[Federal Register Volume 78, Number 158 (Thursday, August 15, 2013)]
[Rules and Regulations]
[Pages 49794-49830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19557]



[[Page 49793]]

Vol. 78

Thursday,

No. 158

August 15, 2013

Part II





Environmental Protection Agency





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40 CFR Part 80





Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards; 
Final Rule

  Federal Register / Vol. 78, No. 158 / Thursday, August 15, 2013 / 
Rules and Regulations  

[[Page 49794]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2012-0546; FRL-9834-5]
RIN 2060-AR43


Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel 
Standards

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Under section 211(o) of the Clean Air Act, the Environmental 
Protection Agency is required to set the renewable fuel percentage 
standards each November for the following year. Today's action sets the 
annual percentage standards for cellulosic biofuel, biomass-based 
diesel, advanced biofuel, and renewable fuels that apply to all motor 
vehicle gasoline and diesel produced or imported in the year 2013. In 
general the standards are designed to ensure that the applicable 
national volumes of renewable fuel specified in the statute are used. 
For cellulosic biofuel, the statute specifies that EPA is to project 
the volume of production and must base the cellulosic biofuel standard 
on that projected volume if it is less than the applicable volume set 
forth in the Act. Today EPA is finalizing a cellulosic biofuel volume 
for 2013 that is below the applicable volume specified in the Act. EPA 
is also leaving the applicable volumes of advanced biofuel and total 
renewable fuel at the statutory levels for 2013 based on its assessment 
of the availability of renewable fuel for compliance purposes.

DATES: This final rule is effective on August 15, 2013.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-OAR-2012-0546. All documents in the docket are listed in the 
www.regulations.gov index. Although listed in the index, some 
information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, will be publicly available only in hard copy. 
Publicly available docket materials are available either electronically 
in www.regulations.gov or in hard copy at the Air and Radiation Docket 
and Information Center, EPA/DC, EPA West, Room 3334, 1301 Constitution 
Ave. NW., Washington, DC. The Public Reading Room is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744, and the 
telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of 
Transportation and Air Quality, Assessment and Standards Division, 
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 
48105; Telephone number: 734-214-4131; Fax number: 734-214-4816; Email 
address: [email protected], or the public information line for 
the Office of Transportation and Air Quality; telephone number (734) 
214-4333; Email address [email protected].

SUPPLEMENTARY INFORMATION:

General Information

Does this action apply to me?

    Entities potentially affected by this final rule are those involved 
with the production, distribution, and sale of transportation fuels, 
including gasoline and diesel fuel or renewable fuels such as ethanol 
and biodiesel. Potentially regulated categories include:

----------------------------------------------------------------------------------------------------------------
                                                                               Examples of potentially regulated
                 Category                   NAICS \1\ Codes    SIC \2\ Codes                entities
----------------------------------------------------------------------------------------------------------------
Industry.................................            324110              2911  Petroleum Refineries.
Industry.................................            325193              2869  Ethyl alcohol manufacturing.
Industry.................................            325199              2869  Other basic organic chemical
                                                                                manufacturing.
Industry.................................            424690              5169  Chemical and allied products
                                                                                merchant wholesalers.
Industry.................................            424710              5171  Petroleum bulk stations and
                                                                                terminals.
Industry.................................            424720              5172  Petroleum and petroleum products
                                                                                merchant wholesalers.
Industry.................................            454319              5989  Other fuel dealers.
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\1\ North American Industry Classification System (NAICS).
\2\ Standard Industrial Classification (SIC) system code.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
final action. This table lists the types of entities that EPA is now 
aware could potentially be regulated by this action. Other types of 
entities not listed in the table could also be regulated. To determine 
whether your activities will be regulated by this action, you should 
carefully examine the applicability criteria in 40 CFR part 80. If you 
have any questions regarding the applicability of this action to a 
particular entity, consult the person listed in the preceding section.

