, EPA will evaluate the facts to ascertain whether issuing a
waiver would be appropriate. We note that EPA recently received a petition from the Governor
of Pennsylvania seeking a waiver on the basis of potential closure of one or more east coast
refineries. That request is not part of the administrative action for this 2018 standards rule; EPA
intends to evaluate the request and to issue a response that is separate from this action. We note,
for informational purposes, that in its "Denial of Petitions to Change the RFS Point of
Obligation," and a memorandum titled, "Assessment of Waivers for Severe Economic Harm or
BBD Prices for 2018," in this docket, EPA assessed available information and did not find
credible evidence that compliance with the RFS program is leading to refinery closures.
Comment:
One commenter suggested that a waiver is proper if there would be "significant and potentially
irreversible harm to a specific segment of the fuel market that forms a critical part of economy"
and that "[t]he severity of economic harm may relate to the particular segment of the economy
that is harmed and the role that segment plays in the economy."
Response:
This suggested interpretation was tied to the idea that severe economic harm to small retailers is
occurring. As described in the "Denial of Petitions to Change the RFS Point of Obligation,"
available in the docket, and in the docket memo "Assessment of Waivers for Severe Economic
Harm or BBD Prices for 2018," EPA does not believe based on the record for this action that the
RFS program is causing severe economic harm to small retailers, and therefore need not evaluate
this potential interpretation at this time.
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Comment:
Several commenters stated that exceeding the E10 blendwall will cause severe economic harm
due to constraints in supply of E15 and E85, and suggested that EPA should set the RFS
standards for 2018 in such a way as to ensure that the pool-wide ethanol content does not exceed
9.7%.
Response:
We have addressed this comment in a memorandum to the docket.7 See also responses to
comments in Section 5 of this document with respect to other E10 blendwall comments.
Comment:
Several commenters stated that high RIN prices are threatening the viability of refineries that
purchase RINs to meet their RFS obligations. These commenters stated that if these refineries
were to close this would cause severe economic harm, and therefore EPA should reduce the RFS
volumes for 2018 to prevent this severe economic harm.
Response:
We have addressed this comment in a memorandum to the docket.8
Comment:
One commenter stated that the current point of obligation is causing severe economic harm to
small and medium independent retailers. They also claimed that the current point of obligation
harms consumers who are not receiving full pass through of RINs when withholding some of the
RIN value allows the large retailers to undercut competition.
Response:
EPA evaluated these and similar claims in the context of responding to petitions we received
requesting that the Agency change the point of obligation in the RFS program. We determined
that small and medium independent retailers are not disadvantaged by the RFS program in
comparison to large retailers, as the profits larger retailers receive from selling RINs are
generally offset by the cost of acquiring the RINs that they sell. Neither are consumers harmed
by the current point of obligation, as higher RIN prices do not result in higher prices for
transportation fuel.9
7 "Assessment of waivers for severe economic harm or BBD prices for 2018," memorandum from David Korotney
to docket EPA-HQ-OAR-2017-0091.
8 "Assessment of waivers for severe economic harm or BBD prices for 2018," memorandum from David Korotney
to docket EPA-HQ-OAR-2017-0091.
9 This issue is discussed in further detail in "Denial of Petitions for Rulemaking to Change the RFS Point of
Obligation," EPA-420-R-17-008, November 2017.
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Comment:
One commenter stated that EPA should reduce the RFS volumes in an effort to reduce RIN
prices and the incentives for fraud in the RFS program. The commenter claimed that this action
would be justified as fraud in the RFS program was causing severe economic harm to obligated
parties that have to replace fraudulent RINs, and that the risk of fraudulent RINs has resulted in
higher RIN prices due to a "risk premium."
Response:
While lower RIN prices may reduce the incentives for fraud within the RFS program, EPA does
not believe this would be an appropriate way to address this issue. We continue to invest
resources to improve the operation of the RFS program and the RIN market. EPA does not
believe there is sufficient evidence that costs paid by obligated parties to address fraudulent
behavior by others under the RFS program have resulted in severe economic harm, and these
costs therefore do not provide sufficient justification for the use of EPA's general waiver
authority. In addition, we have clearly articulated that the RIN program is a "buyer beware"
program, and that obligated parties should minimize the risk associated with the potential
purchase of fraudulent RINs by conducting appropriate due diligence prior to their purchases
and/or participating in the voluntary quality assurance program established through EPA
regulations.
Comment:
One commenter suggested that severe economic harm is occurring because EPA continues to
grant small refinery exemptions.
Response:
EPA notes that the standard for granting an exemption to a small refinery ("disproportionate
economic hardship") is different than the standard for a waiver of the RFS volumes ("severe
economic harm"). The granting of hardship exemptions to small refineries has focused on the
disproportionate hardship conditions of an individual refinery, and therefore the granting of such
exemptions does not indicate that the RFS program is causing severe harm to "the economy . . .
of a State, a region, or the United States."
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2.1.3 Severe Environmental Harm
Commenters that provided comment on this topic include, but are not limited to: 0236, 1692,
1756, 1759, 1776, 2539, 3306, 3320, 3575, 3679, 3680, 3681, 3934, 3961, and 4498.
Comment:
Several commenters suggested that EPA should reduce volumes below those obtained using the
cellulosic waiver authority based on a finding of severe environmental harm. Commenters
pointed to a range of alleged environmental harms, such as increased fertilizer and pesticide
runoffs affecting water bodies (including the Gulf of Mexico and Lake Erie), as well as harm to
soil quality, air quality, wildlife habitat (including deforestation and land conversion), and
increased GHG emissions. In addition, several commenters expressed concern that biofuel
production may harm threatened and endangered species through loss of habitat due to expanded
crop cultivation and impacts associated with agricultural run-off to receiving waters. One
commenter stated that EPA's current ethanol program is causing severe harm to the environment
by decimating prairie and wetland ecosystems in corn-growing regions and jeopardizing the
survival of grassland-dependent plant and animal species that are listed as threatened or
endangered. Some commenters also pointed to the use in biofuel production of feedstocks which
are also used for food (i.e., vegetable-oil based biofuels) as a reason to reduce volumes under a
finding of severe environmental harm. These commenters suggested that the RFS requirements
exceed the available supply of non-food based fuels, and thus vegetable oils are likely to be
diverted to the fuel sector. Commenters suggest that this diversion creates a market for palm oil,
resulting in social and environmental harm, including deforestation, ecosystem change, impacts
to important species and increased GHG emissions. One commenter suggested that there are
increased GHG emissions associated with palm oil replacement of vegetable oils that are
diverted for biofuel, and that such emissions are exacerbating climate change. Some commenters
specifically advocated for reducing the implied conventional volume. Other commenters also
suggested that a determination that the RFS would cause severe environmental harm could not be
supported and that the RFS program, and in particular the required use of advanced biofuels,
creates environmental benefits. One commenter suggested that waiving volumes below 15 billion
gallons of conventional biofuel would harm the environment, and another indicated that the RFS
program protects the environment by encouraging recycling of waste materials. EPA also
received comments suggesting that its interpretation of "severe harm" articulated in 2008 was
"inappropriate and unlawful" and "essentially nullifies a statutory provision."
Response:
Although many commenters expressed general concern regarding the environmental impacts of
increased soy, corn, and palm oil cultivation, or the general production and use of biofuels, for
purposes of the present action these comments are only relevant insofar as they could justify a
further reduction in volumes, beyond those achieved through use of the cellulosic waiver
authority. EPA has not proposed any modification to its general RFS program regulations, and
any suggestions for such modifications are beyond the scope of this rule. EPA's sole authority to
address potential environmental impacts in the context of this rule, including potential impacts to
threatened or endangered species and their critical habitat, would be through exercise of either
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the cellulosic waiver authority or the severe environmental harm prong of the general authority.
However, since EPA is already exercising its cellulosic waiver authority to the maximum extent
permitted under the statute, the only remaining authority permitting further reductions to address
environmental considerations would be through use of the severe environmental harm prong of
the general waiver authority. In this section we discuss whether the record for this action could
support a finding of "severe environmental harm" that would justify the exercise of the severe
environmental harm waiver authority in CAA section 21 l(o)(7)(A)(i). Comments addressing
environmental impacts of the volumes in this final rule more generally are further described, and
EPA's specific responses to them are set forth, in Section VII of the final rule.
While the commenters generally cite to environmental issues which they view as serious or
severe that are associated with biofuels-related activities such as cultivation of crop-based
feedstocks such as corn and soy, they generally presented no supporting data or studies to
support their allegations. While such comments can help to stimulate needed research and data
accumulation, they do not provide the type of record support that would be necessary to support
a finding that implementation of the RFS standards finalized in this action would cause severe
environmental harm. This would be the case even if EPA interpreted the severe environmental
harm provision in a manner that would require a lesser showing of harm, or degree of certainty
than EPA suggested would be necessary in its response to earlier petitions seeking waivers on
the basis of severe economic harm.10 For this reason, EPA need not address comments
suggesting a re-interpretation of the provision at this time. EPA's analysis of the information
presented by commenters relating to environmental impacts is presented in Section VII of the
final rule. In addition, we note below some general considerations that support EPA's view that
available information does not support a finding that the rule establishing the 2018 RFS
standards and 2019 biomass-based diesel volume would lead to severe environmental harm.
As an initial matter, EPA notes that its action in setting the percentage standards for the four
categories of renewable fuel for 2018, and the BBD volume for 2019, will result in only a minor
incremental increase above the total and advanced biofuel volumes required through
implementation of the percentage standards for 2017, and will result in no change in the required
biomass-based diesel volume as compared to 2018. Such a small increase in biofuel volumes is
unlikely to cause severe harm to the environment, and is unlikely to have any impact on
threatened or endangered species or the critical habitat of such species.
Moreover, EPA does not believe that the record supports a finding that the 2018 RFS standards
finalized in this action would cause severe environmental harm even if the 2018 standards were
viewed in isolation as opposed to in relation to the 2017 standards. In addition, we believe that
even with additional research and analysis, that any harm to threatened or endangered species or
their critical habitat that may be associated with crop cultivation in 2018 could not be attributed
with reasonable certainty to EPA's action in setting the 2018 renewable fuel standards and 2019
biomass-based diesel applicable volume.
The RFS annual standards specify the percentage of transportation fuel used in the continental
U.S. and Hawaii that must be comprised of renewable fuel. The standards are implemented on an
10 See 73 FR 47168, and 77 FR 70752, and also Section 2.2.1.3 of the "Renewable Fuel Standard Program -
Standards for 2017 and Biomass-Based Diesel Volume for 2018: Response to Comments," EPA-420-R-16-019.
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annual average and nationwide basis. The types of renewable fuels that can be used to satisfy the
requirements are generally broadly defined, and can be made from a variety of feedstocks and
processes located in the United States or abroad. There is, for example, no specific requirement
under the RFS program for the use of ethanol made from corn starch - a feedstock that is broadly
used for many purposes, including feed and food in addition to biofuel production. Ethanol can
be made from other grains, such as sorghum, or from waste materials or cellulosic feedstocks.
And there are multiple types of renewable fuels that can be used to satisfy RFS requirements,
including fuels such as ethanol, biodiesel, renewable diesel, butanol, compressed natural gas, and
liquefied natural gas. Decisions on what type of feedstock to use for biofuel production, where
such feedstocks are grown, the types and volumes of agricultural inputs such as fertilizer or
pesticide to use in growing the feedstocks, and what types of renewable fuel will ultimately be
produced, are made by third parties whose activities are not required by EPA's renewable fuel
standards and, as discussed below, are likely influenced by a number of market inputs that are at
least as important if not more important than the RFS standards.
While a significant proportion of the corn crop in the U.S. each year is used as a feedstock to
produce ethanol, in 2016 approximately two-thirds of the corn crop was used for other
purposes.11 Thus, it is unclear how to determine whether specific environmental harms can be
attributed to ethanol or non-ethanol uses of corn, or both. In addition, it is unclear to what extent
the RFS program is the key driver of corn ethanol production and use in the U.S. Corn ethanol is
by far the most widely used biofuel in the U.S., and its use not only satisfies RFS requirements,
but also provides an important low-cost source of octane for gasoline as well as gasoline
volume.12 Almost all gasoline in the U.S. now contains ethanol, which is generally blended
downstream of refineries at terminals. The refineries themselves produce sub-octane gasoline
blendstocks (referred to as blendstocks for oxygenate blending, or BOBs) that cannot be sold as
gasoline without the subsequent addition of ethanol downstream at the terminal. This practice
began in the 1990's in reformulated gasoline areas, and quickly expanded beginning in 2006 into
conventional gasoline areas as several factors, including the rising prices for crude oil relative to
corn, caused ethanol to become the preferred source of octane for gasoline. The gasoline refining
and distribution system, driven by the favorable blending economics of ethanol over the last
dozen years has invested heavily to fully transform itself to rely on the use of ethanol. Refiners
have modified their process units and operations to produce BOBs instead of finished gasoline.
Pipelines likewise have shifted their physical assets and operations to distribute these BOBs
instead of finished gasoline. Terminals across the country have all been modified to receive and
store shipments of ethanol and blend it into these BOBs. Consequently, the blending of 10%
ethanol into gasoline in the U.S. is now firmly entrenched. To reverse course and go back to
refining and distributing ethanol free finished gasoline would require a marketwide decision that
would then take years and likely billions of dollars to implement. This would require a
significant economic driver over a sustained period. Given the current economic advantage of
blending ethanol as E10, and the forecasts of crude oil and corn prices, there is no apparent
11 See lit!ps://www.afdc.enerev. gov/data/.1.03 3 9. EPA notes that of the bushels of corn used for ethanol production, a
co-product of ethanol production is distillers grain, which is used as animal feed.
12 See, e.g, comments from PBF Energy, 4702, CVR Energy, 4888, REG, 4500.
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economic driver either at present or on the horizon that would change this market dynamic.1314
Because of these considerations, it is likely that even if a complete RFS waiver were granted in
2018, the market would continue to demand essentially the same volumes of ethanol in 2018 for
use as a gasoline octane enhancer and source of fuel supply. These findings are similar to those
we made in response to petitions for a waiver of the 2012 and 2013 RFS standards on the basis
of severe economic harm associated with a drought, where we concluded that in all likelihood
the RFS standards in the latter part of 2012 and early part of 2013 would not drive ethanol use.15
The volume of ethanol sales in 2012 was only slightly lower than it was in 2016 - the last full
year for which data is available (see Figure 1 below). We also note that, as depicted in Figure 2,
below, U.S. ethanol producers have exported substantial volumes of ethanol to overseas markets,
even as use of this biofuel in the U.S. has increased.
Figure 1
Historical Pool-wide Average Ethanol Concentration of Gasoline
12% | _ a?
10%
8%
6%
4% |
II ^
2%
0% ®
Lnu3i^oocno^(Noo^tLnu3
O O O O O T—I t-H t-H t-H rH t-H t-H
oooooooooooo
(N(N(N(N(N(N(N(N(N(N(N(N
Source: EIA's STEO, Table 4a
13 On November 28, 2017, EIA reported (www.eia.gov/todaYinenergy/prices.php) wholesale spot gasoline (RBOB)
prices in different markets ranging from $1.71-1.77 per gallon in comparison to a CBOT futures prices of ethanol at
$1.36 per gallon. Thus, even without the considerable added octane blending value of ethanol, current market prices
favor blending ethanol as E10 (where ethanol's lower energy content is not transparent to consumers).
14 See EIA AEO 2017, Table A12: Petroleum and other Liquid Prices, Reference Case, projecting increases in crude
oil prices from $43/bbl in 2016 to $86/bbl in 2025, and $117/bbl in 2050, and USDA Long-Term Projections,
February 2017, Table 5: U.S. Corn long-term projections, projecting slight increases from $3.30/bushel in 2016 up
to $3.35/bushel in 2018 and $3.65/bushel in 2025-26. These projections indicate that the market dynamics are
unlikely to change in the near term, and on a longer basis.
15 See 77 FR 70752.
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Figure 2
Annual U.S. Biofuel Export Volumes
Biofuel Exports
1.40
200 7 2008 200 3 2010 2011 2012 2013 2014 201S 2016
¦ Ethanol ¦ Biodiesel ¦ Renewable Diesel j Other
https://quickstats.nass.usda.gov/
If EPA were to completely waive the 2018 RFS requirements, we would expect the domestic use
of ethanol in the U.S. might decrease slightly (primarily as a result of decreased sales of higher
level ethanol blends such as E15 of E85), but we also believe that it is likely that ethanol
producers would seek to make use of their past investments to continue to produce the same
volume of ethanol and would simply shift sales to overseas markets to accomplish this objective.
The result would be comparable impacts associated with corn production as will occur through
implementation of the 2018 RFS standards. Furthermore, even in the unlikely event that
domestic ethanol production was to marginally decrease, corn plantings are a function of a large
number of worldwide agricultural sector market factors (including markets in food and feed) that
make it difficult or impossible to predict, and thus speculative, whether a marginal reduction in
U.S. ethanol production, were it to occur, would have any impact U.S. corn plantings. In sum, it
is difficult, and speculative, based on available information to attempt to discern the extent to
which the RFS program is driving corn plantings or ethanol production and use in the United
States, and it would be particularly speculative to attempt to attribute any particular localized
environmental harm related to corn production to the RFS standard s in light of the competing
uses of corn, ethanol exports, and the current reliance of the market on ethanol for attributes
(octane) unrelated to the RFS program.
In contrast to ethanol, biodiesel is significantly more expensive than diesel fuel, and does not
have properties that would likely result in its continued use in U.S. markets in the absence of
support from the RFS program or other incentives (such as the biodiesel tax credit). It is
uncertain, however, the degree to which decreased use of biodiesel in the US would impact the
planting of soybeans. Soybeans, like other oilseed crops grown in the United States, are
primarily grown to provide high protein animal feed. While lower demand for biodiesel would
be expected to reduce prices for vegetable oils such as soy oil, the lower price for soy oil would
not alter the market demand for high protein animal feed that is the primary driver of soy
plantings. It is possible that soy producers might see reduced profits from their activities as the
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result of lower soy oil prices, or it is possible that they would seek to recoup the loss in soy oil
income through higher priced soy-based animal feed. In either event, it is highly speculative
whether reduced production of soy-based biodiesel would lead to reduced soy plantings or soy-
related impacts to the environment. Further, as depicted in the above chart on biofuel exports,
there are foreign markets for domestically-produced biodiesel, and exports of biodiesel could
increase if domestic demand for this renewable fuel were to drop in response to lowered RFS
standards, potentially minimizing any associated reductions in soy plantings related to decreased
domestic biodiesel use. Finally, we note that soybean acre plantings are often driven by the need
to rotate corn plantings, and soybeans are the primary rotation crop in the U.S. For all of these
reasons, even if use of soy biodiesel in the U.S. were to significantly decrease, such decreased
use may not have an appreciable impact on the number of acres used to produce soybeans in the
U.S. Stated differently, is unclear at best whether implementation of the RFS program is driving
soy plantings and causing whatever environmental harm may be associated with such plantings.
Since corn and soy are by far the predominant feedstocks used for renewable fuel production in
the U.S., and since impacts related to their cultivation were the focus of comments alleging
environmental harm, we believe that this analysis supports EPA's determination that there is
insufficient record support for a finding that the 2018 RFS standards being finalized in this
action would cause severe environmental harm. We also believe that the above considerations
support our determination that whatever impacts or threats to listed and endangered species or
their critical habitats that may be caused by corn or soy cultivation in 2018 cannot with
reasonable certainty be attributed to the 2018 RFS standards or 2019 biomass-based diesel
volume requirement.
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2.2 Cellulosic Waiver Authority
Commenters that provided comment on this topic include, but are not limited to: 0792, 1756,
1776, 2539, 2542, 3108, 3142, 3174, 3175, 3306, 3320, 3377, 3428, 3429, 3478, 3493, 3497,
3575, 3578, 3593, 3645, 3649, 3679, 3876, 3880, 3934, and 3961.
Comment:
In response to the 2018 NPRM, some commenters conflated EPA's use of the general waiver
authority and its use of the cellulosic waiver authority in setting volume standards, and suggested
that the Court's decision in ACE rejecting EPA's use of the general waiver authority under a
finding of inadequate domestic supply for its consideration of demand side factors meant that
EPA was precluded from considering these types of factors entirely in the annual rulemaking
process.
Response:
EPA disagrees. As articulated by the Court in its analysis of EPA's use of the cellulosic waiver
authority in ACE, EPA has broad discretion to consider a variety of factors, including demand
side limitations on the ability of the market to use advanced biofuels, in exercising the cellulosic
waiver authority.16
Comment:
Many commenters supported EPA's decision to use the cellulosic waiver authority to fully
reduce advanced biofuel and total renewable fuel, without allowing other advanced biofuels to
backfill for the shortfall in cellulosic, including some commenters representing biofuel interests.
Some commenters mentioned the reduced GHG benefits of advanced biofuels as compared to
cellulosic biofuel, and the fact that the feedstocks for advanced biofuels often come from food
sources, which could result in food insecurity and land conversion.
Other commenters suggested that EPA should allow other available advanced biofuels to backfill
for the shortfall in cellulosic as it has done in the past. Some commenters suggested that allowing
the advanced biofuel industry to backfill supports the goals of the statute to grow renewable fuel
volumes and achieve GHG and energy security benefits and that use of the cellulosic waiver
authority should not undermine policy goals of the statute. One commenter suggested it was
arbitrary for EPA to consider costs under the cellulosic waiver authority, and that costs should
only be considered under the general waiver authority, while another suggested costs should be
considered under the BBD waiver authority. Some commenters suggested that EPA has not
considered congressional intent in determining whether to allow for backfilling of the cellulosic
shortfall with advanced biofuels, suggesting Congress intended EPA should allow for
backfilling. One commenter suggested that EPA did not consider the biodiesel production
capacity or reasonably attainable volume of biodiesel production, and that EPA's actions will
result in stranded assets, lost jobs, underutilized production capacity and a chilling effect on
16 ACE at 733.
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investments. Another commenter also suggested that RFS has the potential to encourage
development of new feedstocks.
Response:
As discussed in Section IV of the final rule, EPA has broad discretion under the cellulosic waiver
authority to reduce advanced biofuel and total renewable fuel when it reduces the cellulosic
biofuel volume. In deciding to reduce the cellulosic biofuel, advanced biofuel, and total
renewable fuel volumes by the same amount from the statutory targets, EPA considered a
number of factors, including the production potential of the domestic biodiesel and renewable
diesel industry, the potential for imported volumes of these fuels, a desire to avoid feedstock
switching and diverting biofuels from foreign countries, and a recognition of the relatively high
cost of advanced biofuels (see Section IV of the final rule for a further discussion of this issue).
EPA disagrees with commenters who suggested that EPA should not consider costs under the
cellulosic waiver authority. The extent to which costs are directly or impliedly relevant to the
exercise of other waiver authorities is not indicative of whether costs may appropriately be
considered under the cellulosic waiver authority. EPA has broad discretion under the cellulosic
waiver authority to consider many factors.
EPA also disagrees with commenters suggesting that EPA must allow backfilling of missing
cellulosic volumes. The statute specifically authorizes EPA to reduce total renewable fuel and
advanced biofuel by "the same or a lesser volume" than the reductions in cellulosic volumes.
Because the statute allows for the "same" reductions, it is apparent that the statute does not
require backfilling. EPA has broad discretion in deciding whether and by how much to reduce
advanced and total renewable fuel volumes under the cellulosic waiver authority, subject only to
the limitation that the reduction may not exceed that provided for cellulosic biofuels. In deciding
how to exercise this broad discretion, EPA has appropriately considered a number of factors, as
described in Section IV of the final rule.
In Section IV of the final rule, EPA discussed its consideration of biodiesel production capacity,
and EPA is finalizing an advanced biofuel volume that is 10 million gallons higher than the
advanced biofuel volume for 2017. We do not believe the standards we are finalizing will result
in harm to the biodiesel industry, such as stranded assets, job losses, underutilized capacity, or a
chilling effect on investment. While EPA recognizes biodiesel facilities are often performing at
less than peak capacity, EPA has also received comments regarding the industry's ability to ramp
up to utilize that capacity over a short time frame. EPA does not believe the standards will be
detrimental to the biodiesel industry due to underutilized capacity.
EPA agrees that the RFS program can encourage innovation in the development of new
feedstocks for renewable fuel production. EPA has intentionally set the BBD standard at a level
below what we would expect to be produced to meet the advanced biofuel standard so as to
encourage the development and production of alternative advanced biofuels.
We recognize the GHG emissions and energy security benefits associated with the use of
advanced biofuels (considerations that would weigh in favor of a higher advanced biofuel
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requirement) and the fact that many biofuels are produced with feedstocks that could be put to
alternate uses, such as for food or feed (a consideration that could justify lower advanced biofuel
volumes). The factors of primary importance to EPA's exercise of the cellulosic waiver authority
in the context of the 2018 RFS standards are discussion in Section IV of the final rule.
In light of these considerations, EPA has determined that it would not be appropriate to allow
backfilling of statutory cellulosic biofuel volumes with other advanced biofuel volumes. EPA
believes that this approach still supports the goals of the statute, including energy security and
production of renewable fuels.
Comment:
One commenter stated that the statute allows backfilling of the cellulosic biofuel standard with
advanced biofuel.
Response:
EPA acknowledges that the statute allows for the backfilling of advanced biofuels, and has
allows for backfilling in prior annual rulemakings. However, at this time, EPA does not find it
appropriate to allow backfilling due to costs and the potential for feedstock switching as
described in Section IV of the final rule.
Comment:
One commenter noted that EPA proposed to set the advanced biofuel volume below the level
recognized as "reasonably attainable" using only cost as a concern, and that EPA is departing
from past methodologies; they also noted that the market has expectations based on EPA's past
methodologies.
Another commenter suggested that EPA has not acknowledged the change from its previous
position nor explained its reasoning for exercising the full waiver authority.
Another commenter suggested that when the Court in ACE listed the factors EPA considered in
the 2014-2016 rule under the cellulosic waiver authority, feedstock switching and cost were not
among the factors, and thus should be not considered for 2018. The commenter noted that
although FCC v. Fox TV allows for agencies to depart from prior policy, that is not the case
when industry has relied on a previous approach. Another commenter stated that EPA's proposed
action is inconsistent with FCC v. Fox TV.
Response:
Although it is accurate that the Court in ACE listed specific factors that EPA considered in
determining the reasonably attainable volume of advanced biofuel in the 2014-2016 final rule,
nothing in the Court's decision limits EPA from considering other factors. As the Court stated,
the statutory text "does not direct EPA to 'consider particular factors.'" (quotingMonroe Energy,
LCC v. EPA, 750 F.3d 909, 912 (D.C. Cir. 2014))." In the proposed rule, EPA stated that it was
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considering additional factors, including feedstock switching, and costs, and that it was "placing
a greater reliance on cost considerations than we have in past rulemakings." Thus, we provided
stakeholders with ample notice of the potential change in approach. EPA further explains its
decision to consider feedstock switching and costs in Section IV of the final rule.
Many of the commenter's critiques of EPA's cost analysis, which EPA considered as part of the
basis for EPA's decision to utilize the full reduction allowed under the cellulosic waiver
authority, are addressed in Section 7 of this document. EPA believes that although there could be
benefits associated with additional gallons of advanced biofuel, including benefits for rural
economies, GHGs, or energy security, EPA believes that these benefits are outweighed by the
high costs of the advanced biofuels.
Under FCC v. Fox TV, the Supreme Court found that there is "no heightened standard" for an
agency change. The Court concluded that "the agency must show that there are good reasons for
the new policy," but that it "need not always provide a more detailed justification than what
would suffice for a new policy created on a blank slate." The Court noted that the agency may
need to provide a more detailed justification if "its prior policy has engendered serious reliance
interests" (citing Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 742 (1996)). Although
commenters suggested that industry has relied on EPA's previous approach, EPA does not
believe this reliance has "engendered serious reliance interests." EPA considered both "feedstock
switching" and cost in prior rulemakings, so consideration of these factors is not new to this rule.
And, although EPA has previously established rules so as to require reasonably attainable
volumes of advanced biofuel to backfill for missing cellulosic volumes, EPA did not establish
that approach as a rule that would bind future EPA action. Rather, EPA has consistently
articulated in prior rules and in litigation that its discretion under the cellulosic waiver authority
is very broad, and can be informed by any number of factors. Such statements provided notice to
the biofuels industry that EPA could shift course in the exercise of its cellulosic waiver authority.
Comment:
One commenter suggested that the RFS requires renewable fuels to increase each year.
Response:
EPA does not agree with commenters who suggested that the RFS volume must increase every
year. There is no such limitation stipulated in the statute with respect to the cellulosic waiver
authority, or any other waiver authority. For example, the cellulosic biofuel applicable volume
must be set equal to the lower of the statutory volume or EPA's production projection. Nothing
in the statute suggests that a higher value must be used if EPA's production projection for the
previous year was higher.
Comment:
Some commenters suggested that the methodology for determining the 2018 proposed volumes
departed from EPA's interpretation that reductions in volumes under the cellulosic waiver
authority should result in levels that are "reasonably attainable."
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Response:
EPA disagrees with these comments; EPA has in fact determined that the advanced biofuel and
total renewable fuel volumes that are expected to be necessary to comply with the 2018
standards for these fuel types are reasonably attainable. Not all reasonably attainable advanced
volumes will be required, for reasons described in Section IV of the final rule
Comment:
One commenter suggested concerns about the full reduction in total renewable fuel and advanced
biofuel under the cellulosic waiver authority as it does not further the intent of the program to
diversify energy resources. The commenter also noted that the requirements underestimate the
potential of the cellulosic and advanced biofuel industries, and does not account for prospective
contributions from new cellulosic and advanced biofuel producers.
Response:
EPA believes that the finalized volumes do provide for diversified energy sources. While it may
not diversify them as much as the commenter would prefer, nothing in the statute requires EPA
to maximize this consideration over others when it exercises its cellulosic waiver authority. EPA
also believes that it is important to consider several factors in determining the required volumes
of advanced biofuels and total renewable fuels, and EPA's evaluation of the factors it considered
in exercising its discretion under this authority is described in Sections IV and V of the final rule.
With respect to comments about the potential of the cellulosic and advanced biofuel industries,
and future production facilities, EPA discusses these issues in Sections III (for cellulosic) and IV
(for advanced) of this document.
Comment:
One commenter suggested that if EPA reduces the advanced biofuel standard using its cellulosic
waiver authority, it should not use the cellulosic waiver authority to reduce total renewable fuel.
Response:
CAA section 21 l(o)(7)(D)(i) states that when EPA reduces cellulosic biofuel volumes, it "may
also reduce the applicable volume of renewable fuel and advanced biofuels requirement... by
the same or a lesser amount." EPA has consistently interpreted and applied this provision to yield
equal reductions in total renewable fuel and advanced biofuels. EPA acknowledges that this is
not the only permissible approach under the statute, but we believe that our approach best
furthers the goals of the statute. We do not believe it would be appropriate for the gap in the
availability of cellulosic biofuel in 2018 to be filled or partially filled with non-advanced biofuel,
taking into consideration both the substantially lower GHG emissions reductions required for
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non-advanced biofuel17 and the Congressional intent reflected in the statutory tables that use of
these biofuels in this time period would not exceed 15 billion gallons.
17 Non-advanced biofuel must either meet the 20% reduction in lifecycle GHG emissions described in CAA
21 l(o)(2)(A)(i), or if not, qualify for a grandfathering exemption under 40 CFR 80.1403.
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2.3 Biomass-Based Diesel Waiver Authority
Commenters that provided comment on this topic include, but are not limited to: 4451, 4481,
4489, 4491, 4497, 4500, 4503, 4504, 4505, 4508, 4509, 4631, 4633, 4645, 4651, 4653, 4662,
4671, 4673, 4676, 4682, 4693, 4696, 4697, 4701, 4702, 4703, 4704, 4711, 4713, 4859, 4885,
4886 4888, and 4891.
Comment:
One commenter stated that, in the event that EPA reduces the volume of BBD using the BBD
waiver authority, it should also reduce advanced biofuel and total renewable fuel by the same
amount.
Response:
We have not made a finding in the final rule that there is a significant renewable feedstock
disruption or other market circumstance that would make the price of BBD increase
significantly, and thus we are not reducing the volume requirement for BBD under the BBD
waiver authority. Therefore, in this final rule we are not making a definitive finding about the
degree to which we would reduce advanced biofuel and total renewable fuel in the event we were
to reduce BBD. Instead, we will make such a determination based on the factual circumstances
presented if and when such a waiver is granted.
Comment:
Many commenters opposed the possible use of the BBD waiver authority to reduce BBD
volumes for 2018 or 2019. These commenters generally argued that there is no justification for
the use of the BBD waiver authority as there has been no feedstock shortage or market
disruption. Commenters stated that the expiration of the biodiesel tax credit and the potential
countervailing duties on Argentinian and Indonesian biodiesel would not affect the supply of
biodiesel imported into the U.S. Furthermore, commenters also stated that the use of the BBD
waiver authority now for 2018 would upset the market by creating uncertainty. Commenters also
stated that the BBD waiver authority was designed to be used retroactively, rather than
prospectively, and could not be used to reduce the 2018 and/or 2019 BBD standards.
Response:
EPA has decided not to exercise the biomass-based diesel waiver authority at this time. See
Section V of the final rule for a further discussion of EPA's consideration of our use of the
biomass-based diesel waiver authority. EPA will resolve relevant interpretive issues if and when
it uses this authority.
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Comment:
One commenter stated that in considering whether or not to exercise the BBD waiver authority
EPA should consider the price of B99 (which qualifies for the tax credit) rather than B100
(which does not).
Response:
Rather than consider the price of B99, as the commenter has suggested, EPA has considered the
retail price of B20 biodiesel blends and BBD RINs, both of which should be impacted by the tax
credit and were more readily available to EPA than B99 prices, in our consideration of whether
or not to exercise our BBD waiver authority. See Section V of the final rule for a further
discussion of EPA's consideration of our use of the BBD waiver authority.
Comment:
One commenter stated that if EPA uses the BBD waiver authority, it should also allow obligated
parties to subtract 15% of their total gasoline and diesel production from their obligation.
Another commenter similarly stated that the BBD waiver authority should be interpreted to
change the annual standards, not reduce volumes in a specific 60-day period.
Response:
EPA has decided not to exercise the BBD waiver authority at this time. It is therefore not
necessary at this time to determine how the exercise of this authority would be implemented and
applied to obligated parties. EPA will address such issues if and when it uses this authority.
Comment:
Several commenters stated that RIN prices and/or biodiesel prices will be higher in 2018 as a
result of the proposed tariffs and countervailing duties on biodiesel imported from Argentina and
Indonesia, with some commenters stating that BBD RIN prices had already increased to
compensate for the absence of the biodiesel tax credit. These commenters generally stated that
EPA should exercise the BBD waiver authority in response to these price increases.
Response:
The proposed tariffs and countervailing duties on biodiesel imported from Argentina and
Indonesia have not been finalized as of this writing, and the impacts of these actions is uncertain.
While a final imposition of tariffs and countervailing duties could be expected to lead to
increases biodiesel prices to some degree, it is also possible that imported biodiesel from other
countries and/or increased production of domestic biodiesel may be available with minimal
biodiesel price increases. It is also possible that broader market conditions could result in lower
prices for biodiesel despite these tariffs and countervailing duties. At this time EPA has not seen
sufficient evidence of significant price increases for biodiesel to justify the use of our BBD
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waiver authority. See Section V of the final rule for a further discussion of EPA's consideration
of our use of the BBD waiver authority.
Comment:
Multiple commenters stated that the high cost of biodiesel relative to petroleum diesel would
justify EPA's use of the BBD waiver authority.
Response:
EPA may exercise the BBD wavier authority if EPA determines that there is a significant
renewable feedstock disruption or other market circumstance that would make the price of BBD
increase significantly. EPA has reviewed various indicators of the price of biodiesel (including
the price of B100, B20, and BBD RINs) and has not found sufficient evidence of a feedstock
disruption or significant cost increase in the price of BBD that would justify the use of this
waiver authority at this time. For a further discussion of our consideration of the BBD waiver
authority, see Section V of the final rule.
Comment:
One commenter stated that the BBD waiver authority would allow EPA to reduce the BBD
standard by 30% in 2018, from the use of two 60-day waivers. The commenter stated that the
advanced biofuel and total renewable fuel volumes should be reduced by same amount as BBD.
Response:
EPA has determined that the statutory criteria for exercising the BBD waiver authority have not
been met at this time, and we are therefore not exercising this waiver authority to reduce the
volume of BBD for 2018. For a further discussion of our consideration of the BBD waiver
authority, see Section V of the final rule.
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2.4 Carryover RINs
Commenters that provided comment on this topic include, but are not limited to: 1913,3142,
3241, 3478, 3497, 3645, 3677, 3680, 3681, 3953, and 3961.
Comment:
Several commenters expressed their support for EPA's proposed decision to not intentionally
draw down the bank of carryover RINs in setting the 2018 volume requirements. These
commenters were generally obligated parties and reiterated the importance of maintaining the
carryover RIN bank in order to provide obligated parties with necessary compliance flexibilities,
better market trading liquidity, and a cushion against future program uncertainty.
Conversely, other commenters stated that the carryover RIN bank is larger than necessary and
that carryover RINs represent actual supply and should be accounted for when establishing the
annual volume standards. These commenters were generally renewable fuel producers and stated
that not accounting for carryover RINs goes against Congressional intent of the RFS program,
deters investment in next-generation biofuels, and ignores other programmatic buffers and
flexibilities such as carry-forward deficits and small refinery hardship exemptions.
Response:
EPA appreciates the importance of carryover RINs to the RFS program. As the comments
indicate, carryover RINs have played a crucial role in actions by obligated parties to plan for and
achieve compliance with RFS requirements, in enabling the RIN market to function in a liquid
manner, in providing the statutorily required credit program function, in avoiding excessive
market price swings, and in determining whether and to what extent statutory volume targets can
be met. In establishing the renewable fuel volume requirements for 2018, we have weighed these
various roles for carryover RINs and sought to appropriately balance them in the context of the
overall statutory goal of significantly increasing the amount of renewable fuels in the
transportation fuel supply through increasing RFS volume requirements. In light of our
consideration of costs and other factors, as well as allowing for the aforementioned benefits of
carryover RINs to continue to operate to facilitate program operation and compliance and to
contribute towards avoiding the possibility of subsequent waivers, we have determined that it is
prudent for EPA to set the volume requirements for 2018 without the express intention or
expectation of a drawdown in the current bank of carryover RINs.
As explained in Section II.B of the final rule, we believe it is appropriate for EPA to not
intentionally draw down the current bank of carryover RINs in setting the 2018 annual volume
requirements. InMonroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014) the U.S. Court of
Appeals for the D.C. Circuit upheld EPA's decision not to waive the 2013 statutory advanced
and total renewable fuel volume requirements based in part on the availability of abundant
carryover RINs to address a scenario where increasing physical volumes of renewable fuels may
be inadequate to allow compliance. In ACE, the Court upheld EPA's decision to not consider
carryover RINs as part of the "supply" of renewable fuel for purposes of determining whether an
"inadequate domestic supply" exists that may warrant a waiver of the standards.
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Where circumstances make it appropriate to rely on carryover RINs to avoid or minimize
reductions in statutory volumes, we intend to do so, as we did in setting the 2013 standards.
Though this number could be considerably lower as a result of compliance actions not yet
recorded, for 2018, we project that as many as 2.22 billion carryover RINs will be available for
compliance. This is 11.5 percent of the final 2018 total renewable fuel volume standard and less
than the 20 percent limit permitted by the regulations to be carried over for use in complying
with the 2018 standards. Consistent with our past practice, we considered the availability of
carryover RINs in making a determination about whether and how to reduce the 2018 statutory
volume requirements, and that assessment was properly done in view of the specific
circumstances present for 2018. Considering all of the various relevant factors for 2018,
including the potential benefit to biofuel producers in drawing down the bank of carryover RINs,
the role they play for obligated parties in a well-functioning, liquid market for managing
compliance, the increased level of the 2017 and 2018 standards, and the significant uncertainties
and challenges involved in setting and meeting the final standards, we have concluded that we
should not set the volume requirements for 2018 in a manner that would be expected to require a
drawdown in the collective bank of carryover RINs.
We appreciate that it would be helpful to obligated parties if we foreclosed the possibility of ever
again counting on carryover RINs to avoid or minimize the reduction of statutory standards.
Leaving open that possibility leaves obligated parties with some uncertainty about their
compliance options. However, EPA continues to believe that the statutory purpose of
significantly increasing the volume of renewable fuels is best served by continuing to consider
carryover RINs in deciding whether and how to exercise the statute's waiver authorities on a
year-by-year basis. As explained in Section II.B of the final rule and below, we believe the
circumstances for 2018 warrant setting the volume requirements without the express expectation
or intention of drawing down the current bank of carryover RINs.
We also appreciate that it could be favorable to biofuel producers for us to always count on
carryover RINs as a basis to maintain the statutory volume targets or minimize the reduction in
the statutory volume targets, since higher standards generally create higher short-term demand
for and/or higher prices for their products. If the standards cannot be achieved, then RIN prices
may rise dramatically based on scarcity pricing, creating market turmoil that could operate to the
short-term benefit of renewable fuel producers. At the same time, many biofuel producers have
made significant investments in production capacity to meet the demand that the RFS standards
help create. The concerns that many raised about the potential for the proposed standards to
damage their businesses appear to be premised, however, on an assumption that renewable fuel
production volumes would decline significantly. The final rule will continue to place upward
pressure on the production of renewable fuels.
As discussed in the 2014-2016 and 2017 final rules, the bank of carryover RINs is analogous to a
typical bank account, in which it is commonly understood that a reserve fund should be
maintained to cover unforeseen circumstances.18 If such currently unforeseen events occur
without a bank of carryover RINs to operate as a program buffer, we could see RIN shortages
and price spikes, potentially causing a need for an emergency waiver for even relatively small
reductions in renewable fuel supply or increases in petroleum fuel demand. This would only
18 See 80 FR 77483-84 (December 14, 2015).
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create further program uncertainty for the investment needed for the program to grow. We
believe that we should not set the volume requirements for 2018 in a manner that would be
expected to require a drawdown in the collective bank of carryover RINs given the level of the
standards we are promulgating, the level of uncertainty in the market, and the desire to provide
some market stability and assurance for further investment in renewable fuel production.
While the final volume requirements for advanced and total renewable fuels are lower than the
statutory levels, the statute authorizes waivers and EPA has made a determination in this
rulemaking that the statutory 2018 volumes should be waived consistent with EPA's cellulosic
waiver authority. We have set the 2018 advanced biofuel and total renewable fuel volume
requirements at a level that is expected to continue to place upward pressure on the production of
renewable fuels. Setting standards in this manner should not result in a drawdown in the bank of
carryover RINs. However, the projections on which the standards are based still involve
unavoidable uncertainties. As a result, some risk remains that our projections are over-optimistic
and that individual obligated parties will face challenges in complying with the standards. The
bank of carryover RINs will be available for such eventualities.
Comment:
One commenter recommended that the carryover RIN bank should consist of at least 14.6% of
the projected total renewable fuel volume standard, which was the relative size of the carryover
RIN bank in 2013. The commenter stated that a carryover RIN bank of this size is necessary to
ensure the stability and liquidity of the RIN market.
Conversely, another commenter objected to EPA's proposed rationale that carryover RINs
should be preserved as a "programmatic buffer" and argued that EPA had not explained why a
lower relative size of the carryover RIN bank couldn't provide an adequate buffer for the
program. They also argued that this rationale could not be reconciled with the statute's provision
for carry-forward deficits, which they contended was the only mechanism Congress provided for
a buffer.
Response:
As discussed earlier, we have consistently considered the availability of carryover RINs in
making waiver determinations, and we do so on a case-by-case basis taking into account all of
the relevant facts before us.19 Different circumstances can and do lead to different decisions
about whether (and how much) to rely on a drawdown in the bank of carryover RINs when
balancing the various objectives of the RFS program. Under the statutory provision for credits
with a 12-month credit life and the regulations establishing carryover RINs, obligated parties
have the option of obtaining and carrying over excess RINs or carrying forward a compliance
deficit to the next compliance year. This makes it clear that carryover RINs are a key mechanism
for providing compliance flexibility in addition to that provided by the ability to carry forward a
19 For information on our decision on the 2008 waiver request, see http://www2.epa.gov/renewable-fiiel-standard-
program/denial-state-texas-reauest-waiver-portion-renewable-fiiel-standard. For information on our decision on the
2012 waiver request, see fattja://www;Lma4ffiAne^
wa ive r-re newab le-fiiel-s ta nda rd.
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deficit. "Buffer" is another way of conceptualizing the compliance flexibility that carryover
RINs afford to address uncertainties and unforeseen circumstances and otherwise manage
compliance efforts, as well as to avoid unnecessary RIN shortages or price spikes and provide
liquidity to the RIN trading market. While EPA is not currently in a position to state with
specificity the optimal size of the carryover RIN bank, we note that the carryover RIN bank had
been steadily decreasing over the past several years, from a level of 2.5 billion RINs in 2013
down to 1.65 billion RINs in 2016, before increasing to 2.22 billion RINs in 2017. However, the
relative number of available carryover RINs has decreased from approximately 15% of the total
renewable fuel standard in 2013 to 11.5% of the total renewable fuel standard in 2017. Thus, we
do not believe it is necessary at this time to determine an optimal absolute or relative carryover
RIN bank size, either minimum or maximum.
Comment:
One commenter stated that EPA failed to explain why a number of BBD and advanced carryover
RINs that exceed the number than can actually be used is necessary as a programmatic buffer.
Response:
EPA explained in the "Carryover RIN Bank Calculations for 2018 NPRM" memorandum that
"because of the nested nature of the RFS standards, any 2017 D4 RINs in excess of the 20%
carryover limit could still be used to satisfy the Advanced Biofuel or Renewable Fuel standards,
as the total number of 2017 carryover RINs available for both of these categories is below the
20% carryover limit. Thus, in this scenario we expect that the total number of 2017 carryover
RINs would be available to be used to satisfy an obligation in 2018." Furthermore, EPA has
projected that only BBD is expected to exceed the 20% threshold, but not advanced biofuel as
indicated by the commenter.
Comment:
One commenter stated that EPA's calculation of the relative size of the carryover RIN bank for
2012-2015 was flawed. Specifically, the commenter expressed concerns about the inclusion of
exporter RVOs and the double-counting of obligated parties' compliance deficits.
Response:
We have adjusted our calculation methodology of the relative size of the carryover RIN bank
based on the commenter's feedback. Specifically, we now account for compliance deficits in our
calculations by adding the deficit to the reported total RVO in order to determine the actual total
RVO for a given year. We have also clarified the language in our updated calculation of the size
of the carryover RIN bank to better explain how exporter RVOs are treated for purposes of
carryover RIN bank calculations.20
20 The calculations performed to estimate the number of carryover RINs currently available can be found in the
memorandum, "Carryover RIN Bank Calculations for 2018 Final Rule," available in the docket.
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Comment:
One commenter stated that the use of carryover RINs was higher than EPA calculated.
Response:
The commenter is incorrect. As noted throughout the "Carryover RIN Bank Calculations for
2018 NPRM" memorandum, EPA calculates both the actual number of carryover RINs available
and the number of carryover RINs that are available to comply with the following year's
standards by accounting for compliance deficits from that year (e.g., footnote 13: "In other
words, while there were an estimated 2.54 billion carryover RINs available in 2013, this sum was
effectively reduced to 2.47 billion RINs in light of the volume of 2012 deficits carried forward to
2013."). For the purposes of assessing the relative size of the carryover RIN bank, we use the
latter number in our calculations (e.g., 2.47 billion) since it more accurately reflects the number
of RINs that were actually available to comply with the following year's obligations (which do
not include prior year deficits). However, the number used by the commenter was the absolute
number of carryover RINs used for compliance with a given year's RVO and the prior year
deficits, which was the former number in our calculations (e.g., 2.54 billion). Therefore, the use
of carryover RINs was not higher than EPA calculated.
Comment:
One commenter stated that EPA has misstated the number of RINs required to be retired by
Chemoil as part of a settlement agreement.
