Renewable Fuel Standard Program -
Standards for 2019 and Biomass-Based
Diesel Volume for 2020:
Response to Comments
United States
Environmental Protection
tl Agency
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Renewable Fuel Standard Program -
Standards for 2019 and Biomass-Based
Diesel Volume for 2020:
Response to Comments
Assessment and Standards Division
Office of Transportation and Air Quality
U.S. Environmental Protection Agency
United States
Environmental Protection
tl Agency
EPA-420-R-18-019
November 2018
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Table of Contents
List of Acronyms and Abbreviations
List of Organizations Submitting Comments
1. Policy Objectives of the RFS Program
1.1 Broad Policy Issues Including Congressional Intent and Program Goals
1.2 RFS Program Changes, RIN Trading, and Market Oversight
2. Waiver Authorities
2.1 General Waiver Authority
2.1.1 Inadequate Domestic Supply
2.1.2 Severe Economic Harm
2.1.3 Severe Environmental Harm
2.2 Cellulosic Waiver Authority
2.3 Carryover RINs
3. Cellulosic Biofuel Standard
3.1 General Comments on Cellulosic Biofuels
3.2 Methodology for Projecting Volumes
3.2.1 Methodology for Projecting Liquid Cellulosic Biofuel Volumes
3.2.2 Methodology for Projecting Cellulosic Biogas Volumes
3.3 Proposed Cellulosic Biofuel Standard
4. Advanced Biofuel
4.1 Inability to Meet Statutory Targets
4.2 Attainable and Reasonably Attainable Volumes of Advanced Biofuel
4.2.1 Imported Sugarcane Ethanol
4.2.2 Biodiesel and Renewable Diesel
4.2.2.1 General Comments on Advanced Biodiesel and Renewable Diesel
4.2.2.2 Domestic Production Capacity
4.2.2.3 Potential Imports
4.2.2.4 Availability of Advanced Biodiesel and Renewable Diesel Feedstocks
4.2.2.5 Impact of Tax Credit
4.2.3 Other Advanced Biofuel
4.3 Advanced Volume that Can Be Supplied and Used
4.4 Proposed Advanced Biofuel Requirement
5. Total Renewable Fuel and Conventional Renewable Fuel
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5.1 Ethanol 96
5.1.1 E10 Blendwall and Total Gasoline Demand 96
5.1.2 Exceeding the E10 Blendwall 99
5.1.3 Domestic Production Capacity 101
5.1.4 Refiner Responsibilities to Expand Ethanol Use 102
5.1.5 E0 103
5.1.6 E15 106
5.1.7 E85 110
5.1.8 Other Comments Related to Ethanol 113
5.2 Biodiesel and Renewable Diesel 114
5.2.1 Infrastructure for Distributing, Blending, and Dispensing 114
5.2.2 Vehicles That Can Use It 116
5.2.3 Cold Temperature Impacts 117
5.2.4 Production Capacity 118
5.2.5 Feedstock Availability 119
5.2.6 Imports of Conventional Biodiesel and Renewable Diesel 120
5.2.7 Consumer Response 121
5.2.8 Total Volume Achievable 122
5.3 Determination of Standards 124
5.3.1 Total Renewable Fuel Volume 124
5.3.2 Conventional Renewable Fuel / Corn-Ethanol "Mandate" 127
5.3.3 Other Comments Related to the Determination of Standards 132
6. BBD Volume for 2020 133
6.1 General 133
6.2 Supporting the BBD Industry 137
6.3 Ensuring Opportunities for Other Advanced Biofuels 138
6.4 Consideration of Statutory Factors (BBD) 142
6.4.1 General Comments on the Consideration of Statutory Factors 142
6.4.2 Consideration of the Review of the Program to Date 143
6.4.3 Environmental Impacts (Air Quality, Climate Change, Conversion of Wetlands,
Ecosystems, Wildlife Habitat, Water Quality, Water Supply) 144
6.4.4 Energy Security Impacts 147
6.4.5 Expected Rate of Production of Biofuels 149
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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 152
6.4.7 Impact on Transportation Fuel Prices and the Cost to Transport Goods 153
6.4.8 Impacts on Other Factors (Jobs, Price and Supply of Agricultural Goods, Rural
Economic Development, Food Prices) 155
7. Economic and Environmental Impacts 157
7.1 Economic Impacts and Considerations 157
7.1.1 Illustrative Costs of the Program 157
7.1.2 Energy Security 161
7.1.3 Impacts of Standards on RIN Prices 163
7.1.4 Impacts of Standards on Retail Fuel Prices 165
7.1.5 Price and Supply of Agricultural Commodities and Farm Income 167
7.1.6 Rural Economies 170
7.1.7 Jobs and Profitability of Biofuel Producers 171
7.2 Environmental Impacts and Considerations 173
7.2.1 (il IG Impacts 173
7.2.2 Air Quality 175
7.2.3 Water Quality and Quantity 177
7.2.4 Ecosystems, Wildlife Habitat, and Conversion of Wetlands 179
7.2.5 Endangered Species Act 181
8. Percentage Standards 182
8.1 General Comments on the Percentage Standards 182
8.2 Accounting for Small Refinery Hardship Exemptions 183
9. Other Comments 186
9.1 Dates/Deadlines 186
9.2 Statutory and Executive Order Reviews 187
9.3 Beyond the Scope 188
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)
API
APIv. EPA, 706 F.3d 474 (D.C. Cir. 2013)
BBD
Biomass-Based Diesel
BIP
Biofuels Infrastructure Partnership
CAA
Clean Air Act
CBI
Confidential Business Information
CFTC
U.S. Commodity Futures Trading Commission
CNG
Compressed Natural Gas
CO
Carbon Monoxide
CWC
Cellulosic Waiver Credits
DDGS
Distillers Dried Grain Solubles
DOE
U.S. Department of Energy
EIA
U.S. Energy Information Administration
EISA
Energy Independence and Security Act of 2007
EPA
U.S. Environmental Protection Agency
Ergon
Ergon-West Va., Inc. v. EPA, 896 F.3d 600 (4th Cir. 2018)
GHG
Greenhouse Gas
GREET
Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model
IMO
International Maritime Organization
LCA
Lifecycle Analysis
LCFS
Low Carbon Fuel Standard
LNG
Liquified Natural Gas
Monroe
Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014)
NOx
Nitrogen Oxides
OPEC
Organization of the Petroleum Exporting Countries
PM
Particulate Matter
REGS
Renewables Enhancement and Growth Support Rule
RFS
Renewable Fuel Standard
RIA
Regulatory Impact Analysis
RIN
Renewable Identification Number
RVO
Renewable Volume Obligation
SOx
Sulfur Oxides
STEO
Short-Term Energy Outlook
USD A
U.S. Department of Agriculture
VOC
Volatile Organic Compounds
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List of Organizations Submitting Comments
Commenter or Organization Name
Docket Item Number"
Absolute Energy, LLC
0675
Ace Ethanol LLC
0674
ACT Commodities
0615
Action for Ecology and People's Emancipation (AEER)
Indonesia, et al.
1033
ActionAid USA, et al.
1036
Adkins Energy LLC
1296
Advanced Biofuels Association (ABFA)
1277
Advanced Biofuels Business Council
1037
Aemetis, Inc.
0901
AFBF
0657
AgriReNew
0220
American Biogas Council (ABC)
0697
American Coalition for Ethanol (ACE)
1285
American Farm Bureau Federation
0130
American Fuel & Petrochemical Manufacturers
0187, 0672
American Motorcyclist Association (AMA)
0439
American Petroleum Institute (API)
0188, 0620
American Soybean Association
0227, 0659
Anderson, Inc
0490
Anonymous mass comment campaign
0131, 0132, 0133, 0134, 0143,
0145, 0298, 0304, 0314, 0315,
0553, 0554, 0555, 0684
Anonymous public comment
0478
Archer Daniels Midland
0196, 0591
Association of Equipment Manufacturers (AEM)
0514
B & D Farms Corporation
1182
Biogas Researchers, Inc. (BR)
0294, 0673
Biomass Power Association et al.
1265
Biotechnology Innovation Organization (BIO)
0586
Boat Owners Association of The United States (BoatU.S.)
1029
Boeing Company
0525, 0526
BP
1040
Bracewell
1148, 1149
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Commenter or Organization Name
Docket Item Number3
Brazilian Sugarcane Industry Association (UNICA)
1195
BTR Energy, Benefit LLC
1280
Business Council for Sustainable Energy
1266
Carbon Green BioEnergy
0190
Chevron
0536
Clean Air Task Force, Mighty Earth & National Wildlife
Federation
0271, 0472
Clean Fuels Development Coalition (CFDC) et al.
1270
Coalition for Renewable Natural Gas et al.
0671
Coffeyville Resources Refining & Marketing, LLC (CRRM)
and Wynnewood Refining Company, LLC (WRC)
1283
Commonwealth Agri-Energy, LLC
0676
Congressman Donald Norcross, First Congressional District
of New Jersey
0518
Corn Plus
0512
Council on Intelligent Energy & Conservation Policy
1042
Darling Ingredients Inc.
0201, 1039
Drive Green
0316
DTE Biomass Energy
0198
DuPont
0215, 1193
Dynamic Group
0516
East Kansas Agri-Energy
1295
Edeniq, Inc.
0515,1199
Enerkem
0214, 0493
Exxon Mobil Corporation
1271
Food Bank Council of Michigan
0206
Gardner Agriculture Policy Program and Laurence J. Norton
Chair of Agricultural Marketing
0670
Grain Processing Corporation
0677
GreenTop Acres
0228
Growth Energy
0193, 1292
Gundersen Health System Envision
0434
Heartland Corn Products
0436
Hero BX Fuel For Humanity
0207, 0208
HollyFrontier Corporation
0194, 1197
Honeywell UOP's
0532
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Commenter or Organization Name
Docket Item Number3
Illinois Corn Growers Association and Illinois Renewable
Fuels Association President
0621
Incobrasa Industries
0197
Independent Fuel Terminal Operators Association (IFTOA)
1273
Independent Oil Workers (10W)
0519
International Brotherhood of Electrical Workers (IBEW)
Local Union No. 8.
0438
International Council on Clean Transportation (ICCT)
0531
Iowa Biodiesel Board
0209, 0219, 0664
Iowa Corn Growers Association (ICGA)
0529
Iowa Department of Agriculture and Land Stewardship
0961
Iowa Farm Bureau Federation (IFBF)
1192
Iowa Governor
Comment is testimony
Iowa Renewable Fuels Association (IRFA)
0202, 0683
Iowa United States Senate
0669
J. Jung
0115
Kansas Corn
1263
Kansas Corn Growers Association
1262
Kentucky Corn Growers Association
0537
Klickitat Public Utility District
Comment is testimony
Kolmar Americas, Inc. (Kolmar) and American GreenFuels,
LLC (American GreenFuels)
0204
Kolmar Americas, Inc.
0530
Little Sioux Corn Processors, LLC
0437
Magellan Midstream Partners
0667
Marathon Petroleum Corporation (MPC)
0617
Marc IV
Comment is testimony
Methanol Institute (MI)
0661
Michigan Biomass
0534
Michigan Boating Industries Association
0138
Michigan Corn Growers Association
0223, 0224, 0225, 0226
Michigan Department of Agriculture and Rural Development
1289
Mid-Missouri Energy (MME)
1066
Midwest AgEnergy Group LLC
0312
Minnesota Bio-Fuels Association (MBA)
1278
Minnesota Corn Growers Association (MCGA)
0666
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Commenter or Organization Name
Docket Item Number3
Minnesota Farmers Union (MFU)
0435
Missouri Corn Growers Association (MCGA)
0533
Monroe Energy, LLC
0622
Montauk Energy (Montauk)
0492
Murex LLC
1191
Murphy Oil USA, Inc.
0696
National Association of Clean Water Agencies (NACWA)
0663
National Association of Convenience Stores (NACS) and the
Society of Independent Gasoline Marketers of America
(SIGMA)
0523
National Association of Truckstop Operators (NATSO)
0216
National Biodiesel Board
0191, 0192, 0195, 0199, 0711
National Chicken Council (NCC)
0522
National Corn Growers Association
0539
National Farmers Union
0619
National Marine Manufacturers Association (NMMA)
1035
National Renderers Association (NRA)
1201
National Wildlife Federation
Comment is testimony
National Wildlife Federation Action Fund (NWA)
0256
NATSO
0662
Nebraska Corn Board, Nebraska Corn Growers Association
0611
New Jersey Senate & General Assembly
0508
Newport Biodiesel, Inc.
0189
North Dakota Ethanol Producers Association (NDePA)
0521
North Dakota Farmers Union
0527
Northwest Ohio Building Trades Council (NWOBTC)
0520
Novozymes North America Inc.
1284
Omaha, Nebraska-Based Green Plains Inc.
0517
Oregon Economic Development Foundation
0668
Owensboro Grain
0712
Pacific Ethanol
0678
PBF Energy Inc. (PBF)
1196
Peterson Aviation, Inc. Minden, Nebraska
0136
Petroleum Marketers Association of America (PMAA)
1200
Philadelphia Energy Solutions (PES)
1274
Phillips 66 Company
1267
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Commenter or Organization Name
Docket Item Number3
POET Biofuels
0682, 0716
POET Biofuels
Comment is testimony
Producers of Renewables United for Integrity Truth and
Transparency
1198
Purdue University
0221, 0222
Quad County Corn Processors Cooperative (QCCP)
0656
R. Wenzinger
0299
R.W. Beckett Corporation
0442
Renew Kansas Association
1194
Renewable Biofuels LLC
0660
Renewable Energy Group (REG)
0186
Renewable Energy Group, Inc. (REG)
1286
Renewable Fuels Association (RFA)
0205, 0665
Rio Valley Biofuels LLC
1272
Rocky Mountain Farmers Union
1268
Scenic View Dairy, LLC (BVD and SVD)
0217
Shell Oil Products US
0513
Sierra Club
1288
Sievers Family Farms, LLC
1140
Small Refiners Coalition
0166, 1281
South Dakota Corn Growers Association
1005
South Dakota Farmers Union
0700
South Dakota Soybean Association
0389
StandUpforC orn. com
0129
State of Nebraska
0524
Syngenta
1282
Taxpayers for Common Sense (TCS)
0594
Texas Corn Producers Association (TCPA)
0538
Thumb Bioenergy LLC
0200
Toledo Regional Chamber of Commerce
0440
U.S. Canola Association
0658
U.S. Department of Agriculture (USDA)
1038
Union of Concerned Scientists (UCS)
0289, 0535
United Steelworkers Union (USW)
0491
United Way of Gloucester County
0511
Valero Energy Corporation
1041
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Commenter or Organization Name
Docket Item Number3
Wardford Equipment
1168
Waste Management (WM)
0313
Western New York Energy LLC
0679
Western Plains Energy, LLC
0680
White Energy, Inc.
0681
Wisconsin BioFuels Association (WBFA)
1275
Wisconsin Corn Growers Association (WCGA)
1276
World Agricultural Economic and Environmental Analysis
(WAEES)
0203
World Energy
0210, 1269
" Individual comments from the public (and attachments submitted with comments) submitted to Docket No.
EPAHQ-OAR-2018-0167 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-2018-0167-0500 is presented as 0500 in this table and within the text of this document.
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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: 0530, 0619,
1282, and 1286.
Comment:
A commenter suggested that EPA should increase advanced biofuel volumes to fulfill the intent
of Congress. One commenter suggested this should be accomplished by allowing advanced
biofuels to backfill for cellulosic biofuel. Another commenter more generally stated that EPA
should place increasing biofuel volumes above all other considerations, as Congress intended.
Response:
Although the statutory tables do exhibit increasing volumes of advanced biofuels, much of that
increase is attributable to the cellulosic biofuel standard. EPA is increasing the advanced biofuel
standard in this action in accordance with the 500 million gallon statutory increase in the implied
volume of non-cellulosic advanced biofuels.
We disagree with commenters who suggested that increasing volumes should drive our decision-
making, or that Congress intended for advanced biofuels to backfill for cellulosic in all
circumstances. Congress clearly envisioned that under certain circumstances, articulated in the
waiver authorities under CAA section 21 l(o)(7), the volumes can be waived. As discussed
further in Section 2.2 of this document, the cellulosic waiver authority in CAA section
21 l(o)(7)(D) grants EPA broad discretion in determining whether to use that waiver authority to
adjust total renewable fuel and advanced biofuel volumes. While in the past we have found it
appropriate to allow advanced biofuel to backfill for a portion of missing cellulosic biofuels, in
this rulemaking we do not find such backfilling to be appropriate, as discussed in Section 2.2 of
this document and Section IV of the final rule.
Comment:
One commenter suggested that EPA should use the RFS program to provide certainty for
development and investment in renewable fuels. Another commenter stated that it was Congress'
original intent to generate billions of dollars in capital investments in the agriculture and
bioenergy sectors.
Response:
We believe that the RFS program continues to incentivize development and investment in
renewable fuel. This is particularly true this year, where the advanced biofuel volume is
increasing in accordance with the statute.
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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
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." We agree with the
commenter that "energy independence and security" is a stated goal of the Act. However, the
statutory language does not specify whether the production of clean renewable fuels is to come
from domestic or foreign production. Energy security can be enhanced through a range of
different practices beyond just domestic production, namely diversifying sources.1 More
importantly, it is the statute's plain text, read in its context, that is our primary guide to its
meaning. We will not presume with the commenter that any result consistent with their account
of the statute's overarching goal must be the law but will presume more modestly instead that the
legislature says what it means and means what it says. Thus, notwithstanding the commenter's
speculation about Congress' policy purposes, we do not believe that the text of the "inadequate
domestic supply" waiver provision requires us to grant a waiver based solely on a consideration
of domestic production. See also our discussion of the inadequate domestic supply waiver
authority in Section 2.1.1 of this document.
In addition, while the statute does direct EPA to consider "energy security" in CAA section
21 l(o)(2)(B)(ii), that section applies only when EPA is setting volumes for calendar years after
those specified in the statutory tables, or when evaluating volumes under the "reset authority" in
CAA section 21 l(o)(7)(F). Therefore, we have considered this statutory factor in establishing the
BBD volume for 2020.2 This statutory provision, however, does not apply to our actions on the
other biofuel categories. Nor does it require us to consider energy security in the context of the
"inadequate domestic supply" waiver authority in CAA section 21 l(o)(7)(A)(i), which is an
entirely separate statutory provision — or a fortiori grant such a waiver based solely on domestic
production.
Comment:
One commenter stated that making space in the market for alternative fuels that contribute to
energy independence, environmental improvement, and economic development is exactly the
point of RFS2.
1 See, e.g., discussion in the RFS2 final rule (75 FR 14841, March 26, 2010).
2 See "Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD) Applicable Volume,"
available in docket EPA-HQ-OAR-2018-0167.
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Response:
Congress created the RFS program to increase the use of renewable fuels in the transportation
sector, and the standards that EPA is setting for 2019 help to fulfill this goal.
Comment:
One commenter stated that for the second year in a row, EPA had inappropriately reduced
volume requirements after drafts of the rule had been approved in the interagency review
process.
Response:
The interagency review process provides a means for other federal agencies to provide input on
rulemakings before they are signed and published. EPA considers that input and then makes
judgments about the appropriate standards to propose or set based on the statute governing the
action and the discretion that that statute provides.
Comment:
One commenter stated that Congress clearly intended for the use of renewable fuel to increase,
and that it is now time for EPA to get back to that mission by faithfully administering the rule of
law as intended under the RFS.
Response:
The standards we are setting for 2019 include an increase of 630 million gallons in the advanced
biofuel and total renewable fuel standards in comparison to the 2018 standards.
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1.2 RFS Program Changes, RIN Trading, and Market Oversight
Commenters that provided comment on this topic include but are not limited to: 0312, 0513,
0523, 0530, 0536, 0539, 0591, 0615, 0617, 0620, 0622, 0660, 0662, 0671, 0696, 0711, 1037,
1040, 1041, 1192, 1197, 1198, 1267, 1273, 1274, 1281, 1283, 1285, and 1286.
Comment:
Several commenters suggested increasing the amount of data related to the RIN market that EPA
makes publicly available. Suggestions included publishing RIN prices, information on small
refinery exemptions, information on the number of RINs held by different entity categories, RIN
trades exceeding a certain threshold, and number of parties with RIN holding positions above a
certain threshold. Some comments also suggested increasing the frequency at which EPA
updates publicly available information. Other commenters stated that the RIN market is already
sufficiently transparent, and that EPA should not bother publishing certain data, such as RIN
prices, because they are already available to the public elsewhere. At least two commenters
urged EPA to protect CBI as it considers what data to make publicly available.
Response:
In a separate, earlier action, we made additional information available through our public
website.3 The website now publishes data on a number of items of interest to stakeholders,
including the number of small refinery exemption petitions received, granted, and denied by
year; the fuel volume exempted by year; weekly volume-weighted average RIN prices by D-
code; and weekly aggregated RIN transaction volumes by D-code. The website also publishes
RIN holding information by quarter that can be parsed by category (exporter, RIN owner, RIN
originator, refiner, and importer). We intend to update these data regularly going forward. We
believe this additional information will increase the transparency of the RIN market, and
positively impact EPA's administration of the RFS program.
In this rule we are not taking action on any of the other data availability recommendations, due in
part to CBI concerns or resource limitations. However, we may consider implementing some of
these recommendations at a later time.
Comment:
Several commenters provided input on the potential impacts of changing rules related to who
may purchase RINs, the duration for which RINs could be held, and other rules related to the
buying, selling, or holding of RINs. Some commenters supported the ideas under EPA
consideration, including restricting the purchase of RINs to obligated parties only and requiring
RIN retirement for compliance more frequently than annually. At least one commenter supported
restricting RIN trading but suggested that a wider group than just obligated parties would be
more appropriate. Many other commenters opposed the ideas under EPA consideration. Many
commenters stated that limiting RIN market participation would reduce liquidity, increase
3 See https://www.epa.gov/fiiels-registratioii-reporting-and-compliance-help/public-data-reiiewable-fuel-standard
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volatility, and ultimately increase RIN prices. In addition, at least one commenter opined on the
benefits that non-obligated parties bring to the RIN market, such as purchasing and breaking up
large RIN offerings or purchasing and aggregating small RIN offerings that might not otherwise
attract buyers. Some of these commenters also opposed increasing the compliance frequency.
Several commenters provided additional suggestions for changing RIN market rules beyond
those ideas under EPA consideration. For example, some commenters recommended that EPA
consider allowing RINs for exported renewable fuel, limiting the number of times a separated
RIN can be traded, limiting how long a non-obligated party can hold a RIN, limiting a party's
RIN holdings or position, and establishing rolling compliance dates. Other commenters generally
opposed any restrictions on how the RIN market operates and how entities participate.
Several commenters also provided other ideas to stabilize RIN prices beyond changing RIN
market operations. For example, commenters recommended that EPA collect more data and
enhance collaboration with CFTC.
Response:
We appreciate the insights and feedback from commenters. As we stated in the proposal, we did
not propose to make any of these or other regulatory changes to the RFS program and did not
intend to take final action on any such changes in this rule. Thus, they are outside the scope of
this rulemaking.
However, we note that in October 2018, President Trump directed EPA to consider reforms to
increase transparency and prevent price manipulation in the RIN market.4 EPA will be going
through a notice-and-comment rulemaking process for that rulemaking with a goal of finalizing
it by summer 2019. That rulemaking will be informed by comments received in this proceeding.
We do not, however, intend to transfer the comments received on this rule to that proceeding.
Interested parties should therefore submit comments anew in that rulemaking processing.
4 See https://www.whitehouse.gov/briefin.gs-statemeiits/Dresideiit-domld-i-tnxmp-exDtindin.g-waivers-el5-
increasing-transparencv-rin-market
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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: 0439, 0531,
0586, 0617, 0619, 0620, 0660, 0671, 0672, 0711, 1041, 1267, 1277, 1282, and 1286.
Comment:
Numerous commenters stated that the general waiver authority is not triggered in this
rulemaking, as none of the criteria for issuing a waiver have been met. 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. A commenter suggested that reducing the total renewable fuel and advanced
biofuel volumes such that the conventional renewable fuel volume falls below 15 billion gallons
could harm the advanced biofuel and cellulosic biofuel industries. Some commenters suggested
that the notice and comment requirements provided in the CAA have not been met to allow EPA
to finalize use of the general waiver authority.
Conversely, other commenters suggested that EPA should use the general waiver authority to
reduce volumes. One commenter suggested that feedstock market impacts, increased compliance
costs, and indirect GHG emissions at the volumes proposed might constitute severe economic
and environmental harm and may warrant use of the general waiver authority to reduce advanced
and total renewable fuel volumes. Other commenters suggested that EPA has the authority to
waive RFS mandates to reflect declining gasoline consumption, the lack of drop-in biofuels, and
the limited availability of El 5 and E85. A commenter suggested that EPA could not avoid
analyzing the need for reductions under the general waiver authority.
Response:
We are not using the general waiver authority to set the 2019 standards, as described in Section
II of the final rule, and elsewhere in this section. Use of the general waiver authority under a
finding of inadequate domestic supply is discussed in Section 2.1.1 of this document. Use of the
general waiver authority under a finding of severe economic harm is discussed in Section 2.1.2
of this document. Finally, use of the general waiver authority under a finding of severe
environmental harm is discussed in Section 2.1.3 of this document, below and in the docket
memorandum "Endangered Species Act No Effect Finding and Determination on Severe
Environmental Harm under the General Waiver Authority for the 2019 Final Rule." We have
assessed whether to reduce volumes under these authorities and determined that doing so would
not be appropriate.
Comment:
A commenter suggested that EPA should use the general waiver authority to reduce total
renewable fuel and advanced biofuel volumes for 2019. They noted that the biodiesel volumes
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necessary to meet the standard are not available. This commenter cited a study by Advanced
Economic Solutions (AES) titled "Analysis of Potential RFS Volumes for Biodiesel."
Other commenters suggested that the advanced volume should be reduced under the general
waiver authority because 2.8 billion gallons of biodiesel is unattainable.
Response:
We have reviewed the study cited by commenters, but still find our assessment of biodiesel
volumes provided in Section IV of the final rule to be a more appropriate assessment of the
availability of biodiesel for compliance with the RFS program. We continue to believe that the
volume of 2.8 billion gallons of biodiesel is attainable.
We do not believe the AES study demonstrates severe economic harm for several reasons. The
study by AES considered several scenarios, including two scenarios that assumed the RFS
program would require the use of 4.0 billion gallons of biodiesel and renewable diesel in 2018.
These scenarios, which exceed the volumes of biodiesel and renewable diesel we expect will be
used in 2019 to meet the advanced biofuel and total renewable fuel volumes, were responsible
for the most extreme findings of the study. These findings are therefore not relevant to the 2019
rule. The study also notes significant differences depending on whether or not the tax credit is
available. EPA does not consider these impacts costs, but rather transfer payments between
parties. Finally, we note that this study was conducted in August 2017. It therefore does not
consider the large projected stocks of soybeans and other crops for 2019, nor recent trade
actions, which have had a significant impact on the price of agricultural commodities and
biofuels produced using these commodities.
Comment:
Some commenters suggested that the volume reductions using solely the cellulosic waiver
authority are insufficient to arrive at appropriate volumes.
Response:
Were the full exercise of the cellulosic waiver authority to be insufficient, further reductions to
the volume requirements would need to be based on the general waiver authority. We have
evaluated whether the criteria for use of the general waiver authority have been met. As we
explain throughout this section, we have determined that exercising the general waiver authority
would not be appropriate.
Comment:
One commenter pointed to the requirements for public notice and comment before issuing a
waiver, saying that the general request for comment in the proposal on the possibility of using
the general waiver authority was insufficient. This commenter stated that EPA had proposed not
to use the general waiver and, as such, it must initiate a new public notice and comment process,
as well as consultation with USD A and DOE, before acting on any further reductions.
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Response:
After consideration of comments received in response to the proposal, we have determined that
further reductions using the general waiver authority are not warranted for 2019.
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2.1.1 Inadequate Domestic Supply
Commenters that provided comment on this topic include but are not limited to: 0539, 0622,
0672, 0711, 1041, 1198, 1281, 1282, and 1283.
Comment:
Several commenters stated that use of the general waiver authority under a finding of inadequate
domestic supply would be inappropriate given plentiful supply of feedstocks and renewable fuel
to obligated parties.
Response:
We agree with commenters who suggested that we should not use the general waiver authority
under a finding of inadequate domestic supply to waive volumes for the final rule. See responses
within this section for further discussion.
Comment:
Several commenters stated that in setting the advanced biofuel standard, EPA should not
consider imports of advanced biofuels and should instead only look at domestic production. They
suggested that the proposed volumes were "out of line" with the RFS goal of promoting greater
energy independence and security.
Response:
Although this comment addresses how EPA should set the advanced biofuel standard, we note
that because we are using the full reduction under the cellulosic waiver authority for advanced
biofuel, the only way to achieve further reductions is through use of the general waiver authority
under a finding of inadequate domestic supply or severe environmental or economic harm. As
discussed below, we do not believe it is appropriate to exercise our discretion under a finding of
inadequate domestic supply to reduce volumes. As explained later in this section, we are also
electing not to use our general waiver authority under a finding of severe economic harm or
severe environmental harm. Regarding the goals of the RFS program, including with respect to
domestic production, see our discussion in Section 1.1 of this document.
Comment:
Several commenters suggested that there is not an inadequate domestic supply of advanced
biofuels, citing to the meaning of "domestic supply" articulated in ACE at 709, and concluding
that it must include both biofuels produced in the U.S. and imported biofuels. Some commenters
noted that ACE construed "supply" to refer to the renewable fuel available to refiners, blenders,
and importers, including imports. 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." Another commenter noted that Congress intended to reduce
dependence on foreign petroleum, and not increase dependence on foreign renewable fuel. Some
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commenters additionally stated that the goals of the RFS program are best served by reading
"domestic supply" to include imports. Commenters pointed to the 4.1 billion gallons of
registered BBD production capacity in the U.S. (which could provide over 6.3 billion advanced
biofuel RINs) and the global supply of feedstocks as evidence that this standard could be met.
Many other commenters suggested that EPA should interpret the undefined term "domestic"
within the phrase "inadequate domestic supply" to mean renewable fuel produced domestically,
thus excluding imports from any assessment of supply. These commenters suggested that this
interpretation would "give meaning" to the use of the word "domestic" and is the best reading of
the statute. 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 of these
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 renewable fuel production. Many of the commenters suggested that when looking
solely at domestic production, an inadequate domestic supply of renewable fuel exists, and
therefore EPA should exercise the waiver.
Response:
In this action, we are declining to exercise our discretion to reduce total renewable fuel or
advanced biofuel volumes under a finding of inadequate domestic supply.
We recognize that commenters advanced differing interpretations of the statutory term
"inadequate domestic supply." Some commenters claimed that this term refers to only
domestically produced renewable fuels, while others claimed that it also includes imported
renewable fuels. EPA need not resolve this interpretive question, because under either
interpretation we would not find it appropriate to exercise the waiver for two independent
reasons.5
First, even assuming we were to interpret "inadequate domestic supply" to only comprise
domestic production, domestic production may be sufficient to meet the volumes established in
this final rule. To begin with, no parties suggested that there was insufficient conventional
renewable fuel to meet the implied volume requirement of 15 billion gallons, nor did parties
suggest that there was insufficient cellulosic biofuel to meet the cellulosic standard. As we stated
in the 2018 rule,
The total domestic production capacity of corn ethanol in the U.S. is about 16
billion gallons, and total production of denatured and undenatured ethanol from
these facilities in 2016 exceeded 15 billion gallons. As a result, there does not
appear to be an inadequate domestic supply of renewable fuel to satisfy the implied
15 billion gallon conventional renewable fuel volume that results from full
5 See 82 FR 58516-17 (December 12, 2017), adopting this approach in the 2018 rule.
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application of the cellulosic waiver authority to reduce statutory volume targets for
advanced biofuel and total renewable fuel. We note that this assessment does not
include imported volumes of fuel, such as conventional biodiesel, which could also
be used to satisfy the volume requirements.6
For advanced biofuels, the 2019 standard could be satisfied by an increase in domestic
production of approximately 700 million RINs, which is about the same as than the greatest year-
over-year increase in domestic advanced biofuel production.7 This type of increase would be
difficult, but not impossible for the domestic industry to fulfill. As noted in Section IV of the
final rule, we do not believe that feedstock supplies or production capacity would preclude the
domestic industry from meeting the standard.
Alternatively, we could interpret "inadequate domestic supply" to comprise both domestic
production and imports. Under this interpretation, we would not find there to be an inadequate
domestic supply. The domestic production of biofuels, described above, together with imports,
described in Section IV of the final rule and Section 4.2 of this document, likely suffice to supply
the requisite volumes.
Second, we would decline to exercise our discretion under either interpretation. The statute does
not require EPA to reduce volumes upon finding an "inadequate domestic supply," but instead
confers EPA the discretion to do so.8 In determining whether to exercise our discretion, we may
consider, among other things, domestic production, imports, and the size of the carryover RIN
bank.9 As described above, we expect that domestic production and imports likely suffice to
supply the required volumes. Moreover, there exists a significant carryover RIN bank that can be
used to meet the 2019 volumes were the actual use or production of renewable fuels to fall short.
For each of the above reasons, we are not exercising our discretion to further waive volumes
under the inadequate domestic supply waiver authority. We believe the market can and will
supply sufficient biofuels to meet the total and advanced standards we are setting in this action.
Comment:
Several commenters stated that EPA should look at the statutory volumes to determine whether
there is an inadequate domestic supply to meet the statutory volumes.
Response:
We do not find that it is required to analyze whether the volumes would result in an inadequate
domestic supply by looking at the statutory volumes. As described in Section III of the final rule,
we have reduced the volume requirement for cellulosic biofuel to match the volumes we project
will be available in 2019, and we have provided the corresponding maximum volume reductions
6 See 82 FR 58517 (December 12, 2017).
7 The highest year over year increase in domestic advanced biofuel production was approximately 740 million RINs
from 2015 to 2016.
8 See CAA section 21 l(o)(7)(A) ("the Administrator may waive...") (emphasis added).
9 See ACE at 709, 715.
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to the statutory targets for advanced biofuel and total renewable fuel that are permitted under the
cellulosic waiver authority. It is reasonable, therefore, to assess whether the resulting volumes
will give rise to circumstances justifying the use of other waiver authorities to provide further
reductions.
However, even if we were to take the commenters' suggested approach of analyzing whether
imposition of the statutory volume targets would lead to inadequate domestic supply, we believe
it would be reasonable to consider the relationship between renewable fuel volumes and
inadequate domestic supply, including the degree of waiver needed to avoid an inadequate
domestic supply, before determining whether and how to exercise the waiver. Were we to take
this approach we do not believe that the current record would support a finding that applicable
volumes lower than those used in the final rule to set the 2019 applicable standards would be
necessary to prevent an inadequate domestic supply. In other words, as we have explained above,
we do not believe that there is an inadequate domestic supply to meet the volumes established by
this action.
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."
Other commenters suggested that EPA may not consider costs under the "inadequate domestic
supply" prong of the general waiver authority. These parties suggested that costs would
constitute "demand-side concerns," which the court in ACE distinguished from the supply-side
constraints EPA could consider under "inadequate domestic supply."
Response:
We evaluated the costs of the program in Section V of the final rule, as well as in the context of
evaluating whether the standards could lead to severe economic harm in Section 2.1.2 of this
document. We found the costs as compared to 2018 to be between $190 — $630 million in 2019
and determined that it was not appropriate to reduce volumes on the basis of severe economic
harm.
We are not resolving the interpretive issue of whether we must consider costs in determining
"inadequate domestic supply." It is not clear that we can make a finding of inadequate domestic
supply based on economic costs alone.10 But even were we to adopt that interpretation, we would
still decline to exercise the inadequate domestic supply waiver. The costs associated with the
volumes of renewable fuel we are requiring in this action are not so prohibitive as to constitute
its being "unavailable."
10 See^CE at 712.
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2.1.2 Severe Economic Harm
Commenters that provided comment on this topic include but are not limited to: 0439, 0522,
0523, 0536, 0539, 0619, 0620, 0622, 0672, 1037, 1041, 1197, 1198, 1274, 1281, 1282, 1283, and
1292.
Comment:
Numerous commenters suggested that the RFS program is imposing severe economic harm on
specific industries.
The poultry industry, particularly broiler producers, argued that the RFS program caused severe
economic harm by inducing fluctuations in corn prices. This commenter stated that from 2007 to
2013 "at least a dozen poultry companies ceased operations, filed for bankruptcy, or were
acquired by another company," and that these events constituted severe economic harm. This
commenter also suggested that an appropriate and predictable waiver would be based on the
USDA "stocks-to-use-ratio."
Some commenters suggested that increasing volumes are causing severe economic harm to ATV
and motorcycle users due to increasing ethanol concentrations in gasoline and increased risk of
misfueling.
Some commenters suggested that the RFS program is imposing economic harm on merchant
refiners and small retailers. For merchant refiners, commenters pointed to the blendwall, high
RIN prices, and limited availability of higher level ethanol blends as demonstrating harm. One
commenter suggested we should consider significant costs, impacts on small refiners, and
changes to energy markets to support a finding of severe economic harm.
One commenter stated that the dramatic changes in energy markets since 2007 have rendered
moot most of the goals of the RFS program.