Outline of This Preamble

I. Executive Summary
    A. Purpose of This Action
    B. Summary of Major Provisions in This Notice
    1. Cellulosic Biofuel Volume for 2013
    2. Advanced Biofuel and Total Renewable Fuel in 2013
    3. Applicable Volumes Used To Set the Annual Percentage 
Standards for 2013
    4. Applicable Percentage Standard for Cellulosic Biofuel in 2012
    5. Administrative Actions
    C. Effective Date
    D. Impacts of Final Actions
II. Projection of Cellulosic Biofuel Volume for 2013
    A. Statutory Requirements
    B. Status of the Cellulosic Biofuel Industry
    C. Cellulosic Biofuel Volume Assessment for 2013
    1. Comments on the Proposed Rule
    2. Projections From the Energy Information Administration
    3. Current Status of Cellulosic Biofuel Production Facilities
    4. Other Potential Sources of Domestic Cellulosic Biofuel
    5. Imports of Cellulosic Biofuel
    6. Summary of Volume Projections
    D. Cellulosic Biofuel Volume for 2013
III. Assessment of Advanced Biofuel and Total Renewable Fuel for 
2013
    A. Statutory Authorities for Reducing Volumes
    1. Cellulosic Waiver Authority
    2. General Waiver Authority
    3. Modification of Applicable Volumes for 2016 and Beyond
    B. Available Volumes of Advanced Biofuel in 2013
    1. Biomass-Based Diesel
    a. Feedstocks
    i. Feedstock Availability
    ii. Impacts From Feedstock Use
    b. Limitations in the Use of Biodiesel
    2. Domestic Production of Advanced Biofuel Other Than Biomass-
Based Diesel and Cellulosic Biofuel
    3. Imported Sugarcane Ethanol
    a. Brazilian Ethanol Export Capacity
    i. Brazilian Sugarcane and Ethanol Production Capacity
    ii. Brazilian Domestic Demand for Ethanol
    iii. Additional Market Factors

[[Page 49795]]

    b. United States-Brazil Ethanol Trade
    i. Direct Transportation Emissions
    ii. Indirect Emissions
    C. Compliance With the Total Renewable Fuel Standard in 2013
    D. Final Applicable Volume Requirements for 2013
    E. Volume Requirements for 2014
IV. Applicable Percentage Standards for 2013
    A. Background
    B. Calculation of Standards
    1. How are the standards calculated?
    2. Small Refineries and Small Refiners
    3. Final Standards
V. Annual Administrative Announcements
    A. 2013 Price for Cellulosic Biofuel Waiver Credits
    B. Assessment of the Domestic Aggregate Compliance Approach
    C. Assessment of the Canadian Aggregate Compliance Approach
    D. Vacatur of 2012 Cellulosic Biofuel Standard
VI. Comments Outside the Scope of This Rulemaking
VII. Public Participation
VIII. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health Risks and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
IX. Statutory Authority

I. Executive Summary

    The Renewable Fuel Standard (RFS) program began in 2006 pursuant to 
the requirements in Clean Air Act (CAA) section 211(o) which were added 
through the Energy Policy Act of 2005 (EPAct). The statutory 
requirements for the RFS program were subsequently modified through the 
Energy Independence and Security Act of 2007 (EISA), resulting in the 
publication of major revisions to the regulatory requirements on March 
26, 2010.\1\
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    \1\ 75 FR 14670
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    The national volumes of renewable fuel to be used under the RFS 
program each year (absent an adjustment or waiver by EPA) are specified 
in CAA section 211(o)(2). The volumes for 2013 are shown in Table I-1.

  Table I-1--Required Applicable Volumes in the Clean Air Act for 2013
                               [Bill gal]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel............................................   \a\ 1.0
Biomass-based diesel..........................................       \b\
                                                                   >=1.0
Advanced biofuel..............................................  \a\ 2.75
Renewable fuel................................................       \a\
                                                                   16.55
------------------------------------------------------------------------
\a\ Ethanol-equivalent volume.
\b\ Actual volume. The ethanol-equivalent volume would be 1.5 if
  biodiesel is used to meet this requirement.