Response:
This comment is no longer relevant, as Chemoil has retired all 65 million D4 RINs that were
required as part of the settlement agreement and these RIN retirements are now incorporated in
the EMTS data used in EPA's updated calculation of the size of the carryover RIN bank.21
21 For more details on the Chemoil settlement, see https://www.epa.gov/enforcement/chemoil-corporation-
re newab le-fuel-sta ndard-set tie me nt.
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3. Cellulosic Biofuel Standard
3.1 General Comments on Cellulosic Biofuels
Commenters that provided comment on this topic include, but are not limited to: 0792, 1135,
1177, 1760, 1773, 1774, 1776, 1778, 2386, 2999, 3108, 3178, 3236, 3242, 3247, 3317, 3319,
3325, 3494, 3645, 3650, 3658, 3680, 3681, 3873, 3878, and 3931.
Comment:
Several commenters generally expressed support for cellulosic biofuels and support for higher
volume requirements for cellulosic biofuel in the final rule. One commenter also stated that EPA
should place a greater emphasis on promoting non-food sourced biofuels, such as cellulosic
ethanol
Response:
EPA continues to believe that the RFS program provides appropriate support for the
development and commercialization of cellulosic biofuels. As discussed in further detail in
Section III of the final rule, we have increased our projection of cellulosic biofuel production in
2018 relative to the projection in the proposed rule. This projection is consistent with the Court's
direction to project cellulosic biofuel production neutrally.
Comment:
Several commenters stated that the projected volume of cellulosic biofuel for 2018 was too low,
and that volumes higher than the proposed volumes could be produced with strong federal
support. These commenters generally suggested that EPA should increase the cellulosic biofuel
requirements for 2018 to provide market stability for the cellulosic biofuel industry and continue
to promote investment in domestic cellulosic biofuel projects in the future. One commenter also
mentioned that state incentives could support higher volumes of cellulosic biofuel. These
commenters generally claimed that if EPA were to finalize volumes similar to those proposed
this would undermine the potential of the cellulosic biofuels industry, and that the cellulosic
biofuel industry would be negatively impacted, and that many of the potential benefits associated
with cellulosic biofuels, such as increased employment, GHG reductions, energy security, and
energy independence would not be realized.
Response:
The approach we have adopted to projecting cellulosic biofuel production is a neutral projection
of the volume of cellulosic biofuel that will be produced in 2018. We note that the cellulosic
biofuel volume in this final rule is significantly higher than the proposed cellulosic biofuel for
2018. This increase is primarily due to the consideration of additional data that was not available
at the time of the proposed rule, as well as minor modifications made to the cellulosic biofuel
projection methodology (see Section III of the final rule and Sections 3.2, 3.2.1, and 3.2.2 of this
document for further discussion of the methodology EPA used to project the cellulosic biofuel
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volume for 2018). We believe that the changes to EPA's projection methodology for 2018 will
increase the accuracy of our cellulosic biofuel production projections (taking into account all
existing federal and state incentives), and that the increased accuracy of these projections will
add to the sense of program stability the commenters describe as necessary for the development
of the cellulosic biofuel industry, including investment in new commercial scale cellulosic
biofuel production facilities in the U.S. EPA disagrees with commenters that a cellulosic biofuel
standard greater that the standard finalized in this rule (288 million gallons) would lead to greater
cellulosic biofuel production in 2018, as our projection of volume likely to be produced in 2018
reflects the volume of cellulosic biofuel that EPA projects will actually be supplied in 2018. We
therefore disagree that the cellulosic biofuel volume requirement will result in lesser benefits
(including additional jobs, GHG reductions, energy independence, and energy security) than
would be achieved with a higher required volume of cellulosic biofuel. We will continue to
monitor the progress of the cellulosic biofuel industry and will adjust our projection
methodology as appropriate to ensure that the methodology results in an accurate and neutral
projection.
Comment:
Several commenters stated that they are considering investing in cellulosic biofuel production
technology, but that they will not do so if EPA establishes cellulosic biofuel volume
requirements that are too low, leading to low RIN prices and instability in the cellulosic biofuel
and cellulosic RIN markets. One commenter stated that the proposed volumes will force
developers to discount their expectations for RIN values in future years when considering
whether or not to invest in a cellulosic biofuel project. Some commenters specifically mentioned
investments in technologies that would produce biogas for use as CNG/LNG from wastewater.
Response:
As noted above, the approach we have adopted to projecting cellulosic biofuel production is a
neutral projection of the volume of cellulosic biofuel that will be produced in 2018, and we note
that the cellulosic biofuel volume in this final rule is significantly higher than the proposed
cellulosic biofuel for 2018. By establishing cellulosic biofuel requirements that are based on
accurate and neutral projections, EPA is seeking to provide the market stability desired by these
commenters. We further note that EPA's projections are not intended to achieve a particular RIN
price, but rather to reflect cellulosic biofuel production as accurately as possible in 2018 in
accordance with the statutory direction. EPA believes that accurate and neutral projections of
cellulosic biofuel will result in a stable market for cellulosic biofuels and cellulosic biofuel RINs,
and provide the appropriate incentives for investment in cellulosic biofuel production facilities
(including facilities designed to produce biogas from wastewater).
Comment:
One commenter supported our determination that the statutory cellulosic volume for 2018 could
not be met, and our decision to establish the cellulosic biofuel standard for 2018 at the projected
volume available in this year.
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Response:
We agree that the statutory volume for cellulosic biofuel in 2018 (7.0 billion gallons) is not
achievable. We believe this annual rule is consistent with EPA's charge to establish cellulosic
biofuel standards consistent with the projected production of cellulosic biofuels, using a "neutral
aim at accuracy." By establishing cellulosic biofuel requirements equal to our projection of
cellulosic biofuel production we believe we are providing the appropriate incentives for the
purchase of cellulosic biofuels.
Comment:
Several commenters stated that EPA's projection of cellulosic biofuel production in 2018 should
include volumes from all potential sources of cellulosic biofuel, including from pathways and/or
facilities that have not yet been approved to generate cellulosic biofuel RINs (including RINs
from mixed waste digesters, facilities intending to produce cellulosic ethanol from corn kernel
fiber, electricity generated from biogas used as transportation fuel, etc.). By including all
potential sources of cellulosic biofuel in our projection EPA will provide the support the
cellulosic biofuel industry needs.
Response:
Our projection of cellulosic biofuel production in 2018 includes production volumes from all
facilities EPA projects are reasonably likely to produce qualifying cellulosic biofuel in 2018.
These projections include volumes from facilities that have not yet completed facility registration
as cellulosic biofuel producers, but are expected to complete facility registration and produce
cellulosic biofuel in 2018. We have not, however, included in our projections production from
facilities that must address significant technical and regulatory issues prior to facility registration
(such as corn ethanol producers that intend to produce cellulosic ethanol from corn kernel fiber
but do not yet have an approved methodology for determining the portion of the ethanol they
produce that is derived from cellulosic biomass or facilities seeking to generate RINs for
electricity generated from biogas used as transportation fuel) or from pathways that have not yet
been approved. While it is possible that the technical and regulatory issues associated with these
facility registration requests could be resolved (or the pathways in question could be approved)
in a timeframe that would allow additional facilities to produce cellulosic biofuel in 2018, such
approvals and subsequent commercial-scale cellulosic biofuel production is highly uncertain.
Some commenters noted that these approvals are dependent on EPA's actions, and therefore
EPA could reasonably anticipate approving new facility registrations and/or pathways in 2018.
Such an approach, however, inappropriately assumes that approval is a mere formality, and
ignores the significant technical issues related with many of these facility registration requests
and pathway petitions. Simply assuming these technical and regulatory issues can be resolved in
a timeframe that would allow for significant production of cellulosic biofuel from the facilities
awaiting registration (or facilities seeking to use pathways that have not yet been evaluated)
would not result in a neutral projection of cellulosic biofuel production for 2018. EPA will
continue to work with all companies interested in generating cellulosic RINs to address any
outstanding technical and regulatory issues, and may include projected production from these
sources in the future as appropriate.
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Comment:
One commenter stated that EPA's actions in a potential future reset rule could impact investment
in cellulosic biofuel production, including volumes that could be produced in 2018. EPA should
assess whether any actions taken on the reset rule are likely to impact cellulosic biofuel volumes
in 2018. If EPA does not expect any actions on the reset rule to impact cellulosic biofuel
volumes in 2018, they should report such a determination.
Response:
EPA acknowledges the possibility that announcements with respect to actions we intend to take
in a potential future reset rule could impact cellulosic biofuel production in 2018. At this time,
however, we do not anticipate any action taken by EPA related to the reset rule will have a
material impact on cellulosic biofuel production in 2018.
Comment:
One commenter stated that EPA should follow the direction of the D.C. Circuit and set volumes
that encourage higher volumes of cellulosic biofuel, rather than setting the cellulosic biofuel
required volume for 2018 at a level consistent with historical volumes.
Response:
The 2018 cellulosic biofuel volume in this final rule is not set at historical production levels, but
rather uses historic production volumes to project likely cellulosic biofuel production in 2018.
The direction from the D.C. Circuit with respect to the cellulosic biofuel production projections
that form the basis for the cellulosic biofuel volume requirements is to project cellulosic biofuel
production with a neutral aim at accuracy. We are not to be aspirational in our projections in an
effort to provide additional support to the cellulosic biofuel industry. Our projection for
cellulosic biofuel production in 2018 is consistent with this direction.
Comment:
One commenter stated that EPA's proposed rule wrongly assumes that cellulosic biofuel
production will decline in 2018. The commenter notes that this is in conflict with monthly
production volumes, which indicated that cellulosic biofuel production volumes have been
increasing.
Response:
EPA disagrees with the commenters statement that we assume that cellulosic biofuel production
will decline in 2018. While our projection of cellulosic biofuel production for 2018 is lower than
our projected volume for 2017 in the 2017 final rule, this is in part due to our current expectation
(based on cellulosic biofuel RIN generation data through September 2017) that actual cellulosic
biofuel production in 2017 will fall short of the cellulosic biofuel volume requirement for that
year. In projecting cellulosic biofuel production for 2018 we have considered all available
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cellulosic biofuel RIN generation data (including data not available at the time of the proposed
rule). We currently project that cellulosic biofuel production in 2018 will exceed cellulosic
biofuel production in 2017.
Comment:
One commenter stated that EPA should make net cellulosic RIN generation data more easily
accessible.
Response:
EPA currently makes cellulosic RIN generation and retirement data publicly available on our
website.22 This data is updated monthly, and includes monthly RIN generation data available by
D-code, annual RIN generation data available by fuel type, and annual RIN retirement data by
D-code and retirement reason. There are some limitations on EPA's ability to share RIN
generation and retirement data related to our responsibility to protect confidential business
information; however, we will work with interested parties to provide additional data as
appropriate.
Comment:
One commenter stated that the shortfall of liquid cellulosic biofuel production in 2015 was due
to program instability, and therefore is not indicative of likely success of liquid cellulosic biofuel
production in future years.
Response:
EPA disagrees with this commenter. We note that for 2015 EPA only projected cellulosic biofuel
volume for the last quarter of 2015 (production during the first three quarters of 2015 was based
on actual RIN generation data). Several of the facilities EPA projected would produce liquid
cellulosic biofuel in the 4th quarter of 2015 experienced significant technical challenges that
resulted in lower than anticipated production volumes, and in some cases no production of
cellulosic biofuel in 2015. Whether the shortfall in liquid cellulosic biofuel production in 2015
was caused by technical challenges or instability in the RFS program (as the commenter stated),
these challenges are not directly relevant to EPA's projection of liquid cellulosic biofuel
production in 2018. Changes in the production methodology for liquid cellulosic biofuels have
been made primarily in response to the shortfall in liquid cellulosic biofuel production in 2016
and the projected shortfall in 2017 (see Section III of the final rule and Sections 3.2 and 3.2.2 for
a further discussion of the methodology used to project liquid cellulosic biofuel production in
2018).
22 See https://www.epa.gov/fiiels-registratjon-reportlng-and-compliatice-help/pnblic-data-renewable-fiiel-standard.
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Comment:
One commenter stated that EPA data on cellulosic RIN retirements is not transparent and cannot
be independently verified. They stated that EPA should make this information more readily
available, especially as these numbers are used to project cellulosic biofuel production.
Response:
EPA disagrees with this comment. EPA's public website contains annual totals of the number of
RINs retired for various reasons by D-code. The difference in the RIN retirement numbers for
2016 noted by the commenter is the result of RINs that were retired for a reason other than
compliance with the annual standards, and subsequently un-retired. We note that this relatively
small difference in the number of available RINs in 2015 (less than 0.1%) has no impact on our
projection cellulosic biofuel production in 2018. We will work with interested parties to provide
additional data as appropriate in light of our desire to make information publicly available while
still satisfying our obligation to protect confidential business information.
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3.2 Methodology for Projecting Volumes
Commenters that provided comment on this topic include, but are not limited to: 1692, 1774,
2542, 3475, 3478, 3645, 3680, 3681, and 3955.
Comment:
One commenter specifically supported EPA's decision to project liquid cellulosic biofuel
production and the production of CNG/LNG derived from biogas separately. Another commenter
stated that EPA must use a consistent methodology to project liquid cellulosic biofuel production
and the production of CNG/LNG derived from biogas.
Response:
EPA is charged with neutrally projecting the volume of cellulosic biofuel likely to be produced
in 2018. As discussed further in Section III of the final rule, the production of CNG/LNG derived
from biogas is a relatively mature technology, while the production of liquid cellulosic biofuels
is still in the early stages of commercialization. It would not, therefore, be appropriate to use the
same methodology for projection production volumes of these two categories of cellulosic
biofuel in 2018. The fact that significantly higher volumes of CNG/LNG derived from biogas
have been produced in previous years than liquid cellulosic biofuels, both in absolute terms and
relative to production projections received from the producers of these fuels, demonstrates the
problems associated with using the same methodology to project production volumes of
CNG/LNG derived from biogas and liquid cellulosic biofuels. Therefore, using differing
methodologies to project CNG/LNG derived from biogas and liquid cellulosic biofuels is most
consistent with EPA's charge to accurately project cellulosic biofuel production in 2018.
Comment:
Several commenters stated that EPA's methodology for projecting cellulosic biofuel production
in 2018 was inappropriately "backwards looking," or that it assumes that the industry's past
performance determines its future. These commenters generally claimed that our projection
methodology and/or percentile values used to project liquid cellulosic biofuel volume in 2018
should be based less on history and more on factors likely to impact future production. Some
commenters claimed that a "backwards looking" approach could depress investment and growth
in the cellulosic biofuel market.
Response:
EPA disagrees that the methodologies used to project cellulosic biofuel production in 2018 are
inappropriately "backwards looking," or that they should be based less on historical data. We
acknowledge that in projecting both liquid cellulosic biofuel production and production of
CNG/LNG derived from biogas we have used historical data to inform the percentile values used
to project a production volume from a range of potential volumes and the year-over-year growth
rate, respectively. In each case we believe using the historical data in this way is appropriate, as
the percentile values and year-over-year growth rate observed in previous years are likely to be
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indicative of these values in 2018. We also note that EPA is unaware of any suitable alternatives
to using historical data to calculate these values. The two alternatives suggested by commenters,
simply using the volume projections from potential producers or using the same percentile values
as in previous years, have both been proven in previous years to result in inaccurate projections.
We further note that basing elements of our projection methodology on historical data does not
result in a stagnant or declining projection of cellulosic biofuel in 2018. The percentile value is
applied to a potential production range which includes likely new producers of cellulosic biofuel
and higher potential production volumes from existing producers of cellulosic biofuel - and
therefore is likely to project higher volumes of biofuel as new facilities begin production.
Similarly, the year-over-year growth rates calculated for CNG/LNG derived from biogas include
increased production that resulted both from new facilities coming online and existing facilities
expanding their production in previous years. As a result, the volume of cellulosic biofuel
projected to be available in 2018 in this final rule is higher than the volume we currently expect
will be produced in 2017. The methodologies used in this final rule reflect EPA's best efforts to
neutrally project cellulosic biofuel production in 2018, and should therefore provide the
appropriate incentives for growth and investment in the cellulosic biofuel industry.
Comment:
Several commenters stated that the methods used by EPA to project cellulosic biofuel in previous
years had proven accurate, and that EPA should not deviate from the methodology used to
project cellulosic biofuel production in 2016 and 2017. One commenter claimed that EPA did
not identify new data that lead to the change in methodology used to project cellulosic biofuel
production. Some commenters noted that the methodology used in 2016 withstood legal
challenge.
Response:
EPA disagrees with commenter statements that the methodology used in 2016 and 2017 has
proven accurate. In our proposed rule, we noted that this methodology had resulted in an under-
projection of cellulosic biofuel production in 2015 and an over-projection in 2016. However, the
under-projection of cellulosic biofuel in 2015 was largely due to not accounting for very high
RIN generation for CNG/LNG derived from biogas in December. Since EPA only projected
cellulosic biofuel production for the final quarter of 2015, this had a significant impact on the
accuracy of our projection in 2015. EPA now has cellulosic RIN biofuel generation data through
September 2017, significantly more 2017 data than we had for the proposed rule. While there is
still significant uncertainty as to the total volume of cellulosic biofuel that will be produced in
2017, data through September 2017 (approximately 158 million gallons of cellulosic biofuel
produced) indicates that production for the year will likely fall short of the cellulosic biofuel
standard for 2017 (311 million gallons). We believe this data, combined with the fact that this
methodology also resulted in an over-projection of cellulosic biofuel for 2016, justifies a change
to the methodology used to project cellulosic biofuel for 2018 in an effort to project cellulosic
biofuel production more accurately. We further note that while the methodology used by EPA to
project cellulosic biofuel in 2016 withstood legal challenge, this decision was based on the data
available to EPA at the time the decision was made (November 2015). It would not be
appropriate to continue using this methodology after it has resulted in significant over-estimates
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of cellulosic biofuel production in 2016, and appears highly likely to again over-estimate
cellulosic biofuel production in 2017.
Comment:
One commenter suggested that EPA should adopt "roll-over" and "true-up" methodologies to
adjust the cellulosic biofuel volume requirement to equal the number of cellulosic biofuel RINs
available at the end of the year (including both the RINs produced during the year and any
available carryover RINs from the previous year)
Response:
EPA does not believe it would be appropriate at this time to adopt a "roll over" or "true up"
methodology whereby the cellulosic biofuel standard was retroactively changed to the volume of
available cellulosic RINs after the end of a compliance year. Such a methodology would cause
significant uncertainty for obligated parties, as they would not know their actual cellulosic
biofuel obligations for any given year until after the end of the year, at which point they would
have limited time available to obtain the RINs necessary to demonstrate compliance. Such a
change could also inadvertently harm cellulosic biofuel producers if obligated parties, uncertain
of their final cellulosic biofuel obligations, wait until after the end of the calendar year to
purchase cellulosic biofuel and/or cellulosic biofuel RINs. Cellulosic biofuel producers may be
unable to continue commercial production without customers, and may therefore scale back
production volumes or shut down their production facilities. Finally, we note that if carryover
RINs were included in the "roll over" or "true up" calculation, this would effectively penalize
obligated parties for acquiring excess cellulosic biofuel RINs in previous years, an action which
would be beneficial to cellulosic biofuel producers.
Comment:
One commenter stated that EPA should quickly register new facilities, and that volumes from
facilities that have not yet completed registration as cellulosic biofuel producers in the RFS
program should be included in EPA's projections of cellulosic biofuel production in 2018.
Response:
EPA is committed to reviewing facility registration requests and pathway petitions in a timely
manner. However, as discussed in further detail in Section 3.1 of this document, we do not
believe it would be appropriate to project cellulosic biofuel production from facilities (or
pathways) for which there are significant outstanding technical and regulatory issues that must
be resolved prior to these facilities generating cellulosic biofuel RINs.
Comment:
One commenter suggested that EPA has the ability to use the best data available, and that this
data should be used in our projection of cellulosic biofuel for 2018. This commenter encouraged
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EPA to work closely with individual companies, rather than to make aggregate projections of
cellulosic biofuel by sector.
Response:
EPA continues to work closely with potential cellulosic biofuel producers to ensure that we have
the most accurate and up to date information available when projecting cellulosic biofuel
volumes for future years. For this final rule we have reached out to potential cellulosic biofuel
producers to obtain updated information, and have reviewed and assessed additional cellulosic
RIN generation data that was not available at the time of our proposed rule.
Comment:
Several commenters stated that EPA should assess potential cellulosic biofuel production (both
for producers of liquid cellulosic biofuels and CNG/LNG derived from biogas) on a facility-by-
facility basis. One commenter suggested several factors EPA could use to evaluate individual
facilities to increase the accuracy of the production projection from individual facilities.
Response:
EPA disagrees that projecting precise production volumes from individual facilities would result
in a more accurate overall cellulosic biofuel production projection. In previous years (2011-
2013) EPA has used a facility-by-facility projection methodology similar to the methodology
suggested by the commenters; however, this has not resulted in accurate projections. Each year,
EPA has requested volume projections from project developers and these estimates have
consistently proved to be overly optimistic. In recent years EPA has placed special emphasis on
many of the factors suggested by the commenter, yet the accuracy of the production estimates
provided by project developers have not significantly improved. While EPA believes we have
gained sufficient experience to allow us to project likely production from broadly similar groups
of companies, based in part on facility-specific information, we do not believe that our
projections would improve through using a facility-by-facility assessment approach. We
therefore believe the methodology used in this rule is likely to produce a more accurate
projection than a methodology that projects production volumes for each specific facility with
the potential to produce cellulosic biofuel in 2018.
Comment:
One commenter stated that EPA's cellulosic biofuel projection methodology should account for
accelerating growth.
Response:
As discussed in more detail above, by applying a percentile value to a potential production range
which includes likely new producers of cellulosic biofuel and higher potential production
volumes from existing producers of cellulosic biofuel and using a year-over-year growth rate to
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project CNG/LNG derived from biogas, our methodology accounts for the growth observed in
cellulosic biofuel production in recent years.
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3.2.1 Methodology for Projecting Liquid Cellulosic Biofuel Volumes
Commenters that provided comment on this topic include, but are not limited to: 1177, 1756,
1774, 1776, 3174, 3242, 3247, 3251, 3428, 3497, 3645, 3658, 3680, 3681, 3878, and 3955.
Comment:
One commenter stated that EPA's projection of liquid cellulosic biofuel should be forward
looking, and should not rely on data from 2016.
Response:
As discussed in more detail in Section III of the final rule and Section 3.2 of this document,
EPA's methodology for projecting volumes of liquid cellulosic biofuels uses data from previous
years (including both 2016 and 2017) to calculate a percentile value for expected production
within a calculated range of likely production volumes for two groups of companies (those that
have achieved consistent commercial scale production of liquid cellulosic biofuel and those that
have not). This methodology appropriately uses relevant data from the performance of similar
groups of facilities in previous years, along with production expectations in 2018, to neutrally
project likely production of liquid cellulosic biofuel in 2018.
Comment:
One commenter stated that Enerkem intended to export cellulosic ethanol to the U.S. in 2018,
and should be included in EPA's cellulosic biofuel projection.
Response:
After reviewing comments from Enerkem and gathering more information from Enerkem
representatives, EPA agrees that it is likely that cellulosic ethanol produced at Enerkem's
Edmonton facility will be imported into the U.S. in 2018. We have therefore considered
production from this facility in our projection of liquid cellulosic biofuel production in 2018.
Comment:
One commenter claimed that it was arbitrary to base the percentile values used to project liquid
cellulosic biofuel production on historical data from a single year (2016). They further claimed
that data from 2016 did not reflect current market capabilities well. Several commenters claimed
that EPA's proposed methodology did not include any volume from facilities that had not yet
produced cellulosic biofuel. They claimed that this resulted in a projection that was
inappropriately low.
Response:
EPA acknowledges that our proposed methodology projected very low volumes of cellulosic
biofuel production from facilities that had not yet achieved consistent commercial scale
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production. Our proposed methodology used a range of potential production volumes with a low
end of the range at zero gallons and the 1st percentile value to project likely production from
these facilities based on actual production data from 2016. In our final rule EPA has adjusted the
percentile values using additional cellulosic biofuel RIN generation data from 2017.
Consideration of this additional data has resulted in an increased percentile value used to project
liquid cellulosic biofuel production from facilities that have not yet achieved consistent
commercial scale production to the 10th percentile. Using this percentile value effectively
projects an increased production volume of cellulosic biofuel from these facilities in 2018.
Several commenters have requested that higher percentile values be used (or that EPA develop
individual percentile values for each facility). The approach adopted by EPA in this final rule
appropriately uses historical data from 2016 and 2017 to calculate a percentile value that is likely
to be reasonably indicative of cellulosic biofuel production from these facilities in 2018. We
further note that, with the exception of the historical data used by EPA, we are not aware of any
other empirical data that could be used to objectively calculate a percentile value for use in
projecting likely cellulosic biofuel production from a range of potential values, whether for a
group of companies or an individual facility.
Comment:
Several comments stated that EPA should project cellulosic biofuel production from corn kernel
fiber differently than production of other liquid cellulosic biofuels. Commenters generally stated
that corn kernel fiber conversion technology had been successfully demonstrated at commercial
scale and would not face the same start-up challenges as large stand-alone cellulosic biofuel
production facilities, and stated that EPA's projection methodology should reflect these
differences. One commenter suggested that EPA should consider production of cellulosic ethanol
from corn kernel fiber separately from the production of other liquid cellulosic biofuels. Another
commenter requested that EPA project all potential producers of cellulosic ethanol from corn
kernel fiber as if they were existing producers since these facilities face much fewer start-up
challenges than other liquid cellulosic biofuel production technologies.
Response:
EPA recognizes that the challenges associated with producing cellulosic ethanol from corn
kernel fiber at a facility currently producing ethanol from starch differ from the challenges
associated with producing cellulosic biofuel from a large stand-alone cellulosic biofuel
production facility. We also recognize that the production of cellulosic ethanol from corn kernel
fiber has been successfully commercialized at existing ethanol production facilities. However,
while the uncertainties related to the production volumes of cellulosic ethanol from corn kernel
fiber may differ from those related to the production of other types of cellulosic biofuel, at this
point EPA does not have sufficient data to suggest that these differences justify the use of
different projection methodologies for corn kernel fiber relative to other liquid cellulosic biofuel
production technologies. For example, while technologies that convert corn kernel fiber require
little to no additional processing equipment and can theoretically ramp-up production more
quickly than stand-alone cellulosic biofuel production facilities there is much more uncertainty
with respect to the number of facilities that will pursue the use of this technology to produce
cellulosic biofuel in 2018. For example, EPA has not considered any stand-alone liquid
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cellulosic biofuel production facilities in our estimates for 2018 unless they have already made
significant financial investments and achieved significant progress towards completing
construction of their cellulosic biofuel production facilities. Conversely, many of the facilities
EPA expects will produce cellulosic ethanol from corn kernel fiber have not yet signed binding
contracts with the technology providers at this time. EPA will continue to monitor the success of
producers of cellulosic ethanol from corn kernel fiber relative to producers of other liquid
cellulosic biofuels to determine if using different methodologies to project production volumes
from these two groups of facilities is merited in future years. At this time, however, EPA does
not have sufficient data to justify different production methodologies for corn kernel fiber and
other liquid cellulosic biofuels.
Comment:
EPA should recognize that current cellulosic biofuel production technologies are distinct from
those in previous years, and have a higher likelihood of success.
Response:
EPA recognizes that in some cases, the production technologies expected to be employed by
potential producers of cellulosic biofuel in 2018 differ from the technologies used by potential
producers of cellulosic biofuels in previous years. We do not, however, agree that there is
sufficient basis for the commenters claims that these technologies have a higher likelihood of
success than previous technologies or facilities. We will continue to monitor the accuracy of the
methodologies we used to project cellulosic biofuel production, and anticipate adjusting the
methodology as appropriate to achieve greater accuracy in our cellulosic biofuel projections in
future years.
Comment:
One commenter stated that EPA should not reduce the percentile value used to project
production of liquid cellulosic biofuels due to the failure of a few large cellulosic biofuel
production facilities.
Response:
EPA notes that the lower percentile values in our proposed rule were not simply due to the
failure of a few large cellulosic biofuel producers to produce the projected volumes of cellulosic
biofuel, but were based on the historical performance of all liquid cellulosic biofuel production
facilities. For this final rule we have adjusted the percentile values to include additional
cellulosic biofuel production data through September 2017 (in addition to the production data
from 2016). These percentile values appropriately consider the success of all liquid cellulosic
biofuel producers in EPA's projections in 2016 and 2017, which included both large and smaller
cellulosic biofuel production facilities.
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Comment:
One commenter stated that there is strong potential for additional production from the conversion
of corn kernel fiber, but that expanded use of this technology was dependent on a strong market
for cellulosic RINs.
Response:
EPA recognizes the potential for significantly increased production of cellulosic ethanol from
corn kernel fiber in 2018. Our cellulosic biofuel production projections take into account
potential production from facilities using this technology.
Comment:
One commenter stated that EPA should include volumes of cellulosic ethanol produced from
corn kernel fiber at Poet's existing ethanol facilities in our projections of cellulosic ethanol
production. This commenter also requested that EPA should include 80 million gallons of
cellulosic ethanol already produced using this technology that is currently in storage.
Response:
As discussed in greater detail in Section 3.1 of this document, EPA does not believe it would be
appropriate to project cellulosic biofuel production in 2018 from facilities using technologies for
which there are significant outstanding technical issues that must be resolved prior to facility
registration. We further note that in light of these unresolved technical issues, it is highly
unlikely that EPA would allow RINs to be generated for stored fuel that was produced at a
facility prior to the acceptance of that facility's registration as a cellulosic biofuel producer.
Comment:
One commenter stated that EPA should consider data from 2017 in projecting liquid cellulosic
biofuel volumes.
Response:
For the final rule EPA has considered updated data, including both updated information from
potential cellulosic biofuel producers in 2018 and additional cellulosic biofuel RIN generation
data from 2017, in projecting cellulosic biofuel production volumes for 2018.
Comment:
One commenter stated that EPA should work with producers to approve quantification methods
for technologies that convert both cellulosic and non-cellulosic feedstocks. Multiple commenters
stated that EPA should approve more facilities to generate cellulosic RINs for cellulosic ethanol
produced from corn kernel fiber, and that EPA should work with the industry to better quantify
these volumes and include them in our projections for 2018.
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Response:
EPA is committed to working with potential cellulosic biofuel producers to resolve issues related
to the quantification of the conversion of cellulosic biomass to biofuel. In developing cellulosic
biofuel production projections for 2018 EPA has been in contact with multiple companies
working to commercialize technologies to convert corn kernel fiber to cellulosic ethanol, and to
verify the quantify the production of cellulosic ethanol. As discussed above, it would not be
appropriate for EPA to project cellulosic biofuel production from these facilities unless and until
the significant technical issues related to the verification and quantification of the conversion of
corn kernel fiber to cellulosic biofuel are resolved.
Comment:
One commenter supported EPA's proposed use of lower percentile values to project cellulosic
biofuel production in 2017. However, the commenter claimed that the percentile values were still
too high, as the industry has never produced more than 2.1% of their capacity. The commenter
requested that EPA project liquid cellulosic biofuel production at 2.1% of the industry's capacity
unless data exists that supports a higher number. Multiple commenters noted that the proposed
volume of liquid cellulosic biofuel is 450% higher than the volume achieved in 2016, and that
EPA had not shown that such an increase was possible.
Response:
This commenter inappropriately equates EPA's percentile values used to project cellulosic
biofuel production from a calculated range of likely production volumes (with includes
consideration of factors such as facility start-up date, a ramp-up period, and the company's own
production targets) with a percentage of total facility capacity of all potential cellulosic biofuel
producers. Projecting cellulosic biofuel production using the metric of percentage of total
capacity utilized in previous years ignores many of these additional factors, which are likely to
impact actual cellulosic biofuel production in 2018. Ignoring these factors and projecting liquid
cellulosic biofuel volume for 2018 using a percentage of cellulosic biofuel production capacity is
not an approach that is likely to result in a reasonably accurate projection.
EPA notes that the percentile values used to project liquid cellulosic biofuel production in 2018
in this final rule are based on percentile values that would have resulted in projections equal to
the volume of cellulosic biofuel produced in 2016 and 2017.23 We further note that the
production of liquid cellulosic biofuel is currently projected to increase by over 100% from 2016
to 2017 (based on 2017 RIN generation data through September 2017), and that achieving the
volume of liquid cellulosic biofuel projected for 2018 (14 million gallons) would require a
smaller percentage increase from 2017 to 2018 (57%) than is projected to occur from 2016 to
2017 (106%>). The methodology used by EPA to project liquid cellulosic biofuel volumes in
23 The development of these percentile values is discussed in further detail in "Calculating the Percentile Values
Used to Project Liquid Cellulosic Biofuel Production for 2018," memorandum from Dallas Burkholder to EPA
Docket EPA-HQ-OAR-2017-0091. The percentile values that would have resulted in accurate cellulosic biofuel
projections for 2017 are based on an updated projection of liquid cellulosic biofuel in 2017 using data on cellulosic
RIN generation through September 2017.
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2018 appropriately considers both historical production volumes of cellulosic biofuel and the real
progress made in the cellulosic biofuel industry that is likely to impact cellulosic biofuel
production volumes in 2018.
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3.2.2 Methodology for Projecting Cellulosic Biogas Volumes
Commenters that provided comment on this topic include, but are not limited to: 1135, 1503,
1778, 2542, 3319, 3325, 3428, 3645, 3650, 3658, 3680, 3681, 3871, 3873, 3878, and 3953.
Comment:
Multiple commenters stated that EPA should use additional data from 2017 to update the year-
over-year rate of growth used to project the production of CNG/LNG derived from biogas in
2018. Some commenter suggested that EPA should calculate the year-over-year growth rate
using full 12-month periods (rather than partial years as in the proposed rule). One commenter
noted using a full 12-month period is especially important since the 5 months considered by EPA
in our proposed rule included January, a month with unusually low RIN generation data for
CNG/LNG derived from biogas. One commenter stated that the sample size is too short to
calculate a reliable growth rate. Another commenter alternatively requested that EPA use a
growth rate of 35% (based on long term trends and accounting for leading factors) to project the
production of cellulosic CNG/LNG derived from biogas in 2018.
Response:
For the final rule, EPA has used the most recent data available to update the rate of growth used
to project production of CNG/LNG derived from biogas in 2018. Our updated growth rate is
calculated by comparing RIN generation for these fuels during the most recent 12 months for
which data are available to RIN generation for these fuels during the preceding 12 months.24
EPA agrees with comments suggesting that using a full 12 month time period to calculate the
rate of growth results in a growth rate more likely to result in an accurate projection of
CNG/LNG derived from biogas in 2018, and that this methodology reduces the opportunity for
parties to influence this growth rate to their benefit. While the consideration of additional data
might be helpful, we believe that the time period used to calculate the growth rate (the most
recent 2 years for which data are available) in this final rule is sufficient to form the basis for the
growth rate in 2018. We further note that using data from previous years (e.g., prior to October
2015) would be unlikely to be indicative of the growth rate likely to occur through 2018, as the
growth rate observed in the first year in which CNG/LNG derived from biogas was categorized
as a cellulosic biofuel was very high and has not been sustained in recent years.
Comment:
Several commenters stated that EPA's industry-wide projection methodology does not
adequately account for new facilities expected to begin generating cellulosic biofuel RINs in
2018. These commenters requested that EPA adjust our rate of growth methodology used to
project the production of CNG/LNG derived from biogas to better account for new facilities.
These commenters generally suggested that EPA use the rate of growth methodology to project
production of CNG/LNG derived from biogas from currently producing facilities, but requested
24 For further detail on the methodology EPA used to project production of CNG/LNG derived from biogas in 2018
see "November 2017 Assessment of Cellulosic Biofuel Production from Biogas 2018," memorandum from Dallas
Burkholder to EPA Docket EPA-GQ-OAR-2017-0091.
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that EPA increase the volume further to account for new facilities. Many of these commenters
referred to the affidavits submitted by the Coalition for Renewable Natural Gas as a source for
reliable information on new facilities.
Response:
We disagree that the industry-wide projection methodology used by EPA in this final rule does
not adequately account for new facilities that may begin producing CNG/LNG derived from
biogas in 2018. As discussed in further detail in Section III.D.2 of the final rule, the growth rate
used to project the production of CNG/LNG derived from biogas in 2018 includes both increased
production from existing facilities, as well as new facilities that began producing fuel in the last
12 months for which data are available. If EPA were to add an additional volume to what we are
currently projecting using our industry wide rate of growth projection methodology, we would
effectively be double counting production from new facilities. The industry wide methodology
already considers the impact of new facilities in the past in the calculated rate of growth. Adding
additional production volumes expected to be produced from new facilities would not be
appropriate, nor would it be likely to result in an accurate projection.
Comment:
Several commenters requested that EPA use the facility by facility approach from previous
rulemakings (2016 and 2017) to project the production of CNG/LNG derived from biogas in
2018.
Response:
As discussed in further detail in Section III of the final rule, the relative maturity of the industry
producing CNG/LNG derived from biogas and large number of potential producers of this fuel
lends itself well to an industry-wide projection methodology. In such cases, industry-wide
projection methods can be more accurate than a facility-by-facility approach, especially as macro
market and economic factors become more influential on total production than the success or
challenges at any single facility. We further note that the facility-by-facility approach used to
project production of CNG/LNG produced from biogas in 2016 and 2017 significantly over-
estimated production of these fuels. In light of these over projections, adjustments to the
methodology used to project production of CNG/LNG derived from biogas were necessary for
EPA to neutrally project cellulosic biofuel production for 2018.
Comment:
Multiple commenters requested that EPA include facilities that expect to produce CNG/LNG
form both cellulosic and non-cellulosic feedstocks (such as agricultural or food waste digesters)
in our projections of cellulosic biofuel production for 2018.
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Response:
EPA's methodology for projecting CNG/LNG derived from biogas in 2018 in this final rule is an
industry-wide, rather than a facility by facility approach. The projected growth rate (21.6%) is
expected to be achieved by a combination of increased production from facilities currently
generating cellulosic RINs for CNG/LNG derived from biogas and RIN generation from
facilities that have not yet generated RINs, including the potential for RIN generation from
facilities processing multiple types of feedstocks (if the appropriate technical issues are resolved
in 2018). Our methodology therefore accounts for these facilities, as their potential production is
accounted for in the year-over-year growth rate used by EPA to project the production of
CNG/LNG derived from biogas in 2018.
Comment:
One commenter stated that using a historic growth rate to project the production of CNG/LNG
derived from biogas in 2018 would restrict demand for these fuels.
Response:
Ultimately the incentives provided by the RFS program for cellulosic biofuels, including
CNG/LNG derived from biogas, will be dependent on the cellulosic biofuel volume requirement
in 2018 and in future years. Using a historic growth rate to project likely production volumes of
CNG/LNG derived from biogas in 2018 is a neutral projection methodology expected to result in
a reasonably accurate projection of the volume of these fuels that will be produced in 2018.
Accurately projecting the volume of CNG/LNG derived from biogas that will be produced
should provide the appropriate market demand for these fuels.
Comment:
One commenter stated that EPA should consider volumes of cellulosic CNG/LNG derived from
biogas that would have been produced from facilities with pending registrations in our projection
methodology.
Response:
Considering production of CNG/LNG derived from biogas that may have been produced from
facilities with pending registration requests would inappropriately inflate the growth rate used to
project CNG/LNG derived from biogas in 2018. Facilities cannot generate cellulosic biofuel
RINs until they have completed EPA's facility registration process as cellulosic biofuel
producers. This process requires the facility to submit the appropriate information and for EPA
to review this information. The time necessary for potential producers of CNG/LNG derived
from biogas to register as cellulosic biofuel producers is not expected to be significantly different
in 2018 than in previous years. Calculating the year-over-year growth rate using actual RIN
generation, rather than the number of RINs that could have been produced if additional facilities
had completed the registration process, results in a neutral projection of CNG/LNG derived from
biogas in 2018.
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Comment:
One commenter stated that our projection of CNG/LNG derived from biogas should continue to
grow to provide incentives to increase the production of renewable natural gas.
Response:
By attempting to neutrally and accurately project volumes of cellulosic biofuel (including
volumes of CNG/LNG derived from biogas), the required volume of cellulosic biofuel in this
final rule provides the appropriate incentives for the additional production of cellulosic biofuel
(including renewable natural gas).
Comment:
One commenter stated that EPA should adopt the Coalition for Renewable Natural Gas's
projection of CNG/LNG derived from biogas likely to be produced in 2018, and that discounting
production projections from facilities that are currently producing fuel may not be warranted.
Response:
EPA's projection of the production of cellulosic CNG/LNG derived from biogas in 2016 and
2017 relied significantly on information provided by the Coalition for Renewable Natural Gas.
EPA considered that information, and applied a range approach with percentile values for new
and consistently producing facilities as appropriate to effectively discount the projections EPA
received from the Coalition for Renewable Natural Gas in 2016 and 2017. Despite these efforts
to appropriately discount these estimates, EPA's projections of CNG/LNG derived from biogas
exceeded actual production of these fuels in 2016, and is expected to exceed actual production
again in 2017. It therefore does not appear to be appropriate to continue to rely on these
projections to project production of CNG/LNG derived from biogas in 2018.
Comment:
Multiple commenters stated that EPA's industry-wide approach to projecting cellulosic biofuel
production for CNG/LNG derived from biogas is overly conservative.
Response:
EPA disagrees that our industry-wide approach to projecting cellulosic biofuel production for
CNG/LNG derived from biogas is overly conservative. This methodology accounts for the
observed growth rate in previous years and results in a projected production volume for these
fuels for 2018 that is significantly higher than the volumes of these fuels expected to be produced
in 2017. We further note that, as a result of considering additional data that was not available at
the time of our proposed rule, our projection of CNG/LNG derived from biogas in this final rule
is substantially higher than the volume of these fuels projected in the proposed rule, in part due
to the information provided by the commenters.
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Comment:
One commenter stated that the CNG/LNG derived from biogas industry is not sufficiently
mature for industry-wide projection methodology. This commenter suggested that this approach
would not have been accurate if used in previous years.
Response:
EPA disagrees that the CNG/LNG derived from biogas industry is insufficiently mature for an
industry-wide production methodology. As noted in Section III.D.2 of the final rule, 41 facilities
generated RINs for these fuels in the most recent 12 months in which data are available.
Production of CNG/LNG derived from biogas in 2018 (274 million gallons) is expected to reach
47% of the total volume of CNG/LNG projected by EIA to be used as transportation fuel (580
million ethanol-equivalent gallons). We acknowledge that a year-over-year rate of growth rate
would not have produced an accurate projection in previous years. When considering both the
number of facilities currently producing CNG/LNG derived from biogas and the relatively high
volumes of these fuels expected to be produced, it appears that the industry has sufficiently
matured after experiencing significant and unsteady growth in the years immediately following
the categorization of CNG/LNG derived from biogas as cellulosic biofuel in August 2014.
Comment:
One commenter stated that production of CNG/LNG derived from biogas will increase due to
state incentives provided by the state of California.
Response:
We agree that production of CNG/LNG is likely to increase in future years due to a variety of
incentives at the state and national level. The volume of these fuels we project will be produced
in 2018 in this final rule is therefore substantially higher than the volume currently expected to
be produced in 2017.
Comment:
One commenter stated that EPA should base our projection of CNG/LNG derived from biogas in
2018 at the production rate achieved in the most recent 3 months for which data are available
(e.g., the projection for 2018 should be equal to RIN generation from these fuels during the last 3
months multiplied by four).
Response:
Projecting production of CNG/LNG derived from biogas in this manner effectively assumes no
growth in the monthly production volume of these fuels from the most recent months in which
data are available (July - September 2017) through the end of 2018. Projecting production of
CNG/LNG derived from biogas in this manner is also inconsistent with the observed monthly
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production volumes of these fuels, which are generally increasing over the past two years.25 The
methodology proposed by the commenter would therefore be inconsistent with EPA's charge to
neutrally and accurately project the volume of these fuels likely to be produced in 2018.
Comment:
One commenter objected to an approach that uses past data to project future production. The
commenter claimed that this was not a neutral projection methodology.
Response:
EPA disagrees with the commenter's claim that using past data to inform future production
volumes of CNG/LNG derived from biogas does not result in a neutral production methodology.
While this may be the case if there were evidence that the growth rate calculated using past data
was unlikely to represent growth in the industry in 2018, EPA is not aware of any compelling
evidence that would suggest this is the case. Rather, the relatively consistent increases in the
monthly production volumes of CNG/LNG derived from biogas over the past two years indicate
that an industry wide year-over-year growth rate methodology is appropriate for projecting
production of CNG/LNG derived from biogas in 2018.
Comment:
One commenter claimed that the reason EPA under-projected production of CNG/LNG derived
from biogas in 2015 and over-projected production of these fuels was the large production
volume in December 2015 (and subsequent low production volume in January 2016). The
commenter claimed that if EPA had properly accounted for this our projections in 2015 and 2016
would have been accurate, and that EPA therefore has not justified deviating from the
methodology used to project CNG/LNG derived from biogas in 2015 and 2016. Another
commenter similarly noted that since EPA under-projected production of CNG/LNG derived
from biogas ion 2015 and over-projected production of these fuels in 2016 the methodology was
reasonably accurate and should be used to project production of these fuels in 2018.
Response:
The commenter claims that the reason EPA under-projected production of CNG/LNG derived
from biogas in 2015 and over-projected production of these fuels in 2016 was solely due to RIN
generation protocols for producers of CNG/LNG derived from biogas. This is incorrect. These
RIN generation protocols lead to very low RIN generation numbers in January and very high
RIN generation numbers in December of each year. EPA acknowledges that a significant portion
of our under-projection of RINs generated for CNG/LNG derived from biogas in 2015 was the
result of not adequately accounting for the impacts of this RIN generation pattern, combined
with the fact that we only projected RIN generation for the final three months of the year
25 For monthly RIN generation totals for CNG/LNG derived from biogas from October 2015 to September 2017 see
"November 2017 Assessment of Cellulosic Biofuel Production from Biogas 2018," memorandum from Dallas
Burkholder to EPA Docket EPA-GQ-OAR-2017-0091.
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(October - December). For 2016, however, EPA projected RIN generation for the entire year.
The RIN generation protocol used by producers of CNG/LNG derived from biogas had no effect
on the total number of RINs generated in 2016, as very low RIN generation in January of 2016
was offset by very high RIN generation in December of 2016.26 EPA expects this RIN
generation pattern will continue in future years. Contrary to the commenter's claims, EPA's
over-projection of production of CNG/LNG derived from biogas in 2016 was not simply the
result of the RIN generation protocol of these producers, but rather lower than projected
production volumes of these fuels. Based on RIN generation data through September 2017, EPA
currently projects that production of CNG/LNG derived from biogas will once again fall
significantly short of our projected volume of these fuels in 2017 (see Section III.D.2 of the final
rule for a further discussion of the accuracy of our projections of CNG/LNG derived from biogas
in 2016 and 2017). These consistent over-projections of CNG/LNG derived from biogas in 2016
and 2017 are the basis for EPA's revised projection methodology for these fuel in this final rule.
26 For monthly RIN generation totals for CNG/LNG derived from biogas from October 2015 to September 2017 see
"November 2017 Assessment of Cellulosic Biofuel Production from Biogas 2018," memorandum from Dallas
Burkholder to EPA Docket EPA-GQ-OAR-2017-0091.
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3.3 Proposed Cellulosic Biofuel Standard
Commenters that provided comment on this topic include, but are not limited to: 0446, 1132,
3105, 3106, 3142, 3174, 3177, 3178, 3237, 3242, 3249, 3251, 3319, 3429, 3475, 3478, 3493,
3497, 3645, 3650, 3878, 3887, and 3953.
Comment:
One commenter stated that EPA should approve electricity generated from cellulosic feedstocks
to generate cellulosic biofuel RINs when used as transportation fuel. The commenter also
requested that EPA's projection of cellulosic biofuel production include consideration of
cellulosic RINs generated using this pathway.
