Renewable Fuel Standard Program -
Standards for 2020 and Biomass-Based
Diesel Volume for 2021 and
Other Changes:
Response to Comments
SEPA
United States
Environmental Protection
Agency
-------
Renewable Fuel Standard Program -
Standards for 2020 and Biomass-Based
Diesel Volume for 2021 and
Other Changes:
Response to Comments
Assessment and Standards Division
Office of Transportation and Air Quality
U.S. Environmental Protection Agency
United States
Environmental Protection
^1 Agency
EPA-420-R-19-018
December 2019
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Table of Contents
List of Acronyms and Abbreviations v
List of Organizations Submitting Comments on the 2020 RVO Rule vi
List of Organizations Submitting Comments on the REGS Rule xiv
1. Policy Objectives of the RFS Program 1
1.1 Broad Policy Issues Including Congressional Intent and Program Goals 1
2. Waiver Authorities 3
2.1 General Waiver Authority 3
2.1.1 Inadequate Domestic Supply 6
2.1.2 Severe Economic Harm 10
2.1.3 Severe Environmental Harm 19
2.2 Cellulosic Waiver Authority 20
2.3 Statutory Obligation to Reset Volumes 24
2.4 Carryover RINs 25
3. Cellulosic Biofuel Standard 30
3.1 General Comments on Cellulosic Biofuels 30
3.2 Methodology for Projecting Volumes 38
3.2.1 Methodology for Projecting Liquid Cellulosic Biofuel Volumes 41
3.2.2 Methodology for Projecting Cellulosic Biogas Volumes 43
3.3 Proposed Cellulosic Biofuel Standard 47
4. Advanced Biofuel 53
4.1 Inability to Meet Statutory Targets 53
4.2 Attainable and Reasonably Attainable Volumes of Advanced Biofuel 54
4.2.1 Imported Sugarcane Ethanol 55
4.2.2 Biodiesel and Renewable Diesel 59
4.2.2.1 General Comments on Advanced Biodiesel and Renewable Diesel 59
4.2.2.2 Domestic Production Capacity 62
4.2.2.3 Potential Imports 65
4.2.2.4 Availability of Advanced Biodiesel and Renewable Diesel Feedstocks 67
4.2.2.5 Impact of Tax Credit 77
4.2.3 Other Advanced Biofuel 78
4.3 Advanced Volume that Can Be Supplied and Used 79
4.4 Proposed Advanced Biofuel Requirement 80
l
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5. Total Renewable Fuel and Conventional Renewable Fuel 85
5.1 Ethanol 85
5.1.1 E10 Blendwall and Total Gasoline Demand 85
5.1.2 Exceeding the E10 Blendwall 87
5.1.3 Domestic Production Capacity 91
5.1.4 Refiner Responsibilities to Expand Ethanol Use 92
5.1.5 EO 94
5.1.6 E15 95
5.1.7 E85 98
5.1.8 Other Comments Related to Ethanol 101
5.2 Biodiesel and Renewable Diesel 102
5.2.1 Infrastructure for Distributing, Blending, and Dispensing 102
5.2.2 Vehicles That Can Use It 103
5.2.3 Cold Temperature Impacts 104
5.2.4 Production Capacity 105
5.2.5 Feedstock Availability 106
5.2.6 Imports of Conventional Biodiesel and Renewable Diesel 107
5.2.7 Consumer Response 108
5.2.8 Total Volume Achievable 109
5.3 Determination of Standards 110
5.3.1 Total Renewable Fuel Volume 110
5.3.2 Conventional Renewable Fuel / Corn-Ethanol "Mandate" Ill
5.3.3 Other Comments Related to the Determination of Standards 115
6. BBD Volume for 2021 117
6.1 General 117
6.2 Supporting the BBD Industry 119
6.3 Ensuring Opportunities for Other Advanced Biofuels 120
6.4 Consideration of Statutory Factors (BBD) 123
6.4.1 General Comments on the Consideration of Statutory Factors 123
6.4.2 Consideration of the Review of the Program to Date 125
6.4.3 Environmental Impacts (Air Quality, Climate Change, Conversion of Wetlands,
Ecosystems, Wildlife Habitat, Water Quality, Water Supply) 126
6.4.4 Energy Security Impacts 127
6.4.5 Expected Rate of Production of Biofuels 129
li
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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 131
6.4.7 Impact on Transportation Fuel Prices and the Cost to Transport Goods 132
6.4.8 Impacts on Other Factors (Jobs, Price and Supply of Agricultural Goods, Rural
Economic Development, Food Prices) 135
7. Economic and Environmental Impacts 137
7.1 Economic Impacts and Considerations 137
7.1.1 Illustrative Costs of the Program 137
7.1.2 Energy Security 139
7.1.3 Impacts of Standards on RIN Prices 142
7.1.4 Impacts of Standards on Retail Fuel Prices 144
7.1.5 Price and Supply of Agricultural Commodities and Farm Income 145
7.1.6 Rural Economies 149
7.1.7 Jobs and Profitability of Biofuel Producers 150
7.2 Environmental Impacts and Considerations 153
7.2.1 (il IG Impacts 155
7.2.2 Air Quality 156
7.2.3 Water Quality and Quantity 157
7.2.4 Ecosystems, Wildlife Habitat, and Conversion of Wetlands 159
7.2.5 Endangered Species Act 161
8. Percentage Standards 162
8.1 General Comments on the Percentage Standards 162
8.2 Accounting for Small Refinery Hardship Exemptions 164
9. Amendments to the RFS Program Regulations 192
9.1 Clarification of Diesel RVO Calculations 192
9.2 Pathway Petition Conditions 195
9.3 Esterification Pretreatment Pathway 196
9.4 Distillers Corn Oil and Distillers Sorghum Oil Pathways 199
9.5 Clarification of the Definition of Renewable Fuel Exporter and Associated Provisions 200
9.6 Other Revisions to the RFS and Fuels Programs 202
9.6.1 Flexibilities for Renewable Fuel Blending for Military Use 202
9.6.2 Heating Oil Used for Cooling 203
9.6.3 Separated Food Waste Plans 204
9.6.4 Additional Registration Deactivation Justifications 205
in
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9.6.5 New RIN Retirement Section 207
9.6.6 New Pathway for Co-Processing Biomass with Petroleum to Produce Cellulosic
Diesel, Jet Fuel, and Heating Oil 209
9.6.7 Other Revisions to the Fuels Program 212
9.6.7.1 Testing Revisions 212
9.6.7.2 Oxygenate Added Downstream in Tier 3 213
9.6.7.3 Technical Corrections and Clarifications 214
10. Other Comments 217
10.1 Statutory and Executive Order Reviews 217
10.2 Point of Obligation 219
10.3 Periodic Review 220
10.4 Beyond the Scope 223
iv
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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
CNG
Compressed Natural Gas
CO
Carbon Monoxide
CWC
Cellulosic Waiver Credits
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
GHG
Greenhouse Gas
GREET
Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model
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
SRE
Small Refinery Exemption
STEO
Short-Term Energy Outlook
USD A
U.S. Department of Agriculture
VOC
Volatile Organic Compounds
v
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List of Organizations Submitting Comments on the 2020 RVO Rule
Commenter or Organization Name
Docket Item Number3
A. Tusek
0189
ABATE of Indiana Petroleum Council, a division of the American
0427
Petroleum Institute (API)
ABATE of Kansas
1442
Ace Ethanol LLC
0344
Ace Ethanol, LLC
0273
Action Aid et al.
0699
Adkins Energy, LLC
0393, 0500
Advanced Biofuels Association (ABFA)
0202, 0365, 0529
Aemetis, Inc.
0129, 0133, 1138, 2036
AJW, Inc. and Iogen Corporation
0277, 0467
Alabama Petroleum Council, a division of American Petroleum
0421
Institute (API), et al.
Alex Garza, State Representative, Michigan House of
Representatives
0706
Alternative Fuels & Chemicals Coalition (AFCC)
0727
Ameresco, Inc.
0436
American Biogas Council (ABC)
0207, 1285
American Coalition for Ethanol (ACE)
0290, 0357, 0435
American Farm Bureau Federation
0153, 0443
American Fuel & Petrochemical Manufacturers
0299, 0378, 0735
American Motorcyclist Association (AMA)
0286
American Petroleum Industries of Michigan
0433
American Petroleum Institute (API)
0211, 0409, 0445, 0721
American Soybean Association (ASA)
0177, 0372, 0458
Americans for Prosperity Kansas
0439
Anew Travel and Fuel Centers, Zeeland Farm Services for National
0383
Association of Truckstop Operators, (NATSO)
0170, 0182, 0363,
0477, 0478, 0479,
0481, 0482, 0483,
0484, 0513, 0514,
Anonymous public comment
0515, 0516, 0517,
0518, 0519, 0521,
0522, 0523, 0524,
0525, 0527, 0718,
0864, 1123
vi
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Commenter or Organization Name
Docket Item Number"
API-Missouri
1548
Archer Daniels Midland Company (ADM)
0320, 0416, 0715
Aria Energy
0173, 0373, 0488
Arkansas Independent Producers & Royalty Owners Association
(AIPRO), Arkansas Oil Marketers Association, and Arkansas
Petroleum Council
0424
Arkansas Soybean Association
0122
Associated Petroleum Industries of Pennsylvania et al.
0447
Association of Equipment Manufacturers (AEM)
0283, 0456
B. Byrd
0480
B. Carron
0109, 0381
B. Gacke
0144
Badger State Ethanol, LLC
0134, 0422
Big River Resources, LLC
0163
Biodiesel Coalition of Missouri (BCM)
0494
Biogas Researchers, Inc.
0306
Biomass Power Association On behalf of the RFS Power Coalition
0191, 1944
Biotechnology Innovation Organization (BIO)
0208, 1999
Bracewell
0340
Brazilian Sugarcane Industry Association (UNICA)
0304, 0717
Brian K. Elder, State Representative, 96th District, Min. Vice Chair,
State of Michigan House of Representatives Agriculture Committee
2003
Bureau of Public Affairs and Communications, New York City
Department of Environmental Protection (DEP)
0342
Business Council for Sustainable Energy (BCSE)
0298, 0719
C. Fujan
0157
C. Hanson
0141
C. Nelson
0174
Carbon Green BioEnergy
0364
Chevron
0190
Chevron (name illegible)
0432
Clean Air Task Force (CATF)
0275
Coalition for Renewable Natural Gas, et al.
0323, 0723
Commonwealth Agri-Energy, LLC
0295, 0395
Compeer Financial
0178
Connecticut Petroleum Council
0463
Countrymark Cooperative
0501
vii
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Commenter or Organization Name
Docket Item Number"
Crimson Renewable Energy
0302, 0543
CTE Global, Inc.
0417
D. Frederickson
0158
D. McNinch
0403
D3MAX, LLC
0338
Deere & Company (John Deere)
0396
Division of Economic and Business Development, Toledo, Ohio, for
Mayor Wade Kapszukiewicz Toledo, Ohio
0385
DTE Biomass Energy
0316, 0434
DuPont
0184, 0455
E. Hoffman
0162
East Kansas Agri-Energy, LLC
0127, 0475, 0498
Element Markets Renewable Energy, LLC (EMRE or EM)
0341
Enerdyne Power Systems
0440
Enerkem Inc.
0152
Eversheds Sutherland (US) LLP
0183
Flint Hills Resources, LP on behalf of Duonix Beatrice, LP (DBLP)
0267
Florida Petroleum Council et al.
0446
Fuels Regulatory Advocacy, BP America Inc.
0199, 0700
Georgia Petroleum Council, American Petroleum Institute (API)
0420
Gibson, Dunn & Crutcher LLP on behalf of Monroe Energy, LLC
0204, 1284
Golden Grain Energy
0315
Governor Pete Ricketts, State of Nebraska
0468
Governors' Biofuels Coalition
0384
Growth Energy
0312, 0362, 0711, 0726
Haynes and Boone, LLP on behalf of Small Retailers Coalition
0195
Heartland Corn Products
0394
HollyFrontier Corporation
0193, 0471
Illinois Corn Growers Association (ICGA)
0282, 0408
Illinois Corn Growers Association and Illinois Renewable Fuels
Association
0528
Illinois Farm Bureau (IFB)
0708
Illinois Petroleum Council
1784
Independent Fuel Terminal Operators Association (IFTOA)
0185, 0470
Indiana Corn Growers Association
0415
Indiana Corn Growers Association and Indiana Soybean Alliance
0460
viii
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Commenter or Organization Name
Docket Item Number"
Indiana Ethanol Producers Association
0379
Indiana Soybean Alliance (ISA)
0412
Institute for Energy Research
0732
International Brotherhood of Boilermakers, Local Lodge 85
0380
International Council on Clean Transportation (ICCT)
0124
Iowa Biodiesel Board
0703
Iowa Biodiesel Board and Western Iowa Energy
0356
Iowa Biotechnology Association (IowaBio)
0339
Iowa Corn Growers Association (ICGA)
0209, 0368, 0465
Iowa Soybean Association (ISA)
0305, 0370
J. Carstensen
0404
J. Kent Eckles
0406
J. McFall
0405
J. Parks
0166
J. Pavka
1976
J. Schmaltz
0253
Jim Hagedorn, Member of Congress, Congress of the United States
1152
John Barrasso, Chairman, Committee on Environment and Public
Works, Wyoming Senator, U.S. Senate
0731
Joni K. Ernst, United States Senator Iowa, United States Senate
0390
K. Gould
0136
Kansas Corn Growers Association (KCGA)
0187, 0452
Kansas Farm Bureau (KFB)
0194
Kansas Grain Sorghum Producers Association and The National
Sorghum Producers
0367
Kentucky Corn Growers Association (KYCGA)
0730
Kentucky Farm Bureau (KFB)
0714
Kevin Coleman, State Representative, 16th District, Wayne and
Westland, Michigan House of Representatives
0495
Kim Reynolds, Governor and Mike Naig, Iowa Secretary of
Agriculture, Office of Governor, State of Iowa
0311
Kim Reynolds, Governor, State of Iowa
0387
Kinetrex Energy
0697
Klickitat Public Utility District - Goldendale, Washington
0407
Kolmar Americas, Inc.
0186, 0414, 0707
L. Baxter
1919
LaMae Drier, Ace Ethanol LLC
0126
IX
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Commenter or Organization Name
Docket Item Number"
Little Sioux Corn Processors, LLC (LSCP)
0128, 0249, 0335, 0461
M. Michael Rounds, U.S. Senator South Dakota, U.S. Senate
0391
Magellan Midstream Partners L. P.
0493
Marathon Petroleum Company LP (MPC)
0118
Mass Comment Campaign sponsored by Absolute Energy, (paper)
0544
Mass Comment Campaign sponsored by Iowa Renewable Fuels
Association (IRFA)
0504
Mass Comment Campaign sponsored by Michigan Corn Growers
Association (MCGA). Bundle (web)
0218
Mass Comment Campaign sponsoring organization unknown, (web)
0113, 0123, 0170,
0238, 0505, 0506,
0507, 0508, 0509,
0510, 0511, 0736,
0737, 0738, 0739, 0740
Mass Comment Campaign sponsoring organization unknown.
Individual (web)
0214, 0215, 0216, 0217
Massachusetts Petroleum Council, A Division of the American
Petroleum Institute (API)
0425
Michigan Bioscience Industry Association (MichBio) and
Biotechnology Innovation Organization (BIO)
0377
Michigan Farm Bureau (MFB)
0154, 0434
Michigan Soybean Association (MSA)
0466
Mid-Missouri Energy (MME)
0287, 0476
Midwest AgEnergy Group, LLC (MAG)
0176, 0720
Minnesota Bio-Fuels Association (MBA)
0297, 0712
Minnesota Corn Growers Association (MCGA)
0205, 0535
Minnesota Farm Bureau Federation (MFBF)
0701
Minnesota Farmers Union (MFU)
0201
Minnesota Petroleum Council
0423
Missouri Corn Growers Association (MCGA) and National Corn
Growers Association (NCGA)
0336, 0716
Missouri Farm Bureau
0497
Missouri Farmers Union
0285
Missouri Soybean Association (MSA)
0121, 0457
Montauk Energy
0375
Montauk Energy Holdings, LLC
0192, 0722
National Association of State Foresters (NASF)
0490
National Biodiesel Board (NBB)
0213, 0360, 0369, 0451
X
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Commenter or Organization Name
Docket Item Number"
National Chicken Council (NCC)
0278, 0536
National Corn Growers Association (NCGA)
0276, 0359, 0441
National Corn-to-Ethanol Research Center (NCERC) at Southern
Illinois University - Edwardsville (SIU-E)
0116, 0386
National Farmers Union (NFU)
0197, 0713
National Oilseed Processors Association (NOPA)
0200, 0491
National Renderers Association (NRA)
0328
NATSO, Inc.
0301, 0540
Nebraska Corn Board and Nebraska Corn Growers Association
0280, 0486
Nebraska Corn Growers Association
0366
Nebraska Ethanol Board (NEB)
0296, 0410, 0702
Nebraska Farm Bureau Federation (NEFB)
0318, 0454
Nebraska Soybean Association
0117, 0418
Neste US, Inc.
0196, 0537
New England Convenience Store & Energy Marketers Association
(NECSEMA)
0449
New England Fuel Institute (NEFI)
0327, 0734
New Leaf Biofuel, LLC
0289
New York Corn and Soybean Growers Association (NYCSGA)
0169, 0474
New York Farm Bureau (NYFB)
0728
Newport Biodiesel, Inc.
0171, 0266
NH Off Highway Vehicle Association
1763
North Carolina Petroleum and Convenience Marketers Association
1480
North Dakota Corn Growers Association (NDCGA)
0499
North Dakota Farmers Union (NDFU)
0329, 0538
North Dakota Soybean Growers Association (NDSGA)
0181, 0532
NuVu Fuels
0361
Ohio Corn & Wheat Growers Association
0355
Ohio Farm Bureau
0172, 0442
Ohio Soybean Association (OSA)
0496
Outdoor Power Equipment Institute (OPEI)
0119
Owensboro Grain Company
0292, 0542
P. A. Winters
0503
P. Buckwalter
2038
Pacific Ethanol
2037
PBF Holding Company LLC
0212, 0710
XI
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Commenter or Organization Name
Docket Item Number"
Peace 4 Animals
0272
PerkinsCoie, on behalf of Small Refiners Coalition
0324, 0733
Pete Ricketts, Governor, State of Nebraska, Office of the Governor
0206
Petroleum Marketers Association of America (PMAA)
0326, 0729
Phillips 66 Company
0270
Pike-Scott Farm Bureau
0419
POET
0411, 1893
POET-DSM Advanced Biofuels
0303
Policy Resolution Group, for Fueling American Jobs Coalition
0382
Producers of Renewables United for Integrity Truth and
Transparency
0325, 2041
Protec Fuel Management
0135, 0462
Quad County Corn Processors Cooperative (QCCP)
0156, 0274, 0438, 0709
R. Krusemark
0485
R. Weyen
2035
R. White
2000
Red Trail Energy, LLC et al., for North Dakota Ethanol Producers
Association (NDEPA)
0321, 0392
Renew Kansas Biofuels Association
0300, 0453
Renewable Biofuels LLC
0293
Renewable Energy Group (REG)
0313,0705
Renewable Fuels Association (RFA)
0108, 0281, 0534, 1998
Renewable Fuels Nebraska
0168, 2029
Rio Valley Biofuels
0294, 0541
Rocky Mountain Farmers Union
0268
RPMG Inc.
0704
Sacramento Municipal Utility District (SMUD)
0530
Schoon Construction, Inc.
0167
Senator Amy Klobuchar et al., United States Senate
0698
Senator Mike Braun, United States Senate
0388
Senator Roy Blunt, United States Senate
0389
Shell Oil Products US
0131
Show Me Ethanol, LLC (SME)
0125, 0358
Social Compassion in Legislation (SCIL)
0271
Sorghum Producers (NSP)
0492
Xll
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Commenter or Organization Name
Docket Item Number"
South Carolina Petroleum Council, a division of the American
Petroleum Institute (API)
0426
South Dakota Corn Growers Association (SDCGA)
0284, 0469
South Dakota Soybean Association
0413
Southwest Iowa Renewable Energy (SIRE)
2023
State Senator Dayna Polehanki, District 7, Michigan State Senate
0459
Steptoe & Johnson LLP on behalf of National Association of
Convenience Stores (NACS) and Society of Independent Gasoline
Marketers of America (SIGMA)
0322, 0472
Strategy & Planning, Exxon Mobile Corporation
0279, 0489
T. I. Kiefer
0531
Tennessee (TN) Soybean Association
0431, 0502
Tennessee Petroleum Council
0450
Texas Corn Producers Association (TCPA)
0317, 0473
The 25x'25 Alliance
0288, 0533
Thumb Bioenergy LLC
0371
Toledo Refining Company
0376
U.S. Canola Association (USCA)
0164, 0464
Union of Concerned Scientists (UCS)
0120
United Steel workers (USW)
0487
Valero Energy Corporation
0337, 1487
Virginia Petroleum Council et al.
0444
W2Fuels
0374
Waste Management (WM)
0319, 0725
Western Dubuque Biodiesel
0314
Western New York Energy, LLC
0210, 0428
Western Petroleum Marketers Association (WPMA) et al.
0724
Western Plains Energy, LLC (WPE)
0265, 0429
Wisconsin BioFuels Association (WBFA)
0437
Wisconsin Corn Growers Association (WCGA)
0203
Wisconsin Recreation Dealers Alliance and Wisconsin Petroleum
Council
0448
World Energy
0291, 0539
Wynnewood Refining Company, LLC
1153
a Individual comments from the public (and attachments submitted with comments) submitted to Docket No.
EPAHQ-OAR-2019-0136 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-2019-0136-0500 is presented as 0500 in this table and within the text of this document.
xill
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List of Organizations Submitting Comments on the REGS Rule
Commenter or Organization Name
Docket Item Number3
Advanced Biofuels Association (ABFA)
REGS-0313
AE Cote-Nord Canada Bioenergy Inc.
REGS-0216
American Petroleum Institute (API) and American Fuel &
Petrochemical Manufacturers (AFPM)
REGS-0244
Anonymous
REGS-0198
Arbec Forest Products Inc.
REGS-0226
cLausten LLC
REGS-0307
Darling Ingredients Inc.
REGS-0282
Ensyn Corporation
REGS-0229
Ensyn Development Partners
REGS-0232
Fibria Celulose S.A.
REGS-0217
Fulcrum BioEnergy, Inc.
REGS-0269
National Biodiesel Board (NBB)
REGS-0300
Premium Energy Limited
REGS-0221
Renewable Energy Group, Inc. (REG)
REGS-0267
Renova Capital Partners LLC
REGS-0233
Roseburg Forest Products
REGS-0224
Sabine Biofuels II, LLC
REGS-0223
Shell
REGS-0234
Tesoro Companies, Inc.
REGS-0275
Valero Renewable Fuels Company, LLC
REGS-0266
Weaver and Tidwell, LLP
REGS-0272
Western Dubuque Biodiesel, LLC
REGS-0311
a Individual comments from the public (and attachments submitted with comments) submitted to Docket No.
EPAHQ-OAR-2016-0041 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-2016-0041-0500 is presented as REGS-0500 in this table and within the text of this document.
xiv
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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: 0129, 0152,
0186, 0197, 0297.
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.
Some commenters suggested that higher volumes support the goals of the RFS program and that
significant growth in renewable fuels, including increasing the production of clean renewable
fuels, is one of the goals of the program. Other commenters suggested that Congress intended for
the conventional biofuel volume to exceed the blendwall and to require greater than 2 billion
gallons of biodiesel. Some commenters suggested that EPA must implement Congress's
"market-forcing policy." Still other commenters suggested that Congress did not intend for the
RFS program to exceed the blendwall.
Response:
Although the statutory tables do exhibit increasing volumes of advanced biofuels, much of that
increase is attributable to the cellulosic biofuel standard.
Congress did not speak to the E10 blendwall, instead laying out a program that required
increasing volumes of various categories of renewable fuels through 2022 subject to certain EPA
administered waiver authorities. See responses to additional comments on the E10 blendwall in
Sections 5.1.1 and 5.1.2 of this document.
We agree that one of EISA's goals was to increase the production and use of renewable fuels, but
that was not its only goal. Indeed, the preamble to EISA lists numerous goals: "An Act To move
the United States toward greater energy independence and security, to increase the production of
clean renewable fuels, to protect consumers
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.
1
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Additionally, we believe that the standards we are setting will drive additional growth in the
market consistent with our authorities and the statute. We are also establishing a BBD volume of
2.43 billion gallons for 2021 and expect greater quantities of biodiesel and renewable diesel to be
used to meet the advanced biofuel standard in 2021.
Comment:
Commenters 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. A commenter suggested that EPA must restore the RFS as guaranteed
by law. Commenters suggested that EPA should meet the goals set by Congress, drive rural
economic growth, and promote investments in biofuels.
Response:
The standards we are setting for 2020 include an increase of 170 million gallons in the cellulosic,
advanced biofuel, and total renewable fuel standards, in comparison to the 2019 standards. In
addition, the 2020 BBD standard represents an increase of 330 million gallons relative to the
2019 BBD standard.
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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: 0197, 0211,
0270, 0276, 0324.
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, ome 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.
Response:
We are not using the general waiver authority to set the 2020 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. We have assessed
whether to reduce volumes under these authorities and determined that doing so would not be
appropriate.
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.1 We have
evaluated whether the criteria for use of the general waiver authority have been met. As we
1 CAA section 21 l(o)(7)(E) also provides that EPA may waive volumes under the "biomass-based diesel waiver
authority." We received no comments suggesting we should waive volumes under that authority, and do not find that
it would be appropriate to do so. That is, we are not aware of data indicating "a significant renewable feedstock
disruption or other market circumstances that would make the price of biomass-based diesel fuel increase
significantly." We do not further address this waiver authority in this document.
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explain throughout this section, we have determined that exercising the general waiver authority
would not be appropriate.
Comment:
Some commenters suggested that EPA should look at the statutory volumes when evaluating
whether reductions under the general waiver authority are appropriate and make corresponding
reductions because the statutory volumes cannot be used.
Response:
We do not find that we are required to assess the general waiver authority based on 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 2020, 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 following the use of the cellulosic
waiver authority will give rise to circumstances justifying the use of other waiver authorities to
provide further reductions. This approach was affirmed by the D.C. Circuit in AFPMv. EPA, 937
F.3d 559, 579.
In addition, even were we to assess the statutory volumes under general waiver authority, the
statute still gives EPA discretion to waive volumes upon finding that the triggering condition
(inadequate domestic supply, or severe environmental or economic harm) has been met. In
exercising our discretion, we would assess the degree of the waiver needed to avoid inadequate
domestic supply or severe environmental or economic harm. In this analysis, we would still
consider the resulting volumes from the exercise of the cellulosic waiver authority.
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.
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 2020.
Comment:
A commenter suggested that EPA should first determine reasonably achievable volumes, and
then assess whether it can use its waiver authorities to lower volumes to that level, and that doing
otherwise renders the required volumes arbitrary and capricious. They suggested that the
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volumes proposed were not achievable due to the need for significant increases in BBD,
sugarcane ethanol, or a significant drawdown in the carryover RIN bank.
Response:
We note that the statute does not require us to determine "reasonably achievable volumes." In
some prior annual rules, we have assessed the maximum reasonably achievable volume in
determining the appropriate level of reduction under the general waiver authority after a finding
of inadequate domestic supply. However, as described in Section 2.1.1, we do not believe there
will be an inadequate domestic supply of renewable fuel. In general, we find that none of the
statutory criteria for reductions under the general waiver authority have been met. In addition, as
explained in Section IV of the final rule, we account for a reasonably attainable volume of
sugarcane ethanol in estimating the market's response to this final rule. As explained in Section
VI of the final rule, the BBD standard is not expected to be binding. The advanced biofuel
standard is expected to drive the use of BBD in 2020, and that standard is attainable, as described
in Section IV of the final rule. We are also not increasing the BBD volume for 2021 relative to
2020. We do not expect this final rule to result in the drawdown of carryover RINs, as explained
further in Sections II and IV of the final rule, Section 2.4 of this document, and the memorandum
"Updated market impacts of biofuels in 2020."
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2.1.1 Inadequate Domestic Supply
Commenters that provided comment on this topic include but are not limited to: 0197, 0204,
0276, 0288, 0323, 0337.
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 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
commenters additionally stated that the goals of the RFS program are best served by reading
"domestic supply" to include imports.
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. Some commenters suggested that this interpretation would
also provide more certainty to obligated parties due to the potential impacts on imports due to
tariffs and trade issues. Many of the commenters suggested that when looking solely at domestic
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production, an inadequate domestic supply of renewable fuel exists, particularly for advanced
biofuels, 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.2 We first adopted this approach in the 2018 final rule, where it was upheld by the D.C.
Circuit's decision in AFPMv. EPA.
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
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.3
Updated data from 2017 and 2018 shows continued domestic production of corn ethanol in
excess of 15 billion gallons.4
With respect to cellulosic biofuels, we note that the vast majority of cellulosic biofuel supply is
expected to come from domestic sources, and that any imports of cellulosic biofuel are expected
to be less than 13% of the standard based on data from 2018. Given the importance that Congress
placed on the growth of cellulosic biofuel volumes, our projection that compliance with a 590
million gallon requirement is feasible using RINs generated in 2020, and the availability of
carryover cellulosic biofuel RINs and cellulosic waiver credits for additional compliance
2 See 82 FR 58516-17 (December 12, 2017), adopting this approach in the 2018 rule.
3 See 82 FR 58517 (December 12, 2017).
4 See "Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum to docket EPA-HQ-OAR-
2019-0136.
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flexibility, EPA would not exercise its discretion to lower the 590 million gallon projected
cellulosic biofuel volume even if EPA were to interpret the term "domestic supply" to exclude
imported volumes.
For advanced biofuels, the 2020 standard could be satisfied by an increase in domestic
production of approximately 510 million gallons relative to domestic production in 20195, which
is about the same as than the greatest year-over-year increase in domestic advanced biofuel
production.6 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 Sections III and 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.7 In determining whether to exercise our discretion, we may
consider, among other things, domestic production, imports, and the size of the carryover RIN
bank.8 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 2020 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:
A commenter suggested that EPA should define "domestic supply" to only include renewable
fuel produced in the United States, and evaluate whether that supply is adequate, considering
both availability and cost. The commenter also stated that when EPA determines how much
BBD is "reasonably attainable," EPA should consider domestic supply only and not imports, as
imports are not consistent with national security and domestic resource development goals. They
state that in including imports results in a BBD RVO for 2021 that is not reasonably attainable.
5 The advanced biofuel standard for 2020 is 4.5 billion gallons. As discussed in Section IV of the final rule, we
anticipate approximately 50 million gallons of domestic other advanced biofuel will be used to meet that standard.
In 2019, domestic production of biodiesel and renewable diesel is projected to reach approximately 2.356 billion
gallons. Thus, an increase of only 510 million gallons of biodiesel or renewable diesel would need to be produced
domestically to meet the standard.
6 The highest year over year increase in domestic advanced biofuel production was approximately 709 million
gallons from 2015 to 2016.
7 See CAA section 21 l(o)(7)(A) ("the Administrator may waive...") (emphasis added).
8 See ACE at 709, 715.
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Response:
As discussed above, although EPA could interpret "domestic supply" to only include
domestically produced fuel, we choose not to resolve this issue. We also 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. Congress authorized a waiver based on severe economic harm, and
thereby implied that the general waiver authority is not available due to economic cost
considerations that do not rise to the level of severe economic harm.9 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 inadequate or. For further discussion of costs, see Section V
of the final rule.
In determining the "reasonably attainable" volumes of advanced biofuels for purposes of the
cellulosic waiver authority, EPA has considered both domestic supply and imports. The
cellulosic waiver authority provides EPA broad discretion and allows consideration of imports.
Moreover, regardless of the volumes we establish under the cellulosic waiver authority, both
qualifying imported and domestically produced biofuels may be used to satisfy the renewable
fuel standards.
EPA does not, however, assess the reasonably attainable volume in establishing the BBD
volume. We do not find that the "reasonably attainable" analysis is relevant in our setting of the
2021 BBD standard, which we do so under our authority to set BBD volume requirements under
CAA section 21 l(o)(2)(B)(ii). That analysis does consider the impacts of biofuels on energy
security and the domestic economy.
Finally, to the extent the commenter is suggesting that EPA should exercise the general waiver
authority to reduce the 2021 BBD volume, we believe this issue is best resolved when
establishing the 2021 percentage standard for BBD in 2020. In any event, we do not believe the
BBD standard will be binding, as it is the 2021 advanced biofuel requirement that will drive the
use of BBD in 2021.
9 See ACE 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: 0190, 0197,
0204, 0212, 0276, 0278, 0299, 0323, 0337.
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. They also suggested that broiler
producers have faced higher feed costs due to the RFS program. 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. For merchant refiners, commenters pointed to the blendwall, high RIN prices, and
limited availability of higher level ethanol blends as demonstrating harm. Some commenters
specifically mentioned refiners located in particular areas, such as East Coast and Mid-continent
refiners.
Other commenters suggested that a finding of severe economic harm would not be justified.
Some pointed to lower RIN prices than in the past as evidence of a lack of harm.
Response:
CAA section 21 l(o)(7)(A) provides that EPA may grant a waiver based on a determination that
implementation of the 2020 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.10 Based on our interpretation of the statute
and the record before us, we decline to exercise our discretion to grant the waiver for multiple,
independent 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.
Second, in assessing whether to exercise our discretion to grant a waiver, EPA considers the
overall impacts of the 2020 volume requirements, including beneficial impacts on renewable fuel
producers, farmers, and other industries.11 Commenters generally failed to demonstrate that
granting a waiver would be appropriate notwithstanding the beneficial impacts of the 2020
volume requirements. Third, as we explain below, even were we to focus on the impacts to
10 See 77 FR 70755 (November 27, 2012); 73 FR 47170-72 (August 13, 2008).
11 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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particular industries, the commenters did not demonstrate that the 2020 volume requirements
would cause severe harm to their industry.12
Regarding the poultry industry specifically, the commenter pointed to corn price fluctuations and
higher feed costs. However, the commenter did not demonstrate that the 2020 volume
requirements, as opposed to other market factors, would cause these economic impacts. A
fortiori, the commenter did not demonstrate that implementation of the 2020 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.13 We further note in the
memorandum to the docket "Endangered Species Act No Effect Finding for the 2020 Final Rule"
that the 2020 RFS rule itself is having no impact on domestic corn ethanol production 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 severe 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 and small
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.14 The prices refiners receive
for their gasoline blendstocks and diesel fuel have risen in the U.S. to offset their RFS
compliance costs.15 We found this cost recovery notwithstanding the so-called "blendwall" and
the limited availability of higher level ethanol blends. 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 ignores the fact that these parties
are recovering the cost of RINs from the sale of their petroleum products. When the ability for
12 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.
13 See, e.g., "Notice of Decision Regarding Requests for a Waiver of the Renewable Fuel Standard," 77 FR 70752
(November 27, 2012).
14 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.
15 Id.
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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. We also
recognize that refining margins have decreased in recent years for some market participants,16
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.17
Commenters that suggested that the RFS program is harming the PADD 1 or "East Coast" region
suggested that the harm is caused by the struggle or closure of refineries, pointing specifically to
the recent closure of PES. However, the shutdown of PES was due to a fire, not the RFS
program, as commenters acknowledge. These assertions are premised on a study by Pirrong,
suggesting that the 2019 RFS requirements have the potential to make East Coast refineries
unprofitable which will increase the probability that they may shut down. They attribute these
costs to the cost of RINs, which as discussed above, is inconsistent with EPA and external
analysis on RIN pass-through.
Another commenter that suggested that the East Coast and Mid-continent refiners face unique
risks from the RFS program did so without pointing to any specific information about why a
waiver on the basis of severe economic harm would be appropriate.
Comment:
Several commenters pointed out that our BBD and cellulosic biofuel volumes only add up to 2.5
billion gallons which is insufficient to meet an advanced biofuel volume standard of 5.04 billion
gallons.
Response:
The BBD volume of 2.43 is expressed in physical gallons; the advanced biofuel volume is
expressed in terms of RINs. Since a gallon of BBD generates, on average, 1.55 RINs, the
appropriate volume for purposes of meeting the advanced biofuel standard is 3.77 billion RINs.
When added to the cellulosic biofuel volume of 590 million gallons, this results in a volume of
4.36. While this is still less than 5.04 billion gallons, as discussed in Section 6 of this document,
we expect the BBD volume to exceed the BBD standard. As discussed in Section IV of the final
rule and Section 4 of this document, we anticipate that the advanced biofuel standard is
attainable.
16 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://seekingalpha.com/artiele/3991582-refining-
margins-coHapsing-cmde-prices-wiH-foHow
17 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.
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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.18
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.19
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.
18 For a further discussion of this topic, see "Denial of Petitions for Rulemaking to Change the RFS Point of
Obligation," November 22, 2017.
19 "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 "severe economic harm" authority that we
previously set forth, the record for this action would not support a finding that the 2020 volume
requirements would cause severe economic harm, and consequently not support our granting of a
waiver. As upheld by the D.C. Circuit in AFPMv. EPA, the bar is not set "so high as to be
unreasonable."20 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 to 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 2020 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:
Several commenters pointed to EPA's practice of granting SREs as further evidence of harm to
refineries.
Response:
We disagree that EPA's past grant of SREs warrants our exercising the severe economic harm
waiver. Generally, SREs 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 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
20AFPM at 579.
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hardship" does not "require a threat to a refinery's survival as an ongoing operation."21 Second,
SREs 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 that implementation of the RFS requirements would severely harm the economy of a
State, a region, or the United States. Third, our grant of SREs does not undermine the fact that
refiners are passing through their RIN costs. An exempt small refinery may experience
disproportionate economic hardship even though refineries, including small refineries, pass their
RIN costs to their customers. EPA has never granted an SRE because the refinery could not pass
through the costs of RINs to their customers or because of high RIN prices. Fourth, EPA has to
date not granted any SREs for 2020. Whether a severe economic harm waiver is appropriate in
the context of the 2020 volumes, however, depends on the impact of the 2020 volumes, not of
prior year volumes. Fifth, we note that EPA has granted SREs for disproportionate economic
hardship since 2011. Nonetheless, we have consistently declined to waive volumes for severe
economic harm during this time.22 Finally, we have specifically assessed whether we should
grant a waiver of the 2020 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 pointed to a recent study by EVA-NEMs suggesting that "the RIN obligation
represents a net cost to the merchant refiners that has increasingly reduced their refining
margin."
Response:
EPA reviewed the EVA-NEMs study submitted by the commenter. In general, this study simply
repeated claims that RIN obligations represent a net cost to merchant refiners that EPA has
previously examined in other contexts.23 To support these claims the study included data on RIN
revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) from
Murphy USA, a marketer that can separate RINs through blending but generally does not have
an RFS obligation. The study states that "its [Murphy USA] RIN revenue is almost the same as
EBITDA in some quarters." First, we note that this statement does not accurately describe the
data presented. The study presents quarterly data on RIN revenue and EBITDA for 6 years. In
only one of these quarters is the RIN revenue approximately the same as EBITDA. More
importantly, the data clearly demonstrates that there is no correlation between Murphy USA's
RIN revenue and EBITDA. If unobligated blenders such as Murphy USA were able to acquire
RINs at no cost (or even at a reduced cost) because of their position as unobligated blenders we
would expect to see a strong correlation between RIN revenue and EBITDA (e.g., when RIN
revenue increases, we would expect to see EBITDA increase). Instead, we see that there is no
discernable correlation between Murphy USA's RIN revenue and EBITDA. This is precisely
21 Sinclair Wyo. Ref. Co. v. EPA, 874 F.3d 1159, 1161 (10th Cir. 2017).
22 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.
23 "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," November 22, 2017.
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what we would expect if market competition forced Murphy USA to pass along the value of the
RIN in the price of the blended products they sell, as EPA has concluded.
The study also cites calculations based on the price of E10, CBOB, and ethanol as evidence that
merchant refiners are as a disadvantage relative to integrated refiners due to the RFS program.
Unfortunately, the study does not provide sufficient data or citations for EPA to be able to
evaluate their findings. For example, the study simply says that the data are from OPIS, that the
prices are weekly averages from January to April 2019, that RIN prices are D6 RIN prices, and
that prices represent the economics in the Philadelphia area in PADD I. The study further notes
that "this study was inspired and improved by and improved upon Bob Neufeld's study on
PADD 4." EPA previously evaluated similar claims by Mr. Neufeld in the context of the
petitions for rulemaking to change the RFS point of obligation.24 While some of the problems
with Mr. Neufeld's calculations appear to have been addressed (such as the inclusion of a
blending cost), the biggest problem with Mr. Neufeld's calculations, noted in our decision
document, is that the prices used were not from the same terminal. We suspect this error was
repeated in the calculations presented in the study, and the citations are insufficient to allow EPA
to assess these calculations. Further, the citations suggest that the study relied on average prices
over an extended time period (January - April 2019). This may not be appropriate, as it could
obscure potentially different pricing dynamics at different time periods. Finally, we note that the
data presented suggests that parties may be able to realize significant profits from blending
ethanol into gasoline even in the absence of the RFS program. While that may be the case, this
impact is not due to the RFS program, but rather is the result of integrated refiners being
involved in a separate line of business (blending and marketing fuel) as compared to merchant
refiners (refining).25
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
the RFS standards in such a way as to ensure that the pool-wide ethanol content does not exceed
9.7%. Other commenters suggested that EPA should do an analysis of whether the 15 billion
24 We assume this work referenced in the study is similar to the comments submitted by Bob Neufeld based on the
content of the study. At the time EPA prepared this comment response the link included in the study to Bob
Neufeld's work resulted in an error message.
25 The study also presents data on RIN obligation and crack spread, and margins eroded by RIN obligation without
comment. The purpose of this data is unclear, and EPA has previously explained why comparing RIN obligations
and crack spreads is not an appropriate way to determine the impact of the RFS program on refiners. We have
previously addressed the statements from the 2018 NERA Economic Consulting report on the RIN market (see
Modifications to Fuel Regulations to Provide Flexibility for El5; Modifications to RFS RIN Market Regulations:
Response to Comments, May 2019; EPA-420-R-19-004), and we incorporate the relevant portion of the response by
reference.
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gallon implied conventional requirement would cause severe economic harm. Other commenters
suggested that EPA should consider a general waiver under severe economic harm because the
volumes we proposed are not attainable.
Response:
As explained throughout this section, we do not believe the standards we are establishing in this
final rule cause severe economic charm. That inherently includes the 15 billion gallon implied
conventional biofuel requirement. We do not believe the market's exceeding the blendwall or its
use of high level ethanol blends constitute severe economic harm for reasons explained
throughout this section, in Section 5 of this document, and the memorandum "Updated market
impacts of biofuels in 2020."
As explained in Sections III and IV of the final rule and the memorandum "Updated market
impacts of biofuels in 2020," we believe the market can make available the volumes we are
requiring.
Regarding fuel prices, EPA does not anticipate that the market will respond to the 2020 volume
requirements by increasing fuel prices rising to the level of severe economic harm. We
acknowledge that requiring higher volumes of renewable fuels can result in higher fuel prices if
renewable fuels cost more than the petroleum fuels they displace. However, as explained in
further detail in the 2018 final rule,26 fuel prices are affected by numerous market dynamics,
with the cost of crude oil as the single largest component. Thus, it is challenging to assess the
economic impact of the RFS based solely on fuel prices. Nonetheless, in the past EPA has not
seen increasing fuel prices with the implementation of the RFS program, even as fuel blends
exceeded 10%.