Response:
CAA section 21 l(o)(7)(A) provides that EPA may grant a waiver based on a determination that
implementation of the 2019 RFS requirements would severely harm the economy of a State, a
region, or the United States. We have previously interpreted this provision in our decisions
denying requests to exercise this waiver authority.11 Based on our interpretation of the statute
and the record before us, we decline to exercise our discretion to grant the waiver for multiple
reasons. First and generally, while commenters alleged harm to specific industries, they did not
demonstrate severe harm to the economy of a State, a region, or the United States.12 Second, in
assessing whether to exercise our discretion to grant a waiver, EPA considers the overall impacts
of the 2019 volume requirements, including beneficial impacts on renewable fuel producers,
farmers, and other industries. Commenters generally failed to demonstrate that granting a waiver
11 See 77 FR 70755 (November 27, 2012); 73 FR 47170-72 (August 13, 2008).
12 Regardless of whether the statute requires such a showing, EPA would still consider such impacts in deciding
whether to exercise our discretion. See 73 FR 47172 (August 13, 2008).
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would be appropriate notwithstanding the beneficial impacts of the 2019 volume requirements.
Third, as we explain below, even were we to focus on the impacts to particular industries, the
commenters did not demonstrate that the 2019 volume requirements would cause severe harm to
their industry.13
Regarding the poultry industry specifically, the commenter pointed to corn price fluctuations and
negative economic impacts on specific poultry companies. However, the commenter did not
demonstrate that the 2019 volume requirements, as opposed to other market factors, would cause
these economic impacts. A fortiori, the commenter did not demonstrate that implementation of
the 2019 volume requirements would cause these impacts with a high degree of certainty. Nor
did the commenter show that any resulting corn price fluctuations would constitute severe
economic harm. We note, however, that in our analysis of previous waiver requests, we found
that the applicable standards were only responsible for a very small impact on corn prices.14 We
further note in the memorandum to the docket "Endangered Species Act No Effect Finding and
Determination on Severe Environmental Harm under the General Waiver Authority for the 2019
Final Rule" that the 2019 RFS rule itself is having no impact on overall corn ethanol volumes
and therefore on the corn market.
Regarding the suggestion that the USDA "stocks-to-use-ratio" could provide a basis for a waiver,
we do not believe that such an approach would be consistent with the criteria under which we are
authorized to grant a waiver, as it is not a measure of economic harm.
Regarding potential economic harm to ATV and motorcycle users due to increasing ethanol
concentrations in gasoline and increased risk of misfueling, the commenter did not provide data
indicating severe economic harm for the use of E10. Also, ethanol blends higher than E10 are not
permitted to be used in such vehicles, and we have implemented regulations to help prevent
misfueling.
In response to comments that the RFS is causing severe economic harm to merchant refiners,
these commenters did not provide any concrete evidence that their financial difficulties are
caused primarily or even significantly by the RFS program. In our past assessments of this issue
we have concluded that the cost of the RIN is recovered by obligated parties in the revenues
received for their petroleum products, and is passed through to consumers in the marketplace and
does not represent a net cost to obligated parties.15 The prices refiners receive for their gasoline
blendstocks and diesel fuel have risen in the U.S. to offset their RFS compliance costs.16
Commenters provided no new credible evidence to indicate that they do not or cannot recover
the cost of RINs. Accordingly, we do not believe that the price paid for RINs is a valid indicator
of the economic impact of the RFS program on these entities, since a narrow focus on RIN price
13 As we explained in our prior decisions, we do not believe it would be appropriate to exercise our discretion based
on impacts to a single industry. See 77 FR 70755 (November 27, 2012); 73 FR 47172 (August 13, 2008).
Nonetheless, as we explain in the text, the record does not demonstrate severe economic harm even by that standard.
14 See, e.g., "Notice of Decision Regarding Requests for a Waiver of the Renewable Fuel Standard," 77 FR 70752
(November 27, 2012).
15 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 and
"Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," November 22, 2017.
16 Id.
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ignores the fact that these parties are recovering the cost of RINs from the sale of their petroleum
products. When the ability for obligated parties to recover the costs associated with acquiring
RINs is considered, we do not believe that RIN prices have had a negative economic impact on
obligated parties. Moreover, RIN prices have been significantly lower in the second half of 2018
than in recent years, which would also significantly reduce the alleged impacts were obligated
parties not be able to pass along their costs. We also recognize that refining margins have
decreased in recent years for some market participants,17 and believe that it is most likely these
lower refining margins, rather than any cost associated with the RFS program, that are currently
negatively impacting portions of the domestic refining industry.18
Even if changing energy markets have "rendered moot most of the goals of the RFS" as some
commenters alleged and used this as a means to justify the need for a waiver based on severe
economic harm, we do not believe this is a proper justification for use of the waiver authority.
While market conditions may have changed over time, we do not believe that the goals of the
RFS program are now "moot;" many commenters pointed out that the RFS can still provide
incentives to the renewable fuels industry. Moreover, the text of the statute authorizes EPA to
waive volumes based on particular statutory findings, not based on commenters' speculations
about the purposes of the RFS.
Regarding impacts on small retailers, we recently found that the RFS program, and specifically
the RFS point of obligation, is not harming small retailers (or small and merchant refiners).19
Commenters did not present new evidence that undermines that finding, and we decline to revisit
it in this action. For the reasons we described in that denial and throughout this document, we do
not believe that the 2019 rule causes severe economic harm due to impacts on small retailers.
Comment:
Some commenters suggested that compliance costs cannot be grounds for waiving volumes, as
the RIN market is part of the statutory scheme and is not evidence of severe economic harm.
Response:
Compliance costs can be used to make a determination of the economic impact of the applicable
standards on a State, region, or the U.S. and therefore could be grounds for waiving volumes.
The fact that compliance costs are mediated through the RIN system which was designed to
fulfill the statutory requirement for a credit program does not preclude this possibility. However,
the available information does not indicate that the 2019 standards would create severe economic
harm.
17 See, e.g., T. Fitzgibbon, A. Kloskowska, A. Martin, "Impact of low crude prices on refining," McKinsey &
Company Energy Insights. February 2015. and J. Moore, "Refining Margins Are Collapsing, Crude Prices Will
Follow," Seeking Alpha. July 26, 2016. Available Online: https://seekmgalpha.com/article/3991582-refiniiig-
margiiis-coHapsing-crude-prices-wiH-foHow
18 We also note that individual refiners may have been impacted by factors such as unusually high price spreads
between varying types of crude oil from 2011-2014 and the recent legislative changes allowing crude oil exports
from the U.S.
19 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," November 17, 2017.
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Comment:
Several commenters referred to a study by Energy Ventures Analysis, prepared in the context of
the bankruptcy of Philadelphia Energy Solutions Refining and Marketing, LLC ("PESRM"), in
support of their claim that the RFS program is imposing economic harm on merchant refiners
and small retailers.
Response:
We find that the EVA study's comparison of RIN costs to marginal benefits of increasing
ethanol blending above 10% to be a faulty assessment of costs, as it incorrectly assumes that RIN
prices represent costs, rather than transfer payments intended to serve as a cross subsidy between
renewable fuels and the petroleum based fuels they displace.20
The study also uses specific PESRM data to evaluate RIN costs in comparison to crack spreads.
This assessment is flawed for two major reasons. As an initial matter, crack spreads are
susceptible to many factors outside of the RFS, and thus are a poor comparison point.
Additionally, the study's comparison of RIN prices as a percentage of crack spread is an
improper comparison. The authors of the EVA study state that "If sales prices were raised to
compensate for increasingly costly RIN obligations, one should expect this percentage to be
controlled at a relatively stable and low level." This is not accurate. If RIN costs were recovered
by refiners (and crack spreads were constant), we would expect to see that the RIN obligation as
a percent of the crack spread increases as the RIN price increases. For example, if a refiner's
average crack spread was $0.30 per gallon with no RIN costs, and that refiner recovered 100% of
their RIN costs, we would expect the crack spread to remain at $0.30 whether the per gallon RIN
cost increased to $0.01 per gallon or to $0.10 per gallon. Thus, contrary to the EVA's claims,
their RIN obligation as a percent of the crack spread would be expected to rise from 0% to 3% to
33%) as the RIN price rose in the previous example. Finally, the study notes that for fuel sold at
the rack the value of RINs is mostly shared with customers. This statement is consistent with our
conclusions that the RIN costs are passed through; the value of the RIN is not kept with either
merchant refiners or integrated refiners or unobligated blenders.21
Comment:
Several commenters supported EPA's interpretation of the general waiver authority under a
finding of severe economic harm as articulated in the 2008 and 2012 waiver denials, including
the high bar set by the requirement that the harm must be caused by the RFS program, and that
an evaluation must also look at benefits of the RFS program as well, and that any reductions in
the volumes would be likely to result in economic or environmental harm.
20 For a further discussion of this topic, see "Denial of Petitions for Rulemaking to Change the RFS Point of
Obligation," November 17, 2017.
21 "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 and
"Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," November 22, 2017.
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Several commenters suggested that issuing a waiver under severe economic harm would instead
cause harm to the economy, and that compliance costs to refiners are not an appropriate basis for
a waiver.
Some commenters suggested that EPA's interpretation of severe economic harm is too restrictive
and not supported by the statute. Some commenters stated that EPA need not require showing of
harm with a high degree of confidence. These commenters suggested that we could grant a
waiver where the RFS program would be a significant factor, and not the sole factor. They also
suggested that EPA should not consider benefits of the program in evaluating the waiver.
Response:
We believe that under the interpretation of the term "severe economic harm" that we previously
set forth, the record for this action would not support a finding that the 2019 volume
requirements would cause severe economic harm, and consequently not support our granting of a
waiver. However, we also believe that the record for this action would not support granting a
waiver even under the interpretations advanced by commenters. That is, we would decline to
exercise our discretion to grant a waiver even were we re-interpret the term "severe" as requiring
a lesser degree of confidence in the estimation of impacts, require the RFS program to only be a
significant contributor to the harm, and not consider the benefits of the program. As discussed
above, commenters have not demonstrated that the 2019 volume requirements cause or is a
significant contributor of significant harm to an industry, or to a State, region, or the United
States. Therefore, we do not find it necessary to assess a possible reinterpretation of the phrase
"severe economic harm" at this time.
Comment:
Some commenters argued in favor of a high bar for granting a waiver, pointing to several
benefits of the RFS program, including that: renewable fuels depress oil prices; renewable fuels
provide domestic economic benefits; renewable fuels provide octane benefits; and RIN prices
don't harm consumers or oil companies. Other commenters suggested that EPA should consider
the compliance flexibilities provided by the CAA and the regulations in evaluating a waiver.
Response:
Any such benefits support our decision to not exercise our discretion to reduce the volumes using
the general waiver authority.
Comment:
A commenter suggested that the declines in RIN values since EPA elected not to use its general
waiver authority under a finding of severe economic harm in the 2018 rule further support EPA
again declining to use its general waiver authority. They stated that they did not believe
circumstances have changed significantly to justify a waiver.
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Response:
As a cost to refiners that is ultimately passed on to consumers, RIN values are not a direct
indicator of the economic impacts of the program. Therefore, changes in RIN values over time
cannot be used directly in ascertaining the likelihood of severe economic harm. We generally
agree with the commenter that circumstances have not changed so much since 2018 as to warrant
a waiver for severe economic harm.
Comment:
Some commenters pointed to the bankruptcy of PESRM as evidence of severe economic harm.
Response:
We do not find the fact that PESRM filed for bankruptcy to be compelling evidence of severe
economic harm. As an initial matter, the refinery had previously been struggling and received
some state/local tax breaks and grants in 2012, when Sunoco formed a joint venture with Carlyle
Group LP to continue refinery options.22 Reporting based on PESRM's bankruptcy filings
observed that its investor-owners had recently extracted roughly $594 million in distributions
from the company and suggested that it was these corporate payouts, together with poor business
decisions, that "left PESRM unable to cover its obligations under [RFS]."23 Additionally, we
note that PESRM has now emerged from bankruptcy and is continuing both operations and
compliance with the RFS.24
Comment:
Several commenters pointed to the Fourth Circuit's decision in Ergon, suggesting that the court's
decision "invalidate^] the Burkholder study,"25 and EPA's practice of granting small refinery
exemptions as further evidence of harm to refineries.
Response:
Commenters' suggestion that the court decision in Ergon invalidated the Burkholder study
overstates the Court's conclusion, which was in relation to EPA's consideration of the Ergon
West Virginia refinery's specific circumstances. The Ergon Court did not, however, deem the
22 See https://www.reiiters.com/atticle/us-philadelphia.eiiergvsohitioiis-baiittiiptc/exchisive-philadelphia-eiiergv-
solutions-to-file-for-bankruptcy-memo-idUSKBNlFA18P
23 See https://www.reuters.com/article/us-usa-biofuels-pes-batikniptcv-itisight/refiner-goes-bellv-up-after-big-
payouts-to-carlvle-group-idUSKCNlG40Il
24 See docket for PES Holdings, LLC, l:18bkl0122, ECF Document Nos. 244 (proposed settlement agreement), 347
(United States' motion to approve proposed settlement agreement), 376 (order approving proposed settlement
agreement), and 510 (Stipulation between the Debtors and the United States on behalf of the Environmental
Protection Agency relating to Renewable Identification Number Retirement Deadlines under Consent Decree and
Environmental Settlement Agreement) (Bankr. D. Del.).
25 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.
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study itself to be arbitrary and capricious. We continue to maintain that the costs of RINs are
passed through and that RINs do not represent costs or harm to refiners.
We disagree that EPA's past grant of small refinery exemptions warrants our exercising the
severe economic harm waiver. Generally, small refinery exemptions are held to a different
standard than a waiver under severe economic harm: the former requires "disproportionate
economic hardship" to "[a] small refinery" whereas the latter requires severe economic harm to a
State, a region, or the United States. Thus, these two statutory provisions thus entail different
considerations, and exercising one authority does not necessarily require us to exercise the other.
First, the terms disproportionate economic hardship and severe economic harm are not
synonymous; these two different statutory terms require different showings. As one example,
some commenters have argued that refinery closures, or threats of such closures, justify a finding
of severe economic harm. However, the Tenth Circuit has held that "disproportionate economic
hardship" does not "require a threat to a refinery's survival as an ongoing operation."26 Second,
small refinery exemptions are evaluated on a case-by-case basis for a specific refinery and can be
granted on the basis of disproportionate economic hardship to that refinery. By contrast, granting
a waiver requires a showing of severe economic harm to a State, a region, or the United States.
Third, EPA has to date not granted any small refinery exemptions for 2019. Whether a severe
economic harm waiver is appropriate in the context of the 2019 volumes, however, depends on
the impact of the 2019 volumes, not of prior year volumes. Fourth, we note that EPA has granted
small refinery exemptions for disproportionate economic hardship since 2011. Nonetheless, we
have consistently declined to waive volumes for severe economic harm during this time.27
Finally, we have specifically assessed whether we should grant a waiver of the 2019 volumes for
severe economic harm to a State, region, or United States. As we explain throughout this section,
we do not believe it is appropriate to exercise our discretion to grant such a waiver.
Comment:
A commenter suggested that EPA needed to undertake an analysis of harm at the state and
regional levels.
Response:
While an assessment of harm at the state and regional levels could inform a decision by EPA to
exercise its discretion to reduce volumes under the general waiver authority under a finding of
severe economic harm, we have not received and are not aware of evidence suggesting that
severe economic harm is occurring or may occur in a state or region. Therefore, we do not
believe such an assessment would be useful at this time.
26 Sinclair Wyo. Ref. Co. v. EPA, 874F.3d 1159, 1161 (10th Cir. 2017).
27 See, e.g., "Assessment of waivers for severe economic harm or BBD prices for 2018," memorandum to docket
EPA-HQ-OAR-2017-0091; 77 FR 70752; 73 FR 47168.
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Comment:
Commenters suggested that procedurally we could not finalize a waiver without "comprehensive
and robust analytical basis" subject to comment.
Response:
We are not finalizing a waiver under severe economic harm and thus the fact that we did not
provide an analytical basis in the proposal is not at issue.
Comment:
Several commenters suggested that EPA should exercise our general waiver authority under a
finding of severe economic harm, by looking to the statutory volumes as the baseline for
evaluating harm.
Response:
We do not find that we are required to analyze whether the volumes would result in severe
economic harm by looking at the statutory volumes.
As described in Section III of the final rule, we have reduced the volume requirement for
cellulosic biofuel to match the volumes we project will be available in 2019, and we have
provided the corresponding maximum volume reductions to the statutory targets for advanced
biofuel and total renewable fuel that are permitted under the cellulosic waiver authority. It is
reasonable, therefore, to assess whether the resulting volumes will give rise to circumstances
justifying the use of other waiver authorities to provide further reductions. However, even if we
were to take the commenters' suggested approach of analyzing whether imposition of the
statutory volume targets would lead to severe economic harm, we believe it would be reasonable
to consider the relationship between renewable fuel volumes and severe economic harm,
including the degree of waiver needed to avoid severe economic harm, before determining
whether and how to exercise the waiver. Were we to take this approach we do not believe that
the current record would support a finding that applicable volumes lower than those used to set
the 2019 applicable standards would be necessary to prevent causing severe economic harm to a
State, a region, or the United States.
Comment:
A commenter suggested that EPA should waive the standards under a finding of severe economic
harm if the standards would exceed the blendwall and result in increased fuel costs. The
commenter suggested that this harm would be due to the RFS program. The commenter also
suggested that this kind of harm could also meet the other criteria EPA laid out in the 2008 and
2012 waiver denials.
Relatedly, several commenters stated that exceeding the E10 blendwall would cause severe
economic harm due to constraints in supply of El 5 and E85 and suggested that EPA should set
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the RFS standards for 2018 in such a way as to ensure that the pool-wide ethanol content does
not exceed 9.7%.
Response:
While some ethanol may be blended at levels above 10% in 2019, EPA does not anticipate that
the market will respond to the 2019 volume requirements by blending at such high levels that
would result in the harms articulated by the commenter, such as increasing fuel prices. In the past
EPA has not seen increasing fuel prices with the implementation of the RFS program, even as
fuel blends exceeded 10%.28 See also responses in Section 5 of this document with respect to
other E10 blendwall comments.
Comment:
A commenter suggested that the proposed volumes will cause economic harm to obligated
parties and consumers as BBD is increasingly expensive with higher demand. Conversely, other
commenters stated that advanced biofuels, including BBD, are not causing severe harm to the
economy of a state, region, or the United States, and instead provides benefits to the economy
including providing jobs and economic impact within the biodiesel industry, as well as support to
farmers through demand for soy oil. These commenters also suggested that advanced biofuels
help increase competition and energy security which can also reduce shortages and prevent price
spikes.
Response:
We do not believe that the evidence provided by commenters on BBD prices is sufficient to grant
a waiver under severe economic harm. The information provided by commenters is largely
qualitative, highlighting the fact that BBD is typically priced above petroleum-based diesel and
inferring that this price difference is sufficient to cause severe economic harm. As we explain in
Section V of the final rule, we agree that in some cases BBD costs more than petroleum-based
diesel. However, this price differential has existed for some time, and has not caused severe
economic harm.29 The commenter has not demonstrated why this type of price differential would
cause severe economic harm in 2019. Thus, without any further justification, the statements
made by this commenter are insufficient to justify a waiver on the basis of severe economic
harm.
Additionally, other comments citing to the benefits of advanced biofuels would also be
considered in evaluating whether to grant a waiver under severe economic harm. However, even
if we do not consider the benefits of the applicable standards, commenters did not demonstrate
sufficient harm to warrant a waiver.
28 See "Assessment of waivers for severe economic harm or BBD prices for 2018," memorandum to docket EPA-
HQ-OAR-2017-0091.
29 See "Assessment of waivers for severe economic harm or BBD prices for 2018," memorandum to docket EPA-
HQ-OAR-2017-0091.
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Comment:
Some commenters pointed to EPA's past denials of requests for a waiver on the basis of severe
economic harm as evidence that there is likewise no severe economic harm now.
Response:
We agree that our assessment in the context of the 2018 final rule finding no evidence of severe
economic harm is relevant in broad strokes to our consideration of economic harm for the 2019
standards; much of the market circumstances are similar for the two years. However, the 2019
standards include an increase of 630 million gallons of advanced biofuel in comparison to the
2018 standard, thus warranting an update to our consideration of economic harm. As described in
Section II. A.2 of the final rule and this section, we have determined that there will be no severe
economic harm as a result of the 2019 standards.
Comment:
In the past, EPA has sought comment on its interpretation of severe economic harm articulated in
its decisions denying waiver request in 2008, and 2012.30 Some commenters pointed out that in
those denial documents, EPA stated that its interpretation was guidance and non-binding, and
therefore EPA had the ability to change that interpretation.
Response:
In multiple notice-and-comment orders and rulemakings (including those cited by commenters),
we have promulgated our interpretation of severe economic harm pursuant to the authority
Congress delegated to us to make rules carrying the force of law.31 We agree, however, with
commenters that EPA is not precluded from altering the interpretation of the term "severe
economic harm" that it articulated in prior waiver decisions.
Comment:
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:
Commenters did not provide concrete information regarding a possible refinery shutdown or a
particular refinery's net compliance costs. If and when we receive a petition for a waiver based
30 See 82 FR 46174 (October 4, 2017).
31 See United States v. Mead Corp., 533 U.S. 218, 221 (2001).
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on credible evidence of an expected refinery shutdown or high net compliance costs, we will
then evaluate the facts to ascertain whether issuing a waiver would be appropriate.
Comment:
A commenter suggested that we should reduce the cellulosic biofuel volume under a finding of
severe economic harm if the cellulosic volume cannot be blended into fuel produced by refiners.
Response:
We interpret this comment as suggesting that we should reduce the volume of cellulosic biofuel
to only the amount of liquid cellulosic biofuel and exclude cellulosic biofuel from biogas, which
cannot be blended into petroleum-based fuel produced by crude refiners. We do not find that
establishing the cellulosic biofuel standard based on the use of biogas would result in severe
economic harm. The standard has been established based on and met by the use of cellulosic
biofuel from biogas for many years without evidence of severe economic harm.
Alternatively, this comment may be suggesting that severe economic harm may occur to a refiner
if they are unable to blend cellulosic ethanol into their gasoline at levels above the E10
blendwall. We do not find severe economic harm in this case either, as the refiner need not blend
the fuel themselves, but can procure RINs to demonstrate compliance.
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2.1.3 Severe Environmental Harm
Commenters that provided comment on this topic include but are not limited to: 0539, 0619,
1033, and 1036.
Comment:
Several commenters suggested that the RFS program provides environmental benefits, including
GHG reduction benefits, especially as compared to petroleum-based fuels. Several commenters
also pointed to USDA's lifecycle analysis for corn ethanol. Some of these commenters also
suggested that in evaluating whether the volumes will cause severe environmental harm, EPA
should look at renewable fuels compared to other transportation fuels, which EPA's 2018 Second
Triennial Report to Congress did not do. Several commenters stated that farmers are taking steps
to improve water quality and habitat and that additional GHG benefits could be possible in the
future.
In contrast, other commenters suggested that EPA's 2018 Second Triennial Report to Congress
demonstrates environmental concerns regarding soil quality, water quality, air quality, and
wildlife habitat. Some commenters noted that the BBD volumes would lead to increased GHG
emissions. Several commenters advocated for a comprehensive analysis of severe environmental
harm.
Response:
We have responded to comments about use of the general waiver authority under a finding of
severe environmental harm in a docket memorandum entitled "Endangered Species Act No
Effect Finding and Determination on Severe Environmental Harm under General Waiver
Authority."
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2.2 Cellulosic Waiver Authority
Commenters that provided comment on this topic include but are not limited to: 0312, 0513,
0539, 0617, 0619, 0620, 0622, 0662, 0672, 0711, 1036, 1037, 1038, 1198, 1201, 1273, and 1292.
Comment:
Several commenters supported EPA's use of the full reduction in advanced biofuels and total
renewable fuel under the cellulosic waiver authority. Some parties particularly supported the
equal reductions due to the fact that the resulting volume of conventional renewable fuel was in
alignment with the volume in the statute. Other commenters suggested that EPA should not
allow the backfilling of additional advanced biofuel, not consider the existence of carryover
RINs in standard setting, or not increase the standards to account for small refinery exemptions.
Response:
We appreciate the comments in support of our use of the cellulosic waiver authority to its full
extent to reduce advanced biofuel and total renewable fuel. We are finalizing that approach. With
respect to carryover RINs, however, we note that, consistent with our past practice, we have
considered the availability of carryover RINs in making a determination about whether and how
to reduce the statutory volume requirements. Further discussion of comments related to
carryover RINs and our responses to those comments can be found in Section 2.3 of this
document.
Comment:
Some commenters contrasted the decision to utilize the full reduction in cellulosic biofuel to
reduce advanced biofuel to EPA's past practice of allowing backfilling of advanced biofuels.
They suggested that "without continued growth in advanced RVO the industry will not obtain the
level of financial investment required to achieve the long-term goals of the RFS."
Other commenters suggested that EPA should allow for the backfilling of the shortfall in
cellulosic biofuel by advanced biofuel or total renewable fuel. A commenter suggested this is
particularly appropriate because of the potential for reductions in advanced biofuels from small
refinery exemptions.
Response:
We note that the advanced biofuel volume increases in the statute by 500 million gallons for
2019, and therefore this year's annual rule does demonstrate continued growth in the advanced
volume.
As explained in Section IV of the final rule and Section 4 of this document, we do not believe it
would be appropriate to allow advanced biofuel and total renewable fuel to backfill for missing
volumes of cellulosic biofuel in 2019.
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Comment:
Commenters argued that we should lessen the exercise of the cellulosic waiver authority
commensurate with the volume of small refinery exemptions, including those we granted for
2016 and 2017 and those we anticipate granting in the future. Commenters generally argued that
EPA should adjust for exempted small refinery volumes by intentionally drawing down the
carryover RIN bank, including in our exercise of the cellulosic waiver authority. Commenters
also argued that the cellulosic waiver authority requires small refinery reallocation because other
statutory provisions direct EPA to "ensure" that the statutory volumes are met.
Response:
We agree that we may consider exempted small refinery volumes in the exercise of our cellulosic
waiver authority.32 The cellulosic waiver authority grants EPA broad discretion to waive total
renewable fuel and advanced biofuel volumes. As explained in Section II.B of the final rule and
Section 2.3 of this document, we have carefully considered the carryover RIN bank in the
exercise of the cellulosic waiver authority. The carryover RIN bank accounts for previously
exempted small refinery volumes (which tend to increase the size of the bank), including the
exempted volumes for 2016 and 2017 noted by these commenters.33 For the reasons stated in
Section II.B of the final rule and Section 2.3 of this document, we have decided not to
intentionally draw down the carryover RIN bank.
We disagree with comments claiming that EPA is statutorily required to reallocate exempted
volumes through drawing down the carryover RIN bank and limiting the exercise of the
cellulosic waiver authority. We believe that the statute plainly grants us discretion over whether
and how we consider exempted small refinery volumes and the carryover RIN bank in exercising
the cellulosic waiver authority.34 Alternatively, even if the statute is ambiguous, we believe our
interpretation is reasonable under Chevron v. NRDC.
Beginning with the text of the cellulosic waiver authority, it states that EPA "may" waive the
total renewable fuel and advanced biofuel volumes up to the shortfall in cellulosic biofuel
production.35 It does not refer to exempted small refinery volumes, to small refineries generally,
or to the carryover RIN bank.36 To the contrary, the plain text requires another, completely
different statutory condition to be met: "[a]ny reduction EPA makes to the advanced biofuel or
total renewable fuel volume requirements may not exceed the amount of EPA's reduction to the
cellulosic biofuel volume requirement."37 To the extent the statute affords EPA discretion — in
stating that EPA "may" waive volumes — it is silent on how EPA is to exercise that discretion.
That silence does not impliedly mandate small refinery reallocation through a drawdown of the
32 As we explain in Section 8 of this document, however, we believe that other comments relating to small refinery
reallocation or our small refinery exemption policies are beyond the scope of this action.
33 However, Section II.B of the final rule explains why this relationship is not one-to-one.
34 While we may also consider carryover RINs in exercising our other waiver authorities, we have not exercised any
other waiver authority in this action.
35 See CAA section 21 l(o)(7)(D)(i).
36 See ACE at 714.
37 Id. at 733.
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carryover RIN bank. Rather, it authorizes us to consider the carryover RIN bank in deciding
whether and to what extent to exercise our discretion.38
The context and structure of the statute support our reading. Commenters' reliance on the
"ensure" language of other statutory provisions, such as CAA sections 21 l(o)(2)(A)(i) and
(o)(3)(B)(i), is telling.39 That language does not appear in the cellulosic waiver authority. Such
exclusion was likely intentional, for Congress intended to confer "broad discretion" through the
discretionary waiver powers it granted EPA.40 This discretion provides EPA needed flexibility to
respond to unexpected shortfalls in cellulosic biofuel production. Had Congress wanted to
mandate reallocation of exempted small refinery volumes through the cellulosic waiver
authority, it would have said so. Indeed, Congress explicitly required EPA to make a different
adjustment for exempt small refineries.41 Thus, Congress' omitting to specify the adjustment
sought by these commenters is especially telling.
Because the text of the statute is plain, and the statutory scheme is coherent and consistent, we
need not consider extra-textual evidence. In any event, the purpose of the statute affirms our
reading.42 Congress enacted EISA "[t]o move the United States toward greater energy
independence and security, to increase the production of clean renewable fuels, [and] to protect
consumers."43 As we explain in Section II.B of the final rule and Section 2.3 of this document,
preserving the carryover RIN bank ensures liquidity in the RIN market, avoids needless market
disruptions and price spikes, protects against market uncertainties, and obviates the need for
subsequent EPA waivers actions during the compliance year. These benefits are essential to the
smooth operation of the entire RFS program, its ability to incent greater production and use of
renewable fuels in the long-term, and consequently to the nation's energy independence and
security. They are also immediately relevant to protecting consumers from potential price spikes
caused by market illiquidity.
Commenters' view that the we must draw down the carryover RIN bank to account for exempted
small refinery volumes would decimate the carryover RIN bank, the vital functions it serves, and
Congress' purposes in enacting the RFS program. Several commenters, for example, claimed
that EPA should intentionally draw down the carryover RIN bank by the entirety of the 2016 and
2017 exempted small refinery volumes, putatively totaling 2.25 billion RINs, and further draw
down the carryover RIN bank by an unspecified volume of anticipated exemptions for 2019.
Even assuming contrary to the commenters' position that the latter value is nil, a drawdown of
the full 2.25 billion RINs would reduce the current RIN bank by 87%, from an estimated 2.59 to
0.34 billion RINs, which approximates less than 2% of the 2019 total renewable fuel volume.44
38 Cf. ACE at 712-16 (agreeing with this same approach to considering carryover RINs in exercising the general
waiver authority (citing Monroe at 917)).
39 Cf. id. at 714 (rejecting petitioners' reliance on "ensure" language and upholding EPA's approach to carryover
RINs in exercising the general waiver authority).
40 Id. at 733.
41 See CAA section 21 l(o)(3)(B)(ii).
42 Cf. ACE at 714.
43121 Stat. 1492.
44 We acknowledge that it is possible that the market could use more than 19.92 billion gallons of total renewable
fuel in 2019. However, we think it is extremely unlikely that the market could use over 2.25 billion more gallons,
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This would be the lowest carryover RIN bank since the beginning of the RFS2 program in 2010.
With such a small carryover RIN bank, even a small increase in gasoline and diesel usage, or a
minute supply disruption, could cause significant fuel price spikes and harm consumers,
necessitate subsequent EPA waivers during the compliance year, and generally undermine the
regulatory certainty essential to market investments and the RFS program.
Moreover, the commenters' contention that such reallocation is statutorily mandated could
eliminate the carryover RIN bank in the long-term. This would undermine the entire RFS
program and Congress' purposes in enacting it. We do not believe the statute requires these
counterintuitive results. To the contrary, our approach of considering the carryover RIN bank in
exercising our discretion "reasonably balances the need to drive growth in the renewable fuel
industry with the need to ensure that obligated parties have sufficient flexibility to comply with
the statute."45
Comment:
Some commenters suggested that there was no need make reductions in total advanced biofuel
and total renewable fuel to maintain the 15 billion gallons of conventional renewable fuel
implied by the statute. Others suggested that EPA is not required to reduce advanced biofuel and
total renewable fuel by the same amount (i.e., maintaining 15 billion gallon implied volume of
conventional renewable fuel).
Response:
We acknowledge that if we made no reductions to advanced biofuel and total renewable fuel
using the cellulosic waiver authority, the implied volume requirement for 15 billion gallons of
conventional renewable fuel would be maintained. However, as discussed in Section IV of the
final rule, we believe that such reductions are warranted.
We acknowledge we are not compelled by the statute to maintain the 15 billion gallon implied
volume of conventional renewable fuel. However, as explained in Sections II. A. 1 and IV.D of
the final rule, we continue to maintain that the best reading of the statute is one that utilizes equal
reductions for advanced biofuel and total renewable fuel under the cellulosic waiver authority.
Comment:
Several commenters stated that the environmental benefits of renewable fuel should prompt
volumes higher than those proposed.
and we believe establishing the volume as suggested by these commenters would result in a significant and
inappropriate drawdown of the carryover RIN bank.
45 See ACE at 715.
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Response:
We have carefully considered the environmental impacts of renewable fuel in Sections IV and VI
of the final rule, Sections 4, 6, and 7.2 of this document, and memoranda to the docket.46 We do
not believe that environmental benefits of biofuel volumes, to the extent they exist, compel a
higher volume than the one we are finalizing in this action. We still find that reductions using the
full cellulosic waiver authority are appropriate.
Comment:
Some commenters suggested that the advanced biofuel and total renewable fuel volumes are too
high because the cellulosic biofuel volume is too high, and that EPA should consider an "end-of-
year supplemental waiver" if the cellulosic biofuel production falls short of the projection.
Another comment suggested EPA should "true-up" the estimate at the end of the year using the
cellulosic waiver authority.
Response:
Our discussion of the projected volume of cellulosic biofuel can be found in Section III of the
final rule and Section 3 of this document. The volume we are finalizing is a projection of
production that takes a "neutral aim at accuracy" as required by the court in API. Therefore, our
reductions to advanced biofuel and total renewable fuel are limited by our reductions in the
cellulosic biofuel volume.
As 2019 has not yet passed, commenters' request that we "true-up" the cellulosic biofuel volume
at the end of 2019 are unripe and beyond the scope of this proceeding. To the extent that
cellulosic biofuel production actually falls short of production in 2019, and commenters
subsequently ask EPA to "true-up" the cellulosic biofuel volume, we will address these concerns
at that time.
Comment:
A commenter suggested that in setting the cellulosic biofuel standard EPA must be "neutral," but
that some comments in the context of setting the BBD standard indicated that EPA was not
neutral.
Response:
It was not clear from the information provided by the commenter exactly what was not neutral
about EPA's cellulosic projection. However, the statements about providing space for other
advanced in setting the BBD standard are not related to how EPA sets the cellulosic biofuel
standard. The cellulosic biofuel standard is set with a "neutral aim at accuracy" in accordance
with the D.C. Circuit's ruling in API. That neutral aim is only required when EPA projects
46 See "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under
General Waiver Authority" and "Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD)
Applicable Volume," memoranda to docket EPA-HQ-OAR-2018-0167.
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cellulosic biofuel under the cellulosic waiver authority. We also note that the statements quoted
by the commenter are in the context of setting the 2020 BBD volume, not the 2019 advanced or
cellulosic biofuel volumes.
Comment:
A commenter suggested that EPA must consider whether or not to reduce advanced biofuel by
the full amount of the reduction in cellulosic biofuel, and that EPA did not, and should have
reduced advanced biofuel by a lesser amount.
Response:
As explained in Section IV of the final rule and Section 4 of this document, we have carefully
considered the appropriate reduction in advanced biofuel under the cellulosic waiver authority
and has found it appropriate to make the maximum allowable reduction.
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2.3 Carryover RINs
Commenters that provided comment on this topic include but are not limited to: 0312, 0536,
0539, 0586, 0617, 0619, 0620, 0662, 0672, 0712, 1037, 1041, 1197, 1198, 1273, 1274, 1281,
1282, and 1283.
Comment:
Several commenters expressed their support for EPA's proposed decision to not intentionally
draw down the bank of carryover RINs in setting the 2019 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. Several of
these commenters also stated that while it may have been EPA's intent not to draw down the
carryover RIN bank, such a drawdown was possible given the large increase in the advanced
biofuel and total renewable fuel standards.
Conversely, several other commenters stated that the carryover RIN bank is larger than necessary
and should be intentionally drawn down 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 and reduces demand and consumption of
renewable fuels, particularly cellulosic and advanced biofuels.
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 2019, 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
appropriate for EPA to set the volume requirements for 2019 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 2019 annual volume
requirements. In Monroe, 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
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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.
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 2019, we project that as many as 2.59 billion carryover RINs will be available for
compliance. This is approximately 13% of the final 2019 total renewable fuel volume standard
and less than the 20% limit permitted by the regulations to be carried over for use in complying
with the 2019 standards. Consistent with our past practice, we considered the availability of
carryover RINs in making a determination about whether and how to reduce the 2019 statutory
volume requirements, and that assessment was properly done in view of the specific
circumstances present for 2019. Considering all of the various relevant factors for 2019,
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, and the increased level of the 2018 and 2019 standards, we have concluded that we
should not set the volume requirements for 2019 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 2019 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 and use of renewable fuels.47
47 For more detail on how the rule may impact the production and use of various renewable fuels, see Sections III,
IV, and VI of the final rule and "Endangered Species Act No Effect Finding and Determination on Severe
Environmental Harm under General Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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As discussed in the 2014-2016 final rule, 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.31F3 IF48 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 create further
program uncertainty and impede the investment needed for the program to grow. We believe that
we should not set the volume requirements for 2019 in a manner that would be expected to
require a drawdown in the collective bank of carryover RINs given all of the various relevant
factors mentioned above.