    Under the RFS program, EPA is required to determine and publish 
annual percentage standards for each compliance year by November 30 of 
the previous year.\2\ The percentage standards are used by obligated 
parties (refiners and importers) to calculate their individual 
compliance obligations. The percentage standards are applied to the 
volume of gasoline and/or diesel fuel that each obligated party 
produces or imports during the specified calendar year to determine the 
volumes of renewable fuel that must be used as transportation fuel, 
heating oil or qualifying fuel oil, or jet fuel. The percentage 
standards are calculated so as to ensure use in transportation fuel of 
the national ``applicable volumes'' of four types of biofuel 
(cellulosic biofuel, biomass-based diesel, advanced biofuel, and total 
renewable fuel) that are either set forth in the Clean Air Act or 
established by EPA in accordance with the Act's requirements.
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    \2\ The delay in the release of this final rule is addressed in 
more detail in Section I.C below.
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    The cellulosic biofuel industry is transitioning from research and 
development (R&D) and pilot scale to commercial scale facilities, 
leading to increases in production capacity. Construction has begun on 
several facilities with multiple facilities having progressed to the 
start-up phase. Based on information from the Energy Information 
Administration (EIA), detailed information from biofuel production 
companies and a consideration of various potential uncertainties, as 
well as the comments we received on the Notice of Proposed Rulemaking 
(NPRM),\3\ we are projecting that 6 million ethanol-equivalent gallons 
of cellulosic biofuel will be available in 2013.
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    \3\ 78 FR 9282, February 7, 2013.
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    We have evaluated the types of advanced biofuels that can be 
produced or imported in 2013, including biodiesel, renewable diesel, 
biogas, heating oil, sugarcane ethanol, and others. While there is some 
uncertainty in the projected availability of advanced biofuel in 2013, 
we have determined that volumes to meet the statutory applicable volume 
of 2.75 bill gal should be sufficiently available. In addition, the 
combination of available volumes of advanced and non-advanced biofuel 
\4\ from both domestic and foreign sources, the ability of the 
transportation sector to consume some quantity of ethanol in blend 
levels higher than E10, and carryover Renewable Identification numbers 
(RINs) from 2012 has led us to conclude that the statutory volumes for 
both advanced biofuel and total renewable fuel can be met in 2013. As a 
result, we are not reducing the national applicable volumes in the 
statute for either advanced biofuel or total renewable fuel volume of 
16.55 bill gal.
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    \4\ Non-advanced is composed primarily of corn ethanol, but may 
also include such things as biodiesel produced in facilities that 
are grandfathered under Sec.  80.1403.
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A. Purpose of This Action

    EPA is today setting annual percentage requirements for obligated 
parties for cellulosic biofuel, biomass-based diesel, advanced biofuel, 
and total renewable fuel for 2013. Table I.A-1 lists the statutory 
provisions and associated criteria relevant to determining the national 
applicable volumes used to set the annual percentage standards in 
today's final rule.

                    TABLE I.A-1--Statutory Provisions for Determination of Applicable Volumes
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                                                                 Criteria provided in statute for determination
          Applicable volumes           Clean Air Act reference                of applicable volume
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Cellulosic biofuel in 2013...........  211(o)(7)(D)(i)........  Required volume must be lesser of volume
                                                                 specified in CAA 211(o)(2)(B)(i)(III) or EPA's
                                                                 projected volume.

[[Page 49796]]

 
Advanced biofuel in 2013.............  211(o)(7)(D)(i)........  If applicable volume of cellulosic biofuel is
                                                                 reduced to the projected volume, EPA may reduce
                                                                 advanced biofuel and total renewable fuel by
                                                                 the same or lesser volume. No other criteria
                                                                 specified.
Total renewable fuel in 2013.........  211(o)(7)(D)(i)........  If applicable volume of cellulosic biofuel is
                                                                 reduced to the projected volume, EPA may reduce
                                                                 advanced biofuel and total renewable fuel by
                                                                 the same or lesser volume. No other criteria
                                                                 specified.
----------------------------------------------------------------------------------------------------------------

    EPA must annually determine the projected volume of cellulosic 
biofuel production for the following year. If the projected volume of 
cellulosic biofuel production is less than the applicable volume 
specified in section 211(o)(2)(B)(i)(III) of the statute, EPA must 
lower the applicable volume used to set the annual cellulosic biofuel 
percentage standard to the projected volume of production available 
during the year. In today's final rule, we present our analysis of 
cellulosic biofuel production and final projected volume for 2013. The 
analyses that led to the 2013 applicable volume requirement were based 
on our evaluation of EIA's projection for 2013, individual producers' 
production plans and progress to date, and comments received in 
response to the NPRM.
    When we lower the applicable volume of cellulosic biofuel below the 
volume specified in CAA 211(o)(2)(B)(i)(III), we also have the 
authority to reduce the applicable volumes of advanced biofuel and 
total renewable fuel by the same or a lesser amount. Today's action 
includes our consideration of the 2013 volume requirements for these 
biofuels.
    In today's final rule we have also set the annual percentage 
standards (shown in Section I.B.3 below) that will apply to all 
producers and importers of gasoline and diesel in 2013. The percentage 
standards are based on the 2013 applicable volumes for the four types 
of renewable fuel and a projection of volumes of gasoline and diesel 
consumption in 2013 from the Energy Information Administration (EIA).