Response:
While EPA's regulations currently contain a pathway allowing for the generation of cellulosic
biofuel RINs for electricity generated from biogas that is used as a transportation fuel, there are
several issues that must be resolved prior to the registration of facilities intending to register as
cellulosic biofuel producers using this pathway. These issues were most recently discussed in the
proposed Renewable Enhancement and Growth Support rule.27 At this time, EPA does not
anticipate that these issues will be resolved on a timeline that would allow for cellulosic RINs to
be generated for electricity produced from biogas that is used as transportation fuel in 2018. We
have therefore not included volumes of this fuel in our final projections of cellulosic biofuel
production for 2018.
Comment:
One commenter expressed support for EPA's proposed volume for cellulosic biofuel in 2018.
Response:
EPA's projection of cellulosic biofuel for 2018 in this final rule, while higher than the projected
volume in our proposed rule, uses the same general methodology, and is therefore consistent
with the volume in the proposed rule.
Comment:
Many commenters requested that EPA's projection of cellulosic biofuel for 2018 should be
higher in the final rule. Many commenters suggested alternative views on what the cellulosic
biofuel standard should be for 2018. Commenters requested volumes including 358 million
gallons (341 million gallons from CNG/LNG derived from biogas and 17 million gallons of
liquid cellulosic biofuel), at least 380 million gallons, approximately 400 million gallons, and
420 million gallons.
27 See 81 FR 80828 (November 16, 2016).
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Response:
EPA's projection of cellulosic biofuel expected to be produced in 2018 in our final rule is
significantly higher than the volume in our proposed rule, primarily due to the consideration of
additional data that was not available at the time of our proposed rule. Nevertheless, our
projection is still significantly lower than the volumes requested by many of the commenters.
Many of the projected volumes provided by the commenters are based on cellulosic biofuel
production estimates from potential producers of these fuels. While EPA has also considered this
data in our projection of cellulosic biofuel for 2018, we have also considered the accuracy of
these projections in previous years. Cellulosic biofuel producers have consistently over-projected
the volume of cellulosic biofuel they are likely to produce in the coming years. Any
consideration of these projections must therefore appropriately account for these consistent
historical over-projections. The volumes suggested by these commenters are overly optimistic, as
they do not adequately account for this history of over-projection by potential cellulosic biofuel
producers.
Comment:
Some commenters stated that EPA should consider a final cellulosic biofuel projection lower
than the proposed volume. One commenter stated that our projection in the final rule should be
based on updated cellulosic RIN generation data through September 2017.
Response:
EPA has considered updated cellulosic RIN generation data through September 2017 in our
projection of cellulosic biofuel production for 2018, as requested by the commenter.
Commenters requesting that EPA consider a lower projection of cellulosic biofuel production for
2018 in our final rule generally cited the current rate of cellulosic RIN generation and/or EPA's
over-projections of cellulosic biofuel volumes in previous years as the basis for their requests. As
noted above, EPA has considered all cellulosic RIN generation data available at the time of our
assessment in projecting cellulosic biofuel for 2018, however it would not be appropriate to
simply assume that the cellulosic biofuel industry produces fuel in 2018 at the same rate they are
currently producing fuel. Monthly production volumes of cellulosic biofuel over the past two
years have generally increased, and are expected to continue to increase through the end of 2018.
In this case, simply assuming that the observed production rate of these fuels in 2017 holds
constant throughout 2018 would not result in a neutral projection of cellulosic biofuel for 2018,
but rather an inappropriately conservative projection. EPA also acknowledges that some of the
cellulosic biofuel production methodologies used in previous years have resulted in over-
projections of cellulosic biofuel. In light of these over-projections, EPA has adjusted our
methodologies for projecting cellulosic biofuel for 2018 in this final rule (for a further discussion
of the methodologies used to project cellulosic biofuel for 2018 see Section III of the final rule
and Sections 3.2, 3.2.1, and 3.2.2 of this document).
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Comment:
One commenter stated that EPA's projection of cellulosic biofuel must account for volumes of
cellulosic biofuel expected to come online in 2018, in addition to what is expected to be
produced in 2017. Multiple commenters more generally expressed concern about EPA's
proposed cellulosic biofuel volume, which was lower than the required volume of cellulosic
biofuel for 2017, and requested a higher volume in the final rule. One commenter described the
proposed projection as overly pessimistic.
Response:
EPA's projection of cellulosic biofuel for 2018 accounts for production from facilities currently
producing cellulosic biofuel, as well as those facilities expected to begin cellulosic biofuel
production in 2018. We are, however, projecting a lower volume of cellulosic biofuel production
for 2018 than we projected for 2017 in our 2017 final rule. As discussed in further detail in
Section III of the final rule, this is due to the fact that EPA expects the methodology used to
project cellulosic biofuel in the 2017 final rule to result in a significant over-projection. Our
projection of cellulosic biofuel production in 2018 is substantially higher than the volume of
cellulosic biofuel we currently anticipate will be produced in 2017. This projection is consistent
with EPA's charge to neutrally and accurately project cellulosic biofuel production for 2018, and
should provide the appropriate incentives for the continued development of the cellulosic biofuel
industry.
Comment:
One commenter requested that EPA increase the cellulosic biofuel standard, and that a higher
standard would lead to increased adoption of cellulosic technologies. Another commenter
requested that EPA set more ambitious targets for cellulosic biofuel.
Response:
EPA's projection of cellulosic biofuel for 2018 is consistent with EPA's charge to neutrally and
accurately project cellulosic biofuel production for 2018, and should provide the appropriate
incentives for the continued development of the cellulosic biofuel industry. EPA does not have
the statutory authority to establish "ambitious" cellulosic biofuel volume requirements (volume
requirements that are higher than the volume that is expected to be produced in 2018) in an effort
to provide additional support for the cellulosic biofuel industry.
Comment:
One commenter stated that EPA's proposed cellulosic biofuel standard for 2018 should reflect
actual demonstrated domestic production, and should be set at a level that represents likely actual
production in 2018.
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Response:
As noted above, EPA has considered all cellulosic RIN generation data available at the time of
our assessment in projecting cellulosic biofuel for 2018, however it would not be appropriate to
simply assume that the cellulosic biofuel industry produces fuel in 2018 at the same rate they are
currently producing fuel. Monthly production volumes of cellulosic biofuel over the past two
years have generally increased, and are expected to continue to increase through the end of 2018.
In this case, simply assuming that the observed production rate of these fuels in 2017 holds
constant throughout 2018 would not result in a neutral projection of cellulosic biofuel for 2018,
but rather an inappropriately conservative projection. As discussed in further detail in Section III
of the final rule, the methodologies used by EPA to project cellulosic biofuel in 2018 are
intended to neutrally and accurately project actual cellulosic biofuel production in 2018.
Comment:
One commenter stated that EPA should lower the cellulosic biofuel volumes because all
CNG/LNG RINs are controlled by 1-3 companies who offer them only at high prices.
Response:
EPA's projection of cellulosic biofuel production for 2018 is required to reflect the volume of
cellulosic biofuel expected to be produced in 2018. EPA does not have the authority to reduce
our cellulosic biofuel projection in an effort to reduce RIN prices. We further note that the
cellulosic waiver credit provisions in the RFS program, which allow obligated parties to
purchase cellulosic waiver credits in lieu of cellulosic biofuel RINs in years that EPA exercises
our cellulosic waiver authority to reduce the required volume of cellulosic biofuel from the
statutory volumes, is intended to protect obligated parties from situations where a single or small
number of parties control the supply of cellulosic RINs and demand excessive prices for these
RINs. These provisions provide the appropriate safeguards to protect obligated parties from
excessively high cellulosic biofuel RIN prices.
Comment:
One commenter stated that the cellulosic biofuel standard should account for cellulosic waiver
credit purchases in previous years to avoid negative market pressure on cellulosic biofuel RINs
and new cellulosic biofuel projects.
Response:
EPA's projection of cellulosic biofuel production for 2018 is to reflect the volume of cellulosic
biofuel expected to be produced in 2018. Increasing the required volume of cellulosic biofuel for
2018 by the number of cellulosic waiver credits that were purchased in 2017 (or alternatively by
the number of carryover 2017 cellulosic RINs available for use in 2018) could harm obligated
parties that acquire cellulosic biofuel RINs in excess of their renewable volume obligations, an
action which benefits cellulosic biofuel producers. We further note that the average cellulosic
RIN price observed in 2017 through September ($2.75 according to Argus Media) does not
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indicate that cellulosic waiver credit purchases in previous years are having the negative market
impacts suggested by the commenter.
Comment:
One commenter stated that imported cellulosic biofuel should not be included in EPA's
projection of cellulosic biofuel production for 2018, as this fuel does not help achieve the goals
of RFS program.
Response:
In the final rule, as well as in the proposed rule, EPA considered the potential for imported
volumes of cellulosic biofuel to contribute to the overall supply of cellulosic biofuel in the U.S.
in 2018. Our final rule projects imports of cellulosic biofuel from as many as four different
facilities. We believe our approach, in which we contact all foreign facilities that are registered
to produce cellulosic biofuels and include volumes from those facilities that are currently
producing cellulosic biofuel and indicate that they intend to export cellulosic biofuels to the U.S.
in 2018, is both reasonable and appropriate.
Comment:
Multiple commenters stated that the cellulosic standard should be lower until more liquid
cellulosic biofuels are available. These commenters generally claimed that they do not have the
infrastructure to sell CNG/LNG derived from biogas (expected to be the primary source of
cellulosic biofuel in 2018). One commenter stated that there is no transportation fuel demand for
CNG/LNG derived from biogas in their market and that they had been unsuccessful in sourcing
liquid cellulosic biofuel. They therefore must purchase cellulosic RINs or cellulosic waiver
credits to meet their cellulosic biofuel obligations.
Response:
EPA's projection of cellulosic biofuel production for 2018 is to reflect the volume of all
cellulosic biofuel expected to be produced in 2018, not just liquid cellulosic biofuel. It would not
be appropriate for EPA to reduce our cellulosic biofuel projection due to the fact that much of
the available cellulosic biofuel is CNG/LNG derived from biogas, rather than liquid cellulosic
biofuel. The compliance provisions developed by EPA, whereby obligated parties can acquire
the RINs they need to comply with the RFS program by blending renewable fuels with attached
RINs or purchasing separated RINs without blending renewable fuels are designed to address
situations, such as the one described by this commenter, where the obligated party cannot or
chooses not to blend renewable fuels. We believe that these provisions, along with the cellulosic
waiver credit provisions which allow obligated parties to purchase cellulosic waiver credits to
satisfy their cellulosic biofuel volume obligations in years EPA reduces the cellulosic biofuel
volume requirement from the statutory levels, provide appropriate compliance options to
obligated parties that do not have direct access to cellulosic biofuel.
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Comment:
One commenter encouraged EPA to maintain the statutory volume for cellulosic biofuel to
provide producers and stakeholders certainty in the investment of second generation biofuel
technologies.
Response:
The approach we have adopted to projecting cellulosic biofuel production is a neutral projection
of the volume of cellulosic biofuel that will be produced in 2018. The statutory volume for
cellulosic biofuel in 2018 cannot be met, and a cellulosic biofuel standard greater that the
standard finalized in this rule (288 million gallons) would be unlikely to lead to greater cellulosic
biofuel production in 2018, as our projection of the volume likely to be produced in 2018 reflects
the volume of cellulosic biofuel that EPA projects will actually be supplied in 2018.
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4. Advanced Biofuel
4.1 Inability to Meet Statutory Targets
Commenters that provided comment on this topic include, but are not limited to: 1344.
Comment:
One commenter stated that EPA should set the 2018 volume requirements for cellulosic biofuel
and advanced biofuel at the statutory volume targets to provide producers and stakeholders
certainty in their investments in second generation technology.
Response:
Based on our assessment of reasonably attainable volumes, setting the volume requirements at
the statutory targets would result in substantial shortfalls in supply of renewable fuel, which we
believe would result in outcomes that would undermine the RFS program. These outcomes could
include significant noncompliance, subsequent waiver of the original volume requirements, and a
drawdown of the carryover RIN bank to zero with the attendant reduction in the ability of
obligated parties to address unforeseen circumstances. Such outcomes would reduce rather than
increase the certainty needed for long-term investment in and growth of renewable fuel volumes
compared to our final standards. However, we note that the volume requirements that we are
establishing in this final rule are higher than those we proposed.
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4.2 Reasonably Attainable Volumes of Advanced Biofuel
Commenters that provided comment on this topic include, but are not limited to: 2540, 3248,
3249, 3319, 3377, 3430, and 3593.
Comment:
One commenter requested that the advanced biofuel volume requirement be increased to 4.75
billion gallons, adding that there remains substantial opportunities for increasing advanced
biofuel supply above the level that EPA proposed.
Response:
In making our determination of the reasonably attainable and appropriate volume of advanced
biofuels finalized in this rule, we have considered the set of issues related to production,
distribution, and consumption (leading to an assessment of what is "reasonably attainable") and
the potential consequences of a volume requirement at the upper range of attainability such as
feedstock switching, diversion of biofuels from other countries, and cost. This consideration led
us to a final requirement that is less than we believe could be realized, but which is "appropriate"
in light of these considerations. In this rule we are finalizing a volume for advanced biofuel that
is higher than the proposed volume, but still lower than the 4.75 billion gallons requested by
come commenters. See Section IV of the final rule for further discussion of the determination of
the advanced biofuel standard for 2018.
Comment:
Several commenters requested that the advanced biofuel volume requirement for 2018 be
increased to 5.25 billion gallons based on the biodiesel industry's capacity to substantially
increase production, and the benefits it would have for jobs.
Response:
While increasing the volume requirement for advanced biofuel would likely increase
opportunities in the biodiesel industry and other industries for increased production, and that
increased production may include new jobs, we believe it is legally permissible and appropriate
to consider additional factors under the cellulosic waiver authority. As described in Section IV of
the final rule, a consideration of production capacity must be tempered with a consideration of
how quickly the industry could increase production. We have also considered the potential
availability of feedstocks, the potential for feedstock switching, costs, and other factors. Taken
together, these factors led us to conclude that it would not be appropriate to require 5.25 billion
gallons of advanced biofuel in 2018.
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Comment:
One commenter stated that EPA should require all of the advanced biofuel volumes that EPA
says are reasonably attainable, since doing so would support the purpose of the RFS program to
stimulate growth in the renewable fuel market and encourage infrastructure investments.
Response:
While we have determined in the final rule that 4.40 billion gallons of advanced biofuel would
be reasonable attainable in 2018, we do not believe that it would be appropriate to require this
level of advanced biofuel. Under the cellulosic biofuel waiver authority, we can consider a wide
variety of factors in addition to the volumes that are reasonably attainable, and we have done so
in making a determination of the volumes that would be appropriate to require in 2018. As
described in Section IV of the final rule, we have considered such factors as feedstock switching,
diversion of foreign advanced biofuel to the U.S., and costs to conclude that 4.29 billion gallons,
resulting from the maximum permissible reduction under the cellulosic waiver authority, is a
level that is both reasonably attainable and appropriate for 2018. See also responses to comments
on the goals of the RFS program in Section 1 of this document.
Comment:
One commenter stated that EPA should permit advanced biofuels to backfill a portion of the
shortfall in cellulosic biofuel, consistent with Congressional intent.
Response:
The statutory volume targets for 2018 include an allowance of 4.00 billion gallons for advanced
biofuel that is not required to be cellulosic biofuel. For 2018, we are establishing volume
requirements that maintain this 4.00 billion gallon allowance. The final standards do not,
however, require additional volumes to partially compensate for the fact that cellulosic biofuel
supply will fall far short of the 7 billion gallon statutory target in 2018 because we have
determined that it would be inappropriate to do so. Indeed, there is no indication that the intent of
Congress was to require such backfilling in the event of a shortfall in cellulosic biofuel. We have
based our determination on a consideration of a variety of factors that are permissible to consider
under the cellulosic waiver authority as described above.
Comment:
One commenter stated that EPA was stepping backwards in comparison to previous years when
it proposed to not allow any backfilling of the shortfall in cellulosic biofuel with advanced
biofuel in 2018.
Response:
The final 2018 advanced biofuel volume requirement is not stepping backwards, but instead
represents an increase in comparison to 2017. However, we are not requiring more non-cellulosic
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advanced biofuel in 2018 than the statute requires because we have determined that the
circumstances in 2018 are different than those in 2017. In previous years, we determined that
some advanced biofuels could partially backfill for the shortfall in cellulosic biofuel due both to
the fact that such volumes were reasonably attainable and were appropriate to require. For 2018,
we have determined that allowing such backfilling would result in an increase in non-cellulosic
advanced biofuel volumes in comparison to those required in 2017, and that such an increase
would be accompanied by an increased likelihood for feedstock/fuel diversions and increased
costs.
Comment:
One commenter stated that, under the statute, EPA should not be basing its determination of the
advanced biofuel volume requirement for 2018 on near-term petroleum diesel costs, energy
security impacts, and feedstock availability. These criteria can change rapidly, and the U.S.
should not be undercutting long-term federal policy objectives based on short-term
considerations.
Response:
The statute does not preclude a consideration of factors other than volumes that are reasonably
attainable when making a determination of the appropriate volume of advanced biofuel to
require. As discussed in Section 2.2 of this document, EPA has wide discretion under the
cellulosic waiver authority in the factors it may consider in setting standards. These include not
only long-term factors, but also short-term factors, since the standards at issue are for 2018 (and
2019 for BBD).
Comment:
One commenter stated that the primary factor that EPA must consider in setting the advanced
biofuel standard is the blending economics of biodiesel (i.e., whether retailers can acquire and
blend biodiesel into diesel fuel such that they can make a profit and the resulting blend is
attractive to their customers).
Response:
As discussed above, EPA considered a variety of factors in determining the volume of advanced
biofuel that is reasonably attainable and appropriate to require for 2018. One of those factors is
cost, and its consideration relates both to the blending economics of biodiesel as well as the
societal impacts of the advanced biodiesel standard. The status of the federal tax credit for
biodiesel and recent actions to impose countervailing duties on imports of biodiesel from
Argentina and Indonesia both impact our consideration of costs as discussed in Section IV of the
final rule. The consideration of the cost of advanced biodiesel, along with other factors, is an
important component of our determination that the 2018 volume requirement for advanced
biofuel should not be higher than the lowest level permissible under the cellulosic waiver
authority despite the fact that slightly higher volumes may be reasonably attainable.
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4.2.1 Imported Sugarcane Ethanol
Commenters that provided comment on this topic include, but are not limited to: 2542, 3110,
3429, 3496, and 3880.
Comment:
One commenter stated that potential ethanol exports from Brazil to the U.S. are driven primarily
by a combination of Brazilian ethanol production capacity and opportunities created by the RFS
program itself.
Response:
The RIN value of advanced biofuels is undoubtedly a factor in the volume of ethanol that Brazil
exports to the U.S., and the RIN value is a function of the level of the advanced biofuel standard.
However, recent data on imports of sugarcane ethanol into the U.S. suggest that it would be
inappropriate to increase the volume used in the determination of the applicable volume
requirement for advanced biofuel above 100 million gallons. For instance, when establishing the
applicable standards for 2016, EPA assumed that 200 million gallons of sugarcane ethanol would
be imported in 2016. In reality, only 34 million gallons was imported, highlighting the fact that
higher standards do not necessarily result in higher levels of imported sugarcane ethanol and that
other worldwide market factors are also important. Based on these facts, we continue to believe
that recent low import levels and high variability in longer-term historical imports are significant
and must be taken into account in the context of determining reasonably attainable volumes of
advanced biofuel for 2018.
Comment:
One commenter stated that EPA's assumption of 100 million gallons of imported sugarcane
ethanol was too low, and should not be based on historical volumes. Instead, EPA has not
appropriately considered the much higher volume that Brazil could export to the U.S. in 2018.
Response:
In the 2018 NPRM we reiterated our observation that imports of sugarcane ethanol have been
highly variable in the past. This fact makes it impossible to calculate exactly how much
sugarcane ethanol will be imported in 2018; the number of worldwide market factors involved is
large and there is no mechanism for predicting how they will change. As a result, we have no
alternative but to consider historical import levels and the uncertainty associated with potential
future imports in our determination of the applicable volume requirements. Moreover, even if we
were to assume that more than 100 million gallons of sugarcane ethanol could be imported in
2018, our consideration of cost would still lead us to conclude that it is appropriate to require
only that volume of advanced biofuel that results from the maximum reduction permitted under
the cellulosic waiver authority.
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We note that no commenters provided a calculation of exactly how much sugarcane ethanol
would be imported into the U.S. in 2018 that takes into account the various factors influencing
such imports, such as world demand for sugar and ethanol, effects of climate and plantings on
Brazilian sugarcane production, and Brazilian gasoline demand and requirements for ethanol
concentration of gasoline.
Comment:
One commenter stated that 100 million gallons of imported sugarcane ethanol is too high and is
inconsistent with recent historical levels.
Response:
We believe that 100 million gallons reflects a reasonable intermediate point between the lower
levels imported recently and the considerably higher levels that have been achieved in earlier
years. It thus reflects a balancing of considerations in light of the considerable uncertainty in
projecting future volumes of this source of advanced biofuel as permitted under the cellulosic
waiver authority. Had we assumed a lower level of imported sugarcane ethanol in 2018, the total
volume of reasonably attainable advanced biofuel would have been closer to the level generated
through the maximum reduction permitted under the cellulosic waiver authority. There would,
therefore, be no change in the applicable volume requirement for advanced biofuel, though the
potential GHG and energy security benefits of the advanced biofuel volumes forgone would have
been less.
Regardless of the assumed level used only in deriving the advanced biofuel volume requirement,
we note that actual imports of sugarcane ethanol could be higher or lower than 100 million
gallons.
Comment:
One commenter stated that EPA had ignored the fact that California's LCFS program will create
an incentive for a significant volume of sugarcane ethanol to be imported.
Response:
California's LCFS program has not spurred demand for the large volumes of advanced ethanol
imports that commenters have predicted it would. In 2016, despite both the LCFS and RFS
programs creating an incentive for imported sugarcane ethanol, only 34 million gallons were
actually imported in 2016. Based on this recent historical experience, we do not believe that the
LCFS program can be relied upon to increase imported volumes for 2018.
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4.2.2 Biodiesel and Renewable Diesel (Domestic and Imports)
Commenters that provided comment on this topic include, but are not limited to: 1500, 1754,
1775, 2380, 2542, 2545, 2547, 3105, 3106, 3245, 3248, 3377, 3429, 3430, 3478, 3493, 3496,
3497, 3578, 3593, 3677, 3679, 3680, 3876, 3880, 3887, 3934, 3959, 3961, and 3962.
Comment:
One commenter stated that none of the factors discussed by EPA that could potentially limit the
supply of biodiesel and renewable diesel are new, nor would they limit the supply of advanced
biodiesel and renewable diesel in 2018. The commenter claimed that EPA could set higher
standards for advanced biofuel, but is choosing not to and that this choice is contrary to the intent
of congress.
Response:
While concerns over issues such as the impact of feedstock and/or renewable fuel diversion as a
means of increased biofuel production and the relatively high costs of advanced biofuels are not
new, the magnitude of these concerns increases as advanced biofuel volumes increase. For
example, lower advanced biofuel volume requirements are more likely to be satisfied by fuels
produced from waste feedstocks or feedstocks that are by-products of other industries at a
relatively low cost, while higher volumes of these fuels are more likely to be satisfied by fuels
produced from feedstocks diverted from other industries (or biofuels diverted from other
countries) at a relatively high cost. These concerns may not directly limit the volume of
advanced biofuel that could be supplied to the U.S. in 2018, however they are relevant
considerations in EPA's decision to exercise our cellulosic waiver authority. In this final rule
EPA is exercising our statutory waiver authority to reduce the required volume of advanced
biofuels. In doing so, we are maintaining the implied statutory volume of non-cellulosic
advanced biofuels for 2018.
Comment:
One commenter stated that the biodiesel and renewable diesel industry made investments
assuming EPA would continue to require some portion of the shortfall in cellulosic biofuel to be
backfilled with advanced biofuels, and that EPA should continue to require additional volumes
of advanced biofuel in 2018.
Response:
In this final rule EPA has exercised our statutory cellulosic waiver authority to the maximum
extent in recognition of the high cost of advanced biofuels and in an effort to minimize the
incentives for feedstock switching and/or the diversion of biofuels that would be produced in
other countries. EPA has no obligation to increase the advanced biofuel volume for 2018 as the
result of market expectations or investments. Regardless, the commenters provided no evidence
to support this statement.
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Comment:
One commenter claimed that lower biodiesel and renewable diesel requirements could harm the
livestock sector, as higher prices for vegetable oils such as soy oil lead to lower livestock feed
prices.
Response:
Higher prices for soybean oil, which may lead to lower feed prices for the livestock sector (or
alternatively may lead to higher prices for soybeans) also result in higher prices for other
industries that use soybean oil as a feedstock, including the biodiesel and renewable diesel
industry. Potentially lower livestock feed prices are not a sufficient basis for requiring increased
volumes of advanced biofuels in 2018, in light of the potentially adverse impacts of requiring
greater volumes of these fuels, discussed in further detail in Section IV of the final rule.
Comment:
One commenter claimed that the global supply of feedstocks that could be used to produce
advanced biodiesel and renewable diesel was sufficient to support higher volumes of these fuels
than the reasonably attainable volumes projected by EPA.
Response:
EPA is aware that significant quantities of feedstocks that could be used to produce biodiesel or
renewable diesel are expected to be produced globally in 2018. However, as discussed in further
detail in Section IV of the final rule, EPA is concerned that requiring greater volumes of
advanced biodiesel and renewable diesel would result in high costs and the potential to
incentivize undesirable feedstock switching and/or the diversion of renewable fuels. In this final
rule we have therefore exercised our cellulosic waiver authority to reduce the cellulosic biofuel,
advanced biofuel, and total renewable fuel volumes by the same amount from the statutory
targets for 2018.
Comment:
One commenter stated that higher requirements for biodiesel and renewable diesel provide a
higher value market for renewable oils. They claimed that higher standards could drive higher oil
extraction or waste collection rates.
Response:
The final 2018 standards will already provide a high value market for renewable oils. As
discussed in further detail in Section IV of the final rule, EPA is aware that even higher prices
for renewable oils could result in the additional production or collection of oils such as distillers
corn oil or used cooking oil. These higher prices, however, would also result in higher costs to
parties that use renewable oils (including biodiesel and renewable diesel producers), and may
result in feedstock switching and/or the diversion of biodiesel and renewable diesel that would
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otherwise have been used in other countries, rather than additional production or recovery of
renewable oils. This is especially true if the cost of production of palm oil is cheaper than the
cost to recover or produce additional renewable oils, as suggested by some commenters.
Comment:
One commenter stated that the tax credit should not be a factor in EPA's assessment of the
reasonably attainable volume of advanced biodiesel and renewable diesel. The commenter noted
that the tax credit could be renewed, and even if it were not, higher RIN prices could provide the
same incentives as the biodiesel tax credit. The commenter further mentioned that if the tax
credit was changed to a producers' tax credit this would not stop the import of biodiesel and
renewable diesel from other countries, and that domestic production of these fuels would
increase. Other commenters stated that market mechanisms exist to incentivize biodiesel
production with or without the biodiesel tax credit, and that EPA should not consider the impact
of the tax credit in our assessment of available volumes of biodiesel and renewable diesel.
Response:
It is true that Congress could renew the biodiesel tax credit for 2018. It is also the case that even
if the tax credit is not renewed, the BBD RIN price could increase to replace the value that
biodiesel blenders previously realized from the biodiesel tax credit. We further note that even if
EPA's estimate of available volumes of advanced biodiesel and renewable diesel were slightly
higher than those contained in our final rule, this would not impact the required volumes of
renewable fuel for 2018, since these volumes are determined by reducing the cellulosic biofuel,
advanced biofuel, and total renewable fuel statutory targets by the same amount are achievable in
2018. See Section IV of the final rule for a further discussion of EPA's decision to reduce all
three volumes from the statutory targets by the same amount.
Comment:
One commenter stated that there was significant opportunity for growth in the supply of BBD,
citing such factors as the number of vehicles that can consume biodiesel blends, growing diesel
demand, the ability of the market to distribute biodiesel, and the opportunities to use biodiesel in
non-road applications. The commenter requested an advanced biofuel standard of 4.75 billion
gallons and claimed that this volume could easily be met with minimal RIN and feedstock cost
increases. They also noted the availability of a large number of carryover RINs as a reason that
the advanced biofuel standard should be higher.
Response:
EPA recognizes that higher volumes of advanced biofuel could potentially be achieved, and that
factors listed by the commenter are unlikely to limit the use of advanced biodiesel and renewable
diesel in 2018. However, as discussed in further detail in Section IV of the final rule, these
higher volumes of biodiesel and renewable diesel are projected to have a high cost relative to the
petroleum fuels they would displace, and would likely result in feedstock switching and/or
diverting biofuel from use in other countries. In this final rule we have therefore decided to reduc
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the cellulosic biofuel, advanced biofuel, and total renewable fuel statutory targets by the same
amount. As discussed further in Section II of the final rule, we have determined that at this time
it would not be appropriate to increase the advanced biofuel volume for 2018 due to the
availability of advanced biofuel carryover RINs.
Comment:
One commenter stated that is was not reasonable for EPA to assume that all distillers corn oil
would be used to produce biodiesel or renewable diesel, as removing corn oil from distillers
grains removes energy content that must be replaced and makes the distillers grain less viable in
certain markets, such as for chicken feed.
Response:
The removal of distillers corn oil can impact the value of distillers grains as livestock or poultry
feed due to the lower energy content of the distillers grain after the distillers oil has been
removed. However, the increasing removal of distillers corn oil in recent years supports EPA's
projection that increasing quantities of distillers corn oil are likely to be available for use as
biodiesel and renewable diesel feedstock in 2018. Even if we were to eliminate any consideration
of additional volumes of distillers corn oil from our assessment of potentially available
feedstocks we would still conclude that the volume of advanced biofuel in this final rule could be
met through relatively small increases in advanced biodiesel and renewable diesel produced from
increased production of vegetable oils in the U.S. and increased production/collection of animal
fats and waste oils and greases.
Comment:
One commenter stated that there is sufficient production and infrastructure capacity to enable the
distribution, sale, and use of 2.9 billion gallons of biodiesel and renewable diesel in 2018.
Response:
EPA's assessment of biodiesel and renewable diesel production capacity and distribution
infrastructure similarly concluded that these factors were highly unlikely to constrain the
production and use of biodiesel and renewable diesel in the U.S. to a volume below 2.9 billion
gallons in 2018 given the current locations of production and import volumes across the country
and the existing distribution infrastructure for biodiesel and renewable diesel.
Comment:
One commenter rejected claims by NBB that the domestic biodiesel industry is operating at
around 65% of their facility capacity. The commenter estimated that domestic biodiesel industry
could produce approximately 2 billion gallons in 2018.
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Response:
According to EPA's October 2017 assessment, the total production capacity of biodiesel and
renewable diesel production facilities that generated RINs for these fuels in 2017 is
approximately 3.0 billion gallons.28 In 2016, approximately 1.9 billion gallons of biodiesel and
renewable diesel were produced in the U.S. according to EPA data, which suggests that domestic
production facilities that are currently operating are operating at approximately 63% capacity.
However, the ability for these facilities to increase production, and the time it would take for
them to do so, is uncertain. Increasing production at these facilities would require, at minimum,
acquisition of greater volumes of feedstocks (including from potentially new distant sources),
and may require mechanical changes and equipment upgrades at the production facilities.
Comment:
Several commenters stated that EPA should not project increasing volumes of advanced
biodiesel and renewable diesel, as increases in these fuels would cause the feedstock switching
and fuel diversion that EPA seeks to avoid. The commenter claims that the feedstock increases
are unrealistic and not supported by data. Multiple commenters also claimed that increasing
demand for advanced biodiesel and renewable diesel would result in lower exports of soy oil,
higher imports of canola oil, and higher vegetable oil prices.
Response:
As discussed in further detail in Section IV of the final rule, EPA's assessment of the reasonably
attainable volume of advanced biodiesel and renewable diesel for 2018 is designed to minimize
impacts such as feedstock switching and fuel diversion. EPA's assessment of the reasonably
attainable volumes of these fuels is based on the expected increase in the production and
availability of feedstocks that can be used to produce advanced biodiesel and renewable diesel.
The primary source of these feedstocks is expected to come from increased production of
vegetable oils in the U.S. (according to USDA projection), as well as small increases in distillers
corn oil production and the production and recovery of waste fats and oils. The final advanced
biofuel volume for 2018 should therefore be able to be met without the need for decreased soy
oil exports or higher imports of canola oil. Vegetable oil prices are impacted by a wide range of
factors; however, we do not anticipate that the advanced biofuel volumes in this final rule will
appreciably increase vegetable oil prices.
Comment:
One commenter stated that biodiesel and renewable diesel feedstocks are abundant. This
commenter cited a study conducted by LMC and projections by the USDA to support claims that
there is sufficient feedstock globally to produce approximately 9.3 billion gallons of biodiesel.
The commenter also claimed that these feedstocks are commodities, so there will be competition
for these feedstocks among various industries.
28 "Biodiesel and Renewable Diesel Registered Capacity (October 2017)" Memorandum from Dallas Burkholder to
EPA Docket EPA-HQ-OAR-2017-0091.
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Response:
EPA has reviewed the study referenced by the commenter. While there are significant quantities
of potential biodiesel and renewable diesel feedstocks available globally, much of the feedstock
considered in this study is currently being used to produce biodiesel that is used in countries
other than the U.S. While the incentives available through the RFS program may be capable of
drawing a greater proportion of the biodiesel and renewable diesel (and/or the feedstocks used to
produce biodiesel and renewable diesel) to the U.S. market, increasing the volume of advanced
biofuel used in the U.S. in this way would not be expected to have the same benefits as biofuel
produced from increased production of advanced biofuel feedstocks (see Section IV of the final
rule for a further discussion of this issue). EPA's projection of the reasonably attainable volume
of advanced biodiesel and renewable diesel in 2018 is based on the expected increase in the
domestic production and/or collection of advanced biodiesel and renewable diesel feedstocks in
2018.
Comment:
One commenter stated that EPA's projection of reasonably attainable volumes of advanced
biodiesel and renewable diesel should not include imports.
Response:
EPA's projection of reasonably attainable volumes of advanced biodiesel and renewable diesel
do not include any growth in imported volumes of these fuels (or from fuels produced from
imported feedstocks) in 2018. We do, however, project similar volumes of imported biodiesel
and renewable diesel in 2018 as has been observed in 2017. This projection is based on the
observed impact of the expiration of the biodiesel tax credit on imported volumes of biodiesel
and renewable diesel in previous years when the tax credit was not available. While it is possible
that tariffs and countervailing duties on biodiesel imported from Argentina and Indonesia may
impact the volume of biodiesel that is imported from these countries in 2018, the tariffs and
countervailing duties have not yet been finalized. We further note that the impact of these actions
is highly uncertain, as the market could respond to lower volumes of biodiesel imports from
Argentina and Indonesia by increased imported volumes for other countries or by increased
domestic production of these fuels.
Comment:
One commenter supported EPA's projection that the lack of the biodiesel tax credit would
dampen growth of biodiesel and renewable diesel in 2018. Another commenter stated that the
lapse of the biodiesel tax credit will likely decrease domestic biodiesel production in 2018.
Response:
EPA's projections on the impact of the current absence of the biodiesel are based on
observations from previous years when the biodiesel tax credit was not available. The observed
production and use of biodiesel and renewable diesel in previous years following the lapse of the
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tax credit suggests that the market will likely supply a similar volume of these fuels as in
previous years, rather than a decreased volume.
Comment:
One commenter stated that EPA's projection of advanced biodiesel and renewable diesel should
be no greater than the 1.6 billion gallons that EIA projects will be produced domestically in
2018.
Response:
EPA is not aware of how EIA accounts for the impact of the incentives provided by the RFS
program in their projection of biofuel production. We do not believe, however, that EIA's
projections, which are based on economic modeling efforts rather than a consideration of the
statutory volume targets and EPA's waiver authorities, should be used to determine the required
volumes of advanced and total renewable fuel for 2018. The volume of advanced biofuel and
total renewable fuel in this final rule are the lowest volumes that EPA can set for these fuel using
our cellulosic waiver authority. As discussed further in Section V of the final rule, EPA has
determined that it would not be appropriate at this time to further reduce the required volumes of
renewable fuels using our general waiver authority or biomass-based diesel waiver authority.
Comment:
One commenter stated that some form of tariff against imported biodiesel was likely, and that
EPA's standards should reflect this by projecting lower volumes of biodiesel that would be
projected absent these tariffs. Another commenter requested that EPA consider the impacts of the
proposed anti-dumping and countervailing duties cases on the availability of biodiesel and
renewable diesel in 2018. Other commenters conversely claimed that the proposed tariffs would
not impact biodiesel and renewable diesel imports since they only apply to biodiesel (not
renewable diesel) and because imports could come from other countries not impacted by the
tariffs. This commenter further stated that because the RFS is a mandate the U.S. market would
be capable of outbidding foreign markets for available supplies of biodiesel and renewable
diesel.
Response:
While it is possible that tariffs and countervailing duties on biodiesel imported from Argentina
and Indonesia may impact the volume of biodiesel that is imported from these countries in 2018,
the tariffs and countervailing duties have not yet been finalized. We further note that the impact
of these actions on the total volume of advanced biodiesel and renewable diesel supplied to the
U.S. is highly uncertain, as the market could respond to lower volumes of biodiesel imports from
Argentina and Indonesia by increased imported volumes for other countries or by increased
domestic production of these fuels. EPA has considered the likely impacts of the continued
absence of the biodiesel tax credit, as well as the potential finalization of proposed actions by the
Department of Commerce, in our projection of the reasonably attainable volumes of advanced
biodiesel and renewable diesel.
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Comment:
One commenter claimed that due to the expiration of the biodiesel tax credit and potential action
by the Department of Commerce on imported biodiesel, EPA should project that no more than
2.1 billion gallons of biodiesel and renewable diesel will be available to meet the advanced
biofuel standard.
Response:
As discussed above, the potential tariffs and countervailing duties on biodiesel imported from
Argentina and Indonesia have not been finalized, and potential impacts of these actions (if
finalized) on the supply of biodiesel and renewable diesel in the U.S. are highly uncertain. EPA
has considered the likely impacts of the continued absence of the biodiesel tax credit, as well as
the potential finalization of proposed actions by the Department of Commerce, in our projection
of the reasonably attainable volumes of advanced biodiesel and renewable diesel.
Comment:
One commenter claimed that the domestic biodiesel and renewable diesel industry cannot ramp
up fast enough to displace imported biodiesel due to insufficient feedstock and the lack of the
biodiesel tax credit. This commenter requested that the projected volume of advanced biodiesel
and renewable diesel for 2018 should be no higher than the volume of these fuels produced in
2016.
Response:
We expect that, even without the biodiesel tax credit and with the potential for tariffs and
countervailing duties on Argentina and Indonesia, biodiesel and renewable diesel will continue
to be imported into the U.S. in 2018, as imported biodiesel is often available at lower prices than
domestically produced biodiesel, especially in parts of the U.S. where distribution costs are
lower from foreign sources than domestic sources. However, even if imported volumes of
biodiesel and renewable diesel were excluded from our consideration of the available supply of
these fuels, it is possible that the domestic biodiesel and renewable diesel industries could
increase production volumes to satisfy the advanced biofuel volume for 2018 finalized in this
rule. Data reviewed by EPA indicates the available supply of feedstocks that can be used to
produce advanced biodiesel and renewable diesel (both in the U.S. and globally) and the
domestic biodiesel and renewable diesel production capacity are sufficient to produce the volume
of biodiesel and renewable diesel necessary to meet the advanced biofuel volume. EPA is also
not aware of any factors related to the distribution or use of biodiesel and renewable diesel
expected to restrict the supply of these fuels to a volume below that which would be needed to
satisfy the volume of advanced biofuel. Finally, we note that the significant increases in domestic
production of biodiesel and renewable diesel in previous years (443 million gallons from 2012 to
2013 and 426 million gallons from 2015 to 2016) suggest that domestic biodiesel and renewable
diesel producers are capable of significant production increases in a single year.
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Comment:
One commenter stated that trade tariffs and the availability of the biodiesel tax credit do not
impact the availability of biodiesel. The commenter claimed that these factors may impact
international trade flows, but that all the biodiesel is still available to the U.S. market.
Response:
The biodiesel tax credit can impact the availability of biodiesel by increasing the expected return
of using potential biodiesel and renewable diesel feedstocks used to produce biofuel as compared
to other potential uses of these feedstocks. More generally, however, both trade tariffs and the
availability of the biodiesel tax credit can have an impact on the volume of biodiesel and
renewable diesel produced domestically or imported into the U.S. EPA's assessment of the
reasonably attainable volume of biodiesel and renewable diesel considers the volume of these
fuels available for use in the U.S., not the global availability of these fuels, or the volume of
these fuels that could be produced from all potential global feedstocks.
Comment:
One commenter supported EPA's position that the primary driver for oil seed crops like
soybeans in the U.S. will be protein for animal feed. The commenter noted, however, that while
soybean planting is increasing, demand for soybean oil in food products is decreasing. The
commenter stated that if demand for advanced biofuels does not increase it is possible that lower
prices for soybean oil could lead to higher animal feed prices and/or lower soybean prices.
Response:
Higher prices for soybean oil, which may lead to lower feed prices for the livestock sector (or
alternatively may lead to higher prices for soybeans) also result in higher prices for other
industries that use soybean oil as a feedstock, including the biodiesel and renewable diesel
industry. Potentially higher livestock feed prices are not a sufficient basis for requiring increased
volumes of advanced biofuels in 2018, in light of the potentially adverse impacts of requiring
greater volumes of these fuels, discussed in further detail in Section IV of the final rule.
Comment:
One commenter stated that additional biodiesel and renewable diesel feedstocks can be provided
if EPA sets higher standards for these fuels. The commenter specifically noted that USDA
projects increases in livestock and poultry production in future years (which would result in
greater availability of animal fats). The commenter also stated that higher RFS standards have
resulted in higher collection rates of used cooking oil. Another commenter provided data
indicating that the supply of animal fats has not increased since 2010.
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Response:
In EPA's projection of reasonably attainable volumes of advanced biodiesel and renewable
diesel, we project that the supply of feedstocks other than vegetable oils and distillers corn oil
(such as animal fats and used cooking oil) will increase by approximately 15 million gallons in
2018. This is consistent with the data presented by the commenter showing that production of
animal fats has not increase appreciably since 2010. Some commenters suggested that the
increase in the supply of these feedstocks will be greater, while other commenters claimed that
the supply of these feedstocks is unlikely to increase. Similarly, there is uncertainty regarding the
projected increase in the availability of used cooking oil in 2018 despite recent increases in used
cooking oil collection rates, as it is uncertain whether these collection rates will continue to
increase in future years. Regardless, EPA has decided to reduce the cellulosic biofuel, advanced
biofuel, and total renewable fuel volumes by the same amount from the statutory targets for the
reasons discussed in Section IV of the final rule. Thus, the volume of advanced biofuel in this
final rule would not be impacted if EPA's projection of available animal fats and used cooking
oil were slightly higher than the volume projected by EPA.
Comment:
One commenter stated that Tenderers currently supply 30% of all biodiesel feedstocks, and that
they are confident in their ability to increase the supply of feedstocks to the biodiesel industry.
The commenter stated that animal fats have a large and inelastic supply. They further noted that
exported animal fats have decreased due to competition from other oils and trade barriers, and
that biodiesel production provides a market for their products.
Response:
Because of the inelastic supply of animal fats, as noted by the commenter, increasing the
quantity of animal fats used to produce biodiesel and renewable diesel would divert these
feedstocks from other industries currently using them (such as the oleochemical industry). While
we recognize the potential for biodiesel and renewable diesel feedstocks to be increased in this
manner (by diverting feedstocks from existing uses), our projection of reasonably attainable
volume seeks to minimize the incentives for this type of feedstock switching and its potential
impact on costs (see Section IV of the final rule for a further discussion of this issue).
Comment:
One commenter stated that higher biodiesel and renewable diesel volume requirements increase
environmental benefits by increasing collection rates of used cooking oils.
Response:
The environmental benefits of renewable fuels are generally the highest when they are produced
from feedstocks that would otherwise be disposed of as waste materials. One of the results of
increasing demand for biofuels, both domestically and internationally, has been increased
collection rates of used cooking oils. However, there is significant uncertainty as to whether
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higher advanced biofuel requirements would result in further increases to the collection rates of
used cooking oil, or alternatively the diversion of feedstocks that can be used to produce
advanced biofuels from existing uses to biofuel production and increased production of low cost
renewable oils such as palm oil.
Comment:
One commenter stated that EPA's standards should account for the very high volumes of
biodiesel and renewable diesel produced globally (at least 8.9 billion gallons).
Response:
EPA's consideration of the reasonably attainable volumes of advanced biodiesel and renewable
diesel accounts both for the high volume of biodiesel and renewable diesel produced globally, as
well as the fact that significant volumes of these fuels are currently being used in international
markets, and likely will continue to be used in these markets due to incentives and mandates for
biofuel use in other countries, as well as the considerable logistical constraints and cost
associated with importing significantly higher volumes of these fuels into the U.S.
Comment:
One commenter stated that EPA should assume that the domestic biodiesel and renewable
industry can produce at a level equal to their production capacity (4.2 billion gallons) in 2018.
Response:
EPA's projection of the reasonably attainable volume of advanced biodiesel and renewable
diesel takes into account a number of factors, including domestic biodiesel production capacity
and the ability to distribute and use biodiesel and renewable diesel domestically. Ultimately,
however, we have based our projection of the reasonably attainable volume of biodiesel and
renewable diesel on our assessment of the projected increase in domestically produced/collected
feedstocks that can be used to produce these fuels (see Section IV of the final rule for further
details).
Comment:
One commenter stated that if the advanced biofuel standard is too high it will divert a finite,
inelastic supply of animal fats from existing uses (such as the oleochemical industry) to be used
to produce biodiesel. The commenter noted that animal fats are currently more expensive than
palm oil, and that industries such as the oleochemical industry will therefore use palm oil rather
than animal fats as a feedstock. Ultimately this could result in the oleochemical industry re-
locating overseas, and the loss of jobs in the U.S. The commenter requested that EPA should
exclude animal fats from our consideration of available feedstocks for biodiesel production, or
set standards that do not divert animal fats from existing uses.
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Response:
EPA's projection of reasonably attainable volumes of biodiesel and renewable diesel attempts to
minimize the incentives for increasing the production of these fuels by diverting feedstocks (such
as animal fats) from existing uses (such as the oleochemical industry). As discussed further in
Section IV of the final rule, we recognize the potential negative impacts of this type of feedstock
switching. However, as discussed in Section V of the final rule, EPA had decided that at this
time further reductions to the advanced biofuel and total renewable fuel standards using the
general waiver authority or the biomass-based diesel waiver authority are not warranted.
Furthermore, such feedstocks qualify as renewable biomass under the statute and can be used to
produce advanced biofuels. Consequently, it would not be appropriate for EPA to exclude these
feedstocks from consideration in setting the standards.
Comment:
One commenter claimed that EPA had speculated about potential diversion of feedstocks without
any proof. The commenter further stated that the diversion of feedstocks is irrelevant to the
"reasonably attainable" volumes of biodiesel and renewable diesel as the impacts of feedstock
diversion must be measured against petroleum fuels. Another commenter stated that EPA cannot
use the diversion of feedstocks as a basis for not increasing advanced biofuel volumes, as
Congress intended feedstock markets to be disrupted. The commenter claimed that feedstock
suppliers will innovate and adapt if EPA sets higher standards for advanced biofuels. Another
commenter stated that there would be no need for any feedstock switching to accommodate an
advanced biofuel volume that is at least as higher as the advanced biofuel volume in 2017.