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 2019 volumes should be waived consistent with EPA's cellulosic
waiver authority. We have set the 2019 advanced biofuel and total renewable fuel volume
requirements at a level that is expected to continue to place upward pressure on the production
and use 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:
Two commenters recommended that the carryover RIN bank should consist of at least 14-15% of
the projected total renewable fuel volume standard. The commenters stated that a carryover RIN
bank of this size is necessary to ensure the stability and liquidity of the RIN market.
Conversely, two other commenters objected to EPA's proposed rationale that carryover RINs
should be preserved as a "programmatic buffer" and argued that use of carryover RINs as a
"programmatic buffer" is an inaccurate reading of the statute and that allowing RINs to be rolled
over from one year to the next violates the statutory limited life on RINs.
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.32F32F Indeed, we have consistently considered the carryover RIN
bank as a buffer since the 2013 rule.49 In addition, we established our regulations allowing RINs
to be carried over in the RFS2 final rule.50 EPA did not propose changes to, take comment on, or
otherwise reexamine these longstanding legal interpretations and policy approaches, and these
comments are therefore beyond the scope of this proceeding.
48 See 80 FR 77483-84 (December 14, 2015).
49 See 78 FR 49820-23 (August 15, 2013).
50 See 75 FR 14734-35 (March 26, 2010).
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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 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.
EPA is not currently in a position to state with specificity the optimal size of the carryover RIN
bank. 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. As we have explained, we consider the
carryover RIN bank on a case-by-case basis in each annual rule, and the appropriate size of the
carryover RIN bank depends on a complex agglomerate of regulatory and market factors that
cannot be reduced to a single number. In any event, consistent with the commenters' request, we
are not intentionally drawing down the carryover RIN bank in this action.
Comment:
Two commenters stated that any intentional drawdown of the carryover RIN bank would be
inconsistent with the statute since it would prevent obligated parties from using RINs that were
generated in the previous year. These commenters also stated that such a drawdown would also
be inconsistent with EPA's 20% carryover RIN cap.
Response:
Consistent with these commenters' requests, we did not intentionally draw down the carryover
RIN bank in this action. Nonetheless, we believe that we have the authority to intentionally draw
down the carryover RIN bank, and that doing so is not inconsistent with the statute or our
regulations. CAA section 21 l(o)(5)(C) states that "A credit generated under this paragraph shall
be valid to show compliance for the 12 months as of the date of generation" and EPA gave
meaning to this provision by allowing obligated parties to satisfy up to 20% of their RVO using
RINs generated during the previous year. There is nothing in the statute or EPA's regulations
that would prevent EPA from intentionally requiring a drawdown of the carryover RIN bank, and
in fact EPA did just that in establishing the 2013 standards, an approach that was upheld in
Monroe. A decision to intentionally draw down the carryover RIN bank does not at all prevent
obligated parties from using RINs generated during the previous year, but rather, as discussed
earlier, attempts to balance the various objectives of the RFS program. Furthermore, this decision
would not be inconsistent with EPA's 20% carryover RIN cap because it would not further limit
an obligated party's ability to satisfy their RVO using carryover RINs. Carryover RINs are not
evenly distributed amongst obligated parties, so while an intentional drawdown of the carryover
RIN bank would reduce the overall number of carryover RINs available, the 20% cap applies to
individual obligated parties and they would still be able to take full advantage of this flexibility.
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Regardless, we did not propose changes to, take comment on, or otherwise reexamine these
longstanding legal interpretations and policy approaches, and these comments are therefore
beyond the scope of this proceeding.
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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: 0492, 0535,
0539, 0586, 0672, 1037, 1200, 1285, and 1292.
Comment:
One commenter stated that if EPA provided the appropriate market signals through higher
required volumes of cellulosic biofuel, then substantial market opportunities for these fuels
would arise.
Response:
We recognize that higher required volumes for cellulosic biofuels have a positive impact on the
market opportunities for producers of these fuels, as well as parties seeking to develop projects
capable of producing cellulosic biofuel. Our projection of cellulosic biofuel production in this
final rule is an attempt to neutrally project the volume of cellulosic biofuel that will be produced
in 2019, as required in the API decision. This projection is not only consistent with the direction
EPA received from the Court, but we believe it also provides the appropriate market signals for
the continued development of cellulosic biofuels. As an example of these market signals, we note
that the average 2018 cellulosic (D3) RIN price from January - September 2018 was $2.40.51
Comment:
A number of commenters requested that EPA quickly take action on pending facility registration
requests and pathway petitions. These commenters often stated that if EPA processed these
facility registration requests and pathway petitions more quickly, greater volumes of cellulosic
biofuel could be produced. Several commenters stated that EPA's projection of cellulosic biofuel
production in 2019 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.). Commenters stated that by including all potential sources of cellulosic biofuel in its
projection, EPA would provide the support the cellulosic biofuel industry needs.
Response:
We are working as expeditiously as possible, in light of resource constraints and competing
priorities, to evaluate all of the facility registration requests and pathway petitions we have
received to date. While we recognize the importance of timely evaluations of these requests and
petitions, we note that prior to acting on many of these requests there are significant regulatory
51 RIN Price information from Argus Media.
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and technical issues that must be resolved. We remain committed to working with stakeholders
to resolve these issues.
Our projection of cellulosic biofuel production in 2019 includes production volumes from all
facilities that are reasonably likely to produce qualifying cellulosic biofuel in 2019. 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 2019. 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 2019, 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 2019.
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.52 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 2019. We 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.
Comment:
A commenter stated that EPA's delay in processing facility registration requests, along with
EPA's failure to include volumes from these facilities in its projection of cellulosic biofuel
volume, is sending a negative signal to the market and hindering the production of cellulosic
biofuel.
52 In the case of the production of cellulosic ethanol from corn kernel fiber, these issues are related to quantifying the
volume of ethanol produced from the cellulosic components of the feedstock, rather than other non-cellulosic
feedstocks that are being processed simultaneously. We note that until these issues are resolved, these parties may
generate conventional (D6) RINs for any ethanol they believe is produced from corn kernel fiber that is
simultaneously processed with corn starch.
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Response:
We recognize the importance of processing facility registration requests in a timely manner.
However, as discussed above, in some cases there are significant regulatory and technical issues
that must be resolved prior to acting on these facility registration requests.
Comment:
A commenter stated that data on cellulosic biofuel RIN generation to date in 2018 indicated that
cellulosic biofuel production in 2018 would fall far short of EPA's projection for 2018. This
commenter stated that this over-projection in 2018 and previous years meant that it was
inappropriate for EPA to propose a higher volume of cellulosic biofuel for 2019.
Response:
As discussed in greater detail in Section III of the final rule, our projection of cellulosic biofuel
production in 2018 now exceeds the required volume for 2018, rather than falling short as the
commenter alleges. Our projection uses additional cellulosic biofuel production data (through the
end of September 2018) as compared to the projection made by the commenter (which only used
data through the end of June 2018). Our projection also appropriately accounts for the significant
seasonal variation in cellulosic biofuel production.53 Conversely, the commenter's projection
does not account for this seasonality (specifically the fact that for many types of biofuels,
including cellulosic biofuels, greater volumes of fuel are produced in the latter part of the year
than the earlier part of the year), which results in an inappropriately low projection of cellulosic
biofuel.
Comment:
A commenter stated that EPA must make the data they rely on for the final rule publicly
available.
Response:
All data and information used in developing our projections of cellulosic biofuel have been
included in the docket for this action. With the exception of information that is covered by
copyright or is claimed as CBI, all of the data and information is available to the public through
regulations.gov. Further, we updated our public website in September 2018 to provide additional
RFS data, including data on monthly RIN generation by D-code and fuel type, on an ongoing
basis.54
53 For more detail on our current projections of cellulosic biofuel production, including how we accounted for the
seasonality of production, see "Calculating the Percentile Values Used to Project Liquid Cellulosic Biofuel
Production for the 2019 FRM," memorandums from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-0167
and "November 2018 Assessment of Cellulosic Biofuel Production from Biogas (2019)" memorandum from Dallas
Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
54 See https://www.epa.gov/fiieis-registratioii-reportiiig-aiid-compliaiice-Iieip/riiis-geiiera.ted-traiisa.ctioiis
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Comment:
A commenter claimed that EPA issued 353 million CWCs in 2015 and 2016, 311 million CWCs
in 2017, and that if EPA's approach to CWCs remains unchanged it will issue 381 million CWCs
in 2019. The commenter stated that the issuance of CWCs was creating an over-supply of
cellulosic biofuel RINs, and that this was having a negative impact on the cellulosic biofuel
industry.
Response:
The commenter vastly over-states the number of CWCs issued by EPA. Total CWC purchases
were approximately 12.5 million in 2015, 33.2 million in 2016, and 11.8 million in 2017.55 Many
of these CWC purchases were the result of a shortfall in cellulosic biofuel production relative to
the volumes projected by EPA. Such shortfalls meant that the market as a whole could not satisfy
the cellulosic biofuel standard based solely through RINs generated from cellulosic biofuel
produced in a given year, but had to rely on waiver credits to compensate for the shortfall in
production.56 We estimate that there are currently only 1.4 million 2017 cellulosic carryover
RINs available for use towards the 2018 compliance year.57 This data, along with the high
market price for D3 and D7 RINs (which averaged $2.39 in 2018 through the end of
September),58 strongly suggest that CWCs are not resulting in an oversupply of cellulosic RINs,
and are not having a significant negative impact on the market for cellulosic biofuels. In fact, the
CWC price established by the formula in the statute appears to be setting the price for cellulosic
RINs in the market, providing a stable market price for the cellulosic biofuel industry on which
to base their planning and investments.59
55 See public data on CWC purchases on EPA's website: https://www.epa.gov/fuels-registratioii-reportiiig-aiid~
complianee-help/cellulosic-waiver-credits-purchased-arimiallv
56 We note that the number of CWCs purchased each year was greater than the shortfall in cellulosic biofuel
production, as some obligated parties chose to hold excess cellulosic RINs for use in the following year.
57 The calculations performed to estimate the number of cellulosic carryover RINs currently available can be found
in the memorandum, "Carryover RIN Bank Calculations for 2019 Final Rule," available in docket EPA-HQ-OAR-
2018-0167.
58 Average D3 RIN prices calculated from EPA data, available at: https://www.epa.gov/fuels-registratioii-reporting-
aiidcompliai&e-help/riii-trades-and-price-iiiformatioii
59 The CWC price for 2018 is $1.96, while the average advanced biofuel RIN prices in 2018 (through September)
was $0.53. The sum of these two prices ($2.49) is similar to the average price of a cellulosic biofuel RIN ($2.39).
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3.2 Methodology for Projecting Volumes
Commenters that provided comment on this topic include but are not limited to: 0620, 0671,
0672, 0697, 1037, 1197, 1282, and 1285.
Comment:
Multiple commenters stated that EPA should base its projection of cellulosic biofuel in 2019 at
the production rate achieved in the most recent 3 months for which data are available (e.g., the
projection for 2019 should be equal to RIN generation from these fuels during the last 3 months
for which data are available multiplied by four). These commenters suggested that this approach
would result in a more accurate projection of cellulosic biofuel production.
Response:
Projecting production of cellulosic biofuel 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 2018) through the end of 2019. Projecting production of cellulosic
biofuel in this manner is also inconsistent with the observed monthly production volumes of
these fuels, which are generally increasing over the past three years.60 For example, had this
methodology been adopted in the 2018 final rule, it would have resulted in a projection of 249
million gallons of cellulosic biofuel in 2018.61 This is far lower than our projection of cellulosic
biofuel in the 2018 final rule (288 million gallons), as well as our current projection for actual
cellulosic biofuel production in 2018 based on data through September 2018 (320 million
gallons). 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 2019.
Comment:
Multiple commenters stated that EPA should consider available carryover RINs in establishing
the required volume of cellulosic biofuel for 2019.
Response:
Under the cellulosic waiver authority, EPA is required to reduce the applicable volume of
cellulosic biofuel to the projected volume of cellulosic biofuel production in 2019, not to the
number of RINs projected to be available. Moreover, several policy and programmatic
considerations favor our approach over the commenters'. Increasing the required volume of
cellulosic biofuel for 2019 by the number of carryover 2018 cellulosic RINs projected to be
available for use in 2019 may benefit cellulosic biofuel producers, but conversely could harm
obligated parties if some of the obligated parties acquire cellulosic biofuel RINs in excess of
60 For monthly RIN generation totals for cellulosic biofuel see "Monthly RIN Generation of Cellulosic Biofuel
(D3+D7)," memorandum from Dallas Burkholder to EPA Docket EPA-GQ-OAR-2018-0167.
61 This number is calculated based on 62.3 million RINs generated from July - September 2017, the most recent data
available at the time the analyses for the 2018 final rule were completed.
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their RVO. Thus, this approach would disincentivize obligated parties from acquiring cellulosic
biofuel RINs in excess of their RVO. The willingness of obligated parties to acquire RINs in
excess of their RVO is an action that benefits cellulosic biofuel producers. It would be further
complicated by the significant uncertainty surrounding the number of 2018 cellulosic carryover
RINs that will be available for compliance with the 2019 volume obligations. Finally, we note
that the average price for 2018 cellulosic RINs through September 2018 ($2.39)62 does not
indicate that the availability of carryover cellulosic RINs are having a negative impact on
cellulosic RIN or cellulosic biofuel prices. See Section II of the final rule and Section 2.3 of this
document for further discussion of carryover RINs.
Comment:
A commenter stated that EPA had not sufficiently adjusted its methodology to account for its
over-projection of cellulosic biofuel in 2017. The commenter stated that EPA must "go back to
the drawing board" to improve the accuracy of our projections and ensure a neutral projection.
Response:
As discussed in further detail in Section III of the final rule, our over-projection of cellulosic
biofuel in 2016 and 2017 was primarily the result of over-projecting the production of
CNG/LNG derived from biogas. In response to this over-projection, we developed an entirely
new methodology, adopting an industry-wide projection methodology in the 2018 and 2019 rules
rather than the facility-by-facility projection methodology used in 2016 and 2017. This
methodology appears to have resulted in a much more accurate projection for CNG/LNG in
2018. Indeed, we currently project actual use of CNG/LNG derived from biogas in 2018 to
slightly exceed that projected in the 2018 final rule. We therefore believe it is appropriate to
continue to use this methodology in 2019, as we continue to assess the accuracy of this new
methodology over multiple years. While the changes to the percentile values used to project
liquid cellulosic biofuel from the calculated ranges, and the way these percentile values were
calculated, from 2017 to 2018 were more modest, we note that we did adjust the percentile
values used to project production of liquid cellulosic biofuel based on historical data, and that
these adjustments similarly appear likely to result in more accurate projections in 2018.
Comment:
A commenter stated that EPA's proposed cellulosic biofuel volume represented at 32.3%
increase from the required volume in 2018 and claimed that this increase was unsupported and
inappropriately aspirational. The commenter further claimed that increases of this magnitude
were not supported by the historical record.
62 Average D3 RIN prices calculated from EPA data, available at: https://www.epa.gov/fuels-registratioii-reportin.g-
and-compliance-help/rin-trades-and-price-informatioii. The theoretical maximum price for a cellulosic RIN in 2018,
calculated as the sum of the CWC price for 2018 ($1.96) and the average price of an advanced biofuel RIN through
September 2018 ($0.53) is similar to the average cellulosic biofuel RIN price for 2018 through September 2018.
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Response:
We disagree with the commenter's characterization of our proposed volume of cellulosic biofuel
as unsupported and aspirational. The only supporting evidence the commenter cites in support of
their claim are EPA's over-projections from previous years and the growth rate necessary to
achieve the proposed volume of cellulosic biofuel for 2019. The data used by EPA to project
cellulosic biofuel production in 2019, as well as the methodology used to project the production
of liquid cellulosic biofuels and CNG/LNG derived from biogas are presented in detail in Section
III of the final rule and the supporting memos. As discussed in the previous response, we made
significant changes in the 2018 final rule to our projection methodology in response to our over-
projection of cellulosic biofuel in 2016 and 2017. Under that methodology, which we continue to
use in this final rule, we expect to have slightly under-projected cellulosic biofuel in 2018. We
further note that according to the commenter's own calculations, actual production of cellulosic
biofuel increased by 36.2% from 2015 to 2016, and 32.2% from 2016 to 2017. The commenter's
projected growth rate from 2017 to 2018 (-12%) is an artifact of an inappropriately pessimistic
methodology for projecting cellulosic biofuel production through the end of 2018 and is
inconsistent with EPA's current projection of cellulosic biofuel production for 2018 (see Section
III of the final rule for our projection of cellulosic biofuel production through the end of 2018).
These historical growth rates, while not sufficient on their own to support the volume we are
finalizing for 2019, suggest that the growth we are projecting from 2018 to 2019 is not
unprecedented, but rather in line with the growth rates observed in previous years. In fact, our
current projected growth rate of 28.5% from 2017 to 2018 continues to support significant
growth rates.
Comment:
A commenter stated that EPA's proposed volume of cellulosic biofuel was unrealistic,
improperly aspirational, and not supported by real world historical data.
Response:
For this final rule we have used the same general methodology as in the proposal (with updated
data through September 2018). This methodology appropriately uses historical data, for example
in calculating the percentile values used to project liquid cellulosic biofuel volumes and the
growth rate for volumes of CNG/LNG derived from biogas. The basis for the commenter's
statements appear to be EPA's over-projections of cellulosic biofuel in 2016 and 2017, as well as
our projection of cellulosic biofuel in 2018 relative to the required volume in 2018. We
recognize that in 2016 and 2017 we over-projected cellulosic biofuel production. In response, we
adjusted our projection methodologies, adjusting the percentile values used to project liquid
cellulosic biofuel and switching from a facility-by-facility approach for projecting CNG/LNG
from biogas to an industry-wide projection approach. The commenter's projection of cellulosic
biofuel production for 2018 is inappropriately low, as it does not account for the seasonality in
the production of CNG/LNG derived from biogas, a trend that has been observed over the past
several years. Our projection of cellulosic biofuel production in 2018, which relies on data
through September 2018 and accounts for the seasonality of production, exceeds the required
volume for 2018 by a small margin (see Section III of the final rule). Thus, the historical data
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supports the use of this projection methodology in 2019, as the same general methodology
produced a reasonably accurate projection for 2018.
Comment:
A commenter stated that EPA's history of missed projections justifies lowering the cellulosic
biofuel volume from the proposal.
Response:
As discussed in greater detail in Section III of the final rule, we recognize that the projection
methodology we used in 2016 and 2017 resulted in projections that were greater than actual
cellulosic biofuel production in these years. We therefore adjusted the projection methodology
for liquid cellulosic biofuels and adopted a new, industry-wide projection methodology for
CNG/LNG derived from biogas for 2018 and used generally the same projection methodology
for 2019. The cellulosic biofuel projection for 2018 using this new methodology appears likely
to have resulted in a reasonably accurate projection of cellulosic biofuel for 2018 (one that is
likely to be slightly less than actual production in 2018), and therefore is reasonable to use to
project cellulosic biofuel production in 2019 for this final rule.
Comment:
A commenter stated that the cellulosic RIN market was non-competitive, and therefore EPA
should err on the side of caution in projection cellulosic biofuel production for 2019.
Response:
We have not seen any evidence of the claims made by the commenter that the market for
cellulosic RINs is non-competitive. From January through August 2018, approximately 235
million separated D3 RINs have been traded.63 In years in which EPA reduces the required
volume of cellulosic biofuel we also make CWCs available at a price calculated according to a
formula in the statute. These CWCs serve to control the price of cellulosic RINs, as obligated
parties can purchase a CWC and an advanced biofuel RIN instead of a cellulosic biofuel RIN.
This provides protection in the market from non-competitive behaviors. Finally, we note that
EPA is charged with making a neutral projection of cellulosic biofuel production,
notwithstanding potential concerns over the non-competitive nature of the cellulosic RIN market.
Comment:
A commenter characterized EPA's projection methodology as one that considers only gallons
produced in prior years. The commenter encouraged EPA to use a forward-looking, rather than a
backward-looking methodology for establishing the cellulosic biofuel volume in the final rule.
63 Data from EPA's public RIN Trades and Price Information website: https://www.epa. eov/ftiels-registration-
reTOrtiiig-and-compHaiice-help/riii-trades-airi-price-iiiformatioii
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Response:
We disagree that the methodologies used to project cellulosic biofuel production in 2018 and
2019 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 indicative of these values in 2019. We also note that we are unaware of any
suitable alternatives to using historical data to calculate these values. Alternatives suggested by
commenters, such as simply using the volume projections from potential producers or using the
same percentile values as in 2016 and 2017, have both been shown 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 2019.
The percentile value is applied to a potential production range that 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 2019 is higher than the volume we currently expect
will be produced in 2018, as well as the required volume of cellulosic biofuel in 2018. The
methodologies used in this final rule reflect EPA's best efforts to neutrally project cellulosic
biofuel production in 2019 and should therefore provide the appropriate incentives for growth
and investment in the cellulosic biofuel industry.
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:
We do 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
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production volumes or shut down their production facilities. Further, we note that if carryover
RINs were included in the "roll over" or "true up" calculation, this would effectively
disincentivize obligated parties for acquiring excess cellulosic biofuel RINs in previous years.
Finally, the commenter's approach appears inconsistent with the statutory directive to establish
cellulosic biofuel volumes and standards by November 30 of the preceding year.64 Given the
inherent uncertainties associated with projecting cellulosic biofuel production, the commenter's
approach would seem to require EPA to issue a new rulemaking after every year to "roll-over" or
"true-up" the volume requirement, effectively nullifying the timeframe established by Congress.
64 See CAA sections 211(o)(7)(D)(i) and (o)(3)(B)(i).
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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: 0312, 0539,
0586, 1037, 1200, 1282, and 1292.
Comment:
A commenter stated that EPA should assess the accuracy of the proposed production
methodology based on all available data from 2018.
Response:
We have assessed the accuracy of the projection methodology for cellulosic biofuel in the 2018
rule. This assessment can be found in Section III of the final rule. We have determined that this
methodology appears likely to produce a reasonably accurate projection of cellulosic biofuel
production in 2018, and thus continues to be appropriate for use in this final rule.
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 3.2 of this document, EPA's methodology for projecting
volumes of liquid cellulosic biofuels uses data from previous years (including 2016 -2018) 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 2019, to neutrally project
likely production of liquid cellulosic biofuel in 2019. While we recognize the maturation of the
cellulosic biofuel industry, we have not yet seen a consistent trend in the production of cellulosic
biofuel relative to the cellulosic biofuel producer's projections that would justify using percentile
values that differ from those calculated based on historical data. We will continue to monitor the
accuracy of the methodologies we used to project cellulosic biofuel production and anticipate
adjusting the methodology as appropriate in future years.
Comment:
Multiple commenters stated that EPA should increase its projection of cellulosic biofuel
production by 50 million gallons to account for increased adoption of the conversion of corn
kernel fiber to cellulosic ethanol at existing corn ethanol plants.
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Response:
As discussed in greater detail in Section 3.1 of this document, we do not believe it would be
appropriate to project cellulosic biofuel production in 2019 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 unlikely that
facilities that are not currently registered to generate cellulosic RINs for ethanol produced using
these technologies will successfully complete facility registration in a timeframe that would
enable them to generate an appreciable number of cellulosic RINs in 2019. Our cellulosic biofuel
production projections for 2019 do, however, include volumes from all facilities currently
registered to generate cellulosic ethanol from corn kernel fiber.
Comment:
A commenter stated that EPA's projection methodology for liquid cellulosic biofuels transposes
a facility's lack of production in prior years to future years. The commenter stated that this
methodology inappropriately expects facilities to produce cellulosic biofuel before these volumes
are included in the cellulosic biofuel volume requirements. Similarly, another commenter stated
that EPA's methodology for calculating a percentile value using historical data inappropriately
assumes the industry's past determines its future.
Response:
In projecting liquid cellulosic biofuel production for 2019, we use historical production of liquid
cellulosic biofuels in two ways. First, production of liquid cellulosic biofuel in the most recent
12 months for which data are available forms the low end of our projected production range for
liquid cellulosic biofuels. Second, we calculate the percentile values used to select likely
production volume from within a projected range of production volumes based on actual
production in previous years (2016-2018) relative to the projected ranges for these years. We
believe these uses of historical data are appropriate. The production of liquid cellulosic biofuels
has increased year over year each year since 2014, suggesting that cellulosic biofuel produced in
the preceding 12 months is a reasonable estimate for the low end of a range of potential
production of these fuels in 2019. Actual production from within a range of projected values in
previous years can also be reasonably expected to inform production from within a range of
projected values in a future year, if the methodology for calculating the ranges is consistent.
We further note that a key factor in our projection methodology, for both facilities with and
without previous consistent production of cellulosic biofuel, is the expected production volumes
from the facilities themselves in the year in which we are projecting cellulosic biofuel volume.
These projected production volumes from the facilities themselves are generally used as the high
end of the projected production range. While many of these facilities would prefer for EPA to
simply use their projections as our neutral estimate of projected production (instead of as the
high end of our projected production range), this would be inappropriate as their projections have
consistently proven to be overly optimistic in previous years. Contrary to the claims of the
commenter, we do not expect or require a cellulosic biofuel production facility to produce a
volume of fuel before that volume is considered in our projection for the following year. This
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can be seen most clearly in the fact that our projection of liquid cellulosic biofuel for 2019 (20
million gallons) is higher than our projection of cellulosic biofuel in 2018 (14 million gallons)
based on data through September 2018. Our projections for 2019 also include facilities that have
not yet produced consistent commercial scale volumes of cellulosic biofuel.
Comment:
A commenter stated that EPA should assess potential liquid cellulosic biofuel production on a
facility-by-facility basis, rather than grouping facilities and using a single percentile value for
each group.
Response:
We disagree that projecting precise production volumes from individual facilities would result in
a more accurate overall cellulosic biofuel production projection. In previous years (2011-2013)
we have 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, we have
requested volume projections from project developers and these estimates have consistently
proven to be overly optimistic. In recent years we have considered many additional factors that
could be used to temper the projections we receive from the industry, yet the accuracy of the
production estimates provided by project developers have not significantly improved. Thus, even
after considering these additional factors and the individual company projections, we don't
believe a facility-by-facility method would be neutral or accurate. While we believe 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 as we are not
able to sufficiently evaluate the many complex and inter-related factors that are likely to affect
future production at each facility. 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 2019.
Comment:
A commenter stated that EPA had not provided sufficient justification for changing the
methodology used to project cellulosic biofuel in 2015 and 2016, noting that this methodology
had resulted in both under-projecting actual production (2015) and over-projecting actual
production (2016).
Response:
While it is true that we under-projected the production of cellulosic biofuel produced in 2015 and
over-projected the production of cellulosic biofuel produced in 2016, we note that we over-
projected the production of liquid cellulosic biofuel each year form 2015-2017 (see Section III of
the final rule for more detail on our projections relative to actual cellulosic biofuel production).
These consistent over-projections resulted in adjustments to the methodology for the 2018 rule.
These adjustments appear to have resulted in a more accurate projection of liquid cellulosic
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biofuel production in 2018, and therefore have once again been used to project the production of
liquid cellulosic biofuel for 2019.
Comment:
A commenter stated that data from 2018 should be considered when calculating percentile values
used to select a projected volume from within the range of potential volumes for 2019. This
commenter also stated that EPA should include data from 2015, and that not doing so would be
arbitrary, as this year used the same methodology as 2015 and its inclusion would be
advantageous to cellulosic biofuel producers.
Response:
We have included data from 2018 in our consideration of calculating the percentile value used to
select a projected volume from within the range of potential volumes for 2019, as requested by
the commenter. We have not included data from 2015 to calculate the percentile values. Contrary
to the commenter's statement, our projection methodology for 2015 was substantially different
than the methodology in 2016, as we only projected volumes for the last quarter of 2015 (since
data was available for the first three quarters when we finalized the 2014-2016 rule), while we
projected volume for the entire year in 2016. We also note that inclusion of 2015 would not be
expected to significantly change the percentile values used to project cellulosic biofuel
production in 2019. While the commenter is correct that overall cellulosic biofuel production
exceeded our projection in 2015, liquid cellulosic biofuel production was lower in 2015 than we
projected.
Comment:
A commenter stated that EPA should increase its projection of cellulosic biofuel production for
2019 to account for cellulosic RINs that could have been generated in 2018 if EPA had approved
pending facility registration requests more quickly.
Response:
We are required by the statute to set the 2019 cellulosic biofuel volume requirement at the
volume projected to be produced in 2019. It would not be reasonable to increase the 2019
cellulosic biofuel volume requirement to account for fuel that could have been produced in 2018
but was not, especially as doing so would effectively increase the number of cellulosic RINs that
must be retired in 2019 without any corresponding increase to the number of RINs available for
compliance. As discussed further in Section 3.1 of this document, there are significant regulatory
and technical issues that must be resolved prior to acting on many of these pending facility
registration requests.
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Comment:
A commenter stated that EPA should treat producers of cellulosic ethanol from corn kernel fiber
as a separate group of facilities, with a higher percentile value used to project a likely production
volume from the projected range.
Response:
We have reviewed past data on actual production from facilities producing cellulosic ethanol
from corn kernel fiber relative to the range of projected volumes. The percentile value that would
have resulted in an accurate production projection from the projected range for these facilities
did not differ significantly enough from the group of facilities with similar production history to
warrant a separate group of facilities with a higher percentile value.
Comment:
One commenter stated that EPA should recognize that current cellulosic biofuel production
technologies are distinct from those in previous years and have a higher likelihood of success.
Response:
We recognize 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.
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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: 0313, 0492,
0591, 0663, 0671, 0697, 1040, 1266, 1267, 1277, and 1292.
Comment:
Several commenters supported EPA's methodology for projecting production of CNG/LNG
derived from biogas, as well as the growth rate used to project this production in the proposal.
Response:
In this final rule, we have used the proposed methodology to project the production of
CNG/LNG derived from biogas in 2019. We have updated the growth rate using additional
available data, and the growth rate in this final rule remains similar to the growth rate in the
proposal.
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
2019. 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
that EPA increase the volume further to account for new facilities.
Response:
We disagree that the industry-wide projection methodology used in this final rule does not
adequately account for new facilities that may begin producing CNG/LNG derived from biogas
in 2019. The growth rate used to project the production of CNG/LNG derived from biogas in
2019 includes consideration of 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 we 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:
A commenter stated that EPA should use a forward-looking, facility-by-facility projection
approach to projecting production of CNG/LNG derived from biogas in 2019. The commenter
stated that this approach would better account for new projects that are currently in development.
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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, we made adjustments to
the methodology used to project production of CNG/LNG derived from biogas to project
cellulosic biofuel production for 2018.
Comment:
A commenter stated that production of CNG/LNG derived from biogas is on track to meet the
projected volume for 2018.
Response:
We have projected the production of CNG/LNG derived from biogas in 2018 based on data
through September 2018. This projection is presented in Section III of the final rule. We
currently expect production of CNG/LNG derived from biogas in 2018 to exceed the volume we
projected in the 2018 final rule.
Comment:
One commenter supported the proposed methodology but raised concerns that that using a
historic growth rate to project the production of CNG/LNG derived from biogas in 2019 would
leave few opportunities for new projects without risking over-production, which could have
negative impacts on the RIN price.
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 2019 and in future years. Using a historic growth rate to project likely production volumes of
CNG/LNG derived from biogas in 2019 is a neutral projection methodology expected to result in
a reasonably accurate projection of the volume of these fuels that will be produced in 2019. We
note that this projection methodology results in a cellulosic biofuel volume requirement for 2019
that is significantly higher than both the required volume for 2018, and the volume of cellulosic
biofuel currently projected to be produced in 2018 based on data through September 2018. This
projection provides adequate opportunity for new facilities without the risk of overproduction of
cellulosic biofuel. In the event cellulosic biofuel does exceed our projections, the growth rate
used in the following year's rulemaking would he higher as a result, and the RINs generated for
excess volume can be used towards an obligated party's compliance obligation in the following
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year. Accurately projecting the volume of CNG/LNG derived from biogas that will be produced
should provide the appropriate market demand for these fuels.
Comment:
A commenter stressed the importance of a consistent and predictable projection methodology for
CNG/LNG derived from biogas.
Response:
We understand the benefits of a consistent and predictable projection methodology to the
industry. However, these benefits must be balanced with EPA's obligation to neutrally and
accurately project cellulosic biofuel production. Based on data through September 2018 the
projection methodology for CNG/LNG derived from biogas used in the 2018 final rule appears
to have resulted in a reasonably accurate projection, and this is appropriate for use in this final
rule. We will continue to monitor the accuracy of this methodology and anticipate that we will
make adjustments as appropriate.
Comment:
A commenter stated that EPA's starting point for applying the calculated growth rate should be
the last full year for which EPA has data, rather than the volume of CNG/LNG derived from
biogas projected to be produced in 2018 in the 2018 final rule.
Response:
We agree with this comment. In this final rule, we have applied the calculated growth rate to the
number of 2017 RINs produced for CNG/LNG derived from biogas that were available to be
used by obligated parties to demonstrate compliance with the annual standards. This is the most
recent year in which complete data are available. We have applied the growth rate to the number
of available 2017 RINs generated for CNG/LNG derived from biogas as data from this year
allows us to adequately account for not only RIN generation, but also for RINs retired for
reasons other than compliance with the annual standards. While more recent RIN generation data
is available, the retirement of RINs for reasons other than compliance with the annual standards
generally lags RIN generation, sometimes by up to a year or more.65 Using data for the number
of 2017 RINs for CNG/LNG derived from biogas that were available for compliance as our
starting point allows us to start from a year in which we have complete data. We further note that
using actual data for 2017 RINs as a starting point for our projection results in the same
projection for 2019 as using a projection of production of CNG/LNG derived from biogas in
2018 from November 2017, as the 2017 data is the basis for projecting the production of
CNG/LNG derived from biogas in both 2018 and 2019.
65 We note that we do not ignore this more recent data, but rather use it to calculate the year-over-year growth rate
used to project the production of CNG/LNG derived from biogas in 2019.
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Comment:
A commenter stated that the amount of CNG/LNG used as transportation fuel should not be
considered a factor that could potentially constrain the production of cellulosic biofuel for
CNG/LNG derived from biogas in the RFS program. The commenter also claimed that EPA's
projection of the amount of CNG/LNG used as transportation fuel in 2019 was inadequately
explained.
Response:
As the commenter notes, while we estimated the quantity of CNG/LNG expected to be used as
transportation fuel in 2019, this estimate did not constrain our projection of CNG/LNG derived
from biogas projected to be produced in 2019. However, we continue to believe that the volume
of CNG/LNG used as transportation fuel is an important consideration in our projection. In order
to generate RINs in the RFS program, producers of CNG/LNG derived from biogas must be able
to demonstrate that the fuel is used as transportation fuel. Given the plethora of other uses for
natural gas, this is an important issue. CNG/LNG derived from biogas that is used for non-
transportation fuel purposes cannot generate RINs. Therefore, the quantity of CNG/LNG used as
transportation fuel is a key consideration in projecting the amount of qualifying cellulosic biofuel
that will be produced for CNG/LNG derived from biofuel. We also disagree with the
commenter's claim that we have inadequately described our estimate of the amount of
CNG/LNG used as transportation fuel in 2019. Our proposal clearly stated that this estimate was
based on EIA's STEO. The conversion factors used to convert billion cubic feet per day (the
units projected in EIA's STEO) to ethanol-equivalent gallons (or RINs) are shown in the
preamble of both the proposal and this final rule. While the commenter disagreed with one of the
conversion factors used, we note that the difference between the conversion factor used by EPA
and the high end of the preferred range offered by the commenter differed by less than 5% (and
the low end of the range offered by the commenter differed by less than 0.5%). We welcome any
additional data the commenter may have related to the use of CNG/LNG as transportation fuel as
we consider future rulemakings.
Comment:
A commenter supported EPA's recognition of the production of CNG/LNG derived from biogas
as a mature industry.
Response:
We continue to believe that the market for CNG/LNG derived from biogas is mature, and that an
industry-wide projection methodology is therefore appropriate.
Comment:
One commenter mentioned that recent actions by the state of California should be considered in
EPA's projection of CNG/LNG derived from biogas, and that consideration of these incentives
could support higher volumes of cellulosic biofuel.
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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 2019. We note that the cellulosic
biofuel volume in this final rule is significantly higher than the required volume of cellulosic
biofuel for 2018. We further acknowledge that production of CNG/LNG is likely to increase in
future years due to a variety of incentives at the state and national level. We believe that our
methodology for projecting production of CNG/LNG derived from biogas appropriately reflects
that growth that can be expected not only due to the incentives available through the RFS
program, but also the growth that can be expected in 2019 due to state incentives, such as those
available in California, as both state and federal incentives have influenced the growth rate in
CNG/LNG derived from biogas in previous years.
Comment:
A commenter stated that EPA's projection of CNG/LNG derived from biogas does not take into
account EPA's own projection of CNG/LNG used as transportation fuel.
Response:
Valid RINs can only be generated for CNG/LNG used as transportation fuel if it can be
demonstrated that this fuel is derived from qualifying sources (such as landfill biogas, biogas
from a wastewater treatment facility, etc.). It is therefore highly unlikely that parties will be able
to generate RINs for all of the CNG/LNG used as transportation fuel in the U.S. in 2019. The
volume of CNG/LNG used as transportation fuel is therefore an estimate of the maximum
amount of CNG/LNG derived from biogas that could be produced in 2019 if all of the
CNG/LNG used as transportation fuel was sourced from qualifying cellulosic feedstocks, rather
than a projection of the amount of RIN-generating CNG/LNG derived from biogas that will be
produced and used as transportation fuel.