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
26 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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Section V of the final rule, we agree that BBD typically costs significantly more than petroleum-
based diesel. However, this price differential has existed for some time, and has not caused
severe economic harm in the past even with increasing BBD and advanced biofuel standards.27
The commenter has not demonstrated why this type of price differential would cause severe
economic harm in 2020. 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.
Comment:
A commenter suggested that EPA should waive volumes under a finding of severe economic
harm because the standards will result in a drawdown of the carryover RIN bank.
Response:
We do not find that a drawdown in the carryover RIN bank would constitute severe economic
harm, nor do we think that the standards we are setting today are likely to result in a significant
drawdown of the carryover RIN bank. See further discussion in Section 2.4 of this document and
Section II. C of the final rule.
27 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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2.1.3 Severe Environmental Harm
Commenters that provided comment on this topic include but are not limited to: 0197, 0276.
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. 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. Some commenters also suggested that the RFS program
is not causing aggregate land use change. A commenter urged EPA to perform a comparative
assessment to other transportation fuel and perform an updated and rigorous assessment of
environmental benefits of biofuels.
In contrast, other commenters suggested that EPA should use the general waiver authority a
finding of severe environmental harm to reduce implied conventional volumes below 15.0 billion
gallons to address environmental impacts.
Response:
While some commenters suggested that EPA should utilize the general waiver authority under a
finding of severe environmental harm, these parties did not provide further analysis or
justification for such a finding. We find that there is insufficient evidence in the record to support
a finding that the 2020 RFS standards would cause severe environmental harm. As explained in
the "Endangered Species Act No Effect Finding for the 2020 Final Rule," we do not believe that
the 2020 RFS standards induce increased crop cultivation or associated land use changes. In last
year's final rule, we made a similar finding for the 2019 standards and also found that the
standards would not cause severe environmental harm in other ways, related to the impacts from
tailpipe air pollutant emissions, greenhouse gas emissions, and feedstock switching. We believe
these finding remain true for the 2020 standards, particularly as, relative to 2019, they represent
no increase in the implied conventional biofuel volume or the non-cellulosic advanced volumes
and an increase only in cellulosic biofuel. See "Endangered Species Act No Effect Finding and
Determination on Severe Environmental Harm under the General Waiver Authority for the 2019
Final Rule," available in the docket. Therefore, we decline to issue a waiver under the general
waiver authority using a finding of severe environmental harm at this time.
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2.2 Cellulosic Waiver Authority
Commenters that provided comment on this topic include but are not limited to: 0185, 0190,
0196, 0204, 0211, 0276, 0312, 0322.
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 this issue can be found in
Section 2.4 of this document and Section II.C of the final rule.
Comment:
Some commenters suggested that EPA should allow for the backfilling of the shortfall in
cellulosic biofuel with advanced biofuel or total renewable fuel. A commenter suggested this is
particularly appropriate because the larger RIN bank allows for higher standards to be met.
Response:
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 2020. Further discussion of comments related to carryover RINs
and our responses to those comments can be found in Section 2.4 of this document.
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, 2017 and 2018, 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.
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Some commenters suggested that EPA should lessen the reduction in the advanced biofuel
standard to result in an implied advanced biofuel standard of 5.5 billion gallons.
Response:
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 2.4 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.28 For the reasons stated in Section II.B of the final rule
and Section 2.4 of this document, we have decided not to intentionally draw down the carryover
RIN bank.
We agree, however, that we should account for SREs in establishing the standards. As discussed
further in Section 8.2 of this document and Section VII.B of the final rule, we are revising the
percent standards formula at 40 CFR 80.1405(c) to prospectively project the exempt volume of
gasoline and diesel and account for SREs we grant for the 2020 compliance year. Particularly in
light of our decision to account for SREs through the percentage standards formula, we see no
need to make an additional adjustment for such exemptions through limiting the exercise of the
cellulosic waiver authority.
In any event, we disagree with comments claiming that EPA is statutorily required to reallocate
exempted volumes through drawing down the carryover RIN bank or otherwise limiting the
exercise of the cellulosic waiver authority. We have never deemed ourselves bound to do so in
any prior annual rule, and we previously explained our interpretation of the statute in the 2019
final rule.29 We reaffirm our prior interpretation in today's final rule. Namely, 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.30
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.31 It does not refer to exempted small refinery volumes, to small refineries generally,
or to the carryover RIN bank.32 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."33 To the extent the statute affords EPA discretion — in
28 However, Section II.B of the final rule explains why this relationship is not one-to-one.
29 See "Renewable Fuel Standard Program - Standards for 2019 and Biomass-Based Diesel Volume for 2020:
Response to Comments" 26-28.
30 While we may also consider carryover RINs in exercising our other waiver authorities, we have not exercised any
other waiver authority in this action.
31 See CAA section 21 l(o)(7)(D)(i).
32 See ACE at 714.
33 Id. at 733.
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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
carryover RIN bank. Rather, it authorizes us to consider the carryover RIN bank in deciding
whether and to what extent to exercise our discretion.34
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.35 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.36 This discretion provides EPA needed flexibility to
respond to unexpected shortfalls in cellulosic biofuel production. That Congress gave EPA such
flexibility is particularly apt as at the time of the statute's enactment, the cellulosic biofuel
industry was in its infancy. 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.37 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.38 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."39 As we explain in Section II.B of the final rule and Section 2.4 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 significantly reduce or eliminate the carryover RIN bank, the vital
functions it serves, and Congress' purposes in enacting the RFS program. The total exempt
volume of renewable fuel for 2016, 2017, and 2018 exceeds the volume of the carryover RINs.
An increase in the advanced biofuel standard of 1 billion gallons, as suggested by some
commenters, would also be unable to be met using carryover RINs, as that volume exceeds the
volume of advanced biofuel carryover RINs. 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
34 Cf. ACE at 712-16 (agreeing with this same approach to considering carryover RINs in exercising the general
waiver authority (citing Monroe at 917)).
35 Cf. id. at 714 (rejecting petitioners' reliance on "ensure" language and upholding EPA's approach to carryover
RINs in exercising the general waiver authority).
36 Id. at 733.
37 See CAA section 21 l(o)(3)(B)(ii).
38 Cf. ACE at 714.
39121 Stat. 1492.
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regulatory certainty essential to market investments and the RFS program were the carryover
RIN bank to be significantly reduced or eliminated.
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."40
Comment:
Some commenters suggested that there was no need to make reductions in 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). Some suggested that it would be more appropriate, under the
broad policy goals of the RFS program to allow conventional biofuel to backfill for missing
cellulosic.
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.
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. For further discussion of the policy goals of
the RFS program, see Section 1.1 of this document.
40 See^CEat 715.
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2.3 Statutory Obligation to Reset Volumes
Commenters that provided comment on this topic include but are not limited to: 0299, 0324.
Comment:
Commenters suggested that EPA has a statutory duty to implement CAA section 21 l(o)(F) to
reduce the RFS volumes in 2020 and must consider the factors provided in CAA section
21 l(o)(2)(B)(ii) in setting the standards for 2020 because the trigger for resetting total renewable
fuel volumes has been met as of the 2019 RVO.
Response:
We have chosen to promulgate the 2020 renewable fuel standards prior to resetting the volumes
to carry out the statutory mandate to establish the percentage standards for each of the renewable
fuel types by November 30 of each year.41 Not only does the law require us to do this, but doing
so facilitates the smooth functioning of the biofuels market and provides regulatory certainty to
obligated parties and other stakeholders by having percentage standards in place prior to the
beginning of the compliance year.
In addition, we believe that our authority to waive volumes under CAA section 21 l(o)(7)(A) and
(D) remain regardless of whether we have triggered the obligation to reset volumes under CAA
section 21 l(o)(7)(F). Congress granted EPA multiple "textually distinct waiver authorities that
operate in different scenarios pursuant to different limitations."42 Nowhere does the statute
indicate that EPA's exercise of the reset authority displaces its other waiver authorities, which
are meant to address "different scenarios pursuant to different limitations."43 This reading is also
consistent with our well-settled interpretations of the cellulosic and general waiver authorities,
under which we may first exercise one waiver authority and then exercise a different subsequent
waiver authority if the statutory conditions are met.44
41 See CAA section 21 l(o)(3)(B).
42 Americans for Clean Energy v. EPA, 864 F.3d 691, 733 n. 12.
43 See also J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Intern., Inc., 534 U.S. 124 (2001) (When two statutes are
capable of coexistence, it is duty of court, absent clearly expressed congressional intention to the contrary, to regard
each as effective.).
44 See prior annual rules: 2014, 2015, and 2016 volumes 80 FR 77420 (December 14, 2015); 2017 volumes, 81 FR
89746 (December 12, 2016); 2018 volumes, 82 FR 58486 (December 12, 2017); and 2019 volumes, 83 FR 63704
(December 11, 2018); see also the 2012 waiver denial, 77 FR 70752 (November 27, 2012).
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2.4 Carryover RINs
Commenters that provided comment on this topic include but are not limited to: 0185, 0190,
0196, 0197, 0211, 0212, 0276, 0277, 0299, 0304, 0312, 0320, 0324, 0329, 0337.
Comment:
Several commenters expressed their support for EPA's proposed decision to not intentionally
draw down the bank of carryover RINs in setting the 2020 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 high 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, development, 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 2020, 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 2020 without the express intention or
expectation of a drawdown in the current bank of carryover RINs.
As explained in Section II.C 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 2020 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
physical volumes of renewable fuels may be inadequate to allow compliance. In ACE, the Court
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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 2020, we project that as many as 3.48 billion total carryover RINs (including 680
million advanced carryover RINs and 50 million cellulosic carryover RINs) will be available for
compliance. This is approximately 17% of the final 2020 total renewable fuel volume standard,
13% of the final 2020 advanced biofuel volume standard, and 9% of the final 2020 cellulosic
biofuel volume standard, all of which are less than the 20% limit permitted by the regulations to
be carried over for use in complying with the 2020 standards. Consistent with our past practice,
we considered the availability of carryover RINs in making a determination about whether and
how to reduce the 2020 statutory volume requirements, and that assessment was properly done in
view of the specific circumstances present for 2020. Considering all of the various relevant
factors for 2020, 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 2019 and 2020 standards, we have
concluded that we should not set the volume requirements for 2020 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 2020 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
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production volumes would decline significantly. The final rule will continue to place upward
pressure on the production and use of renewable fuels.45
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.46 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 2020 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.
This is even more important now for 2020 given that we are projecting future SREs for the first
time, resulting in percentage standards that will apply throughout the course of the year.
Therefore, there will be greater demand for renewable fuels until the SREs are ultimately granted
(likely early in 2021). Since most obligated parties comply with the RFS program ratably in real
time as they produce their gasoline and diesel fuel, this will likely necessitate the drawdown of a
sizeable portion of the existing carryover RIN bank during the course of the year until it is
restored when the SREs are subsequently granted.
It should be highlighted for this discussion that the carryover RIN bank is not one bank with
equal access by all obligated parties. The carryover RIN bank is separate accounts of prior-year
RINs of varying magnitude held by different individual parties. Some parties may hold
significant numbers of RINs, while other parties hold none at all. Thus, even when carryover
RINs exist, they may not be "available" to parties that need to purchase them for compliance if
the parties that own the carryover RINs are unwilling to sell them. The benefit of market
liquidity is only achieved if there are an adequate number of RINs available and expected to be
available in the future to incent those holding the RINs to sell them to those who need them. This
would not occur were the carryover RIN bank to be brought to or near zero.
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 2020 volumes should be waived consistent with EPA's cellulosic
waiver authority. We have set the 2020 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-
45 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 "Updated market impacts of biofuels in 2020," memorandum to docket EPA-HQ-
OAR-2019-0136.
46 See 80 FR 77483-84 (December 14, 2015).
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optimistic and that individual obligated parties will face challenges in complying with the
standards. The bank of carryover RINs will be available for such eventualities.
Comment:
One commenter recommended that the carryover RIN bank should consist of at least 14% of the
projected volume standard. The commenter stated that a carryover RIN bank of this size is
necessary to ensure stability in the RIN market.
Conversely, 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, that the ACE ruling did not give
EPA carte blanche authority to maintain the carryover RIN bank at any size, 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. Indeed, we have consistently considered the carryover RIN bank as a
buffer since the 2013 rule.47 In addition, we established our regulations allowing RINs to be
carried over in the RFS2 final rule.48 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. Our response to comments is not
meant to reopen these issues.
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.
In response to comments regarding the ACE decision, as commenters point out, the ACE court
did not address the issue of the appropriate size of the carryover RIN bank. EPA is not relying on
the ACE opinion for the proposition that we have carte blanche authority to maintain the
carryover RIN bank at any size. Rather, we are choosing not to intentionally draw down the
47 See 78 FR 49820-23 (August 15, 2013).
48 See 75 FR 14734-35 (March 26, 2010).
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carryover RIN bank based on our consideration of the facts before us, as described in this section
and Section II. C of the final rule.
We are 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. We note, however, that the size of the
carryover RIN bank is essentially capped at 20% of the total renewable fuel volume standard due
to RFS regulations that do not permit more than 20% of prior-year RINs to be used by an
obligated party to comply with the current year's standards.49 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.
49 See 40 CFR 80.1427(a)(5). We evaluated establishing higher or lower regulatory thresholds in the RFS2 rule, and
our rationale for selecting a 20% regulatory threshold is provided in that action. See 75 FR 14734-35 (March 26,
2010). We are not reexamining this issue in this action.
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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: 0118, 0120,
0156, 0191, 0207, 0208, 0211, 0212, 0270, 0276, 0288, 0298, 0299, 0303, 0306, 0312, 0319,
0323, 0337, 0341, 0342, 0438, 0490, 0530, 1285, 1944.
Comment:
Some commenters stated that if EPA provided the appropriate market signals through higher
required volumes of cellulosic biofuel and/or greater stability in the cellulosic RIN market, then
substantial market opportunities for these fuels would arise, leading to increased production of
cellulosic biofuel.
Response:
The EISA directs EPA to establish the cellulosic biofuel volume at the projected volume
available in years where the projected volume of cellulosic biofuel production is less than the
statutory target (as is the case in 2020). Our projection of cellulosic biofuel production50 in this
final rule is an attempt to neutrally project the volume of cellulosic biofuel that will be produced
in 2020. We have increased the cellulosic biofuel volume from the volume proposed based on
updated data as described in Section III of the final rule. This projection is required by the statute
and consistent with the direction EPA received from the Court. We believe it also provides the
appropriate market signals for the continued development of cellulosic biofuels.
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 2020 should or must 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.). One commenter claimed that EPA's standards for cellulosic ethanol
produced from corn kernel fiber were overly restrictive. Commenters stated that by including all
potential sources of cellulosic biofuel in its projection, EPA would provide the support the
cellulosic biofuel industry needs.
50 In this section, we often use "cellulosic biofuel production," "projection of cellulosic biofuel," and similar terms
as shorthand to refer to the "projected volume available" at which we are establishing the cellulosic biofuel volume.
As explained in Section III of the final rule and in this section, this volume includes a projection of domestic
cellulosic biofuel production and of imports of cellulosic biofuel, that are available for domestic use.
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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
and technical issues that must be resolved. Some of these regulatory and technical concerns are
discussed in greater detail in a guidance document released by EPA in May 2019 (in the case of
corn kernel fiber)51 and in the 2016 REGS proposal (in the case of electricity used as
transportation fuel).52 We remain committed to working with stakeholders to resolve these
issues.
Our projection of cellulosic biofuel production in 2020 includes production volumes from all
facilities that are reasonably likely to produce qualifying cellulosic biofuel in 2020. As explained
in Section III of the final rule, 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 2020. Under our long-standing approach to
projecting the available cellulosic volume,53 we have not, however, included in our projections
production from facilities for which significant technical and regulatory issues must be addressed
prior to EPA registering facilities for participation in the RFS program (such as corn ethanol
producers that intend to produce cellulosic RINs for the production of 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 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 2020, 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 2020.
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.54 In the case of facilities seeking to generate RINs for electricity under an
existing pathway, EPA explained that, upon consideration of facility registration requests, we
discovered that the current regulatory structure "has created an untenable environment for the
51 Guidance on Qualifying an Analytical Method for Determining the Cellulosic Converted Fraction of Corn Kernel
Fiber Co-Processed with Starch (EPA-420-B-19-022), May 2019.
52 81 FR 80890 (November 16, 2016).
53 See, e.g., the Response to Comment documents for the 2014-16 Rule at 550, 559; for the 2017 Rule at 431-32; for
the 2018 Rule at 47, 69; and for the 2019 Rule at 36-37, 56.
54 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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approval of any single registration request by the EPA to date."55 Thus, in 2016 EPA sought
comment on, among other issues associated with electricity RINs, "potential RIN generation
structures for renewable electricity in order to help resolve the many issues associated with
choosing an appropriate structure and its design.... Feedback received in response to this request
for comment will be essential to ensuring that an equitable, open, and comprehensive program
structure is adopted and implemented."56 EPA has not reopened and is not taking final action on
this issue in this rulemaking. We continue to consider the comments pursuant to this request as
well as other information received; however, due to resource constraints and competing
priorities, we have yet to propose revisions to the existing regulatory system or otherwise take
the steps that we believe are necessary before registering facilities to generate RINs for the
production of renewable electricity from biogas.
Simply assuming the technical and regulatory issues associated with electricity RINs or any
other pathway for generating cellulosic RINs 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 2020. 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:
EPA should approve the bio-intermediate regulations proposed in the REGS rule to increase
cellulosic biofuel production.
Response:
This issue is beyond the scope of this rulemaking, as explicitly noted in the July 29 proposal.57
Consistent with the proposal, we have not reexamined this issue in this rulemaking. We reiterate,
however, that as noted in the REGS proposal, there are several important issues that must be
addressed for EPA to allow RINs to be generated for fuel produced from bio-intermediates (e.g.
situations where renewable biomass is partially processed at one facility and converted to
transportation fuel at a separate facility).58 We recognize the importance of resolving this issue to
the cellulosic biofuel industry. As with the pathways and facility registrations discussed above,
we are working as expeditiously as possible, in light of resource constraints and competing
priorities, to resolve the issues related to the use of bio-intermediates to produce qualifying
transportation fuel.
Comment:
Multiple commenters stated that an oversupply of cellulosic (D3) RINs in 2019 resulted in lower
D3 RIN prices. Some commenters stated that this oversupply was caused by EPA granting small
55 81 FR 80891 (November 16, 2016).
56 Id.
57 84 FR 36756 (July 29, 2019).
58 81 FR 80833 (November 16, 2016).
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refinery exemptions. A commenter similarly stated that in 2019 cellulosic RINs traded below the
cellulosic waiver credit "price floor".
Response:
The statute mandates EPA to reduce the cellulosic biofuel volume to the projected volume
available. EPA has consistently interpreted this to mean the amount of the cellulosic biofuel
available for use in the United States without consideration of RIN prices. We acknowledge that
the price of D3 RINs has been lower in 2019 (averaging $1.30 for a 2019 D3 RIN through
September 2019) than in 2018 (when the average price for a 2018 D3 RIN was $2.25), and that
SREs were likely one of several factors that impacted the price of D3 RINs. We note, however,
that the RFS is a market-based program and as such changes in RIN prices due to market factors,
including changes in the supply and demand for cellulosic RINs, are to be expected.
We disagree with the commenter's characterization of the cellulosic wavier credit price as a price
floor. EPA would expect cellulosic RINs to generally be priced below the price of a cellulosic
waiver credit plus an advanced biofuel RIN (since this is the compliance equivalent of a
cellulosic RIN) and above the price of an advanced RIN (since excess cellulosic biofuel RINs
can be used to satisfy an obligated party's advanced biofuel and total renewable fuel
obligations). Cellulosic biofuel RINs traded within this range in 2019.
Comment:
EPA's statements in the proposed rule that we "collected data through meetings with
representatives of facilities that have produced or have the potential to produce qualifying
volumes of cellulosic biofuel in 2020" was incorrect since to their knowledge no EPA
representative met with parties capable of producing qualifying fuel from electricity.
Response:
The statement quoted by the commenter describes one of the sources of data used by EPA in our
projection of likely production of cellulosic biofuel in 2020. EPA does not claim to have met
with or contacted every possible producer of cellulosic biofuel, but rather focused outreach on
potential liquid cellulosic biofuel producers that are likely to produce qualifying volumes in
2020. EPA's outreach was focused on liquid cellulosic biofuel producers, as we once again used
an industry-wide projection methodology, rather than a facility-by-facility methodology, to
project the production of CNG/LNG derived from biogas. As discussed above, we do not
currently expect that the technical and regulatory issues that need to be addressed prior to the
generation of cellulosic RINs for electricity used as transportation fuel will be resolved in time
for an appreciable number of RINs to be generated for this fuel.
Comment:
EPA's statements in the preamble that there are two main elements to the projected volume of
cellulosic biofuel in 2020 (liquid cellulosic biofuels and CNG/LNG derived from biogas) was
false. The commenter claimed that electricity produced from cellulosic feedstocks was also
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likely to be produced and made available in the U.S. and that this fuel should not be excluded
from EPA's projection of the available volume of cellulosic biofuel. The commenter further
stated that electricity cannot be excluded on the basis that no facilities have been registered, since
in some cases EPA includes projected volume from other facilities that are not yet registered to
produce qualifying cellulosic biofuel.
Response:
EPA's projection of qualifying cellulosic biofuel production in 2020 does include consideration
of fuel projected to be produced from facilities that have not yet registered as cellulosic biofuel
producers. However, as explained in Section III.B of the final rule, we have only considered
production from facilities that have not yet registered as cellulosic biofuel producers in situations
where we are unaware of any outstanding issues that would reasonably be expected to prevent
these facilities from registering as cellulosic biofuel producers and producing qualifying
cellulosic biofuel in 2020. In the case of potential producers of electricity used for transportation
fuel, there are several technical and regulatory issues that must be resolved prior to these
facilities registering and producing qualifying cellulosic biofuel (see earlier response for more on
these issues). We currently do not expect these issues to be resolved on a timeline that would
allow for the production of a significant volume of cellulosic RINs in 2020.
Because of this, including the potential production of cellulosic electricity used as transportation
in our projection of qualifying cellulosic biofuel produced in 2020 as the commenters suggest
would be unreasonable. Basing the required volume of cellulosic biofuel on a projection that
includes a significant volume of fuel we do not expect to generate cellulosic RINs in 2020 would
result in a cellulosic biofuel volume requirement that cannot be satisfied with cellulosic biofuel
RINs and would be in contradiction with EPA's charge to project cellulosic biofuel production
with a neutral aim at accuracy.
Comment:
EPA should not include electricity used as transportation fuel in our projection of cellulosic
biofuel production in 2020.
Response:
EPA has not included electricity used as transportation fuel in our projection of cellulosic biofuel
production for 2020 due to the unresolved technical and regulatory related to generating RINs
from qualifying cellulosic biofuel under this pathway (for more detail, see previous responses).
Comment:
The cellulosic RIN market is not competitive. This commenter claimed that there are never more
than two or three entities offering cellulosic RINs for sale at any given time.
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Response:
The commenter provides no evidence for their claims that the cellulosic RIN market is not
competitive. 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 cap 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. In 2019 the average D3 RIN price ($1.30) is significantly lower
than the cellulosic waiver credit price for 2019 ($1.77). This pricing information suggests a more
competitive market, rather than monopoly pricing behavior. 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:
Any shortfall in cellulosic biofuel production relative to the required cellulosic biofuel volume in
EPA's final rule would force obligated parties to purchase additional advanced biofuel RINs and
cellulosic waiver credits.
Response:
EPA's projection of cellulosic biofuel represents a neutral projection of the volume of cellulosic
biofuel production in 2020. We therefore do not anticipate a shortfall in cellulosic biofuel
production relative to the required cellulosic biofuel volume. If such a shortfall does occur
obligated parties have multiple options, including: purchasing additional advanced RINs and
cellulosic waiver credits, complying with available carryover RINs, or carrying a deficit into
2021.
Comment:
Multiple commenters stated that CNG/LNG sourced from landfill biogas does not meet the 60%
GHG reduction targets and therefore should not be able to generate cellulosic RINs or be
included in EPA's projection of cellulosic biofuel production for 2020. The commenter also
claimed that EPA should compare the GHG emissions of CNG/LNG derived from biogas to
emissions for fossil natural gas. To support their claims the commenter cites statements from
EPA that landfills expected to produce high BTU gas likely already have collection
infrastructure in place and so the use of this biogas would occur without incentives for cellulosic
biofuel through the RFS program.
Response:
EPA conducted a lifecycle assessment for CNG/LNG derived from biogas sourced from landfills
in the Pathways II rulemaking.59 The GHG assessment for CNG/LGN derived from biogas in the
Pathways II rule assumed that landfills were already capturing and flaring methane.60 In that rule
59 79 FR 42128 (July 18, 2014).
60 79 FR 42141 (July 18, 2014).
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EPA determined that CNG/LNG derived from biogas sourced from landfills exceeded the 60%
lifecycle GHG reduction threshold relative to baseline diesel fuel to qualify as cellulosic biofuel.
We did not reexamine that assessment in this rulemaking, and therefore comments on it are
beyond the scope of this rulemaking.
Comment:
A commenter stated that biogas from landfills and municipal wastewater treatment systems
contain significant levels of siloxanes, which can cause serious problems if the biogas is burned
in gas turbines, boilers, or combustion engines. Commenters also stated that siloxanes could
poison the catalysts on vehicles. The commenter stated that the potential presence of siloxanes
found in landfill biogas should disqualify this fuel from participating in the RFS program, as
siloxanes damage engines and lead to higher GHG emissions. Another commenter similarly
stated that EPA should not increase the projection of CNG/LNG derived from biogas until the
impacts of siloxanes are studied and a specification is established.
Response:
The regulatory framework for biogas introduced into a commercial, i.e., fungible, distribution
system that EPA promulgated in the 2010 RFS2 rule61 (and revised in the 2014 Pathways II
rule62) allows RINs to be generated so long as, among other things, it is demonstrated through
contractual relationships that the quantity of CNG/LNG that is withdrawn from the distribution
system for use as transportation fuel is the same as the quantity of biogas that was introduced
into that same distribution system.63 Once injected into a commercial pipeline, biogas mixes with
conventional natural gas and the biogas molecules become diluted. EPA does not require that the
physical biogas molecules be tracked from introduction point to withdrawal in a commercial
distribution system; the regulatory requirements are intended to ensure that it is at least
theoretically possible that the biogas is ultimately used as a transportation fuel. Thus, it is
possible, if not likely, that the actual molecules of CNG/LNG withdrawn from the distribution
system and used in vehicles as transportation fuel are not the same molecules that originated in a
municipal landfill or wastewater treatment plant and are, in fact, conventional natural gas. We
thus do not currently have a basis to conclude that including biogas in the cellulosic projection
under this rule will have the impacts on vehicle engines that commenters suggest, and
commenters have provided no data or other evidence to the contrary. More generally, while EPA
is aware of the problems associated with the use of CNG/LNG with high levels of siloxanes in
certain applications, at this time we do not have sufficient information to establish a specification
for siloxanes in CNG/LNG derived from biogas or to disqualify all landfill biogas from
qualifying as cellulosic biofuel due to concerns about the presence of siloxanes in this fuel. We
are not reexamining or otherwise reopening the longstanding policies described above, including
the 2010 RFS2 rule and the 2014 Pathways II rule.
61 75 FR 14670, 14876 (Mar. 26, 2010).
62 79 FR 42128, 42162 (July 18, 2014).
63 40 CFR 80.1426(f)(l l)(ii).
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Comment:
The production of biogas in agricultural digesters has many benefits, including the capture of
nutrients and reduction in nutrient run off. The commenter also stated that the value provided by
cellulosic RINs can be shared with farmers (if the biogas is source from agricultural digesters) or
municipalities (if the biogas is sourced from wastewater treatment facilities).
Response:
EPA recognizes these potential benefits of producing CNG/LNG derived from biogas in
agricultural digesters and wastewater treatment facilities. These factors, however, do not impact
our projection of cellulosic biofuel production in 2020.
Comment:
CNG/LNG derived from biogas cannot be produced at a cost that is competitive with natural gas.
Response:
EPA's cost estimate for producing CNG/LNG derived from biogas can be found is Section V of
the final rule. While there may be some cases in which CNG/LNG derived from biogas can be
produced at a price similar to natural gas, in most cases CNG/LNG derived from biogas is more
costly to produce.
Comment:
Increased production of CNG/LNG derived from biogas would provide additional jobs.
Response:
We acknowledge that increased biofuel production, including increased production of
CNG/LNG derived from biogas, could result in increased employment in these industries.
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3.2 Methodology for Projecting Volumes
Commenters that provided comment on this topic include but are not limited to: 0192, 0212,
0296, 0299, 0323.
Comment:
EPA should adopt "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 "true up" methodology whereby
the cellulosic biofuel standard was retroactively changed to the volume of available cellulosic
RINs after the end of a compliance year. Such a methodology would cause significant
uncertainty for obligated parties, as they would not know their actual cellulosic biofuel
obligations for any given year until after the end of the year, at which point they would have
limited time available to obtain the RINs necessary to demonstrate compliance. Such a change
could also inadvertently harm cellulosic biofuel producers if obligated parties, uncertain of their
final cellulosic biofuel obligations, wait until after the end of the calendar year to purchase
cellulosic biofuel and/or cellulosic biofuel RINs. Cellulosic biofuel producers may be unable to
continue commercial production without customers and may therefore scale back production
volumes or shut down their production facilities. Further, we note that if carryover RINs were
included in the "true up" calculation, this would effectively disincentivize obligated parties for
acquiring excess cellulosic biofuel RINs. 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 "true-up" the volume requirement, effectively nullifying the
timeframe established by Congress.
Comment:
Multiple commenters stated that EPA has continuously over-estimated cellulosic biofuel
production and should therefore err on the side of caution when setting the cellulosic biofuel
volume for 2020.
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
64 See CAA sections 211(o)(7)(D)(i) and (o)(3)(B)(i).
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CNG/LNG derived from biogas for 2018 and used the same projection methodology for 2019
and 2020. EPA also adjusted the approach to projecting liquid cellulosic biofuels in 2018 to rely
more heavily on the observed production of cellulosic biofuel within projected production ranges
in previous years when projecting production in future years.
These changes resulted in EPA under-projecting cellulosic biofuel production in 2018. Actual
cellulosic biofuel production appears to be on track to exceed EPA's estimate again in 2019 by a
small margin. These recent changes to EPA's methodology appear to be producing reasonably
accurate projections of cellulosic biofuel; for example, EPA's projection of cellulosic biofuel
production for 2019 is within 4% of expected production in 2019 (based on data through
September 2019). We do not believe there is any basis for "erring on the side of caution" in light
of the recent improvements to EPA's cellulosic biofuel projections (which actually under-
projected cellulosic biofuel production in 2018 and appear likely to do so again in 2019) and the
court's direction for EPA to make a neutral projection.
Comment:
EPA's projection of cellulosic biofuel production should be a reasonable projection of
production potential, and that this should include volumes of cellulosic ethanol produced from
corn kernel fiber.
Response:
While EPA's projection of cellulosic biofuel production must be reasonable, we are charged with
projecting actual production in 2020 rather than production potential. In a developing industry,
such as the cellulosic biofuel industry, the production potential is often much greater than actual
production. EPA has included production of cellulosic ethanol from corn kernel fiber from
currently registered facilities that are reasonably anticipated to generate cellulosic RINs in 2020;
however, we note that as the industry has continued to develop we have become aware that in
many cases there are significant regulatory and technical issues that must be resolved before
potential producers of this fuel can register as cellulosic biofuel producers and produce
qualifying cellulosic biofuel (see Section 3.1 of this document for more on cellulosic ethanol
produced from corn kernel fiber).
Comment:
Potential limitations on the use of cellulosic biofuel (such as the volume of CNG/LNG that can
be consumed in CNG/LNG vehicles) are not valid considerations under the cellulosic waiver
authority.
Response:
EPA does not consider the potential for the transportation fuel market to consume liquid
cellulosic biofuels, such as cellulosic ethanol or cellulosic diesel, when projecting production in
2020.
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With respect to potential limitations on the use of CNG/LNG derived from biogas, we see no
need to resolve the legal issue raised by the commenter. We acknowledge that we have assessed
the potential limitations on use in Section III of the final rule. We do so because to qualify as
cellulosic biofuel, CNG/LNG derived from biogas must meet the definition of a renewable fuel,
which means that the fuel must be "used to replace or reduce the quantity of fossil fuel present in
a transportation fuel."65 If CNG/LNG derived from biogas cannot replace or reduce the quantity
of fossil fuel present in transport fuel because the entire fleet of CNG/LNG vehicles is already
operating on renewable fuel then any additional CNG/LNG derived from biogas cannot be
cellulosic biofuel as it would have to be used for other non-transportation purposes (e.g.,
electrical power generation).
Nonetheless, for 2020, we found that the size of the CNG/LNG vehicle fleet did not limit the
market's ability to consume CNG/LNG derived from biogas, and in turn our projection of
cellulosic biofuel for 2020 was not limited by the ability for the market to consume cellulosic
biofuel as transportation fuel. Thus, even were EPA to adopt the commenter's interpretation of
the statute, it would not affect the cellulosic biofuel volume established by the final rule.
65 CAA section 21 l(o)(l)(J)
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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: 0211, 0276,
0312.
Comment:
EPA's proposed projection methodology for liquid cellulosic biofuels is appropriate.
Response:
EPA has used the same projection methodology (with updated data) in the final rule as in the
proposed rule.
Comment:
EPA should consider production data in 2019 to assess the accuracy of the methodology used to
project 2019 volumes.
Response:
We have assessed the accuracy of the projection methodology for cellulosic biofuel in the 2019
rule using actual production data for 2019 and previous years. This assessment can be found in
Section III of the final rule. We have determined that this methodology produced a reasonably
accurate projection of cellulosic biofuel production in 2019 (based on data through September
2019), and thus continues to be appropriate for use in this final rule.
Comment:
EPA's projection of liquid cellulosic biofuel should be forward looking rather than backward
looking. Another commenter stated that EPA's projection methodology for liquid cellulosic
biofuels was conservative and "history-bound" since many of the factors in the projection use
historical data.
Response:
EPA's methodology for projecting volumes of liquid cellulosic biofuels uses data from previous
years (including 2016 -2019) 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). Many of the other factors used in this methodology, including all the factors used to
determine the high end of the potential production range for each company, do not rely on
historical data. This methodology appropriately uses relevant data from the performance of
similar groups of facilities in previous years, along with production expectations in 2020, to
neutrally project likely production of liquid cellulosic biofuel in 2020. While we recognize the
maturation of the cellulosic biofuel industry, we have not yet seen a consistent trend in the
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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.
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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: 0192, 0202,
0207, 0211, 0270, 0316, 0319, 0323, 0436, 0723.
Comment:
EPA's proposed methodology provides a good foundation, but that EPA should continue to
analyze our methodology to ensure it is accurate and does not underestimate production.
Response:
EPA continues to believe that the methodology used to project CNG/LNG derived from biogas
in this final rule is appropriate. The use of this methodology in 2019, together with the
methodology for projecting liquid cellulosic biofuel, resulted in a projection that is expected to
be within 4% of actual cellulosic biofuel production in 2019. We recognize that the production
methodology for CNG/LNG derived from biogas slightly under-projected actual production of
these fuels in 2018 and appears likely to do so again in 2019. We will continue to monitor the
accuracy of our projection methodologies and anticipate making adjustments in the future if
appropriate.
Comment:
EPA should develop an "intermediate approach" to projecting CNG/LNG derived from biogas
the uses both data from EMTS and continued engagement with the industry and facilities that
produce CNG/LNG derived from biogas. The commenter claimed that this would result in a
more neutral projection. Other commenters similarly claimed that EPA should account for
production from facilities projected to begin producing CNG/LNG derived from biogas in 2020.
Response:
The industry-wide projection methodology used in this final rule accounts for new facilities that
may begin producing CNG/LNG derived from biogas in 2020. The growth rate used to project
the production of CNG/LNG derived from biogas in 2020 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. Thus, the industry-wide methodology already considers
the impact of new facilities in the past in the calculated rate of growth, and the projection for
2020 already includes projected volume from new facilities that begin producing volume in
2020. Adding additional production volumes expected to be produced from new facilities would
not be appropriate, nor would it be likely to result in a more accurate projection. 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. Finally, we note that EPA's efforts to project the production of CNG/LNG derived
from biogas using facility specific information in 2016 and 2017 resulted in significant over-
projections. We do not expect that a facility specific projection methodology for CNG/LNG
derived from biogas, either in place of or in addition to an industry wide projection methodology,
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would result in a more accurate projection in 2020 based on the accuracy of facility specific
projections in previous years.
Comment:
EPA's proposed methodology misses the current anticipated surge in production of CNG/LNG
derived from biogas in 2020. The commenter stated that EPA should not assume "linear" growth
in 2020.
Response:
We disagree with this commenter's assessment of our projection of CNG/LNG derived from
biogas in this final rule. Actual generation of cellulosic biofuel RINs for CNG/LNG derived
biogas increased from approximately 240 million gallons in 2017 to approximately 303 million
gallons in 2018. Cellulosic RIN generation for these fuels is projected to grow to approximately
418 million gallons in 2019 (based on data through September 2019) and to 577 million gallons
in 2020. This is not a linear growth rate. Production of qualifying biogas is projected to increase
by approximately 115 million gallons from 2018 to 2019, and by approximately 178 million
gallons from 2019 to 2020. We believe our projection of CNG/LNG derived from biogas in 2020
in this final rule (which is approximately 53 million gallons higher than our projection in the
proposed rule) adequately accounts for the anticipated surge in the production of CNG/LNG
derived from biogas noted by the commenter.
Comment:
Multiple commenters stated that EPA's projection of CNG/LNG derived from biogas in 2020
should be between 580 and 620 million gallons. Another commenter projected the production of
these fuels at 617 million gallons in 2020.
Response:
EPA's projection of CNG/LNG derived from biogas in 2020 in this final rule (577 million
gallons) is near the low end of the range of volumes requested by most commenters. As
discussed in further detail in Section III of the final rule, we believe this projection represents a
neutral aim at accuracy. Finally, we note that EPA's projection is based in part on production
data from August and September 2019 that was not available to commenters when they
submitted their comments. The growth rate observed in these months (relative to production in
August and September 2018) was lower than many of the preceding months, which resulted in
EPA's projection of CNG/LNG derived from biogas at the low end of the range requested by
many commenters.
Comment:
Multiple commenters noted that EPA under-projected the production of CNG/LNG derived from
biogas in 2018 and 2019.
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Response:
We acknowledge that we under-projected the production of CNG/LNG derived from biogas in
2018 and appear likely to slightly under-project the production of these fuels in 2019. However,
the accuracy of these projections (within 11% of actual production in 2018 and within 5% of
actual production in 2019 based on our projection of production in 2019 using data through
September 2019) is much greater than our projections of CNG/LNG derived from biogas in
previous years. EPA over-projected production of CNG/LNG derived from biogas by
approximately 17% in 2016 and by approximately 16% in 2017. We continue to believe that the
industry wide projection methodology used in this final rule produces a reasonably accurate
projection of cellulosic biofuel production. We will continue to monitor the accuracy of our
projection methodology and anticipate making adjustments as appropriate in future years.
Comment:
A commenter supported EPA's use of an industry wide projection methodology for CNG/LNG
derived from biogas. This commenter supported EPA's view of the biogas industry as a mature
market. Another commenter similarly stated that EPA's projection methodology for CNG/LNG
derived from biogas was appropriate.
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:
Multiple commenters stated that EPA should use the most recent data to re-calculate the rate of
growth for CNG/LNG derived from biogas, and that this more recent data should be used as the
basis for analysis and forecasting production of CNG/LNG derived from biogas in 2020.
Response:
We have used the most recent data available (through September 2019) to re-calculate the
growth rate for CNG/LNG derived from biogas. We have used this re-calculated growth rate
(based on data through September 2019) to project the production of CNG/LNG derived from
biogas in 2020 in this final rule.
Comment:
EPA should use the highest growth rate in the last 12 months (at least 40%) to project production
of CNG/LNG derived from biogas, rather than the most recent data.
Response:
We do not believe that using the highest growth rate the industry has achieved over the past 12
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months is consistent with our responsibility to make a neutral projection of cellulosic biofuel
production in 2020. The rate of growth over the past 12 months has varied from 26.4% (to
January 2018 through December 2018 vs. January 2017 through December 2017) to a high of
42.5% (August 2018 through July 2019 vs. August 2017 through July 2018). Simply selecting
the highest growth rate over the past 12 months would bias our projection and would potentially
allow biofuel producers to manipulate future projections by adjusting the timing of their RIN
generation.
Comment:
A consistent projection methodology for CNG/LNG derived from biogas is important to the
industry.
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 2019 the
projection methodology for CNG/LNG derived from biogas used in the 2018 and 2019 final
rules 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.
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3.3 Proposed Cellulosic Biofuel Standard
Commenters that provided comment on this topic include but are not limited to: 0131, 0152,
0153, 0156, 0185, 0192, 0202, 0207, 0277, 0288, 0298, 0299, 0303, 0312, 0316, 0319, 0323,
0337, 0338, 0341, 0342, 0436, 0438, 0440, 0467, 0530, 0723, 0725, 1285.
Comment:
A number of commenters stated that EPA's proposal underestimated cellulosic biofuel
production, and that our projection should be increased in the final rule. One commenter stated
that EPA's projection in the proposed rule was too close to actual production in 2019.
Response:
In the final rule EPA has used the projection methodology discussed in the proposed rule along
with additional data not available at the time of the proposed rule. This additional data has
resulted in a significant increase to our projection of cellulosic biofuel for 2020 relative to both
the volume projected in the proposed rule and the volume of cellulosic biofuel projected to be
produced in 2019.
Comment:
Multiple commenters stated that EPA should adopt a higher cellulosic biofuel volume for 2020
to offset the impact of SREs in previous years.
Response:
We do not believe that increasing the cellulosic biofuel volume for 2020 to offset the impact of
SREs in previous years would be consistent with EPA's statutory authority. In years when the
projected volume of cellulosic biofuel production is less than the statutory target the
Administrator shall reduce the volume to the projected volume available. SREs granted for
previous years do not impact the projected volume available in a future year. Our response to
commenters' request to include carryover RINs in our cellulosic volume for 2020 is covered in a
separate response. Additional responses to comments about SREs are found in Section 8.2 of this
document
Comment:
EPA should stop granting SREs, or account for them in setting the cellulosic volume for 2020.
Response:
The statute authorizes EPA to grant SREs in situations where petitioners meet the statutory
criteria for relief. In this final rule EPA is accounting for the projected volume of gasoline and
diesel expected to be exempted through the SRE process for the 2020 standards (see Section VIII
of the final rule and Section 8.2 of this document for a further discussion of this issue).
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Comment:
Multiple commenters supported the proposed cellulosic biofuel volume for 2020. One
commenter similarly stated that they expected EPA's projection methodology to produce an
accurate projection of cellulosic biofuel production after updated data were considered.
Response:
In this final rule we have used the same general methodology as in the proposal to project
cellulosic biofuel production in 2020 and have incorporated the most recently available data in
our projection. While the projection in this final rule is higher than the volume from the proposal,
we believe this volume is justified based on the data available since our proposal.