Response:
The significant increase in the use of soybean oil and animal fats to produce biodiesel, repeated
complaints from other industries that have historically used animal fats (such as the oleochemical
industry), and the significant increase in imported volumes of biodiesel and renewable diesel in
recent years are all indicators that the increase in biodiesel and renewable diesel production and
use in the U.S. in recent years has, at least in part, been enabled by the diversion of feedstocks
from other uses. EPA's focus in this rule, however, is the degree to which additional volumes of
biodiesel and renewable diesel could be produced in 2018 without relying on further diversions
of feedstocks. Even if the expansion of biodiesel in recent years primarily or exclusively relied
on newly available feedstocks, rather than diverting feedstocks from other uses (which EPA
contests, as discussed below) this does not necessarily mean that future growth could be
achieved in the same manner. EPA's analysis of potential new sources of advanced feedstocks
for biodiesel and renewable diesel (presented in Section IV of the final rule) suggests limited
growth in these feedstocks in 2018. Ultimately, however, even if EPA has underestimated the
growth in advanced biofuel feedstocks in 2018 this would not impact our standards, as we have
decided it is appropriate to reduce the advanced biofuel and total renewable fuel volume
requirements by the same level as the cellulosic biofuel volume requirement, despite the
projected availability of additional volumes of advanced biofuel. The desire to avoid the
potentially negative consequences of feedstock switching and the diversion of renewable fuels
from use in other countries, along with concerns over the high cost of advanced biofuels relative
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to petroleum fuels are factors that EPA may consider in deciding whether and to what degree to
exercise our cellulosic waiver authority (see Section IV of the final rule and Section 5.2.5 of this
document for a further discussion of this issue).
Comment:
One commenter suggested higher numbers for the availability of advanced biodiesel feedstocks.
The commenter requested that EPA's projection of available feedstocks include the potential for
a total of 78 million gallons from soybean oil, and an additional 35 million gallons from animal
fats and 68 million gallons from canola oil.
Response:
Based on projections from USD A, in our projection of reasonably attainable volumes of
biodiesel and renewable diesel, EPA projected that vegetable oil production in the U.S. in 2018
would be sufficient to produce an additional 94 million gallons of biodiesel and renewable
diesel. We further projected that the increase in the production and collection of non-vegetable
oils (such as animal fats and used cooking oil) would be sufficient to produce an additional 15
million gallons of these fuels. However, even if EPA has underestimated the growth in advanced
biofuel feedstocks in 2018, as this commenter suggests, this would not impact our standards, as
we have decided it is appropriate to reduce the advanced biofuel and total renewable fuel volume
requirements by the same level as the cellulosic biofuel volume requirement, despite the
projected availability of additional volumes of advanced biofuel.
Comment:
One commenter stated that reducing the advanced biofuel volume for 2018 from the 2017
volume, as EPA proposed, would result in stranded assets and underutilized feedstocks.
Response:
The advanced biofuel volume in this final rule is 10 million gallons higher than the advanced
biofuel volume for 2017, while the implied non-cellulosic advanced biofuel volume (the volume
of advanced biofuel minus the volume of cellulosic biofuel) is approximately 30 million gallons
higher than the implied non-cellulosic advanced biofuel volume for 2017. These higher volumes
are not expected to result in stranded assets or underutilized feedstocks.
Comment:
One commenter claimed that additional biodiesel production does not reduce the availability of
fats and oils to other markets, but rather provides a market for surplus fats and oils that are
byproducts of other industries such as the production of soybeans for animal feed. Another
commenter suggested that BBD uses co-products or waste feedstocks, which will not cause
diversions.
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Response:
To the degree that biodiesel and renewable diesel are produced using increases in surplus
feedstocks that are byproducts to other industries, increasing volumes of these fuels is unlikely to
reduce the availability of these feedstocks to other industries. If, however, demand for these
feedstocks by the biodiesel and renewable diesel industry exceeds the quantity that is surplus to
other industries (i.e., feedstocks that are not being used in other industries), feedstock switching
and market disruption can occur. EPA's projection of the reasonably attainable volume of
biodiesel and renewable diesel attempts to minimize the incentives for feedstock switching and
the diversion of renewable fuels from other countries (see Section IV of the final rule for more
detail).
Comment:
One commenter stated that EPA is justified in considering the high cost of biodiesel in our
standards for 2018. The commenter stated that higher volumes lead to increased production of
palm oil, since palm oil is the cheapest vegetable oil that can be used to replace advanced
feedstocks used to produce biofuel. Higher prices for soybean oil lead to greater palm oil imports
into the U.S., and the diversion of waste oils to biodiesel production.
Response:
Not only can the high cost of biodiesel and renewable diesel lead to increased palm oil
production (and the associated negative environmental impacts), but it can also increase fuel
costs for consumers and feedstock costs for other industries that use vegetable oils. These factors
are relevant considerations in EPA's decision whether and to what degree to exercise our
cellulosic waiver authority.
Comment:
One commenter claimed that EPA did not consider the impact of new pathways that could
contribute additional volumes of feedstock in 2018.
Response:
It would not be appropriate for EPA to include potential production of advanced biofuels from
new pathways in our projection of the reasonably attainable volumes, effectively assuming that
pending pathway petitions will be approved (thus prejudging the outcome of our consideration of
these pathways). We further note that ultimately even if EPA's projection of reasonably
attainable volumes of advanced biofuel had been slightly higher as a result of the inclusion of
new pathways this would not impact our standards, as we have decided it is appropriate to reduce
the advanced biofuel and total renewable fuel volume requirements by the same level as the
cellulosic biofuel volume requirement, despite the projected availability of additional volumes of
advanced biofuel.
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Comment:
One commenter stated that increasing production at a biodiesel facility decreases the cost of
production for biodiesel.
Response:
While it is the case that in most industries increasing production rates results in lower production
costs due to economies of scale, there are several reasons to believe this may not be the case for
the biodiesel industry. The majority of the cost of production of biodiesel is attributable to the
feedstock costs, and higher advanced biofuel requirements may lead to higher feedstock costs.
These higher feedstock costs could offset or outweigh any cost savings that result from
increasing the production rates at existing biodiesel and renewable diesel production facilities.
Finally, however, we note that even if higher advanced biofuel volumes resulted in marginally
lower costs for biodiesel and renewable diesel the cost of these fuels would still be expected to
be significantly higher than the petroleum fuels they displace.
Comment:
Multiple commenters stated that EPA should not ignore state incentives for biodiesel and
renewable diesel. One commenter specifically mentioned actions in California, New York,
Minnesota, Illinois, and Iowa.
Response:
EPA is aware that several states offer incentives designed to increase the production or use of
biodiesel and renewable diesel. While these incentives may increase overall biodiesel production
to some degree, the most likely impact of these state incentives is to draw production and use of
biodiesel and renewable diesel to these states. EPA believes that our projection of the reasonably
attainable volumes of biodiesel and renewable diesel in 2018 appropriately accounts for these
state incentives.
Comment:
Multiple commenters claimed that production data from EMTS in 2017 proved that the absence
of the tax credit is not impacting the supply of biodiesel and renewable diesel in 2017.
Response:
RIN generation data for advanced biodiesel and renewable diesel in 2017 is very similar to the
number of RINs generated for these fuels in 2016. This suggests that the pattern observed in
previous years, with the supply or advanced biodiesel and renewable diesel neither increasing
nor decreasing substantially in years when the tax credit was not available is a reasonably
expectation for the impact of the absence of the tax credit.
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Comment:
One commenter stated that an increase in the advanced biofuel standard would be consistent with
the past performance of the industry. Another commenter stated that technology they have
developed would be used to produce additional volumes of advanced biodiesel and renewable
diesel in 2018, and requested that these additional volumes be accounted for in EPA's
projections.
Response:
In determining whether and to what degree to exercise our cellulosic waiver authority to reduce
the volume of advanced biofuel from the statutory target EPA has considered a number of
factors, including the performance of the advanced biofuel industry in previous years and the
production capacity of the advanced biofuel industry, but also the projected increase in the
availability of feedstocks that can be used to produce advanced biofuels and the cost of these
fuels. See Section IV of the final rule for a further discussion of this issue.
Comment:
One commenter stated that domestic feedstock availability in 2018 can only support 1.53 billion
gallons of biodiesel production without causing feedstock switching or cost increases.
Response:
EPA has reviewed this comment and determined that the commenter has underestimated
domestic feedstock availability in 2018, both by assuming a volume of domestic advanced
biodiesel and renewable diesel production for 2016 that was lower than actual production
(possibly by failing to include domestic renewable diesel production) and by under-estimating
the growth in domestic feedstocks in 2018. EPA's assessment of projected available feedstocks
in 2018 can be found in Section IV of the final rule. We also note that further reductions to the
advanced biofuel or total renewable fuel volumes must be made using EPA's general waiver
authority (on the basis of inadequate domestic supply, severe economic harm, or severe
environmental harm) or the biomass-based diesel waiver authority. Our consideration of these
waiver authorities are discussed in Section V of the final rule.
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4.2.3 Other Advanced Biofuel
Commenters that provided comment on this topic include, but are not limited to: 3680.
Comment:
One commenter stated that EPA's projections of advanced biofuel other than cellulosic biofuel
and BBD was too low, and should take into account the investments that are now occurring for
these fuels.
Response:
For 2018, we have based our estimate of other advanced biofuel on volumes of CNG, heating oil,
naphtha, advanced renewable diesel, and domestic advanced ethanol on the volumes that have
been produced in recent years. We agree that opportunities exist for additional volumes of other
advanced biofuel to be supplied in 2018, and believe that they could help the total volume of
other advanced biofuels to reach 60 million gallons in 2018. However, since they have been
produced in only de minimis amounts in the past, we do not have a basis for projecting
substantial volumes from these sources in 2018. Commenters provided no data to indicate that
volumes of these other advanced biofuels will be higher in 2018 than they have been in recent
years. Moreover, even if we were to assume that a higher level of other advanced biofuel was
possible in 2018, our consideration of cost would still lead us to conclude that it is appropriate to
require only that volume of advanced biofuel that results from the maximum reduction permitted
under the cellulosic waiver authority.
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4.3 Advanced Volume Achievable
Commenters that provided comment on this topic include, but are not limited to: 3108 and 3679.
Comment:
One commenter stated that the biodiesel industry produced 2.6 billion gallons in 2016, and that
as a result the 2018 advanced biofuel volume requirement should be at least 5.25 billion gallons.
Response:
The domestic BBD industry supplied 1.83 billion gallons in 2016, equivalent to 2.79 billion D4
RINs.29 When including imports and exports, the total volume supplied was 2.43 billion gallons,
or 3.71 billion D4 RINs. Reaching 5.25 billion gallons of advanced biofuel in 2018 would
require substantially higher volumes of BBD than occurred in 2016. As discussed further in
Sections 4.2 and 4.2.2 of this document, we believe that a higher advanced biofuel volume
requirement than we are establishing for 2018 would increase the likelihood of feedstock
switching, diversion of foreign advanced biofuel to the U.S., and increased costs. Since we do
not believe that these outcomes would be appropriate, we do not believe that a volume
requirement above 4.29 billion gallons is warranted.
Comment:
One commenter stated that BBD supply has grown by about 300 million gallons per year
between 2011 and 2016. Therefore, the 2018 advanced biofuel volume requirement should be 0.3
billion gallons higher than the 2017 volume requirement.
Response:
As described in Section IV of the final rule, we expect increasing volumes of BBD to be
accompanied by an increasing likelihood for feedstock/fuel diversions and higher costs.
Moreover, these are important considerations that are permitted to be considered under the
cellulosic waiver authority. We have taken both the industry's ability to increase supply as well
as these other potential impacts into account in our final determination.
29 "Updated 2016 RIN supply," available in docket EPA-HQ-OAR-2017-0091.
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4.4 Proposed Advanced Biofuel Requirement
Commenters that provided comment on this topic include, but are not limited to: 0792, 1500,
1692, 2380, 2540, 2545, 3108, 3175,3184, 3237, 3245, 3249, 3306, 3317, 3319, 3320, 3321,
3377, 3428, 3429, 3430, 3478, 3493, 3496, 3593, 3645, 3658, 3678, 3679, 3876, 3880, 3934,
3959, and 3961.
Comment:
One commenter stated that the advanced biofuel volume requirement should be reduced from the
proposed level of 4.24 billion gallons to decrease demand for vegetable oils used for food.
Response:
We acknowledge that biodiesel and renewable diesel can be produced from food-based crops
such as soybean oil, but they can also be produced from non-food based feedstocks such as waste
grease. Cellulosic biofuel, in contrast, is produced entirely from non-food based feedstocks.
Insofar as non-cellulosic advanced biofuels are allowed to partially backfill the shortfall in
cellulosic biofuel, the total advanced biofuel volume would likely be composed of a greater
proportion (though not necessarily a greater absolute volume) of food-based biofuels than would
have been the case under the statutory volume targets. Since we have lowered the cellulosic
biofuel applicable volume based on our production projection for 2018, we have broad discretion
under the cellulosic waiver authority to consider an equal or lesser reduction in advanced
biofuels. We believe it is reasonable and appropriate to use the cellulosic waiver authority to
lower the advanced biofuel standard by the full amount of the cellulosic biofuel reduction. Doing
so reduces the possibility that some food-based feedstocks will be used to produce biodiesel
and/or renewable diesel that backfills a portion of the shortfall in cellulosic biofuel.
We do not believe, however, that further reductions below the level achieved through the full use
of the cellulosic waiver authority are warranted for 2018. Further reductions would require the
use of either the general waiver authority or the BBD waiver authority, and neither permits the
direct consideration of competition for feedstocks used for food. While we could consider the
impacts of costs, we are not aware of evidence indicating that competition for feedstocks used
for food has caused either severe economic harm or significant increases in the price of BBD
under the BBD waiver authority. Moreover, commenters did not request a reduction on the basis
of costs or provide information quantifying the potential impact.
Comment:
Some commenters believed that the proposed volume of 4.24 billion gallons for advanced
biofuel was too high. They suggested an alternative 2018 advanced biofuel volume requirement
of 2.61 billion gallons, based on 216 million gallons of cellulosic biofuel and 1.52 billion gallons
of biodiesel and renewable diesel.
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Response:
We do not believe that the suggested volume would be appropriate. Not only is it significantly
lower than the volume we have determined to be both reasonably attainable and appropriate as
discussed more fully in Section IV of the final rule, but we do not believe that the additional
reductions required could be reasonably justified under the general waiver authority or the BBD
waiver authority, as described more fully in Section 2 of this document and a memorandum to
the docket.30 See also discussion of the cellulosic biofuel volume requirement in Section 3 of this
document.
Comment:
One commenter stated that EPA had not cited any new facts or circumstances that warranted a
change in policy on advanced biofuel, and thus was not justified in proposing a level for 2018
that represented a reduction from 2017.
Response:
As described in Section IV of the final rule, the impacts of advanced biofuel change as the
volume requirements increase. Not only is each increment likely to be costlier than previous
increments, but the likelihood of feedstock/fuel diversions also increases. We believe that, given
the magnitude of the 2018 standards, these factors are more important for 2018 than they were
for previous years, and warrant a more measured approach to establishing the volume
requirement for advanced biofuel. Nevertheless, we note that the final volume requirement for
2018 advanced biofuel represents an increase from the 2017 volume requirement of 10 million
gallons.
Comment:
One commenter stated that, since domestic production of biodiesel and renewable diesel is
primarily advanced, while imports of these two biofuels are primarily conventional, EPA could
promote domestic production over imports by increasing the advanced biofuel standard.
Response:
While it is true that nearly all conventional biodiesel and renewable diesel in 2016 was imported
(158 million gallons), there were still 725 million gallons of advanced biodiesel and renewable
diesel imported into the U.S. This suggests that countries exporting biodiesel and renewable
diesel to the U.S. are, in the aggregate, more likely to export advanced rather than conventional.
Thus it is uncertain whether a higher advanced standard would increase domestic supply, or
would instead result in higher imported volumes. Regardless, we do not believe that an advanced
biofuel volume requirement higher than 4.29 billion gallons is warranted for 2018 after a
30 "Assessment of waivers for severe economic harm or BBD prices for 2018," memorandum from David Korotney
to docket EPA-HQ-OAR-2017-0091.
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consideration of not only the volumes that are reasonably attainable, but also feedstock/fuel
diversions and costs.
Comment:
One commenter stated that since the advanced biofuel standard has been met or exceeded every
year, EPA can continue to increase the volume requirement in 2018 with confidence that the
industry will meet it.
Response:
Historical market responses to the applicable standards under the RFS program provide
important benchmarks, but cannot be used to determine potential market responses to future
standards without consideration of additional factors. As volume requirements increase, so also
do the challenges associated with meeting those volume requirements. As described in Section
IV of the final rule, we have taken into account not only the volume of advanced biofuel that is
reasonably attainable in 2018, but also other factors that are legally permissible to consider under
the cellulosic waiver authority. These other factors include the increased potential for
feedstock/fuel diversions as volumes increases, and higher costs. Based on these additional
considerations, we have established a 2018 volume requirement for advanced biofuel that is
lower than the level which is reasonably attainable.
Comment:
One commenter stated that costs cannot be used to reduce the volume requirement for advanced
biofuel below the level that is reasonably attainable.
Response:
We disagree. Under the cellulosic waiver authority, we can consider a wide variety of factors,
including costs. We have used costs and other factors to make a determination that, although
4.40 billion gallons of advanced biofuel may be reasonably attainable in 2018, it would not be
appropriate to require this level. Instead, we are establishing an advanced biofuel volume
requirement of 14.29 billion gallons, the lowest level permitted under the cellulosic waiver
authority. For a more detailed discussion of this determination, see Section IV of the final rule.
Comment:
One commenter suggested that EPA's analysis of wholesale costs in determining the volume of
advanced biofuels was inappropriate. They suggested that EPA had failed to calculate
representative costs to society because it had ignored factors such as subsidies provided to
refiners and the potentially disruptive nature of accidents and Acts of God that can adversely
affect refiners and fuel distribution infrastructure.
This commenter also suggested that EPA's analysis ignored competition, both within the
biodiesel industry and between biodiesel and petroleum diesel.
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The commenter also suggested that EPA did not consider benefits.
This commenter suggested that it was inappropriate for EPA to compare a gallon of biodiesel to
petroleum diesel when biodiesel is typically blended at B5-B20.
Response:
As described in Section IV.E of the final rule, the costs that EPA has estimated are illustrative,
and thus they "... do not attempt to capture the full impacts of this final rule." Certain factors that
are expected to have relatively modest impacts on the societal costs of renewable fuels or the
petroleum-based fuels that they displace, such as subsidies or other supportive policies provided
to the petroleum sector and the agricultural and renewable fuel sectors, or the price impact of
increased fuel supply and increased competition in the transportation fuel sector from biofuels,
have not been analyzed in the estimation of illustrative costs. EPA does not believe that the
impacts of the factors noted by the commenter would affect our assessment of the cost of
advanced biofuels to a degree that it would change our conclusion that advanced biofuels are
more expensive than the petroleum fuels they displace.
EPA balanced the potential costs and benefits of additional advanced biofuel volumes when
determining the reasonably attainable and appropriate level of advanced biofuels. This included
costs, as pointed out by commenters, but also GHG reduction benefits, and energy security
benefits. While the commenter is correct that EPA has not quantified these benefits, it
nonetheless considered them in its determination.
Additional comments on the use of wholesale costs (including as opposed to costs of blended
fuels) can also be found in Section 7.1.1 of this document.
Comment:
One commenter stated that by not allowing advanced biofuel to partially backfill for the shortfall
in cellulosic biofuel, future investments in advanced biofuel and job creation will suffer.
Response:
As discussed in Section 4.2 of this document, our determination not to allow advanced biofuel to
partially backfill for the shortfall in cellulosic biofuel is based on a variety of factors that we are
legally permitted to consider under the cellulosic waiver authority. However, the statutory
provision does not provide direction on how to balance the factors that we consider. In addition
to assessing reasonably attainable volumes of advanced biofuel, we have also considered the
increased potential for feedstock/fuel diversions that could dilute the GHG and energy security
benefits of additional increases in advanced biofuel, while increasing costs. In making a
determination not to allow advanced biofuel to partially backfill for the shortfall in cellulosic
biofuel, we acknowledge that it may have the effect of also making certain future investments in
biofuel production somewhat less financially attractive, but we believe we have appropriately
balanced the relevant considerations and we do not believe that it would be appropriate to require
additional increases in advanced biofuel under these conditions.
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Comment:
One commenter stated that EPA had not conducted any analysis of projected production and
import of advanced biofuel, but instead had simply set the 2018 advanced biofuel volume
requirement at the statutory minimum.
Response:
We disagree. Section IV of the 2018 NPRM provided a detailed assessment of the availability of
advanced biofuels, including separate discussions of imported sugarcane ethanol, biodiesel and
renewable diesel, and other non-cellulosic advanced biofuels. An updated analysis of these
sources can be found in Section IV of the final rule. Based on our assessment, we determined
that 4.40 billion gallons of advanced biofuel were reasonably attainable in 2018. However, we
also considered additional factors, including feedstock/fuel diversions and costs. As a result, we
determine that the volume requirement that was both reasonably attainable and appropriate to
require was 4.29 billion gallons, the lowest level permitted under the cellulosic waiver authority.
We also made a determination that additional reductions using either the general waiver
authority or the BBD waiver authority were not warranted, as discussed in Section V of the final
rule.
Comment:
One commenter stated that EPA should consider costs only after accounting for the reduction in
costs that result from the RIN, making biodiesel less expensive than diesel to consumers.
Response:
As we have discussed in previous annual rulemakings, it is not appropriate to treat RINs as a cost
to obligated parties, nor as a cost to consumers. RINs represent transfer payments between
parties in the fuel market, much like taxes, not societal costs. In our consideration and discussion
of costs, we consider the costs of producing, distributing, and blending renewable fuels in
comparison to the fuels they displace, rather than the price of the blended fuel sold at retail.
Comment:
One commenter took issue with the statement in the 2018 NPRM that stated that the proposed
advanced biofuel volume requirement "provide[s] continued incentive for the development of
other types of advanced biofuel" (at 82 FR 34209), since the proposed level was below the 2017
level.
Response:
As the context of the quoted phrase makes clear, the 2018 NPRM's reference to "other types of
advanced biofuel" meant advanced biofuel that is not required to be BBD. The proposed
advanced biofuel volume requirement of 4.24 billion gallons would have allowed up to 850
million RINs to be met with advanced biofuel other than BBD, since the proposed BBD volume
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requirement was 2.1 billion gallons.31 That is, industries that produce advanced biofuel other
than cellulosic biofuel and BBD have a continued incentive to play a role in meeting the
advanced biofuel volume requirement, as they did in 2017. We note that the final volume
requirement for advanced biofuel is 4.29 billion gallons, an increase of 0.05 billion gallons from
the proposed level.
Comment:
One commenter stated that, if EPA wants to ensure that there is room for competition among
different types of advanced biofuels, it should raise the advanced biofuel standard to at least 4.75
billion gallons.
Response:
The final volume requirements for advanced biofuel and BBD provide a significant opportunity
for competition between different types of advanced biofuel (up to 850 million gallons as
described above). Raising both the advanced standard and the BBD standard by the same amount
would not change the 850 million gallons of undifferentiated advanced biofuel. Since we have
determined that 4.40 billion gallons of advanced biofuel is reasonably attainable in 2018, a
higher level such as 4.75 billion gallons would not be reasonably attainable. However, we have
also determined that it would not be appropriate to require 4.40 billion gallons after a
consideration of costs and other factors. Therefore, we are establishing an advanced biofuel
volume require of 4.29 billion gallons for 2018.
Comment:
One commenter stated that the ACE decision precludes EPA from considering any factors other
than supply to refiners, importers, blenders, or distributors, and that as a result EPA cannot set
standards below the level that is reasonably available.
Response:
The Court's decision, wherein it disallowed the consideration of demand-side factors, applied to
the use of the inadequate domestic supply prong of the general waiver authority. We did not
propose to use the general waiver authority to reduce volumes of advanced biofuel, nor are we
doing so in this final rule. Instead, we are reducing volumes only under the cellulosic waiver
authority, under which EPA can consider such factors as costs and feedstock/fuel diversions.
Based on a consideration of these additional factors, as discussed in the final rule, we have
determined that it is appropriate to exercise the full cellulosic waiver authority for advanced
volumes.
31 4.24 bill gal advanced - 0.24 bill gal cellulosic - 2.1 bill gal BBD (x 1.5 RIN value) = 0.85 bill gal
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Comment:
One commenter stated that EPA's refusal to increase advanced biofuel volumes when such
volumes are available forgoes economic, environmental, and energy security benefits.
Response:
We acknowledged in the 2018 NPRM that the proposed advanced biofuel volume requirement
might "...forgo the marginal benefit that might be achieved by establishing the advanced biofuel
standard to require an additional 30 million gallons." We continue to believe that it is appropriate
to set the final advanced biofuel volume requirement using the maximum reduction permitted
under the cellulosic waiver authority in light of a consideration of the increased costs associated
with each increment of advanced biofuel, a factor that we are legally permitted to consider under
this authority.
Comment:
One commenter stated that the proposed volume for advanced biofuel could hurt investment in
low carbon fuels used to meet California's LCFS program, since those investments presume high
RIN prices.
Response:
EPA's determination of the advanced biofuel volume requirement to set for 2018 was based on a
consideration of factors that could impact both the supply of advanced biofuel as well as its cost
for the nation as a whole. As described in Section IV of the final rule, we have determined that it
would not be appropriate to require advanced biofuel volumes higher than the level resulting
from reducing the statutory target for advanced biofuel by the same amount as the reduction in
cellulosic biofuel. Regional, state, or local programs targeting the use of renewable fuels are
independent from the nationwide RFS program, and have independent standards that either
require or incentivize the use of those fuels. While renewable fuels that qualify under those
programs may also qualify under the RFS program, our determination regarding appropriate
nationwide standards to set under the RFS program is not driven by potential impacts of those
nationwide standards on regional, State, or local programs. Nevertheless, in estimating
reasonably attainable volumes of advanced biofuel for 2018, we have considered imported
sugarcane ethanol that could be used to meet both the California LCFS program and the federal
RFS program.
Comment:
One commenter stated that the 2018 advanced biofuel volume requirement should not exceed
EIA's domestic production projections for biodiesel and other advanced biofuel, which are far
less than the 4.24 billion gallons proposed.
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Response:
As discussed in more detail in Section V of the final rule, we have determined that it would not
be appropriate to base the 2018 advanced biofuel volume requirement on only supply that can be
produced domestically. We have made this determination after a consideration of comments on
both the 2018 NPRM and the notice of availability of supplemental information.32
Comment:
One commenter stated that the decision by the Department of Commerce to impose tariffs on
imported biodiesel eliminates a significant source of non-cellulosic biofuel supply, and that as a
result the advanced biofuel volume requirement should be reduced by 400 million gallons
compared to the proposed level of 4.24 billion gallons.
Response:
The impact of these potential duties is less certain than this commenter alleges. In the notice of
availability of supplemental information,33 we requested comment on the potential impact of the
Department of Commerce's preliminary determination to impose duties on imported biodiesel
from Argentina and Indonesia.34 Apart from speculation, however, commenters provided no
definitive information or quantified projections of what may occur to the total supply of biodiesel
(including both domestic production and imports) as a result of new import duties. While imports
of biodiesel from Argentina and Indonesia may be reduced, there are also likely to be shifts in
international markets that could result in no net change in total imports of biodiesel into the U.S.
It may also be the case that domestic production could compensate for any reduction in imports.
Finally, the duties will not be final until and unless the International Trade Commission makes
an affirmative injury determination. Because we cannot predict these outcomes, it would be
inappropriate to reduce the 2018 advanced biofuel volume requirement below the proposed level
based on the amount of biodiesel that has been imported by Argentina and Indonesia in the past.
Comment:
One commenter stated that the 2018 advanced biofuel volume requirement should be based on a
reasonable projection of cellulosic biofuel plus 2.1 billion gallons of BBD.
Response:
Our determination of the appropriate volume requirement for advanced biofuel for 2018 includes
a consideration of the volume of BBD that is reasonably attainable. As described in Section IV
of the final rule, our analysis concluded that significantly more than 2.1 billion gallons of BBD -
2.55 billion gallons - is in fact reasonably available in 2018. As described in Section VI of the
final rule, 2.1 billion gallons of BBD is not the most that could be expected to be supplied in
2018, but rather is a level that provides support to the BBD industry while simultaneously
32 82 FR 46174 (October 4, 2017).
33 82 FR 46174 (October 4, 2017).
34 That preliminary determination by the Department of Commerce has since been made final.
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providing an opportunity for other advanced biofuels to compete with BBD under the advanced
biofuel standard. We note that this commenter also excluded all consideration of other advanced
biofuel (those with a D-code of 5) in its estimation of the volume of advanced biofuel that should
be required in 2018. In contrast, we have estimated that 60 million gallons of such other
advanced biofuel can be supplied in 2018.
Comment:
One commenter stated that the proposed advanced biofuel volume requirement of 4.24 billion
gallons should be reduced to ensure that the RFS program does not incentivize international
deforestation.
Response:
EPA has previously analyzed the potential indirect impacts of biofuels that can be used to meet
the advanced biofuel volume requirement as part of our lifecycle GHG emissions analysis. Our
analysis has shown that while increased demand for biofuels can lead to some deforestation and
land use change, fuels that qualify as advanced biofuels have limited indirect impacts on
deforestation while reducing lifecycle GHG emissions by at least 50% when compared to the
petroleum fuel they displace.
Comment:
One commenter stated that the advanced biofuel volume requirement for 2018 should be based
on actual volumes produced domestically in 2017.
Response:
EPA is obligated under the statute to make a determination of the appropriate volume
requirements for 2018 based on the factual circumstances for 2018. As described in Section IV
of the final rule, we have determined that a volume requirement calculated on the basis of the
maximum reduction permitted under the cellulosic waiver authority is both reasonably attainable
and appropriate given a consideration of costs and other factors.
We do not believe it would be appropriate to base the 2018 volume requirement for advanced
biofuel on actual volumes produced domestically in 2017 for four reasons. First, this approach
would require an extrapolation of production for the first part of the year to the end of 2017, and
any extrapolation will be uncertain due to seasonal variability and other unpredictable factors.
Second, production volumes must be adjusted for RINs made invalid for any reason (such as
those listed in 40 CFR 80.1431), but some RINs are not determined to be invalid for many
months after their generation. Third, actual production in 2017 provides little information about
the production that is reasonably attainable in 2018, nor the costs of 2018 production. Fourth, as
discussed in Section V of the final rule, we do not believe that the available information and
evidence warrants the exclusion of imports in the determination of the volume requirements for
2018.
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Comment:
One commenter stated that the advanced biofuel volume requirement must increase every year in
order to provide investors the confidence that there will be a market for new sources of advanced
biofuel and that the 2018 NPRM did not do this.
Response:
In order to determine the appropriate advanced biofuel volume requirement for 2018, we must
not only project the volumes that are reasonably attainable in 2018, but we also have a
responsibility to consider other factors that may make substantial increases from one year to the
next inappropriate. For 2018 we have determined that costs, as well as feedstock/fuel diversions
and other factors, are relevant considerations, and we are permitted to consider such factors
under the cellulosic waiver authority. While we recognize that a higher advanced biofuel
standard may provide greater support to the advanced biofuel industry, based on a consideration
of these factors, we have determined that the 2018 volume requirement for advanced biofuel
should be 4.29 billion gallons, an increase of 10 million gallons from 2017.
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5. Total Renewable Fuel and Conventional Renewable Fuel
5.1 Ethanol
5.1.1 E10 Blendwall and Total Gasoline Demand
Commenters that provided comment on this topic include, but are not limited to: 3110, 3177,
3241, 3319, 3497, and 3645.
Comment:
One commenter pointed to the ACE decision that ruled that EPA cannot consider demand-side
factors when making a determination about whether any of the statutory targets can be met.35
But, the commenter noted, EPA included demand-side factors in its proposed determination,
including considerations of infrastructure and consumer preferences regarding E0, E15, and E85.
Although the 2018 NPRM was released prior to the Court's decision, EPA is barred from any
consideration of demand-side factors in the final rule.
Response:
The Court's ruling specifically indicated that EPA cannot consider demand-side factors in the
context of the use of inadequate domestic supply under the general waiver authority. EPA is not
barred from considering demand-side factors under the cellulosic waiver authority. In the final
rule, we have considered infrastructure and demand for E0, El 5, and E85 only in the context of
the cellulosic waiver authority.
Comment:
Some commenters repeated their views from previous annual standard-setting rulemakings
regarding the existence and nature of the E10 blendwall. For instance, some questioned the
existence of an ethanol blendwall and claimed it is an idea invented by obligated parties to
convince EPA to lower their blending obligations. Others stated that the blendwall is a firm
barrier that cannot or should not be crossed.
Response:
Our view of the E10 blendwall falls between the two opposing viewpoints expressed by refiners
and ethanol proponents. We believe that there are real constraints on the ability of the market to
exceed a pool-wide ethanol content of 10%. However, these constraints do not have the same
significance at all levels above 10% ethanol. Instead, for the state of infrastructure that can be
available in 2018, the constraints represent a continuum of mild resistance to growth at the first
increments above 10% ethanol and evolve to significant obstacles at higher levels of ethanol.
This gradual nature of the impacts of the constraints is due to the fact that small increases in
3S American for Clean Energy v. EPA, Court of Appeals for the District of Columbia, No. 16-1005, Decided July 28,
2017.
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ethanol volumes above 10% are likely to be possible with changes in RIN prices, while larger
increases are only possible with changes to infrastructure that cannot occur as quickly. The
transition from mild resistance to significant obstacles occurs by degrees rather than all at once,
and overcoming the constraints will likely require different solutions over different time periods.
It is difficult to identify the precise boundary between volumes that can be achieved with mild
difficulty in 2018 and those that likely cannot realistically be achieved over the next year.
Ultimately the market will determine the extent to which compliance with the annual standards is
achieved through the use of greater volumes of ethanol or other, non-ethanol renewable fuels.
In short, the E10 blendwall is not the barrier that some commenters believe it to be, but neither
are increases in pool-wide ethanol concentrations above 10% unlimited in the 2018 timeframe as
other commenters have suggested. The final 2018 volume requirement for total renewable fuel
can help to create some incentive for use of El 5 and E85, but the volumes of El 5 and/or E85
that would be needed to reach the statutory targets are not achievable in 2017.
Another reason that the E10 blendwall is not the barrier that some commenters make it out to be
is that it is focused solely on ethanol. Many of the comments on both sides of the debate focus on
ethanol, but there is nothing in the statute that requires the use of ethanol, and there is no reason
that the E10 blendwall by itself should limit the total volumes of renewable fuels. The E10
blendwall may create a challenge toward increasing volumes of ethanol, but growth in other
biofuels is not only possible but expected within the capabilities of their markets.
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5.1.2 Exceeding the E10 Blendwall
Commenters that provided comment on this topic include, but are not limited to: 1754, 1756,
1776, 2545, 2547, 3105, 3106, 3175, 3177, 3184, 3249, 3478, 3645, 3680, 3887, and 3962.
Comment:
There were differing views among commenters of Congress's expectations regarding the E10
blendwall when EISA was released in 2007, and whether current market conditions are
consistent with those expectations. Some believed that Congress never intended for the E10
blendwall to be exceeded, while others stated there was a general expectation at that time that it
would need to be exceeded for the statutory volume targets to be reached. One party referenced
an EIA statement in 2008 indicating that the statutory targets could not be reached without
volumes higher than could be used as E10 alone.
Response:
It is unlikely that Congress expected the very high volumes that it specified in the statute to be
reached with only E10 (notwithstanding the 1.0 billion gallon minimum required volume for
BBD). At the time EISA was passed in 2007, EIA's Annual Energy Outlook for 2007 projected
that 17.3 billion gallons of ethanol is the maximum that could be consumed in 2022 if all
gasoline contained E10 and there was no E0, El 5, or E85. However, 17.3 billion gallons is far
less than the 36 billion gallons of renewable fuel that Congress targeted for use in 2022. Thus, if
the statutory targets for 2022 were to be achieved, 18.7 billion gallons of renewable fuel would
need to be consumed in 2022 either as higher level ethanol blends (El 5 and/or E85), or as non-
ethanol fuels.
Nevertheless, the RFS program does not require the use of ethanol, and there is no evidence that
Congress specifically intended for volumes of higher level ethanol blends to increase. Our
determination of appropriate volumes to require for 2018 is based on a consideration of all types
of renewable fuel and factors that could either constrain its use or impact the benefits of
requiring it. These considerations include, among other things, lower gasoline demand than was
projected in 2007, costs, and energy security.
Comment:
A number of commenters, particularly refiners, argued that the 2018 volume requirements should
be set in such a way that the pool-wide ethanol content will be no higher than 9.7%. They based
their preferred approach on the premise that El5 and E85 cannot contribute meaningfully to
higher ethanol consumption, and that there is ongoing demand for E0 (gasoline containing no
ethanol) at a level of at least 3% of the total gasoline pool.
Response:
As we said in the 2014-2016 and 2017 final rules, we do not find the arguments that the pool-
wide ethanol content cannot be higher than 10% to be compelling. As other commenters pointed
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out, the nationwide average ethanol content in 2016 was 10.02%, and this result was
undoubtedly influenced by the 2016 standards. Moreover, despite concerns raised by those
advocating 9.7% ethanol, there is no indication that exceeding the blendwall in 2016 created
severe economic harm for any state, region, or the U.S.
While we agree that use of E15 and E85 in 2018 cannot enable the market to achieve the
statutory target for total renewable fuel, they can make meaningful contributions in 2018. The
final 2018 volume requirement for total renewable fuel creates the opportunity for the market,
should it so choose, to exceed a pool-wide ethanol concentration of greater than 10% as already
occurred in 2016 without forcing the use of E15 and/or E85 in vehicles and engines for which
they were not designed as a number of commenters feared.
Comment:
One commenter stated that targeting a nationwide average ethanol content of 10.13% for 2018 is
unrealistic.
Response:
This concern is premised on assumptions regarding demand for E0, E15, and E85. As discussed
in more detail in Sections 5.2.5 through 5.2.7 of this document, the commenter's assumptions
about these fuels are unwarranted.
As noted in Section V.B. 1 of the final rule, the national average ethanol content of gasoline rose
from 9.91% in 2015 to 10.02% in 2016. An increase to 10.13% in 2017, as projected in the 2017
final rule, would be a smaller increment than that which occurred between 2015 and 2016.36
Moreover, for the purposes of making a determination about whether a total renewable fuel
volume of 19.29 billion gallons, based on the maximum permissible reduction under the
cellulosic waiver authority, is achievable in 2018, we assumed that there would be at least
10.13%) ethanol. In other words, despite the fact that increases in retail station offerings of E15
and E85 are likely to increase between 2017 and 2018, we only accounted for the nationwide
ethanol content of gasoline expected to be reached in 2017 when assessing the 2018 total
renewable fuel volume. Thus, not only is 10.13% ethanol content realistic, it is likely
conservative.
Comment:
Several commenters stated that the nationwide average ethanol content of gasoline should be
kept at or below 10% in order to ensure the well-being of other industries that are indirectly
affected by the price of corn used for animal feed. Similarly, one commenter stated that the
implied conventional renewable fuel volume requirement should be reduced below 15 billion
gallons for the same reason.
36 81 FR 89746
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Response:
EPA recognizes that renewable fuel production from traditional feedstocks (e.g., corn, soybeans,
canola) can benefit some sectors of rural economies while having adverse impacts on other
sectors. While demand for agricultural feedstocks can provide benefits to rural areas that grow
the agricultural feedstocks, the industries that depend on agricultural feedstocks (e.g., the
livestock industry) may face higher input costs, which in turn can lower their profitability. The
actual impacts, however, will depend on how the agricultural market responds both short-term
and long-term. While agricultural feedstock prices rose following the implementation of the
RFS2 program in 2010 (due to a changes in the world market in addition to the RFS), since that
time the agricultural sector has responded to increase supply, causing prices to drop as shown in
Figure 3 below. Further discussion of this issue can be found in Section 7.1.5 of this document.
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
Figure 3
Historical Monthly Crop Prices ($/bushel)
Source: USD A National Agricultural Statistics Service
https://www.nass.usda.gov/Charts_and_Maps/Agricultural_Prices/
Corn
Soybeans
Comment:
One commenter stated that EPA should not be including the denaturant as ethanol volume when
calculating the average ethanol concentration of the gasoline pool.
Response:
As required in 40 CFR 80.1401, ethanol that qualifies under the RFS program must be denatured.
Further, the denaturant portion of ethanol counts towards RIN generation so long as the
concentration of the denaturant is equal to or less than 2%. Since the nationwide average ethanol
concentration of ethanol is the result of the use of E10, E15, and E85, all of which are produced
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from ethanol containing denaturant, it is appropriate to include the denaturant as part of the
ethanol pool.
Moreover, the nationwide average ethanol concentration is generally calculated using total
ethanol use from EIA's STEO, or from RIN supply for ethanol. In both cases, the ethanol
represents denatured ethanol.
Comment:
One commenter stated that the actual estimate of ethanol concentration in 2016 is 9.81%
according to EIA, but EPA claims that the nationwide average ethanol concentration in 2016 was
10.05%.
Response:
EIA's estimate of 9.81% is based on "Refinery and Blender Net Input" which is part of EIA's
tabulation of refining and processing volumes of petroleum and other liquids. These volumes
represent upstream production, not downstream consumption, and it is downstream production
which is the relevant measure for the RFS program given that ethanol is added downstream.
Since the 2018 NPRM, EIA has updated the fuel supply estimates for 2016, which in turn results
in a change in the 2016 nationwide average ethanol concentration. While the 10.05%) was
derived from the March 2017 version of EIA's STEO (Table 4a), EIA's October 2017 version
leads to an ethanol concentration 10.02%.
Comment:
One commenter stated that refiners and importers reached the E10 blendwall as early as 2010
and definitely surpassed it in 2012, contrary to EPA's claims that the blendwall was not reached
until after 2010.
Response:
The calculations done by the commenter to reach this conclusion, while based primarily on data
from EMTS made available through a Freedom of Information Act Request, also included a
number of assumptions that were incorrect. For instance, the commenter made its own
assumptions about the fraction of total obligated fuel volume (gasoline and diesel) that was
gasoline, and assumed that exempt small refiners and refineries blended no ethanol into their
gasoline. These and other assumptions resulted in estimates of the nationwide average ethanol
concentration that appeared to exceed 10% for all years between 2010 and 2016.
We believe that the best estimate of total gasoline use comes from EIA's STEO, and that the best
estimate of total ethanol use comes from the number of RINs generated for ethanol used as fuel
in the U.S. Based on these sources, the nationwide average ethanol concentration did not exceed
10%) until 2016, when it was 10.02%.
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5.1.3 Domestic Production Capacity
Commenters that provided comment on this topic include, but are not limited to: 3178.
Comment:
One commenter stated that since current corn-ethanol production capacity is over 16 billion
gallons and more is under construction, there is no need to reduce the volume requirement for
conventional renewable fuel.
Response:
We agree that domestic production capacity of corn-ethanol is higher than the 15 billion gallon
implied volume requirement for conventional renewable fuel that we are setting in this annual
rule for 2018. However, ethanol producers are not limited by the standards set under the RFS
program. They can produce more ethanol than is required under the RFS program, and the
market will determine if that additional ethanol production will either be used domestically or in
export markets. In recent years, corn ethanol exports have been rising, allowing U.S. production
to continue to grow.
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5.1.4 Refiner Responsibilities to Expand Ethanol Use
Commenters that provided comment on this topic include, but are not limited to: 1756 and 3177.
Comment:
One commenter stated that refiners are responsible for selling higher level ethanol blends, and
that they have had plenty of time to put in place the necessary infrastructure. This commenter
stated that refiners should not be rewarded for failing in their responsibilities.
Response:
The RFS program is structured to create a market for renewable fuels, and it is within that market
system that many different interested parties contribute to maintaining and expanding the
renewable fuel supply chain from producer to ultimate consumer. Obligated parties have a
unique role in being required to acquire RINs that demonstrate compliance with RFS standards,
but the ultimate success of the program depends on the actions of many market participants.
The regulatory structure generally places the responsibility on producers and importers of
gasoline and diesel to ensure that transportation fuel sold or introduced into commerce contains
the required volumes of renewable fuel. Obligated parties have a variety of options available to
them, both to increase volumes in the near term (i.e., through the period being addressed by this
final rule) and in the longer term. The standards that we are establishing in this action reflect
both the responsibility placed on obligated parties as well as their ability to undertake the short-
term activities available to them. We also expect obligated parties to be taking actions now that
will help to increase renewable fuel volumes in future years. However, this general responsibility
does not require obligated parties to take actions specific to El5 and/or E85 infrastructure, as the
RFS program does not require any actions specific to El 5 or E85, and in fact does not require
any actions specific to ethanol at all. Moreover, we do not believe the statute should be
interpreted to require that refiners and importers change the fundamental nature of their
businesses so as to comply with RFS requirements, as this would be a far-reaching result that
Congress can be expected to have clearly specified if it was intended. For example, to the extent
that commenters imply that refiners should be required to build or purchase renewable fuel
production facilities, take over ownership of retail stations, produce or sell cars capable of using
high-ethanol blends, or plant cropland to provide feedstock for increased renewable fuel
production, we would disagree, since they would then be engaging in business practices other
than those directly relevant to their position as a "refiner, importer, or blender" as specified in the
statute. The primary role that obligated parties play in the RFS program is to acquire RINs, and it
is this demand for RINs that in turn drives demand for renewable fuel and which should
stimulate other parties to increase their activities to supply it. In so doing, obligated parties
provide the funding (recouped through higher petroleum fuel prices) to subsidize renewable fuel
prices so that the market is incentivized to expand renewable fuel supply.
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Comment:
One commenter stated that refiners don't control the price of ethanol, and ethanol price is the
primary driver of how much ethanol will be used in higher ethanol blends such as El 5 and E85.
If ethanol producers want to sell more ethanol, this commenter stated, they need to reduce the
selling price of their ethanol.
Response:
Producers of renewable fuel are to a large degree compelled to price their products on the basis
of feedstock costs, just as gasoline and diesel producers are compelled to price their products on
the basis of crude oil prices. Nevertheless, all parties involved in the fuels market play a role in
the volume of renewable fuel that is consumed, and there is no requirement in the statute or
regulations that places the burden on a single industry or market segment for creating the
conditions necessary to increase renewable fuel use. The primary role that obligated parties play
in the RFS program is to acquire RINs sufficient to comply with the applicable standards, while
the primary role that producers of renewable fuel play is to make renewable fuel available. Both
of these groups, as well as marketers, blenders, distributors, and retailers, can play a role in
expanding and updating infrastructure to make renewable fuels available to consumers.
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5.1.5 EO
Commenters that provided comment on this topic include, but are not limited to: 1301, 1692,
1754, 2547, 3105, 3106, 3175, 3177, 3184, 3238, 3478, 3645, 3649, 3680, and 3887.
Comment:
Several commenters stated that EPA's estimate of the volume of EO consumed by recreational
marine engines is far too low.
Response:
The commenters did not provide any data on actual consumption of EO by recreational marine
engines. Instead, commenters pointed to anecdotal evidence that owners of recreational marine
engines preferentially seek out EO. We addressed these comments in detail in the rulemaking
which established the 2017 standards.
Comment:
Several commenters stated that EPA has ignored information on actual historical demand for E0
in its estimation of E0 volumes consumed in recent years. For instance, Pure-gas.org indicates
that 12,000 stations offer E0, Magellan Midstream Partners submitted information indicating that
they sold nearly 700 million gallons of E0 in 2016, and CountryMark indicated that the number
of their retail stations offering E0 has increased from 2012 to 2017. Another commenter pointed
to data from Iowa on E0 use in that state. Also, EIA's Weekly Refiner & Blender Net Production
report indicates that E0 production by refiners was more than 12 billion gallons in 2016.
Response:
None of the information cited by commenters represented E0 sold at retail, and is therefore of
less value in estimating the actual volume of E0 used than commenters claim. For instance, there
is no way to determine with any certainty the volume of E0 sold at retail stations listed in Pure-
gas, org without data on E0 versus E10 throughput at such retail stations, which commenters did
not provide. Similarly, there is no straightforward way to extrapolate data from CountryMark on
E0 sales trends at their own retail stations, or data on E0 use in Iowa, to the nation as a whole.
Data provided by Magellan Midstream Partners represents 87 and 91 octane E0 sold from their
terminals, but despite their statement that they believe most or all of that E0 is actually used as
E0, they provided no data to support their claim. Finally, we do not believe that EIA's Weekly
Refiner & Blender Net Production is an adequate basis for estimating E0 sold at retail. Not only
is the "Other Conventional Motor Gasoline" category presumed to be finished gasoline without
ethanol, but this category does not capture the significant volumes of gasoline that are blended
with ethanol downstream of the refinery.