Comment:
A commenter stated that EPA should use the most recent data available to re-calculate the year-
over-year growth rate for CNG/LNG derived from biogas in the final rule.
Response:
We have used the most recent data available (through September 2018) to re-calculate the
growth rate for CNG/LNG derived from biogas.
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3.3 Proposed Cellulosic Biofuel Standard
Commenters that provided comment on this topic include but are not limited to: 0316, 0493,
0532, 1197, 1200, 1265, 1266, and 1277.
Comment:
Multiple commenters stated that EPA should approve facility registrations for parties intending
to produce cellulosic ethanol from corn kernel fiber and electricity produced from cellulosic
biomass that is used as transportation fuel. These commenters stated that EPA should increase its
projection of cellulosic biofuel for 2019 to account for fuel produced from these facilities.
Response:
As discussed in greater detail in Section 3.1 of this document, there are a number of significant
regulatory and technical issues that must be resolved before we can act on these registration
requests. We do not believe it is likely that these issues will be resolved in time for these
facilities to produce appreciable volumes of cellulosic biofuel in 2019. It would therefore be
inappropriate to include production from these facilities in our projection of cellulosic biofuel for
2019.
Comment:
Multiple commenters supported EPA's proposed volume for cellulosic biofuel for 2019 (381
million gallons). Similarly, a commenter suggested that EPA increase our projection of cellulosic
biofuel for 2019 slightly to 386 million gallons. One commenter requested that EPA keep the
annual standard setting process on schedule and set the cellulosic biofuel requirements in a
predictable manner.
Response:
In this final rule we have used the same general methodology as in the proposal to project
cellulosic biofuel production in 2019 and have incorporated the most recently available data in
our projection. We have once again finalized this rule by the statutory deadline of November 30.
While the projection in this final rule is slightly higher than the volume from the proposal (as
well as the volume suggested by the commenter), we believe this volume is justified based on the
data available since our proposal.
Comment:
A commenter stated that a total of 150-200 million additional gallons of cellulosic biofuel could
be produced in the next 3-5 years if EPA finalized the proposed REGS Rule.
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Response:
At this time, we do not anticipate that significant portions of the REGS Rule will be finalized by
2019. There are significant outstanding regulatory and technical issues that must be resolved
prior to the finalization of many of the changes proposed in the REGS Rule. Even if this rule
were to be finalized, parties intending to use the new pathways or regulatory provisions would
have to complete a registration process with EPA prior to producing RIN generating biofuel.
Finally, it is unlikely that the cellulosic biofuel volumes that the commenter suggested could be
produced in the next 3-5 years would be produced in 2019, as we expect that the vast majority of
this production is likely to occur in the later years.
Comment:
A commenter stated that EPA's cellulosic biofuel projection was too high, and that EPA should
err on the side of caution in establishing the cellulosic biofuel volume for 2019.
Response:
As discussed throughout Section III of the final rule and Section 3 of this document, we believe
our projection of cellulosic biofuel is a neutral projection of the volume of cellulosic biofuel
likely to be produced in 2019. We note that our projection of cellulosic biofuel production is
required to be neutral, and an intentionally conservative projection (erring on the side of caution)
would contradict the API ruling that our projection is to be a neutral aim at accuracy.
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4. Advanced Biofuel
4.1 Inability to Meet Statutory Targets
EPA did not receive any comments on this topic.
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4.2 Attainable and Reasonably Attainable Volumes of Advanced Biofuel
Commenters that provided comment on this topic include but are not limited to: 0535, 0620,
0672, and 1041.
Comment:
One commenter stated that the proposed advanced biofuel volume requirement of 4.88 billion
gallons could not be met with renewable fuel used in 2019 since it is 590 million gallons higher
than the 2018 standard. To comply, obligated parties will need to use carryover RINs.
Response:
The commenter did not directly address the assessment of attainable and reasonably attainable
supply that was provided in the proposal, but instead relied on the implication that an increase
over the previous year's requirement, which they deem to be aggressive, is inappropriate. While
they do cite a projected shortfall in the supply of BBD in the early part of 2018, our assessment
of 2018 supply (including additional data beyond that cited by the commenter) indicates that the
market is on target to reach the 2018 requirements. Given the increase in BBD use in 2018
compared to 2017, and historical annual rates of increase, we continue to believe that 2.8 billion
gallons of BBD can be attained in 2019. In combination with cellulosic biofuel and projected
volumes of imported sugarcane ethanol and other advanced biofuel, we continue to believe that
4.92 billion gallons of advanced biofuel is an appropriate volume requirement for 2019 that can
be attained without the need for carryover RINs.
Comment:
One commenter stated that EPA's proposed estimate of reasonably attainable volumes of
advanced biofuel for 2019 did not adequately account for the high cost and uncertainty related to
imported biofuels.
Response:
The proposal explicitly took into account the uncertainty associated with imports of advanced
sugarcane ethanol in making a proposed determination that 100 million gallons was reasonably
attainable in 2019. While in recent years actual import volumes have been below this level, in the
past they have been much higher. We indicated that our proposal took into account both the
historical variability and the fact that the higher proposed advanced biofuel volume requirement
would create some incentive for increased imports in 2019. The commenter did not provide any
credible argument for why the proposed assessment was inadequate. Further explanation of our
assessment of imported sugarcane ethanol, including consideration of trends in 2018, can be
found in Section IV.B.l of the final rule.
The proposal included a review of historical imports of BBD in its assessment of the volumes
that were attainable in 2019, and in this context the variability in imports was explicitly
acknowledged:
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Volumes of imported advanced biodiesel and renewable diesel have varied
significantly from year to year, as they are impacted both by domestic and foreign
policies, as well as many economic factors. (83 FR 32043, July 10, 2018)
We accounted for the variability in BBD imports in the context of our review of the total
volumes of BBD actually used in previous years, as total use is a function of domestic
production, imports, and exports. Again, the commenter did not provide any credible argument
for why the proposed assessment was inadequate.
While we did not assess costs for imports independently from the costs for domestic BBD, we
did consider costs in our proposed determination of 4.88 billion gallons of advanced biofuel.
More specifically, we discussed the role of costs in our proposed determination to use the full
reduction available under the cellulosic waiver authority. However, we did not find a reasonable
basis for an additional reduction to the advanced biofuel volume requirement using the severe
economic harm prong of the general waiver authority as discussed further in Section 2.1.2 of this
document.
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4.2.1 Imported Sugarcane Ethanol
Commenters that provided comment on this topic include but are not limited to: 1196, 1267, and
1286.
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 likely a factor in the volume of ethanol that Brazil exports
to the U.S., and the RIN value is affected by the advanced biofuel standard. However, recent data
on imports of sugarcane ethanol into the U.S. suggest that the correlation between ethanol
imports and the applicable standards under the RFS program is uncertain and 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 both 2016 and 2017, EPA assumed that 200 million gallons of sugarcane
ethanol would be imported. In reality, only 34 million gallons was imported in 2016 and only 77
million gallons was imported in 2017, and the majority of these volumes were imported into
California presumably to fulfill the requirements of the LCFS program.66 We note that total
ethanol exports from Brazil decreased between 2015 and 2017 despite increasing international
demand and increasing advanced biofuel requirements under the RFS program.67 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.
Comment:
One commenter stated that the advanced biofuel standard should be set at 10.5 billion gallons,
and that Brazil would respond by significantly increasing its exports of sugarcane ethanol to the
U.S.
Response:
As discussed in Section IV of the final rule, we believe that 4.92 billion gallons of advanced
biofuel is attainable in 2019, though not reasonably attainable; we expect the market to respond
with some degree of feedstock and/or foreign advanced biofuel diversion to meet it. An
advanced biofuel volume requirement of 10.5 billion gallons would be more than double the
level we are finalizing and would require an extreme assortment of changes to both domestic and
international biofuel production and distribution to be attained, if indeed it is even possible. Even
66 "Ethanol imports into California," available in docket EPA-HQ-OAR-2018-0167.
67 "UNICA data on ethanol exports 9-18-18," available in docket EPA-HQ-OAR-2018-0167.
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if all domestic biodiesel production capacity were fully operational, providing 4.1 billion gallons
or 6.4 billion RINs (as discussed in Section IV.B.2 of the final rule), and even if the maximum
historical Brazilian exports of about 1.35 billion gallons (achieved in year 2008) were sent
entirely to the U.S. in 2019, it is extremely unlikely that 10.5 billion gallons could be achieved.
Moreover, such volumes would be accompanied by significant and disruptive shifts in food/feed
markets. Given the poor response of Brazilian ethanol imports to the RFS volume requirements
in previous years as discussed in the previous response, we do not believe that sufficient
Brazilian ethanol could be imported to permit 10.5 billion gallons of advanced biofuel to be
reached in 2019.
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 2019.
This same commenter stated that 2 billion gallons of sugarcane ethanol was achievable in 2019
based on the imported volumes in September 2008.
Response:
As discussed in previous annual standard-setting rules, 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 2019; 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
2019, 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.
We do not believe that extrapolating a single month's import volume from ten years ago to a full
year of imports for 2019 is reasonable. The market conditions in the U.S. and Brazil with regard
to ethanol production and use were significantly different in 2008 compared to today, and
international demand for ethanol has increased significantly during that time as well. Ethanol
exports from Brazil are also seasonal due to the harvest cycle, with September being the month
of highest historical exports.68 This fact similarly makes it inappropriate to extrapolate from
September exports to total annual exports.
A comparison of past projections of potential imports of sugarcane ethanol from stakeholders
with actual imports highlights the fact that those projections have been significantly
overestimated. For instance, in response to the proposal for the 2016 standards, UNICA
suggested that Brazil could supply 2 billion gallons in 2016.69 In reality, only 36 million gallons
were exported to the U.S. In response to the proposal for the 2017 standards, UNICA suggested
68 "UNICA data on ethanol exports 9-18-18," available in docket EPA-HQ-OAR-2018-0167.
69 "Comments from UNICA on 2014-2016 proposal," available in docket EPA-HQ-OAR-2018-0167.
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that Brazil could supply up to 1 billion gallons in 2017. In reality, only 77 million gallons were
exported to the U.S.70 This commenter has not provided any information indicating why its
projections for 2019 would be more accurate than in past years, and has not pointed to any new
circumstance expected to occur in 2019 that would increase imports of sugarcane ethanol into the
U.S.
Finally, we note that we have set the volume requirement for advanced biofuel in previous years
with the intention of providing opportunities for advanced biofuels such as imported sugarcane
ethanol to help meet the applicable standards. The non-BBD, non-cellulosic portion of the
advanced volume requirement was 530, 969, and 852 million gallons in years 2016, 2017, and
2018, respectively. Nevertheless, imports of sugarcane ethanol filled only a small portion of that
opportunity.
Comment:
One commenter stated that some ethanol is imported into the U.S. for the production of non-fuel
ethyl tertiary butyl ether (ETBE). Since this ethanol is already being imported into the U.S., it
could easily be diverted to help meet the advanced biofuel volume requirement.
Response:
The fact that sugarcane ethanol is being imported for the production of non-fuel ETBE does not
mean that it is available for use as an advanced biofuel under the RFS program since it is
fulfilling an existing market for ETBE. Diversion of imported sugarcane ethanol away from this
market would most likely be disruptive and costly to accommodate, and these facts create
resistance to such diversion. More importantly, the commenter provided no information to
indicate that such diversion has occurred in the past despite the fact that the advanced biofuel
standard has increased over time.
Comment:
One commenter stated that the data cited by EPA on sugar demand and its potential impacts on
ethanol production in Brazil was outdated, and that more recent data demonstrates that sugar
demand and prices will not hinder ethanol exports from Brazil to the U.S.
Response:
In May 2018, USD A reported that worldwide sugar production had recently increased in the
2017/2018 and 2018/2019 marketing years in comparison to previous years.71 Combined with
larger sugar stocks, the result has been lower worldwide sugar prices in 2017 and 2018 in
comparison to 2016.72 However, information from UNICA indicates only a moderate increase of
about 2% in ethanol production for 2017/2018 in comparison to 2016/2017.73 Moreover, total
70 "Comments from UNICA on 2017 proposal," available in docket EPA-HQ-OAR-2018-0167.
71 "Sugar - World Markets and Trade May 2018," USD A, available in docket EPA-HQ-OAR-2018-0167.
72 "Commodity Market Outlook - April 2018," World Bank Group, available in docket EPA-HQ-OAR-2018-0167.
73 "UNICA data on ethanol production 9-18-18," available in docket EPA-HQ-OAR-2018-0167.
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sugarcane ethanol production in 2017/2018 is lower than levels in both 2014/2015 and
2015/2016. Based on this more recent information, there is no indication that exports of
sugarcane ethanol from Brazil to the U.S. in 2019 are likely to be substantially higher than they
have been in recent years.
Comment:
One commenter noted that the implied volume requirement for non-cellulosic, non-BBD
advanced biofuel in the proposal was 1.34 billion gallons. Meeting this volume with imported
sugarcane ethanol would require volumes nearly twice that of the historical high of 681 million
gallons in 2006, and many times higher than imports in more recent years. Given the constraints
associated with the E10 blendwall, imports of sugarcane ethanol would also displace corn-
ethanol.
Response:
As discussed in Section VI of the final rule, we believe that BBD use in excess of the BBD
volume requirement is likely to fill most of the need for advanced biofuel that is not required to
be cellulosic biofuel or BBD. We have determined that the necessary volumes of BBD are
attainable for the advanced biofuel volume requirement that we are finalizing.
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4.2.2 Biodiesel and Renewable Diesel
4.2.2.1 General Comments on Advanced Biodiesel and Renewable Diesel
Commenters that provided comment on this topic include but are not limited to: 0531, 0672,
1041, 1197, 1267, and 1277.
Comment:
A commenter supported EPA's concerns with regards to the potential negative impacts related
with feedstock diversion and substitution. The commenter stated that any volume of advanced
biodiesel and renewable diesel above 2.03 billion gallons (including the proposed volumes for
BBD and advanced biofuel) would result in some degree of feedstock diversion and substitution.
Response:
EPA shares the commenter's concerns over the potential negative impacts related to feedstock
diversion or substitution. However, as discussed in greater detail in Section IV of the final rule,
we believe a volume of 2.61 billion gallons of advanced biodiesel and renewable diesel is
reasonably attainable in 2019. We believe this commenter significantly under-estimates the
domestic production of these fuels in 2018, as well as the current and projected volumes of
imported biodiesel and renewable diesel. The biggest difference between the commenter's
calculations of the volume above which feedstock diversion was likely to occur and EPA's
"reasonably attainable volume" was the commenter did not include any volume of imported
renewable diesel, nor did the commenter account for growth in the volume of imported biodiesel
from countries other than Argentina and Indonesia observed over the past year. The lack of
inclusion of imported renewable diesel appears to be an oversight on the part of the commenter,
as the commenter used EIA data for imports of "biomass-based diesel" in 2017 from countries
other than Argentina and Indonesia to calculate a volume of imported biodiesel. However, unlike
EPA, EIA does not include renewable diesel in their "biomass-based diesel" category, instead
using the term "other renewable diesel" for this fuel. The commenter further assumed that
biodiesel imports in 2018 and 2019 would be equal to biodiesel imports from countries other
than Argentina and Indonesia in 2017. As discussed in Section IV of the final rule, this has not
been the case, as imports from other countries have been increasing since the tariffs on biodiesel
from Argentina and Indonesia were announced. The commenter also does not include increases
in non-food grade corn oil in their estimate, and projects increasing consumption of vegetable
oils in the food market. While these decisions differ from those made by EPA, they do have a
much smaller impact on the calculated "reasonably attainable" volume of advanced biodiesel and
renewable diesel.
Comment:
A commenter stated that advanced biodiesel and renewable diesel production is only on pace to
reach 1.94 billion gallons in 2018. The commenter stated that EPA should reduce the required
volume of advanced biofuel accordingly, accounting for no more than 2.85 billion RINs from
advanced biodiesel and renewable diesel in 2019.
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Response:
The commenter takes an overly pessimistic view of both the potential for domestic production of
advanced biodiesel and renewable diesel, as well as potential imports of these fuels. Based on
data through September 2018, we currently expect domestic production of advanced biodiesel
and renewable diesel to reach approximately 2.15 billion gallons in 2018, rather than the 1.94
billion gallons projected by the commenter. Similarly, we currently project imports of advanced
biodiesel and renewable diesel to reach approximately 0.37 billion gallons, none of which is
expected to be from biodiesel imported from Argentina and Indonesia. Even assuming advanced
biodiesel and renewable diesel exports remain at 150 million gallons, the supply of advanced
biodiesel and renewable diesel (including both domestic production and imports) would have to
increase by approximately 0.43 billion gallons from 2018 to 2019 to reach the volume projected
for 2019. As discussed in greater detail in Section IV.B.3 of the final rule, we believe these
volumes are attainable. We further note that reductions to the advanced biofuel volume below
the level in this final rule would require the use additional waiver authorities (beyond the
cellulosic waiver authority), and we do not believe that exercise of these authorities to further
reduce volumes is warranted (see Section 2.1 of this document for a further discussion of the
general waiver authority).
Comment:
A commenter characterized the level of advanced biodiesel and renewable diesel EPA projected
would be needed to meet the proposed advanced biofuel requirement (2.8 billion gallons) as
unattainable. The commenter stated that reaching this volume of advanced biodiesel and
renewable diesel would require 100% utilization of domestic capacity for these fuels and zero
exports. The commenter further stated that it was irrational for EPA to count on significantly
higher production of advanced biodiesel and renewable diesel than in previous years and no
exports of these fuels. Finally, they stated that EPA could not finalize the proposed volumes if
there were substantial doubt as to whether the volumes were reasonably attainable.
Response:
As discussed in further detail in Section IV of the final rule, EPA has determined that the volume
of advanced biofuel in this final rule (4.92 billion gallons), as well as the volume of advanced
biodiesel and renewable diesel projected to be used to meet this volume (2.8 billion gallons) are
attainable. Contrary to the commenters statements, domestic production of biodiesel and
renewable diesel is projected to increase significantly from 2017 to 2018, based on data through
September 2018. We believe it could increase by a similar amount from 2018 to 2019. Doing so
would not result in a 100% utilization rate of existing biodiesel and renewable diesel facilities
(see Section 4.2.2.2 of this document for a further discussion of the domestic production capacity
for advanced biodiesel and renewable diesel), nor would it require that exports of these fuels
cease. We also note that while our projection of the reasonably attainable volume of advanced
biodiesel and renewable diesel (2.61 billion gallons) is lower than the volume of these fuels
projected to be supplied to meet the advanced biofuel volume for 2019 (2.8 billion gallons), we
have concluded that 2.8 billion gallons of these fuels is attainable. We further note that
reductions to the advanced biofuel volume below the level in this final rule would require the use
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of additional waiver authorities (beyond the cellulosic waiver authority), and we do not believe
that exercise of these authorities to further reduce volumes is warranted (see Section 2.1 of this
document for a further discussion of the general waiver authority).
Comment:
A commenter stated that EPA's proposed advanced biofuel volume equated to a de facto 3.25
billion gallon mandate for advanced biodiesel and renewable diesel.
Response:
The commenter's statement assumes that the entire proposed volume for advanced biofuel (4.88
billion gallons) is satisfied with advanced biodiesel and renewable diesel. This is unreasonable,
as it assumes no cellulosic biofuel or other advanced biofuels are supplied. As discussed in
Section IV of the final rule, EPA projects that 2.8 billion gallons of advanced biodiesel and
renewable diesel will be used to meet the advanced biofuel volume.
Comment:
A commenter stated that the proposed advanced biofuel volumes amounted to a de facto mandate
for imported biodiesel and renewable diesel, as domestic production could not reach the levels
projected to be used to meet the advanced biofuel volume.
Response:
We disagree that the advanced biofuel volume in this final rule is a de facto mandate for
imported biodiesel and renewable diesel. As discussed in Section IV of the final rule, sufficient
domestic production capacity and feedstocks exist to enable domestic producers of biodiesel and
renewable diesel to supply the volume of these fuels projected to be used to meet the advanced
biofuel standard (2.8 billion gallons). While we expect that some volume of imported advanced
biodiesel and renewable diesel will be used in 2019, this is likely due to the lower cost of
importing these fuels rather than an inability for the domestic producers to supply the projected
volumes. We also note that imported biofuels, including advanced biodiesel and renewable
diesel, increase the energy security of the U.S., which is a goal of the RFS program.
Comment:
A commenter stated that the most viable option to meet the "other advanced" volume (the
difference between the advanced biofuel volume and the cellulosic biofuel and BBD volumes) is
additional BBD.
Response:
EPA's projections of the types of advanced biofuels most likely to be used to meet the advanced
biofuel volume can be found in Table IV.B.3-1 in the final rule. While we expect the majority of
the "other advanced" volume to be met with advanced biodiesel and renewable diesel, we also
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project smaller but significant volumes of other advanced biofuels, including sugarcane ethanol,
naphtha, and domestic advanced ethanol, to be supplied in 2019.
Comment:
A commenter stated that data suggested the market was on track to supply the required volume
of advanced biofuel for 2018.
Response:
EPA data supports the commenter's statement that the use of advanced biofuel as transportation
fuel, heating oil, or jet fuel in the U.S. is on track to meet the required volume for 2018.
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4.2.2.2 Domestic Production Capacity
Commenters that provided comment on this topic include but are not limited to: 0530, 0532,
0711, and 1286.
Comment:
A commenter stated that the production capacity for biodiesel and renewable diesel is sufficient
to produce sufficient volumes of these fuels to enable a higher volume of advanced biofuel than
proposed (4.88 billion gallons).
Response:
We acknowledge that the production capacity of advanced biodiesel and renewable diesel
exceeds the volume of these fuels we project will be used to meet the advanced biofuel volume
in this final rule. However, as discussed in further detail in Section IV of the final rule, EPA
believes that other factors, such as the availability of feedstocks and the cost of advanced
biofuels should also be considered when establishing the advanced biofuel volume.
Comment:
Multiple commenters stated that production capacity is not a limiting factor to the production of
advanced biodiesel and renewable diesel. Some also noted that the domestic production capacity
for biodiesel and renewable diesel is increasing. One commenter stated that they expected the
production capacity for renewable diesel to expand by to 285 million gallons in 2018, and to 515
million gallons by 2020/2021. Another commenter provided a list of anticipated biodiesel
production capacity expansions.
Response:
We recognize the potential for the expansion of biodiesel and renewable diesel production
capacity in future years. As discussed in greater detail in Section IV of the final rule, we do not
expect the production capacity of these fuels to limit their production in 2019 or 2020.
Comment:
A commenter stated that EPA should rely on EIA's estimate of domestic biodiesel production
capacity (2.4 billion gallons).
Response:
We do not believe it would be appropriate to use EIA's estimate of biodiesel production capacity
as the limit of the volume of advanced biodiesel and renewable diesel that can be produced
domestically. First, this estimate does not include the production capacity of renewable diesel
production facilities, whether these are stand-alone production facilities or facilities that co-
process renewable and petroleum based feedstocks. Second EIA's estimate includes only
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facilities that produced biodiesel in a given month. We do not believe it is appropriate to
categorically exclude biodiesel facilities that did not produce in a given month from our
calculation of the domestic production capacity. We finally note that EIA's estimate does not
include facilities that may begin operating in later in 2018 or in 2019. Regardless, as discussed
above, we believe that production capacity is only one of many factors that is important in
assessing potential volumes.
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4.2.2.3 Potential Imports
Commenters that provided comment on this topic include but are not limited to: 0530, 0531,
0662, 0672, 1277, and 1286.
Comment:
A commenter suggested that EPA should expect imports of 164 million gallons of advanced
biodiesel and 222 million gallons of renewable diesel based on data through June 2018.
Response:
These import volumes are very similar to those projected by EPA for 2018 based on data through
September 2018 (discussed in greater detail in Section IV of the final rule). We note that we
expect imports of these fuels to continue to increase through 2019.
Comment:
A commenter stated that they expect only 102 million gallons of imported BBD in 2018 and
2019 due to tariffs of biodiesel from Argentina and Indonesia. Another commenter stated that
imports of biodiesel are less than half what they were in 2017, and that EPA should therefore not
include any imports of biodiesel when determining the advanced biofuel volume.
Response:
In projecting advanced biodiesel and renewable diesel imports for 2018 and 2019 the commenter
relied on import data from EIA for imports for countries other than Argentina and Indonesia. The
commenter did not account for imported volumes of advanced renewable diesel, nor did the
commenter account for the potential for growth in imports from countries not impacted by the
tariffs. EPA's projection of the volume of advanced biodiesel and renewable diesel for 2018 and
2019, which are discussed in greater detail in Section IV of the final rule, account for these
factors. As a result, they are significantly higher than the volume projected by this commenter.
For similar reasons, we do not believe it would be appropriate to ignore the potential for
imported volumes of advanced biodiesel and renewable diesel when determining the advanced
biofuel volume for 2019.
Comment:
A commenter stated that the lower volumes of imported biodiesel and renewable diesel (due to
tariffs on biodiesel imported from Argentina and Indonesia) could result in distribution
challenges due to the fact that imported biodiesel and renewable diesel are generally supplied
closer to population and demand centers on the coasts, while much of the domestic biodiesel and
renewable diesel production is located farther these population and demand centers.
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Response:
We recognize that changing sources of biodiesel and renewable diesel to include greater volumes
domestically produced fuels and lower volumes of imported fuels has an impact on the
distribution and use of these fuels. However, based on the available data through September
2018 these potential distribution challenges do not appear to be limiting the domestic production
and use of biodiesel and renewable diesel. The increase in the volume of domestic biodiesel and
renewable diesel that EPA projects will be used to meet the advanced biofuel in 2019 (300
million gallons) is similar to the projected increase in the supply of these fuels from 2017 to
2018 based on data through September 2018, and significantly lower than the one-year increases
observed in some previous years. We therefore do not expect that the distribution of biodiesel
and renewable diesel will constrain the supply of these fuels in 2019 (see Section IV of the final
rule for a further discussion of the projected increase in these fuels in 2019 relative to observed
increases in previous years).
Comment:
A commenter stated that tariffs on imported biodiesel do not constrain the potential supply of
imported biofuels, rather they simply impact the price. Another commenter similarly noted that
these tariffs have no impact on the ability for the domestic industry to increase the supply of
advanced biodiesel and renewable diesel.
Response:
We recognize that, strictly speaking, the tariffs do not impact the availability of biofuel, as the
price for these fuels could rise high enough to overcome the impact of the tariffs. However, we
note that increasing the supply of biofuel in this manner (importing biofuels at elevated prices
due to the tariffs) does significantly increase the cost of these fuels. In determining the advanced
biofuel volume for 2019, EPA has considered the relatively high cost of advanced biofuels.
While biodiesel imports from Argentina and Indonesia may technically be available, their cost
would be significantly higher than the cost projected by EPA in Section V of the final rule. We
therefore do not believe it would be reasonable to increase the advanced biofuel volume for 2019
on the basis of these fuels. We do, however, believe that domestic production of biodiesel and
renewable diesel, as well as imports of these fuels from countries not effected by the tariffs, can
increase in 2018 and 2019, and likely will do so in response to the advanced biofuel volume
established in this rule (see Section IV for a further discussion of EPA's projections of advanced
biodiesel and renewable diesel domestic production and imports in 2018 and 2019).
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4.2.2.4 Availability of Advanced Biodiesel and Renewable Diesel Feedstocks
Commenters that provided comment on this topic include but are not limited to: 0221, 0389,
0522, 0530, 0531, 0535, 0539, 0591, 0619, 0620, 0660, 0662, 0664, 0711, 1033, 1036, 1039,
1202, 1277, and 1286.
Comment:
A commenter stated that in recent years prices for many agricultural commodities have fallen,
while production of these agricultural commodities has increased and idled cropland has
increased. The commenter stated that increasing biofuel production could increase demand for
crops and lead to increased crop production and higher prices for agricultural commodities.
Response:
EPA is aware of the trends discussed by the commenter; however, we note that these trends have
occurred during a time of significant expansion of biofuel production, and crop production and
agricultural commodity prices are a function of many different factors. As discussed in greater
detail in this section, and in a memorandum to the docket,74 the vegetable oils used for advanced
biofuel production are generally byproducts and/or coproducts of crops primarily grown for other
markets (such as livestock feed). We therefore do not expect that a higher advanced biofuel
volume would necessarily result in increased production of oilseeds such as soybeans or canola.
Comment:
Multiple commenters noted that China has recently imposed tariffs on soybeans produced in the
U.S. Many suggested that soybean exports were likely to decrease as a result of these tariffs, and
that these soybeans could be used to produce additional volumes of biodiesel.
Response:
Our consideration of the expected impacts of these tariffs on feedstocks for advanced biodiesel
and renewable diesel can be found in Section IV of the final rule.
Comment:
A commenter stated that biodiesel production does not rely only on soybean oil or canola oil, and
that EPA should consider the expected increase in non-vegetable oil feedstock for biodiesel
production.
74 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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Response:
EPA's projection of the reasonably attainable volume of advanced biodiesel and renewable
diesel in 2019 was not based solely on vegetable oils, but also considered potential increases in
other feedstocks such as distillers corn oil and waste oils and greases. Our projection of the
reasonably attainable volume of these fuels includes increased production of distillers corn oil.
As discussed in further detail in Section IV of the final rule, while we acknowledge that
additional volumes of waste oils and greases could theoretically be collected, the projected prices
for vegetable oils suggests that this is unlikely in 2019. This conclusion is further supported by
the results of the WAEES model.
Comment:
Multiple commenters stated that soybean production is driven by demand for protein and/or
animal feed. Many stated that increased demand for vegetable oil to produce biodiesel and
renewable diesel would not lead to additional production of soybeans.
Response:
As discussed in Section IV of the final rule and in a memorandum to the docket,75 EPA has
concluded that increased demand for vegetable oils are unlikely to lead to greater production of
advanced biofuel feedstocks, such as soybeans and canola.
Comment:
Many commenters stated that the production of advanced feedstocks is projected to grow.
Multiple commenters stated that the global demand for protein is expected to increase in future
years, and that this would lead to the increased production of soybeans and the increased
availability of soybean oil that could be used to produce higher volumes of biodiesel and
renewable diesel. Some commenters stated that yields of oilseed crops are expected to increase.
Other commenters stated that USD A currently projects significant growth in the stocks of all
major crops used for biofuels (including corn and soybeans). Commenters also noted increased
vegetable oil extraction and waste oil and grease collection as potential supplies of advanced
feedstocks.
Response:
As discussed in greater detail in Section IV of the final rule, EPA has used projections from
USDA's most recent WASDE report (September 2018) to project the increase in vegetable oil
production in the U.S. in 2019. We believe this report reasonably projects the likely increases in
vegetable oil production, which could be used as a feedstock for producing biodiesel and
renewable diesel. The WASDE report does project increasing production of soybean oil in the
U.S. in 2019, and we have reflected this projected increase in our assessment of the reasonably
attainable volume of advanced biodiesel and renewable diesel for 2019. Increasing the quantity
75 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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of soybean oil that is used to produce biodiesel and renewable diesel at a rate greater than the
increase in vegetable oil production is highly likely to result in the diversion of these feedstocks
from other industries that are currently using them. While we recognize that additional volumes
of waste oils and greases (such as used cooking oil) could theoretically be collected, we do not
believe it is likely that significantly higher volumes of these feedstocks will be collected, as
prices for vegetable oils (which directly impact the price for products such as yellow grease and
used cooking oil) are expected to be lower in 2019 than in recent years.
Comment:
Multiple commenters noted that soybean oil prices are currently lower than in recent years.
These commenters state that the declining prices for soybean oil demonstrate that production of
biodiesel and renewable diesel is not causing problematic shortages in the feedstock markets.
Response:
We recognize that prices for soybean oil, as well as other vegetable oils and feedstocks that can
be used to produce biodiesel and renewable diesel are lower than in previous years. This price
reduction appears to be primarily the result of a significant increase in the production of
vegetable oils over this time. While production of soybean oil and other advanced feedstocks
have increased in recent years, production of palm oil has also significantly increased over this
time period. Since, as noted by several commenters and discussed in Section IV of the final rule
and in a memorandum to the docket,76 vegetable oils that can be used to produce advanced
biodiesel and renewable diesel are generally a byproduct or coproduct of crops primarily grown
for other purposes, increased demand for vegetable oil is unlikely to result in the increased
production of advanced feedstocks. Palm oil, conversely, is the primary product of palm
plantations and generally has a lower cost of production than other vegetable oils. Thus, while
increases in the production of biodiesel and renewable diesel beyond the levels in this final rule
may not cause problematic shortages of vegetable oils, they would likely result in increased
global palm oil production.77 We further note that despite these price decreases, biodiesel and
renewable diesel continue to have a significantly higher cost than petroleum based diesel.
Comment:
Multiple commenters stated that the increase in the amount of soybean oil used to produce
biodiesel and renewable diesel was not causing a diversion of soybean oil from other uses.
Multiple commenters also argued that regulation of hydrogenated oils by the FDA was causing a
decrease in the quantity of soybean oil used in food markets, and that biodiesel and renewable
diesel was providing a market for these oils.
76 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
77 If biodiesel and renewable diesel production ultimately results in the increased production of palm oil, it is
expected to have fewer environmental benefits. See the draft GHG assessment of palm oil biodiesel and renewable
diesel at 77 FR 4300 (January 27, 2012).
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Response:
We recognize that the FDA regulations, along with broader market factors resulted in significant
decreases in the quantity of soybean oil used in food markets from 2005 to 2012. However,
comments submitted to EPA suggests that while the use of soybean oil in food markets in the
U.S. declined from 2005 through 2012, use of soybean oil in food markets was fairly consistent
from 2012 through 2018, and is expected to increase in future years.78 The FDA regulations are
therefore unlikely to result in a decrease in the use of soybean oil in the U.S. food market (and
subsequent increase in the amount of soybean oil that could be used to produce biodiesel and
renewable diesel) in 2019.
Comment:
A commenter stated that history has shown that increasing demand for advanced feedstocks has
resulted in innovation, and the availability of cheaper feedstocks that are easier to obtain. The
commenter cites the increased production of distillers corn oil as an example.
Response:
Production of distillers corn oil has increased in recent years, as noted by the commenter, and
this feedstock has generally been cheaper than soybean oil, which is the predominant feedstock
used to produce biodiesel and renewable diesel in the U.S. However, we do not believe that this
increase in distillers corn oil production is exclusively, or even primarily, the result of demand
for advanced biodiesel and renewable diesel driven by the RFS program. Rather, the increase in
distillers corn oil production was the result of increasing production of corn ethanol in the U.S.,
combined with the development of cost effective technologies to recover distillers corn oil from
the distillers grain coproducts produced from these corn ethanol production facilities. The
development of this extraction technology was driven by the economic incentives to obtain the
maximum value for the coproducts from these facilities. While the production of advanced
biodiesel and renewable diesel likely contributed to the demand for distillers corn oil, other
industries, such as the livestock feed and oleochemical industries, likely would have provided an
incentive for the increased production of distillers corn oil in the absence of demand from the
biodiesel and renewable diesel industries. Finally, we note that while there may be a few
exceptions that are the result of local market conditions, it is reasonable to expect that any
industry, including the biodiesel and renewable diesel industry, will first use the cheapest
available feedstocks, and that increased production will therefore result in higher marginal
prices. Thus, higher production volumes of biodiesel and renewable diesel would generally
require the use of more expensive feedstocks and/or processing technologies. The commenter
has not presented compelling evidence as to why this general economic principle would not
apply to biodiesel and renewable diesel.
78 See NBB comments on the 2019 proposal (Docket Item No. EPA-HQ-OAR-2018-0167-0711 Attachment 3).
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Comment:
A commenter stated that while feedstock switching may impact the prices of feedstocks, it does
not impact the supply of feedstocks that could be used to produce advanced biodiesel and
renewable diesel.
Response:
We recognize that concerns over the impacts associated with feedstock switching do not impact
the total quantity of feedstocks that could theoretically be used to produce advanced biodiesel
and renewable diesel. However, as discussed in greater detail in Section IV of the final rule,
producing advanced biodiesel and renewable diesel from feedstocks that are diverted from other
uses not only has potentially higher costs than the feedstocks currently being used to produce
biodiesel and renewable diesel, but also is likely to have lesser environmental benefits than fuels
produced from feedstocks that are coproducts or byproducts of other industries. These are
appropriate factors for EPA to consider in determining the extent to which to use our cellulosic
waiver authority to reduce the advanced biofuel volume for 2019.
Comment:
A commenter stated that EPA's proposed advanced biofuel volume, along with the tariffs on
imported biodiesel from Argentina and Indonesia, would result in greater use of domestic
feedstocks to produce biodiesel and renewable diesel.
Response:
We acknowledge that the increase in the advanced biodiesel volume for 2019 will likely result in
an increased use of domestic feedstocks, such as vegetable oils and waste oils and greases, that
can be used to produce biodiesel and renewable diesel. We also expect that imports of biodiesel
and renewable diesel from countries not impacted by these tariffs will increase. We note that the
market is currently on track to meet the volume of advanced biodiesel and renewable diesel
projected to be used to meet the advanced biofuel volume in 2018 without any imported
biodiesel from Argentina or Indonesia. As further discussed in Section IV of the final rule, much
of the expected increase in the use of feedstocks for advanced biodiesel and renewable diesel
production is expected to be supplied by increased production and/or recovery of domestic
feedstocks.