Comment:
EPA should reassess their projection of cellulosic biofuel for 2020 and ensure that the projection
is realistic rather than aspirational.
Response:
EPA has considered the accuracy of the proposed projection methodology, which was first
adopted in 2018, for both 2018 and 2019 (based on data through September 2019). This
methodology has produced reasonably accurate projections in both years. This methodology
under-projected cellulosic biofuel production in 2018 and appears likely to under-project actual
production again in 2019. This data supports EPA's position that this methodology is not
aspirational, and that it is appropriate to use this methodology to project cellulosic biofuel
production for 2020.
Comment:
A number of commenters requested a volume of at least 650 million gallons (some suggested
higher volumes) to account for cellulosic biofuel production in 2020, anticipated SREs in 2020,
and carryover cellulosic biofuel RINs available in 2020 (sometimes referred to as a "true up").
Some of these commenters claim that including carryover RINs is required by the statutory
language that requires that EPA establishes the cellulosic biofuel volume at the projected volume
available, which includes carryover RINs, and noted that neither EPA nor the courts have
evaluated whether or not carryover RINs can or must be included in the cellulosic biofuel
volume under the current market circumstances (high volume of carryover RINs and low RIN
prices). Commenters generally argued that while a carryover RIN bank may serve a purpose for
the other categories of renewable fuel, due to the cellulosic waiver credit (CWC) a carryover
RIN bank is not necessary for cellulosic biofuel. They further argued that preserving a carryover
RIN bank insures an oversupply of carryover RINs, reducing RIN prices and harming the
cellulosic biofuel industry. One commenter stated that EPA's proposed changes to the
percentage standards to account for small refinery exemptions would not be sufficient to address
the problems caused by the cellulosic carryover RINs that are currently available.
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Response:
EPA disagrees with commenters who stated that the cellulosic waiver authority statutory
language at CAA section 21 l(o)(7)(D) requires EPA to include both projected cellulosic biofuel
production and available cellulosic carryover RINs when using the cellulosic waiver authority to
establish the required volume of cellulosic biofuel. We recognize that the statute uses slightly
different terms when stating the conditions triggering exercise of the cellulosic waiver authority
("any calendar year for which the projected volume of cellulosic biofuel production is less than
the minimum applicable volume") and the volume to which the Administrator shall reduce the
applicable volume ("the projected volume available during that calendar year)." Commenters
suggest that this difference must mean that the "projected volume available" include cellulosic
carryover RINs.
However, the provision does not specifically address this issue at all. The term carryover RINs is
one created by EPA and does not appear in the statute at all. Moreover, the provision does not
refer to the credit provisions in CAA section 21 l(o)(5), under which EPA created the RIN
program. Nor does CAA section 21 l(o)(5) treat cellulosic biofuels differently from other types
of biofuels or indicate that EPA must intentionally eliminate the bank of cellulosic carryover
RINs by including them in projected volume available. In construing a related provision, the
D.C. Circuit also upheld EPA's decision to not consider carryover RINs in determining
"inadequate domestic supply."66
EPA believes that there are multiple reasonable constructions to construe this ambiguous
statutory provision. One reading is to construe "the projected volume available" as a shortened
reference to the "projected volume of cellulosic biofuel production." In this case the terms would
both refer only to projected production. Another reading is the commenters' reading, under
which we construe "the projected volume available" to include carryover RINs. A third reading
is to construe "the projected volume available" to mean all cellulosic biofuel produced in that
year (in this case 2020) which will be available for use in the United States.
EPA adheres to this third reading in this final rule, consistent with our interpretation in past
annual rulemakings: "the projected volume available" is our projection of cellulosic biofuel
produced in 2020 which will be available for use under the RFS program. To calculate this
projection, we estimate the production of qualifying cellulosic biofuel in the United States and
any anticipated imports of cellulosic biofuel. We then subtract any volumes not available for
qualifying domestic use, namely volumes projected to be exported. For 2020, we are not
projecting any exports of qualifying cellulosic biofuel. Thus, we projected the available volume
as the sum of domestic production and imports. We further discuss this projection in Section III
of the final rule.
Not only do we believe that our reading is a reasonable interpretation of the statutory text, we
believe that, under the circumstances present for 2020, this approach strikes an appropriate
balance between the interests of various stakeholders and best ensures the ongoing smooth
implementation of the program. As several of the commenters noted, the current availability of
66 See^CE, 864 F.3dat716.
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cellulosic carryover RINs is largely the result of SREs granted in previous years.67 We expect
that the changes in this final rule, notably the increased projection of cellulosic biofuel
production for 2020 and the adjustments to the percent standard calculations to account for the
projected SREs, will address many of the concerns raised by the commenters. While we
acknowledge that some aspects of the cellulosic category (such as the cellulosic waiver authority
and the cellulosic waiver credits) are unique, at this time we believe that the benefits of carryover
RINs (as discussed in Section II.C of the final rule and Section 2.4 of this document) also apply
to cellulosic carryover RINs. Finally, we note that our proposed rule did not raise the possibility
of including cellulosic carryover RINs as part of the available supply on which the cellulosic
biofuel volume is based. We do not think it would be appropriate at this time to make such a
change in statutory interpretation without giving opportunity for all stakeholders to comment on
the potential change. We are also reluctant to further delay the issuance of this final rule to
provide the opportunity for another round of comment on this issue.
Further discussion of similar comments on the consideration of the use of carryover RINs in
standard setting more broadly is contained in Section 2.4 of this document.
Comment:
If EPA does not require the use of carryover RINs obligated parties will use carryover RINs
rather than new production, reducing demand for cellulosic biofuel.
Response:
Cellulosic carryover RINs have been available in appreciable quantities since 2015. During this
time, EPA is unaware of obligated parties allowing cellulosic biofuel RINs to go unpurchased
and unused despite the existence of carryover RINs. Cellulosic biofuel industry commenters
provided no evidence of this occuring. Instead, carryover RINs have allowed parties an
alternative compliance option to purchasing CWCs when EPA's projection of cellulosic biofuel
has exceeded actual production and excess carryover RINs have been purchases for use in the
following year.
Comment:
EPA should not round the cellulosic biofuel volume to the nearest 10 million gallons as this
could introduce error in the projection.
Response:
See Section 8.1 of this document for our response to this comment.
67 The number of cellulosic carryover RINs (estimated at 50 million 2018 RINs available to be used for compliance
with the 2019 obligations) is primarily the result of SREs granted in previous years. SREs granted from 2016-2018
reduced the cellulosic biofuel volume requirements by about 70 million RINs (10 million RINs in 2016 and 30
millionRINs in both 2017 and 2018).
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Comment:
EPA should project the point at which marginal gallons of cellulosic biofuel are unlikely to be
produced despite the highest incentives that the RFS program can provide. EPA cannot set the
cellulosic volume at what the market would do if the RFS program did not exist. This would
require EPA to increase its projection of cellulosic biofuel for 2020.
Response:
The commenter did not specify the cellulosic biofuel volume that would result from the
suggested approach in 2020. EPA's projection methodology is described in Section III of the
final rule. We have not explicitly accounted for projected cellulosic RIN prices in making these
projections, however EPA's projection of cellulosic biofuel production in 2020 assumes the
continued existence of the RFS program, including the financial incentives provided by the
cellulosic RINs.
Further, EPA does not expect that cellulosic biofuel production in 2020 will be sensitive to the
cellulosic RIN price. All of the facilities expected to produce cellulosic biofuel in 2020 are either
currently producing cellulosic biofuel or in the advanced stages of construction. While
expectations about future cellulosic RIN prices may significantly impact investment decisions
related to future cellulosic biofuel production facilities (and thus impact cellulosic biofuel
production in the long term), we expect that RIN prices will have a far lesser impact on facilities
that have already been built (or will be in the near future). Data from 2019, in which RIN prices
were lower than historical prices but cellulosic biofuel production was significantly higher,
supports this position as production increase significantly despite lower RIN prices than
observed in 2018.
Comment:
EPA cannot implement a RIN price cap for cellulosic biofuel.
Response:
EPA is not implementing a RIN price cap in this rule for cellulosic biofuel or any other RIN
category.
Comment:
EPA should not reduce the growth rate for CNG/LNG derived from biogas from the proposed
rule.
Response:
The rate of growth for CNG/LNG derived from biogas in this final rule is higher than the rate of
growth in the proposed rule. As discussed in Section III of the final rule, the rate of growth in
this final rule is based on updated data through September 2019. Had this data indicated a rate of
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growth that was lower than the proposed rule, adopting this lower rate of growth in the final rule
would have been appropriate.
Comment:
The RIN value is much higher than the value of biogas. EPA should therefore be conservative in
the cellulosic biofuel projection.
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 2020. 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.
Comment:
Volumes should be at least 1 billion gallons higher than proposed, due to the inclusion of RINs
generated for electricity used as transportation fuel in the projection.
Response:
As discussed further in Section 3.1 of this document, we have not included RINs for electricity
used as transportation fuel in our projection of cellulosic biofuel production. Therefore, a higher
projected volume of cellulosic biofuel production, such as the 1 billion gallon increase, is not
warranted.
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4. Advanced Biofuel
4.1 Inability to Meet Statutory Targets
Commenters that provided comment on this topic include but are not limited to: 0276.
Comment:
One commenter stated that while the statutory volume target for cellulosic biofuel cannot be
reached, EPA should be striving to set 2020 standards for advanced biofuel and total renewable
fuel that are as close to their statutory volume targets as possible. This means allowing some
backfilling for missing cellulosic biofuel.
Response:
Under the cellulosic waiver authority, EPA has the discretion to reduce advanced biofuel and
total renewable fuel by less than the reduction in cellulosic biofuel, thereby allowing some
backfilling for missing cellulosic biofuel. However, the cellulosic waiver authority gives EPA
discretion to consider a variety of factors in this determination. As described in Section IV of the
final rule, we believe that a consideration of these factors appropriately leads to a determination
that, for 2020, there should be no backfilling for missing cellulosic biofuel.
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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: 0124, 0213,
0299, 0337.
Comment:
It is inappropriate for EPA to estimate reasonably attainable volumes of advanced biofuel, and
then set standards that are above those levels.
Response:
As described in Section IV.B of the preamble to the July 29 proposal,
As used in this rulemaking, both "reasonably attainable " and "attainable " are terms of
art defined by EPA. Volumes described as "reasonably attainable " are those that can be
reached with minimal market disruptions, increased costs, reduced GHG benefits, and
diversion of advanced biofuels or advanced biofuel feedstocks from existing uses.
Volumes described as "attainable, " in contrast, are those we believe can be reached but
would likely result in market disruption, higher costs, and/or reduced GHG benefits.
Footnote 70 of the proposal elaborates on our use of these terms:
Our consideration of "reasonably attainable " volumes is not intended to imply that
"attainable " volumes are unreasonable or otherwise inappropriate. As we explain in this
section, we believe that an advanced biofuel volume of 5.04 billion gallons, although not
reasonably attainable, is attainable, and that establishing such volume would be an
appropriate exercise of our cellulosic waiver authority.
Thus, these terms are meant to convey a spectrum of attainability and are useful in the absence of
more precise statutory direction on how to make determinations of the appropriate volume
requirements. Moreover, as the statute provides no specific thresholds above which renewable
fuel volumes would be considered unreasonable or inappropriate, we have made our
determinations based on an assessment of attainable and reasonably attainable volumes.
We proposed a determination that 5.04 billion gallons of advanced biofuel is attainable
notwithstanding that it could result in some feedstock/fuel diversions, and that reductions below
this level using the general waiver authority were not warranted. Commenters did not provide
compelling reasons that attainable volumes of advanced biofuel were not an appropriate basis for
establishing the volume requirement for advanced biofuel. We have taken the same general
approach in the final rule with updated data. We are finalizing an advanced biofuel volume
requirement of 5.09 billion gallons, which we find to be attainable.
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4.2.1 Imported Sugarcane Ethanol
Commenters that provided comment on this topic include but are not limited to: 0186, 0196,
0202, 0304, 0313, 0320.
Comment:
One commenter stated that Brazil will export more sugarcane ethanol to the U.S. if the right
market signals are present.
Response:
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. 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 36 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.68 For 2018 we assumed that 100 million gallons of sugarcane ethanol would be
imported, but only 54 million gallons was imported.69
More importantly, over the last several years imports of sugarcane ethanol have fulfilled only a
small portion of the advanced biofuel volume requirement that is not required to be cellulosic
biofuel or BBD.
Year
Portion of the advanced biofuel volume
requirement that is not required to be
cellulosic biofuel or BBD (mill gal)
Actual imports of
sugarcane ethanol
(mill gal)
Fraction
2016
530
36
7%
2017
969
77
8%
2018
852
54
6%
Thus, despite the opportunities created by the RFS program, imports of sugarcane ethanol have
not responded in kind, contrary to the commenter's expectations.
We note that total ethanol exports from Brazil were significantly lower in 2014 - 2018 than they
were in 2012 - 2013, despite the greater opportunities in these later years for use of sugarcane
ethanol as a contributor to meeting the advanced biofuel volume requirement.70 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.
68 "Ethanol imports into California," available in docket EPA-HQ-OAR-2019-0136.
69 "EIA Brazilian ethanol import data queried 11-13-19," available in docket EPA-HQ-OAR-2019-0136.
70 "UNICA data on ethanol exports 11-13-19," available in docket EPA-HQ-OAR-2019-0136.
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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 2020.
EPA has also ignored the increase in ethanol imports that has occurred so far in 2019.
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 2020; the number of worldwide market factors involved is
large and there is no mechanism for accurately 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 2020, 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.
A comparison of past projections of potential imports of sugarcane ethanol from stakeholders
with actual imports discussed above 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 2016.71 In reality, only 36 million
gallons were exported to the U.S. In response to the proposal for the 2017 standards, UNICA
suggested that Brazil could supply up to 1 billion gallons in 2017. In reality, only 77 million
gallons were exported to the U.S.72 This commenter has not provided any information indicating
why its projections for 2020 would be more accurate than in past years, and has not pointed to
any new circumstance expected to occur in 2020 that would increase imports of sugarcane
ethanol into the U.S.
We recognize that imports in 2019 have been slightly higher than in recent years. Based on EIA
data, imports of Brazilian ethanol through August of 2019 have totaled 95 million gallons.73
Using the per-month average, the total for 2019 could reach 142 million gallons. However, the
higher import volumes in 2019 must nevertheless be evaluated in the context of the significant
variability of imports in prior years and in the failure of higher advanced biofuel volumes to
drive increased imports of advanced ethanol.
Comment:
One commenter stated that sugar demand and prices will not hinder ethanol exports from Brazil
to the U.S.
71 "Comments from UNICA on 2014-2016 proposal," available in docket EPA-HQ-OAR-2018-0167.
72 "Comments from UNICA on 2017 proposal," available in docket EPA-HQ-OAR-2018-0167.
73 "EIA Brazilian ethanol imports for 2019 through August," available in docket EPA-HQ-OAR-2019-0136.
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Response:
In May 2019, USD A reported that both worldwide sugar production and consumption are
projected to increase slightly in the 2019/2020 marketing year in comparison to the previous
marketing year.74 Higher production levels are generally correlated with higher prices, creating
some market pressure towards sugar production and away from ethanol production. The same
report indicates that Brazilian sugar production will increase for the 2019/2020 marketing year.
Based on this more recent information, there is no indication that exports of sugarcane ethanol
from Brazil to the U.S. in 2020 are likely to be substantially higher than they have been in recent
years.
Comment:
One commenter said that, since California is projecting 150 million gallons of imported
sugarcane ethanol for 2020, EPA should use at least this level for 2020.
Response:
California has made estimates of the volumes of different types of biofuel that may be needed to
meet the targets under its Low Carbon Fuel Standard (LCFS) program. For 2017 and 2018,
California estimated the need for 50 and 100 million gallons of sugarcane ethanol, respectively.75
Actual use of sugarcane ethanol was 23 and 44 million gallons for 2017 and 2018, respectively.76
Because actual use has fallen significantly short of the estimate, we do not believe it would be
appropriate to use California's estimate of 150 million gallons for 2020 in the context of
estimating reasonably attainable volumes for 2020 under the RFS program.
Comment:
One commenter said that the price for LCFS credits has been higher in 2019 than in recent years.
This will bring more imported sugarcane ethanol into California, and EPA should include this in
their projections for 2020.
Response:
LCFS credit price data from the California Air Resources Board through September of 2019 does
show an increase in comparison to 2018.77 However, it is as yet unclear if these higher credit
prices will continue through 2020; credit prices also increased in both 2013 and 2016 only to fall
afterwards. Furthermore, higher LCFS credit prices do not necessarily lead to increases in
sugarcane ethanol from Brazil if other low carbon fuels prove to be more economical. We will
continue to monitor the market's reaction to LCFS credit prices and will account for clear trends
in future standard-setting actions.
74 "Sugar - World Markets and Trade May 2019," USD A, available in docket EPA-HQ-OAR-2019-0136.
75 "LCFS illustrative compliance scenarios 3-6-18," available in docket EPA-HQ-OAR-2019-0136.
76 "Actual fuel use in California 5-9-19," available in docket EPA-HQ-OAR-2019-0136.
77 "LCFS credit prices as of 10-9-19," available in docket EPA-HQ-OAR-2019-0136
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Comment:
One commenter said that EPA did not account for the expected reduction in Japan's demand for
ethanol nor the fact that the federal biodiesel tax credit may not be reinstated. Both of these
factors should lead EPA to use a higher volume of imported sugarcane ethanol in setting the
2020 advanced standard.
Response:
Both of the factors cited by the commenter are uncertain in terms of their impacts on exports of
Brazilian ethanol to the U.S. Moreover, there are many other factors that are similarly uncertain
which are not cited by the commenter, such as demand for Brazilian ethanol in other countries,
world sugar prices, and climate impacts on sugarcane yields. These factors make it very difficult
to predict with any precision the volumes that may be imported in 2020. Absent a mechanism for
making such predictions, we believe that it is more appropriate to use historical data as the basis
for estimating the volumes of imported sugarcane ethanol to include in determining the
appropriate 2020 volume requirement for advanced biofuel. Moreover, even were EPA to project
greater volumes of sugarcane ethanol, the high costs of advanced biofuels independently justifies
our decision to exercise the cellulosic waiver to the maximum extent.
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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: 0164, 0171,
0177, 0212, 0313, 0320, 0324, 0337.
Comment:
Multiple commenters stated that the advanced biofuel volume for 2020 should be higher to
promote the advanced biodiesel and renewable diesel industries. To support these claims one
commenter stated that biodiesel and renewable diesel production are up 12% in 2019 through
July 2019 despite SREs, the absence of the biodiesel tax credit, and tariffs. Another commenter
noted that there are no limitations to the production, distribution, or use of higher volumes of
these fuels.
Response:
We believe the advanced biofuel volume for 2020 established in this final rule (together with the
BBD volumes established for 2020 and 2021) provide the appropriate incentives for the biodiesel
and renewable diesel industry. The advanced biofuel volume for 2020 established in this final
rule reflects the implied statutory target for non-cellulosic advanced biofuels (4.5 billion
gallons). As discussed in further detail in Section IV of the final rule, while higher volumes of
advanced biofuel may be achievable in 2020, requiring higher volumes would increase the cost
of the RFS program (due to the high cost of advanced biofuels) and would be more likely to
cause unintended adverse consequences associated with diversions of advanced feedstock and
biofuels. New data about production levels in 2019 do not significantly affect these premises or
warrant a different outcome. In any event, we have considered updated data on production,
imports, exports of advanced biodiesel and renewable diesel in Section IV of the final rule. We
agree that production, distribution, and use are not likely to limit the availability advanced
biodiesel and renewable diesel in 2020, and we present our analysis of these issues in the same
section of the final rule.
Comment:
Multiple commenters stated that the proposed advanced biofuel volume effectively requires 2.8
billion gallons of biodiesel. This volume is higher than the volume that can be produced by the
domestic biodiesel industry, and therefore effectively requires the use of imported biodiesel. This
is contrary to the intention of the Energy Independence and Security Act (EISA), including the
goal of promoting energy independence and security.
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 and Section
2.1.1 of this document, sufficient domestic production capacity and feedstocks exist to enable
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domestic producers of biodiesel and renewable diesel to supply the volume of these fuels
projected to be used to meet the advanced biofuel standard (2.83 billion gallons). While we
expect that some volume of imported advanced biodiesel and renewable diesel will be used in
2020, 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:
The RFS program is supposed to result in "market disruption" by requiring greater production
and use of renewable fuels. By not increasing the advanced biofuel volume requirement EPA
causes "market disruption" for biofuel producers.
Response:
We recognize that the RFS program was intended to support and in fact is supporting greater
production of renewable fuels and greater use of these fuels in the U.S. transportation fuel
market. In this rule EPA has established the implied statutory volume for non-cellulosic
advanced biofuels (4.5 billion gallons), which we believe provides the appropriate level of
support for the advanced biofuel industry. We believe this required volume results in
significantly greater use of advanced biofuels than in the absence of the RFS program. As
discussed in further detail in Section IV of the final rule, while higher volumes of advanced
biofuel may be achievable in 2020 achieving higher volumes would increase the cost of the RFS
program (due to the high cost of advanced biofuels) and higher volumes would be more likely to
have unintended adverse consequences.
Comment:
The volume of biodiesel and renewable diesel projected in the proposed rule (2.83 billion
gallons) is overly optimistic. The proposed advanced biofuel volume would require drawing
down the carryover RIN bank, which EPA says is not the intent of this rule. Domestic biodiesel
production is only projected to reach 1.73 billion gallons in 2019, far short of what is needed to
meet the proposed advanced biofuel volume.
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 2019, we currently expect domestic production of advanced biodiesel
and renewable diesel to reach approximately 2.36 billion gallons in 2019, rather than the 1.73
billion gallons projected by the commenter (which does not appear to account for domestic
renewable diesel production or seasonal trends in advanced biodiesel and renewable diesel
production). Similarly, we currently project imports of advanced biodiesel and renewable diesel
to reach approximately 0.50 billion gallons in 2019. Even assuming advanced biodiesel and
renewable diesel exports remain at 150 million gallons, the supply of advanced biodiesel and
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renewable diesel (including both domestic production and imports) would have to increase by
approximately 0.09 billion gallons from 2019 to 2020 to reach the volume projected for 2020. 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).
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4.2.2.2 Domestic Production Capacity
Commenters that provided comment on this topic include but are not limited to: 0164, 0171,
0177, 0186, 0200, 0211, 0293, 0313, 0320, 0337.
Comment:
Multiple commenters stated that sufficient production capacity exists to produce greater volumes
of advanced biodiesel and renewable diesel. Some commenters referenced the Energy
Information Administration's capacity data of over 3 billion gallons per year.
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:
EPA should base the reasonably attainable volume of advanced biodiesel and renewable diesel
on the production capacity for these fuels.
Response:
It would not be appropriate for EPA to project the reasonably attainable volume of advanced
biodiesel and renewable diesel at the production capacity for these fuels at registered facilities.
The term "reasonably attainable" is a term of art created by EPA and refers to volumes that can
be reached with minimal market disruptions. This inherently requires consideration of more than
just production capacity. Basing the reasonably attainable volume solely on the production
capacity of these fuels would ignore other important considerations, such as the availability of
feedstocks to produce these fuels at the production capacity. In addition, actual production of
these fuels has never approached the production capacity in any previous year. These factors are
discussed in further detail in Section IV of the final rule and Section 4.2.2.4 of this document.
Comment:
There has been little growth in the production capacity for advanced biodiesel and renewable
diesel for several years. Achieving 3.2 billion gallons of biodiesel and renewable diesel in 2020
would require the production facilities to operate at a 76% utilization rate, which has never
happened in any previous year.
Response:
Achieving the volume of advanced biodiesel and renewable diesel projected to be used to meet
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the advanced biofuel volume requirement in 2020 (2.83 billion gallons) would only require a
modest increase of about 90 million gallons over the volume of these fuels projected to be
supplied in 2019. Between the excess production capacity that went unused in 2019 and new
production capacity expected to come online in 2020 there do not appear to be any limitations
related to production capacity to achieving the advanced biofuel volume in this final rule. The
3.2 billion gallons referenced by the commenter is the amount of biodiesel and renewable diesel
(including both advanced and conventional biodiesel and renewable diesel) that we estimate the
market could make available to meet the total renewable volume for 2020. We note that the
production capacity for biodiesel and renewable diesel (including both advanced and
conventional biodiesel and renewable diesel) at facilities registered in the RFS program is
approximately 4.2 billion gallons in the U.S. and over 9.6 billion gallons globally.78 Production
capacity is highly unlikely to limit the availability of biodiesel and renewable diesel in 2020.
Comment:
Production capacity is not a limiting factor to biodiesel and renewable diesel production in 2020.
We expect 1.8 billion gallons of BBD production capacity to come online between 2018 and
2020.
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 2020 or 2021.
Comment:
Production capacity is irrelevant as it does not reflect actual production. EPA should rely only on
EIA production capacity of 2.54 billion gallons.
Response:
Production capacity is a relevant consideration when projecting the reasonably attainable and
attainable volume of advanced biodiesel and renewable diesel in future years. Increasing
production of biodiesel and renewable diesel can happen more quickly and at lower cost when
excess production capacity exists, relative to situations where additional production capacity
must be built.
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
facilities that produced biodiesel in a given month. We do not believe it is appropriate to
78 "Biodiesel and Renewable Diesel Registered Production Capacity (March 2019)," memorandum from Dallas
Burkholder to EPA docket EPA-HQ-OAR-2019-0136.
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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 2020.
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4.2.2.3 Potential Imports
Commenters that provided comment on this topic include but are not limited to: 0171, 0212,
0213, 0293, 0302, 0337.
Comment:
Multiple commenters stated that tariffs on biodiesel from Argentina and Indonesia do not impact
the potential supply of advanced biodiesel and renewable diesel as they do not affect the volume
of these fuels that could be imported.
Response:
We recognize that, strictly speaking, the price for biofuels 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 2020, 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 2020 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 affected by the tariffs, can increase in 2020, and likely will do so in
response to the advanced biofuel volume established in this rule (see Section IV of the final rule
for a further discussion of EPA's projections of advanced biodiesel and renewable diesel
domestic production and imports in 2020).
Comment:
Multiple commenters stated that the supply of advanced biodiesel and renewable diesel has
continued to increase even with tariffs on biodiesel from Argentina and Indonesia in place.
Response:
The supply of imported advanced biodiesel and renewable diesel peaked in 2016, before
decreasing in 2017 and 2018 after the tariffs on biodiesel imported from Argentina and Indonesia
were put in place. Imports in 2019 are projected to increase (relative to imports in 2018), but still
projected to be well short of the volume of these fuels imported in 2016. This decrease in imports
has been offset by increases in domestic production of advanced biodiesel and renewable diesel.
The supply of advanced biodiesel and renewable diesel projected for 2019 is projected to be
higher than the volume of these fuels supplied in 2016 (the last year before the tariffs were put in
place). These data demonstrate that while the tariffs impacted the source of advanced biodiesel
and renewable diesel supplied to the U.S., over time increased imports from other parts of the
world and increased domestic production have resulted in higher availability of advanced
biodiesel and renewable diesel despite these tariffs.
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Comment:
Tariffs and highly unpredictable foreign demand will mean that imports will not be sufficient to
meet the 2.83 billion gallons of advanced biodiesel and renewable diesel projected to be needed
to meet the advanced biofuel volume. EPA's projected volume of advanced biodiesel and
renewable diesel for 2020 rely on unreasonably high imports and increases in domestic
production.
Response:
While we acknowledge that tariffs on biodiesel and renewable diesel, as well as foreign demand
for these fuels, are unpredictable we do not believe this uncertainty makes the advanced biofuel
volume established in this final rule unreasonably high. As discussed in further detail in Section
IV of the final rule, the volume of advanced biodiesel and renewable diesel projected to be
needed to meet the advanced biofuel volume for 2020 (2.83 billion gallons) is only 90 million
gallons higher than the volume of these fuels projected to be supplied in 2019 (2.74 billion
gallons). This volume is lower than the average historical rate of growth for these fuels, and we
do not expect that other factors (such as production capacity, distribution infrastructure, etc.) will
limit the availability of these fuels to a volume below 2.83 billion gallons. In addition, further
reductions to the advanced biofuel volume would require exercise of the general waiver
authority. As described in Section 2 of this document, we do not believe that doing so is
warranted.
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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: 0117, 0124,
0164, 0171, 0177, 0186, 0196, 0197, 0200, 0202, 0211, 0213, 0276, 0293, 0301, 0302, 0313,
0320, 0328, 0458.
Comment:
A commenter supported EPA's concerns about feedstock diversion.
Response:
As in the proposed rule, EPA has exercised our cellulosic waiver authority to reduce the
advanced biofuel volume by the maximum amount allowable, in part due to concerns over the
potential for higher volumes to result in greater feedstock diversion.
Comment:
EPA should project an increase in available fats, oils, and greases of 100 million gallons in 2020
(rather than the 32 million gallons based on historical increases). This number is closer to the
115 million gallons projected by LMC. Another commenter stated that additional feedstocks are
available through the increased collection and use of used cooking oil. They estimate that of the
total volume of 5.7 billion pounds of used cooking oil produced in the U.S., 1.7 billion pounds is
still not collected. Higher required volumes increase used cooking oil collection and help
improve water quality.
Response:
As noted in the proposed rule, the LMC estimate of available waste fats, oils, and greases only
accounts for potential sources of feedstock and not for the economic viability of recovering
waste oils. As such, it is not an appropriate volume to use when projecting the reasonably
attainable volume of advanced feedstocks. This is especially true when the price for recycled
feedstocks, which is the primary driver for feedstock collect, is lower than it has been in previous
years. While we recognize the potential benefits to increased collection of waste oils, such as
improved water quality, we continue to believe that the historic increases of these feedstock
represent the best estimate for the growth in the use of these feedstocks in the production of
biodiesel and renewable diesel in future years. Based on updated data, the final rule projects an
increase of 48 million gallons of advanced biodiesel and renewable diesel derived from waste
fats, oils, and greases.
Comment:
Collection of fats, oils, and greases is driven by the incentives created by the RFS program.
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Response:
We acknowledge that the financial incentive provided by the RFS program, along with other
state and local incentives, can provide an incentive to collect additional waste fats, oils, and
greases to use as feedstock for biofuel production. However, these same incentives can also lead
to greater diversion of qualifying feedstocks from existing (non-biofuel) uses to be used to
produce advanced biodiesel and renewable diesel. This diversion of feedstocks could ultimately
lead to the greater use of palm or petroleum-based products in non-biofuel industries. Thus, a
desire to increase the collection of waste fats, oils, and greases is not a sufficient justification for
a higher advance biofuel volume.
Comment:
EPA should not assume the use of oils for food is flat. The commenter projects an 18 million
gallon increase in the use of vegetable oils for food. The commenter further stated that EPA
should not assume that the use of waste oils can increase without causing diversion.
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, increased production of distillers corn oil, and increased collection of fats, oils,
and greases, and have generally assumed that consumption of these feedstocks in markets other
than renewable fuel will not change appreciably from 2019 to 2020. 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 affect our determination that the final advanced biofuel requirement is
attainable or result in a different advanced biofuel volume for 2020.
Comment:
EPA should reduce the reasonably attainable volume to account for lower projected imports in
2020 relative to 2017.
Response:
Imports of advanced biodiesel and renewable diesel were higher in 2017 (653 million gallons)
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than they were in 2018 (353 million gallons) as well as the projected volume of imports in 2019
(502 million gallons). If imports of advanced biodiesel and renewable diesel increase by the
same magnitude from 2019 to 2020 as they are projected to increase from 2018 to 2019 (149
million gallons) then total imports of advanced biodiesel and renewable diesel would be
approximately equal in 2020 (651 million gallons) as in 2017. However, even if imports are
ultimately lower in 2020 than in 2017, this would not affect the reasonably attainable volume, an
analysis which is primarily based on the availability of advanced feedstocks. Thus, as we state in
Section IV of the final rule, we do not consider changes in imports or exports of advanced
biodiesel and renewable diesel in our projection of the reasonably attainable volume. Moreover,
as explained in the preamble, we believe that the required advanced biofuel volume is attainable
even if imports do not rise from 2019 to 2020. Finally, further reducing the advanced biofuel
and/or total renewable fuel volumes in this final rule would require the use of the general waiver
authority, which EPA has determined is not warranted.
Comment:
Multiple commenters stated that higher volumes of advanced biofuel can be achieved without
resulting in feedstock diversion. These commenters generally stated that plentiful feedstocks
exist, and that EPA's concerns about feedstock switching are misguided. One commenter stated
that EPA underestimated the agricultural community and misunderstands the commodity market
when claiming that feedstock switching would result from higher volume requirements.
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 increase of these feedstocks in 2020. The
data reviewed by EPA also suggests that feedstock switching has occurred historically and is a
normal reaction to the changes in supply, demand, and price among the various feedstocks.79
Consequently, there is a reasonable expectation that this would occur in the future were EPA to
mandate greater volumes of advanced biofuel under the RFS program.
Comment:
EPA's discussion of feedstock switching is wrong. EPA's own lifecycle analysis (LCA) in 2010
considered the impact of feedstock switching with increased biodiesel production and concluded
that production of biodiesel and renewable diesel from approved feedstocks still met the 50%
lifecycle GHG threshold for advanced biofuel. More recent modeling confirms these results.
Response:
By considering the potential for indirect land use change, both domestically and internationally,
EPA's 2010 LCA modeling did consider the potential impacts of feedstock switching. However,
the volume scenarios modeled in that rule are significantly different than the volumes of
79 See data on palm oil imports in this document
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advanced biodiesel and renewable diesel expected to be used to meet the 2020 advanced biofuel
volume. The volume of advanced biodiesel and renewable diesel projected to be used to meet the
RFS volume requirements in 2022 in the 2010 RFS final rule (1.82 billion gallons) was over 1
billion gallons lower than the volume projected to be used to meet the advanced biofuel volume
for 2020 (2.83 billion gallons). It is uncertain how these changes to the scenarios modeled for the
2010 RFS rule, together with other changes in the global agricultural and fuels sectors since
2010, would impact the LCA results. We are not claiming in this final rule that volumes above
the reasonably attainable threshold inherently fail to meet the 50% GHG reduction threshold
required by the Clean Air Act. We did not do a new LCA or reopen the 2010 LCA. The analysis
in this final rule considers updated data and market circumstances that have developed since the
2010 lifecycle analysis was conducted. Based on this new information we believe, as a
qualitative matter, that volumes above the reasonably attainable threshold are likely to result in
diversions of advanced biofuels and feedstocks, which in turn are linked with various adverse
effects.
Finally, while some more recent studies, noted by commenters, have supported the conclusion
that biodiesel produced from soybean oil meets the 50% GHG reduction thresholds required for
advanced biofuel when considering indirect land use change, other studies have reached different
conclusions.80
Comment:
The GHG impacts of feedstock switching are small because even if palm oil is used in place of
advanced biofuel feedstocks due to feedstock switching, the use of palm oil is still better than
petroleum-based diesel.
Response:
EPA has not finalized an LCA of biodiesel or renewable diesel produced from palm oil. Our
proposed LCA suggested that while these fuels may have lower GHG emissions that petroleum,
they likely do not meet the 50% GHG reduction threshold to qualify as advanced biofuels.81 In
any event, even assuming the commenter is correct, the statute does not require EPA to single-
mindedly require the maximum amount of biofuels possible where such biofuels have any GHG
reductions relative to fossil fuels. As explained in Section IV of the final rule, we believe that the
concerns about high costs of advanced biofuels and adverse consequences of feedstock and
biofuel diversions justify the final advanced biofuel requirement.
Comment:
There are no pathways for palm oil in the RFS program or California's LCFS. The lack of these
incentives, combined with the tariffs on biodiesel imported from Argentina, mean that biodiesel
and renewable diesel produced from palm oil cannot be used to meet the required volumes, and
80 For example; Valin H, P. D., van den Berg M, Frank S, Havlik P, Forsell N, Hamelinck C. (2015). The land use
change impact of biofuels consumed in the EU: Quantification of area and greenhouse gas impacts. Utrecht,
Netherlands, Ecofys: 261.
81 See the draft GHG assessment of palm oil biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012).
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concerns about the use of palm oil are misguided.
Response:
A number of renewable diesel and biodiesel producers in the U.S. and abroad were grandfathered
under the RFS program in keeping with the provisions of the statute to allow them to produce
such fuels from palm oil that meets the definition of renewable biomass. Thus, palm oil can and
has been used to meet the conventional renewable fuel volumes required by the annual standards.
However, EPA's concerns about increased demand for palm oil due to the RFS program are not
limited to palm oil that is used to produce qualifying biodiesel or renewable diesel. Rather, we
are concerned that palm oil could be used as a replacement feedstock in non-biofuel industries as
demand for qualifying feedstocks to produce advanced biodiesel and renewable diesel increases.
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.
Palm Oil Imports (2000-2017)
S
c
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meat demand. Soybean producers need a new market for soybean oil due to the ban of partially
hydrogenated oils in food, which took effect on June 18, 2018.
Response:
As discussed in greater detail in Section IV of the final rule, EPA has used projections from
USDA's most recent WASDE report (October 2019) to project the increase in vegetable oil
production in the U.S. in 2020. 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 2020, and we have reflected this projected increase in our assessment of the reasonably
attainable volume of advanced biodiesel and renewable diesel for 2020. Increasing the quantity
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. 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 as the
use of partially hydrogenated oils decreased in food markets (that is, even prior to the 2018 FDA
regulation), and the use of soybean oil in food markets was fairly consistent from 2012 through
2018, and is expected to increase in future years.82 The FDA regulations are therefore unlikely to
result in a significant decrease in the use of soybean oil in the U.S. food market (and are
therefore unlikely to result in a corresponding increase in the amount of soybean oil that could be
used to produce biodiesel and renewable diesel) in 2020.
Comment:
Multiple commenters referenced a study by LMC International (submitted in comments on this
rule) that global supplies of all feedstocks are growing.
Response:
We recognize that the production of advanced feedstocks is expected to increase in future years,
according to both the LMC international study and other studies. As discussed in Section IV of
the final rule, we have used the October 2019 WASDE to project the increase in production of
vegetable oils in the U.S. in 2020 in this final rule. We have also used the WAEES model to
project increases in distillers corn oil and EPA's own model to project increases in waste fats,
oils, and greases.
Comment:
A commenter stated that the current trade war is resulting in excess soybean oil in the U.S. that
can be used to produce biodiesel. Another commenter noted that stocks of soybeans are currently
82 See NBB comments on the 2019 proposal (Docket Item No. EPA-HQ-OAR-2018-0167-0711 Attachment 3).
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very high.
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:
Corn oil production is growing with ethanol production. The increased production of corn oil is a
source of additional feedstocks. Another commenter stated that corn oil extracted at ethanol
plants can be used to produce biodiesel, and that the use of this corn oil to produce biodiesel does
not impact food markets.
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 2020 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 ethanol export demand apart from the RFS.
Comment:
EPA should account for 15 million gallons of sorghum oil in the assessment of available
feedstock in 2020.
Response:
We have not separately assessed the quantity of sorghum oil that could be available in 2020. We
do, however, believe that our assessment of available feedstocks incorporates any sorghum oil
that may be available in 2020. Sorghum oil is produced at ethanol production facilities in much
the same way as corn oil. Our projection of corn oil assumed that all conventional grain ethanol
in the U.S. was produced using corn as the only feedstock (rather than a small portion of the
feedstock being sorghum rather than corn), and that all of the distillers oil produced from these
facilities was corn oil. Thus, to the degree that some of these facilities use sorghum, rather than
corn, as their feedstock, the sorghum oil volume produced from these facilities is already
considered in our projection of the growth in corn oil for 2020.
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Comment:
EPA's focus on feedstock and fuel switching violates the statute by creating a bias against
foreign fuels that otherwise meet the minimum lifecycle emissions thresholds.
Response:
EPA's consideration of feedstock and fuel switching does not discriminate against foreign
produced fuels that otherwise meet the regulatory requirements to qualify as advanced biofuel.
These fuels are eligible to generate RINs that have the same compliance and monetary value as
the RINs produced for domestic advanced biofuels. Indeed, EPA's analysis of fuel and feedstock
switching does not distinguish at all between switching that occurs abroad versus that which
occurs in the U.S. Rather, EPA's concerns over the potential for adverse impacts related to
feedstock and fuel switching recognize that the fuels market, as well as the impacts of GHG
emissions, are global. Thus, increasing demand and consumption for renewable fuel in the U.S.
can impact actions in other domestic industries as well as in other countries. To the degree that
these impacts increase GHG emissions, regardless of their location, we consider such increases
in exercising the cellulosic waiver authority. We also note that other concerns, most notably the
high cost of advanced biofuels, also justify EPA's decision to reduce the advanced biofuel
volume by the same amount as the reduction to the cellulosic biofuel volume.
Comment:
A commenter submitted study by Advanced Economic Solutions (AES). The commenter claimed
this study described the negative impacts on the vegetable oil market of volume requirements for
biodiesel and renewable diesel that exceeded 3 billion gallons. The commenter also described
potential limitations on several potential feedstock sources.
Response:
The AES study referenced by the commenter assessed the potential impacts of scenarios where
the volume of biodiesel and renewable diesel (including both advanced and conventional
biodiesel and renewable diesel) required by the RFS program rose to 3 billion gallons and 4
billion gallons. The scenarios examining the impacts of requiring 3 billion gallons of biodiesel
and renewable diesel are most relevant to this final rule, as this volume is slightly higher than the
volume of these fuels that we project will be used to meet the advanced biofuel volume (2.83
billion gallons) and slightly lower than the volume we project will be used to meet the total
renewable fuel volume (3.24 billion gallons). The AES study described the impact of these
scenarios as having a "limited feedstock impact from the current situation," with the impacts on
demand for soybean oil being a "relatively modest increase."83 We further note that the price of
biodiesel projected in the AES study under these scenarios ($4.13 - $4.33 per gallon of biodiesel)
is much higher than the current prices ($2.81-$2.82 per gallon per Argus Americas Biofuels,
depending on the location), notwithstanding that EPA required the same volume of non-
cellulosic advanced biofuels for 2019 as we are doing for 2020.84 This more recent data casts
83 "Analysis of Potential RFS Volumes for Biodiesel," Advanced Economic Solutions, August 2017.
84 "Argus Americas Biofuels," Issue 19-229, November 26, 2019.
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significant doubt on this AES projection. But even were we to assume that the projection is
accurate, these impacts do not rise to the level of severe economic harm that is the criteria for
EPA to consider using the general waiver authority to make further reductions to the advanced
biofuel volume. As discussed further in Section IV of the final rule, EPA has considered the
potential feedstock sources for the additional volume of these fuels necessary to meet the
advanced biofuel volume and determined that sufficient feedstocks will be available in 2020.
Comment:
The RIN value is necessary to "bridge the gap" between the price of bean oil and heating oil to
allow biodiesel producers to cover their cost of production.
Response:
We recognize that the cost of production of biodiesel (and renewable diesel) is higher than the
price of the petroleum fuels they displace. In such situations the RIN value (along with other
federal, state, and local incentives) is intended to incentivize the production of these fuels when
it would not otherwise be economical to so.
Comment:
A commenter cited the WASDE forecast and claimed that 3.6 billion gallons of biodiesel and
renewable diesel could be produced from vegetable oil produced in the U.S. The commenter
further claimed that additional volumes of biodiesel and renewable diesel could be produced
from new feedstock production and currently available lipids.