Commenters did not address the methodology used to estimate 500 million gallons of E0
described in the document titled "Estimate of E0 use in 2016," other than to say that it was too
low. We continue to believe that the approach to estimating E0 in that document, updated with
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additional data in the document "Revised estimate of EO use in 2016," is the most appropriate
way to estimate nationwide EO use, as it relies on gasoline demand in 2016 as estimated by EIA
in their STEO and ethanol use as recorded in EMTS. We believe that EMTS data provides more
accurate information on actual use of ethanol in motor fuel than EIA's survey data on ethanol
production, blending, imports, and exports because it accounts for every gallon of ethanol
produced but not exported, and is verified by the purchaser in the transaction within EMTS.
Using this methodology, our updated estimate of EO for 2016 is about 700 million gallons.
Comment:
Several commenters pointed to a report from EIA suggesting that 5.3 billion gallons of E0 was
consumed in 2015.
Response:
With regard to EIA's estimate that 5.3 billion gallons of E0 was consumed in 2015, we discussed
this source in detail in the 2017 final rule, and commenters provided no new information on it.
As described in that rule, we do not believe that the 5.3 million value represents consumption of
E0 at the retail. EIA's estimate was based on survey data from most U.S. terminals, which
include information about domestic distribution from the terminal level and exports of ethanol-
free gasoline, with the difference representing domestic disposition. EIA combines this
information with estimates of available ethanol, assuming that the ethanol is used in a 10% blend
with ethanol-free gasoline. As described in a memorandum to the docket, our analysis of EIA's
estimate of 5.3 billion gallons of E0 concludes that it would require E85 volumes significantly
higher than the volumes likely to have been supplied in 2015 in order to be consistent with either
EMTS or EIA data on ethanol consumption. In our view, the 5.3 billion gallons of E0 estimated
by EIA must include volumes of gasoline that are subsequently blended with ethanol
downstream of the terminal prior to dispensing from retail and centralized fleet refueling
stations; a common practice not captured in EIA's estimate. Furthermore, EIA's calculations are
very sensitive to the exact volume of total ethanol available for blending, and EIA's estimate
based on survey data differs from EPA's compliance data by about 1 percent.
Comment:
One commenter stated that EPA continues to falsely claim that only 200 million gallons of E0
has been used in the past.
Response:
EPA does not believe that E0 in previous years was 200 million gallons. Instead, as described in
the 2017 final rule, we indicated our belief that the RFS program could result in all but a tiny
portion— estimated at 200 million gallons—of gasoline to contain at least 10% ethanol. We
based this determination on the following two considerations:
1. The RFS program will continue to incentivize the market to transition from E0 to E10
and other higher level ethanol blends through the RIN mechanism.
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2. Recreational marine engines represent a market segment that we believe would be
particularly difficult to completely transition from EO since they are used in a water
environment where there is a greater potential for water contamination of the fuel.
Some recreational marine consumers are concerned that there could be a potential for
consequent engine damage following phase separation of the water and fuel.
Comment:
One commenter stated that it is not appropriate for EPA to assume any volume of EO in its
determination of the volume requirements for 2018, since the RFS program should be forcing
increased volumes of renewable fuel use.
Response:
As described in a previous memorandum, we expect there to be an ongoing need for some EO for
use by recreational marine engines, since they are used in a water environment where there is a
greater potential for water contamination of the fuel.37 Some consumers are concerned that there
could be a potential for consequent engine damage following phase separation of the water and
fuel.
However, we are not assuming any particular level of EO use in the final rule to support our
determination of the 2018 standards. For the 2018 NPRM, we noted that based on EIA projected
gasoline consumption data and estimates of EO, E10, E15, and E85 use, the market could
reasonably attain a nationwide average ethanol concentration of 10.13% ethanol in 2017. In
concluding that the total renewable fuel standard does not need to be reduced further in 2018
below the level resulting from full use of the cellulosic waiver authority, we assumed that the
market could maintain this 10.13% level in 2018. However, for the final rule, we have based our
determination of the volume requirement for total renewable fuel on reducing the statutory target
for total renewable fuel by the same amount as the reduction in advanced biofuel under the
cellulosic waiver authority. To perform this calculation, there was no need to assume a particular
volume of E0, nor of ethanol generally. Additionally, we determined that there is no need for
further reductions in the volume requirement for total renewable fuel using any other waiver
authority, including inadequate domestic supply under the general waiver authority wherein we
considered only the supply of conventional renewable fuel to refiners, importers, and blenders.
See Sections IV and V of the final rule for further discussion.
Comment:
Several commenters stated that EPA should target 9.7% for the nationwide average ethanol
content because doing so would accommodate the 3% of gasoline which is E0.
37 "Estimating E0 use in recreational marine engines," memorandum from David Korotney to docket EPA-HQ-
O AR-2015-0111.
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Response:
In the 2014-2016 final rule we addressed refiners' claim that 3% of the gasoline pool has been
E0 for several years, concluding that those estimates were generated from incomplete EIA
gasoline supply data which overestimated the potential demand for E0 at retail. Comments from
refiners in response to the 2018 NPRM did not provide any new or different information that
would change our conclusions with regard to that 3% estimate. Regardless, we are not targeting
any particular ethanol concentration to support the 2018 standards, as described above.
Comment:
One commenter stated that many consumers want E0, and EPA should account for that fact when
establishing the volume requirements. This commenter pointed to demand for E0 by owners of
motorcycles, ATVs, boats, lawn mowers, and other nonroad equipment.
Response:
The RFS program is designed to permit the use of any type and amount of renewable fuel to be
used within the conditions imposed by the four renewable fuel categories (cellulosic biofuel,
BBD, advanced biofuel, and total renewable fuel). The market will supply E0 so long as there is
demand for it. In the context of EPA's determination of the appropriate volume requirements to
set for 2018, we have not assumed a specific volume of ethanol nor of E0. Instead, we
determined that there is an adequate supply of renewable fuel available to refiners, importers,
and blenders to meet the volume requirements of 4.29 billion gallons of advanced biofuel and
19.29 billion gallons of total renewable fuel. See Section V.A of the final rule for further
discussion.
Comment:
One commenter stated that, while EPA proposed to increase the demand for E0 from 200 million
gallons to 500 million gallons, the proposed standards would nevertheless make it increasingly
difficult for boaters to find E0, and the constrained supply will increase its price.
Response:
This commenter misunderstood both our calculation of E0 volumes and the impact that the
proposed standards would have on E0. The 500 million gallons was our proposed estimate of the
volume of E0 used in 2016, not a projection nor requirement for 20 1 8.38 The 200 million gallons
was the volume that we believed would need to continue to be used when we established the
2016 and 2017 standards, but we did not explicitly use this volume in determining the proposed
2018 standards. Instead, we proposed that the nationwide ethanol concentration in 2018 could be
at least 10.13% without proposing specific volumes of E0, E10, E15, or E85. Moreover, for the
final rule we have not made any projection of the volume of ethanol that is reasonably attainable
in the determination of the applicable volume requirements. Instead, we determined that there is
38 For the final rule, we have revised the estimate of E0 use in 2016 to about 700 million gallons.
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an adequate supply of renewable fuel available to refiners, importers, and blenders to meet the
volume requirements of 4.29 billion gallons of advanced biofuel and 19.29 billion gallons of
total renewable fuel.
While the final 2018 volume requirements are slightly higher than those established for 2017, the
market will determine whether this increase will occur through the increased use of ethanol or
through non-ethanol renewable fuels. However, we note that it is the advanced biofuel volume
requirement which has increased between 2017 and 2018 rather than the implied volume
requirement for conventional renewable fuel which remains constant at 15 billion gallons. The
predominant advanced biofuel used to date is biodiesel rather than ethanol, and thus it is more
likely that the increase between 2017 and 2018 will be met with biodiesel with no concurrent
impact on E0 use.
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5.1.6 E15
Commenters that provided comment on this topic include, but are not limited to: 1301, 1756,
2545, 2547, 3242, 3319, 3497, 3645, 3680, 3681, and 3962.
Comment:
One commenter stated that many retailers are avoiding installing El 5 pumps because of poor
return on investment, and that retailers who have tried to sell El5 have seen low sales volumes.
Response:
We recognize that return on investment is the primary consideration for many retail station
owners. As pointed out by many commenters, grant programs such as USDA's BIP program and
the ethanol industry's Prime the Pump program have increased the availability of El 5 at retail by
offsetting some of the costs of installing or upgrading equipment, and this is expected to help
increase the return on investment. The RFS program also provides an incentive for the market to
use higher level ethanol blends such as El5, though the market could also choose non-ethanol
renewable fuels as well.
Comment:
One commenter stated that retail infrastructure to offer El5 is not a limiting factor in the level of
El5 supply that can be achieved. This commenter quoted a study from the National Renewable
Energy Laboratory (NREL) that said, "...the majority of installed tanks can store blends above
E10."
Response:
We disagree that retail infrastructure is not a limiting factor in El 5 supply. Commenters
representing retail stations indicated that, while it may be the case that much of the existing
equipment at retail is compatible with El5, compatibility with El5 is not the same as being
approved for El 5 use. Recently-amended EPA regulations require that parties storing ethanol in
underground tanks in concentrations greater than 10 percent demonstrate compatibility of their
tanks with the fuel, through either a certification or listing of underground storage tank system
equipment or components by a nationally recognized, independent testing laboratory for use with
the fuel, written approval by the equipment or component manufacturer, or some other method
that is determined by the agency implementing the new requirements to be no less protective of
human health and the environment. The use of any equipment to offer El 5 that does not satisfy
these requirements, even if that equipment is technically compatible with El 5, would pose
potential liability for the retailer, including concerns related to liability for equipment damage.
Few retailers would be willing to assume such liability, according to comments submitted by
their national associations. This issue is of particular concern for underground storage tanks and
associated hardware, as the documentation for their design and the types of materials used, and
even their installation dates, is often unavailable.
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Comment:
One commenter stated that many retailers have significant concerns about liability for misfueling
of pre-2001 vehicles or nonroad engines with E15, and so have a disincentive to install or
upgrade equipment to offer El 5.
Response:
EPA regulations require pump labeling, a misfueling mitigation plan, surveys, product transfer
documents, and approval of equipment configurations for a retail station owner choosing to offer
E15. These regulations are designed to ensure that misfueling does not occur. Nevertheless, the
RFS program does not require the use of El 5 or ethanol in any form, and retailer stations owners
are therefore not required to offer El5.
Comment:
The costs associated with upgrading old equipment at retail stations in order to offer El5, or
installing new equipment, was a matter of disagreement among commenters. In general,
commenters representing the ethanol production industry believed that the costs would be low,
while those who represent the interests of retail stations believed that they would be high.
Response:
Actual costs for a retailer to offer El5 will vary depending on whether existing equipment can be
recertified for El5, whether it is only pumps/dispensers that must be upgraded versus
underground storage tanks and/or other hardware, the number of dispensers at a given retail
station that the retailer wants to be able to offer El5, and other factors. However, based on
expenditures for USDA's BIP program, the average retail station upgrade costs about $140,000
(approximately $200 million in total funds to upgrade about 1,400 stations).39
Comment:
One commenter stated that EPA has significantly underestimated the potential for El5 sales. The
majority of vehicles are legally permitted to use El 5.
Response:
We do not believe that the number of vehicles that are legally permitted to use El 5 is the
predominant factor in the volume of E15 that is likely to be consumed in 2018. Instead, it is the
number of retail stations offering El 5 in 2018 that is a more important factor.
39 The BIP program provided about $100 million in total federal grants, covering about 50% of the costs of the
upgrades. State grants, funding provided by the Prime the Pump program, and private funding supplied the
remaining 50%.
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Comment:
One commenter stated that EPA needs to guarantee the availability of E0/E10 for recreational
marine engines. El 5 will damage these engines.
Response:
The RFS program does not require the use of El 5, and in fact does not require the use of ethanol
at all. If there is a demand for EO and/or E10 for recreational marine engines or any other engine
or vehicle, it can be supplied so long as the volume requirements under the RFS program are
met. Moreover, El 5 is not permitted to be used in motorcycles nor any nonroad engine, and
retail pumps must be labelled to ensure that misfueling does not occur.
Comment:
One commenter stated that EPA has not accounted for the fact that the number of retail stations
offering El 5 is increasing significantly. Moreover, this commenter stated that this increase will
continue into 2018 and beyond because, contrary to EPA's statement in the 2018 NPRM, the
Prime the Pump program is not ending in 2017.
Response:
We agree that the number of retail stations offering E15 has increased in 2017 compared to 2016.
With regard to Prime the Pump, information available to EPA for the 2018 NPRM was that the
program would complete its current round of funding for El 5 upgrades at retail stations by the
end of 2017.40 However, based on information provided by commenters, it is apparent that
additional funding has been procured and additional retail stations will be upgraded to offer El 5
in 2018 and beyond. Regardless, we are not relying on any particular volume of El 5 use to
support the 2018 standards, as described above.
Comment:
One commenter stated that demand for E15 is not constrained. It will increase if EPA increases
the standards, since the standards determine the RIN price, the RIN price determines the retail
fuel price of E15 relative to E10, and consumers make choice based on retail fuel price.
Response:
As described in the 2017 final rule, the applicable standards that we set under the RFS program
provide incentives for the market to overcome many constraints associated with the use of higher
level ethanol blends. However, the market is not unlimited in its ability to respond to the
standards we set. RIN prices are highly variable, and the value of the RIN is not fully passed on
to consumers. Moreover, the standards we set are not specific to ethanol, and the market can
respond to the standards we are establishing for 2018 through volumes of higher ethanol blends
40 "E-mail dialogue with Robert White on Prime the Pump," available in docket EPA-HQ-OAR-2016-0004.
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such as El5 and E85, or by increasing non-ethanol renewable fuels such as biodiesel and
renewable diesel. Thus, notwithstanding the constraints associated with the use of higher level
ethanol blends, increasing standards may result in no change in the use of ethanol. Regardless,
we are not relying on any particular volume of El 5 use to support the 2018 standards, as
described above.
Comment:
Several commenters stated that EPA's assumption that 15% of gasoline sold at retail stations
offering both E10 and E15 is E15 is not supported by statistical evidence.
Response:
We are not aware of any data on nationwide sales of E15, and no the commenter provided such
data, though some pointed to El 5 sales data from Iowa. In lieu of nationwide data, we made
estimates of El 5 sales in 2016 using the following equation:
El5 volume = (Total gasoline throughput per station)
x (Number of stations offering El 5)
x (Fraction of total gasoline sales which are El 5)
This equation was introduced in the 2014-2016 final rule. Our use of 15% for the fraction of total
gasoline sales that are El 5 is based on data provided by commenters in response to the 2017
NPRM, and is discussed in the 2017 final rule.41 No commenter provided alternative data in
response to the 2018 NPRM.
Comment:
One commenter stated that the RFS is already forcing El5 to be sold to meet the 15 billion
gallon implied volume requirement for conventional renewable fuel, and that any further
increases in the applicable volume requirements will result in significant costs to retailers to
upgrade their equipment to offer El 5.
Response:
The RFS program does not require the use of ethanol, nor does it require retailers to offer
particular blends of ethanol. The market will determine the types and volumes of renewable fuels
that will be supplied and used in order to meet the applicable standards. See also responses in
Section 5.3.2 of this document on comments that conflate the implied conventional renewable
fuel volume requirement with ethanol volumes.
41 81 FR 89777
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Comment:
One commenter stated that, due to USDA's BIP program and the Prime the Pump program, the
volume of El 5 could reach 1.2 billion gallons in 2018, which would be a problem for
motorcycles, which cannot use E15.
Response:
The BIP and Prime the Pump programs enable retail stations to offer El 5, but do not require its
use; the market will determine the volume of El 5 actually sold. Moreover, these grant programs
are not associated with the RFS program, and the RFS program does not require the use of E15
nor of ethanol generally. We note that, even if 1.2 billion gallons of El 5 were sold in 2018, it
would represent less than 1% of all gasoline sold, such that motorcycles would continue to have
reasonable access to E10.
Comment:
One commenter stated that raising the ethanol mandate to E15 would force retailers to dedicate
limited underground storage capacity to El5, limiting the ability to carry other blends.
Response:
The RFS program does not require El 5 nor ethanol generally, and retailers are not required to
offer El 5 or any other ethanol blends.
Comment:
One commenter stated that EPA continues to overestimate the amount of El 5 that will be used.
Response:
For both the 2018 NPRM and the 2018 final rule, we did not project a specific volume of El 5
that could be used in 2018. As described in more detail in Section 5.1.5 of this document, the
2018 NPRM included an assumption that the market could reach a nationwide average of
10.13% ethanol in 2018, the same as that assumed in establishing the 2017 volume requirements.
However, for the 2018 final rule, we have based our determination of the volume requirement for
total renewable fuel on reducing the statutory target for total renewable fuel by the same amount
as the reduction in advanced biofuel under the cellulosic waiver authority. To perform this
calculation, there was no need to assume a particular volume of E15, nor of ethanol generally.
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5.1.7 E85
Commenters that provided comment on this topic include, but are not limited to: 1692, 1756,
2545, 3105, 3106, 3177, 3242, 3497, 3645, 3649, 3680, 3681, 3887, and 3962.
Comment:
A number of commenters pointed to efforts by major retailers to offer E85. In contrast, other
commenters pointed to examples of retailers who have discontinued offering E85 due to low
sales.
Response:
Despite these conflicting comments, the totality of available evidence suggests that infrastructure
will expand through 2018 due in part to installation/upgrade costs that have been subsidized by
USDA's BIP program and/or the ethanol industry's Prime the Pump program. Although we
recognize that some retailers may have ended offerings of E85, the net result of expanded
infrastructure under these programs is that E85 use is likely to increase in 2018 compared to
previous years. Regardless, we are not relying on any particular volume of E85 use to support the
2018 standards, as described above.
Comment:
Commenters representing ethanol interests generally stated that an E85 price discount
significantly higher than energy parity is achievable, while commenters representing refiners and
retailers generally stated that this was not possible without losing money.
Response:
Commenters were strongly divided on what E85 price discount may be attainable in 2018. No
commenters provided an unambiguous, quantitative methodology for determining an appropriate
future E85 price discount that would occur under the influence of higher RFS volume
requirements. Since the RFS program does not require the use of ethanol, the market will
determine whether compliance with the applicable standards will occur as a result of increased
El5 and E85 use, or through the use of non-ethanol renewable fuels. Regardless, we are not
relying on any particular volume of E85 use to support the 2018 standards, as described above.
Comment:
One commenter stated that the 2018 NPRM provided no reason to believe that EPA's projection
of 350 million gallons of E85 is attainable, and that an E85 price discount of 30% cannot be
reached in 2018.
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Response:
The 2018 NPRM did not project a specific E85 volume for 2018, and thus did not discuss the
E85 price discount that was achievable in 2018. However, in the context of describing various
ways in which the proposed standards could be met, we said that an E85 volume as high as 350
million gallons was possible if, among other things, the E85 price discount reached 30%.42 The
2018 NPRM did not identify 30% as a likely outcome, and indeed said that:
"The scenarios above cannot be treated as EPA's views on the only, or even most
likely, ways that the market may respond to the proposed 2018 volume
requirements. Instead, the scenarios are merely illustrative of the various ways
that it could play out. Our purpose in generating the list of scenarios above is only
to illustrate a range of possibilities which demonstrate that the standards we are
establishing in this action can reasonably be met." (82 FR 34235)
The 2018 NPRM said that an E85 price discount of 30% was possible because there was
evidence that it had already occurred in a more limited fashion. Commenters provided no
compelling evidence that this was not possible.
Comment:
One commenter stated that EPA's continued reference to so-called constraints on E85 use
ignores the fact that achievable volumes of E85 are determined by the standards that EPA sets.
The market will respond to the standards that EPA sets to increase E85 use.
Response:
As described earlier, the market is not unlimited in its ability to respond to the standards we set
as implied by many commenters that represent the ethanol production industry. We continue to
believe that constraints on the use of higher ethanol blends such as E85 are real, and that higher
standards do not necessarily correspond to increased use of ethanol. Commenters provided no
new information to indicate otherwise. Moreover, the standards we set are not specific to
ethanol, and the market can respond to the standards we are establishing for 2018 through El 5
and/or E85, or through non-ethanol renewable fuels such as biodiesel and renewable diesel.
Comment:
One commenter stated that EPA's correlation between E85 sales volumes and E85 price discount
is based on a flawed analysis, resulting in a correlation that is far too strong. It should be based
on more accurate information.
42 Table V.C-1 in the 2018 NPRM (82 FR 34206, July 21, 2017).
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Response:
The commenter provided critiques of the correlation between E85 sales volumes and price
discount that was developed in the context of the 2014-2016 final rule.43 That correlation was
updated with additional data and a more robust statistical analysis for the 2017 final rule.44 The
commenter's criticisms do not apply to the updated correlation, and the commenter did not
provide a critique of the updated correlation.
Comment:
One commenter stated that the available data on E85 sales volumes versus price discount is not
valid because it occurred when RFS standards were not high enough to push E85 sales
significantly. Because the underlying data is not a valid basis for the correlation, EPA should
base the shape of the curve on what is reasonable and consistent with economic theory rather
than on which curve fits the data best.
Response:
We disagree with the commenter's assertion that the available data is not valid. The available
data represents real-world consumer responses to the retail price difference between E85 and
E10. About one third of the available data is for E85 price discounts higher than the 22% level
representing energy parity between E85 and E10.45 Since it is the data above the energy parity
point that is of primary interest to ethanol proponents, the data on which the updated correlations
were based is more than sufficient to capture consumer response at those levels.
Just as importantly, we disagree with the commenter's position that a correlation based on
economic theory is a more appropriate basis than a correlation based on data. Our analysis
included an investigation into nonlinearity in the region surrounding the energy parity point.46
We determined that the theoretical upward trend that might be expected for E85 price discounts
above the energy parity point of 22% was not evident in the data.
We note that the correlations at issue were not used in making projections of reasonably
attainable ethanol volumes for 2018. We are not relying on any particular volume of E85 use to
support the 2018 standards, as described above.
43 "Correlating E85 consumption volumes with E85 price," memorandum from David Korotney to docket EPA-HQ-
OAR-2015-0111.
44 "Updated correlation of E85 sales volumes with E85 price discount," memorandum from David Korotney to
docket EPA-HQ-OAR-2016-0004.
45 "State E85 Sales and Price Data," Excel file available in docket EPA-HQ-OAR-2016-0004.
46 "Updated correlation of E85 sales volumes with E85 price discount," memorandum from David Korotney to
docket EPA-HQ-OAR-2016-0004. See section "Additional investigation of nonlinearity."
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Comment:
One commenter stated that there are about 3,700 stations offering E85 now, which indicates that
the opportunities for using E85 are expanding. Therefore, there is no reason that E85 cannot
increase substantially in 2018 compared to 2017.
Response:
As described in a memorandum to the docket, we do not believe that the number of retail stations
offering E85 that is available at E85prices.com is accurate.47 Instead, we have used data from
DOE's Alternative Fuels Data Center, which indicates that the number of stations offering E85
as of September 2017 was 3,322, an increase from the 2016 annual average of 3,091.
We note, however, that we have not projected a specific number of retail stations offering E85
for 2018, nor have we projected a specific E85 sales volume for 2018. While the number of retail
stations offering E85 will undoubtedly be higher in 2018 than in 2017, our determination of
whether there will be an adequate supply in 2018 to meet a volume requirement of 19.29 billion
gallons of renewable fuel assumes that, at a minimum, the pool-wide ethanol concentration of
10.13% targeted for 2017 can also be reached in 2018.
Comment:
One commenter stated that retail stations upgraded through the BIP program will only benefit
E15, not E85.
Response:
As described in a memorandum for the 2017 final rule, both the BIP program and the Prime the
Pump program are intended to upgrade retail stations to offer both El5 and E85.48
Comment:
One commenter stated that EPA is incorrect when it says that poor pricing constrains sales of
E15 and E85. In fact, ethanol reduces prices at the pump.
Response:
As described in the 2018 NPRM and in a memorandum to the docket, the relative price of El 5
and E85 compared to the price of the primary alternative E10 is one factor that affects sales
volumes of these higher level ethanol blends.49 The price difference between E15/E85 and E10 is
a function of the price of ethanol (which is in turn primarily a function of the price of corn) in
47 "Estimates of the number of retail stations offering E85," memorandum from David Korotney to docket EPA-HQ-
OAR-2015-0111.
48 "Projections of retail stations offering E15 and E85 in 2017," memorandum from David Korotney to docket EPA-
HQ-OAR-2016-0004.
49 "Market impacts of biofuels," memorandum from David Korotney to docket EPA-HQ-OAR-2017-0091.
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comparison to the price of gasoline (which is in turn primarily a function of the price of crude
oil). Under conditions wherein ethanol prices are low and gasoline prices are high, ethanol may
indeed reduce the price of E15/E85 at retail in comparison to E10 if parties in the distribution
system pass those relative savings to retail customers. Not only is this not always the case as
described in a docket memorandum, but such reductions, if and when they occur, may not be
sufficient to incentivize many customers to purchase E15/E85 instead of the more familiar ElO.50
For these reasons, we continue to believe that the retail price of E15/E85 does in fact place
constraints on the volumes that are sold.
Comment:
One commenter stated that EPA should be relying on EIA estimates of E85 volumes sold, not
creating their own estimates. EIA says that E85 volumes used in 2015 were only 87 million
gallons, not 186 million gallons as EPA estimated.
Response:
As discussed in the 2014-2016 final rule and the 2017 final rule, the EIA sources on which this
estimate was based do not capture all E85 that is actually used; not all production at terminals,
ethanol production facilities, or blenders with less than 50,000 barrels of product storage
capacity are included, nor is E85 captured which is produced using reformulated gasoline or
natural gasoline as the petroleum based component. Also, reported E85 production at ethanol
production facilities is likely to represent net rather than total finished fuel production given the
occasional negative values reported in the past. These commenters provided no new information
on historical E85 supply beyond what these EIA sources capture. We continue to believe that our
own estimate of actual E85 use based on E85 supply data from six states - 186 million gallons -
is a more accurate estimate of nationwide E85 sales in 2015.51 We have used the same
methodology to estimate E85 use at 205 million gallons in 2016.52
Comment:
One commenter stated that EPA should rely on E85 estimates from EIA's AEO. For 2016,
AEO2017 estimates that 320 million gallons of E85 were used, not the 192 million gallons that
EPA estimated in the 2018 NPRM.
Response:
As discussed in detail in the 2017 final rule, we do not believe that the AEO is an appropriate
basis for estimating E85 use in the past nor for purposes of setting future applicable volume
requirements under the RFS program.53 As EIA's STEO projections are based on more current
50 "A Preliminary Assessment of RIN Market Dynamics, RIN Prices, and Their Effects," Dallas Burkholder, Office
of Transportation and Air Quality, US EPA. May 14, 2015, EPA Air Docket EPA-HQ-OAR-2015-0111.
51 "Final estimate of E85 consumption in 2015," memorandum from David Korotney to docket EPA-HQ-OAR-
2016-0004.
52 "Final estimate of E85 consumption in 2016," memorandum from David Korotney to docket EPA-HQ-OAR-
2017-0091.
53 81 FR 89778.
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information and are focused on more near-term outcomes, and the STEO also forms the basis for
the gasoline and diesel demand projections that EIA has indicated should be used for
determining the applicable percentage standards, we do not believe that AEO is an appropriate
basis for estimating the E85 supply.
Comment:
One commenter stated that EPA continues to overestimate the amount of E85 that will be used.
Response:
For both the 2018 NPRM and the 2018 final rule, we did not project a specific volume of E85
that could be used in 2018. As described in more detail in Section 5.1.5 of this document, the
2018 NPRM included an assumption that the market could reach a nationwide average of
10.13% ethanol in 2018, the same as that assumed in establishing the 2017 volume requirements.
However, for the 2018 final rule, we have based our determination of the volume requirement for
total renewable fuel on reducing the statutory target for total renewable fuel by the same amount
as the reduction in advanced biofuel under the cellulosic waiver authority. To perform this
calculation, there was no need to assume a particular volume of El 5, nor of ethanol generally.
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5.1.8 Other Comments Related to Ethanol
Commenters that provided comment on this topic include, but are not limited to: 1774, 3175,
3237, 3242, and 4397.
Comment:
One commenter stated that EPA and EIA should work together to estimate volumes of EO, El5,
and E85.
Response:
EPA and EIA have shared information relevant to the estimation of EO, El 5, and E85 for prior
years. While EPA relies on EIA estimates of gasoline demand, both agencies have information
on total ethanol use: EIA's information comes through its surveys of production, imports, and
use, and EPA's information comes through RIN generation and retirement data in EMTS.
Similarly, both agencies have information on E85 use: EIA's information comes through its
surveys of production by refineries, and EPA's information comes through an analysis of E85
use from six states.54 Neither agency has direct information on the use of El 5 or EO. Therefore,
EPA has made estimates of El 5 and EO use using a combination of information from EIA,
EMTS, and other sources.55
Comment:
One commenter stated that ethanol is a costly way to increase the octane of gasoline, and that
there are less expensive alternatives that are better for the environment.
Response:
Ethanol is often a cost-effective way to increase the octane of gasoline. Studies by others have
indicated that ethanol is in fact a comparatively low cost means of increasing octane.56
Comments related to environmental impacts are addressed in Section 7.2.
Comment:
One commenter stated that current implementation of the RFS program encourages imports of
ethanol and fails to encourage exports of ethanol.
Response:
Total imports of ethanol have demonstrated a decreasing trend since 2012, contrary to this
54 "Final estimate of E85 consumption in 2016," memorandum from David Korotney to docket EPA-HQ-OAR-
2017-0091.
55 "Revised estimate of E0 use in 2016," memorandum from David Korotney to docket EPA-HQ-OAR-2017-0091.
56 "OPIS Octane Value Forum - Lay of the Land - Terry Higgins," available in docket EPA-HQ-OAR-2017-0091
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commenter's assertion.57 Similarly, exports of ethanol have demonstrated an increasing trend
over the same time period.58 While it would be difficult to make a direct causal connection
between the RFS program and imports and exports of ethanol due to the many other factors that
can affect imports and exports, nevertheless the assertions made by this commenter are not
supported by the available data.
57 "Imports of ethanol 2011 - 2017," available in docket EPA-HQ-OAR-2017-0091.
58 "Exports of ethanol 2011 - 2017," available in docket EPA-HQ-OAR-2017-0091.
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5.2 Biodiesel and Renewable Diesel
5.2.1 Infrastructure for Distributing, Blending, and Dispensing
Commenters that provided comment on this topic include, but are not limited to: 3249.
Comment:
One commenter estimated that 3.29 billion gallons of biodiesel and/or renewable diesel would be
needed to meet EPA's proposed volumes for 2018. The commenter stated that the biodiesel
distribution infrastructure would need to be expanded to accommodate this volume of biodiesel,
and that this expansion of biodiesel blending infrastructure could be problematic.
Response:
EPA's market assessment indicates that the required volumes of renewable fuel in this final rule
could be achieved with 2.9 billion gallons of biodiesel and/or renewable diesel.59 This is equal to
the volume of these fuels EPA projected would be used to meet the 2017 RFS standards, and less
than 300 million gallons more than was used in 2016. The average annual increase in the volume
of biodiesel and renewable supplied from 2011 through 2016 is slightly higher than 300 million
gallons. This data indicates that if an expansion of the biodiesel and/or renewable distribution
infrastructure is necessary to satisfy the renewable fuel volume requirements for 2018, the
market is capable of adding the necessary infrastructure.
59 For further detail, see "Market impacts of biofuels," memorandum from David Korotney to docket EPA-HQ-
OAR-2017-0091.
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5.2.2 Vehicles That Can Use It
Commenters that provided comment on this topic include, but are not limited to: 3321.
Comment:
One commenter stated that biodiesel can be used in engines in higher blends, and that renewable
diesel can be used as a drop in fuel. There are therefore no limitations to the use of
biodiesel/renewable diesel related to the ability of vehicles to use these fuels.
Response:
While EPA continues to note that there are a significant number of vehicles for which biodiesel
blends above B5 are not recommended (particularly heavy duty diesel engines, which consume
significant quantities of diesel fuel), we agree with the commenter that the ability of vehicles to
consume biodiesel and renewable diesel is highly unlikely to constrain the use of these fuels in
2018.
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5.2.3 Cold Temperature Impacts
Commenters that provided comment on this topic include, but are not limited to: 3177 and 4397.
Comment:
Multiple commenters stated that customer concerns about biodiesel have merit, and noted that
poor cold weather properties have impeded greater volumes of biodiesel entering the fuel system.
One of these commenters noted that their customers generally do not purchase biodiesel in the
winter months (between November 1 and mid-March). This commenter further stated that they
average less than 2% biodiesel in all diesel fuel sales, and that over 75% of their blends are B5 or
less. One commenter stated that biodiesel has a high viscosity and poor low temperature
volatility and flow properties. This commenter claimed that biodiesel damages engines.
Response:
EPA recognizes the challenges associated with using biodiesel blends in cold weather. We also
acknowledge that the industry has developed approaches for addressing these issues, including
heated storage and blending with #1 diesel or other additives. We further note that several cold
weather states have used biodiesel blends without significant reported issues in recent years.
While poor quality fuel, including both petroleum based diesel and biodiesel, can damage
engines, EPA is not aware of any diesel engines that recommend consumers do not use biodiesel
up to 5% blend levels (B5), nor are we aware of evidence that suggests that biodiesel that meets
the relevant fuel quality specifications, when stored and handled appropriately, damages engines.
Finally, we note that the RFS program is designed to allow obligated parties that cannot obtain
RINs necessary for compliance (or choose not to do so) to purchase separated RINs.
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5.2.4 Production Capacity
Commenters that provided comment on this topic include, but are not limited to: 2540, 2542,
3177, 3319, 3321, 3430, 3497, and 3593.
Comment:
One commenter claimed that excess biodiesel and renewable diesel production capacity exists to
support higher volume requirements for these fuels.
Response:
EPA acknowledges that existing biodiesel and renewable diesel production capacity exceeds the
projected reasonably attainable volume of advanced biodiesel and renewable diesel for 2018
(2.55 billion gallons) as well as the total volume of biodiesel and renewable diesel projected to
be used to meet the 2018 standards (2.9 billion gallons). However, for the reasons articulated in
Section IV of the final rule, we do not believe it would be appropriate to require higher volumes
of biodiesel or renewable diesel in this rule.
Comment:
One commenter questioned claims by NBB that the biodiesel industry is operating at 65% of
capacity. This commenter estimated that the domestic biodiesel production capacity is
approximately 2 billion gallons.
Response:
For this final rule, EPA has updated our assessment of the volume of registered capacity of
biodiesel and renewable diesel.60 Based on this updated assessment, EPA finds that the current
domestic production capacity of registered biodiesel and renewable diesel production facilities is
approximately 4.1 billion gallons, and that the production capacity for these fuels from the sub-
set of facilities that generated RINs in 2017 (through September 2017) was 3.0 billion gallons. It
is uncertain, however, how quickly these facilities could ramp-up production from current
production levels to production volumes at or near their facility production capacities.
Comment:
Multiple commenters cited EPA's October 2016 assessment of registered biodiesel production
capacity (4.2 billion gallons), and suggested that this large production capacity, including
significant unused domestic capacity, supported higher volumes of biodiesel and renewable
diesel in the final rule. One commenter stated that production capacity is the only appropriate
basis for determining the reasonable supply of biodiesel and renewable diesel. Another
60 See "Market impacts of biofuels," memorandum from David Korotney to docket EPA-HQ-OAR-2017-0091.
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commenter noted that this total capacity did not include non-registered domestic facilities or any
foreign production capacity.
Response:
EPA acknowledges that existing biodiesel and renewable diesel production capacity exceeds the
projected reasonably attainable volume of advanced biodiesel and renewable diesel for 2018
(2.55 billion gallons) as well as the total volume of biodiesel and renewable diesel projected to
be used to meet the 2018 standards (2.9 billion gallons). We disagree, however, that this excess
production capacity provides a sufficient basis for higher required volumes of biodiesel and/or
renewable diesel, or that the production capacity is the only appropriate basis for determining the
reasonably available supply of these fuels. For the reasons articulated in Section IV of the final
rule, we do not believe it would be appropriate to require higher volumes of biodiesel or
renewable diesel in this rule.
Comment:
One commenter stated that the biodiesel industry requires certainty to plan for production and
utilization. The commenter stated that there is more than enough domestic production capacity to
meet higher volumes, and that the certainty of an increasing RVO could help the biodiesel
industry get back on track.
Response:
We recognize that certainty in the RFS program is important to the biodiesel industry. By
establishing the RFS standards by the statutory deadline (November 30) and in accordance with
EPA's statutory authority, EPA believes we are providing the appropriate certainty and
incentives to the renewable fuels industry, including the biodiesel industry.
Comment:
One commenter stated that biodiesel production capacity is expanding, noting that from 2016 to
2018 total biodiesel production capacity in Iowa is expected to increase by 78 million gallons
(approximately 25%). The commenter stated that the investments to increase the production
capacity have, in part, been made on the promise of a strong and growing RFS program.
Response:
EPA recognizes that some biodiesel producers have recently made investments to expand
capacity at their biodiesel production facilities. As the biodiesel market has matured over the last
decade, larger plants have come on line as some smaller plants have either expanded or closed.
Thus one cannot look just at actions of individual facilities to get a sense of the overall biodiesel
market. Regardless, for the reasons articulated in Section IV of the final rule, we do not believe
that it would be appropriate to increase the required volumes of advanced or total renewable fuel
on this basis alone.
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Comment:
One commenter stated that the domestic biodiesel industry historically has had a relatively low
capacity utilization, and imported volumes have been necessary to provide the required volumes
of these fuels.
Response:
While it is true that the domestic biodiesel industry has historically had relatively low capacity
utilization rates, this does not necessarily mean that these facilities are incapable of operating at
higher utilization rates. The biodiesel industry has had relatively low capacity utilization rates
over its history for a wide range of reasons. One of these reasons is that in certain markets
foreign sources of biodiesel have often outcompeted potential domestic sources for U.S. market
share. We believe the market is capable of supplying the 2.9 billion gallons of biodiesel and
renewable diesel we projected would be used to satisfy the volumes in the final rule, whether this
volume comes from increased domestic production or imported biodiesel and renewable diesel.
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5.2.5 Feedstock Availability
Commenters that provided comment on this topic include, but are not limited to: 1775, 2539,
3245, 3319, 3321, 3430, 3497, 3578, 3593, 3647, 3680, and 3880.
Comment:
One commenter stated that higher renewable fuel requirements would result in greater demand
for palm oil.
Response:
EPA recognizes that higher renewable fuel requirements generally, and higher required volumes
for biodiesel and renewable diesel specifically, have the potential to increase global demand for
palm oil. As discussed in further detail in Section IV of the final rule, EPA has considered the
growth in the production of advanced biofuel feedstocks in exercising our cellulosic waiver
authority in an effort to minimize the incentives for feedstock switching and the increased
production of non-advanced renewable oils.
Comment:
One commenter stated that farmers are capable of producing additional biodiesel feedstocks.
Response:
We acknowledge that farmers have the capability to produce additional biodiesel and renewable
feedstocks, and that it is possible that farmers could respond to higher RFS standards by
producing additional feedstocks (such as soybean or canola oil) that could then be used to
produce biodiesel and renewable diesel. It is also possible, however, that the market could
respond by diverting these feedstocks from existing uses and that the industries currently using
these feedstocks would instead use palm or petroleum based feedstocks. EPA has exercised our
cellulosic waiver authority in an effort to minimize the incentives for this type of feedstock
switching.
Comment:
One commenter submitted a study of the global supply of waste oils that could be used to
produce biodiesel. This study concluded that the global availability of waste greases could
increase from 29.0 million metric tons in 2017 to 34.2 million metric tons in 2022.
Response:
This study suggests that increased collection of waste greases globally could increase the supply
of biodiesel feedstocks by approximately 5.2 million metric tons by 2022. This would be equal to
an average annual increase in waste greases of 1.04 million metric tons per year, or enough
feedstock to produce approximately 290 million gallons of biodiesel. This study does not,
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however, attempt to quantify how much of this feedstock will be available to produce biodiesel
or renewable diesel for the U.S. market. In fact, the study notes that a key driver for the increased
collection of waste greases in recent years have been the incentives for biodiesel produced from
these fuels in the E.U., making it unavailable for the U.S. market. Furthermore, EPA found that
some of the assumptions made in calculating the total available volume of waste greases are
overly optimistic. For example, the study assumes that countries that have exported used cooking
oil to either the U.S. or the E.U. in recent years increase their collection rates to equal that of the
U.S. by 2022, despite the fact that the majority of these countries do not have incentives in place
to increase the collection of these oils. The study also includes significant volumes of grease trap
oil in their estimate, even while noting that there are significant constraints to using grease trap
oil as a biodiesel feedstock. In addition, the feedstocks in question are often geographically
dispersed, making the collection and transportation costs associated with bringing them to local
markets, let alone the U.S. market cost prohibitive. While we acknowledge that the increased
collection of waste greases is likely to increase the available supply of advanced biodiesel and
renewable diesel feedstocks in 2018 to some degree, we conclude that the actual increase in the
supply of these feedstocks available to producers of biodiesel and renewable diesel to the U.S.
market will be far less than 1.04 million metric tons. We finally note that including some portion
of this available feedstock in our assessment of the reasonably attainable volume of advanced
biodiesel and renewable diesel in 2018 would not impact the required volumes we are finalizing
in this rule, since we ultimately decided to reduce the advanced and total biofuel requirements
from the statutory volumes by the same amount as the reduction to the cellulosic biofuel
statutory volume despite the projected availability of additional advanced biodiesel and
renewable diesel feedstocks.
Comment:
Multiple commenters claimed that EPA had presented no evidence that higher advanced biofuel
standards could lead to feedstock switching. One commenter claimed that feedstock switching
concerns were speculative and contrary to the facts that more feedstocks are becoming available
through more efficient soybean oil crushing, increased use of distillers corn oil, and increased
use of used cooking oil in recent years. The commenter noted that EPA's own analysis showed
that 2.9 billion gallons of feedstock would be available for use to produce biodiesel and
renewable diesel in 2018. Another commenter submitted a study examining whether or not
biodiesel production in the past had diverted feedstocks from other uses. This study concluded
that feedstock diversion has not occurred, and will not occur in the future.
Response:
The significant increase in the use of soybean oil and animal fats to produce biodiesel, repeated
complaints from other industries that have historically used animal fats (such as the oleochemical
industry), and the significant increase in imported volumes of biodiesel and renewable diesel in
recent years are all indicators that the increase in biodiesel and renewable diesel production and
use in the U.S. in recent years has, at least in part, been enabled by the diversion of feedstocks
from other uses. EPA's focus in this rule, however, is the degree to which additional volumes of
biodiesel and renewable diesel could be produced in 2018 without relying on further diversions
of feedstocks. Even if the expansion of biodiesel in recent years primarily or exclusively relied
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on newly available feedstocks, rather than diverting feedstocks from other uses (which EPA
contests, as discussed below) this does not necessarily mean that future growth could be
achieved in the same manner. EPA's analysis of potential new sources of advanced feedstocks
for biodiesel and renewable diesel (presented in Section IV of the final rule) suggests limited
growth in these feedstocks in 2018. Ultimately, however, even if EPA has underestimated the
growth in advanced biofuel feedstocks in 2018 this would not impact our standards, as we have
decided it is appropriate to reduce the advanced biofuel and total renewable fuel volume
requirements by the same level as the cellulosic biofuel volume requirement, despite the
projected availability of additional volumes of advanced biofuel (see Section IV of the final rule
for a further discussion of this issue).
EPA has reviewed the study submitted by the commenter; however, we do not believe the study
supports the stated conclusions. The primary evidence presented in this study that increased
biodiesel production and use has not diverted feedstocks from existing uses is the increased use
of non-vegetable oil feedstocks (used cooking oil, tallow, white grease, etc.) and distillers corn
oil (DCO). The authors of the study suggest that rather than diverting feedstocks, the expansion
of the biodiesel industry has led to the growth of new feedstock sources and the use of co-
products and by-products from other sectors. While EPA recognizes that the expansion of the
biodiesel industry has contributed to the collection or recovery of new feedstocks such as waste
oils and greases and distillers corn oil, and that biodiesel production has expanded to areas
outside traditional soybean growing regions, some of these feedstocks were already being used in
non-biofuel industries prior to the expansion of biodiesel such as the oleochemical industry and
animal feed.61 The report cites potential for the increased use of DCO in future years as an
example of a feedstock that could enable additional biodiesel production without diverting
feedstocks from existing uses, even while stating that currently only 40% of DCO is used as
biodiesel feedstock with the remainder being used primarily as animal feed. Increasing the use of
DCO in the biodiesel industry would therefore likely result in diverting DCO from its current use
as animal feed - precisely the type of diversion EPA is seeking to minimize.
It is also not the case that the growth in the biodiesel industry was entirely due to increased use
of non-vegetable oil feedstocks. While the commenter notes that the share of soybean oil used to
produce biodiesel has not significantly increased since 2011, the quantity of soybean oil used to
produce biodiesel has increased dramatically from 1,141 million pounds in 2010 to 4,153 million
pounds in 2011 and 6,096 million pounds in 2016.62 The study cites lower prices for soybean oil
since 2011 as evidence that the biodiesel industry is not diverting these oils from other industries.
However, there are a wide variety of factors that impact the price of soybean oil (including
things such as the size of the soybean harvest, the price and availability of other vegetable oils,
broad global economic factors, etc.) besides demand from biodiesel producers.
The study also acknowledges that imports of biodiesel have increased significantly in recent
years, but simply states (without supporting analysis) that this was the result of factors other than
the RFS program.
61 See comments from the American Cleaning Institute (3578)
62 Data from EIA Monthly Biodiesel Production Reports (June 2012 and October 2017)
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Comment:
Multiple commenters stated that there are sufficient feedstocks available to produce greater
volumes of biodiesel and renewable diesel. One commenter claimed that the diversity of
biodiesel feedstocks can stimulate new technology and innovation.
Response:
Commenters suggest that there will be additional volumes of advanced feedstocks that could be
used to produce biodiesel and renewable diesel in 2018. We have adjusted our projections where
we find these comments are well supported. EPA's analysis of potential new sources of
advanced feedstocks for biodiesel and renewable diesel (presented in Section IV of the final rule)
suggests limited growth in these feedstocks in 2018. Ultimately, however, even if EPA has
underestimated the growth in advanced biofuel feedstocks in 2018 this would not impact our
standards, as we have decided it is appropriate to reduce the advanced biofuel and total
renewable fuel volume requirements by the same level as the cellulosic biofuel volume
requirement, despite the projected availability of additional volumes of advanced biofuel (see
Section IV of the final rule for a further discussion of this issue).
Comment:
One commenter submitted a study that found that increasing biodiesel production from soybean
oil could affect the use of soybean oil in food markets, and could cause market disruption across
the agricultural, food, and fuel sectors. The study also found that increasing demand for biodiesel
would result in soybean oil price increases, additional planting of soybeans, and increased costs
for food and diesel fuel.
Response:
EPA recognizes that increasing renewable fuel volume requirements can result in price increases
for feedstocks that are used to produce renewable fuels, which can impact the price of renewable
fuels as well as other sectors that use these feedstocks. EPA has reviewed this study, and notes
that the scenarios modeled (required volumes of 3.0 and 4.0 billion gallons of biodiesel and
renewable diesel) are both higher than the volume of these fuels EPA projects will be used to
meet these final standards (2.9 billion gallons). While we acknowledge the possibility that the
RFS standards for 2018 could result in some of the impacts found in the study (such as higher
prices for soybean oil, BBD RINs, greater planting of soybeans, etc.) we have exercised our
waiver authorities in a manner to seek to minimize these impacts. We finally note that while the
modeling results of the study may be directionally accurate, they are highly dependent on many
assumptions used in the model used for the study, and may not accurately model the precise
impacts of any renewable fuel requirement.