B. Summary of Major Provisions in This Notice

1. Cellulosic Biofuel Volume for 2013
    The cellulosic biofuel industry in the United States continues to 
make advances in its progress towards large scale commercial 
production. Ongoing research and development work has resulted in 
increasing product yields, while at the same time lowering enzyme and 
catalyst costs. New supply chains have been developed, and several 
companies have reached contract agreements to provide the necessary 
feedstock for large scale cellulosic biofuel production facilities. 
Companies are continuing to invest significant sums of money to further 
refine cellulosic biofuel production technology and to construct the 
first commercial scale facilities. From 2007 through the second quarter 
of 2012 over $3.4 billion was invested in advanced biofuel production 
companies by venture capitalists alone.\5\ For more information on the 
current status of the cellulosic biofuel industry in the United States 
and the advances being made, see Section II.B.
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    \5\ Solecki M, Dougherty A, Epstein B. Advanced Biofuel Market 
Report 2012: Meeting U.S. Fuel Standards. Environmental 
Entrepreneurs. September 6, 2012. Available Online http://www.e2.org/ext/doc/E2AdvancedBiofuelMarketReport2012.pdf.
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    2013 is also expected to be a year of transition for the cellulosic 
biofuel industry, as several companies are shifting their focus from 
technology development to commercialization. This transition began in 
2012 with the production of the first cellulosic RINs under the current 
regulations and the completion of construction at commercial scale 
production facilities from INEOS Bio and KiOR. KiOR announced the 
shipment of the first renewable transportation fuel produced from their 
Columbus, MS facility on March 18, 2013. INEOS Bio is expected to begin 
producing fuel from their Vero Beach, FL facility in the summer of 
2013. Abengoa, one of the largest producers of ethanol in the United 
States, is planning to begin producing cellulosic ethanol at commercial 
scale later in 2013 or early 2014. Several others companies, including 
DuPont and Poet, expect to be constructing their first commercial scale 
facilities in 2013, with the intention of beginning production in 2014. 
If these facilities are able to operate as anticipated, it would 
represent significant further progress in the commercial viability of 
cellulosic biofuel production.
    As part of estimating the volume of cellulosic biofuel that would 
be made available in the U.S. in 2013, we researched all potential 
production sources by company and facility. This included sources that 
were still in the planning stages, those that were under construction, 
and those that are already producing some volume of cellulosic ethanol, 
cellulosic diesel, or some other type of cellulosic biofuel. Facilities 
primarily focused on research and development were not the focus of our 
assessment as production from these facilities represents very small 
volumes of cellulosic biofuel, and these facilities typically have not 
generated RINs for the fuel they have already produced. From this 
universe of potential cellulosic biofuel sources we identified the 
subset that could be producing commercial volumes of qualifying 
cellulosic biofuel for use in 2013. To arrive at a projected volume for 
each facility, we took into consideration EIA's projections and factors 
such as the current and expected state of funding, the status of the 
technology utilized, progress towards construction and production 
goals, and other significant factors that could potentially impact fuel 
production or the ability of the produced fuel to qualify for 
cellulosic biofuel Renewable Identification Numbers (RINs) in 2013. 
Further discussion of these factors can be found in Section II.B.
    In our assessment we focused on domestic sources of cellulosic 
biofuel. At the time of this final rule no internationally-based 
cellulosic biofuel production facilities have registered under the RFS 
program and therefore no volume from international producers has been 
included in our projections for 2013. Of the domestic sources, we 
estimated that up to four facilities may produce commercial scale 
volumes of cellulosic biofuel available for use as renewable fuel in 
the U.S. in 2013. Two of these four facilities have made sufficient 
progress to project that commercial scale production from these two 
facilities will occur in 2013, and we have therefore included 
production from them in our projected available volume for 2013. All 
four facilities are listed in Table I.B.1-1 along with our estimate of 
the projected 2013 volume for each.