Response:
EPA is aware of this WASDE projection and has used the October 2019 WASDE report as the
basis for our projection of domestic vegetable oil production in 2020. As discussed in Section IV
of the final rule, it would not be appropriate to assume that the entire volume of U.S. vegetable
oil production in 2020 was used to produce biodiesel and renewable diesel. Our projection of the
volume of these fuels that can be produced in 2020 without further diverting feedstocks and
biofuel from existing sources can be found in Section IV of the final rule.
Comment:
EPA could increase the available feedstocks that could be used to produce advanced biodiesel
and renewable diesel by approving new pathways for jatropha and carinata oil.
Response:
These feedstocks have not currently been evaluated by EPA. If EPA determines that biodiesel
and renewable diesel produced using these feedstocks meets the 50% GHG reduction required to
qualify as an advanced biofuel (as well as all other regulatory requirements) we will consider
these feedstocks in future rulemakings.
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Comment:
Feedstock prices are falling, so feedstock availability cannot be a factor that is constraining
biodiesel and renewable diesel production.
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,85 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 biofuel 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.86 We further note that despite these price decreases, biodiesel and
renewable diesel continue to have a significantly higher cost than petroleum based diesel.
Comment:
Renderers supply 29% of all biodiesel feedstock (used cooking oil and animal fat). Feedstock
availability is expected to grow with increased livestock and poultry output, which is growing at
a rate of 2.3% per year according to USDA data. Poultry is increasingly moving to an all
vegetarian diet, which increases the availability of animal fats that could be used to produce
biodiesel and renewable diesel.
Response:
We recognize that the availability of animal fats is likely to increase with increased livestock
output. Changes in the feed formulations for livestock and poultry may result in further increases
to the supply of animal fats and used cooking oil available for biofuel production. In this final
rule we have projected an increase in the quantity of animal fats and used cooking oil in 2020
that is sufficient to produce an additional 46 million gallons of biodiesel and renewable diesel
based on the observed rate of growth in these feedstocks in previous years.
85 "Endangered Species Act No Effect Finding and Determination on Severe Environmental Harm under General
Waiver Authority," memorandum to docket EPA-HQ-OAR-2018-0167.
86 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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4.2.2.5 Impact of Tax Credit
Commenters that provided comment on this topic include but are not limited to: 0171, 0213,
0293, 0301.
Comment:
Multiple commenters stated that the tax credit is independent from the RFS program and should
not be considered as it has no impact on the available supply of advanced biodiesel and
renewable diesel.
Response:
While EPA continues to believe that the availability of the tax credit can impact the availability
of biodiesel and renewable diesel by providing a certain and fixed incentive for these fuels,
whether or not the tax credit is renewed for 2020 does not impact 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 also does not affect our projection of the reasonably attainable volume of advanced
biodiesel and renewable diesel, or our conclusion that 2.83 billion gallons of advanced biodiesel
and renewable diesel is attainable.
Comment:
The tax credit does not impact the price of biodiesel, but rather is a value component that serves
to lower the RIN price as it provides an additional incentive for the blending of biodiesel and
renewable diesel. The market has placed a probability on the availability of a retroactive tax
credit reinstatement.
Response:
The market has and continues to factor the presence or lack thereof of the tax credit into the price
of biodiesel. Regardless of what impact it may have, as discussed in the previous response, the
status of the tax credit does not affect our projection of the reasonably attainable or attainable
volume of advanced biodiesel and renewable diesel in 2020.
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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: 0717.
Comment:
One stakeholder said that EPA had increased the BBD standard to 2.43 without increasing the
advanced standard, thereby reducing the market for non-cellulosic, non-BBD advanced biofuel.
Response:
The increase in the 2020 BBD standard to 2.43 billion gallons from the 2019 volume
requirement of 2.1 billion gallons was effectuated through a rulemaking promulgated on
December 11, 2018, and our justification for that increase is contained in that rule.87 The
increase was justified in part on the fact that the non-cellulosic portion of the 2019 advanced
biofuel volume requirement in both the statute and our final rule was increased by 500 million
ethanol-equivalent gallons. The biodiesel-equivalent of 500 million ethanol-equivalent gallons is
330 million gallons, which is the increase that we established in for the 2020 BBD volume
requirement. As described in that rule:
"This increase, in conjunction with the statutory increase of500 million gallons of non-
cellulosic advanced biofuel in 2019, would preserve a gap for "other " advanced biofuels,
that is the difference between the advanced biofuel volume and the sum of the cellulosic
biofuel and BBD volumes. This would allow other advanced biofuels to continue to
compete with excess volumes of BBD for market share under the advanced biofuel
standard, while also supporting further growth in the BBD industry. " (83 FR 63738)
We recognize that the increase in the BBD volume requirement to 2.43 billion gallons applied in
2020 while the increase in the non-cellulosic portion of the advanced biofuel volume
requirement applied in 2019. This is the result of the statutory requirement that the BBD volume
requirement be set 14 months ahead of the applicable year, while the other three volume
requirements must be set by November 30, effectively 1 month ahead of the applicable year.
However, when comparing the 2020 volume requirements to the 2018 volume requirements, the
non-cellulosic, non-BBD portion of the advanced biofuel volume requirement remains the same
at 0.85 billion gallons. As we explain in Section VI of the final rule, the use of other (non-
cellulosic, non-BBD) advanced biofuels in recent years has been a small fraction of this amount,
and we believe the remaining gap is sufficient to allow the development and increased
production of other advanced biofuels to still be incentivized.
87 83 FR 63704 (December 11, 2018).
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4.4 Proposed Advanced Biofuel Requirement
Commenters that provided comment on this topic include but are not limited to: 0117, 0153,
0164, 0171, 0177, 0186, 0191, 0192, 0196, 0197, 0201, 0202, 0207, 0212, 0213, 0291, 0293,
0298, 0299, 0301, 0302, 0311, 0313, 0320, 0323, 0324, 0328, 0337, 0539, 0541.
Comment:
One commenter said that the advanced biofuel volume requirement should be reduced below the
proposed level of 5.04 billion gallons, to the level that is reasonably attainable, using the general
waiver authority.
Response:
We do not believe that further reductions below the level achieved through the full use of the
cellulosic waiver authority are warranted for 2020. The general waiver authority is not triggered
by the increased likelihood of feedstock or fuel diversions, which is the focus of the reasonably
attainable analysis. This analysis, moreover, was developed by EPA in evaluating the cellulosic
waiver authority, which grants EPA broad discretion to consider various factors. The general
waiver authority, by contrast, is triggered by specific findings of inadequate domestic supply,
severe environmental harm, or severe economic harm. See Section 2.1 of this document for
further discussion of the general waiver authority.
Comment:
One commenter stated that the 2020 advanced biofuel volume requirement should be based on
the sum of cellulosic biofuel, the BBD volume requirement (rather than attainable or reasonably
attainable BBD), and other advanced, which leads to 4.285 billion gallons.
Response:
Our determination of the appropriate volume requirement for advanced biofuel for 2020 includes
a consideration of the volume of advanced biodiesel and renewable that is attainable. As
described in Section IV of the final rule, our analysis concluded that significantly more than 2.43
billion gallons of such fuels - 2.8 billion gallons - is in fact attainable in 2020. By contrast, 2.43
billion gallons of BBD is not the most that could be expected to be supplied in 2020, but rather is
a level that provides support to the BBD industry while simultaneously providing an opportunity
additional volumes of advanced biodiesel and renewable diesel to compete with other advanced
biofuels under the advanced biofuel standard. Nothing in the statute obligates EPA to limit the
opportunity for BBD to that required by the BBD standard. It is appropriate for BBD to compete
with other advanced biofuels in meeting the non-cellulosic, non-BBD portion of the advanced
standard.
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Comment:
Several commenters stated that the advanced biofuel standard for 2019 should be higher than
5.04 billion gallons because there exists sufficient biodiesel and renewable diesel 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 5.09 billion gallons (the updated value for the final rule) to be reached in
2020. 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, and its associated market and environmental
impacts, 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 will suffer.
Response:
As discussed in Section IV of the final rule, based on a consideration of a variety of factors
including the attainability of advanced biofuel volumes, costs, and potential feedstock and fuel
diversions, we have determined that a partial backfilling would not be appropriate for 2020.
However, we note that the portion of the advanced biofuel standard that is not required to be
cellulosic biofuel or BBD can be met with any advanced biofuel. In 2020, this portion will be
0.85 billion gallons. This volume represents a market opportunity for new and innovative
advanced biofuels. The applicable standards in the last several years have included a similar
implied volume requirement for non-cellulosic, non-BBD advanced biofuel, creating
opportunities for ongoing investments in advanced biofuels.
Comment:
One commenter stated that the refusal to partially backfill for the shortfall in cellulosic biofuel
means that EPA is ignoring the statute's overall goal of increasing the use of renewable fuels.
EPA cannot use costs to limit the advanced biofuel standard since doing so runs counter to the
statute's goal of increasing volumes that would otherwise not occur. Also, setting the non-
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cellulosic portion of the advanced biofuel volume requirement for 2020 at the same level it was
in 2019 is also inconsistent with Congressional intent to increase volumes over time.
Response:
The statute does not provide an increase in non-cellulosic advanced biofuels from 2019 to 2020,
but instead only provides for an increase in cellulosic biofuel. Had Congress intended for this
category to increase for 2020, they could have required it. While the statute provides EPA with
the flexibility to allow some backfilling of the cellulosic shortfall with other advanced biofuel as
the commenter suggests by waiving the advanced biofuel and total renewable fuel volumes by a
lesser amount than the cellulosic volume, the statute does not require this and does not command
this at all costs. Rather, Congress explicitly provided mechanisms for reducing the volume target
in certain conditions. The cellulosic waiver authority provides EPA with broad discretion in the
factors it may consider, including diversion of feedstocks, impacts on other markets, GHG
emissions, and costs.
Comment:
Several commenters stated that EPA had not considered whether more than 5.04 billion gallons
of advanced biofuel was attainable, but instead had simply proposed to set the 2020 advanced
biofuel volume requirement at the minimum permitted under the cellulosic waiver authority.
Response:
Attainability is not the sole criterion on which we make our determination under the broad
discretion provided under the cellulosic waiver authority. Rather, we considered additional
factors such as the impact of the required volumes on feedstock and fuel diversions, as well as
costs and benefits. As a result, we determined that the volume requirement that was both
attainable and appropriate to require was 5.09 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 environmental, economic, and energy security 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 and increased costs, and,
factors that we are legally permitted to consider under this authority.
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Comment:
Several stakeholders said that the proposed 2020 advanced biofuel volume requirement should
be increased by 500 million gallons to account for the increase in the BBD volume requirement
from 2.1 billion gallons in 2019 to 2.43 billion gallons in 2020.
Response:
As explained in Section IV of the final rule, we are establishing the advanced biofuel
requirement by exercising the cellulosic waiver to the maximum extent permissible. The
cellulosic waiver does not require us to increase the advanced biofuel standard based on
corresponding increases to the BBD volume, which is established under an entirely separate
statutory authority. Moreover, in the 2019 final rule, we promulgated the 330 million gallon
increase in the 2020 BBD volume at the same time as the 500 million gallon increase in the 2019
non-cellulosic advanced volume.88 As we explained in that rule, the 2020 BBD increase was
keyed to the 2019 non-cellulosic advanced increase, and a desire to preserve market space for
other advanced biofuels. Seeing as there is no increase in the 2020 non-cellulosic advanced
volume, applying the same methodology would entail flatlining the BBD volume in 2021 in this
rule. We explain this further in Section VI of the final rule.
Comment:
Several stakeholders said that the advanced biofuel volume requirement should be higher to
provide support to domestic biodiesel producers.
Response:
Under the cellulosic waiver authority, we can consider a variety of factors in determining the
appropriate volume requirement for advanced biofuel. While we can consider support to biofuel
industries, we can also consider other factors such as costs and potential feedstock/fuel
diversions. As described in Section IV of the final rule, a consideration of multiple factors has
led us to conclude that the statutory volume target for advanced biofuel should be reduced by the
maximum amount permitted under the cellulosic waiver authority.
In the rulemaking which established the 2019 standards, we increased the 2020 volume
requirement for BBD to 2.43 billion gallons, in part to support the biodiesel production industry
in 2020. Given that the advanced biofuel volume requirement for 2020 will be 5.10 billion
gallons and the cellulosic biofuel volume requirement will be 0.60 billion gallons, this means
that the biodiesel industry has an additional 0.57 billion gallons (0.85 billion RINs) of potential
market in 2020 above the level required by the BBD standard. Thus, the advanced biofuel
volume requirement represents substantial support to the biodiesel industry even beyond the
BBD standard.
See also responses to comments about biodiesel production capacity in Section 4.2.2.2 of this
88 83 FR 63734, December 11, 2018.
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document.
Comment:
Several stakeholders said that EPA should increase the advanced biofuel volume requirement
above the proposed level to account for small refinery exemptions that have occurred in the past.
One stakeholder said that the non-cellulosic portion of the advanced biofuel volume requirement
should be raised from 4.5 to 5.5 billion gallons for this purpose.
Response:
See Section 8.2 of this document for our response to comments regarding how we account for
SREs.
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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: 0118, 0153,
0276, 0324.
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
boundary between volumes that can be achieved with mild difficulty in 2020 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 2020 timeframe as
other commenters have suggested. The final 2020 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 2020.
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
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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 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.
Response:
As discussed in Section 5.1.2 of this document, the U.S. exceeded the E10 blendwall in 2016
through 2018, 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 three 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 2020
volume requirements presumes that the ethanol concentration will be no higher in 2020 than it
was in 2017, concerns about potential impacts on the economy of exceeding the E10 blendwall
are unwarranted.89
Our determinations about the market's ability to use biofuels — that 5.09 billion gallons of
advanced biofuel is attainable in 2020 and that the market can make available 20.09 billion
gallons of total renewable in 2020 — 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.
89 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2019-0136.
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5.1.2 Exceeding the E10 Blendwall
Commenters that provided comment on this topic include but are not limited to: 0193, 0211,
0279, 0299, 0324, 0326, 0718.
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 previous annual standard-setting 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 has been above 10.00% for the last three
years. Moreover, despite concerns raised by those advocating 9.7% ethanol, there is no
indication that exceeding the blendwall in 2016 through 2018 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 2020 cannot enable the market to achieve the
statutory target for total renewable fuel, they can make meaningful contributions in 2020. The
final 2020 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 through 2018 without forcing the use of El 5 and/or E85 in vehicles and
engines for which they were not designed as a number of commenters feared.
Comment:
One commenter said that, by requiring more than 9.7% ethanol, EPA is forcing consumers to use
higher ethanol blends which they do not want.
Response:
The RFS program includes no requirements for the use of ethanol, and every retail service station
offering a higher ethanol blend such as El 5 or E85 also offers E0 and/or E10. Thus, consumers
will continue to have the choice not to use higher ethanol blends.
Comment:
Several stakeholders said that exceeding the E10 blendwall will cause RIN prices to go up and
will create excess volatility in the RIN market, and that this creates high costs for refiners. One
stakeholder said that high RIN prices would threaten jobs.
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Response:
There is a significant difference in the cost of blending ethanol to make E10 (typically less costly
than gasoline without ethanol) versus blending ethanol to make E15/E85 (typically much more
costly than gasoline without ethanol) as described in response to comments in Section 5.1.1 of
this document. As a result of this dynamic, RIN prices (in particular, D6 RINs as they represent
the bulk of ethanol blending) will tend to be higher if the market's response to an implied
conventional volume requirement above the E10 blendwall is to increase the use of E15/E85.
However, the market will determine how much ethanol is consumed versus non-ethanol biofuels
such as biodiesel and renewable diesel in order to meet the applicable volume requirements and
may or may not choose to use ethanol in excess of the El 0 blendwall. Moreover, RIN prices are
the result of many other factors which are unpredictable, creating fluctuations in the market. For
instance, the market has exceeded the E10 blendwall in years 2016-2018, but RIN prices have
varied significantly during this time period as shown in Figure VI.B.2-1 of the final rule.
Regardless, however, the evidence has shown that refiners are able to pass through the cost of
compliance with the RFS program to consumers, including the prices that they pay for RINs.90
As a result, we do not believe that high RIN prices will have a direct impact on employment
within the fuels industry.
See also responses to comments on RIN prices in Section 7.1.3 of this document.
Comment:
One commenter said that exceeding the E10 blendwall will compromise the integrity of
underground storage tanks and will have negative effects on automobiles.
Response:
Retailers are responsible for ensuring that the equipment used to store and dispense fuel has been
certified for use with the particular gasoline-ethanol blends they are offering. EPA has also
implemented regulations prohibiting the use of higher ethanol blends in certain vehicles and to
mitigate misfueling. More specifically, El5 is prohibited from being used in vehicles older than
model year 2001 and in all nonroad engines, and E85 is permitted only to be used in FFVs.
Misfueling mitigation regulations were implemented to help ensure that El5 is only used in
approved vehicles.91
See also responses to comments concerning the impacts of El 5 on underground storage tanks
and engines in Section 5.1.6 of this document.
90 See further discussion in "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-
R-17-008, November 2017.
91 76 FR 44406 (July 25, 2011)
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Comment:
One stakeholder said that Congress intended the conventional volume to be filled only with E10,
and cited statements from Senator Thune during debate on the bill that was to become EISA.
Response:
As stated in previous annual standard-setting rules, we are aware that the gasoline demand
projections available in 2007 projected considerably higher future total gasoline demand than has
actually occurred. However, there are no legislative records indicating a general sense of
Congress that the implied conventional renewable fuel volume requirement was intended to be
met with no more than 10% ethanol. For instance, we are not aware of language from a House or
Senate committee report specifically addressing this issue. The statements from Senator Thune
which are quoted by the stakeholder are focused on the use of E10 in conventional vehicles and
exclude consideration of E85 used in FFVs. Moreover, E15 was not approved for use in
MY2001 and later vehicles until 2011, so Congressional debates on the RFS2 program in 2007
and earlier could not have accounted for this later approval. More generally, EPA interprets the
statute based on its text, read in light of its context, structure, and purpose. While the legislative
history can also inform our understanding of the statute, the views of a single Senator are of
limited weight, particularly where other members of Congress may have expressed differing
views.
Comment:
One stakeholder said that EPA had inappropriately redefined the 15-billion-gallon cap on ethanol
as an "implied mandate" for conventional biofuel, an interpretation of the RFS that is not
grounded in the statute and the nested nature of its requirements.
Response:
We recognize that the conventional volume is not a mandate under the statute. Indeed, in some
past years, advanced biofuels have been used to satisfy the implied conventional portion of the
total renewable fuel standard, in excess of that required by the advanced standard. We have used
the term "implied mandate" or its equivalent as a label of convenience, not a redefinition,
recognizing the common treatment of the conventional volume by many stakeholders as
effectively operating like a mandate.
Comment:
One stakeholder said that it is not feasible to have more than 10% ethanol because most cars can
only tolerate up to 10%.
Response:
While all cars can use gasoline containing up to 10% ethanol, cars built in 2001 and later are
legally permitted by EPA to use El 5, and flex-fuel vehicles can use E85. As a result, the
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poolwide average ethanol content can be higher than 10% without requiring all cars to use
greater than 10%.
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5.1.3 Domestic Production Capacity
EPA did not receive any comments on this topic.
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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: 0276.
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.
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 independent 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 cellulosic biofuels.
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.
This compliance flexibility, allowing obligated parties to either produce or blend renewable fuels
themselves or to purchase RINs from a third party, has existed since the very beginning of the
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program and is codified in the regulations implemented by the 2010 RFS2 rule. We have not
reopened this issue in this rulemaking.
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5.1.5 EO
Commenters that provided comment on this topic include but are not limited to: 0493.
Comment:
One stakeholder said that underestimates of EO effectively increase the applicable standards
above the level that can be reached in the market.
Response:
As described in a memorandum to the docket, we did not project volumes of EO for 2020.92
Instead, we estimated the total volume of ethanol that we believe is reasonably attainable in 2020
based on the highest historical poolwide ethanol concentration of 10.13% (which occurred in
2017) combined with EIA's projection of total gasoline demand in 2020. See also our responses
to comments in Section 5.1.7 of this document.
Even with a poolwide ethanol concentration of 10.13%, some E0 can be used so long it is
balanced with a sufficient volume of E15 and/or E85. However, we are not aware of any data on
nationwide consumption of E0. While this stakeholder provided data on E0 supplied in markets
that it serves, indicating a strong and ongoing consumer demand for E0, we were not able to use
that data to estimate E0 use for the nation as a whole.
92 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2019-0136.
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5.1.6 E15
Commenters that provided comment on this topic include but are not limited to: 0118, 0197,
0270, 0276, 0299, 0312, 0324, 0326.
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
tankage at retail is compatible with El5, tank 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:
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
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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).93
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 2020. 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. However, we did discuss these issues generally
in a memorandum to the docket, in the context of projecting the volume of ethanol that we
believe the market can make available in 2020.94
Comment:
One stakeholder said that El 5 sales volumes cannot increase fast enough to have a significant
impact on the volume requirements. Another stakeholder said that El5 cannot fill the gap
between the E10 blendwall and the 15 billion gallon implied volume requirement for
conventional renewable fuel.
Response:
As stated earlier, we did not project specific volumes of El 5 that would be used in 2020, but
instead relied on an estimate of the poolwide average ethanol concentration for 2020, based on
that from 2017. As a result, we did not rely on significant increases in E15 volumes in finding
that the market could make available the 20.09 billion gallon volume requirement. Furthermore,
as also stated earlier, there is no requirement that the 15 billion gallon implied volume for
conventional renewable fuel be met entirely, or even at all, with ethanol.
Comment:
One stakeholder said that the proposal failed to mention the significant increases in El 5 that will
result from the lpsi RVP waiver for El 5 that was approved on June 10, 2019.
93 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%.
94 "Market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-2019-0136.
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Response:
In a memorandum to the docket, we explained that we were not estimating the volume of El 5
that might be used in 2020 due to the difficulty in making such projections, and due to the fact
that it is the total ethanol volume rather than the volumes of individual gasoline-ethanol blends
which is of primary relevance in determining the total volume of renewable fuel that the market
can make available.95 We continue to believe that using the maximum ethanol concentration
reached in a previous year - 10.13% in 2017 - is an appropriate basis for estimating the volume
of ethanol that the market can make available in 2020.
In the June 10 final rule which approved the use of the lpsi RVP waiver for E15, we did indicate
our belief that, based on the experience of E15 in areas that can already use E15 year-round (i.e.,
reformulated gasoline areas), it was unlikely that providing the lpsi waiver to El5 would lead to
a substantial increase in El 5 use. Since the July 29 proposal we have investigated this issue more
closely. Using monthly E15 retail sales data from Minnesota, we estimated that between 2015
and 2018 the annual per-station sales of E15 would have been about 16% higher had the lpsi
waiver been available for E15.96 A 16% increase in E15 use in 2020 due to the lpsi waiver for
El5 is unlikely to have a meaningful impact on total ethanol use. However, it is unclear how
representative the Minnesota data is of the nation as a whole, and this analysis does not take into
account potential changes in infrastructure investment that might occur as a result of increased
opportunities to sell El5.
Comment:
One stakeholder said that there is insufficient distribution and retail infrastructure for El 5 to
make a meaningful contribution to the total volume of ethanol consumed.
Response:
In the July 29 proposal, we discussed the constraints on El5 use resulting from distribution and
retail infrastructure not designed or certified for El 5. However, we also said that it was not
necessary to estimate El 5 volumes that might be used in 2020 in light of the fact that the total
available ethanol volume could be projected from the highest historical ethanol concentration
and a projection of total gasoline energy demand for 2020.
95 "Market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-2019-0136.
96 "Estimating the impacts of the lpsi waiver for E15," memorandum from David Korotney to docket EPA-HQ-
OAR-2019-0136.
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5.1.7 E85
Commenters that provided comment on this topic include but are not limited to: 0197, 0276,
0299, 0312, 0324, 0718.
Comment:
One stakeholder said that E85 use will increase if EPA increases the conventional volume
requirement above 15 billion gallons.
Response:
The use of E85 could be expected to increase if the price discount of E85 in comparison to E10
increased. However, commenters provided no new analysis of the future E85 price discount that
would occur under the influence of higher RFS volume requirements. Moreover, consistent with
this stakeholder's suggested incentive of volume requirements that drive ethanol use above the
E10 blendwall, the market has had opportunities to increase the use of E85 significantly in
previous years but has not done so; the implied conventional biofuel volume requirement has
been 15 billion gallons for several years, while the El0 blendwall being considerably less. We
estimate that E85 use in 2018 reached only 306 million gallons and total ethanol use only 14.6
billion gallons.
Furthermore, since the RFS program does not require the use of ethanol, the market will
determine whether compliance with the applicable standards beyond the blendwall 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.
Comment:
One commenter stated that EPA's continued reference to so-called constraints on E85 use creates
confusion and should only be done in the context of the general waiver authority. Another
commenter said that EPA should not be considering ethanol consumption at all because such
considerations run counter to the purpose of the RFS program to force volumes up.
Response:
We continue to believe that constraints on the use of higher ethanol blends such as El 5 and E85
are real, as described in Section 5.1.1 of this document, in a memorandum to the docket
describing potential market impacts of the applicable 2020 standards,97 in previous annual
rulemakings, and in the 2019 rulemaking extending the 1 psi RVP waiver to El5.98 Commenters
provided no new information to indicate otherwise. Regardless, EPA believes that ethanol
consumption is a valid consideration in assessing the economic impacts of the standards. We
97 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2018-0167.
98 84 FR 26980
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acknowledge that we are precluded from considering demand-side factors in determining
inadequate domestic supply, but we have not exercised this authority.
Comment:
One stakeholder said that it is unreasonable for EPA to use E85 projections from EIA's Annual
Energy Outlook as a basis for the 2020 standards since EIA has always significantly
overpredicted E85 use.
Response:
We did not use projections from EIA's Annual Energy Outlook in any capacity in the July 29
proposal or this final rule. Moreover, we did not project volumes of E85 that might be consumed
in 2020. While we did provide a preliminary estimate of E85 consumption in 2018, this estimate
was EPA's own, based on the number of retail stations offering E85 and E85 price discount
data.99'100 This estimate of E85 use in 2018 was referenced in the discussion of low historical
E85 use generally, but was not used in the specific context of projecting total ethanol use in
2020. We used only the maximum historical ethanol concentration - 10.13% achieved in 2017 -
in combination with the total projected gasoline energy demand from EIA's Short-Term Energy
Outlook to estimate total ethanol use in 2020.
Comment:
One stakeholder said that EPA's use of an ethanol concentration of 10.13% to project total
ethanol use in 2020 assumes no growth in El5 or E85 in 2020, and that doing so is inappropriate
because the number of retail stations offering these higher ethanol blends are expanding.
Response:
Although we projected volumes of E0, E15, and E85 in past annual standard-setting
rulemakings, we did not do so for the 2018 and 2019 rulemakings and did not do so for the July
29 proposal for the 2020 standards or this final rule. Due to the paucity of data on actual use of
these blends and the difficulty in making projections of their use for the future, we determined
that a more robust approach to estimating total ethanol consumption in the following year would
combine an estimate of the average ethanol concentration with the projected gasoline energy
demand from EIA. As described in a memorandum to the docket, in assessing whether the
market can make 20.09 billion gallons available in 2020, we believe that the market is capable of
reaching an ethanol concentration in 2020 that is at least as high as the highest level that has
actually been reached by the market in the past.101 This occurred in 2017 when the national,
annual ethanol concentration was estimated to be 10.13%. Insofar as our assessment concludes
99 "Preliminary estimate of E85 consumption in 2018," memorandum from David Korotney to docket EPA-HQ-
OAR-2019-0136.
i°° for this final rule, the 2018 E85 consumption estimate has been updated. See "Final estimate of E85 consumption
in 2018," memorandum from David Korotney to docket EPA-HQ-OAR-2019-0136.
101 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2019-0136.
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that the market can achieve 20.09 billion gallons of total renewable fuel assuming 10.13%
ethanol, then it can also achieve 20.09 billion gallons of total renewable fuel using a higher
ethanol concentration.
We note that the ethanol concentration in 2018 was 10.07%, lower than the level in 2017 and
lower than the 10.13% level we believe the market can make available in 2020.102 As a result,
meeting the assumed ethanol concentration of 10.13% in 2020 would require an increase in the
proportional use of El 5 and/or E85 compared to 2018, assuming no change in E0 consumption.
Comment:
One stakeholder said that the low demand for E85 represents a market barrier to increasing
ethanol use above the E10 blendwall. Another stakeholder said that E85 cannot help the market
get above the E10 blendwall because there are too few FFVs and FFV owners prefer E10.
Response:
Historical E85 demand has been very low in comparison to total gasoline consumption.
However, EIA consumption data indicates that total ethanol concentration has exceeded 10.00%
for several years in a row, indicating that ethanol consumption above the El0 blendwall has
occurred through a combination of E10, E15, and E85 (along with ongoing E0). Thus, the low
volumes of E85 demand do not represent a barrier to exceeding the E10 blendwall.
102 Based on ethanol and gasoline consumption from the August 2019 STEO.
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5.1.8 Other Comments Related to Ethanol
EPA did not receive any comments on this topic.
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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: 0171, 0293.
Comment:
Multiple commenters stated that there are no infrastructure or blending limitations to higher
volumes of biodiesel.
Response:
As discussed in Section IV of the final rule, EPA does not anticipate that the necessary
distribution and blending infrastructure will constrain the use of biodiesel or renewable diesel
2020.
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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: 0211.
Comment:
Achieving the 3.2 billion gallons of biodiesel and renewable diesel projected to be used to meet
the total renewable fuel volume for 2020 will exceed the 5% limit for many engines.
Response:
While EPA continues to note that there are a significant number of vehicles for which biodiesel
blends above B5 are not recommended by the manufacturer, the ability of vehicles to consume
biodiesel and renewable diesel is highly unlikely to constrain the use of these fuels in 2020.
There are a number situations in which biodiesel and/or renewable diesel are used at levels above
5% or used in qualifying uses other than on-highway diesel fuel that we expect will also allow
diesel blends containing 5% or less biodiesel to be widely available in 2020. As noted in
previous rules, an increasing number of large truck stops are selling biodiesel blends ranging
from B10-B20. Increasing volumes of renewable diesel, which is chemically similar to
petroleum diesel, are expected to be supplied in 2020, reducing the volume of biodiesel that is
projected to be needed. Finally, volumes of biodiesel and renewable diesel are regularly used as
heating oil and jet fuel which qualifies under the RFS program, further reducing the need to
blend biodiesel into diesel fuel at levels above 5% to meet the advanced biofuel and total
renewable fuel volumes for 2020.
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5.2.3 Cold Temperature Impacts
EPA did not receive any comments on this topic.
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5.2.4 Production Capacity
Commenters that provided comment on this topic include but are not limited to: 0164.
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.
Comment:
Additional production capacity is available to achieve higher volumes of biodiesel and renewable
diesel.
Response:
We do not expect the production capacity for biodiesel and renewable diesel to limit the volume
of these fuels supplied in 2020.
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5.2.5 Feedstock Availability
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
A number of commenters discussed the availability of and need for biodiesel and renewable
diesel imports to meet the proposed advanced biofuel and total renewable fuel volumes for 2020.
Responses to comments addressing biodiesel and renewable diesel production capacity can be
found in Section 4.2.2.3 of this document.
Comment:
One stakeholder said that due to ongoing barriers to significant increases in ethanol blending as
well as limits in domestic biofuel production, the proposed volume requirements create a de
facto mandate for the importation of foreign biofuels, particularly biodiesel.
Response:
Under the statute, both domestic and foreign sources of biofuel can be used to meet the
applicable volume requirements. As a result, we consider both sources in our assessment of
available volumes. In a memorandum to the docket, we have acknowledged that ethanol use is
unlikely to reach the 15 billion gallon implied volume requirement for conventional renewable
fuel, and that the shortfall will most likely be composed of biodiesel and renewable diesel.103
However, once the applicable standards are set, there is no requirement for biofuels to be
imported if domestic supply is sufficient.
103 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2019-0136.
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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: 0211.
This section includes comments related to the total volume of biodiesel and renewable diesel
achievable in 2019. For a discussion of the reasonably attainable and attainable volumes of
advanced biodiesel and renewable diesel 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:
The total renewable fuel volume needs to be reduced to avoid potentially dramatic consequences
in the biodiesel and renewable diesel feedstock markets. The 3.2 billion gallons of biodiesel and
renewable diesel projected to be used to meet the total renewable fuel volume for 2020 is much
larger than the 2.44 billion gallons supplied in 2018. Historical monthly generation of D4 and D5
RINs has almost never reached an annualized level of 3.2 billion gallons.
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 2020, or that supplying these volumes would result in dramatic consequences in
the feedstock markets. First, we note that the commenters projection of the volume of these fuels
is overly pessimistic. Based on data through September 2019 and taking into account the
seasonality of the supply of biodiesel and renewable diesel, we currently expect that
approximately 2.74 billion gallons of biodiesel and renewable diesel will be supplied in 2019.
Further support for this projection is found in a memorandum to the docket.104 In addition, as
discussed in further detail in Section IV of the final rule, we project that a volume of 2.83 billion
gallons of advanced biodiesel and renewable diesel is attainable in 2020. We have not, however,
calculated the maximum reasonably achievable volume of advanced biodiesel and renewable
diesel for 2020, which would be higher than the attainable volume of 2.83 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 2020.
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.
104 "Projecting Advanced Biofuel Production and Imports for 2019 (November 2019)" Memorandum from Dallas
Burkholder to EPA Docket EPA-HQ-OAR-2019-0136. We currently do not expect any conventional biodiesel or
renewable diesel to be used in the U.S. in 2019.
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5.3 Determination of Standards
5.3.1 Total Renewable Fuel Volume
EPA did not receive any comments on this topic.
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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: 0278, 0299,
0337.
Comment:
Several commenters stated that the implied volume requirement for conventional renewable fuel
should be set at a level reflecting the E10 blendwall.
Response:
These comments conflate the implied conventional renewable fuel volume requirement with
ethanol. The two are not the same. As discussed further in a memorandum to the docket,105 the
market has historically made available, and will likely make available in 2020, significant
volumes of non-ethanol conventional renewable fuel, primarily but not limited to biodiesel and
renewable diesel. Moreover, as described earlier in this section and in 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 go above 10 percent market-wide. Finally, there
is no conventional renewable fuel standard under the statute, but rather advanced biofuel and
total renewable fuel standards that differ in the statute by 15 billion gallons in 2020. If more
advanced biofuel volumes are used than required by the 2020 standard, then less than 15 billion
gallons of conventional renewable fuel will be needed to meet the total renewable fuel standard.
Comment:
Many commenters, regardless of their views on whether the El 0 blendwall can or should be a
consideration in the determination of applicable volume requirements, made the implicit
assumption in their comments that the total volume of ethanol that would be used was identical
to the volume of non-advanced (i.e., conventional) renewable fuel that would be necessary.
Response:
Not only is this assumption incorrect, but it oversimplifies the true nature of the standards and
the process of determining appropriate levels for those standards. Significant volumes of ethanol
may be used to meet the advanced biofuel volume requirement. It is also likely that a portion of
the renewable fuel pool that is not required to be advanced biofuel will be non-ethanol as
evidenced by production and imports of conventional biodiesel and renewable diesel in the past.
Thus, it is inappropriate and misleading to assume that the conventional renewable fuel volume
is identical to the volume of the ethanol that would be needed.
105 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2019-0136.
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Comment:
Stakeholders differed on whether there is sufficient conventional renewable fuel to reach 15
billion gallons. Some stakeholders pointed to the fact that ethanol volumes cannot reach 15
billion gallons in 2020.
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 2020, we have determined that there are sufficient
volumes of conventional biodiesel and renewable diesel and other 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 should reduce the conventional volume mandate to reduce
animal feed prices and to improve the quality of animal feed.
Response:
There is no conventional volume mandate in the statute; rather the implied conventional portion
of the total renewable fuel standard can be met with conventional as well as advanced biofuels.
Moreover, while corn-ethanol is currently the predominant form of conventional renewable fuel,
further reduction of the 2020 biofuel volumes is unlikely to impact corn ethanol production in
U.S. As described in our assessment of impacts under the Endangered Species Act, E10 is likely
to continue to be produced regardless of the level of the implied volume requirement for
conventional renewable fuel, and significant quantities of ethanol are expected to be exported.106
As a result, there would be essentially no impact of a lower implied conventional renewable fuel
volume requirement on corn used to produce ethanol, and thus no corresponding impact on the
prices or quality of corn-based animal feed, contrary to the commenter's premises. Regardless,
further reductions to the total renewable fuel volume are possibly only by exercising the general
waiver authority, and in Section II. A.2 of the final rule and in response to comments in Section 2
of this document, we have found that doing so would be inappropriate.
We note that corn prices are considerably lower now than they were in 2011 - 2013, implying
that animal feed that is based on corn is likewise currently selling at a low price.107 On this basis,
it would appear that farmers who purchase corn-based animal feed are not currently suffering a
level of harm that can be attributed to the implied conventional renewable fuel volume
requirement under the RFS program.
106 "Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum from EPA staff to docket
EP A-HQ-0 AR-2019-0136.
i°7 "usda historical corn prices," available in docket EPA-HQ-0AR-2019-0136.
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Comment:
One stakeholder said that corn yields are expected to decrease in 2020 according to USDA's
World Agriculture Supply and Demand Estimate (WASDE), contrary to EPA's expectations.
Response:
On page 36784 of the July 29 proposal, EPA indicated that production of corn oil and soybean
oil were likely to increase "... as crop yields, oil extraction rates, and demand for the primary
products increase in 2020." This statement was meant to convey an expectation that historical
trends (including the fact that corn yields have generally increased over time) would continue
into the future. It was not intended to reference a specific projection for the year 2020,
notwithstanding that the sentence included the phrase "in 2020." This phrase has been omitted
for the final rule.
We acknowledge that the October WASDE report projects corn yields in the 2019/2020
marketing year will be 168.4 bushels per harvested acre, down from the estimate of 176.4 for the
2018/2019 marketing year. However, we do not believe that this fact meaningfully affects our
determination that an implied conventional renewable fuel volume requirement of 15 billion
gallons is appropriate. As described in a memorandum to the docket, we expect that ethanol used
to help meet the implied conventional renewable fuel volume requirement will exceed the El0
blendwall by a small amount but will fall far short of 15 billion gallons.108 If the implied
conventional renewable fuel volume requirement were lower than 15 billion gallons, E10 would
continue to be used.109
Comment:
One stakeholder said that there are no environmental benefits for 15 billion gallons of
conventional renewable fuel because volumes in excess of the El 0 blendwall will be filled with
imported biodiesel.
Response:
While environmental impacts are a valid consideration under the cellulosic waiver authority, we
are already reducing volumes by the maximum permissible amount under that authority. Further
reductions would need to occur under the general waiver authority which allows for waivers
based on severe environmental harm. However, as described in responses to comments in
Section 2.1.3, we do not believe that there is severe environmental harm associated with the total
renewable fuel volume requirement. Therefore, we do not believe that further reductions using
the severe environmental harm prong of the general waiver authority are warranted.
108 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2019-0136.
109 "Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum from EPA staff to docket
EP A-HQ-0 AR-2019-0136.
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Comment:
One stakeholder said that the proposal for 15 billion gallons of conventional renewable fuel
departed from promises that were made by President Trump for greater than 15 billion gallons.
Response:
As described in Section VII.B of the final rule, EPA's approach ensures that the renewable fuel
volumes actually used in 2020 will be the same as the final renewable fuel volume requirements.
This includes the 15 billion gallon implied volume requirement for conventional renewable fuel.
As we explain in a memorandum to the docket, we believe that a combination of conventional
ethanol and other biofuels, notably biodiesel and renewable diesel, will contribute to this 15
billion gallon implied conventional volume.110
110 "Updated market impacts of biofuels in 2020," memorandum from David Korotney to docket EPA-HQ-OAR-
2019-0136.
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5.3.3 Other Comments Related to the Determination of Standards
Commenters that provided comment on this topic include but are not limited to: 0212.
Comment:
One stakeholder pointed to the fact that biodiesel is typically the marginal biofuel used to meet
the implied conventional renewable fuel volume requirement and cited a study from Energy
Ventures Analysis (EVA) which concluded that eliminating the implied conventional volume
requirement would save consumers $3.7 billion in 2025 and $5.3 billion in 2030 since biodiesel
in excess of that needed to meet the advanced biofuel volume requirement would no longer be
needed.
Response:
Cost is one of several factors that we considered in determining the appropriate reduction to
make in the advanced biofuel and total renewable fuel volume requirements under the cellulosic
waiver authority, and biodiesel is considerably more costly than petroleum diesel. Since we
made the maximum permissible reduction under that authority, further reductions would have
required the use of the general waiver authority which allows for waivers based on severe
economic harm. However, no stakeholder made a compelling case for severe economic harm
associated with the total renewable fuel volume requirement. See also responses to comments on
use of the severe economic harm prong of the general waiver authority in Section 2.1.2 of this
document.
With regard to the substance of the EVA study cited by this stakeholder, we note first that the
values cited by the stakeholder ($3.7 and $5.3 billion) are in error according to one of the authors
of the study.111 More importantly, we do not believe that the specific conclusions that the study
reaches are directly applicable to the volume requirements under consideration in this
rulemaking. The EVA study examined three scenarios: the complete elimination of the RFS
program, a 5% increase in total renewable fuel volumes (but not advanced biofuel), and the
elimination of only the implied conventional renewable fuel volume requirements. The point of
reference was EIA's Reference Case, and the years examined were 2025 and 2030. None of
these scenarios directly represents the volumes or volume changes included in the July 29
proposal. Moreover, the EVA study does not permit the separation of cost impacts for reductions
in biodiesel from cost impacts of other changes that occur simultaneously.
While the specific modeling scenarios may not be directly applicable to the 2020 volumes under
consideration in this rulemaking, we note that there is some consistency between our own
analyses and those from the EVA study in terms of the higher cost of biodiesel in comparison to
the petroleum diesel that it replaces. We have taken costs into consideration in our determination
that the advanced biofuel volume requirement should be reduced by the maximum amount
permissible under the cellulosic waiver authority. We have not, however, made further
111 Personal communication with Michael Schaal.
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reductions under the severe economic harm prong of the general waiver authority as described
above.
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6. BBD Volume for 2021
6.1 General
Commenters that provided comment on this topic include but are not limited to: 0164, 0171,
0177, 0186, 0196, 0211, 0212, 0213, 0270, 0288, 0291, 0293, 0300, 0302, 0311, 0313, 0320,
0324, 0328, 0451, 0539, 0541.
Comment:
Some commenters supported our proposed volume of 2.43 billion gallons in 2021. Some
commenters also suggested EPA could support further growth in the BBD industry. Some
commenters suggested EPA should set the BBD standard higher, including greater than 3 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. Some commenters supported a
higher standard, particularly in light of the granting of SREs. Other commenters suggested that
EPA should set a BBD standard that does not increase over the 2019 BBD standard. Others
suggested EPA should reduce the standard due to cost concerns.