Comment:
One commenter noted that each year approximately 10 billion pounds of recycled animal fats
and refined used cooking oil are used in the renewable fuel industry. This commenter stated that
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the biodiesel and renewable diesel industry can produce more fuel if the RFS volumes were
increased, and that feedstock availability would not limit the production of these fuels.
Response:
Recycled animal fats and refined cooking oil are significant sources of biodiesel and renewable
diesel feedstocks, and we recognize that greater quantities of these products could be used to
produce biodiesel and renewable diesel. However, as discussed in Section IV of the final rule,
diverting these feedstocks for use to produce additional volumes of biodiesel and renewable
diesel could reduce the benefits associated with biodiesel and renewable diesel production.
EPA's assessment of the reasonably available volumes of these fuels sought to avoid these
feedstock diversions, and is based on projected growth in the production of advanced biodiesel
and renewable diesel feedstocks.
Comment:
One commenter stated that the RFS disadvantages industries that traditionally have used animal
fats, such as the oleochemical industry. The commenter claimed that the supply of animal fats is
inelastic, and that manufacturers face disruption in market availability and higher prices for
animal fats as a direct result of federal incentives for biodiesel production. The commenter
requested that EPA exclude animal fats from our consideration of available biodiesel feedstocks,
or that we require biodiesel volumes at a level that does not unfairly impact historical feedstock
uses for animal fats.
Response:
EPA recognizes the potential negative impacts that could result from diverting animal fats from
traditional uses such as the oleochemical industry to instead use it as biodiesel and renewable
diesel feedstocks. In this final rule we have exercised our waiver authority in such a way that
seeks to minimize these potential negative impacts.
Comment:
One commenter stated that planted crops that supply oil for advanced biodiesel are primarily
grown as livestock feed, and that planted acres respond to the projected demand for livestock
feeds, not demand for vegetable oil for biodiesel production. The commenter further stated that
increased use of oils for biodiesel and renewable diesel feedstock do not compete directly with
use of non-oil components.
Response:
EPA recognizes that planted crops in the U.S. that supply oil for advanced biodiesel and
renewable diesel are primarily grown to provide protein for livestock feed, and that plantings of
these crops are thus much more sensitive to demand for livestock feed. We further recognize that
increased demand for the oil portions of these crops due to higher demand for biodiesel and
renewable diesel does not negatively impact the supply of the non-oil components of these crops.
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Our projection of reasonably available volumes of biodiesel and renewable diesel for 2018 (from
Section IV of the final rule) reflects these facts, by projecting growth in the availability of
vegetable oils in 2018 based on USDA projections of domestic vegetable oil production in 2018.
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5.2.6 Imports of Conventional Biodiesel and Renewable Diesel
Commenters that provided comment on this topic include, but are not limited to: 2545, 3105,
3106, 3177, 3497, and 3887.
Comment:
One commenter stated that 400 million gallons of conventional biodiesel and renewable diesel is
not available, noting that the supply of these fuels has not exceeded 200 million gallons in any
previous year.
Response:
In our final rule, as in our proposed rule, EPA is not projecting that 400 million gallons of
conventional biodiesel and/or renewable diesel will be supplied to the United States in 2018,
rather we are projecting that 2.55 billion gallons of advanced biodiesel and renewable diesel will
be reasonably available in 2018, and that the market will likely supply a total volume of
approximately 2.9 billion gallons of biodiesel and renewable diesel in 2018. The volume of
biodiesel and renewable diesel beyond the volume projected to come from advanced biodiesel
and renewable diesel could be supplied by conventional biodiesel and renewable diesel or
additional volumes of advanced biodiesel and renewable diesel. We also note that historical
volumes of conventional biodiesel and renewable diesel imports are not necessarily reflective of
the volumes of these fuels that could be imported in future years. In light of the significant
production capacity for biodiesel and renewable diesel, the large quantity of feedstocks that can
be used to produce these fuels (both domestically and globally), and domestic infrastructure
capable of distributing and using this volume of biodiesel and renewable diesel, EPA is not
aware of any factors that would limit the total supply of biodiesel and renewable diesel to the
U.S. in 2018 to a volume below 2.9 billion gallons.
Comment:
One commenter stated that EPA should not want to provide incentives for conventional
biodiesel, as these fuels are imported from foreign countries and have high GHG emissions.
Response:
The statutory volume targets imply a target of 15 billion gallons for conventional biofuels. This
volume can be satisfied with any type of conventional biofuel (including corn ethanol and
biodiesel produced from a grandfathered facility), as well as additional volumes of advanced
biofuels. EPA recognizes the concerns related to importing volumes of conventional biodiesel
and/or renewable diesel to satisfy the RFS standards, however as discussed in Section V of the
final rule, we do not believe it would be appropriate to further reduce the renewable fuel volume
requirements for 2018 using the general waiver authority or the biomass-based diesel waiver
authority at this time.
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Comment:
One commenter stated that EPA should consider the impact of the proposed anti-dumping and
countervailing duty cases on the availability of biodiesel and potential distortions in the market.
Another commenter similarly stated that the final RFS level for BBD must account for biodiesel
imports. This commenter estimated that imports will be less in 2017 than in 2016 and the
proposed Department of Commerce countervailing duty determinations against biodiesel imports
from Argentina and Indonesia will likely lower volumes of imported biodiesel and renewable
diesel further in 2018.
Response:
In establishing the renewable fuel volume requirements for 2018, EPA had considered both
domestically produced renewable fuels, as well as the potential for imported renewable fuels. We
note that at this time the Department of Commerce has not yet made a final decision with respect
to tariffs and countervailing duties on biodiesel imported from Argentina and Indonesia. Even if
tariffs and countervailing duties are ultimately applied to biodiesel from these countries, the
impact of these actions is uncertain. If biofuel imports from Argentina and Indonesia decrease as
a result of tariffs or countervailing duties it is possible that biodiesel imports from countries
unaffected by these actions may increase. As discussed in further detail in Section V of the final
rule, EPA has determined that the volumes in this final rule could be achieved through the
increased production of domestic biofuels, or alternatively through a combination of
domestically produced and imported renewable fuels.
Comment:
One commenter claimed that domestic biodiesel industry historically has had a relatively low
capacity utilization, and that imported volumes of biodiesel and renewable diesel have been
necessary to fill the gap. The commenter believes that Department of Commerce action on tariffs
for imported biodiesel will effectively limit volumes of BBD that will be available for blending,
and that EPA should exercise its general waiver authority to account for lower available volumes
of these fuels.
Response:
EPA acknowledges that the utilization of biodiesel production capacity in the United States has
historically been relatively low. We also acknowledge that in previous years, significant volumes
of biodiesel have been imported to the U.S. because this fuel was available to satisfy the local
demand for biodiesel at a lower price. At this time the Department of Commerce has not yet
made a final decision with respect to tariffs and countervailing duties on biodiesel imported from
Argentina and Indonesia. Even if tariffs and countervailing duties are ultimately applied to
biodiesel from these countries, the impact of these actions is uncertain. If biofuel imports from
Argentina and Indonesia decrease as a result of tariffs or countervailing duties it is possible that
biodiesel imports from countries unaffected by these actions may increase. Alternatively,
domestic production of biodiesel and/or renewable diesel may increase to supply volumes of
these fuels previously imported from Argentina and Indonesia. As discussed in further detail in
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Section V of the final rule, EPA has determined that the volumes in this final rule could be
achieved through a combination of domestically produced and imported renewable fuels, and
that the use of our general waiver authority to further reduce the required volume of renewable
fuels is not necessary at this time.
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5.2.7 Total Volume Achievable
Commenters that provided comment on this topic include, but are not limited to: 2545, 3319,
3497, 3649, 3677, 3961, and 3962. This section includes comments related to the total volume of
biodiesel and renewable diesel achievable in 2018. For a discussion of the reasonably attainable
volume of advanced biodiesel and renewable diesels see Section IV of the final rule and Section
4.2.2 of this document. For a discussion of the BBD standard for 2019, see Section VI of the
final rule and Section 6 of this document.
Comment:
One commenter stated that EPA should consider that the lapse of the biodiesel tax credit will
likely decrease domestic biodiesel production.
Response:
In this final rule EPA has considered the likely impacts of the lapse of the biodiesel tax credit on
the total supply of biodiesel and renewable diesel in 2018. We believe, based on the supply of
biodiesel and renewable diesel in previous years when the biodiesel tax credit was not available,
that the most likely impact on the total supply of biodiesel and renewable diesel in 2018 is that
the supply of these is unlikely to decrease, but is similarly unlikely to increase at the rate
observed in previous years. In other words, we anticipate that the supply of biodiesel and
renewable diesel in 2018 will likely be similar to the volume of these fuels we projected would
be available for use in 2017 (2.9 billion gallons).
Comment:
One commenter claimed that the supply of biodiesel and renewable diesel could increase by at
least 100 million gallons (to 3.0 billion gallons) in 2019. Another commenter supported EPA's
proposed volumes.
Response:
EPA acknowledges that the total supply or biodiesel and renewable diesel in 2018 could be
higher than the volume of these fuels we projected would be available in 2018. The 100 million
gallon increase cited by the commenter is lower than the average increase of approximately 300
million gallons observed from 2011 to 2016. In EPA's market impacts assessment,63 we simply
determined that at least 2.9 billion gallons of biodiesel and renewable diesel could be supplied in
2018. As discussed in more detail in Section IV of the final rule, EPA has determined that
despite the potential supply of volumes of biodiesel and renewable diesel greater than 2.9 billion
gallons in 2018 it is appropriate to reduce the required volumes of cellulosic biofuel, advanced
biofuel, and total renewable fuel by the same amount from the statutory targets for these fuels for
2018.
63 "Market impacts of biofuels," memorandum from David Korotney to docket EPA-HQ-OAR-2017-0091.
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Comment:
One commenter stated that EPA's proposed rule overemphasized the impact of the lapsed federal
biodiesel tax incentive on potential volumes of biodiesel and renewable diesel for 2018 and
2019.
Response:
EPA recognizes that there is significant uncertainty surrounding whether or not the biodiesel tax
credit will be available in 2018, as well as the likely impact of the presence or absence of the tax
credit. Our review of the supply of biodiesel and renewable diesel in years in which the tax credit
was not available suggests that even if the tax credit continues to be unavailable, it is reasonable
to project that the volume of biodiesel and renewable diesel projected to be available in 2017 will
continue to be available in 2018. As discussed in the previous response, a greater projected
available supply of biodiesel and renewable diesel in 2018 would not impact the volume
requirements for 2018 in this final rule.
Comment:
Multiple commenters claimed that a supply of 2.9 billion gallons of biodiesel and renewable
diesel is not achievable in 2018. One commenter claimed that achieving this supply of biodiesel
and renewable diesel would require more than 2.5 billion gallons of advanced biodiesel and
renewable diesel (which would cause feedstock switching/diversion EPA sought to avoid in the
proposed rule) or 400 million gallons of conventional biodiesel and renewable diesel. This
commenter stated that the total supply of conventional biodiesel and renewable diesel has never
exceeded 200 million gallons in any year, and claimed that all conventional biodiesel and
renewable diesel is imported and produced from palm oil, which causes negative environmental
impacts. Finally, the commenter claimed that the proposed tariffs and countervailing duties on
biodiesel and renewable diesel imported from Argentina and Indonesia will decrease availability
of biodiesel and renewable diesel in 2018.
Response:
The volume of biodiesel and renewable diesel beyond the volume projected to come from
advanced biodiesel and renewable diesel could be supplied by conventional biodiesel and
renewable diesel or additional volumes of advanced biodiesel and renewable diesel. While
historical volumes of conventional biodiesel and renewable diesel imports have not exceeded
200 million gallons in previous years, these volumes are not necessarily reflective of the volumes
of these fuels that could be imported in future years. In light of the significant production
capacity for biodiesel and renewable diesel, the large quantity of feedstocks that can be used to
produce these fuels (both domestically and globally), and domestic infrastructure capable of
distributing and using this volume of biodiesel and renewable diesel, EPA is not aware of any
factors that would limit the total supply of biodiesel and renewable diesel to the U.S. in 2018 to a
volume below 2.9 billion gallons. We acknowledge that supplying this volume of biodiesel and
renewable diesel in 2018 may lead to some degree of the feedstock switching and/or diversion.
EPA is seeking to minimize the incentive for such feedstock switching in this rule, as well as the
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potential for imported biodiesel and renewable diesel produced from palm oil at grandfathered
biodiesel or renewable diesel production facilities. However, EPA has determined that at this
time it would not be appropriate to exercise our general waiver authority or biomass-based diesel
waiver authority to further reduce the required renewable fuel volumes in an effort to prevent
these results.
Comment:
One commenter expressed support for EPA's assessment that that expiration of the biodiesel tax
credit is likely to have two primary impacts on supply of renewable and biodiesel: decreased
economic incentives for blending BBD for downstream fuel marketers who in the past have been
able to then lower prices at the pump for consumers and the potential for decreased volumes of
imported biodiesel and renewable diesel.
Response:
While EPA expects that the absence of the biodiesel tax credit will likely result in decreased
economic incentives for blending BBD for downstream fuel marketers and potentially lower
volumes of imported biodiesel and renewable diesel, our review of the supply of biodiesel and
renewable diesel in previous years when the tax credit was not available suggests that these
impacts are unlikely to result in a decrease in the supply of biodiesel and renewable diesel in
2018 relative to the volume projected to be available in 2017.
Comment:
One commenter claimed that the market signal of an increasing RVO for biomass-based diesel
must be significantly strong to overcome any uncertainty about the expiration of the biodiesel tax
credit. This commenter noted that EPA acknowledged this in our proposed rule and projected
that that the supply of biodiesel and renewable diesel could reach 2.9 billion gallons in 2018
despite the current absence of tax credit.
Response:
EPA believes that the RFS program, including the required volumes finalized for 2018 that are
being finalized in this rule, provide the appropriate incentives for the biodiesel and renewable
diesel industry.
Comment:
One commenter stated that EPA's proposed total renewable fuel volume (which EPA projected
would be met with approximately 2.9 billion gallons of biodiesel and renewable diesel) would
result in higher biofuel prices, especially in light of the expiration of the biodiesel tax credit and
the potential tariffs on imported biodiesel from Argentina and Indonesia.
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Response:
EPA has estimated the cost increases of the renewable fuel volumes in this final rule (see Section
IV of the final rule for EPA's illustrative cost estimates). EPA has determined that these costs do
not justify further reductions to the RFS standards using EPA's general waiver authority.
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5.2.8 Consumer Response
Commenters that provided comment on this topic include, but are not limited to: 1791
Comment:
One commenter stated that the market for diesel fuel is growing in the U.S., and that consumers
are choosing to use biodiesel blends.
Response:
EPA recognizes that demand for diesel fuel in the U.S. may rise in future years, and that
consumers are choosing to demand biodiesel and renewable diesel blends. We anticipate that this
will continue in 2018 given the standards being finalized.
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5.3 Determination of Standards
5.3.1 Total Renewable Fuel Volume
Commenters that provided comment on this topic include, but are not limited to: 2539, 2545,
3174, 3237, 3249, 3306, 3317, and 3658.
Comment:
One commenter stated that the proposed volume of 19.24 billion gallons for total renewable fuel
will result in high volumes of soybean oil used to produce biodiesel, and that this soybean oil
will be pulled from other vegetable oil markets. To replace the lost soybean oil, palm oil use will
increase. Since palm oil has a number of environmental problems, EPA should reduce its volume
requirements to ensure that palm oil use does not increase.
Similarly, another commenter stated that EPA should reduce the total renewable fuel volume to
avoid competition between biofuel production and the use of vegetable oil for food.
Response:
In establishing the final volume requirements for 2018, we determined that it would not be
appropriate to establish a total volume requirement greater than 19.29 billion gallons due to the
increased potential for feedstock switching. Since the 2018 volume requirements are very similar
to the 2017 volume requirements, we do not believe that there will be an increase in the volume
of palm oil used as a result of the RFS program between 2017 and 2018. Further discussion of
feedstock switching can be found in Section 5.2.5 of this document. Comments on environmental
impacts are addressed in Sections 6.4.3 and 7.2 of this document. We note that further reductions
of the volume requirements would require exercise of other waiver authorities, which do not
permit consideration of feedstock switching.
Comment:
One commenter stated the proposed 2018 volume requirement for total renewable fuel is too low
compared to the 2017 volume requirement. The RFS program was meant to increase volumes
every year.
Response:
Congress provided EPA with the authority to waive volumes under certain conditions. The
statutory text of the waiver provisions does not require that volume requirements increase every
year even after they are waived in part using one of the available authorities. Nevertheless, in
determining that the 2018 statutory volume requirement for total renewable fuel is not achievable
and therefore should be waived, we are establishing a volume requirement for 2018 that is
slightly higher than the volume for 2017.
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Comment:
One commenter stated that EPA should increase the 2018 volume requirement for total
renewable fuel in comparison to the 2017 volume requirement in proportion to the increase in
gasoline and diesel demand between the two years.
Response:
The sum of gasoline and diesel is projected by EIA to increase by about 1% between 2017 and
2018.64 However, our assessment of the volume of renewable fuel that is both reasonably
attainable and appropriate to require is based on a more expansive consideration of relevant
factors impacting the renewable fuel market than just gasoline and diesel demand. As described
in Sections IV and V of the final rule, we have considered volumes that can be produced or
imported, available feedstocks, and costs. As a result of our assessment, the 2018 volume
requirement for total renewable fuel will be 10 million gallons higher than the 2017 volume
requirement.
Comment:
One commenter suggested that the blending requirements under the RFS program be based on a
specified proportion of gasoline demand rather than on a specified volume of renewable fuel.
Response:
The applicable standards under the RFS program are percentages rather than volumes. While the
statutory targets and waivers of those targets that EPA determines are appropriate are given in
volumes, the statute requires that those volumes be converted into percentage standards by
dividing them by the projected demand for non-renewable gasoline and diesel. It is the
percentage standards that are then published in the regulations at 40 CFR 80.1405, and with
which obligated parties must comply.
See also responses to comments in Section 5.1.2 of this document regarding commenter requests
that the volume requirements be specified in such a way as to ensure that the nationwide average
ethanol content of gasoline is no higher than 9.7%.
Comment:
One commenter stated that the total renewable fuel volume requirement for 2018 should be
17.05 billion gallons.
64 Based on the October 2017 version of EIA's Short-Term Energy Outlook, 2017 consumption will be 142.53 bill
gal gasoline and 53.16 bill gal diesel, while 2018 consumption will be 143.22 bill gal gasoline and 54.76 bill gal
diesel.
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Response:
A total volume requirement of 17.05 billion gallons is below the lowest volume permitted under
the cellulosic waiver authority, which is 19.29 billion gallons in the final rule.65 As discussed in
Section V of the final rule, we have made a determination that additional reductions beyond
19.29 billion gallons are not warranted for 2018. Moreover, this commenter's suggested volume
of 17.05 billion gallons is premised on 9.7% ethanol, which, as described in Section 5.1.2 of this
document, is inappropriate.
Comment:
One commenter stated that, without regard to the specific waiver authority being exercised, the
volume of total renewable fuel must be reduced by the same amount as the reduction in advanced
biofuel to ensure that the requirement for conventional renewable fuel does not exceed 15 billion
gallons. This commenter stated that this approach is justified by the fact that the standards are
nested.
Response:
In past annual rulemakings, we have stated our belief that the statute is best interpreted to require
equal reductions in advanced biofuel and total renewable fuel under the cellulosic waiver
authority.66 We have exercised the cellulosic waiver authority in that way in this rule as well, and
the result is that the implied requirement for conventional renewable fuel (i.e., the difference
between the volume for total renewable fuel and advanced fuel) is 15 billion gallons.
Comment:
Some commenters suggested that when reducing a specific standard under the general waiver
authority, EPA may reduce any standard within which the reduced standard is nested at the same
time.
Response:
EPA sought comment on the approach proposed by commenters. However, as EPA is not
making reductions for 2018 under the general waiver authority, it need not resolve this issue at
this time.
65 If this commenter's preferred cellulosic biofuel volume requirement of 216 mill gal were used, the lowest
permissible volume under the cellulosic waiver authority would be 19.22 bill gal.
66 For instance, see 81 FR 89752.
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5.3.2 Conventional Renewable Fuel / Corn-Ethanol "Mandate"
Commenters that provided comment on this topic include, but are not limited to: 1177, 1301,
1754, 1776, 3237, 3242, 3251, 3319, 3478, and 3645.
Comment:
Several commenters stated that the implied volume requirement for conventional renewable fuel
should be 13.86 billion gallons rather than 15 billion gallons, as this would represent a
nationwide average gasoline ethanol concentration of 9.7%.
Response:
This view conflates the implied conventional renewable fuel volume requirement with ethanol.
The two are not the same. Significant volumes of non-ethanol conventional renewable fuel,
primarily but not limited to biodiesel, are also reasonably attainable in 2018. Moreover, as
described in Section 5.1.2 of this document, we believe that E15 and E85 can supplement E10 to
increase total ethanol supply to at least 10.13% in 2018. Finally, there is no conventional biofuel
standard under the statute, but rather advanced biofuel and total renewable fuel standards that
differ in the statute by 15 billion gallons in 2018. If more advanced biofuel volumes are used
than required by the 2018 standard, then less than 15 billion gallons of conventional biofuel will
be needed to meet the total renewable fuel standard.
Comment:
One commenter stated that the proposed volume of 15 billion gallons for the implied
conventional renewable fuel volume requirement increases exports of ethanol. This in turn
increases the use of corn for ethanol without any benefits to the U.S. This commenter stated that
these facts warrant reducing the implied conventional renewable fuel volume requirement below
15 billion gallons.
Response:
The volume requirements under the RFS program can only be fulfilled by renewable fuel that is
used in the U.S. Parties that export denatured ethanol must retire RINs representing that exported
volume. Moreover, the volume that is exported is driven by the relative price in foreign markets
versus the U.S. market. As a result, lowering the volume requirements under the RFS program
would be unlikely to reduce exports, and could result in higher exports by lowering domestic
demand and therefore domestic prices.
Comment:
Many commenters supported the proposed 15 billion gallons of conventional renewable fuel.
Most of these commenters pointed to the fact that the domestic corn ethanol industry has
sufficient capacity to produce 15 billion gallons of ethanol per year. Commenters that asked that
the volume of conventional renewable fuel be set at the implied statutory target of 15 billion
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gallons also emphasized the negative impacts of any reduction on jobs in the corn ethanol
industry and rural economies.
Response:
Consistent with 2018 NPRM, we are finalizing standards that provide an implied conventional
renewable fuel volume of 15.0 billion gallons, the same as the implied conventional volume in
the statute.
Comment:
Many commenters, regardless of their views on whether the El 0 blendwall can or should be a
consideration in the determination of applicable volume requirements, made the implicit
assumption in their comments that the total volume of ethanol that would be used was identical
to the volume of non-advanced (i.e., conventional) renewable fuel that would be necessary.
Response:
Not only is this assumption incorrect, but it oversimplifies the true nature of the standards and
the process of determining appropriate levels for those standards. Significant volumes of ethanol
may be used to meet the advanced biofuel volume requirement. It is also likely that a portion of
the renewable fuel pool that is not required to be advanced biofuel will be non-ethanol as
evidenced by production and imports of conventional biodiesel and renewable diesel in the past.
Thus it is inappropriate and misleading to assume that the conventional renewable fuel volume is
identical to the volume of the ethanol that would be needed, and the conventional renewable fuel
volume should not be used to determine how the market will respond vis-a-vis the El0
blendwall.
Comment:
Some commenters stated that Congress set a minimum required volume of 15 billion gallons for
conventional renewable fuel.
Response:
This is not the case, as the statute does not specify targets for conventional renewable fuel.
Instead, the statute sets targets for total renewable fuel and advanced biofuel, and then provides
waiver authorities for reducing either or both of those targets. Nevertheless, as noted above, the
final rule in fact provides an implied conventional volume of 15 billion gallons.
Comment:
One commenter stated that the requirement for 15 billion gallons of conventional renewable fuel
should be reduced to protect marine engines which cannot tolerate ethanol blends higher than
10%. By setting the conventional volume requirement at 15 billion gallons, this commenter
asserted, consumers would be denied choice at the pump.
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Response:
As stated above, this comment conflates the implied conventional renewable fuel volume
requirement with ethanol. More importantly, the RFS program does not require the use of
ethanol nor the use of specific blends of ethanol and gasoline. See also Section 5.1.6 of this
document.
Comment:
One commenter stated that the actual volume of conventional renewable fuel that entered into
commerce exceeded 15 billion gallons in 2016, contrary to the Congressional cap in the statute.
Response:
As described in a memorandum to the docket, total RIN generation for conventional renewable
fuel, prior to any consideration of exports or adjustments for invalid RINs, was 14,999 million
RINs in 2016.67 It is possible that additional biofuel was produced or imported that did not
generate RINs, but if so such biofuel would either not have met the definition of renewable fuel
under the RFS program, or had not been produced or imported for use as transportation fuel,
heating oil, or jet fuel. EPA does not collect information on biofuel production or import that
does not qualify under the RFS program.
Regardless the RFS program places no limitations on the total volume of renewable fuel that can
be produced, imported, and/or used in the U.S. The applicable standards under the RFS program
are not a cap on the volumes that might be used.
67 "Updated 2016 RIN supply," available in docket EPA-HQ-OAR-2017-0091.
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5.3.3 Other Comments Related to the Determination of Standards
Commenters that provided comment on this topic include, but are not limited to: 3249.
Comment:
One commenter stated that 3.29 billion gallons of advanced biodiesel would be needed to meet
the proposed standards. Such a level would be unrealistic to achieve, and could also result in
"tightness" in the market and problems with distribution.
Response:
This commenter made a number of assumptions that we believe are inappropriate in deriving its
estimate of 3.29 billion gallons of advanced biodiesel. First, they assumed lower levels of
available cellulosic biofuel and ethanol than EPA has estimated would be available in 2018.
Comments on these issues are addressed separately in Sections 3 and 5.1 of this document. This
commenter also assumed that there would be no imported sugarcane ethanol nor advanced
biofuels other than BBD and cellulosic biofuel (e.g. naphtha, heating oil, etc), contrary to EPA's
estimates. Finally, this commenter assumed that all biodiesel used to meet the implied
conventional renewable fuel volume requirement of 15 billion gallons would be advanced
biodiesel rather than conventional biodiesel. Taken together, this commenter's assumptions work
to exaggerate the impact of the proposed volume requirements on advanced biodiesel. Since their
estimate of 3.29 billion gallons of advanced biodiesel is inappropriate, the concerns they raised
with achieving this level are baseless.
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6. BBD Standard for 2019
6.1 General
Commenters that provided comment on this topic include, but are not limited to: 0446, 1759,
1775, 2539, 2540, 2542, 2999, 3245, 3319, 3321, 3377, 3429, 3430, 3493, 3497, 3575, 3578,
3593, 3645, 3658, 3678, 3679, 3880, 3934, 3959, 3961, and 3962.
Comment:
Numerous commenters were in favor of increasing the BBD volume requirements beyond the 2.1
billion gallons proposed for 2019— from 2.5 to 2.9 billion gallons, to reflect the projected supply
of BBD available in 2018. In arguing for increases, these commenters asserted that the proposed
freeze on BBD's 2019 required volume was contrary to Congress's objective of promoting
growth in renewable fuels and that EPA could not neglect to encourage further growth in BBD
production. These commenters cited additional reasons for increasing the volume requirement
including environmental benefits, energy security benefits, and rural economic development
benefits associated with greater use of BBD. Many biodiesel industry and association
commenters also argued that EPA cannot arbitrarily maintain the volume at a static level with the
rationale that the advanced biofuel standard it will set a year later will provide the same
incentives provided by stronger biomass-based diesel volumes. These commenters argue that,
beyond the BBD volume of 2.1 billion gallons proposed for 2019, the reduction in the advanced
biofuel volume that EPA proposed for 2018 will not create a sustainable, profitable market that is
needed to support investment, much less the aggressive targets Congress sought to have the
industry reach. One commenter, in arguing for a 2.3-billion-gallon BBD mandate for 2019,
indicated that 200 million gallons of BBD above the 2018 level would accomplish Congress'
intent with regard to both advanced and BBD.
Response:
EPA disagrees with commenters who advocate a higher mandated level of BBD for 2019. EPA,
in finalizing the 2019 requirement and as required under the Clean Air Act, reviewed the
implementation of the renewable fuels program, all the factors required under the statute,
comments received, and coordinated with the Departments of Energy and Agriculture. EPA
recognizes that there are differing views on what is the appropriate level for the BBD applicable
volume for 2019. EPA has endeavored to consider all comments and has weighed the statutory
factors to reach a decision that is appropriate and reasonable. A final rule memorandum to the
docket entitled, "Final Statutory Factors Assessment for the 2019 Biomass Based Diesel (BBD)
Applicable Volume," discusses our consideration of the statutory factors set forth in CAA
section 21 l(o)(2)(B)(ii)(I)-(VI) in the context of deriving the final 2019 BBD applicable volume.
Based on a review of the implementation of the program to-date and all the factors required
under the statute, we are finalizing the BBD volume at 2.1 billion gallons for 2019. We believe
that maintaining the level finalized for 2018 supports the overall goals of the program while also
maintaining the incentive for development and growth in production of other advanced biofuels
as well as the continued growth in BBD.
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Arguments in favor of increasing the required volume must be balanced against the benefits of
EPA retaining a substantial degree of neutrality with regards to the types of advanced biofuel
that are used to meet the advanced biofuel standard. We continue to believe that allowing
competition among qualifying advanced biofuels types provides an incentive for innovation, and
could lead to the development of new fuels with advantages, including increased volume
potential, lower costs, and greater environmental and energy security benefits. EPA is not
arbitrarily keeping the 2019 BBD applicable volume low as some commenters suggest, but rather
for these reasons is not increasing BBD. In addition, while competition with other advanced
biofuels is not one of the explicit factors listed in the statute that EPA must take into
consideration in establishing the BBD standard for years after 2013, EPA is not limited to just
those factors listed in the statute.
As discussed in the 2018 NPRM and reiterated in the 2018 final rule, given current and recent
market conditions, the advanced biofuel volume requirement continues to drive the BBD
volumes. While we have not yet established the advanced biofuel standard for 2019, we
nevertheless expect this to continue in 2019 as the advanced biofuel standard for 2018 is already
above the BBD standard for 2019. We also believe in the importance of maintaining
opportunities for other types of advanced biofuel, such as renewable diesel co-processed with
petroleum, renewable gasoline blend stocks, and renewable heating oil, as well as others that are
under development.
Comment:
Several commenters stated that EPA cannot set the 2019 BBD volume requirement based on an
anticipated approach to setting the 2019 advanced biofuel requirement in the future.
Response:
We disagree. With the exception of years for which we engaged in retroactive rulemaking (2014
and 2015), we have consistently sought to set the BBD applicable volume for years after
volumes are specified in the statute significantly below the volume of BBD we anticipated would
be supplied under the influence of the advanced and total renewable fuel standards, for the
reasons described in our response to the comment above. It is reasonable for us to expect that the
2019 advanced biofuel volume requirement will be at least as high as the 2018 level, as it has
consistently in the past, and that the volume requirement for BBD that we are finalizing in this
action will appropriately provide additional support for the BBD industry while allowing the
opportunity for competition with other advanced biofuels to satisfy the advanced biofuel
volumes under that future standard.
Comment:
Several commenters promoted a higher BBD mandate by arguing that the proposed BBD volume
for 2018 fails to recognize the existing production capacity, does not reflect the growth that is
occurring in renewable diesel capacity, and ignores the ability for the biodiesel industry to
increase production from existing capacity in a short period of time to address increased annual
RVOs.
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Response:
We disagree. EPA considered the production capacity for advanced biodiesel and renewable
diesel production in setting the total advanced biofuel standard for 2018. There is already more
than sufficient capacity to meet the 2.1-billion-gallon BBD volume requirement for 2019 as
discussed in Section VI.B. of the final rule as evidenced by the fact that the current total capacity
of all registered biodiesel and renewable diesel production facilities in the U.S. is approximately
4.1 billion gallons. As stated earlier, EPA believes that the BBD volume of 2.1 billion gallons
being finalized for 2019 strikes the appropriate balance between providing a market environment
where other types of advanced biofuels are incentivized and providing support and a degree of
certainty for the BBD industry and the RFS program. This approach does not limit additional
BBD production and in fact in deriving the 2018 advanced biofuel requirement we determined
that 2.55 billion gallons of BBD would be reasonably available.
Comment:
Several commenters argued for a reduced BBD volume requirement for 2019. Some oil industry
commenters stated that in reducing the BBD 2019 RVO, EPA should exclude the amount of
BBD imports, include only domestic production, and account for the large number of BBD RINs
that EPA has held to be invalid under past and ongoing enforcement actions. One commenter in
arguing for reduced or flat-lined BBD 2019 standards, indicated that there were significant
unresolved safety and reliability issues associated with higher blends of biodiesel for home
heating oil, including sale and storage of seasonal blends, and corrosion issues.
Response:
As discussed in the 2017 final rule, we continue to believe that under the statute, imports of
renewable fuel qualify to generate RINs for compliance with the applicable RFS standards. The
statutory language indicates that imports can play a role in meeting the volume targets that
Congress set. For a further discussion of EPA's consideration of imported biofuels, see Section
1.2 of this document. With regard to accounting for BBD RINs that have been invalidated under
past and ongoing enforcement actions, EPA has taken these into account in setting the BBD final
standards for 2019 and in past years as well. One of the primary considerations in determining
the BBD volume each year is a review of the implementation of the program to date, as it affects
BBD. This review is required by the CAA, and also provides insight into the capabilities of the
industry to produce, import, export, and distribute BBD. Table VI.B. 1-1 in Section VI of the
final rule provides an overview of available BBD RINs generated, exported BBD RINs, and
BBD RINs retired for non-compliance reasons information from EMTS for the years 2011-
2016, the latest year for which we have complete information. With regard to the technical issues
raised for home heating oil, EPA acknowledges that there may be issues associated with use of
biodiesel in home heating oil but believes that these are due to use of poor quality biodiesel
blends or the improper handling of biodiesel in the home heating oil context. With regard to
corrosion issues raised by the commenter, at this point EPA has no evidence of a link between
biodiesel and storage tank corrosion and has not considered this in setting BBD standards.
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Comment:
Several commenters stated that BBD had grown beyond the mandate put in place by Congress
and advocated for a reduced BBD standard for 2019. Their arguments for reducing BBD
volumes focused on feedstock diversion, reliance on biodiesel from palm oil, reduced cost from a
lower BBD RVO, and greater competition and innovation in the advanced biofuel industry for
the development of more environmentally beneficial fuels.
Response:
We do not dispute the possibility that increased biodiesel production could result in negative
impacts leading to increasing competition for feedstock which could result in exacerbation of
social/environmental problems associated with expansion of palm oil production. However, at
this time, we do not believe that the 2019 BBD volume requirement of 2.1-billion gallons will
lead to such a result. We also note that in exercising our broad discretion under the cellulosic
waiver authority to establish the advanced biofuel volume requirement for 2018 we took into
consideration the availability of increased volumes of advanced feedstocks to be used for
additional advanced biofuel production and sought to minimize the incentives for feedstock
switching and/or the diversion of biofuel that would otherwise be used in other countries (see
Section IV of the final rule and Section 4.2.2 of this document for a further discussion of this
topic).
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6.2 Supporting the BBD Industry
Commenters that provided comment on this topic include, but are not limited to: 0446, 1775,
2540, 3319, 3377, 3430, 3593, 3679, 3959, and 3961.
Comment:
Numerous commenters supported the BBD industry, indicating that the industry had the capacity
to produce greater volume, and stating that EPA should increase the 2019 mandated BBD
volume requirement to 2.3 - 2.9 billion gallons. These commenters stated that maintaining the
current volume of 2.1 billion gallons for BBD sends a negative signal to an industry that already
has underutilized production capacity and is capable of quickly bringing that existing capacity
back online if the BBD RVO were increased. They also noted that maintaining the BBD volume
at 2.1 billion gallons for 2019 would be perceived as a lack of commitment to advanced biodiesel
and could potentially stifle future investment in the industry. In addition, these commenters
noted that EPA had previously supported and increased the BBD volumes to ensure that the
goals of Congress were met, and that the proposed BBD and advanced biodiesel substantially
move away from the statute, creating uncertainty and perpetuating the status quo that Congress
sought to change. These commenters stated that EPA must do more to fulfill the intent of
Congress to promote advanced fuels, including BBD. At least one commenter argued that, if
Congress intended to simply let BBD remain underutilized throughout the RFS program and let
overall advanced volumes drive the market for diesel fuel substitutes, it would not have needed
to give EPA authority to set BBD RVOs starting in 2013. Another commenter viewed EPA's
proposal of no growth in 2019 for the BBD RVO as inappropriate, and contrary to the purposes
of RFS as established by Congress. Finally, some commenters indicated that higher BBD
volumes beyond 2.1 billion gallons would still allow opportunities and competition for other
advanced biofuel feedstocks while delivering real GHG emissions benefits and would also result
in positive economic and employment benefits.
Response:
EPA acknowledges comments submitted by various individuals, associations, and industries,
supporting the BBD industry. The BBD industry has been an important part of the RFS program
to date, delivering ever-increasing volumes of BBD while continuing to address constraints that
impede BBD's future growth and diligently working to develop real world solutions to ensure
growth. Our decisions to establish increasing BBD volumes each year was made in light of the
fact that while cellulosic biofuel production had fallen far short of the statutory volumes, the
available supply of BBD in the U.S. had grown each year, exceeding the statutory BBD volumes.
This growing supply of BBD allowed EPA to establish higher advanced biofuel standards, and to
realize the GHG benefits associated with greater volumes of advanced biofuel than would
otherwise have been possible in light of the continued shortfall in the availability of cellulosic
biofuel. It is in this context that we determined that steadily increasing the BBD requirements
was appropriate to encourage continued investment and innovation in the BBD industry. It
provided necessary assurances to the industry to increase production, while also serving the long
term goal of the RFS statute to increase volumes of advanced biofuels over time.
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However, EPA believes that our final 2019 BBD volume requirement, which maintains the BBD
volume finalized for 2018, strikes the appropriate balance at this time, between providing a
market environment where the development of other advanced biofuels is incentivized, while
also maintaining support for the BBD industry. Based on our review of the data, and the nested
nature of the BBD standard within the advanced standard, we conclude that the advance standard
continues to drive the ultimate volume of BBD supplied. Given the success of the industry in the
past few years, as well as the substantial increases in the BBD volume being driven by the
advanced standard, we have determined that a volume requirement greater than 2.1 billion
gallons for BBD in 2019 is not necessary to provide support for the BBD industry. Setting the
BBD standard in this manner continues to allow a considerable portion of the advanced biofuel
volume to be satisfied by either additional gallons of BBD or by other unspecified and
potentially less costly types of qualifying advanced biofuels.
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6.3 Ensuring Opportunities for Other Advanced
Commenters that provided comment on this topic include, but are not limited to: 2542, 3377,
3497, 3575, 3593, 3679, 3680, 3934, and 3961.
Comment:
Several commenters supported either maintaining the BBD requirement at 2.1 billion or to
further lower the BBD standard to allow for greater competition and innovation within the
advanced biofuel industry rather than favoring the biodiesel industry. A few supporters of
advanced biofuels indicated that the BBD volume requirement did not matter as long as the total
advanced mandate maintains a stable growth trajectory. Numerous commenters indicated that
EPA should support both biodiesel and other advanced biofuels by increasing both the advanced
the BBD volumes. One commenter stated that it was hard to take EPA's rationale for freezing
the BBD 2019 requirement at 2018 level at face value considering EPA's 2018 NPRM would
lower advanced biofuel levels to less than the 2017 targets. Finally, one commenter stated that
EPA improperly focused on advanced biofuels as driving BBD volumes when this fact should be
irrelevant to setting the minimum BBD volume for a given year, especially when EPA is
required to set these volumes over a year ahead of setting the advanced/total standards.
Response:
In establishing the BBD and cellulosic standards as nested within the advanced biofuel standard,
Congress clearly intended to support development of BBD and cellulosic biofuels, while also
providing an incentive for the growth of other non-specified types of advanced biofuels. That is,
the advanced biofuel standard provides an opportunity for other advanced biofuels (advanced
biofuels that do not qualify as cellulosic biofuel or BBD) to be used to satisfy the advanced
biofuel standard after the cellulosic biofuel and BBD standards have been met. Indeed, Congress
specifically directed growth in BBD only through 2012, leaving development of volume targets
for BBD to EPA for later years while also specifying substantial growth in the cellulosic and
general advanced categories through 2022. We believe that Congress clearly intended for EPA to
evaluate the appropriate volume requirement for BBD within the advanced biofuel standard as
described in CAA section 21 l(o)(2)(B)(ii). We note that Congress could have set ambitious
targets for BBD for years after 2012, as it did for cellulosic biofuel, but did not do so. Within the
statutory volumes of advanced biofuels for 2019, the statute specifies 8.5 billion gallons of
cellulosic biofuel and a minimum volume requirement of 1.0 billion gallons of BBD, with the
remainder left unspecified - providing space for the market to develop technologies and
advanced biofuels not known at the time by Congress. Due to the success of BBD industry, and
to provide continued support, we raised the BBD standard to more than double the minimum
specified by Congress to 2.1 billion gallons for 2018.
When viewed from this perspective, BBD can be seen as competing for investment dollars with
other types of advanced biofuels for participation as advanced biofuels in the RFS program. In
addition to the long-term impact of our action in establishing the BBD volume requirements,
there is also the potential for short-term impacts during the compliance years in question.
Therefore, by setting the BBD volume requirement at a level lower than the advanced biofuel
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volume requirement (and lower than the expected production of BBD to satisfy the advanced
biofuel requirement), we are allowing the potential for some competition between BBD and
other advanced biofuels to satisfy the advanced biofuel volume standard. We believe that this
competition will also help to encourage, over the long term, the development and production of a
variety of advanced biofuels that will be needed for the long-term growth of RFS volumes.
However, in the short term it could also result in lower cost advanced biofuels for consumers.
We believe our final 2019 BBD volume requirement strikes the appropriate balance between
providing a market environment where the development of other advanced biofuels is
incentivized, while also maintaining support for the BBD industry. Based on our review of the
data, and the nested nature of the BBD standard within the advanced standard, we conclude that
the advance standard continues to drive the ultimate volume of BBD supplied. Given the success
of the industry in the past few years, as well as the substantial increases in the BBD volume
being driven by the advanced standard, we have determined that a volume requirement greater
than 2.1 billion gallons for BBD in 2019 is not necessary to provide support for the BBD
industry. Setting the BBD standard in this manner continues to allow a considerable portion of
the advanced biofuel volume to be satisfied by either additional gallons of BBD or by other
unspecified and potentially less costly types of qualifying advanced biofuels.
Comment:
Several commenters restated claims made in previous RFS annual rulemakings that EPA
improperly based our consideration of the statutory factors on a comparison of BBD to other
advanced biofuels, rather than to diesel fuel. They continued to suggest that setting the BBD
standard at a higher level than proposed would actually result in BBD competing against diesel
fuel, and therefore, EPA should analyze the impacts of displacing diesel fuel with BBD in its
statutory factors analysis.
Response:
We continue to disagree. In setting the advanced biofuel volume requirement, EPA sets the
advanced biofuel standard based on reasonably attainable and appropriate volumes of BBD and
other advanced biofuels. After determining that it is in the interest of the program, as described
in Section VI.B of the final rule to set the BBD volume requirement at a level below anticipated
BBD production and imports, so as to provide continued incentives for research and
development of alternative advanced biofuels, it is apparent that excess BBD above the BBD
volume requirement will compete with other advanced biofuels, rather than diesel. The only way
for EPA's action on the BBD volume requirement to result in a direct displacement of
petroleum-based fuels, rather than other advanced biofuels, would be if the BBD volume
requirement were set larger than the total renewable fuel requirement. However, since BBD is a
type of advanced biofuel, and advanced biofuel is a type of renewable fuel, the BBD volume
requirement could never be larger than the advanced requirement and the advanced biofuel
requirement could never be larger than the total renewable fuel requirement.
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6.4 Comments on Consideration of Statutory Factors (BBD)
6.4.1 General Comments on the Consideration of Statutory Factors
Commenters that provided comment on this topic include, but are not limited to: 3317, 3593,
3679, 3880, and 3961.
Comment:
Several commenters asserted that EPA had improperly or inadequately undertaken the statutory
factors analysis and pointed to specific factors that they felt EPA had failed to consider or had
not adequately considered (Comments on specific factors can also be found in Sections 6.4.3
through 6.4.8 of this document). Each of these commenters claimed that EPA would have arrived
at a higher BBD volume requirement for 2019 if we had correctly considered the various
statutory factors.
Response:
EPA believes it properly considered the statutory factors both in the 2018 NPRM and the 2018
final rule. EPA has endeavored to consider all comments and has weighed the statutory factors to
reach a decision that is appropriate and reasonable. A final rule memorandum to the docket
entitled, "Final Statutory Factors Assessment for the 2019 Biomass Based Diesel (BBD)
Applicable Volume" discusses our consideration of the statutory factors set forth in CAA section
21 l(o)(2)(B)(ii)(I)-(VI) in the context of deriving the final 2018 BBD applicable volume. Based
on a review of the implementation of the program to date and all the factors required under the
statute, we are finalizing the BBD volume at 2.1 billion gallons for 2019. We believe that
maintaining the level finalized for 2018, 2.1 billion gallons, supports the overall goals of the
program, continues to support the BBD industry, while also maintaining the incentive for
development and growth in production of other advanced biofuels as well as the continued
growth in BBD.
Consistent with our 2017 and 2018 approach in setting the final BBD volume requirement,
EPA's primary assessment of the statutory factors for the final 2019 BBD applicable volume is
that because the BBD requirement is nested within the advanced biofuel volume requirement, we
expect that the final 2019 advanced volume requirement, when set next year, will largely
determine the level of BBD production and imports that occur in 2019. Therefore, EPA
continues to believe that the same overall volume of BBD would likely be supplied in 2019
regardless of the BBD volume we mandate for 2019 in this final rule. This assessment is based,
in part, on our review of the RFS program implementation to date, as discussed above in
Sections VI.B.l and VI.B.2 of the final rule.
Comment:
Some biodiesel industry commenters stated that we improperly based our consideration of the
statutory factors on a comparison of BBD to other advanced biofuels, rather than to diesel fuel.
They suggested that setting the BBD standard at a higher level than proposed would actually
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result in BBD competing against diesel fuel, and therefore, EPA should analyze the impacts of
displacing diesel fuel with BBD.
Response:
We disagree. In setting the advanced biofuel volume requirement, we have assumed reasonably
attainable volumes in advanced biofuels. After determining that it is in the interest of the
program, as described in Section VI.B of the final rule to set the BBD volume requirement at a
level below anticipated BBD production and imports, so as to provide continued incentives for
research, development, and commercialization of alternative advanced biofuels, it is apparent
that excess BBD above the BBD volume requirement will compete with other advanced biofuels,
rather than diesel. The only way for EPA's action on the BBD volume requirement to result in a
direct displacement of petroleum-based fuels, rather than other advanced biofuels, would be if
the BBD volume requirement were set larger than the total renewable fuel requirement.
However, since BBD is a type of advanced biofuel, and advanced biofuel is a type of renewable
fuel, the BBD volume requirement could never be larger than the advanced requirement and the
advanced biofuel requirement could never be larger than the total renewable fuel requirement.
Thus, EPA continues to believe that it is appropriate to evaluate the impact of its action in setting
the BBD volume requirements by evaluating the impact of using BBD as compared to other
advanced biofuels. These commenters also asserted that our analysis of the desirability of setting
the BBD volume requirement in a manner that would promote the development and use of a
diverse array of advanced biofuels is prohibited by statute. We disagree with these comments
and continue to believe that the statutory volumes of renewable fuel established by Congress in
CAA section 21 l(o)(2)(B) provide an opportunity for other advanced biofuels (advanced
biofuels that do not qualify as cellulosic biofuel or BBD) to be used to satisfy the advanced
biofuel standard after the cellulosic biofuel and BBD standards have been met.