[[Page 49797]]



                Table I.B.1-1--EPA Projected Available Cellulosic Biofuel Plant Volumes for 2013
----------------------------------------------------------------------------------------------------------------
                                                                                                  Projected 2013
           Company                 Location        Fuel type     Capacity (mill       First          available
                                                                  gal per year)     production      volume \a\
----------------------------------------------------------------------------------------------------------------
Abengoa......................  Hugoton, KS....  Ethanol........              24  1Q 2014 \b\....               0
Fiberight....................  Blairstown, IA.  Ethanol........               6  1Q 2014 \b\....               0
INEOS Bio....................  Vero Beach, FL.  Ethanol........               8  Mid 2013.......             0-1
KiOR.........................  Columbus, MS...  Gasoline and                 11  March 18, 2013.             5-6
                                                 Diesel.
                                                                ------------------------------------------------
    Total....................  ...............  ...............              49  ...............               6
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\a\ Volumes listed in million ethanol-equivalent gallons.
\b\ Start-up dates for these facilities are projections.

    The EIA projections,\6\ variation in expected start-up times, along 
with the facility production capacities, company production plans, the 
progress made in the first half or 2013, and a variety of other factors 
have all been taken into account in predicting the actual volume of 
cellulosic biofuel that will be available for use in 2013. For more 
detailed information on our projections of cellulosic biofuel in 2013 
and the companies we expect to produce this volume see Section II.
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    \6\ EPA received a letter from Adam Sieminski, EIA administrator 
on October 18, 2012 containing cellulosic biofuel projections for 
2013 and a letter updating to these projections from A. Michael 
Schaal, Director of the office of Petroleum, Natural Gas, and 
Biofuels Analysis, EIA on May 8, 2013. Both of these letters are 
discussed in further detail in Section II.
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2. Advanced Biofuel and Total Renewable Fuel in 2013
    The statute authorizes EPA to reduce the applicable volume of 
advanced biofuel and total renewable fuel specified in the statute if 
we reduce the applicable volume of cellulosic biofuel for a given year 
below the statutory applicable volume specified in Section 
211(o)(2)(B)(i)(III). As shown in Table I.B.1-1, for 2013 we have 
projected cellulosic biofuel production at 6 million ethanol-equivalent 
gallons, significantly less than the applicable volume of 1.0 bill gal 
set forth in the statute. Therefore, we have also evaluated whether to 
lower the applicable volumes for advanced biofuel and total renewable 
fuel. The statute provides no explicit criteria or direction for making 
this determination. As in the proposed rule, we have focused our 
evaluation for this final rule on the availability of renewable fuels 
that would qualify as advanced biofuel and renewable fuel, the ability 
of those fuels to be consumed, and carryover RINs from 2012. We also 
considered the many comments received on our proposed approach, 
including suggested alternative approaches. Comments related to the 
advanced biofuel standard and our responses to those comments are 
discussed in Section III of this preamble.
    The CAA specifies an applicable volume of 2.75 bill gal of advanced 
biofuel for 2013. To determine whether to lower this volume, we 
considered the sources that are expected to satisfy any advanced 
biofuel mandate including: cellulosic biofuel, biomass-based diesel, 
other domestically-produced advanced biofuels, and imported sugarcane 
ethanol.
    As described in Section II, we project that 6 mill gallons of 
cellulosic biofuel will be available in 2013. This volume will fulfill 
0.006 bill gal of the 2.75 bill gal advanced biofuel requirement.
    We established an applicable volume of 1.28 bill gal for 2013 
biomass-based diesel in a separate action,\7\ an increase from the 1.0 
bill gal minimum provided in the statute. We expect that this 
requirement will be fulfilled primarily with biodiesel.\8\ Since 
biodiesel has an Equivalence Value of 1.5, 1.28 billion physical 
gallons of biodiesel will provide 1.92 billion ethanol-equivalent 
gallons that can be counted towards the advanced biofuel standard of 
2.75 bill gal. Additional volumes of biomass-based diesel are also 
possible based on our assessment of available feedstocks and production 
capacity, potentially up to 500 mill gal ethanol-equivalent.
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    \7\ 77 FR 59458, September 27, 2012.
    \8\ Some quantity of renewable diesel is also likely to be used 
towards satisfying the biomass based diesel standard
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    As described in more detail in Section III, we have projected that 
domestic advanced biofuels are expected to grow steadily through 2013, 
and would include renewable diesel that does not qualify to be biomass-
based diesel,\9\ heating oil, biogas used as CNG, and ethanol. We are 
projecting that up to about 250 mill gal of such domestic advanced 
biofuels could be available in 2013, which will count towards the 2.75 
bill gal advanced biofuel requirement.
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    \9\ Biomass-based diesel is defined in the statute to exclude 
renewable fuel that is co-processed with petroleum. Thus, fuel 
derived from biogenic waste oils or fats that is made through co-
processing with petroleum does not qualify as biomass-based diesel 
but could, assuming other definitional requirements are satisfied, 
qualify as advanced biofuel.
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    After taking into account cellulosic biofuel, biomass-based diesel, 
and domestic advanced biofuel described above, the volume of imported 
sugarcane ethanol that will be needed to meet the statutory advanced 
biofuel volume of 2.75 bill gal could be significantly below the 670 
mill gal that we projected would be needed in the NPRM. The U.S. 
imported a total of 575 mill gal of ethanol in 2012, and most 
projections indicate that Brazilian sugarcane crop yields will be 
significantly better in the coming harvest (2013/2014, which began in 
April 2013) in comparison to the previous harvest. Since there is a 
high likelihood that the total volume of all advanced biofuels that can 
be produced or imported in 2013 is above the 2.75 bill gal statutory 
volume, we do not believe that the advanced biofuel requirement should 
be reduced.
    We believe there will be sufficient volumes of conventional 
renewable fuel including corn ethanol, combined with advanced biofuel, 
to satisfy the 16.55 bill gallon applicable volume of total renewable 
fuel specified in the Act. For instance, current corn ethanol 
production capacity is 14.5 bill gal, compared to the 13.8 bill gal 
needed to meet the RFS requirements in 2013.\10\ There will also be a 
significant number of carryover RINs available from 2012 that can be 
used in lieu of actual volume in 2013 and which are sufficient in 
number to address limitations in consumption of ethanol blends higher 
than E10 or limitations in volumes brought about through the 2012 
drought. Therefore, as discussed in more detail in Section III below, 
we are not reducing the advanced biofuel volume requirement of 2.75 
bill gal or the total renewable fuel volume requirement of 16.55 bill 
gal.
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    \10\ Based on facilities registered as corn ethanol producers 
under the RFS program.