Comment:
A commenter raised concern about the use of distillers corn oil as a biodiesel feedstock, stating
that the extraction of distillers corn oil for use as a feedstock for biodiesel and renewable diesel
made the distillers grains less viable as feed for broilers, and thus had a negative impact on the
poultry industry. Another commenter similarly requested that EPA not include increased
distillers corn oil in our projection of the reasonably attainable volume of advanced biodiesel and
renewable diesel, since for some types of livestock, additional sources of energy would have to
be supplied if distillers corn oil was extracted from distillers grains. A third commenter stated
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that removing distillers corn oil from distillers grains only changes its nutritional profile and
depending on the species to which the distillers grain is fed it may increase the digestibility of
this feed.
Response:
We recognize that the extraction of corn oil from distillers grains impacts the nutritional profile
of the distillers grain as animal feed, and that the impact of these changes can vary by industry. It
is likely that distillers grains from which oil has been extracted will be used to feed animals
where the lower energy content of the de-oiled distillers grains has a positive impact, or where
any negative impact is minimal. We note, however, that our projected increase in the use of
distillers corn oil for animal feed in 2019 is relatively small (15 million gallons). Further, the
extraction of distillers corn oil would likely increase regardless of advanced biofuel volumes for
2019 as the extraction of distillers corn oil is primarily driven by other economic factors, such as
corn ethanol producers seeking to produce high value co-products and worldwide demand for
corn ethanol in excess of RFS volumes. In sum, we do not believe that the advanced biofuel
volume for 2019 will harm the livestock industry due to its potential effects on the distillers corn
oil market.
Comment:
A commenter stated that increasing ethanol production would lead to an increase in the
availability of distillers corn oil in future years.
Response:
EPA recognizes that increasing corn ethanol production would likely lead to an increase in the
availability of distillers corn oil, however we do not expect that higher RFS standards would
result in higher domestic corn ethanol production. Corn ethanol production in the U.S. currently
exceeds the implied volume of conventional biofuel in this final rule (15 billion gallons) and is
driven by demand for ethanol as an economical blending component in E10 blends and demand
for ethanol in the export market. We expect a small increase in the production of distillers corn
oil in 2019 due to relatively small increases in the adoption rate of corn oil extraction technology
and an increase in the yield of distillers corn oil extracted at existing facilities as the technology
improves. Additional growth due to expansion in corn ethanol production is possible but would
be driven by export demand apart from the RFS.
Comment:
A commenter stated that EPA's concerns about feedstock diversion were unfounded, and that
growth in the supplies of potential advanced biodiesel and renewable diesel feedstocks will
outpace demand for these feedstocks in 2019.
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Response:
As discussed in greater detail in Section IV of the final rule, EPA has projected the growth of
various advanced biodiesel and renewable diesel feedstocks, including vegetable oil, distillers
corn oil, and waste oils and greases. The data reviewed by EPA does not support the
commenter's statement that there will be a significant over-supply of these feedstocks in 2019.
Comment:
A commenter stated that in EPA's assessment of the reasonably attainable volume of advanced
biodiesel and renewable diesel, EPA had not accounted for an increase in the quantity of
vegetable oils used in food. Other commenters stated that EPA had not accounted for projected
increases in animal fats due to increased meat consumption.
Response:
We recognize that our projection of the reasonably attainable volume of advanced biodiesel and
renewable diesel does not account for every factor that could impact the availability of
feedstocks that could be used to produce advanced biodiesel and renewable diesel. We have
attempted to account for the primary sources of feedstock, including production of virgin
vegetable oils and increased production of distillers corn oil, and have generally assumed that
consumption of these feedstocks in markets other than renewable fuel will not change
appreciably from 2018 to 2019. We have also considered the likelihood of increased recovery of
waste fats, oils and greases and determined that this source of feedstock is unlikely to increase
appreciably in 2019. While there are factors that are not accounted for in our assessment, such as
those noted by commenters above, the impact these factors are expected to have on the total
availability of feedstocks that could be used to produce advanced biodiesel and renewable diesel
are highly uncertain and are expected to be small. We further note that some of these factors,
such as the potential for increased use of vegetable oils in the food market, are expected to
decrease the availability of feedstocks while others, such as increased availability of animal fats
due to increased meat consumption, are expected to increase the supply of feedstocks. On
balance, these factors are not expected to have a significant impact on our assessment of the
reasonably attainable volume of advanced biodiesel and renewable diesel, nor would a slightly
higher or lower estimate of the reasonably attainable volume of these fuels result in a different
advanced biofuel volume for 2019.
Comment:
Multiple commenters stated that the proposed advanced biofuel volume would have a number of
negative impacts, including increased imports of soybean and palm biodiesel, feedstock
switching leading to increased palm oil production, higher costs to obligated parties (which
would be passed on to consumers), and worse environmental results. Another commenter
supported EPA's statements that a large increase in the use of biodiesel would likely result in
significant displacement of existing feedstock uses.
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Response:
As discussed in Section IV of the final rule, EPA acknowledges that the advanced biofuel
volume in this final rule will likely result in some degree of feedstock switching, which could
lead to an increased demand for palm oil and/or petroleum products on other markets. We also
recognize that advanced biofuels, including advanced biodiesel and renewable diesel, have
significantly higher costs than the petroleum based fuels they replace, and therefore requiring
greater volumes of these fuels increases the cost of the RFS program to society. However, as
noted in the final rule, EPA has reduced the advanced biofuel volume for 2019 by the maximum
amount allowable using the cellulosic waiver authority. Further reductions would require the use
of an additional waiver authority. We do not believe the use of this authority to further reduce the
advanced biofuel (or total renewable fuel) volumes for 2019 is appropriate at this time (see
Section II of the final rule and Section 2 of this document for a further discussion of EPA's
waiver authorities).
Comment:
A commenter stated that EPA's concerns — that markets currently using feedstocks that could
be used to produce advanced biodiesel and renewable diesel would switch to using palm oil if
demand for these feedstocks in the biodiesel and renewable diesel industry increased — were not
supported. The commenter further stated that there was no evidence that increased advanced
biofuel production would lead to diminishing benefits.
Response:
EPA has not tracked the use of individual feedstocks year-by-year to determine the degree to
which other markets have switched from using advanced feedstocks as demand for these
feedstocks to produce biodiesel and renewable diesel has increased. However, we note that
imports of palm oil to the U.S. have increased dramatically in recent years, during the same time
period in which domestic consumption of advanced biodiesel and renewable diesel has also
increased dramatically. While there may be multiple reasons for the increase in palm oil imports,
including the FDA regulation of hydrogenated oils in food markets, this provides evidence that a
likely result of increasing demand for advanced feedstocks in the biodiesel and renewable diesel
industry can, and likely has, resulted in an increased use of palm oil in other markets. As noted in
Section IV of the final rule, advanced biodiesel and renewable diesel produced from feedstocks
that had previously been used in other industries are expected to have reduced benefits as these
industries rely on increasing volumes of palm oil.
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Palm Oil Imports (2000-2017)
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000 |
200,000 ¦ ¦ 1 1
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OOOOOOOOOO-^H^HtHtHtHtHtHtH
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rslfNfNfMfNfNrslfNfNfNfNfNfNfNfNfNrslfN
Source: USD A Foreign Agriculture Service
Comment:
A commenter stated that the global supply of vegetable oil, cited by EPA in the proposal, is not a
relevant factor to the advanced biofuel volume for 2019, as it is not practical for the global
vegetable oil production to be used to produce biodiesel.
Response:
The use of the entire global supply of vegetable oil to produce biodiesel and renewable diesel is
not feasible. Moreover, even if the entire supply could hypothetically be used to produce
biodiesel and renewable diesel, such production would have significant negative impacts. The
2019 rule volumes, however, require the use of only a small fraction of this global supply,
especially after accounting for the volumes of biodiesel and renewable diesel produced from
feedstocks other than virgin vegetable oils. As we explain in Section IV of the final rule, we
believe that this limited use is attainable. The significantly larger global supply only further
confirms that, with the right incentives in place, the advanced biofuel volume in this rule for
2019 is attainable.
Comment:
Multiple commenters stated that feedstock availability will not constrain biodiesel production.
Response:
As discussed in Section IV of the final rule, we have determined that there are sufficient
available feedstocks to produce the volume of advanced biodiesel and renewable diesel we have
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projected will be used to meet the advanced biofuel volume for 2019. We also recognize that
additional volumes of these fuels could be produced but are not requiring the use of additional
volumes of advanced biofuel due to concerns related to the high costs and the diminishing
benefits associated with increasing volumes of these fuels.
Comment:
One commenter claimed that higher biodiesel and renewable diesel requirements benefit the
livestock sector, as higher prices for vegetable oils such as soybean oil lead to lower livestock
feed prices.
Response:
Higher prices for soybean oil could lead to lower feed prices for the livestock sector or
alternatively could lead to higher prices for soybeans. Higher soybean oil prices, however, also
result in higher prices for other industries that use soybean oil as a feedstock, including the
biodiesel and renewable diesel industry. In light of these competing price impacts as well as the
potential adverse impacts of requiring higher volumes (discussed in further detail in Section IV
of the final rule), potentially lower livestock feed prices are not a sufficient basis for requiring
increased volumes of advanced biofuels in 2018.
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 2019. 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 2019.
Comment:
A commenter stated that any impact a higher advanced biofuel volume would have on the global
market for edible oils would be so minimal that it should not be considered. The commenter also
stated that due to excess biodiesel production capacity, any increase in the advanced biofuel
volume would result in increased biofuel production, rather than increased consumption of palm
oil and/or petroleum products.
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Response:
We recognize that any impact on global edible oil prices that resulted from a higher advanced
biofuel volume are likely to be modest. Nevertheless, due to the large volume of vegetable oil
consumed globally, even modest price impacts can result in significant overall costs. We further
note that our concerns over the higher costs of a higher advanced biofuel volume are not
primarily related to the impact of a higher standard on global vegetable oil prices, but rather the
high cost of advanced biofuels relative to the petroleum fuels they displace. Finally, while we
acknowledge that there is significant excess biodiesel production capacity, both domestically and
globally, we believe the primary reason these facilities are not producing greater volumes of fuel
is that they cannot do so economically. Increasing demand for advanced biodiesel and renewable
diesel in the U.S. will only result in increased global production of these fuels if the incentives
for advanced biodiesel and renewable diesel in other countries are sufficient to drive this
production. Otherwise these fuels (or alternatively the feedstocks used to produce them) will
simply be diverted to the U.S. and will be replaced with cheaper alternatives such as palm oil or
petroleum based fuels.
Comment:
One commenter stated that higher requirements for biodiesel and renewable diesel provide a
higher value market for renewable oils (such as vegetable oils and distillers corn oil). Some
commenters claimed that higher standards could drive higher oil extraction or waste collection
rates.
Response:
The final 2019 standards will already provide a high value market for vegetable oils and other
feedstocks that can be used to produce advanced biodiesel and renewable diesel. EPA is aware
that even higher prices for these feedstocks could result in the additional production or collection
of oils such as distillers corn oil or used cooking oil, or alternatively lower prices for the non-
vegetable oil products of oilseed production such as animal feed. 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 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:
A commenter stated that increasing volumes of rendered feedstocks are being used to produce
biodiesel and renewable diesel as U.S. Tenderers have lost international market share due to
foreign government restrictions and increased palm oil production.
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Response:
EPA recognizes that biodiesel and renewable diesel provide an important market for rendered
feedstocks, however as discussed in Section IV of the final rule, we expect growth in the quantity
of these feedstocks used to produce biodiesel or renewable diesel in the future to be limited. We
note that these comments support EPA's concerns that increased production of advanced
biodiesel and renewable diesel may be enabled by increased palm oil production.
Comment:
A commenter stated that Congress intended for the RFS to be a market forcing mechanism, and
that it would necessarily disrupt markets for fuels and feedstocks. The commenter stated that
EPA should not use these disruptions as a reason to establish lower advanced biofuel volumes.
Response:
Congress clearly intended the RFS program to increase the production and use of renewable
fuels in the U.S. No commenter provided any credible evidence, however, indicating that
Congress intended renewable fuels to be produced from feedstocks already being used in other
industries, or the concomitant higher costs and lower GHG and energy security benefits
associated with such diversions. Nor did any commenter provide credible evidence that Congress
even considered these factors in establishing the statutory volume targets through 2022.
Congress did, however, clearly give EPA broad discretion as to the factors to consider when
using the cellulosic waiver authority to reduce the advanced biofuel and total renewable fuel
volumes. Consistent with the 2017 and 2018 annual rules, we believe that the potential diversion
of feedstocks and/or biofuels, along with the high costs of advanced biofuels and the expected
diminishing benefits of higher volumes of these fuels, is a sufficient basis for reducing the
advanced biofuel and total renewable fuel volumes by the same amount as the cellulosic biofuel
volume in 2019.
Comment:
A commenter stated that production of biodiesel and renewable diesel, including the production
of biodiesel and renewable diesel from soybean oil, had increased by a greater amount from
2016/2017 to 2017/2018 than projected by EPA in our 2018 final rule. This commenter stated
that this data supported the fact that biodiesel and renewable diesel production can and likely
would exceed EPA's projection in the 2019 proposal.
Response:
Our proposal explicitly acknowledged that biodiesel and renewable diesel production can exceed
our calculated "reasonably attainable" volume, and likely would do so in response to the
volumes in the 2019 rule. For the reasons discussed in greater detail in Section IV of the final
rule, we do not believe that it would be appropriate to increase the required volume of advanced
biofuel in 2019 or BBD in 2020. Finally, we note that while the biodiesel production increases
cited by the commenter were greater than the increase in the reasonably attainable volumes in the
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2018 final rule, the numbers cited by the commenter and the projected increase in the 2018 final
rule were similar.
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4.2.2.5 Impact of Tax Credit
Commenters that provided comment on this topic include but are not limited to: 0660, 0662, and
1286.
Comment:
Multiple commenters 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 commenters 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. These 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 2019. 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. Ultimately, however,
whether or not the tax credit is renewed for 2019 does not have a material impact on the
advanced biofuel volume in this rule. As discussed in Section IV of the final rule, we have
decided to reduce the advanced biofuel volume by the maximum amount allowable. The status of
the tax credit could have an impact on the cost of biodiesel and renewable diesel to consumers,
and the high costs of advanced biofuels are one of the reasons we have decided to reduce the
advanced biofuel volume by the maximum amount allowable. However, EPA is primarily
concerned in the high societal costs of advanced biofuels, which are not impacted by the status of
the tax credit, as tax credits merely shift who in the marketplace pays the high cost of the
advanced biofuel. Tax credits can result in significant transfer payments between parties, but
they do not eliminate or reduce societal costs. In any event, as we explain in Section IV.B.3 of
the final rule, the status of the tax credit does not affect our projection of the reasonably
attainable volume of advanced biodiesel and renewable diesel, or our conclusion that 2.8 billion
gallons of advanced biodiesel and renewable diesel is attainable.
Comment:
A commenter stated that EPA's conclusion that the status of the tax credit can impact the supply
of advanced biodiesel and renewable diesel is not supported by the data. This commenter
claimed that the data illustrate that it is the RFS volumes, rather than the tax credit, this is the
primary driver for the supply and demand of biodiesel.
Response:
EPA continues to believe that both the RFS program and the federal tax credit have an impact on
the supply and demand of biodiesel and renewable diesel in the U.S. While both of these
programs provide financial incentives for the production and use of biodiesel and renewable
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diesel, they are different in significant ways. The federal tax credit provides a guaranteed value
(historically $1 per gallon) to parties that blend biodiesel and renewable diesel, while the RFS
program allows producers or importers of biodiesel and renewable diesel to generate RINs that
can be sold at the market price. We recognize that these incentives can and often are
complimentary, however under some circumstances a guaranteed price may be more effective at
incentivizing the production and use of these fuels, especially when the price of RINs are low.
Furthermore, the federal tax credit provides an incentive for the advanced biofuel standard to be
met with biodiesel and renewable diesel at the expense of other advanced biofuels that do not
benefit from the tax subsidy. Ultimately, however, the status of the tax credit has not had a
significant impact on the volume of advanced biofuel established in the rule for 2019.
Comment:
A commenter stated that EPA should assume that the biodiesel tax credit will be extended, as it
has been reinstated each year in the past.
Response:
The biodiesel tax credit has been applicable each year, proactively in some years and
retroactively in others. We do not, however, believe that this is a sufficient basis for assuming
that the tax credit will continue indefinitely in its current form. As noted above, the status of the
tax credit has not had a significant impact on the volume of advanced biofuel established in the
rule for 2019.
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4.2.3 Other Advanced Biofuel
EPA did not receive any comments on this topic.
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4.3 Advanced Volume that Can Be Supplied and Used
Commenters that provided comment on this topic include but are not limited to: 0530.
Comment:
One commenter stated that the goals of the RFS program would best be met by setting the
advanced biofuel volume requirement at 5 billion gallons for 2019, while another commenter
stated that at least 5.3 billion ethanol-equivalent gallons of advanced biofuel can be supplied and
used in 2019.
Response:
The commenter pointed to biodiesel and renewable diesel production capacity as primary reasons
that 5.3 billion gallons can be supplied and used in 2019. We do not believe that using
production capacity alone is an appropriate way to determine the volumes that are attainable, as
the cellulosic waiver authority permits us to consider a wide variety of factors, and indeed we
have done so in making a determination to reduce the advanced biofuel volume requirement for
2019 by the full amount permitted under that authority as discussed in Section IV of the final
rule.
An advanced biofuel volume requirement of 5.3 billion gallons would represent an increase of
about 0.4 billion gallons in comparison to the 4.88 billion gallons we proposed. This increase
would most likely be filled with BBD; instead of the 2.8 billion gallons of BBD that we
estimated would be needed to meet an advanced biofuel volume requirement of 4.88 billion
gallons, nearly 3.1 billion gallons of BBD would need to be used. As discussed more fully in
Section 4.2.2 of this document, we do not believe BBD use in excess of 2.8 billion gallons would
be appropriate to require as it would increase the likelihood for feedstock/fuel diversions, higher
costs, and reduced GHG benefits due to increases in the use of palm oil to backfill for diverted
soy oil. Moreover, while we made a proposed determination that 2.8 billion gallons of BBD is
attainable, we also acknowledged that a lesser volume of 2.61 billion gallons would be
reasonably attainable. Even so, we did not propose further reductions in the advanced biofuel
volume requirement because we determined that the increased costs associated with 2.8 billion
gallons of BBD did not constitute severe economic harm. See Section 2.1.2 of this document for
further discussion of severe economic harm.
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4.4 Proposed Advanced Biofuel Requirement
Commenters that provided comment on this topic include but are not limited to: 0389, 0493,
0531, 0532, 0539, 0586, 0591, 0619, 0660, 0671, 0672, 0711, 0712, 1036, 1039, 1196, 1202,
1271, and 1286.
Comment:
One commenter stated that the advanced biofuel volume requirement should be reduced from the
proposed level of 4.88 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 2019, 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 2019. Further reductions would require the
use of the general waiver authority, and it does not permit 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 severe economic
harm. See Section 2.1 of this document for further discussion of these waiver authorities.
Comment:
Some commenters believed that the proposed volume of 4.88 billion gallons for advanced
biofuel was too high. One stated that the 2019 level should be 4.18 billion gallons, as the 2.8
billion gallons of BBD assumed in support of the 4.88 billion gallon proposal would cause
significant market disruption and GHG impacts. Another stated that the 2019 level should be
3.11 billion gallons, based on lower volumes of cellulosic biofuel and all forms of non-cellulosic
advanced biofuel.
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Response:
We do not believe that the suggested volumes would be appropriate. Not only are they
significantly lower than the volume we have determined to be 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 as described
more fully in Section 2 of this document. See also discussion of the cellulosic biofuel volume
requirement in Section 3 of this document.
Comment:
One commenter stated that the 2019 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 2019 includes
a consideration of the volume of BBD that is attainable. As described in Section IV of the final
rule, our analysis concluded that significantly more than 2.1 billion gallons of BBD - 2.8 billion
gallons - is in fact attainable in 2019. As described in Section VI of the final rule setting the 2018
standards and the 2019 BBD volume requirement, 2.1 billion gallons of BBD is not the most that
could be expected to be supplied in 2019, but rather is a level that provides support to the BBD
industry while simultaneously providing an opportunity for other advanced biofuels to compete
with BBD under the advanced biofuel standard.
Comment:
One commenter stated that the proposed advanced biofuel volume requirement of 4.88 billion
gallons exceeds actual domestic production and would require an increase in imports.
Response:
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 attainable and appropriate given a consideration of costs and other factors.
We do not believe it would be appropriate to base the 2019 volume requirement for advanced
biofuel on actual volumes produced domestically in the past. The largest historical level of
domestic advanced biofuel production was 3.07 billion RINs in 2017.79 Reducing the 2019
advanced biofuel volume requirement to this level would require use of the general waiver
authority. As discussed in Section 2.1 of this document, we have determined that this would not
be appropriate.
79 "2017 supply 3-13-18," available in docket EPA-HQ-OAR-2018-0167.
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We also do not believe it would be appropriate to base the 2019 volume requirement for
advanced biofuel on actual volumes produced domestically in 2018, for four reasons. First, this
approach would require an extrapolation of production for the first part of the year to the end of
2018. Any extrapolation will be uncertain due to seasonal variability and other unpredictable
factors, and thus would introduce uncertainty into the determination of the applicable 2019
volume requirement. Second, production volumes must be adjusted for RINs made invalid for
any reason (such as those listed in 40 CFR 80.1431). Since some RINs are not determined to be
invalid for many months after their generation, basing the 2019 standard on 2018 domestic
production would likely be biased high. Third, actual production in 2018 is not, by itself,
indicative of the production that is attainable in 2019 or the costs of 2019 production. Fourth, as
discussed in Section 2.1.1 of this document in relation to our inadequate domestic supply waiver
authority, we do not believe that the available information and evidence warrants the exclusion
of imports in the determination of the volume requirements for 2019.
Comment:
Several commenters stated that the advanced biofuel standard for 2019 should be higher than
4.88 billion gallons because there exists sufficient biodiesel production capacity and sufficient
feedstocks to reach a higher level.
Response:
We acknowledge that total domestic production capacity for biodiesel and renewable diesel is
considerably higher than actual production in recent years (as discussed further in Section 4.2.2.1
of this document), and that sufficient feedstocks exist to permit an advanced biofuel volume
requirement higher than 4.92 billion gallons to be reached in 2019. However, as volume
requirements increase, so also do the challenges associated with meeting those volume
requirements. We believe that it is important to take these challenges into account when making
a determination of the appropriate volume requirements to set. Moreover, we have the authority
under the cellulosic waiver authority to consider factors other than production capacity and the
total amount of qualifying feedstock that is produced. As described in Section IV of the final
rule, we have taken into account the increased potential for feedstock/fuel diversions as volumes
increase, the higher costs, and the reduced benefits. Based on these additional considerations, we
determined that an advanced biofuel volume requirement resulting from the full use of the
cellulosic waiver authority is appropriate.
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. Another
commenter stated that the refusal to partially backfill for the shortfall in cellulosic biofuel, EPA
is missing an opportunity to maximize the benefits of advanced biofuels for Americans as
envisioned by Congress.
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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, including
whether to maximize certain benefits. In addition to assessing 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. The commenter's expressed concerns about future investments and job creation
were not supported with any data or analysis. However, despite potential impacts in these areas,
in making a determination not to allow advanced biofuel to partially backfill for the shortfall in
cellulosic biofuel, 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.
Comment:
One commenter stated that EPA was ignoring the intent of Congress to increase biofuel volumes
in deciding not to backfill any portion of the cellulosic biofuel shortfall, and that any
consideration of the potential diversion of feedstocks is inconsistent with Congressional intent.
Response:
While Congressional intent can be inferred from the fact that the statutory volume targets
increase every year, the statute does not establish Congressional intent as the singular
consideration that should drive the determination of applicable volume requirements. On the
contrary, Congress also explicitly provided mechanisms for reducing those volume targets where
factors other than Congressional intent can be considered. The cellulosic waiver authority which
Congress established provides EPA with broad discretion in the factors it may consider, and thus
diversion of feedstocks and the attendant impacts on other markets, GHG emissions, and costs
are valid considerations.
Comment:
Several commenters stated that EPA had not considered whether more than 4.88 billion gallons
of advanced biofuel was attainable, but instead had simply proposed to set the 2019 advanced
biofuel volume requirement at the minimum permitted under the cellulosic waiver authority.
Response:
Section IV of the proposal 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 4.92 billion
gallons of advanced biofuel were attainable in 2019, but not reasonably attainable. That is, 4.92
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billion gallons could be produced and used in 2019 with some degree of feedstock switching
and/or diversion of foreign-produced advanced biofuel to the U.S. Volumes above 4.92 billion
gallons may also be attainable, though with increasing levels of feedstock switching and/or
diversion of foreign-produced advanced biofuel to the U.S. Thus, attainability is not the sole
criterion on which we make our determination under the broad discretion provided under the
cellulosic waiver authority. In addition to feedstock switching and foreign fuel diversions, we
also considered additional factors such as costs and benefits. As a result, we determined that the
volume requirement that was both attainable and appropriate to require was 4.92 billion gallons,
the lowest level permitted under the cellulosic waiver authority.
Comment:
One commenter stated that EPA's refusal to increase advanced biofuel volumes when such
volumes are available forgoes energy independence, GHG, and rural economic development
benefits.
Response:
The commenter did not provide any data or analysis to support the foregone benefits claimed.
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 likelihood for feedstock/fuel diversions, increased costs, and
market disruption associated with each increment of advanced biofuel, factors that we are legally
permitted to consider under this authority.
Comment:
One commenter stated that there is no need to set the advanced biofuel volume requirement
below 10.5 billion gallons, representing a 20% reduction from the statutory target. This
commenter stated that such a level could be reached because there are sufficient sugarcane
ethanol and carryover RINs, and because Equivalence Values could be based on GHG reductions
instead of energy equivalence.
Response:
A volume requirement of 10.5 billion gallons is far higher than the level we believe can be
attained in 2019. Even if all of the suggested avenues for meeting such a volume requirement
were pursued to the maximum extent, we do not believe that 10.5 billion gallons could be
reached. In addition, we do not believe that the suggested avenues would be appropriate. See also
the response to a previous comment in Section 4.2.1 of this document on an advanced biofuel
volume requirement of 10.5 billion gallons.
As described in Section 4.2.1 of this document, the annualized volume of the highest month of
sugarcane ethanol imports is only about 2 billion gallons, and moreover we do not believe that
such a level can be reached in 2019. As discussed in Section IV.B. 1 of the final rule, we believe
that 100 million gallons is a reasonable estimate of the volume that could be imported in 2019.
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As described in Section II.B of the final rule, we do not believe it would be appropriate to
intentionally draw down the bank of carryover RINs as a means for increasing the advanced
biofuel volume requirement.
Finally, changing the basis for Equivalence Values is outside the scope of this rulemaking.
Comment:
One commenter stated that regardless of the applicable volume requirement for advanced
biofuel, the actual volume requirement is unknown due to the existence of small refinery
exemptions.
Response:
The applicable percentage standards with which obligated parties must comply remains
unchanged in the event that one or more small refinery exemptions is approved after those
percentage standards are established. Thus, apart from small refineries that receive an exemption,
the volume requirements for each obligated party are known once the percentage standards are
established. See Section 8.2 of this document for further discussion of small refinery exemptions.
Comment:
One commenter stated that costs are not an appropriate factor for consideration in setting the
advanced biofuel volume requirement and requested a return to the earlier years in the program
when EPA assessed potential available supply.
Response:
Under the cellulosic waiver authority, EPA has wide discretion in the factors in may consider.
Therefore, costs are a valid consideration. As discussed at 83 FR 32047 of the proposal, we have
considered costs in previous years, though we placed a greater emphasis on costs for the 2018
standards final rule and again for the proposed 2019 standards. We have considered potential
available supply in every year that we have set annual standards.
Comment:
One commenter stated that EPA's use of "attainable" versus "reasonably attainable" does not
provide sufficient clarity to the market to understand its implementation of the program.
Response:
The terms "attainable" and "reasonably attainable" were defined in the proposal at 83 FR 32039
in terms of our assessment of the potential for market disruptions and higher costs resulting from
increasing volume requirements. We discussed these factors at length in the proposal,
particularly in regard to the volumes of BBD that would be needed to reach the advanced biofuel
volume requirement that would result from the full use of the cellulosic waiver authority.
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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: 0523, 0539,
0619, and 1278.
Comment:
One commenter alleged that the ACE decision had ruled that EPA cannot consider demand-side
factors when making a determination about whether any of the statutory targets can be met. But,
the commenter noted that has EPA continued to consider demand-side factors in a docket
memorandum entitled "Market impacts of biofuels in 2019."
Response:
The Court's ruling specifically indicated that EPA cannot consider demand-side factors in
determining inadequate domestic supply under the general waiver authority. However, EPA did
not propose reductions using inadequate domestic supply. EPA is permitted to consider demand-
side factors under the cellulosic waiver authority. We may also consider demand-side constraints
in evaluating how the market might respond to the proposed volume requirements as we do in
the market impacts memorandum.
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, by "constraints" we do not mean a firm
barrier but rather the transition from mild resistance (if any) below 10% ethanol to more
significant obstacles above 10% ethanol. Moreover, these constraints do not have the same
significance at all levels above 10% ethanol. This gradual nature of the impacts of the constraints
is due to the fact that small increases in 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
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boundary between volumes that can be achieved with mild difficulty in 2019 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 recent years additional biodiesel
and renewable diesel, together with smaller increases in El 5 and E85, have provided additional
biofuel volumes in excess of the El 0 blendwall.
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 2019 timeframe as
other commenters have suggested. The final 2019 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 in the absence of increases in non-ethanol
biofuels are not achievable in 2019.
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 or the RFS program that requires the use of ethanol.
The advanced biofuel and total renewable fuel standards can and have been met with other
biofuels as well, especially biodiesel and renewable diesel. 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.
Comment:
One commenter stated that E10 should not be used as a point of reference in EPA's
determination of reasonably attainable volume. Instead, EPA should use El 5 as the point of
reference to demonstrate EPA's commitment to the intent of Congress to increase volumes.
Response:
EPA has not arbitrarily chosen E10 as a point of reference in its assessments. As described
above, E10 is merely a level of ethanol blending that marks the transition from mild resistance
(or no resistance) below 10% ethanol to more significant obstacles above 10% ethanol. This is a
market reality that EPA has identified and considered in its assessment of how the market might
respond to the applicable standards. The use of E15 as a point of reference would not change the
reality of the constraints associated with the E10 blendwall.
Comment:
One commenter stated that exceeding the blendwall will mean higher costs and harm to the
economy, and that refiners unable to acquire sufficient RINs will face fines or will be forced to
reduce their obligation by reducing production of gasoline and/or diesel for domestic use.
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Response:
As discussed in Section 5.1.2 of this document, the U.S. exceeded the E10 blendwall in both
2016 and 2017, but there has been no indication of harm to the economy as a result, and
commenters provided no evidence of such harm to the economy in those two years. Similarly,
commenters provided no evidence that exceeding the blendwall in those years precluded refiners
from acquiring sufficient RINs so as to face fines, or induced refiners to reduce the production of
gasoline or diesel for domestic use. Since our assessment of the market impacts of the final 2019
volume requirements presumes that the ethanol concentration will be no higher in 2019 than it
was in 2017, concerns about potential impacts on the economy of exceeding the E10 blendwall
are unwarranted.80
Our determinations about the market's ability to use biofuels — that 4.92 billion gallons of
advanced biofuel is attainable in 2019 and that the market can make available 19.92 billion
gallons of total renewable in 2019 — mean that we expect there will be a sufficient number of
valid RINs available for all obligated parties to comply with the applicable standards. Moreover,
as we discuss in Section II.B of the final rule, to the extent the market falls short of using these
volumes, obligated parties can rely on the carryover RIN bank to satisfy their obligations. Other
compliance flexibilities, such as the carryforward deficit provision and small refinery
exemptions, also exist. As a result, we do not expect any obligated parties to be unable to acquire
sufficient RINs for compliance.
80 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
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5.1.2 Exceeding the E10 Blendwall
Commenters that provided comment on this topic include but are not limited to: 0617, 0672,
1196, 1201, 1267, 1271, and 1273.
Comment:
A number of commenters, particularly refiners, argued that the 2019 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, 2017, and 2018 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 out, the nationwide average ethanol concentration was 10.02% in 2016 and 10.13% in
2017. Moreover, despite concerns raised by those advocating 9.7% ethanol, there is no indication
that exceeding the blendwall in 2016 or 2017 created severe economic harm for any State,
region, or the U.S., which would be necessary to support use of the general waiver authority to
lower the statutory volume targets down to such a level.
While we agree that use of E15 and E85 in 2019 cannot enable the market to achieve the
statutory target for total renewable fuel, they can make meaningful contributions in 2019. The
final 2019 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 and 2017 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 exceeding a poolwide national average ethanol concentration of 10%
would cause catastrophic downstream consequences.
Response:
As discussed above, the U.S. exceeded a poolwide national average ethanol concentration of
10%) in both 2016 and 2017. Commenters did not provide any information or data indicating that
such ethanol levels caused problems in distribution, blending, or dispensing of gasoline, and we
are not aware of any such problems.
Importantly, the RFS program does not require the use of ethanol, and thus downstream parties
will only distribute and blend ethanol into gasoline to the degree that doing so provides an
advantage to them relative to other options for compliance, including biodiesel and renewable
diesel.
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Comment:
One commenter stated that since most cars can use E15, EPA should not treat the E10 blendwall
as insurmountable.
Response:
While we have approved the use of El 5 in 2001 and newer model year vehicles, auto
manufacturers generally only warrant much more recent model year vehicles for the use of El 5,
and some not at all. Regardless, as discussed in Section 5.1.1 of this document, EPA does not
treat the E10 blendwall as insurmountable. Instead, the E10 blendwall marks the transition from
mild resistance to increases in ethanol use to more significant obstacles to increases in ethanol
use. E15 and E85 can both contribute to poolwide exceedances of the E10 blendwall. See
Sections 5.1.6 and 5.1.7 of this document for additional discussion of these two higher ethanol
blends.
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5.1.3 Domestic Production Capacity
Commenters that provided comment on this topic include but are not limited to: 1292.
Comment:
One commenter stated that since current corn-ethanol production capacity is over 16 billion
gallons and significant volumes have been produced and exported, there is no need to reduce the
volume requirement for conventional renewable fuel.
Response:
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 2019.
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.
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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: 0539.
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. Another
commenter stated that the petroleum industry's unwillingness to offer higher level ethanol blends
must not be taken as evidence that the RFS2 is unworkable.
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. We
do believe that the RFS program has been working as intended to expand the use of renewable
fuel despite the slower-than-expected rate of increase in the use of higher ethanol blends.
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 this 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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5.1.5 EO
Commenters that provided comment on this topic include but are not limited to: 0667, 0672,
1029, and 1035.
Comment:
Several commenters stated that EPA has ignored information on actual historical demand for EO
in its estimation of EO volumes consumed in recent years.
Response:
None of the information cited by commenters represented EO sold at retail, and it is therefore of
less value in estimating the actual volume of EO used than commenters claim. For instance, there
is no way to determine with any certainty the volume of EO sold at retail stations listed in Pure-
gas, org without data on EO versus E10 throughput at such retail stations, which commenters did
not provide. Similarly, there is no straightforward way to extrapolate data on EO sales trends at
one chain of retail stations, or data on EO use in Iowa, to the nation as a whole. Data provided on
EO sold from terminals was not accompanied by any verifiable information on whether that EO is
actually used as EO in vehicles or, instead, subsequently blended with ethanol.
More importantly, as we explain Section IV.D of the final rule, in exercising our cellulosic
waiver authority and establishing the 2019 standard for total renewable fuel, we did not rely on
any estimate of the volume of any particular ethanol blend or E0 used in 2019. Nonetheless, we
do provide a description of the ways in which the market could make 19.92 billion gallons of
total renewable fuel available in 2019 in a memorandum to the docket.81 As detailed in that
memorandum, we do not believe that a precise estimate of the volume of E0 sold at retail is
necessary to determine how the market might respond to the volume requirements we establish.
Instead, it is the poolwide average ethanol concentration that is more pertinent as it takes into
account E0, El 5, and E85 volumes in the aggregate while being essentially independent of total
gasoline demand. Thus, while the market has offered and may continue to offer E0, it is not
necessary for us to project a specific volume of E0 use in order to determine that the 2019
standards can be met.
Comment:
One commenter stated that EPA continues to falsely claim that only 200 million gallons of E0
has been used in the past. Another commenter stated that recent data from the Iowa Department
of Revenue shows that Iowans alone bought approximately 200 million gallons of E0 in 2017, so
the volume of E0 used by the whole country must be much higher than 200 million gallons.
81 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
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Response:
EPA does not believe that total EO use in previous years was 200 million gallons and has never
made such a claim. 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.
2. Recreational marine engines represent a market segment that we believe would be
particularly difficult to completely transition from E0 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
engine damage following phase separation of the water and fuel, which is of greater
likelihood with ethanol blends than with EO.82
In any event, in this action we are not assuming that the market will use no more than 200
million gallons of E0. Indeed, we are not making any projection of the volume of E0 that will be
used in 2019, or justifying this action based on a specific volume of E0. Instead, we have
estimated total ethanol consumption in 2019 based on the 2017 poolwide ethanol concentration
of 10.13% which inherently includes some E0, as well as some El5 and E85.
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.
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.83 Comments
from refiners in response to the 2019 proposal did not provide any new or different information
that would change our conclusions with regard to that 3% estimate. Regardless, as described
throughout this section, we are not basing the 2019 standards on any particular ethanol
concentration.