Response:
Our discussion of the BBD volume for 2021, 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.112 We have chosen to maintain the 2021 BBD volume at the same
volume as the 2020 BBD volume. We continue to believe that the advanced volume, when set
for 2021, will drive BBD use, and therefore, a higher or lower BBD volume is unlikely to result
in different volumes of BBD use. In the long-term, however, leaving adequate room for growth
of other advanced biofuels could have a beneficial impact on certain statutory factors. We do not
find that it would be appropriate to increase the BBD standard in light of SREs. As described in
Section 8.2 of this document and Section VII of the final rule, we are taking action today to
project the exempt volume of gasoline and diesel due to SREs, which will reduce the impact of
SREs on the applicable volumes going forward and better ensure that the renewable fuel volumes
are actually used.
Comment:
Some commenters suggested we should set the BBD standard to reflect domestically produced
biodiesel. Some commenters also pointed to additional uncertainties in the biodiesel market
including countervailing duties and the lack of a tax credit.
112 "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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Response:
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.113 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). While there are uncertainties in the market, we still find
that the volume we are establishing today is appropriate in light of those uncertainties. Those
uncertainties also existed in 2019 when EPA established the 2020 BBD standard.
Comment:
A commenter suggested we should set the volume considering the removal of tariffs to ensure
that there are no negative price implications.
Response:
We have generally considered the impacts of trade related issues, but do not find that they justify
a different volume. Based on experience in years past, the production and international trade of
biodiesel and its feedstocks around the world provides sufficient flexibility to accommodate
changing trade related issues with some countries.
113 See, e.g., CAA section 21 l(o)(5)(A); 40 CFR 80.1426.
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6.2 Supporting the BBD Industry
Commenters that provided comment on this topic include but are not limited to: 0186, 0288,
0291, 0301, 0539.
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. Some suggested that in order to accomplish Congress's goals in supporting
the industry, EPA must set the volume above past production. Commenters suggested that
increasing the volume would encourage expansion of efficient sources of supply.
Response:
EPA acknowledges this unique aspect of the BBD volume, but still believes a volume of 2.43
billion appropriately provides a floor for guaranteed BBD volume, while also providing space for
other advanced biofuels to compete in the market. 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 the reasons discussed in
the final rule, the docket memorandum on the BBD factors, and Section 6.3 of this document, we
believe that it is more appropriate to continue to continue to use the advanced biofuel standard to
drive BBD demand, which allows space for incentivizing other advanced biofuels to compete
with BBD, rather than seeking to set the BBD standard to drive BBD demand.
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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: 0186, 0313.
Comment:
Some commenters 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 2021 to preserve
space for advanced biofuels, EPA could allow for a higher advanced volume when it determines
the advanced biofuel volume for 2021 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 or unwarranted. 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,114 these other advanced biofuels may have more beneficial impacts
when considering some of the factors articulated in CAA section 21 l(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 raised it to 2.43 billion gallons for 2020 and 2021.
When viewed from this perspective, BBD can be seen as competing for investment dollars with
other types of advanced biofuels for participation as advanced biofuels in the RFS program. In
addition to the long-term impact of our action in establishing the BBD volume requirements,
there is also the potential for short-term impacts during the compliance years in question.
Therefore, by setting the BBD volume requirement at a level lower than the advanced biofuel
114 "Final Statutory Factors Assessment for the 2021 Biomass Based Diesel (BBD) Applicable Volume."
memorandum from EPA Staff to EPA docket EPA-HQ-OAR-2019-0136.
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volume requirement (and lower than the expected production of BBD to satisfy the advanced
biofuel requirement), we are allowing the potential for some competition between BBD and
other advanced biofuels to satisfy the advanced biofuel volume standard. We believe that this
competition will also help to encourage, over the long term, the development and production of a
variety of advanced biofuels that will be needed for the long-term growth of RFS volumes.
However, in the short term it could also result in lower cost advanced biofuels for consumers.
We believe our final 2021 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 2021 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 2021 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 2021. 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:
Some commenters suggested that EPA need not create "intra-program competition" between
BBD and other advanced and should instead grow all categories of renewable fuel consistent
with congressional intent.
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Response:
EPA is not creating "intra-program competition", but rather allowing what was created in the
statutory structure to continue. We have determined that both the advanced biofuel volume for
2020 and the BBD volume for 2021 established in this rulemaking are appropriate as discussed
in Sections IV and VI of the final rule. Additional growth at this time is not warranted.
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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: 0213, 0293,
0302.
Comment:
Commenters suggested that EPA must assess the impact of each of the six factors for BBD
before determining the BBD volume, and that such an assessment would lead to higher BBD
volumes.
Response:
The statute provides that EPA shall determine the applicable volume of BBD based on a review
of implementation of the program and consideration of the six factors. It does not dictate that one
assessment must be done first. Therefore, we continue use as our primary assessment a review of
implementation of the program and find that it is the advanced biofuel requirement that will
drive the use of BBD. We continue to perform our assessment of the six factors as a long-term
assessment.
Comment:
A commenter suggested that by comparing BBD to advanced biofuel in evaluating the statutory
factors, EPA is not furthering the goal of the RFS to "increase the production of clean renewable
fuels."
Response:
As discussed in Section 1.1 of this document, we believe that this rule continues to support the
goals of EISA and EPAct. We find that the comparison between advanced biofuels and BBD is
appropriate as discussed in Section VI of the final rule, and the memorandum "Final Statutory
Factors Assessment for the 2021 Biomass Based Diesel (BBD) Applicable Volume," available in
the docket for this action.
Comment:
Commenters 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 suggested that EPA should not consider imports when
setting volumes.
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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
Commenters that provided comment on this topic include but are not limited to: 0202.
Comment:
A commenter suggested that because the biodiesel industry has consistently exceeded the BBD
volume requirement, EPA should increase the BBD volume for 2021.
Response:
As discussed in Section VI of the final rule, the BBD volume has exceeded the advanced volume
and in setting the BBD volume for 2021 we have considered that fact. However, we do not find
that BBD exceeding the standard is justification for an increase in the volume due to the desire to
preserve space for other advanced biofuels.
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6.4.3 Environmental Impacts (Air Quality, Climate Change, Conversion of
Wetlands, Ecosystems, Wildlife Habitat, Water Quality, Water Supply)
Responses to comments addressing environmental impacts can be found in Section 7.2 of this
document.
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6.4.4 Energy Security Impacts
Commenters that provided comment on this topic include but are not limited to: 0164, 0171,
0177, 0213, 0293, 0302, 0324, 0328.
Comment:
Numerous commenters lauded the energy security benefits for the U.S. associated with increases
in the use of biodiesel as a result of the RFS program. They suggested that increasing biodiesel
reduces the U.S.'s oil imports and contributes to U.S. energy independence and security.
Commenters also suggested that the wider use of biodiesel in transportation fuel provides a
hedging function and helps to diversify fuel supplies in U.S. motor fuel markets, moderating
motor fuel prices while shielding U.S. consumers from potential world oil price spikes.
Response:
We agree that increases in the use of biodiesel can contribute to U.S. energy independence and
security. As we explain 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
the energy security position of the U.S. The production of renewable fuels supports one of the
goals of the RFS program by improving U.S. energy independence and energy security through
diversification of U.S. transportation fuels and displacement of imported petroleum. Renewable
fuels, including biodiesel, 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, renewable fuel supply disruptions from weather events are not likely to be
correlated with oil supply disruptions, which are usually triggered by geopolitical events such as
military incursions. Additional details on the energy security benefits associated with the full
implementation of the RFS program are included in the March 2010 final RFS2 rulemaking.115
For more discussion on the energy security impacts of renewable fuels, see Section 7.1.2 of this
document.
Comment:
One commenter suggested that using more foreign renewable fuel such as biodiesel to meet the
RFS renewable fuel volumes reduces the energy security position of the U.S. According to this
commenter, domestic (i.e., U.S.) production of transportation fuel is the securest form of liquid
energy and, also, furthers U.S. energy independence. This commenter suggested that
encouraging renewable fuel imported into the U.S. such as biodiesel as a result of the RFS
creates an unjustified incentive for foreign renewable production.
Also, this commenter suggested that even if imported renewable fuel such as biodiesel can be
said to diversify the U.S. supply of transportation fuels, this ignores the possible disruption of
foreign renewable fuel supplies and the greater energy security benefits of using domestically-
115 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006.
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produced renewable fuels. The commenter suggested that EPA should not implement the RFS in
a manner that encourages more foreign renewable fuels (e.g., biodiesel) at the expense of
American-produced fuels in the name of energy security.
Response:
As we explain 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 the
energy security position of the U.S. The RFS has twin goals of U.S. energy independence and
energy security. Although the wider use of imported renewable fuels, such as biodiesel, as a
result of the RFS does not contribute to energy independence, it still supports the goal of energy
security. 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 the production of renewable fuels from weather events are
not likely to be correlated with oil supply disruptions, which are usually triggered by geopolitical
events such as military incursions. Thus, both domestically and imported renewable fuels have
energy security benefits, as they both reduce the U.S.' reliance on imported petroleum-based
fuels. For more discussion on the energy security impacts of renewable fuels, see Section 7.1.2
of this document.
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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: 0171, 0202,
0213, 0293, 0301, 0302, 0337, 0541.
Comment:
Multiple commenters stated that EPA should set the BBD volume for 2021 to drive further
production and use of biodiesel closer to the production capacity of 4.1 billion gallons. One
commenter similarly stated that EPA should increase the BBD volume for 2021 to 2.73 billion
gallons to reflect the additional production capacity that is being built.
Response:
We recognize that sufficient biodiesel and renewable diesel production capacity exists, both
domestically and globally, to produce significantly higher volumes of biodiesel and renewable
diesel than the 2.43 billion gallon BBD volume EPA established for 2021. As discussed in
greater detail in Section VI of the final rule and earlier in Section 6 of this document, the statute
requires that EPA analyze a wide range of factors in establishing the BBD volume. While we
have considered the available production capacity in establishing the BBD volume for 2021, we
do not believe it would be appropriate to consider this factor alone in establishing the 2021 BBD
volume.
Comment:
EPA is directed by the statute to base the BBD volume on the projected volume of domestically
produced and imported BBD that will be consumed in 2021.
Response:
The statute does not direct EPA to set the BBD volume at the projected volume of domestically
produced and imported BBD that will be consumed, but rather directs EPA to analyze and
consider a number of factors that cover a wide range of issues (see Section VI of the final rule
and earlier in Section 6 of this document for more on this issue).
Comment:
A commenter projected domestic biodiesel production in 2019 at 1.73 billion gallons and notes
EIA's reported domestic biodiesel production capacity of 2.54 billion gallons. The commenter
stated that the BBD volume should be based on domestic production only, and that the proposed
volume is too high.
Response:
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
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domestically produced BBD, we also disagree with the commenter that 2.43 billion gallons of
BBD in 2021 is unreasonably high. The commenter's projection of domestically produced BBD
in 2019 appears to be based only on biodiesel production data (thus ignoring the significant
volumes of renewable diesel expected to be produced) and does not appear to account for
seasonal production trends. Based on data through September 2019, we currently project that
domestic BBD production will be approximately 2.32 billion gallons in 2018, approximately 180
million gallons higher than in 2018. Domestic production of these fuels would have to increase
by approximately 55 million gallons per year in 2020 and 2021 to reach 2.43 billion gallons in
2021. This is well below the historical growth rate for domestically produced BBD.
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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: 0171, 0213,
0293, 0302.
Comment:
Multiple commenters stated that there is sufficient infrastructure to distribute and use 3.2 billion
gallons of biodiesel and renewable diesel, which is significantly higher than the proposed BBD
volume for 2021.
Response:
We acknowledge that there is sufficient distribution infrastructure to distribute a higher volume
of biodiesel and renewable diesel, including the 3.2 billion gallons mentioned by the
commenters. The BBD volume for 2021 is based on our analysis of many different factors, as
directed by the statute.
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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: 0171, 0212,
0213, 0293, 0301, 0302, 0324.
Comment:
Multiple commenters noted that according to EPA's cost assessment in the 2010 RFS rule
increased use of biofuels, including biodiesel, will result in cost savings for consumers.
Response:
The cost assessment in EPA's 2010 RFS rule is not an appropriate representation of the cost of
BBD in 2021. First, the 2010 cost assessment included the impact of all biofuels projected to be
produced in 2022, not just the impact of BBD. Notably this included significant volumes of
cellulosic diesel which were projected to be produced at low costs in comparison to petroleum
diesel based on much higher projected crude oil prices than we are experiencing today. More
importantly, EPA now has more recent information on which to project the cost of biodiesel
relative to petroleum diesel in 2020. Based on this cost assessment, we project that soybean
biodiesel (which we expect to be the marginal gallon of biodiesel produced in 2020) will cost
$1.25 more per gallon than petroleum diesel in 2020. These costs are presented in the cost
impacts memorandum.116 While these illustrative costs do not address 2021 (they address costs
in 2020), they are informative for 2021.
Comment:
One commenter noted that biodiesel, including excess biodiesel to meet the advanced biofuel and
total renewable fuel volume requirements, drive the cost of the RFS program. Biodiesel
consistently costs more than $0.50 more than petroleum diesel. Another commenter stated that
EPA should reduce the BBD volume to the statutory minimum of one billion gallons due to the
high cost of BBD.
Response:
While we do not anticipate that the 2021 BBD volume will directly impact the volume of BBD
used in the U.S. in 2021 (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 an increase in the cost of transportation fuel and cost
to transport goods in 2020 and 2021. Despite the higher expected costs of renewable fuels in
these years, we believe the 2021 BBD standard in this final rule is appropriate in light of the
statutory direction in EISA.
116 "Cost Impacts of the Final 2020 Annual Renewable Fuel Standards", Memorandum from Michael Shelby, Dallas
Burkholder, and Aaron Sobel available in docket EPA-HQ-OAR-2019-0136.
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In a memorandum to the docket, we provide an illustrative cost estimate for soybean oil
biodiesel. In the memorandum, EPA finds that in 2020 soybean biodiesel will cost $1.25/gallon
more than diesel fuel that it replaces. More detail on this analysis can be found in the memo to
the docket titled, "Illustrative Costs Impact of the Final Annual RFS2 Standards, 2020."117 These
costs estimates are based on projected market conditions, and it is quite likely that market
conditions will vary over time. While these illustrative costs do not address 2021 (they address
BBD costs in 2020), they are informative for 2021.
Comment:
EPA's concerns about the high costs of advanced biofuels ignore the benefits. The commenter
presents modeling results for scenarios that increase the advanced biofuel volume to 5.42 billion
gallons in 2020 and 5.92 billion gallons in 2021. This modeling estimated that these volume
increases would result in an increase of just over $0.02 per pound of biodiesel feedstock. The
commenter noted that soybean oil prices have been falling since 2011, and that these price
increases could be offset by the impact of the ongoing trade war with China.
Response:
We recognize that higher feedstock prices are beneficial to feedstock producers. These higher
feedstock prices, however, in turn represent higher costs to industries that use these feedstocks
(including both the biofuel industry and other users of these feedstocks), including diesel fuel,
which ultimately result in higher prices for consumers. We do not believe the benefits of higher
feedstock prices to feedstock producers justify a higher BBD volume for 2021.
Comment:
BBD increases the supply of fuel transportation fuel, which inherently decreases the price of
transportation fuel.
Response:
While it is generally true that increasing the supply of fuel decreases the price of fuel, this is not
the case if the supply is being increased due to a mandate for a fuel that would otherwise not be
used due to its higher cost, as is the case for additional volumes of BBD. As discussed in a
memorandum to the docket, soybean biodiesel is estimated to cost $1.25 per gallon more than
petroleum diesel in 2020.118 Increasing the required volume of this fuel would increase the
average cost of diesel fuel to consumers.
Comment:
Biodiesel is more expensive than diesel fuel to produce and will only be blended into the diesel
fuel supply if incentives or other subsidies make it cost effective to do so.
117 Ibid.
118 Ibid.
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Response:
EPA's estimate for the cost of production of biodiesel in 2020 is currently significantly higher
than EIA's projected price for diesel fuel in 2020. As discussed in a memorandum to the docket,
soybean biodiesel is estimated to cost $1.25 per gallon more than diesel fuel in 2020.119 Because
of the higher cost of production of biodiesel, we do not expect that significant volumes of BBD
would be used in the market absent the incentives provided by the RFS program, or other federal,
state, or local programs.
119 Ibid.
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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: 0117, 0164,
0171, 0177, 0213, 0291, 0293, 0302, 0328.
Comment:
Several commenters suggested biodiesel plants are closing due to lack of renewable fuel demand
as a result of the decisions made by EPA on how to implement the RFS annual fuel volumes. For
example, one commenter pointed to several large biodiesel facilities that have closed recently.
This commenter suggested that the small refinery exemptions of the RFS were a major factor
contributing to the biodiesel plant closings.
Response:
Biorefinery shutdowns are caused by many different factors. In any particular case, it is unlikely
that a single factor can be identified as the sole or even primary cause of a biorefinery shutdown.
Moreover, instances of individual facility shutdowns are not necessarily a reflection of poor
market demand as a whole. U.S. production of biodiesel and renewable diesel has continued to
rise over time, and the standards under the RFS program for advanced biofuel and BBD have
never decreased from one year to the next. Thus, any biodiesel refinery closures can only be the
result of other market factors that are in play. Available information (such as the current price for
D4 and D5 RINs) indicates that the RFS program is one factor that does help to drive BBD
volumes (in addition to the CARB LCFS program, tax credits, trade policies, crude oil prices,
soy oil prices, etc.), and that the 2020 final annual RFS standards will result in the higher use and
production of BBD than in the absence of the RFS program requirements. Following the increase
in biodiesel production in recent years, the market is continuing to consolidate with older,
smaller facilities closing, larger facilities expanding, and larger companies taking over smaller
companies. Given the wide range in size and technologies across biodiesel and renewable diesel
facilities, and the influence of factors like the fluctuating presence of the blenders tax credit, this
market has been going through a maturation process. For example, at present there are a number
of large renewable diesel production facilities that are in financing, construction, startup, and/or
expansion. Comments specific to SREs are addressed in Section 8.2 of this document.
Comment:
One commenter cited a study by LMC International that the U.S. BBD industry currently
supports more than 65,600 jobs, $2.5 billion in wages, and $17 billion in total economic impact
throughout its supply chain in the U.S. The commenter also cited the same study by LMC
International that estimated that three billion gallons of biomass-based biodiesel would generate
over 79,000 U.S. jobs, $3 billion in wages paid, and $20.4 billion in total U.S. economic impact.
The commenter suggested that because BBD feedstocks are co-products of the meal portion of
crops used for food, BBD volumes lower input prices for food production. The commenter
concluded that an increase in the BBD RFS RVOs provide benefits to U.S. in terms of
employment and rural development. Another commenter suggested that increasing the use of
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biodiesel promotes rural development. The commenter referenced a biodiesel plant in Iowa that
employs 24 full-time employees with wages and benefits totaling $1.75 million annually. In
addition, the plant employs 28 contract haulers with payments to the contractors of $1.9 million
annually. According to the commenter, spending by workers at this biodiesel plant contributes to
the employment of hairdressers, insurance sales representatives and waiters at local restaurants in
the town where the biodiesel plant is located. This increased spending in the town where the
BBD plant is located promotes rural development.
Response:
As we explain 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 on
employment, rural development in the U.S., or food production. EPA recognizes that greater use
of biodiesel has economic impacts that benefit various U.S. agricultural sectors, while causing
adverse effects on other U.S. agricultural and non-agricultural sectors. EPA does 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 produce other (i.e., non-BBD) advanced biofuels. We believe our
final 2021 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.
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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: 0192, 0197,
0211, 0212.
Comment:
One commenter suggested that EPA only addressed costs to the refiners of the 2020 annual RFS
rule, ignoring reduced costs to consumers. In addition, this commenter suggested that the use of
ethanol to meet the 2020 annual RFS renewable fuel provides a cost-effective means of meeting
octane requirements. In addition, this commenter suggested that EPA failed to assess the benefits
that result from increasing the 2020 annual RFS volume requirements.
Response:
EPA's illustrative cost estimates for the final 2020 annual RFS rule represent the increase in
cellulosic biofuel using CNG/LNG derived from landfill gas over the finalized 2019 volumes.
The costs of using CNG/LNG derived from landfill gas compared to fossil-fuel derived natural
gas are modest. EPA estimates the impact of the renewable fuels on costs at the wholesale level.
EPA agrees with the commenter that up to the E10 blendwall, ethanol is a cost-effective means
of meeting the RFS renewable fuel volumes, and, also octane requirements. The use of E15 and
E85, as well as biodiesel and renewable diesel, however, tends to be more expensive than the use
of the petroleum fuels they replace. The costs of compliance with the RFS program are passed
through to consumers in the prices they pay for fuel.
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 quantify the benefits.120 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. We have, however, considered both costs and
benefits in exercising the cellulosic waiver authority (Section IV of the final rule), in establishing
the 2021 BBD volume (Section VI of the final rule), and in evaluating the exercise of our general
waiver authorities, particularly the severe economic harm authority (Section 2 of this document).
Comment:
One commenter submitted comments, and a study by de Gorter, suggesting that the RFS program
becomes more costly as RFS renewable fuel volumes are increased.121 The paper by de Gorter
120 "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.
121 de Gorter, H., The Social Costs and Burdens of Potential Future RFS Policies, Cornell University June 2019.
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focuses upon the impacts of the RFS program at or above the ethanol blendwall. According to de
Gorter, upon saturating the gasoline pool with E10 gasoline, additional RFS requirements are
likely to be met with biodiesel. de Goiter's analysis finds that increasing the use of biodiesel is
costly. According to de Gorter, diesel fuel consumers are disproportionately impacted with
increased renewable fuel volumes as a result of the RFS. Also, because diesel fuel is largely
consumed by trucks and trains, the increased costs of transportation fuel as a result of the RFS
can lead to higher prices for consumers. Combining RFS volumes with declining fuel demand
projected by EIA, the de Gorter study finds that annual welfare costs of the RFS renewable fuel
volumes could reach $17 billion by 2022 and $30 billion by 2027.
Response:
EPA's illustrative costs estimates for the 2020 annual RFS rule represent the increase in
cellulosic biofuel using CNG/LNG derived from landfill gas. The costs of using CNG/LNG
derived from landfill gas compared to fossil-fuel derived natural gas are modest. There are no
increases in the advanced or conventional portions of the 2020 annual RFS standard, so there are
no costs associated with using renewable fuels that can comply with these portions of the final
2020 annual RFS standards. The costs of compliance with the RFS program are passed through
to consumers in the prices they pay for fuel. While biodiesel is often more expensive than
petroleum-based diesel and is likely to be used to meet a portion of the standards we are
establishing, we do not believe this expense rises to the levels required to exercise the general
waiver authority, as described in Section 2 of this document. We have, however, relied upon this
factor in establishing the 2021 BBD volume, choosing to leave space for other, non-BBD
advanced biofuels to incent the commercialization of less expensive advanced biofuels. In
addition, the study is of limited relevance as today's action only establishes standards for 2020
and the BBD volume for 2021, and not standards or volumes for subsequent years through 2022
or 2027.
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7.1.2 Energy Security
Commenters that provided comment on this topic include but are not limited to: 0288, 0299,
0718.
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. 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.
Response:
The production of renewable fuels supports one of the goals of the RFS program by improving
the U.S.'s energy independence and energy 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 such as military incursions. 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.122 For more discussion on the energy
security impacts of using BBD, see Section 6.4.4 of this document.
Comment:
One commenter suggested that using more foreign renewable fuel to meet the 2020 RFS
renewable fuel volumes reduces the energy security position of the U.S. According to this
commenter, domestic (i.e., U.S.) production of transportation fuel is the securest form of liquid
energy and, also, furthers U.S. energy independence. This commenter suggested that
encouraging renewable fuel imported into the U.S. as a result of the RFS creates an unjustified
incentive for foreign renewable production.
Also, this commenter suggested that even if imported renewable fuel can be said to diversify the
U.S. supply of transportation fuels, this ignores the possible disruption of foreign renewable fuel
supplies, and the greater energy security benefits of using domestically-produced renewable
fuels. The commenter suggested that EPA should not implement the RFS in a manner that
encourages more foreign renewable fuels (e.g., biodiesel) at the expense of American-produced
fuels in the name of energy security.
122 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006.
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Response:
The RFS has twin goals of U.S. energy independence and energy security. From the standpoint
of U.S. energy independence, the wider use of imported renewable fuels as a result of the RFS
moves the U.S. away from this goal. With respect to energy security, 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 from weather events in the production of renewable fuels are not likely to be
correlated with oil supply disruptions, which are usually triggered by geopolitical events such as
military incursions. Thus, both domestically and imported renewable fuels have energy security
benefits, as they both reduce U.S. reliance on imported petroleum-based fuels. For more
discussion on the energy security impacts of using BBD, see Section 6.4.4 of this document.
In exercising the cellulosic waiver authority, EPA has also considered the potential for advanced
feedstock and biofuel switching, and its impacts on energy security and market disruptions (see
Section IV of the final rule). The statute, as implemented by EPA's regulations, does not
preclude the use of foreign produced biofuels for RFS compliance. Both qualifying foreign and
domestically produced biofuels can be used to comply. We established this policy in the 2010
RFS2 regulations and have not reexamined it in this rulemaking. Contrary to the commenter's
claim, today's rulemaking does not implement the RFS program in a way that favors foreign
biofuels at the expense of domestic ones.
Comment:
One commenter noted that the U.S. is not importing as much foreign oil as it has in past decade.
According to the commenter, since the RFS indiscriminately reduces demand for oil
from both domestic and foreign producers, most of the burden has fallen on foreign producers
when the U.S. was importing most of its oil. The commenter points out that this is no longer the
case due to the growth in domestic (i.e., U.S.) oil production. According to the commenter, this
means that the RFS replaces domestic oil production more than foreign production. This
indirectly helps foreign oil firms since it reduces the potential strength of domestic oil firms.
Response:
We acknowledge that since the RFS program was established by Congress, the U.S. has become
much less dependent on foreign sources of oil. In fact, we are now exporting large quantities of
oil and refined products, offsetting much, or all, of our oil imports. The growth in biofuel use is a
part of that story, but certainly the revolution in U.S. tight oil production has been key. To the
extent that biofuel use continues to grow in the U.S., it may displace U.S. production of
conventional fuels as the commenter suggests. However, the statute does not differentiate
between foreign and domestic gasoline and diesel production when it comes to identifying
obligated volumes under the RFS program. Regardless, for 2020, the RFS annual rule does not
change the non-cellulosic advanced and conventional renewable fuel requirements from the 2019
rule. The sole increase in renewable fuel volumes is attributable to the increase in landfill biogas.
Therefore, relative to 2019, there are not likely to be impacts on oil production as a result of this
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final 2020 RFS annual rule. Thus, the final 2020 RFS annual rule will not significantly influence
the competitive position of U.S. oil firms in comparison to foreign oil firms. In any event, further
reductions to the volumes would require the use of the general waiver authority, and we are
declining to do so as explained in Section 2 of this document.
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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: 0129, 0212,
0320, 0326, 0337, 0718.
Comment:
RIN prices should be zero and should only rise if refiners don't comply with their blending
obligations. EPA should not intervene to lower RIN prices.
Response:
EPA disagrees with this commenter's assessment of RIN prices. Because many renewable fuels,
including biodiesel, renewable diesel, and ethanol blended at levels above 10%, cost more to
produce than the petroleum fuels they displace, some incentive is required to bring these fuels
into the transportation fuel pool. Under the current RFS program RINs incentivize the blending
of renewable fuels, and generally represent the marginal cost of blending additional volumes of
renewable fuel. While the actions in this final rule (such as the volumes we are establishing for
2020) are expected to impact RIN prices, the justification for the volumes established in this rule
are explained in the final rule preamble and elsewhere in this document. EPA has not established
these volumes in an effort to achieve a pre-determined RIN price.
Comment:
One commenter stated that the proposed volumes would cause D6 RIN prices to rise to the price
of D4 RINs as excess biodiesel/renewable diesel would be needed to meet the volume
requirement. Another commenter similarly stated that the proposed volumes could result in
higher RIN prices (greater than $1). A commenter stated that a conventional volume requirement
of 15 billion gallons will trigger a spike in RIN prices and create economic harm.
Response:
In previous years we have observed time periods when the price of D6 RINs was approximately
equal to the price of D4 RINs, as well as time periods when both D6 and D4 RINs exceeded $1
per RIN. 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 2020, especially if sales of higher level ethanol blends such
as El 5 and E85 continue to be modest. Further discussion of the relationship between D4 and D6
RIN prices is in Section VI of the final rule.
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
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petroleum fuels they produce which reflect RIN prices.123 Higher RIN costs, therefore, do 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 2020 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:
EPA's decisions on small refinery exemptions have resulted in lower prices for RINs and
ethanol.
Response:
SREs granted in previous years reduced the demand for RINs, and thus likely had an impact on
RIN prices. See Section VII of the final rule and Section 8.2 of this document for further
discussion of accounting for future SREs in the percentage standards. See Section 5 of this
document for a discussion of the expected impact of this rule on ethanol prices.
Comment:
High RIN prices cause inequity among fuel retailers, as terminal operators who own retail
stations can use RIN values to lower retail prices.
Response:
EPA examined whether high RIN prices disadvantaged small fuel retailers, or conversely
provide a competitive advantage to large retailers who blended renewable fuels. Based on the
available data, EPA determined that high RIN prices did not disadvantage small retailers relative
to larger retailers or terminal operators that acquired RINs by blending renewable fuels.124
Commenters did not present any new evidence or arguments in this rule that would cause EPA to
question the conclusions reached in the point of obligation decision document.
123 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
124 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: 0718.
A number of commenters discussed the impact of the BBD volume for 2021 on transportation
fuel prices and the cost to transport goods. Responses to comments addressing the impact of the
2021 BBD volume on transportation fuel prices and the cost to transport goods can be found in
Section 6.4.7 of this document.
Comment:
The proposed standards will increase fuel costs.
Response:
The RFS program is expected to increase transportation fuel costs if the required renewable fuels
have a higher cost than the petroleum fuels they displace. EPA has considered the costs of this
rule in Section V of the final rule, with more detail on these costs in a memorandum to the
docket.125 As discussed in Section II of the final rule, these costs do not represent severe
economic harm, and thus do not provide a basis for further reductions to the required volumes.
125 See "Cost Impacts of the Final 2020 Annual Renewable Fuel Standards", Memorandum from Michael Shelby,
Dallas Burkholder, and Aaron Sobel available in docket EPA-HQ-OAR-2019-0136.
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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: 0276, 0288,
0320, 0718.
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 pointed out that U.S.
agricultural commodity markets are oversupplied with agricultural commodities currently,
resulting in low overall U.S. agricultural commodity prices. For example, one commenter
pointed out that crop prices in the U.S. have been relatively low in recent years. This commenter
stated that corn prices averaged $4.70 per bushel between 2006 and 2013. Since then, corn prices
have declined to $3.70 per bushel in 2014 and are expected to remain at $3.60 per bushel for the
2018/2019 marketing year. According to this commenter, the price of corn will be well below the
average cost of production of $4.24 per bushel estimated by USDA. These commenters argued
that higher renewable fuel volumes can easily be accommodated by U.S. agricultural commodity
markets currently without undue commodity price impacts. Numerous commenters 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.
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 contained in the statutory RFS tables, including 15 billion gallons of
implied conventional renewable fuel.
EPA recognizes that major U.S. agricultural commodity prices have been relatively low in recent
years and that U.S. agricultural commodity prices are projected to increase only modestly in the
near term. For example, soybean futures prices for July 2020 are $9.38/bushel.126 Corn futures
prices, in the same time frame, July 2020, are $3.90/bushel.127 A variety of factors have
contributed to the oversupply of U.S. agricultural commodities. The recent trade actions between
the U.S.-China are a significant contributing factor to low U.S. agricultural commodity prices
currently. For more discussion on this topic, see "Endangered Species Act No Effect Finding for
the 2020 Final Rule," memorandum to docket EPA-HQ-OAR-2019-0136.
126 See "Soybean Futures Prices 2020," available in the docket for this action
127 See "Corn Futures Prices 2020," available in the docket in this action.
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Comment:
Another commenter cited a report by LMC International suggesting that global protein demand
(i.e., meat) will result in increases in soy meal demand over the next decade.128 Since soy oil
production is a by-product of soy meal production, soy oil production will increase as well. Thus,
according to this commenter, global protein demand will cause extra supply of soy oil, which
will depress soy oil prices. Also, as the commenter notes, soybean oil prices have significantly
declined while at the same time that advanced biofuel and BBD volumes under the RFS have
grown. According to the commenter, soybean oil prices were 56 cents per pound in May 2011
when the RFS BBD volume was 800 million gallons, compared to just 28 cents per pound in
June 2019 when the RFS BBD volume was 2.1 billion gallons. Further, according to the
commenter, the ongoing trade war with China has exacerbated the glut of soybean oil in the U.S.
In addition, the commenter pointed to a variety of factors: new feedstocks such as CoverCress,
rising soybean yields and improved corn oil extraction efficiencies, that will result in increased
supplies of feedstocks for biodiesel. According the commenter, all of these factors suggest that
agricultural commodity markets can accommodate an increase in the RFS renewable fuel
volumes.
Response:
EPA agrees with the commenter that soy oil supplies are currently in abundance and that soy oil
prices are influenced more by the overall demand for protein (i.e., meat) as opposed to the RFS
renewable fuel volumes. Nevertheless, an increase in RFS renewable fuel volumes would likely
increase the demand for biodiesel and renewable diesel produced from soy oil and increase the
price of soy oil modestly. But since the volume requirements for non-cellulosic advanced
biofuels are not being increased for 2020 (relative to 2019), we also do not expect this rule to
have any impact on vegetable oils prices relative to 2019. For more discussion on this topic, see
"Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum to docket
EPA-HQ-OAR-2019-0136.
Comment:
Numerous commenters pointed out that low U.S. agricultural commodity prices in the U.S.
agricultural sector have led to lower U.S. agricultural sector income. Some commenters
mentioned that in the most recent planting season, farmers across the Corn Belt experienced
significant flooding that delayed or prevented planting for many farmers. In addition, numerous
commenters pointed to the current trade actions between China and the U.S. as affecting U.S.
agricultural commodity prices and lowering U.S. agricultural sector income. One commenter
cited a USDA study that projects net U.S. farm income of $69.4 billion in 2019, 40 percent
below 2013 net farm income, and well below the historical average of $90 billion between 2000
and 2017. These commenters suggested that increasing the 2020 RFS renewable fuel volumes
will help to partially offset this decline in U.S. net farm income.
128 LMC International, The Growing U.S. Soybean Oil Surplus, Paper for: National Biodiesel Board, Jefferson City,
Missouri, August 2018.
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Response:
EPA acknowledges that U.S. agricultural commodity prices have been lower in recent years,
impacting U.S. agricultural sector income. However, agricultural commodity prices over time
have shown little correlation with the RFS program, being driven by a host of market factors,
including the U.S.-China trade actions. Nonetheless, we believe that our exercise of the
cellulosic waiver authority to the maximum extent is justified for the reasons stated in Section IV
of the final rule.
Comment:
One commenter suggested that the RFS has increased the feed costs of producing chickens
adversely affecting the U.S. poultry industry. According to the commenter, broiler production in
the U.S. poultry sector comprises the largest single user of corn outside of biofuels producers.
The commenter asserted that the price of corn has increased with increased RFS renewable fuel
volumes. In addition, the commenter suggested that the RFS fuel volumes are increasing the
volatility of corn prices. The commenter suggested that weather and other factors have created an
especially volatile corn market leading into the 2019/2020 marketing year. According to the
commenter, this year and the coming 2019/2020 crop year, are following a similar pattern to the
volatility that occurred in the market due to supply disruptions in 2008 and 2012/2013, which
had significant adverse impacts on the U.S. broiler industry.
Response:
Agricultural commodity prices over time have shown little correlation with the RFS program,
and, regardless, EPA does not believe that this final 2020 RFS annual rule will increase domestic
ethanol production. Thus, the final 2020 RFS annual rule will not impact demand for corn to
produce ethanol and, as a result, cannot be expected to have any impact on corn prices.
Furthermore, corn prices in the U.S. have been relatively stable and low over the last five years.
To provide some perspective, since 2014, corn prices have been below $4.00/bushel except for a
one short time period in 2019 where corn prices increased above $4.00/bushel. Given the variety
of recent factors affecting the U.S. corn market such as recent adverse weather events (i.e.,
flooding in the Midwestern portion of the U.S.) and the U.S.-China trade actions, it is difficult to
predict whether corn prices will be more volatile in the 2019/2020 marketing year. Corn futures
prices in July 2020 are $3.90/bushel.129
Comment:
Several commenters suggested that increased renewable fuels production (i.e., ethanol and
biodiesel) as a result of the RFS has led to an increase in food prices. One commenter suggested
that a large portion of America's corn is used to make ethanol and valuable crop land is diverted
away from food production. According to the commenter, both urban and rural families in the
U.S. have been adversely affected by food price increases from the RFS. In addition, one
commenter cited multiple groups such as the Food and Agricultural Organization of the United
Nations, ActionAid, World Resources Initiative, Organization for Economic Co-operation and
129 See "Corn Futures Prices 2020," available in the docket for this action.
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Development, and the World Bank that have claimed that higher food prices are a negative
consequence of biofuel policies.
Response:
Agricultural commodity prices overtime have shown little correlation with the RFS program,
and regardless, this final 2020 RFS annual rule is not expected to result in increased ethanol
production in the U.S., and thus is not expected to impact demand for corn or corn prices. Since
the volume requirements for non-cellulosic advanced biofuels are not being increased for 2020
(relative to 2019), we also do not expect this rule to have any impact on vegetable oils prices as
well relative to 2019. Thus, the final 2020 RFS annual rule will not impact food prices.
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7.1.6 Rural Economies
Commenters that provided comment on this topic include but are not limited to: 0290, 0300,
0718.
Comment:
Numerous commenters suggested that the RFS stimulates rural economic development by
increasing the demand for renewable fuels such as ethanol and biodiesel. These commenters note
that the increased production of renewable fuels increases employment and income mainly in
rural areas of the U.S. According to one commenter, 40 percent of the Kansas corn crop is used
to make renewable fuels and the RFS has helped to stabilize regional agricultural commodity
markets and net farm income in the State. The same commenter pointed out that renewable fuel
processing plants in Kansas provide high-paying jobs and reinvestment into local economies.
Also, a commenter pointed out that employment in the U.S. renewable fuels industry cannot be
outsourced.
Response:
EPA has not undertaken a detailed analysis of the impacts of the final annual 2020 RFS
standards on rural development and U.S. farm income. However, as stated above, demand in the
U.S. for corn ethanol is being driven by market factors apart from the RFS program. As further
stated above, we do not expect the 2020 RFS volume requirements, in particular, to impact
demand or prices for corn. Similarly, since the volume requirements for non-cellulosic advanced
biofuels are not being increased for 2020 (relative to 2019), we also do not expect this rule to
have any impact on vegetable oils prices relative to 2019.
Comment:
One commenter suggested that the RFS does not help rural communities. This commenter
asserted that when agricultural commodities are used for fuel production, that both food and fuel
prices increase. These price increases adversely affect households living in rural communities
and rural economies.
Response:
The 2020 final annual RFS rule does not increase the implied volumes for conventional biofuel
or non-cellulosic advanced biofuels. As stated above, we do not expect that this rule will impact
corn prices or vegetable oil prices.
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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: 0164, 0288,
0290, 0458.
Comment:
Numerous commenters suggested that ethanol and biodiesel plants are closing due to lack of
renewable fuel demand as a result of the decisions made by EPA on how to implement the RFS
annual fuel volumes. For example, one commenter suggested that between 15 and 20 ethanol
production facilities have shut down recently across the U.S., with dozens of other ethanol plants
operating below capacity. This commenter suggested that there has been a lost market for
hundreds of millions of bushels of corn and the layoff of hundreds of high-skilled, high-wage
jobs in rural communities. Another commenter pointed to several large biodiesel facilities that
have closed recently. This commenter suggested that the small refinery exemptions of the RFS
were a major factor contributing to the biodiesel plant closings.
Response:
It is not appropriate to pinpoint RFS program decisions, and the 2020 final annual RFS rule in
particular, as the cause of biorefinery shutdowns. Biorefinery shutdowns are a function of many
different factors, and in any particular case, it is unlikely that a single factor can be identified as
the sole or even primary cause. Moreover, instances of facility shutdowns are not necessarily a
reflection of poor demand for the market as a whole. As discussed in the Endangered Species
Act no-effect finding memo in the docket, we have assessed the impacts of the RFS program on
corn ethanol demand, and find that the 2020 final annual RFS standards do not cause increased
corn ethanol production in the United States.130 Rather, the corn ethanol market has been, and is
being driven, by other primarily economic factors such as crude oil prices, corn prices, trade
policies, and federal, state, and local incentive programs, to levels well beyond the RFS program
requirements. While these factors together have supported the ongoing growth in U.S. corn
ethanol production, as of late they have been less favorable, leading to relatively lower levels of
demand. Furthermore, following the rapid rise in ethanol production over the last 15 years, the
market is continuing to consolidate in a typical market maturation process, with older, smaller
facilities closing, larger facilities expanding, and larger companies taking over smaller
companies, etc. While each of these actions will have impacts on the people and communities
involved, they are also part of an overall growing and maturing biofuels market.
For biodiesel and renewable diesel, U.S. production of biodiesel and renewable diesel has
continued to rise over time, and the standards under the RFS program for advanced biofuel and
BBD have never decreased from one year to the next. Thus, any biodiesel refinery closures are
unlikely to be the result of the RFS standards, but are due to other factors, including the result of
the above-described market maturation dynamic at play. Unlike for corn ethanol, available
information (such as the current price for D4 and D5 RINs) indicates that the RFS program is
one factor that does affect the volumes of use and production of biodiesel and renewable diesel
130 "Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum to docket EPA-HQ-OAR-
2019-0136
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(in addition to the CARB LCFS program, tax credits, trade policies, crude oil prices, soy oil
prices, etc.), and that the 2020 final annual RFS standards will result in their higher use and
production than in the absence of the RFS program requirements. Given the wide range in size
and technologies across the biodiesel and renewable diesel facilities, and the influence of factors
like the fluctuating presence of the biodiesel blenders tax credit, this market has been for several
years been going through a maturation process like that described above for ethanol. For
example, at present there are a number of large renewable diesel production facilities that are in
financing, construction, startup, and/or expansion. Comments specific to SREs are addressed in
Section 8.2 of this document.
Comment:
Numerous commenters suggested that the RFS increases employment in the renewable fuels and
related industries. One commenter cited a study by Urbanchuk that in 2018 the RFS supported
roughly 366,000 direct, indirect and induced jobs nationwide, resulting in nearly $25 billion in
income directly and indirectly related to the ethanol sector, while "the manufacturing activity of
ethanol production alone contributed nearly $14.5 billion to the U.S. economy".131 According to
another 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 full-time employees, 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 the commenters suggested
that reducing the RFS RVOs would reduce employment and the profitability of renewable fuels
industries and related industries that supply inputs to renewable fuels producers.
Response:
EPA has not undertaken a detailed analysis of the impacts of the final annual 2020 RFS
standards on employment and U.S. farm income. However, there are many drivers of biofuel use
and production besides the RFS, so not all economic impacts of biofuels can be directly
attributed to the RFS or to the 2020 final annual RFS standards in particular. Furthermore, while
the comments on employment may provide insights into the impacts of biofuels and related
industries, they do not provide a complete picture of the impact of a change in biofuel use on
employment throughout the whole U.S. economy. From an economy-wide perspective, consider
an example estimating the overall impacts on employment in the U.S. of an environmental
requirement. When the economy is at full employment, an environmental regulation is unlikely
to have much impact on net overall U.S. employment; instead, labor would primarily be shifted
from one sector of the economy to another sector. On the other hand, if a regulation comes into
effect during a period of high unemployment, a change in labor demand due to regulation may
affect net overall U.S. employment because the labor market is not in equilibrium. In the longer
run, the net effect on employment is more difficult to predict and will depend on the way in
which the related industries respond to the regulatory requirements. For this reason, caution is
131 Urbanchuk, J., Contributions of the Ethanol Industry to the Economy of the United States in 2018, January 30,
2019.