Comment:
Some commenters stated that the consideration of competition within the advanced biofuel pool
between BBD and other advanced biofuels, and the potential for lower compliance costs cited in
our proposed rule, are not included in the list of factors in CAA section 211 (o)(2)(B)(ii)(V) that
EPA is to consider in establishing the volume requirement for BBD.
Response:
EPA disagrees. Three of the factors specified in the statute are indeed related to the
considerations discussed above. The "impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods" referenced in CAA section
21 l(o)(2)(B)(ii)(V) is relevant, since we believe a diverse advanced biofuel pool will potentially
result in decreased costs associated with the use of advanced biofuels and, consequently,
decreased costs to consumers. Similarly, the "impact of the production and use of renewable
fuels on the environment" referenced in CAA section 21 l(o)(2)(B)(ii)(I) is relevant, since we
believe that incentivizing research and development in a variety of advanced biofuels could lead
to the development of biofuels that have more benign effects on the environment than those that
are currently available. In addition, "the impact of renewable fuels on the energy security of the
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United States" referenced in CAA section 21 l(o)(2)(B)(ii)(II) is relevant, since we believe that
incentivizing the development of a diverse array of biofuels will increase energy security.
Furthermore, we note that the list of factors specified in the statute is not exclusive; that is EPA
is not precluded from considering additional factors that advance the statutory objectives when it
sets applicable volumes for years not specified in the statute.
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6.4.2 Consideration of the Review of the Program to Date
Commenters that provided comment on this topic include, but are not limited to: 3430, 3478,
3593, 3679, and 3880.
Comment:
One commenter stated that, with respect to BBD, the "years specified in the tables" that EPA
must review are 2009 through 2012 and that EPA incorrectly makes the primary consideration in
determining the level of BBD based largely on EPA's analysis of data from 2016.
Response:
EPA disagrees that the language in CAA section 21 l(o)(2)(B)(ii) "based on a review of the
implementation of the program during calendar years specified in the tables," refers only to 2009
through 2012 for BBD. We believe this language to requires us to review all calendar years since
the RFS program was launched— up to the present time that we have data with which to assess
the program. This type of review provides insight into the capabilities of the industry to produce,
import, export, and distribute BBD. It also helps us to understand what factors, beyond the BBD
standard, may incentivize the production and import of BBD. Not reviewing the program in this
manner would lead to the absurd result that we could only look at the very early years of the RFS
program, 2009 and 2010, when the program was not fully operational, and 2011 and 2012, when
the program was still in its infancy, when making decisions about the capabilities of this industry
to produce and distribute BBD in 2019, seven years since the last of those dates.
Therefore, our review of the RFS program in Sections IV.B.2 and VI.B of the final rule, and also
discussed in the statutory factors memo to the docket, discuss both the historical and recent
trends in the supply of biodiesel and renewable diesel. As EPA noted in Section VI.B of the final
rule, the BBD industry is more mature, and we have increased BBD volumes significantly in
recent years so that the BBD standard is now over twice the minimum statutory volume required
in CAA section 21 l(o)(2)(B)(v). In these circumstances we do not believe that an additional
increase in the required BBD required volume is necessary to support the industry in 2019.
In addition, while we do not expect the BBD applicable volume to be determinative of the
volume of BBD use in 2019, the BBD volume requirement can still have a positive impact on the
future development and marketing of BBD by providing a base guaranteed level for investment
certainty in meeting the (anticipated) higher advanced volume requirement. This is consistent
with the objectives of the CAA to support the continued growth in production and use of
renewable fuels including advanced biofuels.
Comment:
One commenter stated that biodiesel has shown it can meet rising RFS standards in previous
years, thus retaining a 2.1 billion gallon requirement for BBD is arbitrary and capricious. The
commenter further asserted that EPA fails to explain how finalizing a volume at the same level
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as 2018, and well below actual production, provides any support for growth which is the purpose
of RFS.
Response:
EPA disagrees with this commenter. We believe that setting the applicable volume of BBD at 2.1
billion gallons sets the appropriate floor for BBD, and that the volume of advanced biodiesel and
renewable diesel actually used in 2019 will be driven by the level of the advanced biofuel and
total renewable fuel standards that the Agency will establish for 2019 in 2018.
As discussed more fully in Section VI.B. of the final rule, EPA believes that our final 2019 BBD
volume requirement strikes the appropriate balance between providing a market environment
where the development of other advanced biofuels is incentivized, while also maintaining
support for the BBD industry. Based on our review of the data, and the nested nature of the BBD
standard within the advanced standard, we conclude that the advance standard continues to drive
the ultimate volume of BBD supplied. Given the success of the industry in the past few years, as
well as the substantial increases in the BBD volume being driven by the advanced standard, we
have determined that a volume requirement greater than 2.1 billion gallons for BBD in 2019 is
not necessary to provide support for the BBD industry. Setting the BBD standard in this manner
continues to allow a considerable portion of the advanced biofuel volume to be satisfied by either
additional gallons of BBD or by other unspecified and potentially less costly types of qualifying
advanced biofuels.
Comment:
One commenter stated that EPA failed to articulate what other types of advanced biofuels could
be used to meet the advanced biofuel volume requirement in 2019, and that this actually argues
for increasing advanced biofuel requirements to accommodate both BBD and "other types" of
advanced biofuels.
Response:
EPA disagrees and we note that in the Final Statutory Factors Docket Memo, EPA discusses
other types of advanced biofuels that could meet the advanced biofuel volume requirements
including: sugarcane ethanol; ethanol from grain sorghum using certain processing technologies;
renewable naphtha from food waste or cover crops; CNG/LNG from non-cellulosic sources;
renewable diesel co-processed with petroleum diesel fuel; renewable jet fuel; renewable heating
oil; and cellulosic biofuel.
While non-cellulosic advanced biofuel volumes other than BBD have not grown appreciably in
recent years, this may not be the case in the future, particularly given that the biodiesel blender's
tax credit has not been renewed to date. Without the competitive advantage the tax credit
provided to BBD, other advanced biofuels may become more competitive with BBD, potentially
filling a larger share of the advanced biofuel space above the BBD standard.
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In setting the BBD volume requirement at 2.1 billion gallons for 2019 EPA believes this volume
sets the appropriate floor for BBD, and that the volume of advanced biodiesel and renewable
diesel actually used in 2019 will be driven by the level of the advanced biofuel and total
renewable fuel standards that the Agency will establish for 2019. At that time, we will undertake
our analysis to determine what is the reasonably available supply of advanced biofuels. We note,
however, that the advanced biofuel volume in 2018 is already larger than the BBD volume
established for 2019 and therefore is likely to be in 2019 as well.
Comment:
One commenter noted that the supply of biodiesel should be sufficient to meet the 2.1 billion
gallon 2019 RVO, although the supply may be impacted by expiration of the blender's tax credit
and ongoing Department of Commerce action on biodiesel imports.
Response:
As discussed in Section 4.2.2 of this document, we believe that approximately 2.55 billion
gallons of advanced biodiesel and renewable diesel will be reasonably attainable in 2018 despite
the expiration of the blender's tax credit and the impact of potential tariffs.
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6.4.3 Environmental Impacts (Air Quality, Climate Change, Conversion of
Wetlands, Ecosystems, Wildlife Habitat, Water Quality, Water Supply)
Commenters that provided comment on this topic include, but are not limited to: 0236, 0792,
1759, 2539, 3242, 3306, 3320, 3430, 3575, 3578, 3679, 3681, 3880, 3959, and 4397.
Comment:
Several commenters raised concerns regarding a wide variety of environmental impacts from
biofuel feedstock production such as degradation of habitat, biodiversity, wildlife, water quality,
and water supply. For example, one commenter noted that EPA modeling indicates increased
corn production in the Chesapeake Bay watershed has led to increase nitrogen and phosphorus
loadings to the Bay. Several commenters described similar impacts to the Great Lakes and Gulf
of Mexico. Several commenters expressed concerns about habitat loss and degradation due to
extensification and intensification of biofuel crop production, especially corn ethanol and soy
biodiesel. Many of these commenters also raised concerns regarding deforestation and peatland
conversion, in countries such as Malaysia, Argentina, and Indonesia, from any potential
increases in demand for palm and soy oils.
Response:
Analyses completed in 2011 suggested that environmental impacts from increased biofuels
production and use associated with EISA 2007 were negative but limited in magnitude, mostly
associated with the intensification of corn feedstock production.68'69 A more recent review of the
scientific literature still supports this finding. There is more evidence of negative environmental
impacts associated with land use change and biofuel production than there was suggested in
2011.70 However, the magnitude of the effect from biofuels is still unknown and has not been
quantified to date. Furthermore, the more recent scientific literature continues to support the
conclusion from the First Triennial Report to Congress that biofuel production and use can be
achieved with minimal environmental impacts if existing conservation and best management
practices for production are widely employed. 71
68 U.S. Environmental Protection Agency. December, 2011. Biofuels and the Environment: First Triennial Report to
Congress.
69 Committee on Economic and Environmental Impacts of Increasing Biofuels Production, National Research
Council, National Academies of Science. 2011. Renewable Fuel Standard: Potential Economic and Environmental
Effects of U.S. Biofuel Policy. National Academies Press. Washington, D.C.
70 Since the 2011, there have been several advances in our understanding of land use change trends in the U.S. Three
major national efforts have been published: (1) a pair of related studies quantifying cropland extensification from
2008-2012 (Lark et al. 2015; Wright et al. 2017), (2) the USDA 2012 Census of Agriculture (Census) (USDA 2014),
and (3) the 2012 USDA National Resources Inventory (NRI) (USDA 2015). There have also been several regional
studies documenting land use change in different parts of the country, including the Prairie Pothole Region
(Johnston 2013; Johnston 2014; Reitsma et al. 2016), around the Great Lakes (Mladenoff et al. 2016), for the
western cornbelt (Shao et al. 2016), for lands in the Conservations Reserve Program (CRP) (Morefield et al. 2016),
and for corn/soybean farms (Wallander et al. 2011).
71 U.S. Environmental Protection Agency. December, 2011. Biofuels and the Environment: First Triennial Report to
Congress.
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While some commenters believed that the connections between RFS mandates and the
environmental impacts are undeniable, the science continues to tell us that quantifying such
connections is very complicated. Specifically, identifying and separating the extent of negative
environmental impacts attributed to the RFS program from the negative impacts due to overall
land use changes is difficult. Since 2010, researchers have continued to explore potential
connections between biofuel production and environmental impacts. Areas of particular focus for
this new, growing body of research include GHGs, water quality, and land use change impacts
from biofuel production, particularly impacts associated with the production of corn, soy, and
perennial grasses as biofuel feedstocks. While no definitive conclusions have been made
regarding RFS-caused environmental impacts, the potential for impacts remains an area of
interest and EPA continues to look at these impacts and track the science in these areas.
Comment:
One commenter raised concerns that RFS promotes the cultivation of invasive, non-native,
and/or noxious weeds. This commenter raised specific concerns regarding water use in biofuel
production, explaining that biofuel production uses more water per unit of energy than refined
petroleum fuels. This commenter also stated that ethanol extends gasoline soil and groundwater
pollution plumes.
Response:
In the context of RFS pathways analysis and approval, EPA solicits public comment as part of its
evaluation of new biofuel feedstocks. As part of that process, concerns regarding potential
invasiveness of some feedstocks have been brought to EPA's attention. In response to these
comments, and in collaboration with USD A, EPA has examined the invasion risk of feedstock
species and includes further regulatory requirements (e.g., a Risk Mitigation Plan) as appropriate
in pathway approvals in order to reduce the risk that species with invasive potential spread
beyond the cultivated acres. We note that the principal planted biofuel crops - corn and soybeans
- do not raise invasiveness concerns.
Analysis completed in 2011 suggests that water used for irrigation of feedstocks greatly exceeds
the water required for conversion of feedstocks to biofuels. Additionally, water use for biofuel
conversion depends on several factors including facility size, water reuse technologies, and other
process efficiencies.72 Irrigation practices are dependent on a number of economic and
agronomic factors that drive land management practices making attribution of increased
irrigation and water quantity to biofuels difficult let alone the subset driven by the RFS. More
research and quantitative evaluations are needed on increases in water use through changes in
land use and/or land management, and whether those changes can be attributed to feedstock
production.
EPA's 1999 Blue Ribbon Panel report on oxygenates cited by one commenter characterizes
ethanol as traveling at about the same rate but degrading faster than the oxygenate being
examined, methyl tertiary butyl ether (MTBE). The range to which the commenter stated ethanol
72 U.S. Environmental Protection Agency. December, 2011. Biofuels and the Environment: First Triennial Report to
Congress.
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extends a gasoline plume was not confirmed by the Panel, but rather presented as a hypothetical
situation to the Panel with no corroborating evidence, data gathered from the field, or any
additional research. Therefore, EPA still considers this a hypothetical outcome that needs
additional research and data to verify.73
Comment:
Several commenters raised a recent EPA Office of Inspector General report, which concluded
that EPA had not delivered in a timely manner required reports to Congress on the environmental
impacts of biofuels.74
Response:
The agency is currently working on the Second Triennial Report to Congress (as noted in other
responses) and expects to deliver that report in the spring of 2018.
Comment:
Several commenters stated that BBD has air quality benefits over petroleum diesel fuel and that
biomass based diesel production reduces emissions of PM, CO, and unburned hydrocarbons
when compared to petroleum diesel and further noting that scientific studies have linked PM to
many health problems and that there are dollar benefits to reducing PM.
Response:
EPA agrees that human exposure to PM and other pollutants is associated with adverse health
effects. Reducing exposures to such pollutants yields health benefits that can be both quantified
in terms of avoided incidence and monetized. More detailed information is available in Sections
3.5 and 5.4 of the RFS2 RIA.75
EPA did not conduct a new air quality impact assessment in assessing the volumes of renewable
fuel that are expected to be available for this rulemaking. However, as part of the RFS2
rulemaking in 2010, EPA conducted a detailed assessment of the emissions and air quality
impacts associated with an increase in production, distribution, and use of the renewable fuels
sufficient to meet the RFS2 volumes, including biodiesel and ethanol blends. That air quality
assessment is described in Section VI.D of the preamble76 for that rule and Chapter 3.4 of the
RIA77 for that rule.
73 U.S. EPA. September 15, 1999. Achieving Clean Air and Clean Water: The Report of the Blue Ribbon Panel on
Oxygenates in Gasoline (EPA420-R-99-021).
74 U.S. EPA Office of Inspector General. August 18, 2016. EPA has not met certain statutory requirements to
identify environmental impacts of Renewable Fuel Standard (16-P-0275). https ://www. epa. gov/of fice-i nspect o r-
general/report-eDa-has-not-met-certain-statutory-requirements-identify
75 U.S. EPA, 2010. Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006.
76 Available at http://www.gpo.gov/fdsvs/Dkg/FR-2010-03-26/pdf/2010-3851.Ddf.
77 Available at http://www.epa.gov/otaa/renewablefiiels/420rl0006.pdf.
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The RFS2 RIA indicates that the impact of increased biofuels (as assumed to meet the RFS2
volumes) on PM and some air toxics emissions at the tailpipe is generally favorable compared to
petroleum fuels, but the impact on VOCs, NOx, and other air toxics is generally detrimental.78
The impact of biodiesel specifically on VOC, PM, and air toxics emissions at the tailpipe is
generally favorable compared to petroleum diesel fuel, but the impact on NOx is slightly
detrimental.79 The RFS2 RIA also indicates that the upstream impacts on emissions from
production and distribution of biofuel (including biodiesel) are generally detrimental compared
to petroleum fuel.80 Taking tailpipe, upstream, and refueling emissions into account, the net
impact on emissions from RFS2 volumes of renewable fuels was projected to be increases in the
pollutants that contribute to both ambient concentrations of ozone and particulate matter as well
as some air toxics. The air quality impacts, however, are highly variable from region to region
and more detailed information is available in Section 3.4 of the RFS2 RIA.
78 U.S. EPA, 2010. Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006.
Table 3.2-7 and 3.2-8.
79 U.S. EPA, 2010. Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006.
Table 3.2-9.
80 U.S. EPA, 2010. Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006.
Table 3.2-2 and 3.2-3.
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6.4.4 Energy Security Impacts
Commenters that provided comment on this topic include, but are not limited to: 0446, 1756,
2540, 3184, 3245, 3321, 3496, 3679, 3681, 3880, and 3934.
Comment:
Numerous commenters lauded the energy security benefits for the U.S. associated with increases
in BBD as a result of the RFS program. They suggested that increasing the 2019 BBD RVO
reduces U.S. oil imports, and contributes to U.S. energy independence and security. They also
suggested that the increased production of renewable fuels, such as BBD, is consistent with the
current Administration's energy policy priority of "energy dominance". One commenter
suggested that the petroleum-based fuel displaced by renewable fuels in domestic fuel markets
does not appear to reduce U.S. crude production or domestic refinery output. Instead, the surplus
petroleum-based fuel is likely to be absorbed by the export markets and improves the U.S.'s
market share in the world petroleum products market. Finally, commenters suggested that
renewable fuels, such as BBD, provide a hedging function and diversify fuel supplies in U.S.
motor fuel markets. This helps to moderate motor fuel prices while shielding U.S. consumers
from potential world oil price spikes. Another commenter suggested that reducing the BBD
standard would provide greater opportunity for non-BBD biofuels to contribute towards the
advanced biofuel volume requirement. This commenter suggested that reducing the BBD
standard may provide greater energy security benefits, since there may be more advanced biofuel
pathways, improving fuel supply diversification.
Response:
We believe our final 2019 BBD volume requirement strikes the appropriate balance between
providing a market environment where the development of other advanced biofuels is
incentivized, while also maintaining support for the BBD industry. Based on our review of the
data, and the nested nature of the BBD standard within the advanced standard, we conclude that
the advance standard continues to drive the ultimate volume of BBD supplied. Arguments in
favor of increasing the required BBD volume must be balanced against the benefits of EPA
retaining a substantial degree of neutrality with regards to the types of advanced biofuel that are
used to meet the advanced biofuel standard. While biodiesel and renewable diesel help diversify
energy sources beyond petroleum, a variety of different types of advanced biofuels, rather than a
single type such as BBD, would positively impact energy security (e.g., by increasing the
diversity of feedstock sources used to make biofuels, thereby reducing the impacts associated
with a shortfall in a particular type of feedstock). We continue to believe that allowing
competition among qualifying advanced biofuels types provides an incentive for innovation, and
could lead to the development of new fuels with advantages, including increased volume
potential, potentially lower costs, and energy security benefits that are as yet unforeseen.
Comment:
EPA requested comment on whether volumes of imported renewable fuels to the U.S. have the
same impact on energy independence and security benefits as renewable fuels produced
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domestically. When requesting comment, EPA noted that for 2017, the U.S. imported 731
million gallons of BBD. One commenter suggested that considerations of energy independence
and security must consider the volumes of imported renewable fuels. They stated that 731
million gallons of BBD are roughly equivalent to 47,700 barrels per day of BBD. This volume of
BBD, one commenter suggested, is too small to have significant effects on the U.S.'s energy
independence and security. This commenter also suggested that imports of renewable diesel are
largely the result of California's LCFS program. If the renewable fuel volumes for the RFS
program were reduced, this might not have a significant impact on imports of renewable diesel to
the U.S., since imported renewable diesel would still likely be used to meet the California LCFS
program.
Response:
The terms energy security and energy independence are complimentary but not interchangeable
concepts.81 A country's energy security measures the ability of the country to withstand and
adapt to sudden shocks in energy prices or, in extreme cases, physical availability. The concept
of U.S. energy independence, on the other hand, suggests that the U.S. is self-sufficient in
providing for its own energy needs from domestic production sources. U.S. energy independence
implies eliminating payments to energy suppliers outside of the U.S. Since many energy markets
are global in nature, especially liquid fuel markets, even if the U.S. achieved energy
independence, energy supply disruptions throughout the globe would still result in price spikes
that increase fuel costs to consumers. Thus, energy independence does not mean that the U.S. is
necessarily more energy secure.
The wider use of renewable fuels such as BBD as well as other advanced biofuels in the U.S.,
both domestically produced and imported, improves the U.S.'s energy security position. The
major energy security issue that the U.S. deals with is the possibility of foreign oil supply
disruptions which raise the cost of fuels to consumers. These disruptions largely stem from the
possibility of actions that restrict the supply of oil by significant key market participants such as
the Organization of the Petroleum Exporting Countries (OPEC), or from wars or other sudden
events. Since oil demand is highly insensitive to its own price, modest changes in the global
supply of petroleum can lead to large oil price swings that adversely affect consumers.
BBD, both domestic and imported, as well as other biofuels, are less likely to face supply
disruptions in comparison to global oil supply. When BBD and other biofuels, experience supply
disruptions, they are likely to be tied to weather patterns (i.e., drought). Since weather patterns
are not correlated with wars and other sudden events that may restrict global oil production, the
wider use of BBD and other biofuels will improve the energy security position of the U.S. EPA
agrees with the commenter that California's LCFS program may still result in imports of
renewable diesel into California, even in the absence of the RFS program, though the market
may shift to other low carbon fuels without the incentive provided by the RFS program.
Increased renewable fuels such as BBD and other advanced biofuels produced in the U.S. reduce
U.S. imports of oil. Also, renewable fuels such as BBD and other biofuels produced in the U.S.
81 Greene, D., Measuring energy security: Can the U.S. achieve oil independence?", Energy Policy, 38 (2010); pp.
1641-1621
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reduce U.S. oil consumption, which may allow for the displaced oil consumption to be exported.
The likely result is an improvement in the U.S.'s net export position in terms of energy. Imports
of BBD and other biofuels do not promote a goal of energy independence, since they are not
domestically produced.
We believe our final 2019 BBD volume requirement strikes the appropriate balance between
providing a market environment where the development of other advanced biofuels is
incentivized, while also maintaining support for the BBD industry. Based on our review of the
data, and the nested nature of the BBD standard within the advanced standard, we conclude that
the advance standard continues to drive the ultimate volume of BBD supplied. Arguments in
favor of increasing the required BBD volume must be balanced against the benefits of EPA
retaining a substantial degree of neutrality with regards to the types of advanced biofuel that are
used to meet the advanced biofuel standard. We continue to believe that allowing competition
among qualifying advanced biofuel types provides an incentive for innovation, and could lead to
the development of new fuels with advantages, including increased volume potential, potentially
lower costs, and energy security benefits that are as yet unforeseen.
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6.4.5 Expected Rate of Production of Biofuels
Commenters that provided comment on this topic include, but are not limited to: 3317, 3319,
3880, and 3934.
Comment:
Several commenters challenged EPA's proposed BBD volume requirement of 2.1 billion gallons
for 2019 based on their assessment of a much higher expected annual rate of future commercial
production of renewable fuels (statutory factor III). They argued that this much greater capacity
for BBD should warrant raising the BBD volume requirement for 2019, and that to the extent the
production capacity is currently idle, there is more than enough time to ramp up production to
meet increased BBD volume requirements for 2019. Another commenter stated that the BBD
volume requirement should account for increased demand for renewable jet fuel (renewable
diesel).
Response:
EPA acknowledges that the annual rate of future commercial production of renewable fuels is
not expected to act as a constraint for setting the BBD volume requirement for 2019. As we
noted in Section IV.B.2 of the final rule and in a memo to the docket,82 the available production
capacity for all registered domestic biodiesel and renewable diesel production facilities was
approximately 4.1 billion gallons. Registered production capacity of biodiesel and renewable
diesel facilities in the U.S. that generated RINs in 2017 (through September 2017) was
approximately 3.0 billion gallons.
EPA also acknowledges that more than 2.1 billion gallons of advanced biofuel and renewable
diesel is capable of being produced in 2019. In fact, as discussed in Section IV of the final rule,
we project that already in 2018 2.55 billion gallons is reasonably attainable. However, it does not
follow that we must therefore mandate this higher BBD volume requirement in 2019. In setting
the BBD requirement for any given year, we are setting a floor for the minimum amount of
biodiesel volume that is guaranteed to the industry. Additional levels of BBD volumes will be
incentivized by the final advanced biofuel volume requirement for 2019. EPA did take into
account other advanced biofuel, including jet fuel, in determining the reasonably available
supply. Discussion of potential volumes for 2018 are discussed in Section IV.B.3 of the final
rule. There, we recognize that the potential exists for additional volumes of advanced biofuel
from sources such as jet fuel, LPG, and LNG (as distinct from CNG), as well as non-cellulosic
biogas such as from digesters. However, since they have been produced in only de minimis and
sporadic amounts in the past, we do not have a basis for projecting substantial volumes from
these sources in 2018.
82 "Biodiesel and Renewable Diesel Registered Capacity (October 2017)" Memorandum from Dallas Burkholder to
EPA Docket EPA-HQ-OAR-2017-0091.
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Comment:
Several commenters stated that we should be setting the 2019 BBD requirement at the full
volume of BBD that we believe is reasonably attainable for 2019, and then provide space for
other advanced biofuels to compete in the space between the established 2019 BBD volume
requirement and the advanced biofuel requirement in 2019.
Response:
We disagree. EPA has not yet determined what volumes of advanced biofuels might be
reasonably attainable in 2019. These will be the subject of regulatory actions next year. But since
the statute requires that we set the BBD standard volumes earlier, we have done so with this final
rulemaking. The 2019 BBD volume requirement is being finalized in a manner consistent with
how we set the 2017 and 2018 BBD volume requirement, and is based on a review of the
implementation of the program to date and all the factors required under the statute as detailed in
Section VI of the final rule and in the "Final Statutory Factors Assessment for the 2019 Biomass
Based Diesel (BBD) Applicable Volume" memorandum to the docket. Overall, we have
determined that the assessment of all the statutory factors specified in CAA section
21 l(o)(2)(B)(ii)(I)-(VI) for the 2019 BBD applicable volume, which includes statutory factor III,
"expected annual rate of future commercial production..does not provide significant support
for proposing the BBD requirement at a level higher or lower than 2.1 billion gallons in 2018.
We believe that maintaining the level of BBD finalized for 2018 of 2.1 billion gallons supports
the overall goals of the RFS program while also maintaining the incentive for development and
growth in production of other advanced biofuels as well as the continued growth in BBD and
renewable diesel. This industry is currently the single largest contributor to the advanced biofuel
pool, one that to date has been largely responsible for providing the growth in advanced biofuels
envisioned by Congress.
Arguments in favor of increasing the required BBD volume must be balanced against the
benefits of EPA retaining a substantial degree of neutrality with regards to the types of advanced
biofuel that are used to meet the advanced biofuel standard. We continue to believe that allowing
competition among qualifying advanced biofuels types provides an incentive for innovation, and
could lead to the development of new fuels with advantages, including increased volume
potential, potentially lower costs, and greater environmental and energy security benefits that are
as yet unforeseen. EPA is not arbitrarily keeping the 2019 BBD applicable volume low, but
rather for these reasons is not increasing it as might otherwise be possible were there no
advanced biofuel standard. While competition with other advanced biofuels is not one of the
explicit factors listed in the statute that EPA must take into consideration in establishing the
BBD standard for years after 2013, EPA is not limited to just those factors listed in the statute,
and furthermore costs are listed, and competition with other sources of supply is a key factor in
the costs of the program. We do not believe it is either necessary or appropriate to set the BBD
volume at a higher value closer to the full projected value of commercial production, but instead
believe that it is appropriate to set the BBD mandate in a manner to provide space for other
advanced biofuels to compete with BBD within the advanced biofuel volume requirement.
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In summary, the domestic BBD industry coupled with foreign production available for import to
the U.S. already has sufficient production capacity to meet the full 2.1 billion gallons being
finalized for 2019. Based on comments received and further analysis, we believe that
maintaining the BBD volume at 2.1 billion gallons for 2019 strikes the appropriate balance
between providing a market environment where other types of advanced biofuels are
incentivized and providing support and a degree of certainty for the BBD industry.
Comment:
One commenter stated that recent increases in the BBD standard are greater than increases in
advanced feedstock availability and therefore the BBD 2019 requirement should be lowered.
Response:
EPA disagrees with this comment. An advanced biodiesel or renewable feedstock refers to any
of the biodiesel, renewable diesel, jet fuel, and heating oil feedstocks listed in Table 1 to 40 CFR
80.1426 or in petition approvals issued pursuant to 40 CFR 80.1416, that can be used to produce
fuel that qualifies for D4 or D5 RINs. These feedstocks include, for example, soy bean oil; oil
from annual cover crops; oil from algae grown photosynthetically; biogenic waste
oils/fats/greases; non-food grade corn oil; camelina sativa oil; and canola/rapeseed oil. Data
reviewed by EPA indicates the available supply of feedstocks that can be used to produce
advanced biodiesel and renewable diesel (both in the U.S. and globally) and the domestic
biodiesel and renewable diesel production capacity are sufficient to produce the volume
necessary to meet the 2018 advanced biofuel volume. EPA is also not aware of any factors
related to the distribution or use of biodiesel and renewable diesel expected to restrict the supply
of these fuels to a volume below that which would be needed to satisfy the volume of advanced
biofuel. Finally, we note that the significant increases in domestic production of biodiesel and
renewable diesel in previous years (443 million gallons from 2012 to 2013 and 426 million
gallons from 2015 to 2016) suggest that domestic biodiesel and renewable diesel producers are
capable of significant production increases in a single year.
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6.4.6 Impact of Renewable Fuels on Infrastructure in the U.S. (Deliverability
of Materials, Goods, Renewable Fuels, and Other Products) and Sufficiency of
Infrastructure to Deliver and Use Renewable Fuel
Commenters that provided comment on this topic include, but are not limited to: 3249, 3679, and
3880.
Comment:
Several commenters faulted EPA for refusing to recognize that, in the absence of infrastructure
constraints, EPA should increase the volume requirement for BBD in 2019. One commenter
noted that infrastructure for BBD is a significant advantage when compared to less established
advanced biofuels. Another commenter stated that the BBD industry continues to improve its
distribution infrastructure to meet increased production. For example, a review of listed bulk
liquid storage facilities by OPIS shows they more than doubled from the 2016 to 2017 edition.
Response:
EPA acknowledges that the biodiesel industry has continued to expand its distribution and retail
infrastructure. While our final rule analysis indicates that there is sufficient infrastructure to
support greater than 2.1 billion gallons of biodiesel and renewable diesel for 2019, it does not
follow that we must therefore mandate this higher BBD volume requirement in 2019. In setting
the BBD requirement for any given year, we are setting a floor for the minimum amount of
biodiesel volume that is guaranteed to the industry. Additional levels of BBD volumes will be
incentivized by the final advanced biofuel volume requirement for 2019.
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6.4.7 Impact on Transportation Fuel Prices and the Cost to Transport Goods
Commenters that provided comment on this topic include, but are not limited to: 2547, 3245,
3248, 3593, 3645, 3880, and 3934.
Comment:
Several commenters stated that EPA should consider costs when setting the BBD standards and
give more weight to fuel costs in determining the level of the BBD standard for 2019. One
commenter urged EPA to lower the 2019 BBD standard since this would reduce the cost of
transportation fuel prices since BBD is much more expensive than diesel.
Response:
We acknowledge that current renewable fuels, in particular BBD, are generally more expensive
than the petroleum fuels on an energy equivalent basis, and therefore increasing renewable fuel
use is expected to result in a modest increase in the cost of transportation fuel and cost to
transport goods in 2018 and 2019. This is true even in situations where renewable fuel blends
have a lower retail price than petroleum fuels with little or no renewable content due to the
transfer payments associated with tax credits and the RIN value. Despite the higher expected
costs of renewable fuels in these years, we believe the 2019 BBD standard in this final rule is
appropriate in light of the statutory direction in EISA.
In Section IV.E.2 of the final rule, we provide illustrative cost estimates for examples in which
either soybean oil biodiesel, sugarcane ethanol, cellulosic biofuel from CNG/LNG, or cellulosic
biofuel from corn kernel fiber fills the entire change in the overall advanced biofuel mandate in
2018 which includes BBD. We estimate the difference in the price per energy-equivalent biofuel
on the one hand, and the petroleum-based fuel they would replace on the other. We then multiply
this difference by the year-on-year change in the advanced biofuel volume requirement. More
detail on this analysis can be found in the memo to the docket titled, "Illustrative Costs Impact of
the Final Annual RFS2 Standards, 2018." These costs estimates are based on current market
conditions, and it is likely that market conditions will vary over time. While these illustrative
costs do not address 2019 costs estimates, they are informative for 2019.
Comment:
Several commenters stated that due to the value of RINs, BBD blends can be offered at a cost
lower than that of 100% petroleum diesel fuel. Thus, compared to petroleum the commenters
argued, BBD production lowers the costs for the end users as well as the cost to transport goods.
The commenters also stated that obligated parties don't pass along costs of RFS compliance on
to consumers in the form of higher diesel pump prices. The commenters stated that overall, the
supply-increasing effect of adding BBD to the pool of transportation fuels, reduces the cost of
petroleum diesel to consumers.
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Response:
As we have discussed in previous annual rulemakings, we do not believe it would be appropriate
to treat RINs as a cost to obligated parties, or as a cost adjustment to consumers. RINs represent
transfer payments within the marketplace in a similar fashion to fuel taxes, not societal costs.
Thus, it is not directly relevant to our consideration of the costs of the program whether biodiesel
or any other renewable fuel is less costly relative to petroleum-based gasoline or diesel for an
individual that purchases. Instead, the relevant costs of producing, distributing, and blending are
the costs that we consider. Further, while the increase in transportation fuel supply for biodiesel
should have a directional impact of lowering transportation fuel prices, this impact will be small
in comparison to the higher costs of biodiesel and renewable diesel given the size of the global
transportation fuel market in comparison to U.S. biodiesel use.
Comment:
One commenter questioned EPA's ability to forecast accurately both petroleum diesel and
biodiesel costs in 2019. The commenter stated that marginal costs differentials should not be the
basis for failing to increase the BBD RVO for 2019.
Response:
As we discussed above, in the final rule EPA has provided illustrative costs examples for
changes in the advanced fuel volumes, including soy-based biodiesel, which continues to
represent the feedstock most often used to produced BBD. Compared to 2017, we estimate what
an additional 10 million gallons of advanced biofuels could cost in 2018. The estimate for 10
million additional gallons of soy-based biodiesel ranges from $10-$13 million in 2018. It is
important to note that these illustrative costs do not take into consideration the benefits of the
program. To the extent that cost considerations favor BBD, the cost benefit can be obtained
through the market choosing BBD over competing products in meeting the advanced and total
RFS standards.
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6.4.8 Impacts on Other Factors (Jobs, Price and Supply of Agricultural
Goods, Rural Economic Development, Food Prices)
Commenters that provided comment on this topic include, but are not limited to: 1775, 2540,
3245, 3322, 3430, 3575, 3578, 3679, 3880, and 3959.
Comment:
Several commenters suggested that increasing BBD volumes for the 2019 RFS standard would
increase employment in the renewable fuels industries, industries that supply inputs to the
renewable fuels industry, and be overall beneficial to rural economies. For example, these
commenters suggested that the BBD industry supports 64,000 jobs throughout it supply chain in
the U.S. and every 500 million extra gallons of BBD will increase the number of jobs by 13,000.
Response:
EPA recognizes that the BBD standards have led to significant job creation, especially in rural
areas, and in addition indirectly supports job creation in other industries. However, an increase in
the BBD standard for 2019 will result in more employment in the BBD industry but at the
expense of employment in industries that produce other (i.e., non-BBD) advanced biofuels.
Accordingly, we do not believe that this factor provides a compelling reason for setting a higher
or lower nested standard for BBD. We believe our final 2019 BBD volume requirement
continues to provides support for continued rural economic development while striking the
appropriate balance between providing a market environment where the development of other
advanced biofuels is incentivized, while also maintaining support for the BBD industry. Based
on our review of the data, and the nested nature of the BBD standard within the advanced
standard, we conclude that the advance standard continues to drive the ultimate volume of BBD
supplied.
Comment:
Several commenters requested that the BBD RVO for 2019 be set to discourage the use of food-
based biofuels to backfill for the so called advanced or cellulosic biofuels gap. These
commenters suggested that backfilling will likely increase food prices.
Response:
To the extent that the BBD standard causes more BBD to be used to fulfill the non-cellulosic
advanced biofuel volume, there might be modest increases in the price of soybeans and soybean
oil. However, increases in BBD may also result in offsetting price and supply impacts on
feedstocks used to make other advanced biofuels such as grain sorghum and sugarcane. In the
aggregate, the impacts on individual feedstock prices may balance each other out and result in a
negligible impact on overall food prices. Accordingly, we do not believe that this factor warrants
setting a higher or lower nested standard for BBD.
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Comment:
One commenter suggested that BBD has benefitted farmers by increasing the supply of co-
products of soy oil such as soybean meal. The commenter stated that that increased production of
BBD has reduced U.S. soybean meal prices that livestock producers pay for animal feed by
approximately $21 per ton. As another example, the commenter suggested that the use of animal
fats in BBD production has increased the value of those fats, providing $16 per head of value to
beef producers.
Response:
To the extent that the BBD standard causes more BBD to be used to fulfill the non-cellulosic
advanced biofuel volume, there might be modest increases in the amount of soybean meal and
animal fats used to make renewable fuels. However, using more BBD may cause offsetting price
and supply impacts on feedstocks used to make other advanced biofuels such as grain sorghum.
Thus, the overall impacts on the prices of feedstocks used to make advanced renewable fuels
may be modest. Given the success of the BBD industry in the past few years, as well as the
substantial increases in the BBD volume being driven by the advanced standard, we have
determined that a volume requirement greater than 2.1 billion gallons for BBD in 2019 is not
necessary to provide support for the BBD industry. Setting the BBD standard in this manner
continues to allow a considerable portion of the advanced biofuel volume to be satisfied by either
additional gallons of BBD or by other unspecified and potentially less costly types of qualifying
advanced biofuels. Accordingly, we do not believe that this factor warrants setting a higher or
lower nested standard for BBD.
Comment:
Several commenters pointed to the positive impacts an increasing BBD requirement can have on
the soybean industry, noting that expanding biodiesel markets are important since soybean
production is driven by demand for livestock feed and the oil is a co-product. The commenters
state that without a market outlet for the co-product, production of the protein meal is restrained
and that biodiesel provides a market outlet for the surplus soybean oil. Another commenter noted
that higher BBD requirements also helps protect jobs in the rendering industry as biodiesel
producers provide a market for rendered animal fats.
Response:
An increase in the BBD standard for 2019 may have benefits to some sectors of the economy,
but at the expense of benefits in other advanced biofuel sectors that BBD would displace.
Similarly, an increase in the BBD standard for 2019 will result in more employment in the BBD
industry but at the expense of employment in industries that produce other (i.e., non-BBD)
advanced biofuels. Accordingly, we do not believe that these factors warrant setting a higher or
lower nested standard for BBD. We believe our final 2019 BBD volume requirement strikes the
appropriate balance between providing a market environment where the development of other
advanced biofuels is incentivized, while also maintaining support for the BBD industry. Based
on our review of the data, and the nested nature of the BBD standard within the advanced
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standard, we conclude that the advance standard continues to drive the ultimate volume of BBD
supplied.
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7. Economic and Environmental Impacts
7.1 Economic Impacts and Considerations
7.1.1 Illustrative Costs of the Program
Commenters that provided comment on this topic include, but are not limited to: 1776, 2547,
3245, 3322, 3428, 3593, 3645, 3679, 3680, 3961, and 3964.
Comment:
Several commenters stated that while EPA provides cost estimates for the 2018 RFS rule, it does
not account for the benefits (e.g., energy security, the ability of renewable fuels to protect
consumers from oil price swings, air quality impacts etc.) in its rulemaking. Other commenters
stated that EPA does not undertake a complete cost analysis for the 2018 RFS rule, since EPA
does not account for factors such as infrastructure costs and investment impacts. Another
commenter suggested that EPA's estimates of the costs of the 2018 RFS are understated since
EPA only focuses on wholesale costs. Another commenter suggested that EPA overestimated
costs by not accounting for the reduction in the price of diesel fuel and home heating oil prices
from the increase in renewable fuel volumes as a result of the 2018 RFS. One commenter
suggested that EPA's 2018 RFS analysis fails to satisfy a cost/benefit analysis test since EPA has
not updated its lifecycle GHG estimates since 2010. One commenter submitted a confidential
analysis assessing the impacts of higher advanced renewable fuel and biodiesel volumes (4.75
billion gallons of advance fuel in 2018 and 2.5 billion gallons of biodiesel in 2019, respectively).
The analysis suggests that the increases in the volumes of renewable fuels modeled in their study
would have only modest impacts on agricultural commodity markets.
An additional commenter submitted a Working Paper (The Renewable Fuel Standard in
Competitive Equilibrium: Market and Welfare Effects, by Moschini et al.) that uses a multi-
market model (e.g., corn, soybeans, petroleum etc.) to assess the costs and impacts of the RFS
program. The model suggests that the RFS program has improved the overall economic welfare
of the U.S. by altering "terms of trade" effects. The U.S. is a net exporter of farm products and a
net importer of petroleum. The model estimates that the RFS has increased agricultural prices
(e.g., corn, soybeans) and lowered the price of imported oil. According to the paper, these price
effects stemming from the RFS benefit the U.S. and increase economic welfare. Another
commenter suggested that EPA needs to have better cost estimates of the individual renewable
fuels, instead of basing illustrative cost estimates on representative fuels (e.g., using soy oil
biodiesel to represent the costs of all biodiesel). This commenter suggested that EPA undertake a
more detailed cost analysis of the 2018 standards similar to the type of analysis that EPA
undertook for the Regulatory Impact Analysis that accompanied the 2010 RFS rulemaking.
Response:
EPA continues to believe that while costs can be associated with the impacts of the rule on an
annual basis, the long-term nature of the benefits of the RFS program are not well suited for
being analyzed on a piecemeal basis and are better addressed with the full maturity of the
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program in 2022. EPA estimated GHG, energy security, air quality impacts, and benefits in the
2010 RFS2 final rule assuming full implementation of the statutory volumes in 2022. EPA
focuses on wholesale fuel costs in its cost analysis since wholesale cost estimates exclude
transfer payments (i.e., RIN values, tax payments) that are included in the retail price of both
renewable fuels and petroleum-based fuels. By focusing on the wholesale level, EPA's analysis
is better able to estimate societal costs. In response to one commenter who suggested EPA
account for the reduction in the price of diesel fuel and home heating oil prices from the change
in renewable fuel volumes as a result of the 2018 RFS, it is not anticipated that petroleum-based
fuel prices will be measurably affected. Thus, we use the most recent fuel price available from
DOE's STEO. Another commenter suggested that the agricultural commodity impacts of
increasing renewable fuel volumes would be modest. The commenter's assessment, however,
assumed that the biodiesel blenders' credit will continue to be renewed and doesn't consider the
possibility of U.S. tariffs on Argentina and Indonesian biodiesel. Extension of the biodiesel
blenders' credit and U.S. import tariffs on biodiesel would likely alter the agricultural
commodity impacts of higher renewable fuel volumes from this rule. One commenter suggested
that EPA consider "terms of trade" effects when accounting for the costs of the 2018 RFS. Given
the modest increase in volumes of renewable fuels being required in this rulemaking, it is
unlikely that the terms of trade for agricultural and petroleum products for the U.S. would be
altered significantly. As a result, EPA did not factor terms of trade effects into its cost analysis.
Given the limited time frame for conducting this annual rule, it is not feasible to develop a
detailed cost analysis of each type of individual renewable fuel that could comply with the 2018
RFS. In response to the comment that EPA should update its lifecycle GHG estimates as part of a
revised cost benefit analysis, see Section 7.2.1 of this document.
Comment:
Several commenters stated that the illustrative cost analysis is inaccurate since it focuses on the
societal costs of the program, and not the costs to consumers of using blended fuels. One
commenter suggested that the RIN associated with BBD allows parties to sell the BBD fuel at a
lower cost to consumers, providing costs savings to the consumer. The same commenter
suggested that that EPA should provide estimates of the costs of 2018 RFS by comparing the
retail prices of biodiesel and diesel fuel using information from the DOE's Alternative Fuels
Data Center, instead of estimating the costs of renewable and petroleum fuels at the wholesale
level.
Response:
When undertaking a cost analysis, EPA assesses the societal costs of renewable fuels compared
to the petroleum fuels that they are replacing. Societal costs represent the resource costs (e.g.,
extra costs in making the fuel such as the use of corn or soybeans, fertilizers to grow the crops,
tractors to plow the fields) that are required to produce the renewable fuels. The RIN value is a
transfer payment between renewable fuel providers and RFS obligated parties that are required to
blend renewable fuels into their petroleum-based fuels. The RIN value reduces the price of the
renewable fuel in relation to the petroleum fuel into which it is blended, but also increases the
price of the petroleum fuel blendstock. In many blends, these two price impacts essentially offset
each other. In blends with higher than average renewable fuel content, marketers can offer them
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to consumers at a price discount as the commenter suggests. However, that price discount is
offset by other consumers paying higher prices for fuel with less than average renewable fuel
content. Other than the administrative transaction costs associated with exchanging the RIN,
there are no societal costs associated with the RIN. The DOE Alternative Fuels Data Center
reports retail prices of renewable and petroleum-based fuels that drivers see when they purchase
the fuels. Retail fuel prices are determined by a variety of factors including the costs of the fuels,
the RIN values for renewable fuels and fuel taxes. Thus, retail prices combine the costs of
producing the renewable fuels with their RIN values, as well as other transfer payments such as
fuel taxes. Therefore, retail fuel prices do not reflect the real societal costs of the RFS program.
Comment:
Several commenters recommended that EPA should place more weight and emphasis on cost
considerations when setting the renewable fuel volumes for the 2018 RFS.
Response:
As described in the Section IV and V of the final rule, the costs of using renewable fuels is one
factor that EPA has considered in setting the advanced biofuel and BBD standards for 2018
renewable fuel volumes for the RFS.
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7.1.2 Energy Security
Commenters that provided comment on this topic include, but are not limited to: 0446, 3184,
3245, 3317, 3496, 3497, 3681, and 3961.
Comment:
Numerous commenters lauded the energy security benefits for the U.S. associated with increases
in renewable fuels as a result of the RFS program. They suggested that increasing renewable
fuels, such as ethanol and biodiesel, reduce U.S. oil imports, and contribute to U.S. energy
independence and security. They also suggested that the increased production of renewable fuels
is consistent with the current Administration's energy policy priority of "energy dominance."
They further suggested that the gasoline displaced by renewable fuels in domestic fuel markets
does not appear to reduce U.S. crude production or domestic refinery output. Instead, the surplus
gasoline is likely to be absorbed by the export markets and improves the U.S. market share in the
world petroleum products market. Finally, commenters suggested that renewable fuels provide a
hedging function and diversify fuel supplies in U.S. motor fuel markets. This helps to moderate
motor fuel prices while shielding U.S. consumers from potential world oil price spikes. Another
commenter stated that advances in unconventional oil and gas production has transformed North
America into a major hydrocarbon producing region. The commenter stated that imports as a
share of U.S. petroleum consumption declined from 60 percent in 2005 to 25 percent in 2016.
This commenter suggested that energy security was a spurious rationale for the RFS even in the
mid-2000s, and is now obsolete.
Response:
EPA believes that the production of renewable fuels supports one of the goals of the RFS
program by improving energy independence and security of the U.S. through diversification of
U.S. transportation fuels and displacing imported petroleum. Also, the renewable fuels that
displace petroleum are less likely to be subject to periodic supply disruptions or "oil shocks."
Additional details on the energy security benefits associated with the full implemented of the
RFS program are included in the March 2010 final RFS2 rulemaking.
Comment:
EPA requested comment on whether volumes of imported renewable fuels to the U.S. have the
same impact on energy independence and security benefits as renewable fuels produced
domestically. When requesting comment, EPA noted that for 2017, the U.S. has imported 46
million gallons of ethanol and 731 million gallons of biodiesel/renewable diesel. One commenter
suggested that considerations of energy independence and security must consider the size of the
volumes of imported renewable fuels. They stated that 46 million gallons of ethanol are roughly
equivalent to 2,740 barrels per day of ethanol and the 731 million gallons of biodiesel/renewable
diesel are roughly equivalent to 47,700 barrels per day of biodiesel/renewable diesel. These
volumes, the commenter suggested, are too small to have significant effects on the U.S.'s energy
independence and security. The commenter also stated that 3,000 barrels per day of imports,
roughly the quantity of ethanol being imported, represents 0.3% of U.S. ethanol production.