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[[Page 49798]]

    However, we believe that delaying the compliance demonstration for 
the 2013 compliance period would alleviate some of the concerns that 
obligated parties have regarding the tardiness of the final rule and 
its effect on their decisions regarding RIN acquisition. Therefore, we 
are extending the RFS compliance deadline for the 2013 RFS standards 
from February 28, 2014 to June 30, 2014.
    As described in the NPRM, we recognize that ethanol will likely 
continue to predominate in the renewable fuel pool in the near future, 
and that for 2014 the ability of the market to consume ethanol as E15-
E85 is constrained in a number of ways. We believe that it will be 
challenging for the market to consume sufficient quantities of ethanol 
sold in blends greater than E10 and to produce sufficient volumes of 
non-ethanol biofuels (biodiesel, renewable diesel, biogas, etc.) to 
reach the mandated 18.15 bill gal for 2014. Given these challenges, EPA 
anticipates that adjustments to the 2014 volume requirements are likely 
to be necessary based on the projected circumstances for 2014, taking 
into account the available supply of cellulosic biofuel, the 
availability of advanced biofuel, the E10 blendwall, and current 
infrastructure and market-based limitations to the consumption of 
ethanol in gasoline-ethanol blends above E10. As discussed in Section 
III.E below, EPA will discuss options and approaches for addressing 
these issues, consistent with our statutory authorities, in the 
forthcoming NPRM for the 2014 standards.
3. Applicable Volumes Used to Set the Annual Percentage Standards for 
2013
    The renewable fuel standards are expressed as a volume percentage 
and are used by each refiner, blender or importer to determine its 
renewable fuel volume obligations. The applicable percentages are set 
so that if each regulated party meets the percentages, and if EIA 
projections of gasoline and diesel use for the coming year are 
accurate, then the amount of renewable fuel, cellulosic biofuel, 
biomass-based diesel, and advanced biofuel actually used will meet the 
volumes required on a nationwide basis.
    To calculate the percentage standards for 2013, we have used the 
projected volume of 6 million ethanol-equivalent gallons of cellulosic 
biofuel and the volume of biomass-based diesel of 1.28 bill gal that we 
established in a separate action. The applicable volumes used in this 
final rule for advanced biofuel and total renewable fuel for 2013 are 
those specified in the statute. These volumes are shown in Table I.B.3-
1.