82 See 81 FR 89775-76; "Estimating E0 use in recreational marine engines," memorandum from David Korotney to
docket EP A-HQ-0 AR-2015-0 111.
83 See 80 FR 77462; see also 81 FR 89776.
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Comment:
One commenter stated that many boaters want EO, and EPA should account for that fact when
establishing the volume requirements.
Response:
As we explain in Section IV.D of the final rule, in exercising our cellulosic waiver authority and
establishing the 2019 standard for total renewable fuel, we did not rely on any estimate of the
volume of any particular ethanol blend used in 2019. Nonetheless, we did provide a description
of the ways in which the market could make 19.92 billion gallons volume of total renewable fuel
available in 2019 in a memorandum to the docket.84 In addition, we note that the RFS program
does not preclude the sale of EO. The market will supply EO so long as there is demand for it.
84 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
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5.1.6 E15
Commenters that provided comment on this topic include but are not limited to: 0539, 0672,
1197, 1201, 1271, and 1292.
Comment:
One commenter stated that retail infrastructure to offer El 5 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 stated that "the majority of installed tanks can store blends
above E10."
Response:
We disagree that retail infrastructure is not a limiting factor in El5 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. Parties storing ethanol in underground tanks in concentrations greater than
10% are required to 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 to be no less protective of human health and the environment. These requirements are
designed to protect against equipment failure that could lead to leaks and to satisfy insurance
requirements. The use of any equipment to offer El 5 that has not been demonstrated to 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. In sum, even if retailers' installed tanks are
technically compatible with El 5, the ability of those retailers to sell El 5 may be significantly
limited by the ability to demonstrate such compatibility.
Comment:
One commenter stated that retailer concerns about liability for misfueling of pre-2001 vehicles or
nonroad engines with El 5 are baseless since EPA regulations address this issue.
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 help ensure that misfueling does not occur. However,
some retailers will continue to have concerns about potential liability associated with vehicle
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owners misfueling their vehicles and engines, and as a result may view the potential for
misfueling as a disincentive to install or upgrade equipment to offer El5.
Since the RFS program does not require the use of E15 or ethanol in any form, retail station
owners are not required to offer E15. Thus, concerns on the part of retailers about misfueling
liability, warranted or not, may constrain the growth of El 5.
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, whether it is a new station or existing
station modification, 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).85
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 E0 and/or E10 for recreational marine engines or any other engine
or vehicle, the market can be supply these fuels. Moreover, El5 is not permitted to be used in
motorcycles nor any nonroad engine, and retail pumps must be labelled to help ensure that
misfueling does not occur.
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
85 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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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. Moreover, the implied
volume requirement for conventional renewable fuel in 2019 will be the same as it was for 2018
at 15 billion gallons. Insofar as the implied volume requirement for conventional renewable fuel
is the primary driver for ethanol use, the 2019 standards would provide no more incentive for the
use of El 5 than the 2018 standards.
Comment:
One commenter stated that by not projecting the volume of El 5 that is reasonably attainable,
EPA has neglected to make a determination that the proposed volume of total renewable fuel is
reasonably attainable.
Response:
As we explain in Section IV.D of the final rule, in exercising our cellulosic waiver authority and
establishing the 2019 standard for total renewable fuel, we did not rely on any estimate of the
volume of any particular ethanol blend used in 2019. Nonetheless, we did provide a description
of the ways in which the market could make 19.92 billion gallons volume of total renewable fuel
available in 2019 in a memorandum to the docket.86 As detailed in that memorandum, we do not
believe that a precise estimate of the volume of El 5 sold at retail is necessary to determine how
the market might respond to the volume requirements we establish. Instead, it is the poolwide
average ethanol concentration that is more pertinent as it takes into account E0, El 5, and E85
volumes in the aggregate while being essentially independent of total gasoline demand.
Comment:
One commenter stated that EPA failed to consider the small number of retail stations offering
El 5 and the small number of vehicles warranted to use El 5.
Response:
We did not discuss these issues in the proposal because we were not making a projection of E15
sales volumes for 2019. We do not believe that any consideration of the number of retail stations
offering El 5 or the number of vehicles warranted to use El 5 would have changed our proposal
or the approach we have taken in the final rule.
86 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
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Comment:
One commenter stated that El5 sales volumes cannot increase fast enough to have a significant
impact on the volume requirements.
Response:
As stated earlier, we did not project specific volumes of El 5 that would be used in 2019, but
instead relied on an estimate of the poolwide average ethanol concentration for 2019, based on
that from 2017. As a result, there is no reason why El 5 volumes would have to increase
noticeably in 2019 to meet the 19.92 billion gallon volume requirement.
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5.1.7 E85
Commenters that provided comment on this topic include but are not limited to: 0672, 1197, and
1292.
Comment:
A number of commenters pointed to examples of retailers who have discontinued offering E85
due to low sales as a reason that E85 cannot be relied upon to increase ethanol consumption.
Response:
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 2019
compared to previous years. Regardless, we are not relying on any particular volume of E85 use
to support the 2019 standards, as described above.
Comment:
Commenters representing ethanol interests generally stated that an E85 price discount
significantly higher than energy parity is achievable, and that it will occur if EPA increases the
volume requirements.
Response:
Commenters provided no new analysis of the future E85 price discount that would occur under
the influence of higher RFS volume requirements, but instead pointed to analyses presented in
response to the proposal for previous annual standard-setting rulemakings. Responses to those
analyses can be found in the response to comments document for the 2018 RFS standards
rulemaking.87
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 El 5 and E85 use, or
primarily through the use of non-ethanol renewable fuels such as biodiesel and renewable diesel
as has occurred historically. Regardless, we are not relying on any particular volume of E85 use
to support the 2019 standards, as described above.
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.
87 "Renewable Fuel Standard Program - Standards for 2018 and Biomass-Based Diesel Volume for 2019: Response
to Comments." December 2017. EPA-420-R-17-007.
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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, as described in
Section 5.1.1 of this document, a memorandum to the docket describing potential market impacts
of the applicable 2019 standards, and in previous annual rulemakings.88 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 2019 primarily
through El 5 and/or E85, or through non-ethanol renewable fuels such as biodiesel and renewable
diesel. Notably, the market has demonstrated a stronger preference for increases in biodiesel and
renewable diesel rather than increases in ethanol as the standards have increased over the last
several years.
Comment:
One commenter stated that the available data on E85 sales volumes versus price discount
between E85 and E10 is not valid because it occurred when RFS standards were not high enough
to push E85 sales significantly. The commenter argued that although EPA's analysis concluded
that the correlation between E85 sales volumes and E85 price discount compared to E10 was
essentially linear, EPA should reject that analysis because the underlying data is not valid.
Instead, the commenter claimed that 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,
which would include a strongly nonlinear correlation with accelerating E85 sales volumes as the
price discount increases.
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 E10.89 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 nonlinear correlation based
on economic theory is a more appropriate basis than a linear correlation derived from the
analysis of data. Our analysis included an investigation into nonlinearity in the region
surrounding the energy parity point.90 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. Moreover, our analysis of the E85 market concluded that the full value of the RIN
88 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
89 "State E85 Sales and Price Data," Excel file available in docket EPA-HQ-OAR-2016-0004.
90 "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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was generally not transmitted to retail E85 sales prices, most likely as a result of the current lack
of competition at the retail level.91 Therefore, assumptions that might be made based on
economic theory in a competitive market do not hold under current circumstances.
We note that the correlations at issue were not used in making projections of reasonably
attainable ethanol volumes for 2019. We are not relying on any particular volume of E85 use to
support the 2019 standards, as described above.
Comment:
One commenter stated that EPA failed to consider the small number of flex-fueled vehicles
(FFV) that can use E85.
Response:
We did not discuss this issue in the proposal because we were not making a projection of E85
sales volumes for 2019. We do not believe that any consideration of FFVs would have changed
our proposal or the approach we have taken in the final rule.
Comment:
One commenter stated that by not projecting the volume of E85 that is reasonably attainable,
EPA has neglected to make a determination that the proposed volume of total renewable fuel is
reasonably attainable.
Response:
As we explain Section IV.D of the final rule, in exercising our cellulosic waiver authority and
establishing the 2019 volume requirement for total renewable fuel, we did not rely on any
estimate of the volume of any particular ethanol blend used in 2019. Nonetheless, we did provide
a description of the ways in which the market could make 19.92 billion gallons volume of total
renewable fuel available in 2019 in a memorandum to the docket.92 As detailed in that
memorandum, we do not believe that a precise estimate of the volume of E85 sold at retail is
necessary to determine how the market might respond to the volume requirements we establish.
Instead, it is the poolwide average ethanol concentration that is more pertinent as it takes into
account E0, El 5, and E85 volumes in the aggregate while being essentially independent of total
gasoline demand.
91 "An Assessment of the Impact of RIN Prices on the Retail Price of E85," memorandum from Dallas Burkholder,
available in docket EPA-HQ-OAR-2018-0167.
92 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
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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: 1197.
Comment:
One commenter stated that the RFS program has no impact on ethanol use. E10 would be used
without the RFS program, and the volume requirements have little impact on the use of higher
ethanol blends such as E15 and E85.
Response:
In a memorandum to the docket, we acknowledge that E10 would likely continue to be used if
the RFS program were eliminated in the future.93 With regard to higher ethanol blends such as
El5 and E85, we acknowledge that growth has been slow and is unlikely to accelerate in the near
future, but it is likely that the growth that has occurred has been influenced by the RFS program.
93 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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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: 0442, 0662, and
1277.
Comment:
A commenter stated that biodiesel is incompatible with some elements used in home heating oil
equipment. The commenter raised similar concerns about the stability of biodiesel, stating that
biodiesel should not be stored for longer than six months before use, and therefore should not be
used in heating oil applications.
Response:
Biodiesel is chemically distinct from petroleum based diesel fuel, and thus may not be
compatible with some of the materials used in certain home heating oil equipment, especially at
high level blends. Similarly, biodiesel and biodiesel blends may have a shorter "shelf life," than
petroleum diesel and may not be appropriate for applications where the fuel may be stored for
long periods of time. We note, however, that the industry continues to take actions to address this
concern through the use of fuel additives. In any event, the advanced biofuel volume established
in this rule does not require heating oil to contain biodiesel. We believe the volumes established
in this rule can be supplied, while still allowing for sales of petroleum based heating oil that does
not contain biodiesel in situations where biodiesel is not compatible with home heating oil
equipment.
Comment:
A commenter raised concerns over observed corrosion in oil tanks. The commenter suggested
that this corrosion could be linked to increased use of biodiesel and suggested that EPA should
not require the increased use of biodiesel until this issue was better understood.
Response:
We are aware of the commenter's concerns related to corrosion in oil tanks. The exact cause(s)
of this corrosion is still a matter of industry study and evaluation, and it would be inappropriate
at this point in time to conclude that biodiesel is a primary contributer to this corrosion.
Moreover, we have exercised the maximum extent of our discretion to reduce volumes under the
cellulosic waiver authority. As we explain in Section 2 of this document, we do not believe that
further reductions under our other waiver authorities are warranted.
Comment:
A commenter stated that all diesel fuel infrastructure is certified to store blends of up to 20%
biodiesel, and that infrastructure was not a factor that would limit the use of biodiesel in 2019.
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Response:
EPA does not expect that infrastructure compatibility with biodiesel blends will limit the use of
biodiesel in the U.S. in 2019.
Comment:
A commenter stated that there was no "biodiesel blendwall," and that their association members
commonly blend biodiesel at a 10% rate.
Response:
EPA is aware that many diesel retailers often sell biodiesel blends at levels above 5% biodiesel.
Other retailers, including many large truck stops that sell significant quantities of diesel fuel,
often sell fuel blends up to and including 20% biodiesel. While fuel blends containing higher
levels of biodiesel may not be appropriate for use in all diesel engines or in cold weather, we do
not expect, based on recent market activity, that these concerns will limit the use of biodiesel in
the U.S. in 2019.
Comment:
A commenter stated that they had made substantial investments in biodiesel infrastructure in
response to the RFS program, and that without the RFS requirements it would not be financially
viable to continue selling biodiesel.
Response:
We recognize that many parties have made significant investments to produce, distribute, and
use biofuel blends. We believe that the 2019 RFS volumes finalized in this rule provide the
appropriate incentives for the continued production, distribution, and use of biofuel in 2019. We
note that that both the advanced biofuel volume and the total renewable fuel volume, which are
the primary drivers of biodiesel use, are higher for 2019 than in 2018.
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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: 0662.
Comment:
A commenter stated that nearly all over the road trucks are warranted to run on biodiesel blends
of up to 20%, and that this factor would not constrain the use of biodiesel in 2019. Another
commenter stated that over 82% of diesel vehicles produced today are approved for use with B20
biodiesel blends, and that over 90% of the OEMs in the medium and heavy-duty truck market
support the use of B20 blends.
Response:
While EPA continues to note that there are a significant number of vehicles for which biodiesel
blends above B5 are not recommended (particularly older 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 2019.
Comment:
A commenter stated that the use of renewable diesel has been approved for airline use, and that
the approval of renewable diesel (which qualifies as BBD) in the airline industry will increase
the demand for these fuels.
Response:
We recognize that the approval of renewable diesel for use in the aviation sector represents a
new potential market for this fuel. However, as stated in Section IV of the final rule and Sections
4 and 5 of this document, we do not expect that demand for BBD, particularly renewable diesel,
will limit the production and use of BBD in 2019.
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5.2.3 Cold Temperature Impacts
Commenters that provided comment on this topic include but are not limited to: 0442.
Comment:
A commenter raised concerns that heating oil purchased in the summer could have cloud point
issues in the winter months, especially in situations where the heating oil is stored outside.
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 note, however, that the
advanced biofuel volume established in this rule does not require heating oil to contain biodiesel.
We believe the volumes established in this rule can be supplied, while still allowing for sales of
petroleum based heating oil that does not contain biodiesel in situations where heating oil
blended with biodiesel may not be appropriate.
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5.2.4 Production Capacity
Commenters that provided comment on this topic include but are not limited to: 0530, 0532,
0711, 1041, 1286.
A number of commenters discussed the production capacity for biodiesel and renewable diesel.
These comments were generally focused on the ability of the market to supply sufficient volumes
of advanced biodiesel and renewable diesel to satisfy the advanced biofuel volume for 2019.
Responses to comments addressing biodiesel and renewable diesel production capacity can be
found in Section 4.2.2.2 of this document.
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5.2.5 Feedstock Availability
Commenters that provided comment on this topic include but are not limited to: 0531, 0664, and
0711.
A number of commenters discussed the availability of feedstocks that can be used to produce
biodiesel and renewable diesel. These comments were generally focused on the availability of
feedstocks that could be used to produce advanced biodiesel and renewable diesel to satisfy the
advanced biofuel volume for 2019. Responses to comments addressing biodiesel and renewable
diesel production capacity can be found in Section 4.2.2.4 of this document.
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5.2.6 Imports of Conventional Biodiesel and Renewable Diesel
EPA did not receive any comments on this topic.
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5.2.7 Consumer Response
EPA did not receive any comments on this topic.
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5.2.8 Total Volume Achievable
Commenters that provided comment on this topic include but are not limited to: 0620, 1036, and
1267.
This section includes comments related to the total volume of biodiesel and renewable diesel
achievable in 2019. 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 2020, see Section VI of the final rule and Section 6 of this
document.
Comment:
Multiple commenters stated that EPA's projection that 3.2 billion gallons of biodiesel and
renewable diesel would be used to meet the total renewable fuel volume was unrealistic. One
commenter stated that only 1.15 billion gallons of biodiesel and renewable diesel were produced
in the first half of 2018. Another commenter noted the current absence of the biodiesel tax credit,
which they claimed would make achieving a supply of 3.2 billion gallons of biodiesel and
renewable diesel even more difficult and requested that EPA exercise the general waiver
authority to reduce the total renewable fuel volume.
Response:
EPA disagrees with commenters that 3.2 billion gallons of biodiesel and renewable diesel
(including both advanced and conventional biodiesel and renewable diesel) could not be supplied
to the U.S. in 2019. First, we note that the commenters projection of the volume of these fuels is
overly pessimistic. Based on data through September 2018 and taking into account the
seasonality of the supply of biodiesel and renewable diesel, we currently expect that
approximately 2.6 billion gallons of biodiesel and renewable diesel will be supplied in 2018.
Further support for this projection is found in a memorandum to the docket.94 In addition, as
discussed in further detail in Section IV of the final rule, we project that a volume of 2.8 billion
gallons of advanced biodiesel and renewable diesel is attainable in 2019. We have not, however,
calculated the maximum reasonably achievable volume of advanced biodiesel and renewable
diesel for 2019, which would be higher than the attainable volume of 2.8 billion gallons. Even if
additional volumes of advanced biodiesel and renewable diesel are not available, significant
volumes of conventional biodiesel and renewable diesel are produced globally and could be used
to supply the total renewable fuel volume for 2019.
Finally, we note that because we have used the cellulosic waiver authority to reduce the
advanced biofuel and total renewable fuel volumes by the maximum amount, further reductions
to the total renewable fuel volume would require the use of an additional waiver authority. As we
explain in Section II of the final rule and Section 2 of this document, we do not believe exercise
of our other waiver authorities is warranted.
94 "Projecting Advanced Biofuel Production and Imports for 2018 (November 2018)" Memorandum from Dallas
Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
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Comment:
A commenter stated that EPA should reduce the total renewable fuel volume to a level that does
not result in the diversion of vegetable oils from existing uses (including use in food markets)
which they claim would result in increased production of soybeans or palm oil.
Response:
EPA recognizes the potential negative impacts of increasing the production of biodiesel and
renewable diesel by diverting feedstocks used to produce these fuels from other markets. This is
one of the reasons cited by EPA in reducing the advanced biofuel and total renewable fuel
volumes by the maximum amount using the cellulosic waiver authority. Further reductions to the
advanced biofuel and/or total renewable fuel volumes would require the use of another waiver
authority. As we explain in Section II of the final rule and Section 2 of this document, we do not
believe exercise of our other waiver authorities is warranted.
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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: 0531, 0672, and
1197.
Comment:
One commenter stated that the total renewable fuel volume requirement for 2019 should be
17.37 billion gallons.
Response:
A total volume requirement of 17.37 billion gallons is below the lowest volume permitted under
the cellulosic waiver authority, which is 19.92 billion gallons in the final rule.95 As discussed in
Section II.A.2 of the final rule and Section 2 of this document, we have made a determination
that additional reductions below 19.92 billion gallons are not warranted for 2019. Moreover, this
commenter's suggested volume of 17.37 billion gallons is premised on a poolwide concentration
of 9.7% ethanol. As described in Section 5.1.2 of this document, we believe that this is
inappropriate.
Comment:
One commenter stated that the total renewable fuel volume requirement should be 19.18 billion
gallons, comprised of 4.18 billion gallons of advanced biofuel and 15 billion gallons of
conventional renewable fuel. This commenter stated that the 2.8 billion gallons of BBD assumed
in support of the 4.88 billion gallon proposal would cause significant market disruption and
GHG impacts.
Response:
We do not believe that the suggested volumes would be appropriate. Not only are they
significantly lower than the volume we have determined to be 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 justified under the general waiver authority as described more fully
in Section 2 of this document.
95 If this commenter's preferred cellulosic biofuel volume requirement of 222 mill gal were used, the lowest
permissible volume under the cellulosic waiver authority would be 19.72 bill gal.
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Comment:
One commenter stated that EPA's analysis of the attainability of 19.88 billion gallons in the
proposal was inadequate, and that EPA must take into account the difficulty in consuming
increased volumes of ethanol.
Response:
The commenter appears to make the assumption that an increase in the volume requirement for
total renewable fuel will necessarily require an increase in U.S. ethanol consumption. However,
historically this has not been the case; the market has demonstrated a stronger preference for
increases in biodiesel and renewable diesel rather than increases in ethanol as the standards have
increased over the last several years.
In a memorandum to the docket, we did provide a discussion of the ways in which the market
could make available the proposed volume of 19.88 billion gallons of total renewable fuel. An
updated version of that memorandum describes how the market could make available the final
volume of 19.92 billion gallons of total renewable fuel.96 These memoranda recognize that
consumption is the primary constraint on the amount of ethanol used in the U.S. We also
discussed the attainability of advanced biofuel in detail in Section IV of both the proposal and
the final rule. In addition, we note that we reduced total and advanced biofuel volumes by the
maximum amount allowed under the cellulosic waiver authority. Further reductions to the
advanced biofuel or total renewable fuel volumes would require the use of another waiver
authority. As we explain in Section II of the final rule and Section 2 of this document, we do not
believe exercise of our other waiver authorities is warranted.
Comment:
One commenter stated that the proposed volume requirement for total renewable fuel would put
refinery jobs at risk.
Response:
The commenter provided no analyses to support this comment. As exports of refined petroleum
products have been increasing steadily since 2011 at the same time that the RFS volume
requirements have increased, there is little evidence to suggest that the RFS program has resulted
in a loss of refining industry jobs.97 See also Section 2.1.2 of this document, where we discuss
severe economic harm, including alleged harms associated with the refining industry.
96 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
97 "Historical exports of petroleum products," available in docket EPA-HQ-OAR-2018-0167.
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Comment:
One commenter stated that the volume requirement for total renewable fuel should be higher
than 19.88 billion gallons to promote energy independence, GHG reductions, and rural economic
development.
Response:
Under our interpretation of the cellulosic waiver authority, articulated in past annual rules and
repeated in Section II. A. 1 of the final rule, we believe that advanced biofuel and total renewable
fuel should be reduced by the same amount. As a result, a higher volume of total renewable fuel
would result only if we allowed some advanced biofuel to backfill for the shortfall in cellulosic
biofuel. However, as described in Section IV of the final rule and Section 4 of this document, we
do not believe that this would be appropriate. While an advanced biofuel volume higher than
4.92 billion gallons may be attainable, we do not believe that doing so would be appropriate
given the higher costs, increased frequency of feedstock and fuel diversions, reduced GHG and
energy security benefits, and potential market disruptions that would likely result.
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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: 0493, 0522,
0539, 0586, 0620, 1033, 1035, 1036, 1041, 1201, and 1267.
Comment:
Several commenters stated that the implied volume requirement for conventional renewable fuel
should be set at a level reflecting a nationwide average gasoline ethanol concentration of 9.7%.
Another commenter stated that doing so would protect small retailers. Yet another stated that an
implied volume requirement for conventional renewable fuel of less than the proposed 15 billion
gallons would address EPA's acknowledgment of the environmental harm caused by corn
ethanol.
Response:
These comments conflate the implied conventional renewable fuel volume requirement with
ethanol. The two are not the same, as described in the next response. As discussed further in a
memorandum to the docket,98 the market has historically made available, and will likely make
available in 2019, significant volumes of non-ethanol conventional renewable fuel, primarily but
not limited to biodiesel. Moreover, as described in Section 5.1.2 of this document and the
memorandum to the docket, the market achieved 10.13% poolwide ethanol concentration in
2017. We believe that E15 and E85 can continue to supplement E10 to reach at least the same
level. 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 2019.
If more advanced biofuel volumes are used than required by the 2019 standard, then less than 15
billion gallons of conventional biofuel will be needed to meet the total renewable fuel standard.
Retailers are not required to offer higher level ethanol blends such as El 5 and E85 but can offer
them if they provide an economic advantage. Moreover, the applicable standards do not require
the use of ethanol at all, and there is no way to set the standards in such a way as the guarantee
that the market will not exceed 9.7% ethanol. Finally, as we further explain in our recent denial
of petitions to revise the point of obligation and in Section 2.1.2 of this document, we do not
believe that the RFS program causes economic harm to small retailers."
The proposal did not address the environmental impacts of corn ethanol, though they have been
addressed in other EPA reports. As discussed further in a memorandum to the docket,100 and in
Section 2.1.3 of this document, we have made a determination that alleged potential
environmental impacts were not severe, and thus do not warrant any reductions under the general
waiver authority.
98 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
99 "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," November 17, 2017.
100 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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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. As we discuss in Section
IV.B. 1 of the final rule, 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.
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, supply of El 5 will increase and supply of E0 will decrease, both of which are a
problem for boaters.
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. The market will supply E0 if there
is demand for it, and EPA regulations are designed to prevent misfueling of marine engines with
E15. See also Section 5.1.6 of this document.
Comment:
One commenter supported the proposed 15 billion gallon implied volume requirement for
conventional renewable fuel because it provides support for the infrastructure needed for higher
ethanol blends.
Response:
While the implied volume requirement for conventional renewable fuel does not require the use
of ethanol and need not be met exclusively with ethanol, it may provide some incentive to
retailers to expand offerings of higher level ethanol blends. For purposes of evaluating the
market impacts of the applicable 2019 standards, however, we determined that the market could
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make available the total renewable fuel volume required by this action with a poolwide average
ethanol concentration equivalent to that in 2017: 10.13%.
Comment:
One commenter stated that there is sufficient conventional renewable fuel to reach 15 billion
gallons, while several others stated that there is insufficient ethanol to reach 15 billion gallons.
Response:
It is inappropriate to base the determination of the appropriate implied volume requirement for
conventional renewable fuel on ethanol alone since there are several non-ethanol conventional
renewable fuels that qualify as conventional renewable fuel. Thus, while it is unlikely that
ethanol use could reach 15 billion gallons in 2019, we have determined that there are sufficient
volumes of conventional biodiesel and other conventional renewable fuels available to permit an
implied volume requirement for conventional renewable fuel of 15 billion gallons to be reached.
Comment:
One commenter stated that EPA had considered the constraints of the E10 blendwall for
advanced biofuel but not for conventional renewable fuel.
Response:
The constraints associated with efforts to exceed the E10 blendwall apply to total ethanol, not to
advanced biofuel or conventional renewable fuel specifically. In a memorandum to the docket,
we did discuss the total volume of ethanol that the market could use in response to this action.101
That discussion included a consideration of different potential consumption levels of E15 and
E85. We did not, however, rely on that analysis in deciding to exercise the maximum reductions
permitted under the cellulosic waiver authority. Further reductions to the advanced biofuel or
total renewable fuel volumes would require the use of another waiver authority. As we explain in
Section II of the final rule and Section 2 of this document, we do not believe exercise of our
other waiver authorities is warranted.
Comment:
One commenter stated that EPA should reduce the implied volume requirement for conventional
renewable fuel to 14 billion gallons and increase the advanced biofuel volume requirement to
generate more GHG benefits.
Response:
While we have the authority to reduce the advanced biofuel volume requirement by less than the
reduction in cellulosic biofuel, permitting some advanced biofuel to backfill for the shortfall in
101 "Updated market impacts of biofuels in 2019," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
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cellulosic biofuel, we have determined that it would not be appropriate to do so based on a
consideration of costs, and the potential for increases in feedstock/fuel switching, associated
market disruptions, and reduced GHG and energy security benefits.
Moreover, reducing the implied volume requirement for conventional renewable fuel to 14
billion gallons while simultaneously increasing the advanced biofuel volume requirement above
the proposed level of 4.88 billion gallons could not be accomplished under the cellulosic waiver
authority. As discussed in Section II. A. 1 of the final rule, we continue to believe that the statute
is best interpreted to require equal reductions in both advanced biofuel and total renewable fuel
under the cellulosic waiver authority. To accomplish what this commenter has suggested would
require that we reduce both advanced biofuel volume and total renewable fuel by less than the
reduction in cellulosic biofuel, and then reduce total renewable fuel further using the general
waiver authority. However, we do not believe that such a reduction could be justified under the
general waiver authority, as discussed in Section II.A.2 of the final rule and in Section 2.1 of this
document.
Comment:
One commenter stated that EPA should limit the required volume of corn ethanol because of its
adverse impacts on the environment and food security.
Response:
As discussed above, this comment conflates corn-ethanol with the implied volume requirement
for conventional renewable fuel. Moreover, while corn-ethanol is currently the predominant form
of conventional renewable fuel, further reduction of the 2019 biofuel volumes is unlikely to
impact corn ethanol production in U.S., and consequently unlikely to limit any related
environmental or food security impacts. 102
Comment:
One commenter stated that corn ethanol produces very little benefit compared to its cost, and that
EPA should instead be promoting cellulosic and advanced biofuels. Another commenter stated
that EPA should be supporting cleaner advanced biofuels to reverse the environmental damage
from ethanol.
Response:
The structure of the applicable standards that Congress established does not require that we make
tradeoffs between conventional renewable fuel and advanced/cellulosic biofuels. Instead, we can
and have considered them separately. For instance, we have set the cellulosic biofuel volume
requirement at the level that represents the projected volume available, and the advanced biofuel
volume requirements at a level that reflect a consideration of what can be produced and
imported, costs, and other factors such as feedstock and fuel diversions. Under our long-standing
102 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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interpretation that advanced biofuel and total renewable fuel should be reduced by the same
amount under the cellulosic waiver authority, we then considered whether additional reductions
in total renewable fuel, which would affect only the implied conventional renewable fuel volume
requirement, were warranted under the general waiver authority. As discussed in Section II.A.2
of the final rule, we have determined that the criteria for further reductions have not been met.
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5.3.3 Other Comments Related to the Determination of Standards
EPA did not receive any comments on this topic.
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6. BBD Volume for 2020
6.1 General
Commenters that provided comment on this topic include but are not limited to: 0389, 0442,
0530, 0531, 0532, 0535, 0591, 0620, 0660, 0711, 1033, 1039, 1201, 1202, 1267, 1269, 1272,
1277, and 1286.
Comment:
One commenter suggested that based on the number of small refinery exemptions granted for
2020, and changed gasoline demand, the 2020 BBD volume may be binding.
Response:
Because all of the standards, including BBD and advanced biofuel, are calculated based on a
percentage of an obligated parties' gasoline and diesel production, any effects on the aggregate
use of renewable fuel due to small refinery exemptions would result in proportional effects on
the use of both advanced biofuel and of BBD. Thus, as long as EPA establishes a 2020 BBD
volume that is less than the 2020 advanced biofuel volume, the BBD volume would likely not be
binding. We explain this further in Section VI of the final rule.
Comment:
Some commenters suggested that we should support renewable diesel over biodiesel due to
implications for home heating equipment.
Response:
We recognize some of the advantages of renewable diesel, but also note that the statutory
definition of BBD includes both biodiesel and renewable diesel.103 Accordingly, Congress
directed EPA to establish a single standard for BBD, including both biodiesel and renewable
diesel. The statute does not contemplate a separate standard for renewable diesel. With regard to
the technical issues raised for home heating oil, see our response in Section 5 of this document.
In any event, EPA does not mandate the use of renewable diesel or biodiesel in home heating
equipment, and this action does not limit the market's ability to use either fuel or other fuels in
home heating equipment.
Comment:
Some commenters supported our proposed volume, which grows the BBD volume by 330
million gallons to 2.43 billion gallons in 2020. Some commenters also suggested EPA could
103 The statutory definition of biomass-based diesel refers to a diesel fuel substitute produced from nonpetroleum
renewable resources that meets the registration requirements for fuels and fuel additives established by EPA under
section 7545. Both biodiesel and renewable diesel meet this definition.
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support further growth in the BBD industry. Some commenters suggested EPA should set the
BBD standard higher, including greater than 2.88 billion gallons. Some pointed to the attainable
volume of advanced biodiesel and renewable diesel (2.8 billion gallons) as an appropriate
volume for the BBD standard. Others suggested EPA should not set the standard higher than 2.1
billion gallons due to cost concerns.
Response:
Our discussion of the BBD volume for 2020, including our consideration of volumes both higher
and lower than the volume in this final rule can be found in Section VI of the final rule and a
memorandum to the docket.104
Comment:
A commenter suggested that the 2020 BBD standard may become binding if EPA resets the
advanced volume to equal to the 2020 BBD volume.
Response:
While the 2020 BBD volume could become binding if EPA were to reset the advanced volume to
be equivalent to the 2020 BBD volume, this is something we will consider as we evaluate
potential volumes in the context of the rulemaking establishing the 2020 advanced biofuel
standard. In addition, as we explain in Section VI of the final rule, even though we are not
establishing the 2020 advanced biofuel volume requirement as part of this rulemaking, we expect
that, as in the past, the 2020 advanced volume requirement will be higher than the 2020 BBD
requirement, and, therefore, that the BBD volume requirement for 2020 would not be expected to
impact the volume of BBD that is actually produced and imported during the 2020-time period.
Comment:
Some commenters suggested we should set the BBD standard to reflect domestically produced
biodiesel, for which annual production has not exceeded 1.6 billion gallons. These commenters
also suggested that the interaction between the 2020 advanced biofuels volume, which would be
determined in the forthcoming reset rulemaking, and the 2020 BBD volume warrants
consideration of a lower BBD volume due to the nested nature of the standards.
Other commenters suggested that EPA should set a BBD standard that does not increase over the
2019 BBD standard.
Response:
We are aware of the interaction between the 2020 BBD and the reset advanced biofuel volume,
and this will be something we consider in the context of the reset rule.
104 "Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD) Applicable Volume."
memorandum from EPA Staff to EPA docket EPA-HQ-OAR-2018-0167.
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We do not believe that it would be appropriate to set the BBD standard to only reflect domestic
production of BBD. The RFS program contemplates the use of imported biofuel and does not
discriminate against such imports.105 Given that imported biofuels can be used to satisfy the
renewable fuel standards, it is appropriate for EPA to consider their availability in setting the
BBD standard. We have also historically considered the availability of imported biofuels in the
exercise of our discretionary waiver authorities. See, e.g., Section IV of the final rule (in
exercising the cellulosic waiver authority, considering imports of advanced biodiesel and
renewable diesel) and Section 2.1.1 of this document (considering imports in declining to
exercise the general waiver authority).
Comment:
A commenter suggested that we should reduce the BBD standard due to increased GHG
emissions from BBD.
Response:
EPA determined in the 2010 RFS2 rule that biodiesel and renewable diesel made from certain
qualifying feedstocks meets the statutorily required 50% lifecycle GHG reduction to qualify as
BBD. We did not reopen this issue in this proceeding, and thus lifecycle GHG analyses of BBD
are beyond the scope of this rule. We did, however, consider the impacts on climate change in
setting the BBD standard as described in the docket memorandum "Statutory Factors Assessment
for 2020 Biomass-Based Diesel." While the market is meeting the advanced biofuel standard
primarily with advanced biodiesel and renewable diesel, we have set the BBD standard at a
lower level to preserve space for other advanced biofuels, which must also meet a 50% GHG
reduction threshold and which could have greater GHG benefits than BBD.
Comment:
Several commenters stated that EPA cannot set the 2020 BBD volume requirement based on an
anticipated approach to setting the 2020 advanced biofuel requirement in the future.
Response:
We disagree. As we explain in Section VI of the final rule, we believe it is appropriate to
consider the advanced biofuel volume in setting the BBD volume. In addition, since 2016 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.
105 See, e.g., CAA section 21 l(o)(5)(A); 40 CFR 80.1426.
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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 2020. Their arguments for reducing BBD
volumes focused on feedstock diversion leading to an increased demand for 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 increased
competition for feedstock which could result in exacerbation of social or environmental
problems associated with expansion of palm oil production. However, at this time, we do not
believe that the 2020 BBD volume requirement of 2.43 billion gallons will lead to such a result.
We note that in exercising our broad discretion under the cellulosic waiver authority to establish
the advanced biofuel volume requirement for 2019, 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). Specifically, we found that the market can
reasonably attain 2.61 billion gallons of advanced biodiesel and renewable diesel in 2019, with
minimal feedstock and fuel diversions. For similar reasons, we expect that the market can use at
least 2.43 billion gallons of BBD in 2020 with minimal or no diversions.
We do not believe establishing a lower 2020 BBD volume will reduce costs. As we explain in
Section VI of the final rule, the use and production of BBD is driven by the advanced biofuel
volume, not the BBD volume.
We agree that we should allow for competition and innovation in the advanced biofuel industry
for the development of more environmentally beneficial fuels. As we explain in Section VI of the
final rule and a memorandum to the docket,106 we have intentionally preserved a significant
space for other advanced biofuels to facilitate this.
106 "Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD) Applicable Volume."
memorandum from EPA Staff to EPA docket EPA-HQ-OAR-2018-0167.
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6.2 Supporting the BBD Industry
Commenters that provided comment on this topic include but are not limited to: 0530, 0591,
0664, 0711, 1039, 1269, and 1272.
Comment:
Some commenters suggested that the 14-month lead time for setting the BBD standard provides
a unique signal to producers and investors and allows the market certainty about the amount of
BBD required and time for investments to meet the standard. They suggested this incentive
justifies a higher BBD volume. They also suggested that because of the 14-month lead time
provided in the statute, the BBD volume should be used to drive BBD use, rather than the
advanced standard.
Response:
This comment is responded to in Section VI of the final rule.
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6.3 Ensuring Opportunities for Other Advanced Biofuels
Commenters that provided comment on this topic include but are not limited to: 0530, 0591,
0711, 1277, and 1286.
Comment:
A commenter suggested that the goal to ensure opportunities for other advanced biofuels is not
required by the statute and is ineffective.
Another commenter suggested that instead of setting a lower BBD standard for 2020 to preserve
space for advanced biofuels, EPA could allow for a higher advanced volume when it determines
the advanced biofuel volume for 2020 to create space for other advanced biofuels. They
suggested that EPA should look at the statutory factors and determine the volume that is
warranted under those without consideration of other advanced biofuels.