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Also, the commenter suggested that imports of both sugarcane ethanol and renewable diesel are
largely the result of the California LCFS program. If the renewable fuel volumes for the RFS
program were reduced, this might not have a significant impact on imports of renewable fuels to
the U.S., since imported renewable fuels would still likely be used to meet the California LCFS
program requirements.
Response:
The terms energy security and energy independence are complimentary but not interchangeable
concepts.83 A country's energy security measures the ability of the country to withstand and
adapt to sudden shocks in energy prices or, in extreme cases, physical availability. The concept
of U.S. energy independence, on the other hand, suggests that the U.S. is self-sufficient in
providing for its own energy needs from domestic production sources. U.S. energy independence
implies eliminating payments to energy suppliers outside of the U.S. Since many energy markets
are global in nature, especially liquid fuel markets, even if the U.S. achieved energy
independence, energy supply disruptions throughout the globe would still result in price spikes
that increase fuel costs to U.S. consumers. Thus, energy independence does not mean that the
U.S. is necessarily more energy secure.
The wider use of renewable fuels in the U.S., both domestically produced and imported,
improves the U.S.'s energy security position. The major energy security issue that the U.S. deals
with is the possibility of foreign oil supply disruptions which raise the cost of fuels to consumers.
These disruptions largely stem from the possibility of actions that restrict the supply of oil by
significant key market participants such as the Organization of the Petroleum Exporting
Countries (OPEC), or from wars or other sudden events. Since oil demand is highly insensitive
to its own price, modest changes in the global supply of petroleum can lead to large oil price
swings that adversely affect consumers.
Renewable fuels, both domestic and imported, are less likely to face supply disruptions in
comparison to global oil supply. When renewable fuel supply disruptions occur, they are likely
to be tied to weather patterns (e.g., drought). Since weather patterns are not correlated with wars
and other sudden events that may restrict global oil production, the wider use of renewable fuels
will improve the energy security position of the U.S. EPA agrees with the commenter that
California's LCFS program may still result in imports of renewable fuels into California, even in
the absence of the RFS program, though the market may shift to other low carbon fuels without
the incentive provided by the RFS program. Renewable fuels produced in the U.S. reduce U.S.
oil consumption, which may allow for the displaced oil consumption to be exported. The likely
result is an improvement in the U.S.'s net export position in terms of energy. Imports of
renewable fuels do not promote a goal of energy independence since they are not domestically
produced. In any case, EPA agrees with the commenter that energy security and energy
independence outcomes are only modestly affected by the current size of the volumes of
imported renewable fuel to the U.S.
83 David L. Greene 2010 "Measuring energy security: Can the United States achieve oil independence?" Energy
Policy, 38(4), 1614-1621
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7.1.3 Impacts of Standards on RIN Prices
Commenters that provided comment on this topic include, but are not limited to: 1776 and 2547.
Comment:
One commenter submitted a study projecting a variety of agricultural, economic, and RIN price
impacts of various RFS volume scenarios in future years.
Response:
This study focused on several different RFS scenarios in the year 2022. While it may provide
some insights to the economic impacts of potential future scenarios, it is not directly relevant to
this final rule.
Comment:
Multiple commenters requested that EPA finalize RFS volumes that are lower than the proposed
volumes in an effort to reduce RIN prices. These commenters often claimed that merchant
refiners are suffering economic harm from high RIN prices.
Response:
EPA has invested significant resources evaluating the impact of high RIN prices on refiners.
After reviewing the available data, EPA has concluded that refiners are generally able to recover
the cost of RINs in the prices they receive for their refined products, and therefore high RIN
prices do not cause significant harm to refiners.84 In light of these findings, EPA does not have
the statutory authority to reduce the required renewable fuel volumes for 2018 in an effort to
achieve lower RIN prices. For a further discussion of EPA's consideration of the use of the
general waiver authority on the basis of severe economic harm, see Section V of the final rule.
84 For more detail on EPA's assessment of this issue see "A Preliminary Assessment of RIN Market Dynamics, RIN
Prices, and Their Effects," Dallas Burkholder, Office of Transportation and Air Quality, US EPA. May 14, 2015 and
"Denial of Petitions to Change the RFS Point of Obligation," available in EPA docket EPA-HQ-OAR-2016-0054.
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7.1.4 Impacts of Standards on Retail Fuel Prices
Commenters that provided comment on this topic include, but are not limited to: 3248, 3961, and
4397.
Comment:
One commenter stated that biodiesel is far more expensive to produce than petroleum diesel, but
that it can be sold for less than petroleum diesel due to the value of the BBD RIN and the
biodiesel tax credit.
Response:
EPA recognizes biodiesel is typically more expensive to produce that petroleum diesel, but that
the combination of the RIN value and the biodiesel tax credit (when available) has resulted in
some retailers offering biodiesel blends (such as B20) at lower prices that petroleum diesel. We
note, however, that while the value of the RINs may enable retailers to offer biodiesel blends at
lower prices than petroleum diesel, as long as the cost of biodiesel is greater than the cost of
petroleum diesel requiring greater volumes of biodiesel in the fuel supply will ultimately
increase the price of transportation fuel. Specifically, the RIN value reduces the effective price of
the renewable fuel in relation to the petroleum fuel into which it is blended, but also marginally
increases the price of the petroleum fuel blendstock. In many blends, these two price impacts
essentially offset each other. In blends with higher renewable fuel content, marketers can offer
them to consumers at a price discount as the commenter suggests. However, that price discount
is offset by other consumers paying higher prices for fuel with lower renewable fuel content.
Comment:
One commenter claimed that BBD RIN costs are absorbed by refiners and are not passed on to
consumers.
Response:
EPA has invested significant resources evaluating the impact of high RIN prices on refiners and
consumers. After reviewing the available data, EPA has concluded that refiners are generally
able to recover the cost of RINs in the prices they receive for their refined products, and
therefore high RIN prices do not cause significant harm to refiners.85 Higher RIN prices are
therefore not absorbed by refiners, but rather effectively function as a cross-subsidy. In other
words, higher RIN prices function to decrease the cost of fuels that contain higher proportions of
renewable fuel (such as B20 or E85), while at the same time increasing the cost of fuels with
relatively low proportions of renewable fuel (such as EO or petroleum diesel).
85 For more detail on EPA's assessment of this issue see "A Preliminary Assessment of RIN Market Dynamics, RIN
Prices, and Their Effects," Dallas Burkholder, Office of Transportation and Air Quality, US EPA. May 14, 2015 and
"Denial of Petitions to Change the RFS Point of Obligation," available in EPA docket EPA-HQ-OAR-2016-0054.
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Comment:
One commenter claimed that ethanol and biodiesel cost more than gasoline and diesel to
produce, and that requiring the use of these fuels increases fuel prices. The commenter further
stated that high RIN prices increase fuel prices. Other commenters stated that ethanol was
cheaper than gasoline, and that increased use of ethanol resulted in lower fuel prices for
consumers. Some of these commenters also mentioned that ethanol was the cheapest source of
octane available to the market.
Response:
EPA recognizes that the cost of biodiesel, and at times ethanol, is higher than the petroleum fuels
they displace on an energy-equivalent basis. We note, however, that there are a number of
factors, such as the high octane value of ethanol, that may result in the use of ethanol in E10
blends even in the absence of RFS standards. If the cost of biodiesel and/or ethanol are higher
than the petroleum fuels they displace (after accounting for the value and/or cost of the various
properties of these fuels, such as the octane value of ethanol), then requiring greater volumes of
these fuels will increase the price of fuel to consumers. In this final rule EPA has considered the
impact of renewable fuels on costs, and has concluded that these costs do not represent severe
economic harm, and therefore do not justify additional volume reductions using our general
waiver authority (see Section V of the final rule for a further discussion of EPA's consideration
of severe economic harm). EPA has also invested significant resources evaluating the impact of
high RIN prices on refiners and consumers. After reviewing the available data, EPA has
concluded that for any given renewable fuel volume requirement consumers are not harmed by
higher RIN prices themselves, as RINs effectively function as a cross-subsidy between fuels with
varying levels of renewable fuel.86
Comment:
Several commenters stated that high RIN prices disadvantaged small retailers and distorted the
retail fuel market, as larger retailers capable of blending renewable fuels are able to benefit from
large profits by selling RINs. These commenters generally claimed that larger retailers are using
these profits to gain market share at the expense of small retailers.
Response:
EPA evaluated these claims in the context of responding to petitions we received requesting that
the Agency change the point of obligation in the RFS program. We determined that small
retailers are not disadvantaged by the RFS program, as the profits larger retailers receive from
selling RINs are generally offset by the cost of acquiring the RINs that they sell.87
86 For more detail on EPA's assessment of this issue see "A Preliminary Assessment of RIN Market Dynamics, RIN
Prices, and Their Effects," Dallas Burkholder, Office of Transportation and Air Quality, US EPA. May 14, 2015 and
"Denial of Petitions to Change the RFS Point of Obligation," available in EPA docket EPA-HQ-OAR-2016-0054.
87 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
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7.1.5 Price and Supply of Agricultural Commodities and Farm Income
Commenters that provided comment on this topic include, but are not limited to: 0446, 1754,
1756, 1775, 1776, 3237, 3959, and 4397.
Comment:
Numerous commenters addressed the impact of the RFS RVOs on agricultural commodities and
prices (e.g., corn, soybeans), various intermediate products such as seed, as well as suppliers of
agricultural inputs (e.g., agricultural equipment manufacturers). The commenters argued for
higher renewable fuels volumes associated with the RFS annual standard in order to boost
agricultural commodity demand and, thereby, raise agricultural commodity/input suppliers'
prices and U.S. farm income. They point out that agricultural commodities are currently in
relative abundance. For example, one commenter pointed to information that shows 2017 U.S.
agricultural producers are facing their fourth year of depressed agricultural commodity prices
and farm income. According to the commenter, U.S. net farm income has declined 50 percent
since 2013. U.S. net farm income is expected to increase slightly in 2017 compared to 2016, but
corn receipts have declined for the past five years. Corn prices averaged roughly $3.40 for the
2016/2017 marketing year, with corn prices below the costs of production, which are roughly
$4.24/bushel, according to the commenter. Another commenter pointed out that that USDA data
shows that soybean production has been increasing significantly in recent years and is projected to
increase in 2017. According to the commenter, the U.S. soybean harvest last year was a record 4.3
billion bushels; 380 million bushels larger than the previous year. Given the recent relatively large
agricultural commodity crops and the current low agricultural commodity prices, numerous
commenters argued that now is not the time to reduce the demand for agricultural commodities
with lower RFS RVOs.
Response:
By requiring volumes of renewable fuels, the RFS increases the demand for key agricultural
commodities (e.g., corn and soybeans) and agricultural input supplies (e.g., agricultural
equipment) and boosts the prices of these commodities. In the March 2010 RFS2 final rule, EPA
found that increased renewable fuel volumes will result in a modest increase in key agricultural
commodity prices and boost net U.S. farm income. The final 2018 standards are expected to
continue to provide support for agricultural commodity/input supply prices as well as net farm
income in the U.S.
Comment:
Several commenters argued for reductions in 2018 RFS RVOs because of the adverse impacts
higher agricultural commodity prices could cause. One commenter pointed out that the more
corn oil that is extracted from distillers dried grain solubles (DDGS) to make biodiesel for the
RFS program, the less useful the DDGS become as feed ingredient for poultry production.
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Response:
EPA recognizes that increasing renewable fuel production from traditional feedstocks (e.g., corn,
soybeans) can benefit some segments of the U.S. agricultural economy while having adverse
impacts on other segments of the agricultural economy. While increased demand for agricultural
feedstocks can provide benefits to agricultural economy that grow the agricultural feedstocks
used to make renewable fuels, alternative industries that depend on agricultural feedstocks (e.g.,
the livestock, chicken industries) may face higher input costs, which, in turn, can lower their
profitability. The actual impacts, however, will depend on how the agricultural market responds
both short-term and long-term. Agricultural feedstock prices rose following the implementation
of the RFS2 program in 2010 (due to a changes in the world market in addition to the RFS).
Since that time, the agricultural sector has responded to increase supply, causing agricultural
commodity prices to drop.
An important factor to consider when discussing the impacts on the demand for a crop for
renewable fuels is feed co-products. For every extra bushel of corn demanded for food or ethanol
use, DDGS are produced, which can be supplied into feed markets. Absent this co-product from
ethanol production, much of this feed demand would be met directly with corn. Therefore, any
impact on corn prices due to changing demand for ethanol will generally result in a lesser impact
on the cost of feed. The same fundamentals are true for soybean meal, a feed co-product that
results from the soybean oil extraction process. Greater production of biodiesel leads to greater
volumes of soy meal, which can benefit poultry, swine and to a lesser extent cattle production.
Comment:
Some commenters raised concerns that higher 2018 RFS RVOs will place an upward pressure on
food prices. For example, one commenter asserted that increasing renewable fuel volumes have
driven up, and will continue to drive up, U.S. agricultural commodity prices (e.g., corn and
soybean prices). In turn, higher commodity prices will increase the overall price of food both in
the U.S. and internationally. Another commenter suggested that food commodity costs for chain
restaurants and their small business franchisees have been volatile and difficult to predict. This
commenter suggested that volatile food commodity costs has coincided with the enactment and
implementation of the RFS. Alternatively, another commenter suggested that the proposed 2018
RFS renewable fuel volumes would have little impact on food prices. For example, according to
this commenter, in 2016 U.S. food prices experienced the first yearly decline since 1967, and the
current consumer price index for food is up just 0.9% since June 2016.
Response:
EPA has not undertaken a detailed analysis of the food price impacts of the 2018 annual RFS
standards (as compared to the 2017 standards). However, given the modest changes in the RFS
renewable fuel volumes for 2018, EPA does not believe that the standards will have a
discernable impact on overall food prices. Based on the analysis we did for the March 2010
RFS2 final rule, we believe that increases in renewable fuels as a result of the RFS program are
likely having a modest overall impact on the price of agricultural commodities (e.g., corn and
soybeans) and, in turn, food prices. Also, since the RFS program began, the agricultural sector
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has responded by increasing supply, such that agricultural commodity prices are now at, or near,
levels experienced prior to the RFS program.
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7.1.6 Rural Economies
Commenters that provided comment on this topic include, but are not limited to: 0446, 1756,
1774, 1775, 3178, 3184, 3496, 3680, 3681, and 3959.
Comment:
Numerous renewable fuels industry commenters asserted that increases in RFS renewable fuel
requirements raise farm incomes and spur rural development in the U.S. For example, one
commenter stated that the RFS has restored farming as a viable business and revitalized small
communities across the U.S. Similarly, another commenter asserted that renewable fuel
production has provided an essential market for U.S. farmers and has helped to offset low overall
agricultural commodity prices. In turn, this commenter suggested that renewable fuel production
has helped to revitalize rural communities.
Numerous renewable fuels industry commenters suggested that the benefits of the RFS program
extend beyond the individual farmer to the broader agriculture sector of the U.S. Commenters
asserted that impacts on the agriculture sector from the RFS extend to a number of industries that
provide inputs and services to agricultural production (e.g., farm equipment manufacturers and
services). One commenter suggested that in many rural areas of the U.S., biodiesel plants are the
driving force of the local rural economy. Another commenter suggested that the RFS has driven
investment and high skilled job creation in rural economies. Numerous commenters stated that
the economies of many rural communities in the U.S. are closely tied to the agriculture sector
and that these communities are likely to benefit when the RVOs of the RFS are increased.
According to one commenter, U.S. farmers and rural communities are struggling economically
as a result of a multi-year slump in the prices for corn, wheat and other farm commodities,
brought on by a world-wide glut of grain. This glut is pushing many farmers in the U.S. into
debt. According to this commenter, net U.S. farm income dropped 15 percent to about $68
billion last year, the lowest since 2009. By way of comparison, according to the commenter, net
U.S. farm income was $124 billion in 2013. Net U.S. farm income is expected drop another 9%
in 2017. According to the commenter, the number of farms continues to decline in the U.S. The
commenter contended that as EPA has set renewable fuel volumes that have deviated from
statutory levels, demand for agricultural commodities and also rural economies have stagnated.
In addition, this commenter points out that in the decade prior to RFS passage, row crop
production in the U.S. routinely hovered at or below the cost of production. The low market
prices for farm commodities required significant transfer of taxpayer dollars to producers under
existing farm programs to maintain growers' solvency.
Response:
EPA has not undertaken a detailed analysis of the impacts of the 2018 annual RFS standards (as
compared to the 2017 standards) on U.S. farm incomes or rural development. However, given
the modest changes in the renewable fuel volumes for 2018, EPA does not believe that farm
income or rural development will be influenced significantly. Based on the analysis we did for
the March 2010 RFS2 final rule, we believe that increases in renewable fuels as a result of the
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RFS program generally boost U.S. farm income and promote rural development. Both farmers
and agricultural input suppliers (e.g., farm equipment manufacturers and services), located
principally in rural areas of the U.S., benefit from the RFS program because of the higher
demand from renewable fuels in the U.S.
Comment:
Numerous commenters advocated that EPA set RFS RVOs at statutory volumes to spur increases
in U.S. farm income and promote rural economic development. The same commenters warn that
reductions from RFS statutory volumes will have a depressing effect on U.S. farm incomes and,
in turn, rural communities.
Response:
Since EPA does not consider the statutory targets for cellulosic biofuel, advanced biofuel and
total renewable fuel to be attainable, we do not believe it is appropriate to attribute any perceived
negative impact on U.S. farm incomes and rural economies to EPA's decisions to lower the
statutory volumes for these fuel types. Furthermore, we are only using our cellulosic waiver
authority (not using general waiver authority) to reduce the advanced biofuel and total renewable
fuel volumes. As a result, the implied volume for conventional renewable fuel (total minus
advanced) is maintained at the full volume of 15 billion gallons provided for in the statute.
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7.1.7 Jobs and Profitability of Biofuel Producers
Commenters that provided comment on this topic include, but are not limited to: 0446, 1775,
3304, 3321, 3496, 3959, and 4397.
Comment:
Several commenters addressed the impact of the RFS RVOs on employment and the profitability
of firms in the U.S. producing renewable fuels, as well as firms that supply inputs to renewable
fuels industries (e.g., agricultural equipment manufacturers, methanol manufacturers). For
example, these commenters suggested that the BBD industry supports 64,000 jobs throughout it
supply chain in the U.S. and every 500 million extra gallons of BBD will increase jobs by
13,000. The commenters suggested that reducing the RFS RVOs would reduce employment and
the profitability of renewable fuels industries and related industries that supply inputs to
renewable fuels producers.
Response:
EPA has not undertaken a detailed analysis of the impacts of the 2018 annual RFS standards (as
compared to the 2017 standards) on the renewable fuel industries and their input suppliers.
However, given the modest changes in the renewable fuel volumes for 2018, EPA does not
believe that employment or the profitability of the renewable fuels industries and input suppliers
will be influenced significantly. While the comments on employment and profitability provide
insights into the impacts of the RFS on the renewable fuels and related industries, they do not
necessarily provide a complete picture of the impact of a change in the RFS RVOs standards on
employment and the profitability of firms throughout the whole U.S. economy. From an
economy-wide perspective, consider an example estimating the overall impacts on employment
in the U.S. of an environmental requirement. When the economy is at full employment, an
environmental regulation is unlikely to have much impact on net overall U.S. employment;
instead, labor would primarily be shifted from one sector of the economy to another sector. On
the other hand, if a regulation comes into effect during a period of high unemployment, a change
in labor demand due to regulation may affect net overall U.S. employment because the labor
market is not in equilibrium. In the longer run, the net effect on employment is more difficult to
predict and will depend on the way in which the related industries respond to the regulatory
requirements. For this reason, caution is needed when assessing the net employment impacts for
the whole U.S. economy of an individual environmental standard such as the RFS.
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7.2 Environmental Impacts and Considerations
7.2.1 GHG Impacts
Commenters that provided comment on this topic include, but are not limited to: 0446, 0792,
1692, 1759, 3184, 3247, 3681, 3964, and 4397.
Comment:
Various commenters voiced their concerns about either positive or negative perceived climate
impacts of biofuels, sharing multiple studies and statistics in support of their positions. Several
commenters pointing to GHG reduction benefits of replacing petroleum-based fuel with
renewable fuels cited a recent report by ICF, contracted by USDA88 that concluded with greater
GHG reductions from corn starch ethanol than EPA's analysis in the 2010 RFS final rule.
Multiple other commenters pointed to a report by Cerulogy, commissioned by the Clean Air
Task Force and National Wildlife Federation89 critiquing the ICF report. One commenter cited
excerpts from that Cerulogy report finding that "the USDA-commissioned report, completed by
ICF International, includes 'too many problems... for the numerical lifecycle results to be
considered informative.'" Several commenters also cited various, different conclusions for
reductions in GHG emissions from corn starch ethanol based on the work of Argonne National
Lab's GREET model.90 Based on this information, multiple commenters requested that EPA
update its lifecycle analysis (LCA) modeling in order to reflect new data and information.
Response:
EPA has reviewed both the study by ICF and the study by Cerulogy. We believe the Cerulogy
report raises some important points, and we note that the ICF report is not a peer-reviewed study.
Based on our ongoing review of the peer-reviewed literature associated with lifecycle GHG
emissions of biofuels, we believe EPA's 2010 analysis still falls within the wide range of
published results. EPA will continue to monitor the GHG emission impacts and lifecycle
determinations as we implement the program going forward. However, these issues and related
requests for updating biofuel LCA results under the RFS program are beyond the scope of this
annual rulemaking.
Comment:
Multiple commenters requested that EPA update its LCA modeling in order to reflect an
increasing carbon intensity of petroleum fuels used as the baseline in comparison to the values
88 Mark Flugge et al., "A Life-Cycle Analysis of the Greenhouse Gas Emissions of Corn-Based Ethanol," January
12, 2017, https://www.usda.gOv/oce/climate_change/mitigation_technologies/USDAEthanolReport_20170107.pdf.
89 Chris Malins, "Navigating the Maize," July 2017, http://www.cerulogy.com/wp-
content/uploads/2017/07/Cerulogy_Navigating-the-maize_July2017.pdf.
90 Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET). Argonne National
Laboratory, Department of Energy, https://greet.es.anl.gov/.
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that EPA currently use. These commenters suggested that changes in petroleum sources make the
use of renewable fuels more beneficial than in the past.
Response:
EPA has not assessed the impacts of changes in petroleum sources since the CAA requires EPA
to compare renewable fuel GHG emissions relative to the U.S. 2005 petroleum baseline fuel that
it replaces.
Comment:
Some commenters pointed to increased productivity and improved agricultural practices on
farms, as well as improvements in the energy efficiency of many biofuel production facility
technologies over time. One other commenter countered that U.S. based corn yields have
"plateaued", and that herbicide-resistant weeds are a concern for future advancements in
efficiency.
Response:
When EPA conducted the lifecycle GHG analysis for RFS2 in 2010, the analysis took into
account projected improvements in both agriculture and conversion efficiencies. In addition,
EPA allows facilities that have incorporated improvements in production technology to take
credit for these energy efficiency improvements in our approvals of facility-specific petitions.
For example, the Efficient Producer Petition Process allows certain ethanol facilities to
demonstrate more efficient production and reductions in GHG emissions, and to receive
expedited review and approval. EPA has approved over 70 Efficient Producer Petitions since this
program was implemented in 2014, and has improved the petition review time by over 80%.
Conversely, EPA does has not have significant information to support that crop yield rates have
plateaued.
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7.2.2 Air Quality
Commenters that provided comment on this topic include: 3106, 3887, and 4397.
Comment:
Several commenters stated that the annual renewable fuel mandates should be reduced until EPA
has completed the required studies of the environmental impacts of the RFS program. The
required studies include the triennial Report to Congress on the environmental and resource
conservation impacts of the RFS program, and the Anti-backsliding study and determination on
adverse air quality impacts of the RFS program.
Response:
Neither the Report to Congress or the anti-backsliding study provide EPA with authority to
reduce the renewable fuel mandates under the RFS program. The agency is currently working on
the Second Triennial Report to Congress (as noted in other responses) and expects to deliver that
report in 2018.
Comment:
One commenter expressed concern on the non-CC>2 air quality impacts associated with ethanol
and the RFS standards in general and that EPA is pursuing a policy that results in negative air
quality impacts.
Response:
EPA did not conduct a new air quality impact assessment in assessing the volumes of renewable
fuel that are expected to be available for this rulemaking. However, as part of the RFS2
rulemaking in 2010, EPA conducted a detailed assessment of the emissions and air quality
impacts associated with an increase in production, distribution, and use of the renewable fuels
sufficient to meet the RFS2 volumes, including biodiesel and ethanol blends. That air quality
assessment is described in Section VI.D of the preamble91 for that rule and Chapter 3.4 of the
RIA92 for that rule.
The RFS2 RIA indicates that the impact of increased biofuels (as assumed to meet the RFS2
volumes) on PM and some air toxics emissions at the tailpipe is generally favorable compared to
petroleum fuels, but the impact on VOCs, NOx, and other air toxics is generally detrimental.93
The RFS2 RIA also indicates that the upstream impacts on emissions from production and
distribution of biofuel (including biodiesel) are generally detrimental compared to petroleum
91 Available at http://www.gpo.gov/fdsvs/Dkg/FR-2010-03-26/pdf/201Q-3851.Ddf.
92 Available at http://www.epa.gov/otaa/renewablefiieis/420rl0006.pdf.
93 U.S. EPA, 2010. Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006.
Table 3.2-7 and 3.2-8.
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fuel.94 Taking tailpipe, upstream, and refueling emissions into account, the net impact on
emissions from RFS2 volumes of renewable fuels is increases in the pollutants that contribute to
both ambient concentrations of ozone and particulate matter as well as some air toxics. The air
quality impacts, however, are highly variable from region to region and more detailed
information is available in Section 3.4 of the RFS2 RIA.
94 U.S. EPA, 2010. Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. EPA-420-R-10-006.
Table 3.2-2 and 3.2-3.
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7.2.3 Water Quality and Quantity
Commenters that provided comment on this topic include, but are not limited to: 0236, 0792,
1759, 3242, 3306, 3320, 3681, 3959, and 4397.
Comment:
Several commenters highlighted concerns with growing corn, including: the relatively high use
of water, fertilizer and pesticide runoff, impacts on aquifers, increasing number of algae blooms,
and costs to drinking water systems. For example, one commenter stated that EPA models show
that increased corn production in the Chesapeake Bay watershed has led to increased nitrogen
and phosphorus loadings. Several other commenters described similar impacts to the Great Lakes
and Gulf of Mexico. One commenter raised specific concerns with the water quality of Lake Erie
that the group traces back to runoff from corn production. Another commenter also linked corn
ethanol expansion with water quality and quantity impacts.
Response:
In previous rulemakings, EPA has recognized the potential impacts on water use and water
quality from row crops, especially corn. These impacts were assessed in the First Triennial
Report to Congress, which qualitatively assessed both potential impacts and opportunities for
mitigation.95 A more recent review of the scientific literature still supports this finding. There is
more evidence of negative environmental impacts associated with land use change and biofuel
production than there was in 2011.96 However, the magnitude of the effect from biofuels is still
unknown and has not been quantified to date. Furthermore, the scientific literature continues to
support the conclusion from the First Triennial Report to Congress that biofuel production and
use can be achieved with minimal environmental impacts if existing conservation and best
management practices for production are widely employed.97
While these potential impacts remain an area of interest, in our judgment the information and
data available on these issues does not warrant our taking a different approach than is reflected in
the final rule. EPA supports the growing adoption of mitigation techniques such as no till
farming and better control of fertilizer usage, and notes that further technical information on this
complicated set of issues would be helpful.
95 U.S. Environmental Protection Agency. December, 2011. Biofuels and the Environment: First Triennial Report to
Congress.
96 Since the 2011, there have been several advances in our understanding of land use change trends in the U.S. Three
major national efforts have been published: (1) a pair of related studies quantifying cropland extensification from
2008-2012 (Lark et al. 2015; Wright et al. 2017), (2) the USDA 2012 Census of Agriculture (Census) (USDA 2014),
and (3) the 2012 USDA National Resources Inventory (NRI) (USDA 2015). There have also been several regional
studies documenting land use change in different parts of the country, including the Prairie Pothole Region
(Johnston 2013; Johnston 2014; Reitsma et al. 2016), around the Great Lakes (Mladenoff et al. 2016), for the
western cornbelt (Shao et al. 2016), for lands in the Conservations Reserve Program (CRP) (Morefield et al. 2016),
and for corn/soybean farms (Wallander et al. 2011).
97 U.S. Environmental Protection Agency. December, 2011. Biofuels and the Environment: First Triennial Report to
Congress.
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Comment:
One commenter raised more specific concerns regarding water use in biofuel production
explaining that biofuel production uses more water per unit of energy than refined petroleum
fuels. This same commenter also stated that ethanol extends gasoline soil and groundwater
pollution plumes.
Response:
Analysis completed in 2011 suggests that water used for irrigation of feedstocks greatly exceeds
the water required for conversion of feedstocks to biofuels. Additionally, water use for biofuel
conversion depends on several factors including facility size, water reuse technologies, and other
process efficiencies.98 Irrigation practices are dependent on a number of economic and
agronomic factors that drive land management practices making attribution of increased
irrigation and water quantity to biofuels difficult. More research and quantitative evaluations are
needed on increases in water use through changes in land use and/or land management, and
whether those changes can be attributed to feedstock production.
EPA's 1999 Blue Ribbon Panel report on oxygenates cited by one commenter characterizes
ethanol as traveling at about the same rate but degrading faster than the oxygenate being
examined, methyl tertiary butyl ether (MTBE). The range to which the commenter stated ethanol
extends a gasoline plume was not confirmed by the Panel, but rather presented as hypothetical
situation to the Panel with no corroborating evidence, data gathered from the field, or any
additional research. Therefore, EPA still considers this a hypothetical outcome that needs
additional research and data to verify."
Comment:
Several commenters stated that the RFS program contributes to protecting water quality and
habitats by encouraging the recycling of used cooking oils and greases that keeps them out of the
nation's waterways and sewer systems.
Response:
EPA acknowledges that fats, oils, and greases that are improperly disposed of can cause
municipal water systems to malfunction and lead to public health and environmental problems.
However, EPA has not conducted an analysis of the degree to which the recycling of used
cooking oils and greases may mitigate the potential adverse impacts on water quality and sewer
system maintenance costs for this rule. No supporting analysis was submitted with the
comments.
98 Ibid.
99 U.S. EPA. September 15, 1999. Achieving Clean Air and Clean Water: The Report of the Blue Ribbon Panel on
Oxygenates in Gasoline (EPA420-R-99-021).
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7.2.4 Ecosystems, Wildlife Habitat, and Conversion of Wetlands
Commenters that provided comment on this topic include, but are not limited to: 0236, 0792,
1759, 3242, 3306, 3320, 3681, 3959, and 4397.
Comment:
Several commenters raised general concerns about the loss of habitats, including wetlands,
forests, and grasslands, to biofuel crop expansion. For example, several commenters expressed
concerns about habitat loss and degradation due to extensification and intensification of biofuel
crop production, especially corn ethanol and soy biodiesel. Many of these commenters also
raised concerns regarding deforestation and peatland conversion, in countries such as Malaysia,
Argentina, and Indonesia, from any potential increases in demand for palm and soy oils (i.e.,
food-based oils). Several of these commenters also shared their perspective that aggregate
compliance does not meet the land protection mandate in the statute.
Response:
EPA acknowledges that habitat loss and landscape simplification are detrimental to
environmental health with potential for acute impacts in environmentally sensitive areas.
However, as discussed in Section 6.4.3, identifying the extent of negative environmental impacts
due to overall land use changes that may be attributed to the RFS program, as opposed to other
factors that may influence such conversion, is difficult, and the relative contribution of the RFS
program has not been quantified to date. Since 2010, researchers have continued to explore any
potential connections between biofuel production and environmental impacts. While no
definitive conclusions have been made regarding RFS-caused environmental impacts, EPA
continues to look at these impacts and track the science in these areas.
We note that under the aggregate compliance requirements of the RFS program, applicable to
crops and crop residue grown in the United States and Canada, total agricultural acres cannot
exceed the baseline amount of agricultural land in 2007. In fact, based on data provided by
USD A and the government of Canada, the number of acres used for agricultural production in
the U.S. and Canada has decreased as compared to the 2007 baseline. Thus, while some shifting
in agricultural land use has likely occurred (e.g., moving from crops to pasture or pasture to crop
production), data does not indicate a net increase in land devoted to agricultural production.
More importantly, changes in the types of crops grown and the location of these crops is due to a
host of factors, not just the demand created by the RFS program. Further information and studies
would be helpful to better understand specific impacts that may arise from renewable fuel
production.
Comment:
Several commenters mentioned impacts on listed, threatened, or endangered species as part of a
general list of environmental impacts, such as biodiversity and habitat loss, that commenters
linked to the RFS program, specifically corn, palm oil, and soy oil production.
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Response:
No specific supporting analysis was submitted with these comments. EPA acknowledges that
habitat loss and landscape simplification are detrimental to ecosystems and could result in
potential acute impacts in environmentally sensitive areas. However, as noted above, identifying
the extent of negative environmental impacts due to overall land use changes that may be
attributed to the RFS program, as opposed to other factors that may influence such conversion, is
difficult, and the relative contribution of the RFS program has not been quantified to date. Since
2010, researchers have continued to explore any potential connections between biofuel
production and environmental impacts. While no definitive conclusions have been made
regarding RFS-caused environmental impacts, EPA continues to look at these impacts and track
the science in these areas.
We note that the 2018 rule will require only a very modest increment in renewable fuel volumes
as compared to 2017, and this incremental volume can readily be satisfied based on current
agricultural output, without additional expansion of agricultural production. Under these
circumstances, the information and data available in the record does not warrant our taking a
different approach than is reflected in the final rule.
For further discussion, see Section 2.1.3 of this document.
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8. Percentage Standards
8.1 General Comments on the Percentage Standards
[No comments]
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8.2 Accounting for Small Refinery Hardship Exemptions
Commenters that provided comment on this topic include, but are not limited to: 2547, 3105,
3106, 3142, 3429, 3478, 3647, 3657, 3677, 3680, 3887, and 3953.
Comment:
Several commenters expressed their support for EPA's current approach for accounting for small
refinery hardship exemptions (which is to not adjust the annual percentage standards after EPA
issues the final RFS standards for given year). These commenters also expressed support for not
adjusting the annual standards for the given year to "make up for" small refinery exemptions
granted for the previous year. Several commenters also stated that EPA cannot practically grant
small refinery exemptions before the 2018 standards are established under the current petition
process, and so there is no practical way to account for 2018 small refinery exemptions in the
2018 rulemaking and EPA should maintain its current approach on this issue.
Response:
EPA has decided to maintain its current approach regarding the treatment of small refinery
exemptions. While EPA disagrees with commenters that stated that it is impractical to grant
small refinery exemptions before the annual standards are established (CAA section
21 l(o)(9)(B)(i) allows for small refineries to petition for an exemption "at any time," including
before the annual standards are established), we nevertheless agree with the commenters that the
current approach for accounting for small refinery hardship exemptions is appropriate and no
changes are necessary at this time.
Comment:
Several commenters stated that when small refinery exemptions are granted before the annual
standards are established, EPA should uniformly lower the volume requirements by an
equivalent amount rather than spreading the burden across the rest of the industry. Another
commenter suggested that EPA should account for any exempted small refinery volumes by
reducing the following year's RVO to reflect reality when the RVO has created a hardship.
Response:
EPA's intent in seeking comment on the issue of accounting for small refinery exemptions in
establishing the percentage standards was in the context of a potential change in the number and
magnitude of small refinery exemptions granted. Thus, EPA was seeking information on whether
changes were needed to how the percentage standards are calculated in order to ensure that the
renewable fuel volume requirements established in this rule are met. The approaches suggested
by the commenters all seek to reduce the applicable volumes of renewable fuel used in the
percentage standards calculations, thereby reducing the standards themselves. EPA is required to
ensure that transportation fuel (i.e., gasoline and diesel) sold in the U.S. contains the applicable
volumes of renewable fuel established by EPA on an annual basis under CAA section
21 l(o)(2)(A)(i). Furthermore, CAA section 21 l(o)(3)(B)(i) requires that the percentage
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standards established by EPA ensure that the volume requirements are met. Currently, when
exemptions are granted before the annual standards are established, the exempted gasoline and
diesel volumes are excluded from the denominator in the calculation of the percentage standards.
However, the volume of renewable fuel required in the numerator of the calculations does not
change.
Comment:
Several commenters opposed the granting of any small refinery hardship exemptions. These
commenters stated that because RIN costs are recovered by refiners through the market value of
products sold, these exemptions create an unlevel playing field and give the exempted refineries
a windfall from avoided compliance costs. Commenters also stated that if circumstances do
warrant the granting of small refinery exemptions, EPA should uniformly lower the volume
standards for everyone by an equivalent amount.
One commenter stated that when small refinery exemptions are granted retroactively, the market
perceived demand for RINs is greater than reality and therefore sets the price of RINs too high,
and so EPA should only grant small refinery exemptions prior to the compliance year. The
commenter suggests that alternatively, EPA should require the retirement of any RINs held by a
small refinery when an exemption is granted or provide immediate transparency to the market so
that prices are not set higher than necessary to meet actual demand.
One commenter suggested that exempted small refineries should not be able to carryover RINs
into the following compliance year in order to ensure that those RINs are made available to the
market for compliance. The commenter stated that this could be accomplished by removing the
refiner's ability to demonstrate compliance with a prior year RIN if that refiner was exempted in
the prior year.
Response:
These comments are beyond the scope of this rulemaking. EPA did propose changes to, nor take
comment on, the manner in which small refinery hardship petitions are evaluated; rather, EPA
only sought comment on whether any changes were needed to how we account for exemptions in
setting the annual percentage standards.
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9. Other Comments
9.1 Dates/Deadlines
Commenters that provided comment on this topic include, but are not limited to: 1776, 3645, and
4453.
Comment:
Several commenters stated that EPA should ensure that it finalizes the 2018 standards by the
November 30th statutory deadline.
Response:
EPA has met the November 30th statutory deadline to set percentage standards for 2018, and
plans to continue to do so in the future.
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9.2 Statutory and Executive Order Reviews
Commenters that provided comment on this topic include, but are not limited to: 1792, 3105,
3572, and 3657.
Comment:
Several commenters raised concerns with the screening analysis performed by EPA. Specific
issues raised by the commenters include:
- EPA's screening analysis should have considered the cost of compliance with the RFS
program as a whole, rather than an incremental cost of compliance from the 2017
standards
- EPA cannot rely on the 2010 SBREFA analysis because it:
o Is outdated and unreliable
o Does not consider manipulation, speculation, and fraud in the RIN market
o Does not accurately capture the impacts of the RFS program on small refiners
o Does not consider the impacts of the RFS program and designation of obligated
parties on small retailers
o Does not include the significant increase in RIN prices
- EPA's screening analysis did not accurately assess the impact of the 2018 standards on
small entities because it:
o Did not include other costs of compliance such as financing costs to borrow
money to buy RINs, opportunity costs of spending money on RINs, lost sales of
refined petroleum products as a result of the RFS program, and the inability to
purchase RINs ratably throughout the year
o Should have used a cost-to-profit test instead of a cost-to-sales test because it is a
better indicator of the economic impact on small refiners
o Overestimated small refineries' sales and should have only considered sales from
the refinery's transportation fuel production
o Should have used the average profit margin of small refiners as the threshold for
the cost-to-sales analysis, rather than 1%
- EPA should have consulted with small refiners on ways to minimize the impact of the
rule
Response:
EPA has updated the screening analysis using more recent prices for gasoline, diesel, renewable
fuels, and RINs. As discussed in the updated screening analysis memo 10°, our analysis was
performed for those entities meeting the definition of a small business as defined by the Small
Business Administration.101 Refiners not meeting this definition but meeting the definition of a
small refinery in CAA section 21 l(o)(l)(K) were not included in this analysis. The memo
concerns our screening analysis performed for the 2018 annual volume standard rule only.
100 "Screening Analysis for the Final Renewable Fuel Standard Program Renewable Volume Obligations for 2018,"
Memorandum from Dallas Burkholder, Nick Parsons, and Tia Sutton to EPA Docket EPA-HQ-OAR-2017-0091.
101 Entities in the petroleum refining industry with 1,500 employees or less company-wide (13 CFR 121.201).
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However, prior to issuing our 2009 NPRM for the RFS regulatory program regulations required
to implement amendments enacted pursuant to the Energy Independence and Security Act, we
analyzed the potential impacts of implementing the full RFS program on small entities through
calendar year 2022 (the "RFS2" rule), and convened a Small Business Advocacy Review Panel
(SBAR Panel, or 'the Panel') to assist us in this evaluation. This information is located in the
RFS2 rulemaking docket (Docket No. EPA-HQ-OAR-2005-0161).
We continue to believe that it is more appropriate to consider the impacts of the 2018 standards
on small businesses as a part of the overall RFS program, rather than as a separate action. We
disagree with the commenters that the SBREFA analysis performed in conjunction with the 2010
rule is no longer valid. Further, EPA has determined, based on available information, that
obligated parties, including small entities, are generally recovering the cost of acquiring the
credits (called "renewable identification numbers," or "RINs") necessary for compliance with the
RFS standards through higher sales prices of the petroleum products they sell.102'103 This is true
whether they acquire RINs by purchasing renewable fuels with attached RINs or purchase
separated RINs. If we were to consider the impacts of the 2018 standards as a separate action,
then we believe it is appropriate to look at the incremental costs associated with the increased
renewable fuel volumes being finalized for 2018 relative to those established for 2017. In this
context, and that the screening analysis is complimentary to, rather than a replacement for, the
full SBREFA analysis performed as part of the 2010 rule. Nevertheless, as detailed in our
updated screening analysis memo, even if the RFS standards for 2018 are viewed as a separate
action and the ability for obligated parties to recover the cost of acquiring RINs is not
considered, EPA finds that these standards will not have a significant economic impact on a
substantial number of small entities.
To perform our screening analysis, we used a cost-to-sales ratio test - a ratio of the estimated
annualized compliance costs to the value of sales (for a complete description of the method used
to analyze costs, please see the screening analysis memo). A cost-to-sales ratio test is a
recommended quantitative approach for small business screening analyses. While we
acknowledge that other factors such as those identified by commenters may affect a small
entity's profitability, these factors are not generally considered under the cost-to-sales ratio test.
Further, in performing such analyses, agency practice involves assessing the cost-to-sales
percentages - and impact of less than 1% is generally recognized as a threshold for the
assessment of whether or not an action constitutes a significant impact on small entities. For our
first approach and the one we consider to be most appropriate, we considered the annual RFS
standards as a subset of the overall RFS2 program finalized in 2010; for the remainder of our
approaches, we considered the 2018 standards to be a separate action. For our second approach,
we compared obligated parties' cost of compliance (whether they acquire RINs by purchasing
renewable fuels with attached RINs and blending these fuels into transportation fuel or by
purchasing separated RINs) with the ability for the obligated parties to recover these compliance
102 For a further discussion of the ability of obligated parties to recover the cost of RINs see "A Preliminary
Assessment of RIN Market Dynamics, RIN Prices, and Their Effects," Dallas Burkholder, Office of Transportation
and Air Quality, US EPA. May 14, 2015, EPA Air Docket EPA-HQ-OAR-2015-0111.
103 Knittel, Christopher R., Ben S. Meiselman, and James H. Stock. "The Pass-Through of RIN Prices to Wholesale
and Retail Fuels under the Renewable Fuel Standard." Working Paper 21343. NBER Working Paper Series.
Available online http://www.nber.org/papers/w21343.pdf.
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costs through higher prices for the gasoline and diesel fuel they sell than would be expected in
the absence of the RFS program. While some commenters have contended that the RIN value is
not able to be passed through in the market and that RIN prices represent a net cost for
compliance with the RFS program, we do not believe the record supports these claims.
Nevertheless, for our third and fourth approaches we assumed that obligated parties were unable
to recover the cost of the RFS program or the cost of acquiring RINs in the marketplace. Finally,
for our last approach, we analyzed the specific situations of small refiners (using their actual
gasoline and diesel production volumes from 2016) under the same assumption that RIN costs
could not be passed through to consumers. The cost-to-sales test indicated that all obligated
parties, including the small refiners subject to the RFS program, would be affected at less than 1
percent of their sales (i.e., the estimated costs of compliance with the rule would be less than 1
percent of their sales) even when we did not consider their potential to recover RIN costs - with
the estimated cost-to-sales percentages ranging from -0.04% (a cost savings) to 0.006%. For a
more detailed description of EPA's analyses, see the updated screening analysis memo. With
respect to comments claiming that EPA did not consider the impacts of the RFS program and
designation of obligated parties on small retailers, EPA evaluated these claims in the context of
responding to petitions we received requesting that the Agency change the point of obligation in
the RFS program. We determined that small retailers are not disadvantaged by the RFS program,
as the profits larger retailers receive from selling RINs are generally offset by the cost of
acquiring the RINs that they sell.104
Comment:
One commenter stated that this rulemaking does not comport with the mandates of Executive
Order (EO) 12866, the Paperwork Reduction Act, and the Regulatory Flexibility Act.
Response:
EPA complied fully with EO 12866, the Paperwork Reduction Act, and the Regulatory
Flexibility Act. EPA based its decisions in this rule on the best available data. EPA does not
view EO 12866 as directing EPA to reopen the entire RFS2 program in the context of an annual
rulemaking. The impacts of the RFS2 program were already addressed in the RFS2 final rule
promulgated on March 26, 2010 (75 FR 14670). For purposes of the Paperwork Reduction Act,
this final rule will not impose any additional requirements or collect new information beyond
those already analyzed. EPA addresses its Regulatory Flexibility analysis in a previous response.
104 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
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9.3 Annual Point of Obligation Evaluation
Commenters that provided comment on this topic include, but are not limited to: 2547, 3105,
3106, 3429, 3649, 3677, and 3887.
Comment:
Several commenters suggested that EPA is required to evaluate the point of obligation with each
annual rulemaking.
Response:
As noted in Sections 1 and 9.4 of this document, comments on changing the point of obligation
are beyond the scope of this rulemaking. EPA does not agree with the commenters that the
statute requires annual reconsideration of the matter, see Order on Motion to Dismiss, Valero
Energy Corp. v. EPA., No. 7:17-cv-00004-0, ECFNo. 39 (ND Tex, Wichita Falls Div., Nov. 28,
2017). We believe the instability and uncertainty that would be associated with an annual
reconsideration of the point of obligation would undermine success in the program. EPA issued a
final denial of several petitions for reconsideration or rulemaking to change the current point of
obligation on November 22, 2017, and this issue is also addressed there.105
105 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," p. 7, EPA-420-R-17-008,
November 2017.
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9.4 Beyond the Scope
Commenters that provided comment on this topic include, but are not limited to: 0446, 1177,
1301, 1756, 1774, 1776, 1913, 2539, 2542, 2545, 3105, 3106, 3110, 3142, 3178, 3241, 3247,
3306, 3497, 3575, 3593, 3646, 3677, 3678, 3873, 3887, and 3955.
Comment:
Commenters addressed numerous additional topics, including the following:
- Legislative changes for the RFS program, including repeal of the RFS program
Changes to the existing RFS regulations, including removing the obligation on exported
renewable fuel
- Updates to EPA's lifecycle analyses
Treatment of cellulosic waiver credits
Changes to the point of obligation for the RFS program
- RFS registration issues
Suggestions for new RIN-generating pathways including renewable electricity, and
improvements to the petition and efficient producer pathways processes
Impacts of ethanol on engines
Extending the 1 psi RVP waiver for El5
Changes to the El5 misfueling mitigation plans
Approving new fuels such as mid-level ethanol blends and biobutanol
- Potential future RFS rulemakings such as the "reset rule" or an action to address the
remand of the 2016 RFS standards
The creation of a general hardship exemption for refiners
The Renewables Enhancement and Growth Support (REGS) rule, including
biointermediates and ethanol flex fuel
Response:
These comments are all beyond the scope of this rulemaking as EPA did not propose any
changes to the overall structure of the RFS program or otherwise seek comment on these issues.
These topics are not further addressed in this document.
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