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needed when assessing the net employment impacts for the whole U.S. economy of an individual
environmental standard such as the RFS.
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7.2 Environmental Impacts and Considerations
Commenters that provided comment on this topic include but are not limited to: 0171, 0200,
0213, 0271, 0275, 0293, 0302, 0328.
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,
soil quality, air quality, and water supply. Several commenters expressed concerns about habitat
loss and degradation due to increased biofuel crop production and pointed to EPA's 2018 Second
Triennial Report to Congress as evidence that EPA has linked environmental impacts associated
with agriculture to the RFS. Some of these commenters also raised concerns regarding
deforestation, in countries such as 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.132'133'134 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 2011.135 However, the magnitude of the effect from biofuels is still unknown and
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.136' 137
132 U.S. EPA. December 2011. Biofuels and the Environment: First Triennial Report to Congress. EPA/600/R-
10/183F.
133 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.
134 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
135 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 al. 2015; Wrighrt et al. 2017), (2) the USDA 2012 Census of Agriculture (Census) (USDA
2014), and (3) the 2012 USDA National Resources Inventory (NRI) (USDA 2015). There have also been several
regional studies documenting land use change in different parts of the country, including the Prairie Pothole Region
(Johnston 2013; Johnston 2014; Reitsma et al. 2016), around the Great Lakes (Mladenoff et al. 2016), for the
western cornbelt (Shao et al. 2016), for lands in the Conservations Reserve Program (CRP) (Morefield et al. 2016),
and for corn/soybean farms (Wallander et al. 2011).
136 U.S. EPA. December 2011. Biofuels and the Environment: First Triennial Report to Congress. EPA/600/R-
10/183F.
137 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
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We further note that, as discussed in the docket memo entitled "Endangered Species Act No
Effect Finding for the 2020 Final Rule" we determined that the 2020 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 2020. In addition, the 2020 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.138 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. This continues to be the case despite the recent research in this area
that commenters submitted to the docket. When EPA examines the science in this area as a
whole, there continues to be no definitive conclusions regarding RFS-caused environmental
impacts.139 EPA notes that we received one substantial comment in support of this position. The
potential for impacts remains an area of interest and EPA continues to look at these impacts and
track the science in these areas.
138 Id.
U9ld.
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7.2.1 GHG Impacts
Commenters that provided comment on this topic include but are not limited to: 0271, 0288,
0297.
Comment:
Various commenters voiced their concerns about either positive or negative perceived GHG and
climate impacts of biofuels, sharing multiple studies and statistics in support of their positions.
One commenter pointed to GHG reduction benefits from replacing petroleum-based gasoline
with cornstarch-based ethanol in a 2017 report by ICF, contracted by USD A.140 That report
found greater GHG reductions from corn biofuels than EPA's analysis in the March 2010 RFS2
final rule. That same commenter also cited similar conclusions for reductions in GHG emissions
from cornstarch-based ethanol based on the work of Argonne National Lab's GREET
model.141 Additional commenters shared concerns over the CO2 emissions released from forest
clearings and burning, especially in regions with peat soil due to expansion of agricultural land
that takes place in response to increased volumes of biofuel under the RFS program. One
commenter asserted there is an increasing global demand for palm oil as corn oil continues to be
used for fuel. Another commenter stated concerns with agriculture based GHG emissions from
producing corn-based ethanol.
Response:
EPA will continue to monitor the GHG emission impacts and lifecycle determinations as we
implement the program going forward. However, requests for updating biofuel lifecycle
greenhouse gas results under the RFS program are beyond the scope of this annual rulemaking.
We have considered greenhouse gas impacts in establishing the BBD standards (Section VI of
the final rule) as well as in assessing advanced biofuel and feedstock diversions in exercising the
cellulosic waiver (Section IV of the final rule). We further discuss the greenhouse gas impacts of
palm oil in Section 4.2.2 of this document.
140 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/climate change/mitigation tecfanotogies/U a no IRepo rt 20.1.70.1.07. pdf
141 Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET). Argonne National
Laboratory, DOE. https://greet.es.ani. gov
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7.2.2 Air Quality
Commenters that provided comment on this topic include but are not limited to: 0531.
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 fuel
volumes sufficient to meet the RFS2 (statutory) volumes, including assumed volumes of
biodiesel and ethanol blends.142
The RFS2 RIA indicated that the impact of increased biofuels (as assumed to meet the RFS2
volumes) on PM and some air toxics emissions at the tailpipe was generally favorable compared
to petroleum fuels, but the impact on VOCs, NOx, and other air toxics is generally
detrimental.143 The RFS2 RIA also indicated that the upstream impacts on emissions from
production and distribution of biofuel (including biodiesel) are generally detrimental compared
to petroleum fuel.144 Taking tailpipe, upstream, and refueling emissions into account, the net
impact on emissions from RFS2 volumes of renewable fuels was 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, were 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 summarized existing literature on
emissions and air quality impacts. The report did not identify any new information that
contradicted previous conclusions. It also noted 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 note that given only a limited portion of biofuels use is attributable to the RFS standards, and
in particular the 2020 standards, not all air quality impacts from biofuels use can be attributed to
this final rule.
142 See 75 FR 14803-08 (March 26, 2010) and Chapter 3.4 of the RFS2 Regulatory Impact Analysis (EPA-420-R-
10-006).
143 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. Table 3.2-7 and 3.2-8.
144 U.S. EPA. February 2010. RFS2 Regulatory Impact Analysis. EPA-420-R-10-006. Table 3.2-2 and 3.2-3.
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7.2.3 Water Quality and Quantity
Commenters that provided comment on this topic include but are not limited to: 0275, 0328.
Comment:
Some commenters 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.145
Comment:
Several commenters raised general concerns about water quality and quantity impacts due to the
expansion of crops that could be used to produce biofuels.
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.146 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 2011.147 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
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. See Section 2.1.3 of this document and
"Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum to docket
EPA-HQ-OAR-2019-0136.
145 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
146 U.S. EPA. December 2011. Biofuels and the Environment: First Triennial Report to Congress. EPA/600/R-
10/183F.
147 U.S. EPA. June 2018. Biofuels and the Environment: Second Triennial Report to Congress. EPA/600/R-18/195.
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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.
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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: 0271, 0275.
Comment:
Several commenters raised general concerns about ecosystem health, the loss of habitats, and
impacts to wildlife and biodiversity 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 increased crop production, especially the production of corn and
soy. Many of these commenters also raised concerns regarding deforestation in countries such as
Indonesia, from any potential increases in demand for palm and soy oils (i.e., food-based oils).
Another commenter argued that attributing environmental impacts to the RFS program, as
opposed to other factors, was difficult.
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 for the 2020 Final Rule" we determined that
the 2020 RES 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 2020. In
addition, the 2020 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:
A few commenters mentioned potential impacts on 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 7.2.5 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.148
Comment:
Two commenters called on EPA to implement the land conversion protections contained in
EISA. These 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.149
148 "Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum to docket EPA-HQ-OAR-
2019-0136.
149 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: 0271, 0275,
0312.
Comment:
Several commenters mentioned potential impacts on 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. Two commenters
also raised concerns regarding deforestation in countries such as Indonesia, from any potential
increases in demand for palm and soy oils (i.e., food-based oils) in the context of endangered
species.
At least one commenter explained that there is no causal link between the RFS program, land use
change, and any potential environmental impacts from that land use change, including potential
impacts to threated or endangered species or their habitat.
Response:
EPA acknowledges that habitat loss and landscape simplification are detrimental to ecosystems
and could result in potential acute impacts in environmentally sensitive areas. EPA has not
performed a comprehensive analysis of the environmental impacts of the RFS program in this
action. However, as explained in a memorandum to the docket and Section 7.2.4 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.150 This position is supported by the one comment
referenced above and the materials they submitted as addendums to their comment.
150 "Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum to docket EPA-HQ-OAR-
2019-0136.
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8. Percentage Standards
8.1 General Comments on the Percentage Standards
Commenters that provided comment on this topic include but are not limited to: 0192, 0503.
Comment:
One commenter stated that the proposed rounding of the cellulosic biofuel volume to the nearest
10 million gallons, and the associated rounding of the cellulosic biofuel percentage standard to 2
places rather than 3, should not be implemented because it results in a loss of precision and, in
the specific case of the 2020 standards, results in a lower volume than EPA determined is
appropriate to require.
Response:
All of the statutory volume targets, including those for cellulosic biofuel, are provided in billion
gallons with two decimal places. This is the equivalent of rounding to the nearest 10 million
gallons. It has been our practice since the beginning of the RFS program to use billion gallons
rounded to two decimal places in specifying the volume requirements for BBD, advanced
biofuel, and total renewable fuel, though in the derivation of those volumes we often use million
gallons for clarity. However, due to the significantly lower volumes for cellulosic biofuel, we
chose to use billion gallons rounded to three decimal places, the equivalent of rounding to the
nearest 1 million gallons, in order to represent those volumes more accurately. This was
appropriate so long as cellulosic volumes remained much lower than the other three categories of
renewable fuel. EPA did this in our discretion; nothing in the statute specifically required three
decimal places.
In the context of the 2020 rule, we are changing our approach. With the final 2020 cellulosic
biofuel volume of 590 million gallons, there is less need to deviate from the rounding guidance
provided by the statutory volume targets. Indeed, were we to round up or down, the maximum
theoretical difference between the commenter's approach and ours is 5 million gallons. That is
less than 1% of the 2020 cellulosic biofuel volume. In the specific case of the 2020 standards
rounding to the nearest 10 million gallons leads to a change of 2 million gallons, or roughly 0.3%
of the volume. Given the inherent uncertainties in precisely projecting the cellulosic biofuel
volume, we think this level of rounding is reasonable and does not make the projection
inaccurate. Moreover, although the rounding results in a slightly reduced cellulosic biofuel
volume for 2020, this may not be the case in future years. Over time, we would expect this new
rounding protocol to have no net effect on the volume requirement as in some years it would
result in rounding up while in other years it would result in rounding down. Both in 2020 and
especially over time, the impact of the rounding on the required cellulosic volume would thus be
minimal.
Given this, we continue to believe that returning the approach for cellulosic biofuel to that used
for the other three categories of renewable fuel is appropriate. Doing so allows us to be
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consistent across all four renewable fuel categories as well as with the Congressional intent
expressed in the volume tables.
Comment:
One commenter stated that the multiplier in the formula used to calculate the percentage standard
for BBD should be changed from 1.5 to 1.55.
Response:
We did not solicit comment on or otherwise reexamine this aspect of the percent standards
formula at 80.1405(c). Therefore, this issue is beyond the scope of the rulemaking. In addition,
as discussed in Section VILA of the final rule, we do not believe that the difference between our
treatment of biodiesel + renewable diesel in the calculation of the percentage standard for BBD
and our treatment of biodiesel + renewable diesel in other contexts would have a meaningful
impact on our assessment of appropriate volumes to require or on the market's response to the
volumes.
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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: 0355, 0381,
0384, 0386, 0387, 0388, 0389, 0390, 0391, 0392, 0393, 0394, 0395, 0396, 0406, 0413, 0417,
0418,0419, 0420, 0421, 0422, 0423, 0424, 0425, 0426, 0427, 0428, 0429, 0430, 0431, 0432,
0433, 0434, 0435, 0437, 0438, 0439, 0440, 0441, 0442, 0443, 0444, 0445, 0446, 0447, 0448,
0449, 0450, 0451, 0452, 0453, 0454, 0455, 0456, 0457, 0458, 0459, 0460, 0461, 0462, 0463,
0464, 0465, 0466, 0468, 0469, 0470, 0471, 0472, 0473, 0474, 0475, 0476, 0486, 0487, 0488,
0489, 0491, 0492, 0493, 0494, 0495, 0496, 0497, 0498, 0499, 0500, 0501, 0502, 0503, 0504,
0528, 0529, 0530, 0532, 0533, 0534, 0535, 0537, 0538, 0540, 0541, 0542, 0543, 0698, 0700,
0701, 0702, 0703, 0704, 0705, 0706, 0707, 0708, 0709, 0709, 0710, 0711, 0712, 0713, 0714,
0715, 0716, 0717, 0719, 0720, 0721, 0722, 0723, 0724, 0725, 0727, 0728, 0729, 0730, 0731,
0732, 0733, 0734, 0735, 1152, 1153, 1284, 1285, 1442, 1480, 1487, 1548, 1763, 1784, 1893,
1998, 1999, 2003, 2023, 2029, 2036, 2037, 2041.
Comment:
Many commenters (primarily renewable fuel producers) stated that EPA should provide a non-
zero projection for the volume of exempt gasoline and diesel volumes in 2020. The commenters
argued that EPA has a statutory obligation 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).
Conversely, many other commenters (primarily obligated parties) stated that EPA should not
project future exempt volumes.
Response:
We are finalizing changes to the projected volume of exempt volumes of gasoline and diesel.
Our rationale for making these changes is discussed in Section VII.B of the final rule.
Comment:
Many commenters objected to the methodology EPA proposed to use to develop the projection
of exempted volumes of gasoline and diesel. The commenters stated that rather than using a 3-
year average of the volumes of exemptions that DOE recommended, EPA should use a 3-year
average of the actual exempted volumes (specifically, 2016-2018 rather than 2015-2017). The
commenters stated that the proposed approach does not guarantee the 15 billion implied
conventional biofuel mandate, as there is nothing to guarantee that EPA will actually follow
DOE's recommendations in issuing SREs, and that only by using a 3-year rolling average of
actual exempted volumes would EPA be accounting for actual gallons waived.
Conversely, other commenters expressed concern that EPA's proposed approach would result in
exceeding the implied 15 billion conventional biofuel mandate.
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Response:
We do not believe it would be appropriate to the use a 3-year average of actual exempted
volumes in making our projection of future exempted volumes of gasoline and diesel. Our
objective is not to reallocate prior-year exemptions (which is what using a 3-year average of
actual exemptions would accomplish) or to impose a retroactive obligation on obligated parties.
Rather, we are seeking to make a projection of the volume of gasoline and diesel that we expect
will be exempt in 2020, thereby ensuring that the volume standards are met. We believe that the
methodology used in this final rule for projecting exempted volumes will closely match the
volumes ultimately exempted from the 2020 standards and thereby accomplishes that objective,
including ensuring that the 15 billion implied conventional renewable fuel standard will be met.
We acknowledge that the actual exempted volume may ultimately differ from the projection, and
that if it does so, the actual required volume may also differ from the volumes established in the
final rule. Nonetheless, the projection is our best estimate based on the record and our intended
small refinery policy for 2020. Moreover, by requiring EPA to establish prospective standards,
Congress implicitly anticipated the possibility of differences between the volumes in the final
rule and the actual volumes. As we stated in the 2012 final rule:
we are not required to ensure that the biofuel volumes in the statute are precisely met. We
are required to use the specified volumes to set the percentage standards, but there are no
provisions for ensuring that the percentage standards actually result in the specified
volumes actually being consumed. This outcome is evidenced by the fact that we use
projections of gasoline and diesel volume for the next year which might turn out to be too
high or too low. Insofar as those projections are wrong, the percentage standards will not
produce a demand for biofuels that exactly corresponds to the volumes in the statute.
Thus Congress allowed for some imprecision to exist in the actual volumes of renewable
fuel that are consumed as a result of the percentage standards that we set each November
77 FR 1340. We do not anticipate that the percentage standards we are finalizing will result in
exceeding the implied conventional renewable fuel standard. Further discussion of our
justification for the methodology used to make the projection of exempt volumes of gasoline and
diesel, including the allowance by Congress for some imprecision in the actual required volumes
of renewable fuels, is discussed in Section VII.B of the final rule.
Comment:
Many commenters supported EPA's proposed revisions to the definitions of GE; and DE;.
However, several of these commenters requested more changes to these definitions, generally
suggesting that EPA provide additional regulatory text that made it more certain how EPA was
going to make its projection of the exempt volumes of gasoline and diesel (e.g., specify that the
projection for year i was the average of the actual exempted volumes for years i-2, i-3, and i-4).
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Response:
We do not believe that it is necessary or appropriate to establish by regulation the mechanism by
which EPA will estimate the exempt volumes of gasoline and diesel. There is no legal
requirement that EPA establish this mechanism by regulation. Moreover, doing so would remove
the flexibility for EPA to adjust its methodology for estimating these volumes (without revising
the regulation) should it be warranted based on new information in the future. By maintaining
this flexibility, our projection of the exempt volumes of gasoline and diesel is analogous to our
methodology used to project the volume of cellulosic biofuel production, which we have
adjusted several times since the inception of the RFS2 program based on new information.
Comment:
Many commenters noted that EPA has the statutory authority to issue partial exemptions.
Conversely, a number of other commenters stated that EPA does not have statutory authority to
issue partial exemptions, as the statute only allows for an extension of the original full exemption
for small refineries. These commenters often pointed to the existence of the August 9
Memorandum where EPA interpreted CAA section 21 l(o)(9) to only allow full relief.
Commenters suggested that granting partial relief would read "extend" out of the statute.
Response:
Our response to this comment is in Section VII.B of the final rule.
Comment:
Several commenters argued that EPA does not have the statutory authority to reallocate
exempted volumes, as the statute is written in such a way that it only allows for downward
adjustments, and as such they opposed revising the definitions of GE, and DE;. At least one of
these commenters also stated that even the current GE; and DE, terms are illegal and should be
removed entirely.
Commenters suggested that because the only adjustment the statute provides regarding SREs in
the context of the percentage standards is a reduction to the standards "to account for the use of
renewable fuel during the previous calendar year by small refineries that are exempt," CAA
section 21 l(o)(3)(B)(ii)(II), EPA lacks the authority to reallocate volumes through adjustments
to the percentage standard. Some suggested that this downward adjustment is the only
adjustment allowed by the statute. They also point to CAA section 21 l(o)(5)(A)(iii) which
provides for the generation of credits by small refineries, and CAA section 21 l(o)(9)(D) which
provides that small refineries that waive their initial exemption will be assigned an RVO. They
suggest that had Congress intended EPA to have the authority to account for exempt volumes,
the statute would have provided for it.
Commenters claimed that EPA's proposed approach conflicted with longstanding interpretation
of the statute, under which EPA allegedly maintained that the statute does not permit reallocation
of exempt volumes other than exemptions already granted at the time of the final rule.
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Commenters pointed to the D.C. Circuit's statement in ACE that Congress "included waiver
provisions that allow EPA to lessen the [RFS] requirements in specified circumstances," and
contend that SREs are a waiver authority. They also noted that such waiver authorities meant
Congress did not pursue its purpose of increased biofuel generation at all costs.
Commenters also stated that projecting future exempt volumes is unfair to non-exempt obligated
parties that will have to comply with higher RVOs.
Commenters also pointed to EPA's discussion of the statutory term "ensure" in the 2012 annual
rule, where EPA stated that it need not "ensure that the biofuel volumes in the statute are
precisely met," and suggested that our approach to projecting exemptions was in conflict with
that assertion.
Response:
We agree with commenters that there are specific waiver authorities provided in the statute that
allow for the downward adjustment of the applicable volumes, including the general waiver
authority in CAA section 21 l(o)(7)(A), the cellulosic waiver authority in CAA section
21 l(o)(7)(D) and the BBD waiver authority in CAA section 21 l(o)(7)(E). We also agree that the
statute provides in CAA section 21 l(o)(3)(C)(ii) that EPA is to account for renewable fuel used
by exempt small refineries and also includes other provisions regarding small refineries.
However, none of these provisions specifically address whether EPA is authorized to account for
a projection of exempted small refinery volumes when promulgating the percent standards so as
to ensure that the volumes are met under CAA section 21 l(o)(2)(A)(i) and (3)(B). We explain
why we are allowed to account for such volumes through the standard-setting formula in Section
VII.B of the final rule. Here, we supplement that explanation by specifically addressing critiques
raised by commenters.
We do not find that the exercise of our waiver authorities diminishes our ability to adjust the
percentage standards to ensure that the statutory volumes are met. CAA section 21 l(o)(3)(B)
provides that EPA is "to determine the renewable fuel obligation that ensures that the
requirements of paragraph (2) are met." EPA's waiver authorities in CAA section 21 l(o)(7)
allow EPA to modify the volumes in paragraph (2). They do not address how EPA is to ensure
that the volumes in paragraph (2) are met through the annual standard-setting process in
paragraph (3)(B), and we do not read them to imply that we are not allowed to consider exempt
small refinery volumes in the standard-setting process.
Relatedly, CAA section 21 l(o)(3)(C)(ii) states that EPA "shall make adjustments to account for
the use of renewable fuel during the previous calendar year by small refineries that are exempt
under paragraph (9)." In the 2010 RFS2 rule, EPA prospectively determined that this number
was zero, given that this number was expected to be very small and in any event the RIN system
accounted for the use of renewable fuel by small refineries.151 We have not reexamined this
determination in this rulemaking.
151 75 FR 14717; see also 72 FR 23911 (making the same determination under RFS1); 77 FR 1340 (2012 annual
rule) (reaffirming the conclusion in the RFS2 rule).
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In any event, this statutory provision does not foreclose EPA's authority to account for exempted
small refinery volumes to ensure that the volume are met.152 Indeed, it does not address
exempted small refinery volumes at all, namely the volumes of non-renewable transportation
fuels (gasoline and diesel) that are projected to be exempt from RFS obligations during the
compliance year. Rather, it addresses the volumes of renewable fuels used by small refineries
during the previous compliance year. These are two different issues.
Moreover, the statutory adjustment is meant to ensure that non-exempt obligated parties are not
redundantly required to ensure the use of renewable fuels already used by small refineries but not
accounted for by the RFS program. Thus, we stated that "[accounting for this volume of
renewable fuel would reduce the total volume of renewable fuel use required of others, and thus
directionally would reduce the percentage standards."153 By contrast, the formula terms GE; and
DE; are meant to ensure that the volumes of renewable fuels required by EPA are met (i.e., when
small refineries do not use renewable fuel because of their exemptions, the terms GE, and DE;
ensure that the renewable fuel is used by non-exempt obligated parties). The two provisions do
not conflict and in fact both ensure the use of the renewable fuel volumes in CAA section
21 l(o)(2), the former by ensuring that renewable fuels used by small refineries not participating
in the RFS2 program are nonetheless accounted for, and the latter by ensuring that renewable
fuels not ensured by exempt small refineries are ensured by other, non-exempt refineries.
The other small refinery provisions also do not preclude EPA from accounting for exempted
volumes in the standard-setting process. CAA section 21 l(o)(5)(A)(iii) and (o)(9)(C) address the
generation of credits by non-exempt small refineries, while (o)(9)(D) simply allows small
refineries to waive the statutory exemptions provided by Congress and based on the DOE study.
None of these provisions address the annual standard-setting process at all, much less the
specific issue of whether EPA can account for exempted volumes in setting the standards.
To the extent commenters are suggesting that Congress needed to explicitly provide for this
adjustment in the statute for EPA to implement it, we disagree. The statute provides EPA broad
authority to implement the RFS program and the corresponding percentage standards with which
obligated parties must comply.154 This includes adjusting those percentage standards to account
for SREs that are projected to be granted in the relevant compliance year. As with many other
aspects of the RFS program, Congress delegated to EPA the authority to determine how to
address this detail in implementing the program.155
Some commenters argued that EPA's approach to projecting exempt volumes is impermissible
under the statute, but also argue that EPA's prior approach, which only accounted for exempt
volumes associated with SREs granted prior to establishing the percentage standard, "was
correct."156 However, if EPA lacks statutory authority to consider exempted volumes at all in the
152 We acknowledge that the statutory adjustment at CAA section 21 l(o)(3)(C)(ii) suggests that other adjustments
for small refineries in the standard-setting process are not statutorily mandated. However, that does not mean, as we
explain in the text, that EPA lacks authority to make other adjustments.
153 75 FR 14717.
154 CAA sections 21 l(o)(2)(A)(i), (o)(3)(B), 301(a); Chevron v. NRDC.
155 See generally 75 FR 14670 (promulgating regulations to implement EISA and filling numerous gaps left by
Congress).
156 See comments from API, Appendix 1 p. 6, Docket Item No. EPA-HQ-OAR-2019-0136-0721.
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annual rule, it is difficult to understand how this could be. The statute does not indicate EPA can
consider SREs granted prior to the final rule, but not SREs granted thereafter. Indeed, the statute
does not address this timing issue at all, indicating that EPA may adopt any reasonable approach
such as the one we are finalizing today.
Moreover, commenters are simply wrong that EPA's prior interpretation was that the statute
prohibited us from accounting for small refinery exemptions granted after the annual rule.
Rather, we previously said that we did not think it appropriate to reconsider the final rule based
on subsequently granted small refinery exemptions. But today we are not reconsidering a final
rule setting the percentage standards, but rather projecting exempted volumes in the final rule.
We further address the prior interpretation in Section VII.B of the final rule.
We also disagree with commenters who claim that SREs are a waiver authority. The waiver
authorities provided in CAA section 21 l(o)(7) allow EPA to directly reduce the volumes under
paragraph (2). However, the small refinery exemption provision at CAA section 21 l(o)(9) does
not directly reduce the applicable volumes, but rather authorizes EPA to grant exemptions to
particular refineries. To the extent these exemptions affect the actual volumes of renewable fuel
utilized in the market, the statute does not address how EPA should address this issue, allowing
EPA to adopt the reasonable approach we are finalizing today.
We agree with commenters that Congress did not pursue increased biofuel generation at all costs.
Indeed, EPA has reduced the statutorily required volumes in today's final rule pursuant to our
cellulosic waiver authority. However, this does not address the specific issue of projecting
exempt volumes.
For those commenters that suggested that it is unfair to non-exempt obligated parties to have to
comply with higher RVOs, we note that biofuel groups have also argued that it is "unfair" for
biofuel demand to be reduced when EPA grants SREs without accounting for them in setting the
standards. We have weighed these concerns and concluded that the approach set forth in the final
rule reasonably balances them and, consistent with the statute, ensures that the renewable fuel
volumes are actually used.
In response to comments regarding EPA's statements in the 2012 annual rule, see Section
VII.B.2 of the final rule.
Comment:
A commenter suggested that EPA's decision to account for exempt gasoline and diesel in the
percentage formula through the formula terms GEz and DE/, without making adjustments for
renewable fuel used by small refineries under CAA section 21 l(o)(3)(C)(ii) is inconsistent with
the text of the statute.
Another commenter suggested that CAA section 21 l(o)(3)(C)(ii) is the basis for EPA's prior
approach of only accounting for small refinery exemptions that were granted at the time of
setting the percentage standard, and not projecting exempt gasoline and diesel.
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Response:
CAA section 21 l(o)(3)(C)(ii) does require that EPA make adjustments to the percentage
standards to account for renewable fuel used by exempt small refineries in the prior year. As
explained above, in the 2010 RFS2 rule, EPA prospectively determined that this number was
zero, given that this number was expected to be very small and in any event the RIN system
accounted for the use of renewable fuel by small refineries.157 We have not reexamined this
determination in this rulemaking.
The second commenter is incorrect. CAA section 21 l(o)(3)(C)(ii) has not been used by EPA to
justify our prior policy regarding accounting for SREs in the percentage standards. See, e.g., 77
FR 1340.
Comment:
Commenters claim that EPA's approach to accounting for SREs deviates from its longstanding
interpretation. Commenters claim that EPA's justification for the change is insufficient and
factually inaccurate. Some allege that EPA only offers one reason for its change in course: that
exempt volumes are projected to constitute a significant portion of the total volume of obligated
volume, and that this was not true in early years of the program. They claim that EPA exempted
24 SREs in 2011 and 2012 and did not reallocate the required volumes associated with those
exemptions. They also pointed to EPA's decision in the 2018 RVO to maintain its prior
approach, despite having granted an allegedly significant number of exemptions by that time.
Response:
EPA agrees that this final rule represents a change in the policy to accounting for exempted small
refinery volumes in the annual rule. We have clearly explained the reasons for this change in
Section VII.B of the final rule. As a general matter, commenters seem to be suggesting that EPA
cannot change its policy approach in this annual rule because in prior annual rules we also
allegedly did not account for significant exempted volumes. This argument misunderstands the
law, under which EPA may change its policies by recognizing that it is doing so and providing a
reasoned explanation for the change.158 That is, to the extent that commenters are claiming that
EPA cannot take a different policy position in 2020 relative to past years just because we also
exempted small refinery volumes in those years, that position is legally incorrect. To the
contrary, "the agency must consider varying interpretations and the wisdom of its policy on a
continuing basis, for example, in response to changed factual circumstances, or a change in
administrations."159 In this final rule, we have done so, for the reasons articulated in Section
VII.B of the final rule and in this document.
157 75 FR 14717; see also 72 FR 23911 (making the same determination under RFS1); 77 FR 1340 (2012 annual
rule) (reaffirming the conclusion in the RFS2 rule).
158 See F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 514-16 (2009).
159 Nat'l Cable & Telecomms. Ass'nv. Brand X Internet Servs., 545 U.S. 967, 981 (2005) (internal citation and
formatting omitted).
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Commenters are incorrect to suggest that EPA provided only one reason for its change in policy;
both the supplemental proposal and the final rule provide numerous reasons, multiple of which
commenters themselves address in their submissions and which are discussed in Section VII.B of
the final rule. One other notable reason is that we have a prospective policy approach to SREs for
the 2020 compliance year at the time of this rule, whereas we lacked such a prospective policy
approach in recent annual rules. In any event, commenters wrongly claim that EPA expected
equally significant volumes of exemptions in prior years (such as in 2011, 2012, and 2019) but
nonetheless refused to account for them in establishing the standards. This claim is incorrect for
three reasons.
First, in early years of the program, all (in 2010) or most (in 2012) of the volumes were
exempted prior to the final rule, and therefore EPA did account for such volumes in establishing
the standards. Second, in other years, such as 2011 and 2013-17, at the time of the final rule,
EPA expected relatively limited volumes to be exempted following the final rule. Third, by the
time of the 2018 and 2019 final rules, exempted volumes were beginning to rise, but EPA
nonetheless chose, in its discretion, to retain its prior approach in those rules. By the time of the
2020 rule, however, changing circumstances—as described in Section VII.B of the final rule
including the significant increase in exempted volumes over a period of multiple years as well as
our articulation of our prospective SRE policy—persuaded us reconsider and revise our
approach. Generally, we believe that EPA's dynamic responses satisfy the Supreme Court's
admonition that "the agency must consider varying interpretations and the wisdom of its policy
on a continuing basis, for example, in response to changed factual circumstances, or a change in
administrations."160
We explain now in more detail the evolution for our policy in response to the commenters'
specific assertions about specific past annual rules. We do so not to reexamine prior rulemakings,
but merely to explain in response to comment why we have provided an adequate explanation for
this rule's change in policy regarding how we account for exempted volumes. In the 2010 RFS2
rule, EPA assigned a percentage to gasoline and diesel expected to be produced by exempt small
refineries.161 Doing so was straightforward because the statute in CAA section 21 l(o)(9)(A)
provided that all small refineries would be exempt through 2010. That is, EPA accounted for the
entire exempted volume of gasoline and diesel associated with SREs for 2010 in the final rule.
For the 2011 final rule, at the time EPA promulgated the percentage standards, DOE had issued a
study in accordance with CAA section 21 l(o)(9)(B) that found that no small refineries were
likely to suffer disproportionate economic hardship. The Senate Appropriations Committee then
"directed [DOE] to reopen and reassess the Small Refineries Exemption Study." At the time of
the final 2011 annual rule, DOE had not published its revised study. Therefore, based on the
record then before it, EPA did not account for any small refinery exemptions in the 2011 final
rule.162 This is in contrast to this final rule, where we anticipate significant exempted volumes
based on our intended approach to adjudicating 2020 SREs.
160 Nat'I Cable, supra.
161 75 FR 14716-17.
162 75 FR 76790, 76804-5 (December 9, 2010).
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After the 2011 final rule, DOE published a second study, which found that 13 small refineries
would suffer disproportionate economic hardship, and thus EPA provided those small refineries
with a two-year exemption as provided by the statute. Subsequently, EPA also granted two-year
exemptions to 8 additional small refineries for 2011 and 2012. All those exemptions were
accounted for in setting the 2012 percentage standards.163 EPA later granted 3 more SREs which
were not accounted for in the 2012 percentage standards. In total, 24 small refinery exemptions
were granted in 2011 and 2012, and the vast majority of these were accounted for in the 2012
final rule.
For the 2013-17 final rules, EPA did not expect significant exempted volumes at the time of
those final rules, and commenters do not claim to the contrary. For the 2018 final rule, the
commenter notes that "EPA had already granted 19 small refinery exemptions for the 2016
compliance year, and may have already decided on its approach to the 2017 compliance year.
Yet EPA again declined to change its position." However, there is a significant difference
between having granted 19 exemptions for 2016 by the time of the 2018 final rule and having
granted 31 exemptions for 2018 by the time of this final rule. Indeed, the exempted volumes are
starkly different (7.84 billion versus 13.42 billion gallons of gasoline and diesel).
In addition, for both the 2018 and 2019 final rules, EPA had not yet decided its general policy
approach to adjudicating SREs for those years, as we have now done for the 2020 SREs in this
final rule. That, together with our additional experience of a relatively higher number of SRE
grants and associated exempt volume in recent years, and the other factors described in Section
VII of the final rule, persuaded us to adopt a different approach for this final rule.
We also note that commenters often use the term "reallocation" to describe EPA's action in this
rulemaking. This term is imprecise and does not accurately represent what we are doing in this
action. In past rulemakings, we have discussed and sought comment on whether it would be
appropriate to set the percentage standards prior to the start of the compliance year in accordance
with CAA section 21 l(o)(3) and later modify the percentage standards to account for SREs that
may be granted afterwards. Within the context of a notice and comment rulemaking process, we
previously said that periodic revisions to the standards would be "inconsistent with the statutory
text."164 However, we are not modifying the percentage standards to account for SREs after
setting the percentage standards in November of the prior year. Nor are our standards meant to
account for SREs granted in past years. Instead we are projecting the exempt volume of gasoline
and diesel associated with 2020 SREs and utilizing those projections to adjust the percentage
standards prior to the beginning of the compliance year. Thus, we are not "reallocating" burdens
previously borne by exempt refineries onto non-exempt refineries. Rather, we are accounting for
a projection the exempted volume to ensure that the renewable fuel volumes are met.
163 Id. See also "Accounting for Volumes of Gasoline and Diesel from Exempt Small Refineries in the Calculation
of 2012 Standards Under the Renewable Fuel Standard (RFS) Program," Docket Item No. EPA-HQ-OAR-2010-
0133-0211.
164 75 FR 76804 (December 9, 2010).
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Comment:
Commenters suggested that our statements that we are able to project the aggregate exempted
volume are disingenuous because doing so is still the sum of individual exemptions. They state
that we could have also done so in prior years.
Response:
We disagree. Of course, it is always possible to make a projection; the question is how
reasonable or good that projection is. As we explain Section VII.B of the final rule, several
factors allow us to project the exempted volume reasonably and with greater confidence in this
final rule relative to prior final rules.
Comment:
Commenters suggested that our statements that we can adjust the standards if the projections are
inaccurate is inconsistent with the statute, particularly where EPA's approach is likely to require
subsequent adjustments to the standards. Relatedly, commenters asserted that EPA's approach
deprived obligated parties of the certainty that they need to make decisions about compliance.
Response:
As commenters point out, the statute does require EPA to set annual standards by November 30
of the preceding year. We do not intend to adjust the 2020 percentage standards after this
rulemaking. As we explain in Section VII.B of the final rule, our approach is intended to ensure
that the final volumes are used. Therefore, it is not "likely" to result in adjustment of the
standards after the fact. Nor do we expect that EPA's subsequent grant of 2020 SREs would
cause us to revise the standard or otherwise alter the compliance burden of non-exempt obligated
parties.
We are aware that commenters claim EPA cannot reconsider an already-issued standard. This
claim is highly questionable. Where appropriate, it appears that EPA may make subsequent
adjustments to the standards based on our inherent authority to reconsider or amend a
rulemaking. Additionally, our statutory waiver authorities under CAA section 21 l(o)(7)(A) and
(E) appear to allow EPA to adjust the applicable volumes even after we have promulgated the
standards. Further, the D.C. Circuit's caselaw authorizes EPA to impose retroactive RFS
standards. Were EPA to consider retroactively adjusting any standards due to new information
about SRE decisions (or for any other reason), we would act consistent with our statutory
authorities and with the D.C. Circuit's caselaw, under which we would consider the burdens of a
retroactive action on the market. We note, moreover, that EPA has previously revised an already-
issued standard.165 Nonetheless, we need not definitively resolve this issue as we are not revising
an already-issued standard in today's final rule.
165 See 79 FR 25025 (retroactively revising the 2013 cellulosic biofuel standard).
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Comment:
Commenters claim that EPA's new approach to exempted small refinery volumes would upset
reliance interests and contradict previous EPA findings.
Response:
Commenters' claim that EPA's actions unjustifiably upset reliance interests is erroneous. In the
first place, even where serious reliance interests are present, EPA may still change its policy
based on a reasoned explanation of the change.166 EPA has provided such a reasoned
explanation, even under the "further justification" demanded in cases of serious reliance
interests. In this document as well as in Section VII.B of the final rule, EPA clearly explains the
reasons for its change in policy as well as the changing facts and circumstances that support its
new policy. Nothing more is required.
Moreover, commenters do not explain with reasonable specificity what their serious reliance
interests are. In any event, no such serious reliance interests are present. The statute authorizes
EPA to promulgate annual volumes and standards that change from year to year, and EPA also
has broad authority to promulgate and revise its implementing regulations. Stakeholders
generally lack serious reliance interests in EPA's annual standards or the mechanism for
establishing those standards.167 EPA has never indicated that its prior policy to accounting for
SREs would never be changed. Indeed, EPA has solicited comment on this issue multiple times
since its inception, including as recently as in the 2018 final rule.
Comment:
Commenters argued that EPA's approach to exempt small refinery volumes could end up setting
compliance standards that are unachievable for obligated parties.
Response:
As we explain in Sections III and IV of the final rule and "Updated market impacts of biofuels in
2020," we believe that the market can make available the volumes we are finalizing today. We
acknowledge that it is theoretically possible for greater biofuel volumes to be required should our
projection overestimate the exempted volume. We do not think, however, that this will happen as
we are projecting the exempted volume based on our approach to 2020 SRE petitions. Rather, we
anticipate that our approach to small refinery exemptions will ensure that the volumes
established in this final rule are actually used.
Moreover, even if greater volumes are ultimately required, we do not think this will result in
unachievable standards. For one, the volumes of advanced and total renewable fuels we analyzed
in Sections III and IV of the final rule are not the maximum achievable volumes, and the market
166 See F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 516 (2009).
167 See Monroe Energy, 750 F.3d at 920 (rejecting claim that oil refiners had a "legally settled expectation" in EPA's
exercise of its waiver authorities); AFPM, 937 F.3d 577-78 (finding it far from obvious that biofuel producers had
serious reliance interests in the annual volumes).
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may make additional volumes available. Moreover, there exists a significant bank of carryover
RINs (currently estimated at 3.48 billion total RINs), as well as cellulosic waiver credits, that can
help meet any shortfall in actual production. In addition, obligated parties can also carry forward
a deficit into the following year.
Comment:
Commenters suggested that EPA's SRE policy is unstable and unpredictable, and thus cannot
form the basis of a projection.
Response:
We agree with the commenter that EPA's SRE policies have changed over time. Moreover, the
exempt volume of gasoline and diesel due to SREs has fluctuated over the years, and that is
precisely why we have taken a 3-year average. This is a reasonable approach as a 3-year average
accounts for the variability in number of petitions, volumes of gasoline and diesel, changing
circumstances for small refineries, changes in EPA's policies, and other factors that change from
year to year. We take a 3-year average of the exempt volume of gasoline and diesel had EPA
followed DOE's recommendation as following DOE's recommendation is our prospective
approach to SREs, beginning in 2019 and applying in 2020.
Underlying commenters' claim is the notion that unless EPA can project the exempted volume
with perfect precision, any projection is arbitrary and capricious. This is simply false. All
projections contain inherent uncertainty, including the projections mandated by Congress to
implement the RFS program.168 In projecting the exempted small refinery volume, EPA has
made a reasonable projection. We have carefully considered all the information and analysis
before us (including this commenters' concerns), acknowledged factual uncertainties, and
identified the considerations we found persuasive.
Comment:
Commenters suggested that EPA's supplemental proposal completely ignored consideration that
the proposed percentage standards may result in exceeding the blendwall of 10% poolwide
ethanol content.
Response:
Commenters misunderstand EPA's action. In increasing the percentage standard to account for
the exempt volume of gasoline and diesel, EPA is not modifying the applicable volumes that
EPA found to be available as discussed in Sections III and IV of the final rule, Sections 3-5 of
this document, as well as the "Updated market impacts of biofuels in 2020" ("Market Impacts
Memo"), available in the docket. EPA's analysis in those sections assume that the full volumes
established by this rulemaking will be used. Our approach to projecting exempt volumes is also
168 See, e.g., CAA section 2ll(o)(3)(A), (B)(ii)(II), (o)(7)(D)(i).
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aimed at ensuring that the full volumes will be used. The market is capable of making those full
volumes available.
Commenters are also wrong that EPA ignored the existence of the blendwall. To the contrary,
EPA provides ample discussion of the blendwall in the Market Impacts Memo, the analogous
docket memorandum to the July 29 proposal, and Section 5 of this document. As EPA explains
further in those documents, the market exceeded 10% poolwide ethanol concentration in 2017
and 2018. We expect the market to be able to do so in 2020 as well. Moreover, notwithstanding
difficulty in increasing ethanol concentration significantly above 10% in 2020, the market is
capable of meeting the total renewable fuel standard through additional use of biodiesel and
renewable diesel, which are not constrained by the blendwall.
Comment:
Commenters suggested that "reallocation of [BBD] volumes is unlawful," stating that the
increase in the BBD percentage standard by 0.09%, requires reconsideration of the statutory
factors in CAA section 21 l(o)(2)(B)(ii).
Response:
We do not agree that our adjustments to the percentage standards require reconsideration of the
statutory factors for BBD. The statutory factors apply in determining the "applicable volume[]"
of BBD, which is unchanged in this action. CAA section 21 l(o)(2)(B)(ii). As further explained
in the above response, the adjustments to the percentage standard are intended to ensure an
applicable volume of 2.43 billion gallons, that is, the 2020 BBD volume that EPA analyzed in
the 2019 final rule. There is thus no need to do another analysis.
In addition, the BBD standard is nonbinding; it is the advanced standard, not the BBD standard,
that is driving BBD use and production. Even with an increase in the BBD percentage standard,
this will not drive BBD use or production, and therefore would not impact the statutory factors.
For further explanation of the role of the advanced and BBD standard in driving BBD use, see
Section VI of the final rule, Section 6 of this document, and the analogous portions of last year's
final rulemaking.