Response:
While ensuring opportunities for other advanced biofuel is not required by the statute, we
disagree that it is ineffective. The statutory volumes for BBD and advanced biofuel in 2011 and
2012 appear to reflect a desire by Congress to preserve space for advanced biofuels other than
BBD. As we explain in Section VI.B of the final rule, since 2011, EPA has consistently
preserved space for other advanced biofuels. This has historically allowed for other advanced
biofuels to be used to meet the advanced standard. As we explain further in a memorandum to
the docket,107 these other advanced biofuels may have more beneficial impacts when considering
some of the factors articulated in CAA section 211 (o)(2)(B)(ii), and in the long term, we believe
it is appropriate to continue to allow for space for their use. 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 consider the
nested nature of the RFS requirements when determining the appropriate volume requirement for
BBD. 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 the 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 and 2019 and are raising it again to 2.43 billion gallons for 2020.
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.
107 "Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD) Applicable Volume."
memorandum from EPA Staff to EPA docket EPA-HQ-OAR-2018-0167.
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Therefore, by setting the BBD volume requirement at a level lower than the advanced biofuel
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 2020 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 advanced 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 2.43 billion gallons for BBD in 2020 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.
In response to comments that EPA could set a higher advanced volume in 2020 to create space
for other advanced biofuels rather than setting a lower BBD standard, we do not believe that this
approach would be appropriate. Because other advanced biofuels currently take up a small
portion of the market, it is the market signal that we are preserving space for these fuels that
allows for their use while also ensuring that we are not setting a standard that cannot be met. If
we were to take the commenter's approach, we could potentially end up setting an advanced
biofuel volume that could not be met because the other advanced biofuels may not end up being
available to meet the standard in 2020. Our approach allows for development of other advanced
biofuels, or additional BBD if those fuels do not appear in the market.
Regarding commenters' suggestion that we should set the BBD volume without considering the
relationship between BBD and other advanced biofuels, we disagree. The statute directs EPA to
review "the implementation of the program" as well as to consider the impacts of "renewable
fuels." "[T]he program" refers to the RFS program, and both "the program" and "renewable
fuels" generally include advanced biofuels. In establishing the BBD volume, the advanced
biofuel volume part of "the program" and "renewable fuels" is both relevant and important. As
we explain in this document and in Section VI of the final rule, BBD use and production has
historically been driven by the advanced biofuels standard. This is an important market reality.
Thus, in reviewing the program and analyzing the statutory factors, as they apply to BBD, we
reasonably consider the relationship between BBD and advanced biofuels.
Comment:
A commenter suggested that there is not a need to grow the space reserved for other advanced
biofuels.
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Response:
The non-cellulosic advanced biofuel volume increases by 500 million gallons in 2019. In this
action setting the 2020 BBD volume, EPA is raising the BBD volume by the entirety of that 500
million increase (330 million gallons of BBD, after applying the 1.5 equivalence ratio). Thus, we
are allocating the 500 million-gallon increase in advanced biofuels to BBD, as opposed to
creating greater space for other advanced biofuels.
We acknowledge that the 500 million-gallon increase in the non-cellulosic advanced biofuels
volume occurs in 2019, not in 2020. Nonetheless, we believe that increasing the 2020 BBD
volume by 330 million gallons, equivalent to the 500 million-gallon increase in the 2019
advanced volume, is appropriate for three reasons. First, EPA previously established the 2019
BBD volume in the 2018 final rule at the same volume as in 2018 (2.1 billion gallons). EPA's
decision not to increase the 2019 BBD volume in the 2018 final rule, in combination with the
500 million gallons increase in the 2019 advanced biofuel volume in this rule, results in a
significant increase in the opportunity for other advanced biofuels in 2019. As discussed in
greater detail in Section IV of the final rule, we expect that the supply of other advanced biofuels
will still fall short of the space allowed for it in 2019. We believe it therefore is appropriate to
increase the BBD volume, as even after the increase in the BBD volume we anticipate there will
be sufficient incentives for other advanced biofuels to compete. Specifically, we note that in
2018, our standards preserved an 852 million-gallon space for other advanced biofuels, while we
only expect 121 million gallons of such biofuels to be supplied. This space increases by 500
million gallons in 2019 (to a total of 1.35 billion gallons). Given the limited availability of other
advanced biofuels, we do not believe this additional 500 million-gallon space is needed to incent
the development of other advanced biofuels.
Second, given the 14-month statutory lead time for setting the BBD volume compared to the 1-
month statutory lead time for the advanced biofuel volume, the 2020 BBD volume is the earliest
available opportunity for us to adjust the BBD volume in light of the 2019 advanced biofuel
volume. We believe it is appropriate for us to do so at this first opportunity.108 Simultaneously
raising both the 2019 non-cellulosic advanced biofuels volume and the 2020 BBD volume
signals to the market EPA's intent to preserve sufficient space, without undue increases, for other
advanced biofuels over time.
Finally, we recognize that the space for other advanced biofuels in 2020 will ultimately depend
on the 2020 advanced biofuel volume. While EPA is not establishing the advanced biofuel
volume for 2020 in this action, we anticipate that the non-cellulosic advanced biofuel volume for
2020, when established, will be greater than 3.65 billion gallons (equivalent to 2.43 billion
gallons of BBD, after applying the 1.5 equivalence ratio). This expectation is consistent with our
actions in previous years. Accordingly, we expect that the 2020 advanced biofuel volume,
together with the 2020 BBD volume established in this action, will continue to preserve a
considerable portion of the advanced biofuel volume that could be satisfied by either additional
gallons of BBD or by other unspecified and potentially less costly types of qualifying advanced
108 We do not believe that it would be appropriate to reconsider to 2019 BBD volume in this action for many
reasons. For example, doing so would generate significant regulatory uncertainty and amount to reconsidering the
standard outside of the timeframe provided for by the statute, see CAA section 21 l(o)(2)(B)(ii).
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biofuels. To the extent that the 2020 advanced biofuel volume is less than 3.65 billion gallons or
otherwise insufficient to preserve the gap for other advanced biofuels, we will consider these
factors in the rulemaking establishing the 2020 advanced biofuel standards.
Comment:
Some commenters supported EPA's approach to leaving space for non-BBD advanced biofuels
because this encourages the development of other technologies that could produce or increase
volumes of other advanced biofuels.
Response:
EPA agrees with these commenters; this is one of the reasons we have left space for other
advanced biofuels as described in Section VI of the final rule, and in the docket memorandum
"Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD) Applicable
Volume."
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6.4 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: 0672.
Comment:
We received a comment that suggested that because several of the factors articulated in CAA
section 21 l(o)(2)(B)(ii)(I)-(VI) refer to domestic impacts, EPA should only consider domestic
volumes of fuel when setting standards. They suggest that EPA should not consider imports
when setting volumes.
Response:
While some of the statutory factors do include domestic impacts, we do not believe that it would
be appropriate to only include domestic volumes when setting the standards. Both imported and
domestically-produced BBD qualify for the standard, and we believe it is appropriate to consider
both types when setting the standard.
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6.4.2 Consideration of the Review of the Program to Date
EPA did not receive any comments on this topic.
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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: 0528, 0586,
1029, 1033, 1036, and 1202.
Comment:
Several commenters asked the agency to use the severe environmental harm prong of the general
waiver authority to address environmental impacts associated with biofuels.
Response:
For a discussion of severe environmental harm under the general waiver authority please see the
docket memorandum entitled "Endangered Species Act No Effect Finding and Determination on
Severe Environmental Harm under General Waiver Authority."
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,
air quality, and water supply. For example, several commenters associate agricultural run-off
from corn production and the resulting harmful algal blooms in the Gulf of Mexico with the RFS
program. Several commenters expressed concerns about habitat loss and degradation due to the
extensification and intensification of biofuel crop production, especially in the Prairie Pothole
region. Many of these commenters also raised concerns regarding deforestation in countries such
as Argentina and Indonesia, from any potential increases in demand for palm and soy oils. Some
commenters also raised concerns about the air quality impacts associated with biofuels.
Response:
Analyses completed in 2011 and updated in 2018 suggest that some of the environmental
impacts from increased corn and soy production is associated with biofuels.109'110'111 As
described in the 2018 Second Triennial Report to Congress, there is more evidence of negative
environmental impacts associated with land use change and biofuel production than there was
suggested in 2011.112 However, the magnitude of the effect from biofuels is still unknown and
109 U.S. EPA. December 2011. Biofuels and the Environment: First Triennial Report to Congress. EPA/600/R-
10/183F.
110 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.
111 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
112 Since 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 at. 2015: Wright et at. 20171. (2) the USDA 2012 Census of Agriculture (Census) (USD A
20141. and (3) the 2012 USDA National Resources Inventory (NRI) (U 15). There have also been several
regional studies documenting land use change in different parts of the country, including the Prairie Pothole Region
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has not been quantified to date. Furthermore, the more recent scientific literature cited in the
2018 Second Triennial Report to Congress continues to support the conclusion from the 2011
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. 113' 114
We further note that, as discussed in the docket memo entitled "Endangered Species Act No
Effect Finding and Determination on Severe Environmental Harm under the General Waiver
Authority for 2019 Final Rule," we determined that the 2019 RFS standards are not expected to
increase the cultivation of corn or oilseed crops in the U.S., because the production of these
feedstocks will be driven by other factors in 2019. In addition, the 2019 RFS standards do not
require, authorize, fund or carry out the production of any specific biofuel or crop. For further
details, please see the above referenced docket memo.
While some commenters believe 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 requires deciphering many layers of causation that when considered together
make attribution to the RFS program difficult.115 As described in detail in the 2018 Second
Triennial Report to Congress, connections between biofuel production and environmental
impacts is an active area of research for many environmental endpoints such as GHGs, water
quality, and land use change. While no definitive conclusions have been made regarding RFS-
caused environmental impacts,116 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:
Several commenters stated that the use of biofuels, notably ethanol, has air quality benefits
including reductions in PM, CO, benzene, and unburned hydrocarbons when compared to
petroleum.
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
(Johnston 2013: Johnston 2014: Reitsma et at. 20161. around the Great Lakes (Mladenoff et at. 20161. for the
western cornbelt (Shao et al 20161. for lands in the Conservations Reserve Program (CRP) (Morefield et at. 20161.
and for corn/soybean farms (WaHander et al 20111.
113 U.S. EPA. December 2011. Biofuels and the Environment: First Triennial Report to Congress. EPA/600/R-
10/183F.
114 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
115 Id.
116 Id.
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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.117
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.118
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.119 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.120 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.
More recently, the 2018 Second Triennial Report to Congress found that emissions of NOx,
SOx, CO, VOCs, ammonia (NH3), and particulate matter can be impacted at each stage of
biofuel production, distribution, and usage. These impacts depend on feedstock type, land use
change, and feedstock production practices. Ethanol from corn grain has higher emissions across
the life-cycle than ethanol from other feedstocks, and ethanol facilities relying on coal have
higher air pollutant emissions than facilities relying on natural gas and other energy sources,
although coal-fired plants account for a small fraction of overall production. Only limited data
exist on the impacts of biofuels on the tailpipe and evaporative emissions of Tier 3 light-duty
vehicles and light-duty vehicles using advanced gasoline engine technologies to meet GHG
emissions standards. Comprehensive studies of the impacts of biofuels on the emissions from
advanced light-duty vehicle technologies, similar in scope to previous studies of such impacts on
Tier 2 vehicles, would improve understanding.121 Heavy-duty diesels without catalysts were
found to have lower PM emissions and slightly higher NOX emissions with a B5 (5%)
biodiesel/diesel blend. However, at this time there are insufficient data to determine an effect on
catalyst-equipped diesel engines. The magnitude, timing, and location of emissions changes can
have complex effects on the atmospheric concentrations of criteria pollutants (e.g., ozone (O3)
and PM2.5) and air toxics, the deposition of these compounds, and subsequent impacts on human
and ecosystem health. We further discuss air quality impacts in a memorandum to the docket.122
117 See 75 FR 14803-08 (March 26, 2010) and Chapter 3.4 of the RFS2 RIA (EPA-420-R-10-006).
118 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. Table 3.2-7 and 3.2-8.
119 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. Table 3.2-9.
120 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. Table 3.2-2 and 3.2-3.
121 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
122 "Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD) Applicable Volume."
memorandum from EPA Staff to EPA docket EPA-HQ-OAR-2018-0167.
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6.4.4 Energy Security Impacts
Commenters that provided comment on this topic include but are not limited to: 0619, 0620,
0672, and 1277.
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 2020 BBD RVO
reduces U.S. oil imports and contributes to U.S. energy independence and security. One
commenter suggested that fuel diversity will be critical for the U.S.'s transportation sector and
argued that the U.S. needs to promote "drop in" renewable fuels to replace diesel fuel, which is
used mainly in the heavy-duty vehicle sector of the U.S. economy. Two commenters pointed out
that the RFS requirements are being met with significant renewable fuel imports as a share of net
total renewable fuel supplies available. They suggested that U.S. biodiesel and renewable diesel
imports available for meeting the RFS requirements increased from 44 million gallons in 2011 to
655 million gallons in 2017, with imports of biodiesel from Argentina and Indonesia accounting
for a majority of the imports. According to the commenters, the increase in imports of biodiesel
is undermining the RFS's statutory goals of energy security and energy independence.
Response:
Assuming that the current tariffs in place on biodiesel from Argentina and Indonesia are
unchanged, EPA does not project any imported biodiesel from Argentina and Indonesia in the
near term (i.e., 2019 or 2020) (see Section IV of the final rule for our projection of advanced
biodiesel and renewable diesel that could be supplied to the U.S. in 2019). However, we note that
imports of biodiesel and renewable diesel from other countries not impacted by the tariffs (such
as Canada and countries in the European Union) have increased in recent years.
The wider use of renewable fuels such as BBD, as well as other advanced biofuels, both
domestically produced and imported, improves the U.S.'s energy security position. The
possibility of foreign oil supply disruptions represents an energy security issue for the U.S. and
could result in increased fuel costs for consumers. Such disruptions may largely stem from
potential actions that restrict the supply of oil by significant key market participants, such as
OPEC, or from wars or other sudden geo-political 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. Since potential biofuel supply disruptions are likely to
be uncorrected with oil supply shocks, increases in biofuels to meet the RFS, both domestically
produced and imported, will provide energy security benefits. While imports of biodiesel reduce
the U.S.'s energy independence by marginally increasing the U.S.'s reliance on foreign sources
of energy, this needs to be balanced with the energy security benefits and other statutory factors
set forth in CAA section 21 l(o)(2)(B)(ii)(I)-(VI) in determining the 2020 BBD volume
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requirement. For more discussion on this topic see Section 7.1.2 of this document and a
memorandum to the docket.123
We believe our final 2020 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.
123 "Final Statutory Factors Assessment for the 2020 Biomass Based Diesel (BBD) Applicable Volume."
memorandum from EPA Staff to EPA docket EPA-HQ-OAR-2018-0167.
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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: 0591, 0620,
0660, 0672, 0711, 1041, and 1277.
Comment:
Multiple commenters stated that production capacity was unlikely to limit the production of
biodiesel and renewable diesel. One commenter cited the domestic production capacity reported
by EPA (4.1 billion gallons) to support their comments. Others pointed to BBD capacity as high
as 3 billion gallons within the U.S.
Response:
EPA does not expect that production capacity will limit the production of biodiesel and
renewable diesel in 2019 or 2020.124
Comment:
A commenter stated that tariffs on biodiesel imported from Argentina and Indonesia will result in
far fewer imports of biodiesel from these countries.
Response:
EPA does not project any imported biodiesel from Argentina and Indonesia in 2019 or 2020 (see
Section IV of the final rule for our projection of advanced biodiesel and renewable diesel that
could be supplied to the US in 2019). However, we note that imports of biodiesel and renewable
diesel from other countries not impacted by the tariffs (such as Canada and countries in the
European Union) have increased in recent years.
Comment:
A commenter stated that the current absence of the biodiesel tax credit would likely result in
decreased production of biodiesel and renewable diesel.
Response:
As discussed in Section IV of the final rule, production of biodiesel and renewable diesel has
generally increased since 2011 despite the biodiesel tax credit only being available retroactively
in several of these years. While increases in production have been larger in years where the tax
credit is available prospectively, this is not a necessary condition for increasing production of
biodiesel and renewable diesel. For example, domestic production of advanced biodiesel and
renewable diesel is expected to increase by 320 million gallons from 2017 to 2018 despite the
124 See Section IV of the final rule and "Biodiesel and Renewable Diesel Registered Capacity (May 2018)"
Memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-0167 for EPA's estimate of biodiesel
and renewable production capacity.
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absence of the tax credit in 2018. We projected that the incentives provided by the RFS program
will be sufficient to incentivize the volumes of BBD projected in this rule for 2019 and 2020.
Comment:
Multiple commenters cited the high production of BBD in the fourth quarter of 2017 as evidence
that higher production of BBD is possible in 2019 and 2020. Some commenters claimed that the
production achieved in this quarter (670 million gallons) was evidence that production could
reach at least 2.7 billion gallons annually, while one commenter claimed even higher volumes
were possible.
Response:
We do not believe it is appropriate to assume that the highest production rate achieved over three
months of the year can be sustained for a full year. For example, if production of BBD in a
quarter were increased by drawing down feedstock supplies or storing excess production that
could not be distributed or used during that time period it is unlikely that this higher production
rate could be sustained over the long term. We recognize the potential for increased production
of BBD in 2018 and 2019 and have projected that production of BBD will continue to grow in
these years. We do not, however, think that it is appropriate to project production in 2019 or
2020 by simply multiplying the volume produced in a recent quarter by four. As we explain in
Section IV of the final rule, the production and availability of BBD depends on many complex
regulatory and market factors.
Comment:
Multiple commenters stated that EPA should only consider domestically produced BBD in
setting the BBD volume for 2020. One commenter further stated that the 2020 BBD volume was
unreasonably high, and it would require a nearly 30% increase from domestic BBD production in
2017 (1.88 billion gallons).
Response:
As discussed in Section 6.4.1 of this document, we do not believe that the statutory factors
constrain EPA to considering only domestically produced BBD when establishing the BBD
volume. However, even were we to only consider domestically produced BBD, we also disagree
with the commenter that 2.43 billion gallons of BBD in 2020 is unreasonably high. Based on
data through September 2018, we currently project that domestic BBD production will be
approximately 2.15 billion gallons in 2018, approximately 320 billion gallons higher than in
2017. If this growth rate continues through 2019 and 2020, domestic BBD production in 2018
would exceed the 2.43 billion gallon volume established in this rule for 2020.
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Comment:
A commenter stated that some volume of BBD may be used in marine fuel, especially with the
January 1, 2020 compliance date for the 0.5% sulfur IMO standard. Any RINs generated for
BBD used as marine fuel would not be available for compliance with the RFS obligations.
Response:
As the commenter notes, as directed in EISA, fuel used as marine fuel does not qualify in the
RFS program. Because of the financial incentive provided by RINs, we do not think that
significant volumes of BBD will be used in marine fuel in 2020 (since in doing so parties would
forgo any RIN incentives). We therefore do not expect that the IMO standard will have an
appreciable impact on the availability of BBD in the transportation fuel market.
Comment:
A commenter stated that they supported EPA's proposed BBD volume for 2020.
Response:
EPA is finalizing the proposed 2020 volume for BBD in this rule, based on a review of the
implementation of the RFS program to date, an analysis of the statutory factors specified in CAA
section 21 l(o)(2)(B)(ii)(I)-(VI), and a review of the comments on the proposal.
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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: 0591 and 1277.
Comment:
One commenter stated that other countries are currently using biodiesel blends in rates up to
10%, and implied that higher volumes would not negatively impact infrastructure in the U.S.
Response:
We are aware that biodiesel blends up to and exceeding 10% are regularly used in other countries
as well as in some parts of the U.S. While higher level biodiesel blends may not be appropriate
for use in all engines and in cold weather, we do not expect that biodiesel and renewable diesel
that meets the relevant fuel quality specifications will negatively impact the fuel delivery
infrastructure in the U.S., nor do we expect that the use of biodiesel and renewable diesel will be
limited due to constraints on the fuel delivery infrastructure in 2020.
Comment:
A commenter stated that the BBD volume for 2020 should protect investments of parties who
have invested in infrastructure to distribute and use biodiesel, as well as incentivizing additional
investment in infrastructure needed to expand the use of BBD.
Response:
We believe that the BBD volume we are finalizing in this rule for 2020 (2.43 billion gallons),
along with the advanced biofuel volume we are finalizing for 2019 (4.92 billion gallons) provide
the appropriate incentives for both the existing infrastructure and future infrastructure
investment. We note that these volumes are both substantially higher than the volumes
established in the 2018 final rule (2.10 billion gallons of BBD in 2019 and 4.29 billion gallons of
advanced biofuel in 2018).
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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: 0620, 0662, and
1197.
Comment:
Multiple commenters stated that BBD is generally more expensive than petroleum-based diesel
fuel. Several commenters stated that EPA should lower the BBD volume for 2020 to reduce
these costs. Another commenter stated that because BBD was more expensive than petroleum
diesel a high BBD volume requirement was necessary to ensure the use of BBD.
Response:
While we do not anticipate that the 2020 BBD volume will directly impact the volume of BBD
used in the U.S. in 2020 (since the volume of this fuel will be driven by the advanced biofuel
standard), 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 2019 and 2020. 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 2020 BBD standard in this final rule is
appropriate in light of the statutory direction in EISA.
In Section V of the final rule, we provide an illustrative cost estimate for soybean oil biodiesel.
We estimate the difference in the price of biodiesel and petroleum-based diesel fuel on an
energy-equivalent basis. 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 2020, they are informative for 2020.
Comment:
One commenter 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.
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 due to
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subsidies at the time for an individual that purchases the fuel. Instead, the relevant costs of
producing, distributing, and blending are the costs that we consider.
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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: 0389, 0514,
0522, 0619, 0621, 0664, 0711, and 1202.
Comment:
Numerous commenters suggested that increasing the 2020 BBD RFS volumes would provide
employment opportunities and increase income in rural areas. For example, one commenter
pointed out that the BBD industry supports 64,000 U.S. jobs throughout its supply chain, and for
every additional 500 million gallons of domestic production, the industry would provide an
additional 13,000 jobs. Another commenter suggested that increased demand for biodiesel,
increases the use of methanol used to produce biodiesel. This commenter suggested that
increases in methanol production results in more employment in this industry. Another
commenter suggested that increased use of soybean oil to make BBD benefits livestock
production by improving the margins for soybean processing and lowering the cost of soy meal
used for livestock feed. The commenter cited a 2015 analysis by Informa Economics that showed
biodiesel resulted in lower feed costs for U.S. livestock producers that ranged from $21 to $42
per ton, totaling $5.9 to $11.8 billion in total value.125 One commenter suggested that the
increase in distillers' corn oil production to meet the BBD standard from defatting DDGS has
reduced the benefits of DDGS in broiler feed. According to this commenter, prior to the RFS, up
to 90% of broiler production in the U.S. used some DDGS at an inclusion rate of up to 8%. Last
year, only about 60% of broiler production included some DDGS in the rations with average
inclusion rates at 5% lower.
Response:
As we explain above in this section and in Section VI of the final rule, the BBD standard is
nested within the advanced biofuel standard, and the use and production of BBD is driven by the
advanced biofuel volume, not the BBD volume. Consequently, changes to the BBD standard
itself will not impact rural employment, or livestock economics.
Furthermore, as discussed in in a memorandum to the docket, soy is grown primarily for high
protein animal feed, independent of biodiesel demand.126 Nevertheless, EPA recognizes that
greater use of biodiesel may have economic impacts that benefit specific sectors of the U.S.
agricultural sector and have adverse effects on other portions of the U.S. agricultural sectors
(e.g., the poultry industry). Given the many market factors influencing the poultry industry (i.e.,
broiler production), discerning the impacts attributable to the near term RES annual volumes on
broiler production can be challenging. However, we do not believe that these potential impacts
warrant a higher or lower BBD standard. For example, greater use of biodiesel may result in
more employment in the biodiesel industry but at the expense of employment in industries that
125 Informa Economics; Impact of the U.S. Biodiesel Industry on the U.S. Soybean Complex and Livestock Sector;
March 2015.
126 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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produce other (i.e., non-BBD) advanced biofuels. We believe our final 2020 BBD volume
requirement continues to provide support for continued rural economic development,
employment and incomes while striking the appropriate balance between providing a market
environment where the development of other advanced biofuels is incentivized and 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 advanced standard continues to
drive the ultimate volume of BBD supplied. For more discussion on this topic see Sections 7.1.5,
7.1.6, and 7.1.7 of this document.
Comment:
A commenter stated that increasing the BBD volume for 2020 to 2.8 billion gallons would have
little to no impact on feedstock prices. The commenter cited the results of the WAEES model to
support their claims.
Response:
Because we anticipate that 2.8 billion gallons of advanced biodiesel and renewable diesel will be
used to meet the advanced biofuel volume in 2019, it is unlikely that increasing the BBD volume
for 2020 to 2.8 billion gallons would have an appreciable impact on BBD availability or the
feedstocks used to produce these fuels. However, as discussed in Section VI of the final rule,
increasing the BBD volume for 2020 would reduce the opportunity for other advanced biofuels
to compete for market share within the advanced biofuel category, and would likely negatively
impact investment in the development of these fuels.
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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: 0531, 0594,
0711, 1037, 1278, and 1286.
Comment:
Two commenters asserted that EPA should account for the cost savings of adding BBD to the
U.S. fuel supply. One commenter submitted a study by WAEES that provided estimates that
increased worldwide volumes of biodiesel, and U.S. total biodiesel volumes, have resulted in
decreases in the world price of diesel fuel in the short to medium term by roughly 9.3% and
1.8%, respectively. WAAES assumes that wholesale price changes in diesel prices from
increased volumes of biodiesel are passed through to retail diesel prices. The commenter also
cited estimates in EPA's RFS2 RIA that predicted that "[t]he addition of biodiesel, renewable
and cellulosic diesel fuel is estimated to reduce the cost of diesel fuel by $8.5 billion in the year
2022 or save 12.0 cents per gallon."127
Response:
The commenter raises the issue of how diesel prices will be altered by a change in biodiesel use
(i.e., the cross-price elasticity of demand for diesel fuel from an increase in biodiesel use). There
is only limited research estimating this cross-price elasticity. For example, one of the papers that
WAAES cites, by Dahl, states: "Technical changes along with numerous country policies have
encouraged fuel switching, most often away from gasoline toward diesel fuel, but sometimes
towards natural gas or biodiesel. These policies substantially changed demand patterns. I was not
able to find consistent evidence of cross-price elasticities to measure the effect of these
policies."128 The other paper that the commenter cites, by Edelenbosch et al., uses estimates from
integrated assessment models to derive estimates of diesel price changes from greater biodiesel
use.129 The assumed price elasticities in integrated assessment models can vary widely in terms
of the quality of their empirical estimates and the degree to which the empirical estimates have
been peer reviewed. As a result, the conclusions of the WAAES study are somewhat speculative.
Further, EPA believes that the potential increased volume of BBD as a result of the 2019 annual
RFS is too modest in relationship to the diesel fuel market to result in a discernible impact on
U.S. diesel prices. The commenter is looking at much larger changes in BBD when finding a
significant impact of BBD on diesel prices. For example, the commenter referenced a 9.3%
127 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. 821.
128 Dahl, C. (2012). "Measuring global gasoline and diesel price and income elasticities." Energy Policy, 41 2-23.
129 Edelenbosch, O., Vuurne, D., Bertram, C., Carrar, S., Emmeling, J., Daly, H., Kitous, A., McCollum, D. and
Failali, S. "Transportation fuel demand responses to fuel prices and income projections: Comparison of Integrated
Assessment Models." Transportation Research Part D. 55, 310-327.
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decrease in the global price of diesel as a result of increased total production of biodiesel
worldwide. This 9.3% decrease in world diesel prices is based upon a change of 9.6 billion
gallons of total global production of BBD, 2.2% of global diesel supply in 2017 (adjusted on an
energy equivalent basis). The 1.8% decrease in the price of diesel fuel that the commenter
referenced is a result of a change in total U.S. biodiesel production of 2.9 billion gallons, roughly
0.7%) of 2017 global diesel supply. Similarly, the RFS2 RIA examined a RFS fuel scenario
where BBD increased by roughly 6.6 billion gallons.
By way of comparison, EPA's illustrative cost analysis of the RFS 2019 advanced standard is
based on an increase in BBD of roughly 321 million gallons (in diesel energy-equivalent
gallons). This increase in biodiesel is only 0.01% of 2017 world diesel production. When
changes in BBD production are relatively modest in comparison to diesel supply worldwide, as
they are with the 2019 RFS advanced standards, EPA does not believe that there would be a
discernible impact on U.S. diesel prices. Also, the assumption that wholesale changes in diesel
prices will be completely passed through to retail diesel prices is not well supported.
Comment:
One commenter stated that EPA improperly uses processing costs that represent a variety of
different biodiesel feedstocks, rather than one specifically for soybean oil in its illustrative costs
calculations for representing the cost of biodiesel production. The commenter asserted that
feedstocks other than soybean oil tend to have higher processing costs. As a result, the
commenter contended that EPA's estimate of processing costs to produce BBD are overstated.
Response:
EPA provides a range of costs of producing BBD from soy oil in its illustrative cost estimates.
The latest available data from EIA's Monthly Biodiesel Production Report summarizes the
feedstock inputs to biodiesel production that were used in July 2018. Approximately 58% of the
mass of feedstocks used to make BBD during that month was from soybean oil in the U.S.130 We
continue to believe that the most significant marginal supply of biodiesel to meet the 2019 RFS
advanced standard will be from soybean oil feedstock, as the remaining growth potential in the
supply of other existing feedstocks is somewhat limited. Thus, we believe that using soy oil
feedstock as a representative feedstock provides reasonable estimates of the cost of producing
BBD.
EPA provides a range of cost estimates that is intended to be a reasonable bracket of the costs of
producing BBD. To calculate this range, we considered two cost estimates. For the first cost
estimate, we use per-gallon cost estimates from the University of Missouri, Food and
Agricultural Policy Research Institute (FAPRI-Missouri) March 2018 U.S. Baseline Briefing
Book.131 They estimate variable BBD production costs (i.e., processing costs) of $0.53 per-
gallon, net of the co-product (e.g., glycerin) value for 2019. FAPRI-Missouri also includes
average net operating returns to pay back the capital used to produce biodiesel of $0.42 per-
130 "Monthly Biodiesel Production Report." September 28, 2018. U.S. EIA
https://www.eia.gov/biofuels/biodiesei/productioii/bible3.pdf
131 https://www.fapri. missouri. edu/wp-co nte nt/up loads/2018/03/2018-Baseline~Outtook~l .pdf
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gallon in 2019. For the second cost estimate, we use a forecast of average biodiesel variable cost
projections of $0.50/gallon previously obtained from the NBB.132 In this second case, we
assumed that there are no capital costs associated with the biodiesel plant (i.e., average net
operating returns are zero). This would be a reasonable assumption if the biodiesel plant is an
older plant and the capital costs have already been amortized. The two estimates of combined
processing costs and capital costs for BBD have a range of $0.45/gallon ($0.95/gallon for
FAPRI-Missouri and $0.50/gallon for NBB). EPA believes that the range of combined
processing cost and net operating returns likely captures the lower estimate of processing cost
estimates from excluding other feedstocks that the commenter expressed concerns about. The
commenter did not provide EPA with new processing cost information and based upon the
record before us, we believe that we our cost estimates are reasonable.
In any event, even were EPA to adopt the approaches to cost recommended by these
commenters, it would make no difference to the outcome of this action. In exercising our
cellulosic waiver authority, EPA considered a number of factors including the high costs of
advanced biofuels. Even under the approaches suggested by commenters, the cost of BBD would
remain significantly higher than the cost of diesel, continuing to warrant the same outcome under
the cellulosic waiver authority.
Comment:
One commenter pointed out that EPA only estimates the costs of producing BBD considering
soybean oil as its feedstock. The commenter asserted that BBD will be produced from a variety
of different feedstocks (e.g., canola oil, corn oil from DDGS, yellow grease) that taken together
account for a greater share of the feedstock market for BBD than soybean oil. The commenter
asserted that many of the feedstocks other than soybean oil have lower costs than soybean oil. By
only considering soybean oil as a feedstock, the commenter suggested that EPA overstated
feedstock costs to make BBD.
Response:
EPA only provided illustrative costs of producing BBD considering soybean oil as its feedstock.
EPA recognizes that a variety of feedstocks are currently used to make BBD and could also be
used to provide extra BBD to meet the 2019 RFS advanced standards. The latest available data
from EIA's Monthly Biodiesel Production Report summarizes the feedstock inputs to biodiesel
production that were used in July 2018. Approximately 58% of the mass of feedstocks used
during that month was from soybean oil in the U.S.133 However, we continue to believe that the
most significant marginal supply of biodiesel to meet the 2019 RFS advanced standard will be
from soybean oil feedstock, as the remaining growth potential in the supply of other existing
feedstocks is limited.
132 Presentation to EPA: Analysis of Cost of Carbon Reduction January 27, 2014. NBB did not provide data on
processing costs that was specific to soybean oil-based biodiesel.
133 "Monthly Biodiesel Production Report." September 28, 2018. U.S. EIA
https://www.eia.gov/biofuels/biodiesei/productioii/table3.pdf
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Comment:
Several commenters stated that while EPA provides illustrative cost estimates for the 2019 RFS
rule, it does not account for the benefits (e.g., energy security (i.e., the ability of renewable fuels
to protect consumers from oil price swings, avoided military costs from protecting access to
foreign oil supplies), air quality impacts, GHG impacts etc.) in its rulemaking. Other commenters
stated that EPA does not undertake a complete cost analysis for the 2019 RFS rule, since EPA
does not account for factors such as infrastructure costs and investment impacts. Another
commenter stated that EPA's illustrative cost estimates do not account for all of the costs of
using biofuels. Some of the costs that the commenter lists are damages to small engines,
increases in GHG emissions, impacts on sensitive lands, such as grasslands which are converted
to corn and soybean fields. Another commenter suggested that subsidies, mandates and fuel
infrastructure grants have been used to help the biofuels industry. This commenter suggested that
consumers have spent an average of $5.4 billion a year on the RFS BBD mandate.
Response:
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. In this action, EPA provided
only an illustrative cost analysis for the rule and did not try to estimate benefits. As further
explained in a memorandum to the docket,134 EPA continues to believe that long-term costs and
benefits of the RFS program are not well suited to being analyzed on a piecemeal annual basis.
EPA has not undertaken an analysis of the total costs of the RFS BBD standards. EPA has
considered the cost of using biodiesel to meet the increased advanced biofuel volume for 2019 in
our illustrative cost calculations. However, EPA does not separately include the cost of meeting
the BBD volumes established in our annual rule (in this rule, the BBD volume for 2020) for two
reasons. The first reason is that the rule only establishes a required volume for 2020, it does not
set percentage standards that apply to obligated parties. The second reason is that the BBD
standards are not binding. For example, in the 2018 final rule we established the BBD volume
for 2019 at 2.1 billion gallons. But in this rule, we project that the market will supply
approximately 2.8 billion gallons of BBD to meet the advanced biofuel volume for 2019. Thus,
there is no cost to meeting the BBD volume requirement for 2019 (and we anticipate there will
similarly be no cost to meeting the BBD volume for 2020).
134 "Cost Impacts of the Final 2019 Annual Renewable Fuel Standards," Memorandum from Michael Shelby,
Dallas Burkholder, and Aaron Sobel available in docket EPA-HQ-OAR-2018-0167.
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7.1.2 Energy Security
Commenters that provided comment on this topic include but are not limited to: 1037, 1286, and
1292.
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 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. Refinery capacity utilization remains at high levels. 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. Commenters also suggested that renewable fuels provide a hedging function
and diversify fuel supplies in U.S. motor fuel markets, helping to moderate motor fuel prices
while shielding U.S. consumers from potential world oil price spikes. Further, commenters
suggested that potential foreign oil supply disruptions are a major energy security issue that
could raise the cost of fuels to U.S. consumers, and that these disruptions might stem from
possible actions that restrict the supply of oil by significant key market participants such as
OPEC, from wars, or other sudden geopolitical events.
Response:
The production of renewable fuels supports one of the goals of the RFS program by improving
the U.S.'s energy independence and security through diversification of U.S. transportation fuels
and displacement of imported petroleum. Renewable fuels that displace petroleum are less likely
to be subject to periodic supply disruptions (i.e., significant crop yield changes principally due to
weather related events) than petroleum. Also, supply disruptions in renewable fuels from weather
events are not likely to be correlated with oil supply disruptions, which are usually triggered by
geopolitical events. 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.135 For
more discussion on the energy security impacts of renewable fuels, see Section 6.4.4 of this
document.
Comment:
One commenter suggested EPA include an assessment of avoided military costs when
undertaking an analysis of the energy security benefits of renewable fuels. The commenter
suggested that EPA should include the cost to the American taxpayer of maintaining military
support for petroleum supply channels. The commenter cites cost estimates ranging from $166.3
billion to $304.9 billion.136'137 The commenter also cited EIA petroleum import data for 2017
135 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006.
136 Danes, A., Dollars & Sense. 2010. "The True Cost of Oil".
http://www.donarsairiseiise.org/archives/2010/0510danes.html
137IAGS. October 2003. "NDCF report: the hidden cost of imported oil." http://www.iags.org/nl030034.htm
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which shows that the U.S. imported 1.74 million barrels per day of crude oil from Persian Gulf
countries.138 Accordingly, the commenter stated that for every $100 billion dollars that the U.S.
spends on protecting Persian Gulf oil supplies, $3.75 is added to the cost of a gallon of diesel
fuel.