 Table I.B.3-1--Volumes Used To Determine the 2013 Percentage Standards
                                   \a\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel.....................  6 mill gal.
Biomass-based diesel...................  1.28 bill gal.
Advanced biofuel.......................  2.75 bill gal.
Renewable fuel.........................  16.55 bill gal.
------------------------------------------------------------------------
\a\ All volumes are ethanol-equivalent, except for biomass-based diesel
  which is actual.

    Four separate standards are required under the RFS program, 
corresponding to the four separate volume requirements shown in Table 
I.B.3-1. The specific formulas we use in calculating the renewable fuel 
percentage standards are contained in the regulations at 40 CFR Sec.  
80.1405 and repeated in Section IV.B.1. The percentage standards 
represent the ratio of renewable fuel volume to projected non-renewable 
gasoline and diesel volume. The projected volume of transportation 
gasoline and diesel used to calculate the standards in today's rule was 
derived from EIA projections.\11\ EPA has approved a single small 
refinery/small refiner exemption for 2013, so an adjustment has been 
made to the standards to account for this exemption. The final 
standards for 2013 are shown in Table I.B.3-2. Detailed calculations 
can be found in Section IV, including the projected 2013 gasoline and 
diesel volumes used.
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    \11\ Letter, A. Michael Schaal, Director, Office of Petroleum, 
Natural Gas, and Biofuels Analysis, U.S. Energy Information 
Administration, to Christopher Grundler, Director, Office of 
Transportation and Air Quality, U.S. EPA, May 8, 2013.

           Table I.B.3-2--Final Percentage Standards for 2013
------------------------------------------------------------------------
                                                                 Percent
------------------------------------------------------------------------
Cellulosic biofuel............................................     0.004
Biomass-based diesel..........................................      1.13
Advanced biofuel..............................................      1.62
Renewable fuel................................................      9.74
------------------------------------------------------------------------

4. Applicable Percentage Standard for Cellulosic Biofuel in 2012
    On January 25, 2013, the United States Court of Appeals for the 
District of Columbia Circuit responded to a challenge to the 2012 
cellulosic biofuel standard. The Court found that in establishing the 
applicable volume of cellulosic biofuel for 2012, EPA had used a 
methodology in which ``the risk of overestimation [was] set 
deliberately to outweigh the risk of underestimation.'' The Court held 
EPA's action to be inconsistent with the statute because EPA had failed 
to apply a ``neutral methodology'' aimed at providing a prediction of 
``what will actually happen,'' as required by the statute. As a result 
of this ruling, the court vacated the 2012 cellulosic biofuel standard. 
In today's final rule we have revised the regulations to eliminate the 
applicable standard for cellulosic biofuel for 2012 in light of the 
court's decision and the very small number or cellulosic biofuel RINs 
produced in 2012. All of the money paid by obligated parties to 
purchase cellulosic waiver credits to comply with the cellulosic 
biofuel standard in 2012 has been refunded. This change does not impact 
any other applicable 2012 standard.
5. Administrative Actions
    By November 30 of each year we are required to make several 
administrative announcements which facilitate program implementation in 
the following calendar year. These announcements include the cellulosic 
biofuel waiver credit price and the status of the aggregate compliance 
approach to land-use restrictions under the definition of renewable 
biomass for both the U.S. and Canada. Since we did not make these 
announcements for 2013 by November 30 of 2012, we presented our 
proposed assessments of these administrative actions in the February 7, 
2013 NPRM. In today's action we are providing the final announcements 
for these administrative actions.
    When EPA reduces the applicable volume of cellulosic biofuel for 
2013 below the volume specified in the statute, EPA is required to 
offer biofuel waiver credits to obligated parties that can be purchased 
in lieu of acquiring cellulosic biofuel RINs. These waiver credits are 
not allowed to be traded or banked for future use, are only allowed to 
be used to meet the 2013 cellulosic biofuel standard, and cannot be 
applied to deficits carried over from 2012. Moreover, unlike cellulosic 
biofuel RINs, waiver credits may not be used to meet either the 
advanced biofuel standard or the total renewable fuel standard. For the 
2013 compliance period, we have determined that cellulosic biofuel 
waiver credits can be made available to obligated parties for end-of-
year compliance should they need them at a price of $0.42 per credit.
    As part of the RFS regulations, EPA established an aggregate 
compliance approach for renewable fuel producers who use planted crops 
and crop residue from U.S. agricultural land. This compliance approach 
relieved such producers (and importers of such fuel) of the individual 
recordkeeping and reporting requirements otherwise required of 
producers and importers to verify that such feedstocks used in the