Comment:
Commenters suggested that reallocation violates due process, the CAA and the APA because
SRE adjudications are done in secret. They suggested that the parties who are bearing an
increased burden due to the higher percentage standards were unable to participate in the SRE
proceedings, and will be unable to do so going forward, and that this violates due process.
Commenters suggested that EPA acted in violation of the APA sections 555(b) and 552(a)(2).
They claim that Section 555(b) provides obligated parties the right to participate in small refinery
petition proceedings. They also claim that under section 552(a)(2) EPA cannot rely on past SRE
decisions because some of those opinions were unpublished, and therefore cannot be "relied on,
used or cited as precedent" without "actual and timely notice." Commenters claim that they
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would participate in future SRE proceedings (and would have participated in past proceedings)
had EPA provided them the opportunity to do so.
Commenters also suggested that by relying on SRE decisions which are subject to CBI
protections EPA is not including its "factual, legal and policy considerations" as part of the
rulemaking record as required under the CAA. Commenters suggested that by failing to include
the past SRE decision documents in the administrative record, EPA has not provided interested
parties the opportunity to comment on the basis for projecting exempt volumes in future
compliance years.
Response:
The commenters appear to be conflating the projection established in this final rule with past and
future SRE decisions. For the projection, which has a direct impact on the stringency of the
standard for non-exempt obligated parties, we set forth our approach to SREs for 2020 in the
supplemental proposal, thus allowing obligated parties the opportunity to comment and engage
with the agency on that approach. Indeed, EPA provided the full procedures set forth in CAA
section 307(d), including public notice and a public hearing followed by a thirty-day comment
period. Thus, we are not acting without notice or opportunity to participate. Interested parties can
and have commented on this action. We also intend to continue to provide information on the
exempt volume of gasoline and diesel associated with SREs when they are granted in our online
dashboard at https://www.epa.gov/fuels-registration-reporting-and-cornpliance-help/rfs-srnall-
refinery-exemptions.
Commenters are wrong that just because the projected exempt volume is based on the aggregate
sum of DOE recommendations for past SRE petitions, EPA is required to allow third parties to
participate in SRE proceedings. First as a general matter, today's action, including our response
to comments, does not resolve any SRE petitions, reexamine previously adjudicated SRE
petitions, or reexamine the regulation governing the process for adjudicating SRE petitions at 40
CFR 80.1441. This rulemaking is therefore not the proper forum for commenting on these
actions, or for making collateral attacks on them. Comments regarding these other actions are
beyond the scope of the rulemaking.
Second, EPA has broad discretion to determine the scope of its rulemaking.169 Nothing requires
us to reexamine past SRE decisions or to resolve pending ones in today's rule, or by extension,
to provide additional process associated with such proceedings. Indeed, the statute contemplates
EPA's adjudicating SRE petitions outside of the annual rulemaking, as it authorizes such
petitions "at any time" and requires EPA to act on them within 90 days, while prescribing that
EPA must issue the annual rule by November 30 of the preceding year.170
To the extent the commenter is seeking to reopen all past SRE adjudications for 2016-18
compliance years, that would be unprecedented and could cause undue retroactive effects. We
are not aware of any legal principle that states merely because an agency relies on aggregate
169 See Alon Ref. Krotz Springs, Inc. v. Envtl. Prot. Agency, 936 F.3d 628, 659 (D.C. Cir. 2019).
170 CAA section 21 l(o)(9)(B)(i), (iii), (3)(B)(i).
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information about past adjudications in a rulemaking, it must necessarily reopen all those
adjudications and subject them to rulemaking procedures.
To the extent the commenter is asking us to reopen our regulatory process for adjudicating SRE
decisions, set forth at 40 CFR 80.1441, we decline to do so in this rulemaking. We have not
reexamined this regulation. But commenters who believe they merit greater participation in SRE
proceedings may file an administrative petition to amend 40 CFR 80.1441. We note, however,
the basic administrative principle that any adjudication may affect multiple persons not directly
impacted by the agency decision, but this does not mean all such persons have the right to
participate in the adjudicatory process.171
Third, commenters' specific arguments based on the Due Process Clause, APA sections
552(a)(2) and 555, and CAA section 307(d), are unfounded. Generally, none of these sections
require EPA to expand the scope of this rulemaking to include reexamination of 40 CFR
80.1441, past SRE decisions, or pending SRE petitions. And none of them require this
rulemaking to also disclose past SRE decisions or provide the public the opportunity to
participate in future SRE proceedings.
Beginning with the Due Process Clause, it is questionable whether the Due Process Clause
requires EPA to do anything in this rulemaking beyond the generous procedures already afforded
by CAA section 307(d). We are aware of no caselaw reaching such a result. Moreover, this
rulemaking imposes standards applicable to all non-exempt obligated parties, and therefore is not
the kind of "quasi-judicial determination by which a very small number of persons are
exceptionally affected, in each case upon individual grounds" that might warrant additional
procedures under the Due Process Clause.172
The APA similarly does not require a different outcome. As relied upon by commenters, section
552(a)(2) states "A final order, opinion, statement of policy, interpretation, or staff manual or
instruction that affects a member of the public may be relied on, used, or cited as precedent by an
agency against a party other than an agency only if it has been indexed and either made available
or published as provided by this paragraph; or the party has actual and timely notice of the terms
thereof." EPA, however, is not relying on, using, or citing as precedent past SRE decisions
against the commenters. Rather, EPA is relying on aggregate data about past SREs to derive the
percent standards, which are applicable to obligated parties. Both this aggregate data and the
percent standards have been published in the Federal Register, in supplemental proposal and in
this final rule. Moreover, section 552 explicitly states that it "does not apply to matters that are
trade secrets and commercial or financial information obtained from a person and privileged or
confidential," and EPA is required to treat CBI claimed by small refineries as such until it makes
a final determination. See 40 CFR part 2 subpart B. We note that even some commenters that
171 See Pension Ben. Guar. Corp. v. LTV Corp., 496 U.S. 633, 655 (1990) (the "minimal requirements" for informal
adjudications are established in APA, 5 USC § 555); .1 via Dynamics, Inc. v. F.A.A., 641 F.3d 515, 520 (D.C. Cir.
2011) (informal adjudications are not subject to notice-and-comment requirements), or to seek judicial review of the
adjudication, see Conf. Grp., LLC v. FCC, 720 F.3d 957, 963 (D.C. Cir. 2013).
172 Vermont Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 542 (1978); see also Bi-
Metallic Investment Co. v. State Board of Equalization, 239 U.S. 441, 446 (1915).
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raise this issue agree that EPA should act pursuant to its regulations and not disclose claimed
CBI.
APA section 555(b) is even less helpful to commenters. As relied upon by commenters, that
section states "So far as the orderly conduct of public business permits, an interested person may
appear before an agency or its responsible employees for the presentation, adjustment, or
determination of an issue, request, or controversy in a proceeding, whether interlocutory,
summary, or otherwise, or in connection with an agency function." However, EPA has provided
notice with opportunity for a public hearing and for comment, as required by CAA section
307(d). APA section 555(b) requires nothing more of EPA, and in fact it requires much less.173
EPA has also complied with CAA section 307(d) in issuing this rulemaking. We provided notice
of this rulemaking—including the methodology and data underlying the projection of the exempt
volume—a public hearing, and an opportunity for comment. We also relied on, but have not
publicly released, a record containing the data relating to individual small refineries. This data
underlies the calculation of the projection but is claimed CBI in its entirety. Therefore, we placed
a placeholder document into the docket for this action in lieu of the actual record.
Nonetheless, in order to provide additional transparency to stakeholders, we explain in more
detail what this record contains, to supplement the explanation already provided in Section VII.B
of the final rule. This record lists, for each small refinery petitioner for each compliance year
from 2015-18:
• Its production of gasoline, diesel, and gasoline + diesel (in barrels per day and million
gallons for the year) based on information from each petition for each compliance year;
• Its calculated total RVO (in millions of RINs);
• DOE's recommended relief (0%, 50%, or 100%) for it; and
• Its exempted volumes of gasoline, diesel, gasoline + diesel, and total RVO based on
DOE's recommended relief (gasoline production * recommended relief; diesel
production * recommended relief; gasoline + diesel production * recommended relief;
and total RVO * recommended relief).
The record also sums the exempted volumes based on DOE's recommended relief for each year.
This aggregate information is contained in preamble to the final rule, as well as in the preamble
to the supplemental proposal. With respect to 2016-18 SREs, we relied upon this aggregate
information to calculate the projected exempt volume for 2020. We did not consider or rely upon
EPA's actual decisions on SREs for 2016-18. Thus, our past SRE decisions are not part of the
record for this rulemaking, and do not belong in the docket.174 As we explain in the Section
VII.B of the final rule, the aim of our projection is not to reallocate exempted volumes that we
granted in those past years, but rather to project exemptions in the future. For that limited
173 See Koch & Murphy, 2 Admin. L. & Prac. § 5:20 (3d ed. Feb. 2019) (this provision does not afford any
"interested person" a right to intervene); Litwak, A Guide to Federal Agency Adjudication 74 (2d ed. 2012)
("Absent a statute or rule providing for a right to intervene, the question of intervention is left to the agency's
discretion.").
174 See Am. Trucking Ass 'ns v. EPA, 283 F.3d 355, 372 (D.C. Cir. 2002).
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purpose, we used the historical data described above, not data from actual 2016-18 SRE
decisions.
We also do not think it violates CAA section 307(d) for us to redact the data we did use as it was
claimed as CBI. Indeed, this is a common practice, including in our RFS annual rules. For
example, in this rule and in past annual rules, EPA has considered information submitted by
cellulosic biofuel producers in projecting the available volume of cellulosic biofuel. Pursuant to
EPA's CBI regulations, 40 CFR part 2 subpart B, EPA does not disclose that information when
the producers claim it is confidential.175 That is analogous to what we are doing here for the
above-described record.
In sum, contrary to commenters' assertions, we have included in this final action the relevant
factual, legal and policy considerations underlying our decision to project small refinery
exemptions for 2020 while still protecting information claimed as CBI by small refineries. We
have provided estimates of past exempt volumes, which inform our calculation of the relevant
projection. We have also described our approach for adjudicating SREs in 2020, and our
justification for making a projection of the exempt gasoline and diesel in calculating the
percentage standards.
Comment:
One commenter suggested that EPA provide a true-up mechanism to account for over- or under-
projection of SREs at the end of each compliance year.
Response:
We continue to believe that the statute is best read to require a percentage standard established
prior to the beginning of the compliance year.176 Additionally, our projection of exempt gasoline
and diesel provides a reasonable basis for a projection of SREs. A "true-up" after the compliance
year has passed would not further renewable fuel use during the compliance year. It would also
introduce uncertainty into the program over the predictability and reliability of the percentage
standards. As we have previously stated, a regulatory scheme that contemplates regular revisions
to established standards is not appropriate:
the Act is best interpreted to require issuance of a single annual standard in November
that is applicable in the following calendar year, thereby providing advance notice and
certainty to obligated parties regarding their regulatory requirements. Periodic revisions
to the standards to reflect waivers issued to small refineries or refiners would be
inconsistent with the statutory text, and would introduce an undesirable level of
uncertainty for obligated parties.
77 FR 1340. One true-up idea raised by some commenters relates to the treatment of carryover
RINs which is discussed at length in Section 2.4 of this document.
175 See Alon Ref. Krotz Springs, Inc. v. Envtl. Prot. Agency, 936 F.3d 628, 661 (D.C. Cir. 2019).
176 See CAA section 21 l(o)(3)(B).
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Comment:
Several commenters stated that by increasing the percentage standards, the market may be unable
to comply with the increased demand for RINs as small refineries will still be purchasing RINs
throughout the year assuming they will have to comply since EPA does not typically issue
exemptions until after the compliance year is over. This, they argue, will likely cause a
drawdown in the carryover RIN bank, resulting in increased RIN costs and fuel prices.
Response:
We acknowledge that to the extent that all obligated parties (including small refineries which
may later be exempted) comply with their 2020 RVOs on an ongoing basis throughout the year,
EPA's approach to accounting for projected exemptions would increase demand for renewable
fuels during the year. Even were this to occur, we do not believe this would make compliance
unachievable. The current size of the carryover RIN bank (3.48 billion RINs) is large enough to
sufficiently ensure that the market will be able to comply with the 2020 percentage standards,
regardless of the actions by small refineries during the compliance year. Even in the extreme
situation where EPA grants no SREs for 2020, the existing RIN bank is significantly larger than
the 770 million RIN increase to the renewable fuel volumes resulting from the projection. The
same is true for advanced and cellulosic biofuel; additionally, for cellulosic biofuel, obligated
parties can rely on cellulosic waiver credits as well. We further discuss this issue in Section 2.4
of this document.
We do not speculate on whether RIN prices, which are affected by many factors, will rise or fall
as a result of the annual volume standards, nor is today's rulemaking based on commenters'
speculation about the impact of this action on RIN prices. Fluctuations in the prices of RINs,
which are traded on a highly competitive market, are normal.
However, it is our intent to issue decisions on SRE petitions before the annual compliance
deadline, at least to the extent that small refineries petition for relief within 90 days prior to the
deadline.177
Comment:
Some commenters further suggested that because EPA may grant 2020 SREs after the 2020
calendar year, its approach to accounting for projected SREs would require obligated parties to
ensure additional volumes beyond what is required in the final rule during 2020. They claimed
that this would result in a "redundant obligation," which CAA section 21 l(o)(3)(C)(i) directs
EPA to avoid.
Response:
As we explain in Section VII.B of the final rule, the statute directs EPA to issue prospective
standards to ensure the applicable volumes. Although our intention is to ensure the applicable
177 See CAA section 21 l(o)(9)(B)(iii).
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volumes, no more and no less, we acknowledge that greater or lesser volumes could potentially
be used. This is a natural consequence of the prospective statutory scheme established by
Congress. In addition, the statute contemplates that small refineries can apply for an exemption
"at any time," indicating that Congress contemplated the possibility of a small refinery seeking
and receiving relief after it had already complied.
The commenters rely on CAA section 21 l(o)(3)(C)(i), but do not explain with reasonable
specificity what they think this provision means or why it prohibits EPA's approach to projecting
exempt volumes. In any event, we note that while we have not definitively interpreted this
provision and need not do so today, it could be read to address an entirely different issue: that an
obligated party ought not be required to satisfy the RFS standards more than once for the same
volume of gasoline and diesel. We are, of course, not requiring that result.
But regardless of how this provision is interpreted, the commenters' concern is unfounded. We
acknowledge that it is possible that additional compliance (beyond the renewable fuel volumes in
this final rule) could occur during the course of the compliance year due to timing of SRE
decisions. But once EPA grants 2020 SREs, any RINs that are ultimately not needed for
compliance would still be available for trading or use by another party or for carryover into the
next year. As such, all renewable fuel use is properly accounted for, and no "redundant
obligations" are imposed.
Comment:
Many commenters expressed overall opposition to the implementation of the small refinery
exemption program and suggested changes to how EPA evaluates SRE petitions. Some of these
commenters generally claimed that any challenges to EPA's SRE policies were within the scope
of the rulemaking, even if EPA did not specifically reopen that aspect of the policy in this rule.
Commenters raised three reasons: EPA has reopened the entire SRE policy by soliciting
comment on some aspects of it, or the entire SRE policy is an important aspect of the problem
regarding how EPA reallocates small refinery exemptions, or EPA has constructively reopened
the entire SRE policy under the D.C. Circuit's caselaw.
Response:
In this response, we generally respond to commenters' arguments that EPA's small refinery
policies are within the scope of this action. Later responses address in more detail comments
about specific aspects of our small refinery policy.
In this action, we are not adjudicating any SRE petitions, and thus we are not applying the
statutory provisions in the context of any exemption decisions. To the extent commenters are
attacking any particular exemption decision, it is beyond the scope of the action. To the extent
commenters are suggesting that our projection is erroneous because it depends upon an unlawful
SRE policy, the comment is also beyond the scope of the action to the extent EPA did not reopen
the issue. EPA did reopen the issue of our authority to grant partial relief, and we have responded
to comments on this issue. We did not, however, reopen any other aspect of our SRE policy.
Those issues are thus beyond the scope of this rule. EPA has broad authority to determine the
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scope of the rulemaking and may generally rely upon its prior rules or policies without
subjecting them to reexamination.
Commenters wrongly claim that the entire SRE policy is nonetheless within the scope of this
rulemaking for three reasons. We address each of the critiques in turn with respect to the SRE
policy as a whole. In subsequent responses, we also address these critiques with respect to
specific aspects of the SRE policy that commenters allege are within the scope of the rule.
First, just because EPA solicited comment on other aspects of the small refinery policy does not
reopen aspects that we did not solicit comment on. Commenters' argument has no logical ending
point. For instance, we also solicited comment on discrete changes to multiple framework
regulations in this rulemaking. That does not mean that all framework regulations, as
promulgated in the 2010 RFS2 rule and subsequent rules, are now reopened.178
Second, commenters are wrong that because the SRE policy is allegedly "an important aspect of
the problem" regarding how EPA projects small refinery exemptions, it necessarily falls within
the scope of the rulemaking. As with the first argument, this has no logical ending point. Just
because something is relevant to the current rulemaking does not mean that EPA cannot rely on
rules or policies established in past proceedings without reexamining them.
Third, EPA did not constructively reopen the entire SRE policy. Commenters claim that EPA is
newly proposing to convert SREs into additional burden on obligated parties, totally roughly 770
million RINs in 2020 alone, causing a significant change in the regulatory landscape that could
not have been reasonably anticipated, and thereby constructively reopening the entire SRE
policy. We disagree.
We do not think this change in how we account for SREs — choosing to account for SREs
granted after the final rule in addition to those granted before the final rule — constitutes the
kind of unanticipated "sea change" to the basic regulatory scheme that constructively reopens old
rules. Nat'l Biodiesel Bd. v. EPA, 843 F.3d 1010, 1017 (D.C. Cir. 2016). This is especially
because we also accounted for significant exempted volumes under the old regulation, as in 2010
and 2012. For example, in the 2010 final rule, EPA accounted for exempt gasoline and diesel,
amounting to 11.9% of the gasoline pool and 15.2% of the diesel pool. We also accounted for
significant exempted volumes in establishing the 2012 standards.
178 An issue is not reopened when EPA "in a later rulemaking restates the policy or otherwise addresses the issue
again without altering the original decision," Nat 7 Ass 'n of Reversionary Prop. Owners v. Surface Transp. Bd., 158
F.3d 135, 141 (D.C. Cir. 1998), applies the rule to new facts, see Am. Rd. & Transp. Builders Ass'n v. EPA, 705
F.3d 453, 458 (D.C. Cir. 2013), or takes action on "related aspects" of "abroad subject," NRDC, 571 F.3d at 1266.
Rather, EPA reopens an issue only where it "has—either explicitly or implicitly—undertaken to reexamine its
former choice," Nat'l Biodiesel Bd. v. EPA, 843 F.3d 1010, 1017 (D.C. Cir. 2016): when "the entire context
demonstrates that the agency ha[s] undertaken a serious, substantive reconsideration" of the specific issue. Id.
(quotation marks omitted; alterations in original); see also NARPO, 158 F.3d at 142 (Permitting any affected rule to
be reopened for purposes of judicial review by a rulemaking that does not directly concern that rule would stretch
the notion of final agency action beyond recognition).
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In addition, EPA's policy for accounting for SREs in the annual standards is not a premise of our
SRE policies, such that revision to the former "inextricably" requires reopening of the latter.179
Moreover, we also do not think the change is one that could not have been reasonably anticipated
prior to today's rule.180 Notably, in the 2018 final rule, EPA also solicited comment on how to
consider exempted volumes in the annual rule at that time, reopening this issue then. Although
EPA ultimately chose to adhere to its prior approach, it could have chosen to finalize an
approach similar to what we are finalizing today so as to account for significant exempted
volumes in setting the standards.
Finally, for EPA to constructively reopen an issue, commenters must suffer an onerous burden
from the regulation that they seek to reopen. Sierra Club, 551 F.3d at 1026. As we explain in
Section 2 of this document, we do not believe that higher annual standards impose an onerous
burden on these commenters. Notably, refiners are able to pass through their RFS compliance
costs to their customers.
In sum, these comments are not within the scope of the rulemaking. However, given that
commenters forcibly press these claims and some uncertainty in the governing caselaw, EPA
also chooses to respond on the merits to some of these comments. The merits responses are not
intended to reopen the issue; however, should a reviewing court find an issue to be newly
judicially reviewable for any reason, EPA is providing this response in the record for purposes of
defending its action.
Comment:
Commenters suggested that EPA has abused its discretion by developing the SRE policy via
adjudications and relying on those adjudications to increase the applicable percentage standard
for obligated parties.
Response:
As we explain above, comments on past SRE adjudications and the regulatory process for
adjudicating SREs in 40 CFR 80.1441 are beyond the scope of today's action.
In addition, the commenter seems to be suggesting that because EPA allegedly relied on past
SRE adjudications in this rulemaking, those past adjudications were arbitrary and capricious, and
EPA should have used rulemaking to resolve past SRE petitions. We are aware no principle
indicating that an adjudication that is otherwise reasonable later becomes arbitrary and capricious
because of the agency's reliance on it in a subsequent rulemaking. In any event, as we have
stated above, we are not relying on past SRE decisions to project the exempted volume. We are
only relying on volumes of gasoline and diesel information submitted to us by small refinery
petitioners and DOE's recommended relief regarding such petitions.
179 Sierra Club, 551 F.3d at 1025-26.
180 Id.
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Comment:
Several commenters 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. A commenter claimed that the 2014 rule does not address the issue of
whether "the extension" must be continuous in nature, and instead addresses the definition of
"small refinery."
Response:
As explained above, this issue is not within the scope of the rulemaking. We resolved this issue
in a 2014 final rule modifying 40 CFR 80.1441, and we have not reexamined this issue in this
rulemaking.
In the 2014 final rule, we added 40 CFR 80.1441(e)(2)(iii), which revised the eligibility criteria
for small refinery hardship relief. That regulation states: "In order to qualify for an extension of
its small refinery exemption, a refinery must meet the definition of 'small refinery' in § 80.1401
for the most recent full calendar year prior to seeking an extension and must be projected to meet
the definition of 'small refinery' in § 80.1401 for the year or years for which an exemption is
sought." The regulation does not require small refineries to have received a continuous
exemption, or even to have been continuously eligible for exemptions. Rather, so long as the
small refinery met the definition of "small refinery" in the relevant years and demonstrated
disproportionate economic hardship, relief was available.181
Commenters' claim that the 2014 final rule did not address the statutory term "the extension,"
but instead only addressed the statutory term "small refinery" is incorrect. EPA construed both
terms in promulgating the regulatory amendment. Indeed, the term "extension" appears at least
six times in the section of the preamble explaining the amendment.182
Thus, the 2014 final rule resolved this issue of EPA's authority to grant exemptions to small
refineries that had not been continuously eligible for relief. EPA's projection in this rulemaking
is based upon the regulatory framework as established in that final rule and earlier rules. This
issue is beyond the scope of this rulemaking.
Nonetheless, we provide a merits response for the reasons stated above. On the merits, we
disagree with commenters' claims that EPA may not extend relief to small refineries who have
not continuously received relief since the commencement of the RFS program. Our interpretation
of the statutory language, which allows EPA "to extend" or "make available"183 an exemption is
permissible under the CAA and Chevron v. NRDC. The CAA states that a "small refinery may at
any time petition [EPA] for an extension of the exemption under [CAA section21 l(o)(9)(A)] for
181 See 79 FR 42152 (specifically rejecting EPA's proposed approach that small refineries would need to have been
continuously eligible in every year since 2006 to be eligible for relief).
182 See, e.g., 79 FR 42152 (explaining that a primary motive for the amendment was that "we no longer believe that
it is appropriate that refineries satisfying the 75,000 bpd threshold in 2006 should be eligible for extensions to their
small refinery RFS exemption if they no longer meet the 75,000 bpd threshold" (emphasis added)).
183 Webster's New Third International Dictionary 804 (1986).
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the reason of disproportionate economic hardship." CAA section 21 l(o)(9)(B)(i). The definition
of "small refinery," CAA section 21 l(o)(K)(l), requires only that a facility meet a specified
throughput threshold "for a calendar year." In the RFS1 and RFS2 regulations regarding SREs,
we did not opine on whether an exemption needed to be continuous.184 In 2014, EPA revised its
interpretation of this language to allow eligibility to be determined based on throughput during
the desired exemption period and the year immediately preceding the petition, and specifically
rejected an inquiry focused on throughput from 2006 and all subsequent years.185
Our 2014 interpretation of the eligibility criterion appropriately focuses on the operative phrase
in the "small refinery" definition: "for a calendar year." If Congress meant that a small refinery
must be both eligible for, and received, a small refinery exemption continuously since 2006, it
would have at least required that the definition's throughput threshold not be exceeded for the
current and all preceding years or otherwise indicated a date certain. In other definitions in the
RFS, Congress used specific, identifiable dates to establish eligibility cut-offs.186
We also note that the statute permits EPA to grant SREs "at any time."187 Here, the statute uses
"any" to authorize an exemption of a recurring, annual compliance obligation, to a party that
must show eligibility based on its performance "for a calendar year." Thus, the phrase "at any
time" naturally refers to "any" one of the annual compliance periods and does not require
continuous receipt of the exemption in prior years.
This reading does not conflict with Congress's use of the phrase "temporary exemption" in CAA
section 21 l(o)(9)(A). As an initial matter, the word "temporary" appears in the heading of a
different subparagraph, addressing the initial blanket exemption and those based on DOE's 2011
Study, which apply for specified "calendar" years. CAA section 21 l(o)(9)(B), governing small
refinery petitions, does not contain the word "temporary." Regardless, small refineries seeking
the exemption under CAA section 21 l(o)(9)(B) must apply each compliance year and EPA
typically grants exemptions for only the identified compliance year. Thus, like the exemptions
under CAA section 21 l(o)(9)(A), the exemptions EPA grants under (o)(9)(B) are of limited
duration and therefore temporary.188
That "extension" requires continuousness is not supported by the plain text of the statute. If
Congress had intended to so strictly limit the phrase "at any time," it would have used
unambiguously restrictive language, not the word "extension." "Extend" means "to make
available (as a fund or privilege) often in response to an explicit or implied request; GRANT."
184 See 72 FR 23924-23926 (May 1, 2007), 75 FR 14735-14737 (March 26, 2010).
185 §80.1441(e)(2)(iii).
186 See, e.g., CAA section 21 l(o)(l)(I) (defining "renewable biomass" as "Planted crops and crop residue harvested
from agricultural land cleared or cultivated at any time prior to December 19, 2007"), CAA section 21 l(o)(2)(A)(i)
(requiring that "renewable fuel produced from new facilities that commence construction after December 19, 2007,
achieves" sufficient greenhouse gas reductions).
187 CAA section 21 l(o)(9)(B).
188 Although EPA previously "regarded as eligible for the hardship relief only those refineries that received the
initial statutory exemption" under 42 U.S.C. § 7545(o)(9)(A)(i), EPA has changed its view. EPA's current
interpretation is consistent with a natural reading of the text at §80.1441(e)(2)(iii), as amended in 2014, which
focuses on the small refinery's throughput for the desired exemption period, regardless of whether it qualified for or
received the blanket exemption.
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Webster's New Third International Dictionary 804 (1986). The RFS requirements impose annual
compliance obligations. Small refineries may petition EPA to extend—i.e., make available—the
exemption that Congress permitted in the opening years of the program. Our 2014 regulation
gives effect to the ordinary meaning of both the word "extension" and the phrase "at any
time."189 Commenters suggested that our reliance on the definition of "extend" is misplaced
because the statute uses the term "extension." However, Merriam Webster defines "extension" as
"the action of extending: state of being extended."190 Therefore, looking to the definition of
"extend" is appropriate.
Comment:
Several commenters stated that EPA should not grant any SREs since no refinery suffers
disproportionate economic hardship. These commenters stated that because RIN costs are
recovered by refiners through the market value of products sold, these exemptions create an
unlevel playing field and give the exempted refineries a windfall from avoided compliance costs.
Response:
As explained above, this issue is not within the scope of the rulemaking. EPA as well as DOE,
which has a statutorily-prescribed role in the SRE process, have long considered other factors
besides RIN pass-through in assessing disproportionate economic hardship. This is reflected in
numerous documents since 2011.191 We have not reexamined this choice in this rulemaking, and
this issue is beyond the scope.
Nonetheless, we provide a merits response for the reasons stated above. We agree that obligated
parties are able to recover their RFS compliance costs including the cost of RIN purchases, as
discussed in Section 2.1.3 of this document. As stated there, an exempt small refinery may
experience disproportionate economic hardship even though refineries, including small
refineries, pass their RIN costs to their customers. EPA has never granted a small refinery
exemption because the refinery could not pass through the costs of RINs. Rather, we have found
disproportionate economic hardship for other reasons. The statute authorizes us to determine
"disproportionate economic hardship" broadly, and thus provides us the authority to consider
more than the existence of RIN cost pass-through. Indeed, the statute directs us to evaluate
petitions, in consultation with DOE, and considering the DOE study and "other economic
factors." The DOE study assess many factors aside from RIN costs, and the term "other
economic factors" also suggests that EPA may consider a broad range of economic factors other
than RIN cost pass-through.
189 See Leocal v. Ashcroft, 543 U.S. 1, 12 (2004) ("[W]e must give effect to every word of a statute wherever
possible...").
190 See definition of "extension," available at: https://www.merriam-websfer.com/dictionare/exfension.
191 See, e.g., August 9 Memorandum; 2016 Small Refinery Guidance; 2011 DOE Study; Hermes Consol., LLC v.
E.P.A., 787 F.3d 568 (D.C. Cir. 2015).
187
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Comment:
Many commenters requested that no exemptions should be granted retroactively after the
compliance date has passed. Other commenters requested that EPA establish a deadline by which
all SRE petitions for a given compliance year must be submitted or 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.
Response:
As explained above, this issue is not within the scope of the rulemaking. EPA has long indicated
its view that it has authority to grant exemptions after the compliance deadline. See, e.g., 77 FR
1340. And EPA has not established a deadline for SRE petitions, per 40 CFR 80.1441. We have
not reexamined these issues, and they are therefore beyond the scope of this rulemaking.
Nonetheless, we provide a merits response for the reasons stated above. We do not believe that
granting exemptions after the final rule but before the compliance deadline affects the
reasonableness of our projection. Either way, we would still need to make a projection based on
the information available now.
Requiring all exemptions to be granted before the final rule would obviate the need to make a
projection. However, this approach would be inconsistent with our and DOE's longstanding
approach to evaluating these petitions, which assesses the financial and operational status of the
refinery during the course of the compliance year. It also is not contemplated by our regulation at
40 CFR 80.1441, which does not specify any deadline for an exemption petition to be filed. We
do not think the statute compels this approach to either SRE petitions or to accounting for
exempted volumes in the exempted rule. In all cases, our approach to accounting for exempted
volumes is a reasonable one for the reasons stated in Section VII.B of the final rule.
Comment:
At least 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.
Response:
As explained above, this issue is not within the scope of the rulemaking. Nonetheless, we
provide a merits response for the reasons stated above. To the extent the commenter is
suggesting that EPA should provide a specific small refinery petitioner relief only from one
standard and not another, it is not possible to resolve this issue in this rulemaking as we are not
acting on any SRE petitions here. To the extent the commenter is suggesting that we lack legal
authority to relieve small refineries of all their compliance obligations in an entire year (for all
four standards), that position is foreclosed by the statute. The statute clearly authorizes relief
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from the "requirements of paragraph (2)," which refer to all four renewable fuel categories, and
extension of that relief based on disproportionate economic hardship.192
Comment:
A commenter suggested that EPA is prejudging the 2020 SREs prior to receiving petitions.
Response:
EPA is not adjudicating any 2020 SREs in this action. As we explain in Section VII.B of the
final rule, final decisions on 2020 SREs must await EPA's receipt and adjudication of those
petitions. Instead, we are describing our general policy approach for evaluating 2020 SREs and
establishing a projection of the exempt volume based on that approach and aggregate exemption
data from 2016-18.
Comment:
A commenter suggested that in making its projection of exempt gasoline and diesel, EPA should
use the lowest exempted volume over the past five years which would minimize economic harm
to merchant refiners.
Other commenters suggested that EPA should base its projection only on the most recent year of
small refinery exemptions.
Response:
We find that using a 3-year average of exempt gasoline and diesel is the appropriate method.
While using the lowest exempted volume would have a lesser impact on the percentage standard,
doing so is likely to underestimate the exempt volume of gasoline and diesel in 2020. Relatedly,
we have chosen not to use only the most recent year of small refinery exemptions because in
recent years the exempt volume of gasoline and diesel has fluctuated, and in general, we find that
an average would best account for those fluctuations more so than a single point in time. See
Section VII.B of the final rule for further discussion.
As we explain in Section 2 of this document, we do not believe that this rule will cause economic
harm to merchant refiners or other obligated parties, as refiners are able to pass through the costs
of RFS compliance to their customers.
Comment:
Several commenters also stated that biodiesel imports will increase as a result of increasing the
percentage standards to account for SREs. They suggested that biodiesel imports are very costly.
192 CAA section 2ll(o)(9)(A)(i), (ii), (B)(i); see also CAA section 21 l(o)(9)(D).
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Response:
Parties may choose to utilize imported biodiesel to comply with increased percentage standards.
As we explain in the Market Impacts Memo, it is possible that significantly higher volumes of
biodiesel and renewable diesel could be imported into the US in 2020 relative to 2019. As shown
in Section IV.B.3 of the final rule, the volumes of imported biodiesel and renewable diesel have
also fluctuated over the past years. For further discussion on this topic, see Section 4.2.2.1 of this
document. We acknowledge that biodiesel is generally more expensive than petroleum diesel.
See "Cost Impacts of the Final 2020 Annual Renewable Fuel Standards", available in docket
EPA-HQ-OAR-2019-0136.
Comment:
Many commenters requested that EPA provide additional 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:
Besides the explanations already provided in Section VII.B of the final rule and elsewhere in this
document, we have taken steps outside of this rulemaking to provide additional transparency on
SREs. This includes publishing regularly-updated information on our website as to the number of
petitions we have 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/fuels-
reei strati on-reporting-and-compliance-help/rfs-small-refinery-exemptions.
Comment:
Commenters stated that granting SREs does not impact biofuel blending or cause demand
destruction. Other commenters stated that SREs reduce overall biofuel demand and hurts rural
America. A commenter claimed small refinery exemptions of the RFS were a major factor
contributing to the biodiesel plant closings.
Commenters claimed that EPA is projecting exempted volumes as a result of decreased
renewable fuel use in the market, and that such a justification was inappropriate as there is no
demand destruction due to SREs and increasing the percentage standards to account for SREs
will not result in additional renewable fuel use.
Response:
As explained above, comments about past and future SRE decisions are beyond the scope. We
are not taking action on any small refinery petitions today.
With respect to the comment about the projection, as stated in Section VII of the final rule, we
are projecting exempt volumes of gasoline and diesel in order to better fulfill our obligation to
ensure that the volumes are met under 21 l(o)(2)(A)(i) and (3)(B). We are doing so for the
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reasons stated in Section VII of the final rule, including because exempt volumes of gasoline and
diesel have increased in recent years and we have a prospective policy for adjudicating SREs in
2020. Not projecting exempt volumes of gasoline and diesel would result in less renewable fuel
used for compliance with the 2020 RVO.
We acknowledge that other factors affect the use and production of renewable fuels, and that
even in the absence of the 2020 RFS standards or the RFS program, significant quantities of
renewable fuels would be used and produced.193 However, we do believe that the RFS program
incentivizes the use of certain volumes of renewable fuels that would not otherwise be used. But
this is not the basis for our decision to project exempted volumes. Regardless of whether and
how much biofuels would be produced or used in the absence of incentives provided by the RFS
program, EPA still has a legal obligation to ensure that the renewable fuel volumes are used.
For further discussion, see also sections 7.1.7 (impacts of the RFS program on biodiesel plant
closings), and 7.1.3 (impact of SREs on RIN prices).
Comment:
A commenter suggested that EPA has failed to demonstrate that SREs are "the sole cause" of any
shortfall in the volumes being met, and therefore the proposal lacks factual support. Commenters
pointed to the 2012-2015 compliance years where the volume of RINs retired exceeded the
applicable volumes, and the 2016-2018 compliance years where RIN retirements were nearly
equivalent to the applicable volumes.
Response:
The commenter misunderstands the purpose of our action today, which is to project the exempt
volume of gasoline and diesel in 2020. While past SREs may have resulted in less RINs being
used for compliance in past years, our action today intends to adjust our percentage standard
formula such that when SREs are granted for the 2020 compliance year, those exemptions will
not result in applicable volumes less than what we are promulgating today. While this projection
is based in part on data from 2016-18, we are not reallocating prior exempted volumes for the
2016-18 (or 2012-15) compliance years in today's action. Nor is our projection equal to the
actual volume exempted in 2016-18.
The data provided by commenters specifically for 2018 compliance only indicates that the
market overcomplied in making available more RINs than were required to be retired for
compliance. This has been true for all compliance years since 2014. The 1.43 billion reduction in
RINs required for compliance due to SREs does not equate to a shortfall in the number of RINs
available. Rather, as described in the final rule, SREs have resulted in a reduction in the number
of RINs required to be retired to demonstrate compliance.
193 "Endangered Species Act No Effect Finding for the 2020 Final Rule," memorandum to docket EPA-HQ-OAR-
2019-0136.
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9. Amendments to the RFS Program Regulations
9.1 Clarification of Diesel RVO Calculations
Commenters that provided comment on this topic include but are not limited to: 0118, 0131,
0183, 0185, 0193, 0211, 0213, 0270, 0299, 0323, 0337.
Comment:
Numerous commenters supported EPA's primary proposed approach (downstream redesignation
of certified NTDF to 15 ppm diesel fuel) as proposed, while some commenters supported this
approach with modifications. One commenter supported EPA's first alternative option
(presumptive inclusion of 15 ppm sulfur diesel fuel) as proposed, all other commenters opposed
this option. All commenters opposed EPA's second alternative proposed option (presumptive
exclusion of 15 ppm sulfur diesel fuel).
Response:
We are finalizing our primary proposed approach with modifications, discussed in more detail in
Section IX. A of the final rule and below. We are not finalizing either of the two alternatives.
Comment:
Several commenters stated that these additional provisions are unnecessary, as the market
already generally understands that an RVO is incurred for any positive net annual redesignation
of certified NTDF to 15 ppm diesel fuel, and EPA provided no data to the contrary.
Response:
We are finalizing these provisions to provide the regulated community with more specific
direction regarding how to calculate an RVO for any positive net annual redesignation and to
provide EPA with information to assist in evaluating compliance with these requirements.
Comment:
Several commenters stated that the "reasonable expectation" criteria are vague, subjective, and
difficult to implement.
Response:
The "reasonable expectation" criteria are designed to prevent refiners and importers from
circumventing the requirement to incur an RVO for all transportation fuel by designating all fuel
as non-transportation fuel even if they expect it will be used for transportation purposes. After
considering comments, EPA has modified the criteria it will use to evaluate if a refiner has a
reasonable expectation that its fuel will be used for non-transportation purposes.
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Comment:
Several commenters stated that the proposed PTD language was confusing and contradictory.
Response:
We have simplified the proposed PTD language and now require the following simple statement
on PTDs: "15 ppm sulfur (maximum) certified NTDF - This fuel is designated for non-
transportation use."
Comment:
Several commenters stated that EPA should provide more explanation on how the volume
balances are calculated and to whom they apply.
Response:
We have added an equation to the regulations for calculating volume balances and specified that
the redesignation provisions apply to the certified NTDF product owner at the time of
redesignation. Balances apply to each facility that is registered as a refinery.
Comment:
Several commenters stated that EPA should only require reporting and attest engagements for
refiners at facilities where they incur an RVO.
Response:
We are finalizing requirements for refiners to submit reports and attest engagements at facilities
that redesignate NTDF to 15 ppm diesel fuel, divided into the following 3 cases:
Case 1: Facilities where a refiner incurs no RVO through redesignation, and where the refiner
does not incur an RVO for any activities at any other facilities. For the facility, the only required
report is a brief statement that no RVO was incurred at the facility, and no attest engagement is
required.
Case 2: Facilities where a refiner incurs no RVO through redesignation but performs attest
engagements relating to activities at other facilities. For the facility, the only required report is a
brief statement that no RVO was incurred at the facility, and an attest engagement is required.
Case 3: Facilities where a refiner incurs an RVO through redesignation. For the facility, RFS
compliance reports are required, and an attest engagement is required.
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Comment:
Several commenters stated that EPA should delay implementation of the new redesignation
provisions until January I, 2021 to allow time for updating recordkeeping and reporting
software.
Response:
We agree and are delaying implementation of the redesignation provisions until January 1, 2021.
Comment:
Several commenters stated that EPA should expand the certified NTDF redesignation provisions
to allow refiners to exclude exporter gasoline.
Response:
While we are not at this time expanding the NTDF redesignation provisions to allow refiners to
exclude exporter gasoline, we may consider doing so in the future.
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9.2 Pathway Petition Conditions
Commenters that provided comment on this topic include but are not limited to: 0131, 0211.
Comment:
Several commenters supported the proposed provisions related to EPA's ability to enforce
conditions created by requirements included in an approved pathway petition submitted under
§80.1416.
Response:
We are finalizing these provisions.
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9.3 Esterification Pretreatment Pathway
Commenters that provided comment on this topic include but are not limited to: 0186, 0196,
0211, 0213, 0267, 0313.
Comment:
Numerous commenters supported the addition of esterification and transesterification with
esterification pretreatment as approved production processes for the production of biodiesel.
One commenter stated that further clarification of the feedstock column in Table 1 to §80.1426
may be needed by adding "FFA produced from the listed feedstocks."
Another commenter stated that EPA omitted adding esterification to the existing pathway for
canola oil (Pathway G) and should be added for consistency.
Response:
We are finalizing language that clarifies that transesterification with or without esterification
pretreatment is an approved production process for biodiesel. We are not at this time finalizing
the proposed standalone esterification pathway and as such do not believe an update to the
feedstock category or existing pathways (including the pathways in row G of Table 1 to
§80.1426 ("Table 1")) is necessary at this time.
Comment:
One commenter stated that it is not necessary to enumerate pretreatment or other processing
steps commonly considered part of the larger conversion process for a given pathway, such as
esterification pretreatment as part of the transesterification production process. The commenter
stated that EPA should not set a precedent whereby only enumerated steps are considered part of
the pathway.
Response:
Table 1 sets forth the specific feedstocks, processes, and renewable fuels that must be used to
generate RINs with particular D-codes under EPA's generally applicable pathways. For clarity
we are stipulating in the regulations that the approved pathways in rows F and H include
"transesterification with or without esterification pretreatment." The "production process
requirements" listed in Table 1 have varying levels of specificity based on EPA's determinations
of what requirements are necessary to satisfy the applicable GHG reduction requirements. The
pathways in rows F and H for biodiesel produced from biogenic waste oils, fats, and greases are
based on modeling of yellow grease converted into biodiesel with esterification pre-treatment
and transesterification.194 In general, we endeavor to provide as clear a description as possible of
the fuel, feedstock, and production process requirements when we promulgate a pathway;
194 See 77 FR 700, 723-24 (January 5, 2012).
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however, there may be circumstances where we find subsequent clarification is helpful or
necessary. Our decision to clarify that pathways in rows F and H include "transesterification with
or without esterification pretreatment" is specific to the circumstances of these pathways.