Response:
As explained in Section 7.1.1 of this document, we have not estimated the energy security
benefits of this action. In addition, we note that assessing the military component of the energy
security cost of using imported petroleum fuels has two major challenges: attribution and
incremental analysis. The attribution challenge is to determine which military programs and
expenditures can properly be attributed to oil supply protection, rather than some other
geopolitical or economic objective. The incremental analysis challenge is to estimate how much
the petroleum supply protection costs might vary if U.S. oil use were to be reduced or
eliminated. Since military forces are multi-purpose and fungible to a great extent across theaters
and missions, and because the U.S.'s military budget is presented along regional accounts rather
than by mission, the allocation of military costs to particular missions is not clear.
Comment:
One commenter suggested that increased use of corn ethanol will increase fossil fuel use, since
fossil fuels are required to make ethanol. Increase fossil fuel use, the commenter suggests, reduce
the U.S.'s energy security.
Response:
While many corn ethanol plants use fossil fuels as an energy source, the ethanol produced
reduces the need for fossil fuels in transportation fuel in the U.S. In the RFS2 final rule, EPA's
lifecycle analysis found that, depending on the technologies and energy source used, corn
ethanol could achieve a 20% reduction in lifecycle GHG emissions.139 This evaluation
considered fossil fuels used to produce ethanol.
138 EIA. 2018. "How much petroleum does the United States import and export?"
https ://www. eia. eov/too ts/faq s/faq. php? id=727&t=6
139 See 75 FR 14670 (March 26, 2010).
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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: 1037 and 1197.
Comment:
A commenter stated that the RFS program is designed to allow higher RIN prices to provide the
incentives for increased biofuel production and use.
Response:
The RFS program established a market-based system wherein the value of RINs generated for
qualifying renewable fuels helps to provide the necessary incentives to increase the production
and use of these fuels. In some cases, such as ethanol blended as E10, no financial incentives are
necessary (the relatively low cost of ethanol when compared to gasoline and the octane value of
the ethanol already provide sufficient incentive) for renewable fuels to be produced and used. In
other cases, such as biodiesel, the financial incentives provided by the RIN value can make
biodiesel production and use economical, despite the relative high cost of production of these
fuels. We note, however, that the RIN value is not unlimited in its ability to increase the
production and use of renewable fuels. This is especially true in cases where commercial scale
production of renewable fuels is not yet technically viable (as for many liquid cellulosic biofuels)
or where retail markets for renewable fuel blends are not competitive (as for E85 and other
higher level ethanol blends).140
Comment:
A commenter stated that if EPA does not lower the total renewable fuel volume (and the implied
volume for conventional renewable fuels) the price for D6 RINs will rise to the price of D4
RINs, resulting in excessive costs for refiners.
Response:
In previous years we have observed time periods when the price of D6 RINs was approximately
equal to the price of D4 RINs. This is generally the case when the cost of the marginal gallon of
conventional renewable fuel is equal to or higher than the cost of the marginal gallon of BBD. In
these cases, excess volumes of BBD (beyond what is needed to satisfy the BBD and advanced
biofuel volumes) are supplied to help meet the total renewable fuel volume. It is possible that
these market circumstances may occur in 2019, especially if sales of higher level ethanol blends
continue to be modest. We do not, however, believe that higher D6 RIN costs (or RIN costs more
generally) will result in excessive costs to refiners. EPA has examined the available market data
and concluded that refiners recover the cost of the RINs they acquire through the higher market
prices for the petroleum fuels they produce which reflect RIN prices.141 The potential for higher
140 See "An Assessment of the Impact of RIN Prices on the Retail Price of E85," memorandum from Dallas
Burkholder to EPA Docket.
141 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
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RIN costs, therefore, does not constitute severe economic harm to refiners (or the state or regions
in which refineries are located), and is not a sufficient basis for reducing the total renewable fuel
volume for 2019 using the general waiver authority. For a further discussion of the general
waiver authority, see Section II of the final rule and Section 2 of this document.
Comment:
A commenter stated that the effects of a RIN "price cap" would be devastating to rural America,
and that there was no way to cut, cap, or eliminate RINs without impacting homegrown fuel.
Response:
EPA did not propose to cap the price if RINs, nor are we finalizing a RIN price cap in this rule.
Comment:
A commenter stated that EPA's proposed volumes would mandate renewable fuel in amounts
over the E10 blendwall, and that this would drive up RIN prices. The commenter stated that
these higher RIN prices would in turn have a negative impact on refiners.
Response:
While the volumes in this final rule exceed the volume of ethanol that can be blended into
gasoline at a 10% blend rate, we note that none of the RFS volume requirements specifically
require the use of ethanol. RIN prices are impacted by a large number of factors, including
commodity prices (such as the price of corn, vegetable oil, crude oil, etc.) and market
expectations about the future of the RFS program. We do not believe it is possible to reliably
predict the impact of this final rule on RIN prices in 2019. Further, in the context of evaluating a
petition for rulemaking to change the point of obligation in the RFS program, EPA evaluated
these claims that high RIN prices negatively impacted refiners (specifically merchant refiners)
using the available market data. We determined that while refiners acquire RINs at a significant
expense, these refiners are able to recover the cost of acquiring RINs through the prices of the
gasoline and diesel fuels they sell.142 Thus higher RIN prices are not expected to negatively
impact refiners generally, nor any specific category of refiners.
142 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
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7.1.4 Impacts of Standards on Retail Fuel Prices
Commenters that provided comment on this topic include but are not limited to: 0662, 1197, and
1201.
Comment:
A commenter stated that fuel markets, especially diesel fuel markets, are very competitive. To
compete and maintain market share, diesel fuel retailers must pass through the value of the RIN
to fuel consumers. Another commenter stated that large retailers are using RIN profits to
subsidize lower fuel prices and drive out their smaller competitors. This commenter stated that
while large refiners are able to pass through their costs to acquire RINs, refiners are not passing
the RIN value on to small retailers.
Response:
EPA has examined the available market data and concluded that, with the exception of very low
volume fuels (such as E85) where the retail market is non-competitive, the value of the RIN is
being passed on to consumers in the price of both E10 and diesel fuel.143 Our conclusions are
consistent with both commenters' descriptions of parties that realize income from the sale of
RINs and use the income from RIN sales to enable lower prices for the gasoline and diesel fuels
they sell. These actions by large retailers (using the value of the RIN to subsidize fuel prices for
fuel blends containing renewable fuels) are the precise actions the RFS program was intended to
promote. While we do not have information on the comparative margins between larger retail
chains and smaller retailers, the terminal level pricing data that EPA has analyzed clearly
demonstrates that the RIN value is being reflected in the wholesale price of E10 and diesel fuel
(with the possible exception of the very small volume fuels - like E85 - noted above). Therefore,
the refiners costs are passed through to all parties that purchase fuel at terminals, whether these
parties are small or large retailers.
Comment:
A commenter stated that there is no correlation between RIN prices and the use of E85, E15, or
the rate at which ethanol is blended into the gasoline pool. The commenter claimed that this
demonstrated that higher RIN costs are not effective at incentivizing the market to increase the
blending of ethanol beyond the E10 blendwall. Given that RIN prices are allegedly ineffective in
incenting increased ethanol use, the commenter argued that EPA should further reduce the total
renewable fuel volume.
Response:
There are a number of factors that impact the relative pricing of E10, E15, and E85. It is
unreasonable to expect a strong correlation between the RIN price and the price and/or sales
143 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
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volumes of these fuels, as this ignores other important factors such as the cost of production of
gasoline and ethanol, ethanol's octane value for E10, and ethanol's lower energy content for
E85. The incentives provided by RINs can and are incentivizing renewable fuels. However, the
situation for ethanol is fairly unique. For ethanol sold as E10 blends, no RIN incentive is
necessary, as ethanol's cost and octane value provide sufficient incentive, and the energy content
loss of ethanol is not readily apparent to the consumer. However, this is not the case for ethanol
blended into gasoline above 10%. For ethanol blended in gasoline above 10%, the lack of
additional octane value (due to the fact that blendstocks that can take advantage of the high-
octane value of ethanol when blended above 10% are not commercially available), the cost of
additional RVP control (in the case of El 5), and the lower energy content (in the case of E85)
reduce ethanol's economic value. More importantly, however, is the fact that most retail stations
do not have the infrastructure necessary to sell gasoline containing greater than 10% ethanol.
This can result in non-competitive pricing behavior, especially for the relatively few retail
stations selling E85. As a result, higher RFS standards generally result in greater use of biodiesel
and renewable diesel, rather than ethanol, as it has generally been more cost effective to increase
the use of these fuels as transportation fuel in the U.S. At the same time U.S. ethanol production
has continued to increase to support exports and ethanol blending abroad.
EPA has examined market data and found that, all else equal, a higher RIN price results in a
lower retail price for E85.144 We have similarly determined that a larger discount for E85 relative
to gasoline results in increased sales of E85.145 However, we acknowledge that even when the
combination of gasoline prices, ethanol prices, and RIN prices suggest favorable economics for
higher level ethanol blends such as E85, sales volumes of these fuels have been very small. This
is likely due to a number of factors specific to higher level ethanol blends, including a relatively
small number of retail stations offering them, the generally non-competitive market, the
relatively small number of vehicles that can use these fuels, and unfamiliarity of consumers with
these fuels (see our response in Section 7.1.3 of this document).
Despite these relatively small sales volumes of higher level ethanol blends, we disagree with the
commenter that this justifies a reduction to the total renewable fuel volume for 2019. The
purpose of the RFS program is to increase the production and use of renewable fuels, including
non-ethanol biofuels. Higher RIN prices have been very effective at increasing the use of non-
ethanol renewable fuels, such as biodiesel, renewable diesel, and CNG/LNG derived from
biogas, which are not limited by the E10 blendwall. Finally, we note that any further reductions
to the total renewable fuel volume (beyond those made using the cellulosic waiver authority in
this final rule) would require the use of the general waiver authority. As discussed in greater
detail in Section II of the final rule and Section 2 of this document, we have determined that it
would not be appropriate to reduce the total renewable fuel volume for 2019 using the general
waiver authority.
144 "Updated Assessment of the Impact of RIN Prices on the Retail Price of E85," Memorandum from Dallas
Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
145 "Updated correlation of E85 sales volumes with E85 price discount," memorandum from David Korotney to EPA
docket EPA-HQ-OAR-2018-0167.
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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: 0221, 0522,
0539, and 0586.
Comment:
Numerous commenters addressed the impact of the RFS on agricultural commodities and prices
(e.g., corn, soybeans) and various intermediate products such as soybean meal, a feed co-product
that results from the soybean oil extraction process. Most 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. One commenter asserted that maintaining an implied volume for conventional
renewable fuel at 15 billion gallons provides a firm base of support for ethanol production and
corn prices.
Numerous commenters point out that agricultural commodities are currently in relative
abundance. For example, one commenter pointed out that, following global trends, crop prices in
the U.S. have been decreasing in recent years.146 Using a USDA (2018) database, the commenter
presented information that prices received for many agricultural crops in the U.S. have declined
between 2011 (one year before the severe drought in 2012) and 2017. For example, for corn:
from $6.02/bushel in 2011 to $3.36/bushel in 2017, a 44% reduction; for soybeans from
$12.50/bushel in 2011 to $9.39/bushel in 2017, a 25% reduction; for sorghum from
$10.70/hundredweight (cwt) in 2011 to $5.45/cwt in 2017, a 49% reduction. The commenter
suggested that observed price decreases show that crop supplies in the U.S. have grown faster
than their demands in recent years, suggesting that extra crop supplies could be used to make
renewable fuels.
Another commenter pointed out that the current downturn in U.S. agricultural commodity prices
is projected to lead to a fairly significant decline in farm income in the U.S. agricultural sector.
The commenter cited a USDA Economic Research Service report that estimates that net U.S.
farm income is forecast to decline $5.4 billion (8.3%) between 2017 and 2018 (in inflation-
adjusted (real) 2018 dollars). If realized, this would be the lowest real-dollar level since 2002.
Real net cash farm income is forecast to decline $6.7 billion (6.8%) in 2018, and this would be
the lowest real-dollar level since 2009.147>148
According to several commenters, the potential of a trade war and resulting retaliatory tariffs on
U.S. agricultural products could further contribute to declining U.S. agricultural commodity
prices and U.S. farm income. According to one commenter, the trade war is already having an
146 Commenter's calculation based onUSDA Quick Stats, 2018.: https://auickstats. iiass.nsda.gov/
147 USDA Economic Research Service "2018 Farm Sector Income Forecast." (February 2018).
https://www.ers.usda.gov/topics/farm-economy/farm-sector-iiicome-fiiiances/farm-sector-income-forecast
148 Net cash farm income encompasses cash receipts from farming as well as farm-related income, including
government payments, minus cash expenses. Net farm income is a more comprehensive measure that incorporates
noncash items, including changes in inventories, economic depreciation, and gross imputed rental income of
operator dwellings.
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impact on the U.S. agriculture sector. The commenter referred to a 10-year projection for the
U.S. agricultural sector released by the USD A in early 2018.149 The report projected that there
would be strong global demand for U.S. soybeans. However, this projection is being revised as
strong global demand for U.S. soybeans is not anticipated to materialize. In response to U.S.
duties placed on foreign steel, aluminum, and other products, many countries that import U.S.
agricultural commodities have placed retaliatory tariffs on U.S. agricultural goods. The evolving
trade war, and general abundance of agricultural commodities in general, is projected to result in
declines in the prices of key U.S. agricultural commodities. Also, according to one commenter,
China has not purchased significant volumes of U.S. sorghum since February 2018. In 2017,
China bought about $839 million worth of U.S. sorghum. In part, because of reduced Chinese
purchases of sorghum, U.S. sorghum prices have declined.150 Given the recent agricultural
commodity production patterns and the current low agricultural commodity prices, numerous
commenters argued that this is the time to increase the demand for U.S. agricultural commodities
with higher RFS annual volumes.
Response:
This action only reduces the volume requirements under the cellulosic waiver authority due to a
shortfall in the production of cellulosic biofuels. As a result, the volumes being finalized in this
action represent the full implied statutory volumes of conventional renewable fuels and non-
cellulosic advanced biofuels required by the statute which are sourced from the agricultural
commodities highlighted by the commenters. (For more discussion on this topic see Section 6.4.8
of this document.) EPA recognizes that major U.S. agricultural commodity prices have declined
over the last five years and that U.S. agricultural commodity prices are projected to decline in the
near term. For example, for soybeans, prices have fallen significantly, with March 2019 U.S.
futures prices at $8.58/bushel.151 Also, corn futures prices have fallen as well, with March 2019
U.S. futures prices at $3.57/bushel.152 However, what the impact of the RFS program has been,
in reality over the last decade, is less than clear as evidenced by the data cited by the
commenters. That is, despite significant increases in the RFS, the price of agricultural
commodities has decreased. Moreover, as we explain in a memorandum to the docket, we
believe that this action has no effect on the cultivation of corn and soybeans.153
Comment:
One commenter argued for reductions in 2019 RFS annual volumes because of the adverse
impacts higher agricultural commodity prices would have on the poultry industry. This
commenter pointed out that the more corn oil that is extracted from DDGS to make biodiesel for
the RFS program, the less useful the DDGS become as a feed ingredient for poultry production.
149 Office of the Chief Economist, World Agricultural Outlook Board, USD A. "USDA Agricultural Projections to
2027." (Feb. 2018) https://www.iisda.gov/oce/commoditv/Droiectioiis/USDA Agricultural Projections to 2027.pdf
150 Hirtzer, M., Polansek, T. Reuters "Over sorghum salad, U.S. farmers and Chinese buyers chew on trade." (July
20, 2018). https://www.reiiters.com/articie/usa-trade-chim-sorghnm/over-sorghiim-salad-n-s-fa.miers-aiid-chiriese-
bttve rs-chew-o n-trade-idU SL1N1IIF1 DP
151 https://www.cmegroup.coin/tradiiig/agTicultural/graiii-aitd-oilseed/sovbeanhtml
152 https://www.cmegroup.com/tradirig/agricultiiral/grdiri-aiid-oilseed/com.htmi
153 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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The resulting DDGS after the corn oil is extracted have a different nutritional profile: there is a
higher concentration of protein and fiber commensurate with the reduction in fat and energy
content. According to the commenter, prior to the use of corn oil to meet the RFS volumes, up to
90% of broiler production used some DDGS at an inclusion rate of up to 8%. Last year, only
about 60% of broiler production included some DDGS in the rations with average inclusion rates
at 5% or lower.
Response:
Demand for corn oil used in biodiesel production in 2019 is not expected to increase
significantly as a result of this rule compared to last year. While the non-cellulosic advanced
biofuel volume is increasing commensurate with the statutory increase, it reflects the maximum
use of the cellulosic waiver authority and cannot be lowered further without the use of our
general waiver authority. As discussed in Section II of the final rule and Section 2 of this
document, we have determined that it would not be appropriate to exercise the general waiver
authority. Further, corn ethanol supply, from which corn oil is a byproduct, is being driven by
U.S. and foreign demand for corn ethanol well in excess of, and independent of the RFS
program. Given the many market factors influencing broiler production, discerning the impacts
attributable to the 2019 RFS annual volumes on broiler production can be challenging. For more
discussion on this topic see Section 6.4.8 of this document and a memorandum to the docket.154
154 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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7.1.6 Rural Economies
Commenters that provided comment on this topic include but are not limited to: 1292.
Comment:
Commenters suggested that renewable fuels have stimulated substantial economic development
in rural midwestern areas of the U.S. and provided various other economic benefits. One
commenter suggested that more than 90% of ethanol production is in the Midwest. The
commenter provides an estimate that the biofuels industry employs 105,000 employees, of which
about 34,500 employees work in the corn ethanol fuels sector. The commenter cited a USDA
study showing that 32% of the total change in employment is in counties in the U.S. where new
ethanol plants are established.155 The timeframe for the USDA study was 2000-2008.
Response:
EPA has not undertaken a detailed analysis of the impacts of the 2019 annual RFS standards on
U.S. farm incomes or rural development. Based on the analysis EPA did for the March 2010
RFS2 final rule, we stated that increases in renewable fuels as a result of the RFS program
should generally boost U.S. farm income and promote rural development.156 Moreover, as we
explain in a memorandum to the docket, we believe that this action has no effect on the
cultivation of corn and soybeans, or on the production of corn ethanol.157 In any event, this
action only reduces the volume requirements under the cellulosic waiver authority due to a
shortfall in the production of cellulosic biofuels. As a result, the volumes being finalized in this
action represent the full implied statutory volumes of conventional renewable fuels and non-
cellulosic advanced biofuels required by the statute. For more discussion on this topic see
Section 6.4.8 of this document.
155 Brown, J., et al. USDA. "Emerging Energy Industries and Rural Growth." Economic Research Report No. 159
November 2013.
156 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006.
157 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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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: 0221, 0514,
0621, and 0664.
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). According to one commenter,
biodiesel has revitalized many rural areas in Iowa. As an example, the commenter pointed to
Western Dubuque, a town of 900 people, where biodiesel production employs 24 employees full-
time, with wages and benefits totaling $1.6 million. Much of the income from the workers at the
biodiesel plant is spent in the local town, spurring more spending and employment in the town,
according to the commenter. Most of these 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 2019 annual RFS standards on
the renewable fuel industries and their input suppliers. However, as we explain in a
memorandum to the docket, we believe that this action has no effect on corn ethanol
production.158 In any event, this action only reduces the volume requirements under the
cellulosic waiver authority due to a shortfall in the production of cellulosic biofuels. As a result,
the volumes being finalized in this action represent the full implied statutory volumes of
conventional renewable fuels and non-cellulosic advanced biofuels required by the statute.
Relative to the 2018 RFS, this action maintains an implied volume of 15 billion gallons of
conventional renewable fuel, and effectively maintains the same level of demand for corn
ethanol. This action also increases the implied non-cellulosic advanced volume by 500 million
gallons (from 4 billion to 4.5 billion gallons), thereby increasing the demand for the use of soy
oil for biodiesel, the demand for other feedstocks used to make biodiesel (e.g., canola), as well as
the demand for sugarcane used to make ethanol, to fulfill the advanced biofuel standard. The
increase in demand for advanced fuels, such as BBD, will likely increase the profitability of
advanced fuel producers such as biodiesel producers.
While the comments on employment and profitability may 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 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
158 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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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.
Comment:
Numerous commenters suggested that the RFS requirements, by increasing compliance costs
which results in high RIN prices, are reducing the profitability of oil refiners and leading to
employment losses. Some commenters pointed to the PES bankruptcy as an example of
employment losses as a result of the RFS program
Response:
EPA previously assessed claims by refiners that RIN prices are costs for certain refiners, and that
high RIN prices threaten the viability of some refiners. After reviewing the available market
data, EPA concluded that RIN costs are recovered by refiners, and thus do not have the negative
impacts that these commenters claim.159 EPA separately assessed a report by EVS submitted by
comments which claimed that high RIN prices negatively impacted PESRM. Our assessment of
this report can be found in Section 2 of this document.
159 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," November 17, 2017.
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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: 0528, 0531,
0539, 0586, 0619, 1033, 1036, 1195, 1196, 1202, 1285, and 174856.
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 pointed to GHG reduction benefits from replacing petroleum-based gasoline with
cornstarch-based ethanol asserted by a report by ICF, contracted by USD A.160 That report
allegedly found greater GHG reductions from corn biofuels than EPA's analysis in the March
2010 RFS2 final rule.
Multiple commenters directed EPA to a report commissioned for the European Commission by
the International Institute for Applied Systems Analysis (IIASA) and Ecofys, suggesting that
biodiesel produced from soybean oil could result in lifecycle GHG emissions 2-3 times greater
than petroleum diesel due largely to land-use changes as modeled by the global recursive
dynamic partial equilibrium model, GLOBIOM.161
Several commenters also cited various, different conclusions for reductions in GHG emissions
from biofuels based on the work of Argonne National Lab's GREET model,162 and related work
conducted with authors from Purdue University and USD A.163
Based on this information, multiple commenters requested that EPA update its LCA modeling in
order to reflect new data and information. One commenter requested that EPA adopt GREET's
GHG analysis results.
Response:
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.
160 Mark Flugge, et al., "A Life-Cycle Analysis of the Greenhouse Gas Emissions of Corn-Based Ethanol," January
12. 2017. https://www.nsda.gov/oce/ciimate change/mitigation technologies/U anolRepoft 20170107.pdf
161 Hugo Valin, et al., "The Land Use Change Impact of Biofuels Consumed in the EU: Quantification of Area and
Greenhouse Gas Impacts," August 27, 2015,
https://ec.eiiropa.en/eiiergv/sites/eiier/files/docnmeiits/Fiiial%20ReDort GLOBIOM' Dublicatioapdf
162 Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET). Argonne National
Laboratory, DOE. https://greet.es.atil.gov
163 Rui Chen et al., "Life Cycle Energy and Greenhouse Gas Emission Effects of Biodiesel in the United States with
Induced Land Use Change Impacts," Bioresource Technology 251 (March 1, 2018): 249-58,
https://doi.Org/10.1016/i.biortech.2017.12.031
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Comment:
One commenter asserted that palm oil imports to the U.S. have gone up "concomitantly" with
increased use of soybean oil feedstock for biodiesel production through means of feedstock
switching. The commenter asserted that palm oil production is strongly associated with peat
drainage, deforestation, and high GHG emissions from land use change.
Response:
EPA does not dispute the possibility that increased biodiesel production could result in impacts
leading to increased competition for feedstock, possibly exacerbating social and environmental
problems associated with expansion of palm oil production. This is one of the reasons we
articulate in Section IV of the final rule and Section 4 of this document for not allowing the
reduction in cellulosic biofuel to be backfilled with other advanced biofuel. While definitive
conclusions have not been made regarding RFS-related impacts on palm oil imports, the
potential for impacts remains an area of interest and EPA continues to review data and track the
science in this area.
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7.2.2 Air Quality
Commenters that provided comment on this topic include but are not limited to: 0528 and 1036.
Comment:
Several commenters stated that the air quality impacts of the standards were mixed, with some
asserting that the air quality impacts of biofuels were positive while others asserted that they
were negative.
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.164
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.165
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.166 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.
More recently, the 2018 Second Triennial Report to Congress found that emissions of NOx,
SOx, CO, VOCs, ammonia (NH3), and particulate matter can be impacted at each stage of
biofuel production, distribution, and usage. These impacts depend on feedstock type, land use
change, and feedstock production practices. Ethanol from corn grain has higher emissions across
the life-cycle than ethanol from other feedstocks, and ethanol facilities relying on coal have
higher air pollutant emissions than facilities relying on natural gas and other energy sources,
although coal-fired plants account for a small fraction of overall production. Only limited data
exist on the impacts of biofuels on the tailpipe and evaporative emissions of Tier 3 light-duty
vehicles and light-duty vehicles using advanced gasoline engine technologies to meet GHG
emissions standards. Comprehensive studies of the impacts of biofuels on the emissions from
advanced light-duty vehicle technologies, similar in scope to previous studies of such impacts on
Tier 2 vehicles, would improve understanding.167 Heavy-duty diesels without catalysts were
164 See 75 FR 14803-08 (March 26, 2010) and Chapter 3.4 of the RFS2 Regulatory Impact Analysis (EPA-420-R-
10-006).
165 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. Table 3.2-7 and 3.2-8.
166 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. Table 3.2-2 and 3.2-3.
167 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
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found to have lower PM emissions and slightly higher NOx emissions with a B5 (5%)
biodiesel/diesel blend. However, at this time there are insufficient data to determine an effect on
catalyst-equipped diesel engines. The magnitude, timing, and location of emissions changes can
have complex effects on the atmospheric concentrations of criteria pollutants (e.g., ozone (O3)
and PM2.5) and air toxics, the deposition of these compounds, and subsequent impacts on human
and ecosystem health.
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7.2.3 Water Quality and Quantity
Commenters that provided comment on this topic include but are not limited to: 0528, 0586,
1029, 1033, and 1036.
Comment:
One commenter suggested that soil and water quality benefit from biofuels production because
sustainable agricultural production practices are utilized by feedstock and biofuel producers.
Response:
EPA acknowledges that impacts to water and soil quality can be mitigated during feedstock
production when agricultural best management practices are widely employed and encourages
their use.168
Comment:
Several commenters highlighted concerns with growing corn, including: the relatively high use
of water, fertilizer and pesticide runoff, impacts on aquifers, and increasing number of algae
blooms. For example, several commenters associate agricultural run-off from corn production
with the RFS program and harmful algal blooms in the Gulf of Mexico. Other commenters
emphasized protection of soil quality, source waters, groundwater and aquifers from exploitation
and contamination. One commenter raised specific concerns with the water quality of Lake Erie
and the Chesapeake Bay that the group traces back to runoff from corn production. One
commenter asked the agency to evaluate water quality impacts from the proposed volumes.
Response:
EPA has previously recognized the potential impacts on water use and water quality from row
crops, especially corn and soy. These impacts were assessed in RFS2 and the 2011 First
Triennial Report to Congress, which qualitatively assessed both potential impacts and
opportunities for mitigation.169 The 2018 Second Triennial Report to Congress found more
evidence of negative environmental impacts associated with land use change and biofuel
production than there was in 2011.170 However, the magnitude of the effect from biofuels is still
unknown and has not been quantified to date. Furthermore, the 2018 Second Triennial Report to
Congress found that the scientific literature continues to support the conclusion from the 2011
First Triennial Report that biofuel production and use can be achieved with minimal
environmental impacts if existing conservation and best management practices for production are
widely employed. EPA supports the growing adoption of mitigation techniques such as no till
168 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
169 U.S. EPA. December 2011. Biofuels and the Environment: First Triennial Report to Congress. EPA/600/R-
10/183F.
170 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
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farming and better control of fertilizer usage, and notes that further technical information on this
complicated set of issues would be helpful.
While these potential impacts remain an area of interest, we do not believe that the record
warrants a different approach for this action.171
Comment:
One commenter stated that the RFS program and a higher BBD standard protects water quality
and enhances compliance with the Clean Water Act by increasing the amount of used cooking
oil, grease, and fats collected by Tenderers at food service establishments such as restaurants. The
commenter suggested that increasing the collection of cooking oil, grease, and fats at restaurants
and other business establishments would reduce the amount of cooking oil, grease, and fats
channeled into sewer systems and water treatment plants.
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 comment.
171 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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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: 0528, 1033, and
1036.
Comment:
Several commenters raised general concerns about the loss of habitats, including wetlands,
forests, and grasslands, due to the expansion of crops that could be used to produce biofuels. For
example, several commenters expressed concerns about habitat loss and biodiversity degradation
due to extensification and intensification of such crop production, especially the production of
corn and soy. Many of these commenters also raised concerns regarding deforestation in
countries such as Argentina and Indonesia, from any potential increases in demand for palm and
soy oils (i.e., food-based oils).
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 of this document and in a memorandum to the docket
entitled "Endangered Species Act No Effect Finding and Determination on Severe
Environmental Harm under the General Waiver Authority for 2019 Final Rule," we determined
that the 2019 RFS standards are not expected to increase the cultivation of corn or oilseed crops
in the U.S., because the production of these feedstocks will be driven by other factors in 2019. In
addition, the 2019 RFS standards do not require, authorize, fund, or carry out the production of
any specific biofuel or crop. Furthermore, 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.
Comment:
Several commenters mentioned impacts on insects and birds or 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.
Response:
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
explained in a memorandum to the docket and Section 6.4.3 of this document, we do not believe
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that any effects on listed species, critical habitat, or land use conversion can be attributed to this
action, or that this action causes severe environmental harm.172
Comment:
Several commenters called on EPA to implement the land conversion protections contained in
EISA. Several commenters claimed that the aggregate compliance approach does not meet the
land protection mandate in the statute.
Response:
These comments are beyond the scope of this rulemaking. In this rulemaking, EPA did not
propose changes to, take comment on, or otherwise reexamine our aggregate compliance policy,
which was established in the March 2010 RFS2 final rulemaking.173
172 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
173 See 40 CFR 80.1454(g); 75 FR 14670, 14691 etseq.
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7.2.5 Endangered Species Act
Commenters that provided comment on this topic include but are not limited to: 0528, 1033, and
1036.
Comment:
Several commenters mentioned impacts on listed, threatened, or endangered species that
commenters linked to the RFS program, specifically corn, palm oil, and soy oil production, and
called on the agency to act on consultation requirements under Section 7 of the Endangered
Species Act. One commenter also suggested that implied impacts to endangered species from
biofuels constitutes severe environmental harm and therefore the agency should exercise the
general waiver.
Response:
As explained in a memorandum to the docket and Section 6.4.3 of this document, we do not
believe that any effects on listed species, critical habitat, or land use conversion can be attributed
to this action, or that this action causes severe environmental harm.174
174 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
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8. Percentage Standards
8.1 General Comments on the Percentage Standards
EPA did not receive any comments on this topic.
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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: 0166, 0271,
0289, 0312, 0435, 0472, 0491, 0513, 0514, 0517, 0521, 0523, 0527, 0529, 0530, 0535, 0536,
0539, 0586, 0591, 0619, 0620, 0621, 0662, 0665, 0669, 0670, 0672, 0683, 0711, 1037, 1038,
1039, 1040, 1041, 1193, 1194, 1195, 1196, 1197, 1198, 1199, 1202, 1269, 1271, 1272, 1273,
1274, 1275, 1276, 1277, 1278, 1281, 1282, 1283, 1284, 1285, and 1292.
Comment:
Many commenters stated that EPA has a statutory obligation to more appropriately account for
small refinery exemptions. These commenters argued that by not accounting for small refinery
exemptions that are granted after the annual percentage standards are established, EPA is failing
to "ensure" that the renewable fuel volume requirements are met, pursuant to CAA sections
21 l(o)(2)(A)(i) and (o)(3)(B)(i). Several commenters also stated that not accounting for small
refinery exemptions reduces overall biofuel demand and hurts rural America. Commenters
generally requested that EPA reallocate the 2.25 billion RINs that would have otherwise been
retired for RFS compliance in 2016 and 2017, along with developing a mechanism to account for
exemptions that are granted in future years. Commenters suggested several options for
accounting for such exemptions, including:
A revised interpretation of the term "projected" in the percentage standards equations in
40 CFR 80.1405(c) to mean the number small refineries that EPA expects to grant an
exemption to (rather than the number of small refineries that have already been issued an
exemption).
Adjusting the percentage standards mid-year after small refinery exemptions have been
granted.
Adjusting the percentage standards based on the adjustments provision in CAA section
2H(o)(C)(ii).
Other commenters, however, stated that EPA should not reallocate small refinery exemption
volumes. Many of these commenters stated that such reallocation would not be fair to other
obligated parties that had complied with their obligations. These commenters also argued that
there is, in fact, nothing to reallocate since these exemptions do not impact biofuel blending or
cause demand destruction. Several commenters also argued that EPA does not have the statutory
authority to reallocate these volumes, as the statute is written in such a way that it only allows for
downward adjustments.
Response:
These comments are beyond the scope of this rulemaking. In this rulemaking, we did not propose
changes to, take comment on, or otherwise reexamine (collectively "reopen") these issues
relating to the reallocation of exempt small refinery volumes. Specifically, we did not reopen the
regulatory formula used to set the percentage standards and to reallocate exempted small refinery
volumes, its interpretation of that formula or its policies relating to small refinery reallocation, or
its interpretation of CAA section 21 l(o)(3)(C)(ii). We determined our legal, technical, and policy
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approach to these issues many years ago, and have simply applied our longstanding regulations
and policies in this action.175 We also note that we have addressed and rejected many of the
commenters' concerns in prior rulemakings.176
Comment:
Commenters argued that EPA should account for small refinery exemptions by raising the RVOs
through reduced use of the cellulosic waiver authority.
Response:
As discussed in Section II of the final rule and Sections 2.2 and 2.3 of this document, we do not
believe it is appropriate to intentionally drawn down the carryover RIN bank and limit the
exercise of our cellulosic waiver authority.
Comment:
Many commenters requested that EPA provide transparency on how the small refinery
exemption program is being implemented, what the standards are for granting an exemption, and
which refineries are receiving exemptions.
Response:
Outside of this rulemaking proceeding, we have recently taken steps to provide additional
transparency on small refinery exemptions, including publishing regularly-updated information
on its website as to the number of petitions it has received, the number of exemptions granted,
and the volume of exempted RVOs from these exemptions. This information can be found at
https://www.epa.gov/fiiels-registratioii-reportiiig-aiid-compliaiice-help/rfs-small-refmerv-
exemptions.
Comment:
Many commenters expressed overall opposition to the implementation of the small refinery
exemption program. Many commenters requested that no exemptions should be granted
retroactively after the compliance date has passed. Other commenters requested that all
exemptions for a given compliance year must be granted before the volume standards for that
year have been established, as that way they would be accounted for in the applicable percentage
standards for that year.
Several commenters stated that EPA should not grant any small refinery exemptions since no
refinery suffers disproportionate economic hardship. These commenters stated that because RIN
175 See 40 CFR 80.1405(c) (regulatory formula); 75 FR 14716-17, 14867; 75 FR 76804 (small refinery reallocation);
75 FR 14717 (interpretation of CAA section 21 l(o)(3)(C)(ii)).
176 See 77 FR 1340 (January 9, 2012); see also 75 FR 14717 (March 26, 2010); 75 FR 76804 (December 9, 2010),
78 FR 49825 (August 15, 2013), 80 FR 77511 (December 14, 2015), 81 FR 89800 (December 12, 2016), and 82 FR
58523 (December 12, 2017).
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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.
Several commenters also stated that in order to receive an "extension" of its exemption, a
refinery must have received the exemption continuously since the original exemption for all
small refineries expired in 2010.
One commenter suggested that a small refinery exemption should only apply to the total
renewable fuel standard and not the cellulosic and advanced biofuel standards.
One commenter expressed support for EPA's implementation of the small refinery exemption
program and that EPA should continue issuing exemptions.
One commenter requested that small blender-refiners should also be eligible for small refinery
exemptions.
Response:
These comments are beyond the scope of this rulemaking. In this rulemaking, we did not propose
changes to, take comment on, or otherwise reexamine the manner in which small refinery
hardship petitions are evaluated. These topics are not further addressed in this document.
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9. Other Comments
9.1 Dates/Deadlines
EPA did not receive any comments on this topic.
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9.2 Statutory and Executive Order Reviews
EPA did not receive any comments on this topic.
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9.3 Beyond the Scope
Commenters that provided comment on this topic include but are not limited to: 0312, 0313,
0316, 0413, 0434, 0439, 0492, 0493, 0517, 0528, 0529, 0530, 0532, 0534, 0535, 0539, 0586,
0591, 0619, 0620, 0621, 0660, 0662, 0665, 0669, 0671, 0672, 0673, 0711, 1029, 1033, 1035,
1036, 1037, 1041, 1194, 1195, 1196, 1198, 1266, 1267, 1271, 1273, 1274, 1277, 1280, 1281,
1282, 1283, 1284, 1285, and 1292.
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 adjusting equivalence values,
removing the obligation on exported renewable fuel, and modifying the aggregate
compliance provision
- Updates to EPA's lifecycle analyses and modeling of market responses to strong RVOs
and RIN prices
Treatment of CWCs
Changes to the point of obligation for the RFS program and claims that EPA must
evaluate the point of obligation in each annual rulemaking
Suggestions for new RIN-generating pathways including renewable electricity and
hydrogen
Impacts of ethanol on engines
Extending the 1 psi RVP waiver for El5
Changes to the El5 misfueling mitigation plans
Changes to RVP and PTD requirements for biobutanol
- Potential future RFS rulemakings such as the "reset rule" or an action to address the
remand of the 2016 RFS standards
- Provisions proposed in the REGS Rule, including biointermediates
- Mandates and specifications for high octane gasoline
Vehicle certification fuel
"Substantially similar" assessments of transportation fuels
Vehicle fuel economy standards and measurement practices
- Flex fuel vehicle credits
Controls on mobile source air toxics and toxic components of gasoline
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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