Comment:
One commenter stated that EPA should use more representative data in evaluating the GHG
emissions and qualification for D4 and D5 RINs associated with the esterification pathways. The
commenter recommended that EPA use data from a 2016 NBB survey rather than the 2008 NBB
survey referenced in the proposed rule.
Response:
We agree with the commenter that representative data should be used for lifecycle GHG
analysis. For the March 2010 RFS2 rule we evaluated biodiesel produced from yellow grease via
transesterification with esterification pretreatment and estimated this fuel results in an 86% GHG
reduction relative to the statutory diesel baseline. For the proposed rule we considered data from
a 2008 NBB survey and using more conservative assumptions estimated the same pathway
results in a 71% GHG reduction. We believe these assessments are sufficient to determine that
this and similar fuel pathways satisfy the 50% GHG reduction requirement for biomass-based
diesel. The purpose of lifecycle assessment under the RFS program is not to precisely estimate
lifecycle GHG emissions associated with particular biofuels, but instead to determine whether or
not the fuels satisfy specified lifecycle GHG emissions thresholds to qualify as one or more of
the four types of renewable fuel specified in the statute. Where there are a range of possible
outcomes and the fuel satisfies the GHG reduction requirements when "conservative"
assumptions are used, then a more precise quantification of the matter is not required for
purposes of a pathway determination. We also note that Chen et al. 2018,195 which used data
from the 2016 NBB survey referenced by the commenter, estimated that biodiesel produced from
tallow via transesterification with esterification pretreatment resulted in GHG emissions of
approximately 20 grams of C02-equivalent emissions per megajoule of biodiesel, which is
roughly equivalent to a 78% GHG reduction relative to the diesel baseline. Thus, we are
confident that using the data from the newer NBB survey would not change our determination.
We additionally note that in this rule we are not finalizing standalone esterification pathways, but
rather are providing clarification that the existing transesterification pathways can include an
esterification pretreatment step. This clarification is based on as assumption in the modeling on
which the original promulgation of the transesterification pathways in rows F and H relied;
specifically, an analysis of transesterification of yellow grease to produce biodiesel that included
esterification pretreatment.196
195 Chen, R., et al. (2018). "Life cycle energy and greenhouse gas emission effects of biodiesel in the United States
with induced land use change impacts." Bioresource Technology 251: 249-258.
196 77 FR 700, 723 (January 5, 2012).
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Comment:
One commenter stated that they operate a facility that combines esterification and
transesterification into a single process step that EPA has approved as being sufficiently similar
to the existing transesterification pathway such that a petition for a new pathway was
unnecessary. The commenter requested that EPA omit the word "pre-treatment" from the
proposed process descriptions in order to encompass both esterification as a pre-treatment step
and esterification combined with transesterification in a single process step.
Response:
We are finalizing pathways for "transesterification with or without esterification pretreatment."
We believe the term "pretreatment" should be included, in part because we are not finalizing the
proposed pathways for standalone esterification. These pathway changes are intended to clarify
the existing pathways.
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9.4 Distillers Corn Oil and Distillers Sorghum Oil Pathways
Commenters that provided comment on this topic include but are not limited to: 0213, 0320.
Comment:
One commenter supported adding distillers corn oil and commingled distillers corn oil and
sorghum oil as feedstocks to row I of Table 1 to §80.1426.
Response:
We have finalized the new pathway.
Comment:
One commenter requested that EPA include corn oil from wet milling as an approved feedstock
under the RFS program.
Response:
This comment is beyond the scope of this rulemaking, as we did not evaluate, and thus did not
propose, the use of corn oil from wet milling to produce renewable fuel. Corn oil from wet
milling is produced and processed differently than distillers corn oil and has been and continues
to be used for different purposes than distillers corn oil. Wet mill corn oil is often used for
human food (e.g., cooking oil, baking) whereas distillers corn oil is typically fed to livestock
when not used for biodiesel. For these and other reasons, wet mill corn oil is outside the scope of
what was proposed for this rulemaking.
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9.5 Clarification of the Definition of Renewable Fuel Exporter and Associated
Provisions
Commenters that provided comment on this topic include but are not limited to: 0118, 0131,
0183, 0186, 0211, 0213, 0323.
Comment:
Several commenters supported EPA's desire to ensure that exported renewable fuel is properly
accounted for in the RFS program. Multiple commenters asserted that EPA's targeting of "sham"
transactions where parties knowingly structure transactions to place RIN retirement obligations
on shell companies or other "third parties" is entirely appropriate.
One commenter stated that this update is unnecessary.
Response:
We appreciate commenter support of the objectives of this amendment. We believe it is entirely
appropriate and in fact necessary to update the regulations in order to ensure that RINs are
properly retired in export transactions and avoid situations we have observed where entities
purport to accept RIN retirement obligations but never fulfill those obligations. Therefore, we are
finalizing the renewable fuel exporter amendments as proposed.
Comment:
Several commenters were concerned that the proposed definition for renewable fuel exporter is
too broad and could place liability and burden on multiple parties, including producers and
sellers who may not have control or even knowledge that the product sold was transferred to a
destination outside of the covered location. One commenter said this expanded liability would
increase due diligence requirements.
Several commenters recommended alternative definitions that they felt were narrower than what
EPA proposed and reduced the risk of liability for multiple parties. One commenter suggested
that the definition of "renewable fuel exporter" be updated instead to "the product owner at the
time that the product leaves the covered location," consistent with Tax and Customs
requirements. At least two commenters suggested it be "the party that designated the fuel for
export, i.e., the exporter of record." A third commenter suggested the definition should be
exporter of record unless otherwise agreed to by contract. The party asserted that when the RIN
obligation for an exported biofuel is contractually assigned to a party, and that party fails to retire
RINs as appropriate, the counterparty should not be held liable for of the RIN obligation.
Response:
We disagree that the proposed definition is too broad. As we stated in the proposal, a renewable
fuel producer would only be jointly and severally liable if they knew or had reason to know that
the fuel would be exported. Also, we agree with the comment that joint and several liability will
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increase industry due diligence and we believe this will also ensure proper functioning of the
RFS program.
As discussed in Section IX.E of the final rule, we considered adopting various definitions of
exporter used under other regulations, such as those used in tax and customs requirements, and
we concluded that those alternatives would not fully address the concerns with the current
definition. We disagree with the suggestion that the definition should be exporter of record
unless otherwise agreed to by contract. Using contracts to assign liability to another party,
potentially an insolvent, undercapitalized party, is exactly the kind of arrangement we believe we
need to prevent.
Comment:
At least one commenter requested that EPA provide further clarification about which parties may
or may not be liable, given their concern that the definition was being broadened to include joint
and several liability for any "transaction that results [in renewable fuel being exported]."
(brackets in commenter quote). Specifically, the commenter requested EPA provide additional
examples beyond a "renewable fuel producer who produces a batch of fuel, generates a RIN, and
sells the renewable fuel with attached RINs into the fungible fuel distribution system would not
be considered an exporter of renewable fuel under the proposed definition unless they know or
have reason to know that the batch of fuel would be exported" that would be considered outside
the proposed definition. The commenter stated that "a biodiesel producer selling its product FOB
(free on board) at its plant or local storage terminal as an RFS-fuel, even RIN-less, should be
assured of not being subject to joint and several liability absent knowing or having reason to
know the fuel will be exported."
Response:
We agree with the commenter's proffered example and concur that a biodiesel producer selling
its product FOB at its plant or local storage terminal as an RFS-fuel, even RIN-less, would not be
subject to joint and several liability if that seller did not know or have reason to know that the
fuel would be exported.
Comment:
One commenter asserted that this expanded liability would most likely lead to a reduced pool of
non-obligated customers, such as home heating oil customers who buy RIN-less fuel, for
renewable fuel.
Response:
We disagree with the premise of this comment. If a customer has no intention of exporting
renewable fuel it purchases, then that customer should not be affected by this amendment at all
since none of the exporter provisions or requirements will ever be applicable. If a customer
intends to export the renewable fuel it purchases or wants to maintain the option to export it, the
proposed provisions will not change that party's responsibility from what it was previously.
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9.6 Other Revisions to the RFS and Fuels Programs
9.6.1 Flexibilities for Renewable Fuel Blending for Military Use
Commenters that provided comment on this topic include but are not limited to: REGS-0244,
REGS-0300, REGS-0307, REGS-0313 0118, 0186, 0192, 0196, 0213, 0323.
Comment:
Numerous commenters supported allowing parties that blend renewable fuel to produce
transportation fuel under a national security exemption to delegate their RIN-related
responsibilities to an upstream party. Several of the commenters expressed their support for
providing flexibility and encouraging the broad use of biofuels for military applications.
Response:
We are finalizing these provisions.
Comment:
One commenter requested that EPA specify the particular national security exemptions under 40
CFR part 80 in §80.1440(a)(2).
Response:
We have clarified the regulations to refer specifically to the national security exemptions
provided under §§80.606 and 80.1655.
Comment:
One commenter requested that EPA clarify that renewable fuels used by the military are not
subject to RFS geographic or export provisions.
Response:
The provisions only allow flexibility related to the RIN-related responsibilities outlined in
§80.1440(b). All other statutory and regulatory requirements apply to renewable fuels used by
the military.
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9.6.2 Heating Oil Used for Cooling
Commenters that provided comment on this topic include but are not limited to: REGS-0216,
REGS-0217, REGS-0221, REGS-0224, REGS-0226, REGS-0229, REGS-0232, REGS-0233,
REGS-0244, REGS-0300, REGS-0307, REGS-0313, 0118, 0185, 0186, 0192, 0202, 0213, 0327.
Comment:
Numerous commenters supported expanding the definition of heating oil to include fuels used to
cool interior spaces of homes or buildings to control ambient climate for human comfort.
Response:
We are finalizing this provision.
Comment:
Several commenters requested that EPA further expand the definition of heating oil to include
fuels used in commercial and industrial process applications. The commenters stated that the
same type of fuel used to generate heat for comfort comes from the same central facility
providing process heat, and that this change would strengthen U.S. energy security and reduce
GHG emissions. One of the commenters stated that if a cellulosic fuel is used for process heat,
the cellulosic fuel should be allowed to generate RINs for such uses. Another commenter
requested EPA clarify the treatment of biodiesel used as heating oil for purposes of power
generation or process heat.
Response:
CAA section 21 l(o)(l)(A) defines the term "additional renewable fuel" to mean "fuel that is
produced from renewable biomass and that is used to replace or reduce the quantity of fossil fuel
present in home heating oil or jet fuel." Given that this definition only includes home heating oil
and not heating oil in general, we do believe it would be appropriate to expand the definition of
heating oil to include fuels used for process heat or power generation in commercial and
industrial applications or to allow cellulosic fuels used for process heat to generate RINs for such
uses.
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9.6.3 Separated Food Waste Plans
Commenters that provided comment on this topic include but are not limited to: REGS-0223,
REGS-0300, REGS-0307, REGS-0313, 0118, 0186, 0192, 0196, 0213.
Comment:
Numerous commenters supported EPA's proposed changes to separated food waste plans.
One of the commenters supported allowing producers who have not previously submitted a
separated food waste plan to do so in their next periodic registration.
Response:
We are finalizing this provision.
Comment:
One commenter stated that EPA should not require a separated food waste plan for all biogenic
waste oils/fats/greases, such as animal waste materials and by-products. The commenter stated
that such a plan such a plan would not provide any benefit with respect to biodiesel production,
and that these feedstocks are clearly renewable biomass under the RFS program.
Response:
We believe that the information provided in separated food waste plans and waste
oils/fats/greases feedstock plans is necessary for EPA to determine if the feedstock in question
meets renewable biomass requirements. Without this information, we would not know what the
specific feedstock is (e.g., tallow, yellow grease, etc.) or whether and how it would qualify as
separated food waste or biogenic waste fats/oils/greases.
Comment:
One commenter requested that EPA clarify what criteria it would use to perform a case-by-case
review of separated food waste plans.
Response:
Each plan is reviewed for completeness and adherence to the regulations, including any
definitional requirements.
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9.6.4 Additional Registration Deactivation Justifications
Commenters that provided comment on this topic include but are not limited to: REGS-0266,
REGS-0267, REGS-0300, 0118, 0192, 0323.
Comment:
Several commenters supported the proposed additional registration deactivate justifications.
Response:
We are finalizing the additional justifications.
Comment:
One commenter stated that the deactivation process should be open and transparent, and that
EPA should use discretion and avoid deactivations for situations that could be easily remedied
and result in the company remaining active. The commenter stated that this could be
accomplished by changing 30 days late to 60 days or allowing for an extension to be requested.
The commenter also stated that there should be clearly stated actions/responses and timeframes.
Several commenters expressed concern that the new justifications were overly broad or not well-
defined. The commenters stated that EPA should not deactivate a company for easily correctable
actions, for violations unrelated to the RFS program, or use deactivation provisions to pressure
companies that dispute violations. One of the commenters stated that EPA has not provided
information regarding how the deactivation provisions have operated to date or justification for
expansion of the provisions.
Response:
§80.1450(h)(1) provides that "EPA may deactivate a company's registration... if any of the
following criteria are met." (emphasis added) As is currently our policy for this process, we will
make reasonable attempts to allow a party to correct its deficiency before deactivating its
registration. Given this policy and the process laid out in §80.1450(h)(2), we do not believe that
further flexibilities in the process are warranted. As noted in the REGS proposal, these
deactivation circumstances are consistent with cases where EPA may deny or revoke a certificate
of conformity under 40 CFR 1051.255(c) and 86.442-78 for engines and vehicles manufactured
in or imported into the U.S.
Comment:
One commenter requested that EPA clarify that the failure to pay a penalty is tied to the
"requirements under the terms of a court order, administrative order, consent decree, or
administrative settlement between the company and EPA" in §80.1450(i)(v). The commenter
was concerned that the provision could be misconstrued to allow EPA to deactivate a registration
when a company appeals a notice of violation containing a penalty amount.
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Response:
We believe the existing language is clear that the failure to pay a penalty is tied to the
requirements referenced by the commenter.
Comment:
Several commenters requested that EPA either clarify or remove the reference to "reasonable
assistance" in §80.1450(i)(vii). The commenters stated that the term is ambiguous and creates
uncertainty.
Response:
We believe the existing language is appropriate and that it is appropriate to include "failure to
provide reasonable assistance" as an example of denying EPA access or preventing EPA from
completing authorized activities.
Comment:
One commenter requested that EPA either eliminate the reference to "intent" in §80.1450(i)(ix)
or re-word the paragraph to create a concrete compliance objective.
Response:
We believe the existing language is appropriate and that it would be reasonable to deactivate a
party for attempting to circumvent the intent of the CAA.
Comment:
One commenter stated that EPA must remove references to the registration of third-party
engineers from the deactivation provisions, as that requirement has not yet been finalized.
Response:
We have removed all references to third-party engineers in the final regulations.
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9.6.5 New RIN Retirement Section
Commenters that provided comment on this topic include but are not limited to: REGS-0244,
REGS-0266, REGS-0300, 0118, 0185, 0192.
Comment:
Several commenters supported the consolidation of the RIN retirement requirements into a single
section.
Response:
We are finalizing the new RIN retirement section.
Comment:
Several commenters requested that EPA either eliminate or clarify proposed §80.1434(a)(13),
which specified an "Other" category in which a RIN must be retired for "[a]ny other instance
identified by EPA." One commenter stated the requirement is ambiguous and creates uncertainty
on the part of the regulated community as to when EPA will require retirement of a RIN.
Another commenter stated that proposed §80.1434(a)(13) may be creating uncertainty by
including a general RIN retirement provision that doesn't limit EPA's ability to require
retirement for remedial actions, and that EPA must provide an opportunity for notice and
comment on other reasons it believes require RIN retirements.
Response:
The flexibility under this provision, which is being finalized at §80.1434(a)(l 1), provides EPA
the ability to implement the program as new pathways come online through the petition process,
remedial actions or other emerging requirements. Retirement reasons that fall under "Other" may
include remedial actions such as "Remediation of invalid RIN use for compliance," "Remedial
Action - Retire for Compliance," and "Remedial Action - Retirement pursuant to 80.1431(c)."
Maintaining some flexibility with an "Other" category enables EPA to take into account the full
spectrum of remedial actions.
Comment:
One commenter stated that proposed §80.1434(a)(4) for RIN expiration is inconsistent with
§80.1428(c), and that EMTS can remove the expired RIN rather than having the party taking the
extra step to retire the RIN.
Response:
We agree with the commenter and have removed this requirement.
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Comment:
One commenter opposed proposed §80.1434(a)(8) for retiring RINs for contaminated or spoiled
fuel, which the commenter states is a new requirement and that while that retirement code
already exists in EMTS, it was not previously in the regulations and EPA did not provide
adequate notice and comment opportunity for the change.
Response:
We are finalizing this requirement and disagree that we did not provide adequate notice and
comment opportunity for the change. This provision was included as part of the REGS proposal,
which was proposed in 2016; we provided notice that we were considering finalizing the new
RIN retirement section from the REGS proposal, which included this provision, in the July 29,
2019 proposal.197 Furthermore, this change is simply codifying the existing way in which EPA
has implemented its RIN retirement requirements.
Comment:
One commenter questioned the need to include proposed §80.1434(a)(l 1) and (12) related to
potentially invalid RINs, which the commenter stated are related to retirements for remediation
purposes only and for actions governed by §80.1474, and there should be no confusion on the
part of parties retiring such RINs. The commenter also stated that proposed §80.1434(a)(7)(iii)
includes a similar exclusion for spills or disposals of renewable fuels as in §80.1432(c).
Response:
We have consolidated RIN retirement reasons found across subpart M under the new §80.1434
section. Requirements and procedures specific to these retirement reasons will still be maintained
under existing sections, such as §§80.1432 and 80.1474.
Comment:
One commenter stated that EPA provided an exception for biofuel used in stationary engines in
the proposed §80.1433 that was not carried over in proposed §80.1434.
Response:
We are not at this time finalizing the exception for biofuel used in stationary engines in
§80.1433. Therefore, we have not carried over that exception to §80.1434.
197 84 FR 36762, 36765 (July 29, 2019).
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9.6.6 New Pathway for Co-Processing Biomass with Petroleum to Produce
Cellulosic Diesel, Jet Fuel, and Heating Oil
Commenters that provided comment on this topic include but are not limited to: REGS-0234,
REGS-0267, REGS-0269, REGS-0272, REGS-0275, REGS-0282, REGS-0300, REGS-0311,
0118, 0185, 0192, 0202, 0213, 0323.
Comment:
Several commenters supported creating a new D3 pathway for cellulosic diesel, jet fuel, and
heating oil produced from biomass that is co-processed with petroleum.
Response:
We are finalizing new D3 pathways for cellulosic diesel, jet fuel, and heating oil produced from
biomass that is co-processed with petroleum.
Comment:
Several commenters opposed adding a new pathway for co-processing of renewable biomass
with petroleum. Several of the commenters stated that EPA has not properly conducted a
lifecycle analysis for co-processing and also questioned how this new pathway will interact with
EPA's allowance that only 75% of certain feedstocks need to be cellulosic material to still be
considered cellulosic. One of the commenters stated that it is incorrect to assume that co-
processing will have the same yields, energy consumption, waste stream, and product
composition as a linear combination of the processes individually. The commenter stated that co-
processing of the two types of materials will not be straightforward or easily modeled, and that a
true co-processing facility will be substantially different from both the neat cellulosic fuel
production process it's derived from and a conventional petroleum fuel production process.
Response:
As discussed in Section IX.F.6 of the final rule, we are finalizing a narrower set of pathways than
originally proposed in the REGS proposal. The narrower set of pathways is supported by the
lifecycle GHG analyses completed for the March 2013 Pathway I rule (78 FR 14190) for the
pathways in row M for renewable gasoline and gasoline blendstock. That analysis also supports
the addition of "co-processed cellulosic diesel, jet fuel and heating oil" to row M. The
commenters did not provide any analytical data or emissions modeling results that would support
a different conclusion.
Regarding the comment on the 75% threshold, our regulations regarding the generation of RINs
for pathways using cellulosic biomass co-processed with non-renewable feedstocks (e.g.,
§§80.1426(f)(3), (4), and (15), 80.1450(b)(l)(xiii), and 80.1451 (b)(l)(ii)(U)) were promulgated
in the RFS2 and Pathways II final rules and we did not propose to change them in this action.198
198 See 75 FR 14670 (March 26, 2010) and 79 FR 42128 (July 18, 2014).
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The approval of new pathways in row M of Table 1 does not change or otherwise affect these
existing regulatory requirements.
Comment:
One commenter stated that refiners may overestimate the renewable content of fuels created
through co-processing and that EPA should eliminate the option to use a mass-balance method,
and instead require C14 testing to verify renewable content.
Response:
This comment is beyond the scope of this rulemaking, as we did not propose, nor did we
evaluate, eliminating the option of using a mass balance to determine renewable content for co-
processed renewable fuels. Our regulations regarding co-processed renewable fuels and use of a
mass-balance approach were promulgated in the RFS2 final rule and we did not propose to
change them in this action.199
Comment:
Several commenters stated that Pathway U is insufficient to account for all co-processing of
cellulosic biofuels (namely the co-processing of bio-oils into gasoline products) and requested
that EPA add renewable gasoline and gasoline blendstock to Pathway U. Alternatively, one of
the commenters stated that EPA could instead amend Pathway M to include "Any process that
converts cellulosic biomass to fuel."
Response:
These comments are beyond the scope of this rulemaking, as we did not evaluate or propose
additional production processes for renewable gasoline or gasoline blendstock. The proposal and
supporting evaluation addressed only pathways under which cellulosic biomass is co-processed
with petroleum to produce diesel, jet fuel, or heating oil. Renewable fuel producers that wish to
generate RINs under a pathway not currently approved in Table 1 to §80.1426 should submit a
petition for a facility-specific pathway under §80.1416.
Comment:
Several commenters stated that the definition of cellulosic diesel is confusing and requested that
EPA clarify the definition to read "... heating oil and jet fuel made from cellulosic feedstocks
and renewable fuel produced as a result of co-processing cellulosic renewable biomass with
petroleum."
199 See 75 FR 14714-15, 14874 (March 26, 2010); §80.1426(f)(4).
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Response:
We have revised the definition.
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9.6.7 Other Revisions to the Fuels Program
Commenters that provided comment on this topic include but are not limited to: REGS-0198,
REGS-0244, REGS-0272, REGS-0300, 0118, 0192.
9.6.7.1 Testing Revisions
Comment:
One commenter supported removing the October 28, 2013, sunset date designated primary test
methods.
Conversely, another commenter opposed removing the sunset date, and suggested instead adding
clarifying language to indicate that the designated primary test methods that are in operation after
the sunset date are required to meet the precision requirements in §80.47(n)(2)(i) and accuracy
requirements in §80.47(n)(l)(i).
Response:
We are removing the October 28, 2013, sunset date for designated primary test methods in
§80.47. Thus, the designated primary test methods in §80.46 will be exempt from meeting
accuracy and precision qualification requirements. The designated primary test methods in
§80.46 are still required to meet the applicable statistical quality control (SQC) accuracy and
precision requirements for absolute fuel parameter in §80.47(n) or applicable SQC accuracy and
precision requirements for method defined fuel parameters in §80.47(o). Requiring designated
primary test methods to meet these SQC accuracy and precision requirements will ensure they
operate in practice as intended.
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9.6.7.2 Oxygenate Added Downstream in Tier 3
Comment:
One commenter supported the proposed clarifications for downstream oxygenate blending in the
gasoline sulfur program.
Response:
We have finalized the provisions.
Comment:
One commenter supported adopting similar provisions for the gasoline benzene program—
specifically adopting a default value for the benzene content of denatured fuel ethanol (DFE).
The commenter stated that sampling ethanol at the terminal is burdensome, so having a default
value would be more practical when including downstream oxygenate into the refinery's
compliance calculations.
Response:
While we are not at this time establishing a default value for the benzene content of DFE in this
action, we may consider doing so in the future.
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9.6.7.3 Technical Corrections and Clarifications
Comment:
One commenter suggested several revisions to §80.47(n)(l)(i) and §80.47(o)(l)(i)—specifically:
- Removing the control chart requirements in §80.47(n)(l)(i) and §80.47(o)(l)(i), but
applying the 0.75R criterion to every check standard result. The commenter stated that if
every result is within +/- 0.75R, the average, by definition, must be less than 0.75R.
Adding a requirement in §80.47(n)(l)(i) and §80.47(o)(l)(i) to cease use of the
instrument until the assignable causes are found, mitigated, and, the instrument is verified
to be back inside the accuracy tolerance using a check standard.
Specifying a minimum sulfur level for the gravimetric or check standard between 8-12
PPm.
Response:
We are keeping the requirement of control charts in §80.47(n)(l)(i) and (o)(l)(i). The other two
suggested revisions are beyond the scope of this rulemaking, as we did propose changes to these
provisions. We appreciate these two suggestions for improvements to the SQC accuracy
requirements and may consider implementing them in the future.
Comment:
One commenter identified a typographical error in §80.46(f) in which "Olefin" should be
replaced with "Aromatic."
Response:
We have corrected the error.
Comment:
One commenter requested EPA clarify §80.47(b)(2)(i) and (ii) and §80.47(c)(2)(i) and (ii) with
respect to whether labs should use the discrete value or the calculation based off the repeatability
for ARV of the reference standard.
Response:
We have clarified that the accuracy qualification criteria for sulfur in gasoline in §80.47(b)(2)(i)
and (ii) and sulfur in butane in §80.47(c)(2)(i) and (ii) is to be based off repeatability for ARV of
the commercially available gravimetric sulfur standard.
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Comment:
One commenter stated that since "MR" and "I" charts require 20 points to set up, it may be
difficult if using the round robin for accuracy and may not be necessary if the accuracy is bound
by 0.75R and expanded uncertainty.
Response:
We believe the construction of "MR" and "I" charts is customary business practice that is
necessary to monitor the operation of test method instrumentation in a laboratory to ensure all
test methods are providing reliable test results and are operating in practice as intended. We have
therefore finalized the provision as proposed.
Comment:
One commenter stated that EPA has not provided instruction on how expanded uncertainty is to
be used with respect to §80.47(n)(l)(ii) and (o)(l)(ii) and asked what the significance is of
calculating this value.
Response:
The expanded uncertainty of the ARV is to be incorporated into the accuracy qualification
criterion so the standard error of the ARV in the consensus named fuels is accounted when
compared to 0.75R.200
Comment:
One commenter stated that §80.47(o)(l)(i) provides conflicting instruction, as the ARV is to be
established by the ILCP of the alternative test method, but the user must determine compliance
using control charts with ARVs from the designated test method. The commenter further stated
that the accuracy requirements in §80.47(o)(l)(i) is inconsistent with §80.47(n)(l)(i), (p)(l)(i),
and (p)(2)(i), as the "mean of back-to-back tests" is required to be within 0.75R for these
sections, but §80.47(o)(l)(i) has been changed to be the "absolute difference" of 0.75R, which is
inconsistent and the additional restriction is not necessary.
Response:
The statistical quality control regulations in §80.47(o)(l)(i) were previously silent with respect to
the method used to determine the ARV of the check standard for VCSB method defined
alternative test method validation. We have clarified in the final provision for §80.47(o)(l)(i)
when facilities are using a VCSB alternative method defined test method, the ARV of the check
standard is determined in a VCSB Inter Laboratory Crosscheck Program (ILCP) or a
commercially available ILCP following the guidelines of ASTM D6299. If the ARV is not
provided in the ILCP, accuracy must be assessed based upon the respective EPA-designated test
200 See the Tier 3 final rule (79 FR 23588, April 28, 2014).
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method using appropriate production samples. Moreover, this clarification that the ARV as
determined by the designated primary test method provides an ongoing validation of the D6708
bias correction equation in terms of meeting SQC accuracy criteria. Thus, this clarification
means that if the ARV is not provided by the ILCP, the site using the VCSB or the non-VCSB
alternative test method will compare the D6708 bias-corrected result against the ARV by the
designated primary test method, and this difference must be less than or equal to 0.75R, where
the R is published precision of the designated primary test method.
Comment:
One commenter stated that it was unclear what EPA's intent was in creating a definition of "non-
renewable feedstock."
Response:
While we believe that this term is self-explanatory, we are providing clarity regarding what a
"non-renewable feedstock" is, as this term is used in several locations throughout Subpart M but
was previously undefined.
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10. Other Comments
10.1 Statutory and Executive Order Reviews
Commenters that provided comment on this topic include but are not limited to: 0195, 0323.
Comment:
One commenter stated that EPA should consider the effects of the rule on small fuel retailers as
part of its Regulatory Flexibility Act (RFA) analysis. The commenter argued that fuel retailers
are regulated entities, even though they are not obligated parties. The commenter also cited
comments submitted by the U.S. Small Business Administration (SBA) as part of the
"Modifications to Fuel Regulations to Provide Flexibility for El5; Modifications to RFS RIN
Market Regulations Rule" requesting that EPA consider the impacts on small non-obligated
entities.
Response:
We disagree with the commenter that small fuel retailers should be considered as part of EPA's
RFA analysis. Agencies need conduct Regulatory Flexibility Act analyses only with regard to
small entities that are directly "subject to the proposed regulation—that is, those 'small entities
to which the proposed rule will apply.'"201 The commenter failed to identify any provision of this
rule that regulates small retailers. Indeed, the only entities obligated to comply with annual RFS
standards are refiners and importers (i.e., the obligated parties).202 Thus, the 2020 standards only
apply to obligated parties. The 2021 BBD volume does not impose any obligation until it is
translated into percent standards in next year's annual rule, at which point it will apply only to
obligated parties. Furthermore, we do not expect that any of the regulatory amendments in this
action will apply to small retailers.
In any event, EPA certified that this final rule does not "have a significant economic impact on a
substantial number of small entities." Therefore, EPA is not required to conduct either an initial
or final regulatory flexibility analysis.203 This certification applies both to small refineries (who
are directly regulated by this rule),204 as well as to small retailers. That is, we find that this rule
will not have a significant economic impact on small retailers. EPA has previously received
comments from small retailers claiming that the RFS program, and specifically the point of
obligation, put them at a disadvantage relative to their larger competitors. These small retailers
generally claimed that their larger competitors were generating profits by blending renewable
fuels and selling the RINs associated with these fuels to obligated parties, or that the larger
retailers were able to sell gasoline and diesel fuel at lower prices than the small retailers as a
201 Cement Kiln Recycling Coal. v. EPA, 255 F.3d 855, 867-69 (D.C. Cir. 2001).
202 40 CFR 80.1406(a); see also 42 U.S.C. § 7545(o)(3)(B)(ii)(I) (excluding "distributors" from the list of entities to
whom "[t]he renewable fuel obligation determined for a calendar year... shall be applicable"); ACE, 864 F.3d at
704.
203 5 U.S.C. § 605(b).
204 See "Screening Analysis for the Final Renewable Fuel Standards for 2020," memorandum to docket EPA-HQ-
OAR-2019-0136.
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result of the profits from RIN sales. EPA evaluated these claims in the context of responding to
petitions we received requesting that EPA change the point of obligation in the RFS program.
We determined that small retailers are not disadvantaged by the RFS program, as the profits
larger retailers receive from selling RINs are generally offset by the cost of acquiring the RINs
that they sell. Commenters did not provide any new information or studies to support their claims
that they are being harmed by the current point of obligation.205
Comment:
One commenter stated that EPA's RFA analysis was arbitrarily focused on the impacts of the
program on small refiners/refineries and gives an unfair advantage to these parties through small
refinery exemptions at the expense of small producers of biofuels. The commenter stated that
EPA's RFA analysis was inadequate because it failed to consider the impacts of its substantial
requirements on producers to participate in the RFS program.
Response:
While there are some minor changes to the requirements that apply to renewable fuel producers
in the action (e.g., simplified separated food waste plans), these changes will not meaningfully
affect the compliance burden associated with participating in the RFS program, nor will they
affect most producers. Moreover, while all producers are subject to certain requirements in order
to participate in the RFS program (e.g., recordkeeping and reporting) and gain the benefit of
having their production volume count toward the renewable fuel mandates of the program, it is
not necessary for us to assess these impacts as part of our RFA analysis in the context of setting
the annual volume requirements. The standards we are establishing in this action apply only to
obligated parties and do not affect the requirements or burdens on small producers. Furthermore,
renewable fuel producers are in general the beneficiaries of the RFS program's requirements
placed on obligated parties (i.e., refiners and importers). As such, we have only assessed the
impact of this action on small refiners under our RFA screening analysis.
205 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," EPA-420-R-17-008, November
2017.
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10.2 Point of Obligation
Commenters that provided comment on this topic include but are not limited to: 0193, 0195,
0299, 0324, 0337.
Comment:
Several commenters stated that that EPA must evaluate the point of obligation in each annual
rulemaking, and that EPA has not met its statutory duty to do so.
Response:
The D.C. Circuit reviewed this issue in Alon RefiningKrotz Springs v. EPA, 936 F.3d 628 (D.C.
Cir. 2019). Contrary to these commenters' claims, the Court held that EPA "has no duty to
reconsider the appropriateness of its point of obligation regulation as part of its yearly
determination of volumetric requirements." Id. at 659.
EPA acknowledges that it has discretion to reevaluate the point of obligation in the annual
rulemaking should it choose to do so. EPA did not solicit comment on or otherwise reexamine
this issue in this rulemaking. We decline to reopen this issue and we believe that our recently-
conducted examination of this issue in the Point of Obligation Denial document remains valid.206
In that proceeding, we provided the public with notice and an opportunity to comment on a
proposed denial. We received over 18,000 comments, and carefully evaluated all comments. In
an 85-page final decision, we decided to maintain the existing point of obligation (i.e., refiners
and importers of gasoline and diesel).207 We supported our decision with a comprehensive
analysis of the impacts on fuel refiners, blenders, and retailers, as well as of a vast array of other
economic and regulatory factors.
We acknowledge that we have again received comments asking us to reevaluate or revise the
point of obligation from some parties.208 However, we are not aware of new information or
analyses that warrant our reconsidering this issue at this time. Indeed, commenters asking us to
reevaluate the point of obligation primarily rely on premises that we rejected in the Point of
Obligation Denial. To the extent commenters present new analysis, we do not believe that the
new analysis casts significant doubt on the Point of Obligation Denial. We address these
comments throughout this document, especially in our response to comment regarding severe
economic harm in Section 2.1 of this document. To the extent that parties have simply re-
submitted the same comment on last year's annual rule, we also incorporate last year's response
to those comments by reference.209
206 See "Denial of Petitions for Rulemaking to Change the RFS Point of Obligation," November 22, 2017.
207 40 CFR 80.1406(a).
208 In prior actions, we have received many comments asking us to maintain the current point of obligation. See, e.g.,
comments on our proposed Denial of Petitions for Rulemaking to Change the RFS Point of Obligation (Docket No.
EPA-HQ-OAR-2016-0544).
209 "Renewable Fuel Standard Program - Standards for 2019 and Biomass-Based Diesel Volume for 2020: Response
to Comments," EPA-420-R-18-019, November 2018.
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10.3 Periodic Review
Commenters that provided comment on this topic include but are not limited to: 0337.
Comment:
One commenter claimed that EPA had not fulfilled its duty to conduct periodic reviews since it
has not evaluated the impact of the RFS regulations on individual refineries, especially merchant
refineries that do not seek or qualify for a small refinery hardship waiver but purportedly suffer
severely and disproportionately from the RFS obligations imposed by the rule. The commenter
stated that EPA must evaluate the disparate impact of increased mandates on merchant refineries
who lack control over the physical means to separate RINs necessary to comply.
Response:
EPA has evaluated the impacts of the RFS program on merchant refineries in the context of the
Point of Obligation Denial. We further considered the impacts of this rulemaking on merchant
refineries in responding to requests for a waiver under CAA section 21 l(o)(7)(A) on the basis of
severe economic harm. As discussed further in the Denial, and in Section 2.1.2 of this document,
merchant refiners are not particularly harmed by the RFS program or by this rulemaking.
EPA disagrees that it must evaluate the impact of the RFS regulations on individual refineries in
this annual rulemaking. Nothing in the annual standard-setting process requires EPA to conduct
an analysis of the impacts of the RFS program or the annual rule on all individual refineries. To
the contrary, the statute requires EPA to promulgate renewable fuel standards that apply
uniformly to all non-exempt obligated parties, and it does not distinguish between merchant and
other refiners. 42 U.S.C. § 7545(o)(3)(B)(ii)(III) ("The renewable fuel obligation determined for
a calendar year under clause (i) shall ... consist of a single applicable percentage that applies to
all categories of persons specified in subclause (I)"). Relatedly our waiver authorities address the
waiving of nationally-applicable volumes of renewable fuel, and do not explicitly provide for
exempting particular merchant refineries.210 Thus, given the national nature of the annual
volumes and standards and of our waiver authorities, our analysis is generally based on large-
scale considerations.
The periodic review provision, 42 U.S.C. § 7545(o)(l 1), does not require a different result. As an
initial matter, that provision does not require annual review of anything—it only requires us to
conduct "periodic" reviews.211 As EPA has previously explained, numerous EPA actions,
conducted since the beginning of the program, contribute to satisfying this obligation in the
aggregate. See EPA, Periodic Reviews for the Renewable Fuel Standard Program (Nov. 2017)
210 The statute does allow us to exempt small refineries, and in that context, we do generally consider financial and
operational information specific to the individual small refinery petitioner. We have not adjudicated any SRE
petitions in this action.
211 See Order at 4-5, Small Retailers Coalition v. EPA, 17-cv-00121, Dkt. No. 29 (N.D. Tex. May 21, 2018); Order
at 10-11, Valero Energy Corp. v. EPA, 7:17-cv-00004, Dkt. No. 39 (N.D. Tex. Nov. 28, 2017), appeal docketed, No
18-10053 (5th Cir.).
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("Periodic Review Document"). There is no need for this annual rule, or any specific annual rule,
to individually satisfy the obligation.
In any event, the commenter wrongly claims that this provision requires us to analyze the
impacts of the RFS program or this rule on individual refineries. The relevant portion of the
provision requires EPA to review "the impacts of the requirements in subsection (a)(2) of this
section on each individual and entity described in paragraph (2)." CAA section 21 l(o)(l 1)(C).
EPA explained in the Periodic Review Document that "subsection (a)(2)" of section 211 does not
exist and did not exist at the time EISA was enacted. Moreover, there is no obviously appropriate
way to fix this erroneous cross-reference, with the result that this provision must be considered
inoperative and, as written, does not require EPA to do anything.
EPA further explained in the Periodic Review Document that if the provision should be
salvaged, it should be understood as directing EPA to periodically review the impacts of the RFS
volume requirements on refineries, blenders, distributors, and importers, as well as on consumers
of transportation fuel. The commenter does not disagree with this view.
However, the commenter's interpretation of the statute, taken to its logical extension, would
require EPA to review impacts not just on these classes of individuals and entities but on every
single member of these classes: each refinery, blender, distributor, importer, and consumer of
transportation fuel. The suggestion that EPA should have conducted an individualized inquiry
into the impacts on the volume requirements of the RFS program on every single member of
these classes leads to an absurd result that would render the statute unadministrable. This would
require EPA to request, collect, and review information—potentially including confidential
business information that is not already available to EPA—from numerous businesses and
consumers, and would grind EPA's administration of the RFS program to a halt. There is no
textual basis for distinguishing refiners from the other classes, so as to only require
individualized analysis of refineries but not of the other classes. In any event, even conducting an
annual, individualized impacts analysis of every regulated refinery would severely hamper
EPA's administration of the program, particularly given the statutory directive to establish
volumes and standards on an annual basis by November 30 of the preceding year.212
The text, structure, and purpose of the periodic review provision all support reviewing the
impacts of the volume requirements on a class-level. The purpose of EPA's periodic reviews is
to inform EPA's "appropriate adjustment" of the statutory volumes, CAA section 21 l(o)(l 1),
which form the basis of percentage standards that apply equally to all obligated parties, CAA
section 21 l(o)(3)(B)(ii)(III). As already explained, EPA makes this adjustment based on large-
scale considerations, not the impact of the requirements on any individual company. See, e.g.,
CAA section 211 (o)(7)(A) (general waiver based on "severe[ ] harm [to] the economy or
environment of a State, a region, or the United States'' or "inadequate domestic supply"
(emphasis added)); id. (o)(7)(D) (cellulosic waiver based on total "projected volume available");
id. (o)(7)(E); id. (o)(7)(F); id. (o)(2)(B)(ii) (direction to set volumes not listed in table based on
six factors). To the extent commenters believe that harm to individual refineries shapes how EPA
exercises these authorities, they may comment accordingly. For example, on the 2019 rule,
commenters alleged that harm to an individual refiner would result in harm to the economy of
212 CAA section 21 l(o)(3)(B), (7)(D)(i).
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the region and State the refiner was located in, and we addressed this comment in considering
whether to exercise the severe economic harm waiver.213
Moreover, a class-level review of the impacts on the entities described by the statute is also
consistent with the text of the statute. Section 21 l(o)(2) "describes" the "individuals and entities"
subject to the "impacts" review,214 but it does so in terms of broad classes: "refineries, blenders,
distributors, and importers" and "consumers of transportation fuel."215 The import of these
provisions is, therefore, that EPA should evaluate the impacts on "each" of these five entities as a
class, not that it must evaluate each member of each entity described in CAA section 21 l(o)(2).
To the extent the commenter disagrees with the point of obligation, we address that issue in
Section 10.2 of this document. We note, moreover, that CAA section 21 l(o)(l 1) creates no duty
to periodically review the point of obligation. It provides that EPA is to conduct periodic reviews
of certain matters—none of which is the point of obligation—for the specific purpose of
informing the "appropriate adjustment of the requirements described in subparagraph (B) of
paragraph (2)."216 The statutory cross-reference is to CAA section 21 l(o)(2)(B), the annual
volume requirements, not the point of obligation.
213 "Renewable Fuel Standard Program - Standards for 2019 and Biomass-Based Diesel Volume for 2020: Response
to Comments" 18, EPA-420-R-18-019, November 2018 (considering alleged harm to Philadelphia Energy
Solutions).
214 CAA section 21 l(o)(ll)(C).
215 CAA section 21 l(o)(2)(A)(iii)(I).
216 CAA section 21 l(o)(ll).
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10.4 Beyond the Scope
Commenters that provided comment on this topic include but are not limited to: 0119, 0131,
0184, 0191, 0193, 0202, 0206, 0207, 0212, 0276, 0283, 0286, 0288, 0290, 0298, 0299, 0300,
0306, 0319, 0320, 0324, 0337, 0449, 0471, 0490, 0493, 0721, 0729.
Comment:
Commenters addressed numerous additional topics, including but not limited to the following:
- Nationwide mandate for El 5
Introduction of new mid- and higher-level ethanol blends into the market
- 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, modifying the aggregate compliance
provision, and implementing RIN trading reforms
- Updates to EPA's lifecycle analyses
Suggestions for new RIN-generating pathways including renewable electricity
- Pending facility registration requests and pathway petitions
Impacts of ethanol on engines
Changes to the El5 misfueling mitigation plans
- Potential future RFS rulemakings such as the "reset rule"
- Provisions proposed in the REGS Rule that were not under consideration in this action,
including biointermediates and ethanol flex fuel
Response:
These comments are all beyond the scope of this rulemaking. While we did propose several
changes to the RFS program as part of this action, we did not propose any of the changes
described above or otherwise seek comment on these issues. These topics are not further
addressed in this document.
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