[[Page 49799]]

production of renewable fuel meet the definition of renewable biomass. 
EPA determined that 402 million acres of U.S. agricultural land was 
available in 2007 (the year of EISA enactment) for production of crops 
and crop residue that would meet the definition of renewable biomass, 
and determined that as long as this total number of acres is not 
exceeded, it is unlikely that new land has been devoted to crop 
production based on historical trends and economic considerations. We 
indicated that we would conduct an annual evaluation of total U.S. 
acreage that is cropland, pastureland, or conservation reserve program 
land, and that if the value exceed 402 million acres, producers using 
domestically grown crops or crop residue to produce renewable fuel 
would be subject to individual recordkeeping and reporting to verify 
that their feedstocks meet the definition of renewable biomass. Based 
on data provided by the USDA, we have estimated that U.S. agricultural 
land reached 384 million acres in 2012, and thus did not exceed the 
2007 baseline acreage.
    On September 29, 2011, EPA approved the use of a similar aggregate 
compliance approach for planted crops and crop residue grown in Canada. 
The Government of Canada utilized several types of land use data to 
demonstrate that the land included in their 124 million acre baseline 
is cropland, pastureland or land equivalent to U.S. Conservation 
Reserve Program land that was cleared or cultivated prior to December 
19, 2007, and was actively managed or fallow and nonforested on that 
date (and is therefore RFS2 qualifying land). The total agricultural 
land in Canada in 2012 is estimated at 120.9 million acres. The total 
acreage estimate of 120.9 million acres does not exceed the trigger 
point for further investigation.

C. Effective Date

    Under CAA 211(o)(3)(B)(i), EPA must determine and publish the 
applicable percentage standards for the following year by November 30. 
EPA did not meet this statutory deadline for the 2013 standards. The 
NPRM was published on February 7, 2013 and the comment period closed on 
April 7, 2013. Nevertheless, we believe that the applicable percentage 
standards we are finalizing in today's rulemaking should apply, as 
proposed, to all gasoline and diesel produced in 2013, including that 
produced prior to the effective date of this final rule.
    Some commenters asserted that this approach would provide 
insufficient notice and lead time to obligated parties, and result in 
prohibited retroactive rulemaking. However, as discussed below, 
application of the standards to the entire year's production is 
reasonable given the structure of the statute, advance notice to 
obligated parties, compliance mechanisms under the program, and 
sufficiency of lead time for obligated parties to achieve compliance. 
Moreover, we have considered the alternative approaches suggested by 
commenters, and have determined that they are inappropriate as they 
would not satisfy the statutory requirements.
    In response to the NPRM, several obligated parties commented that 
the rulemaking process to establish the applicable 2013 standards 
should be abandoned due to its tardiness, and instead EPA should focus 
only on promulgating the applicable standards for 2014. Other 
commenters requested that we make the applicable 2013 standards apply 
only to gasoline and diesel produced or imported after the publication 
of the final rule, thereby effectively reducing the volume of renewable 
fuel to be used in 2013 by an amount proportional to the months in 2013 
prior to the publication date. Alternatively, some commenters suggested 
that we apply the 2012 standards to 2013. All of these suggested 
approaches would result in 2013 standards requiring substantially less 
renewable fuel use than specified in the statute.
    Under the statute, the renewable fuel obligations apply on a 
calendar year basis. The national volumes are established for each 
calendar year, and EPA's regulations must ensure these national volumes 
are met on an annual average basis. The renewable volume obligation is 
based on a projection of gasoline and diesel production for the 
calendar year, and the renewable fuel obligation for that calendar year 
is to be expressed as a percentage of the transportation fuel a refiner 
or importer sells or introduces into commerce for that calendar year.
    EPA acknowledges that today's rule is being finalized later than 
the statutory deadline of November 30, 2012. However, this delay does 
not deprive EPA of authority to issue standards for calendar year 2013. 
As the United States Court of Appeals for the District of Columbia 
Circuit noted in its review of EPA's delayed 2010 RFS standards, the 
statute does not specify a consequence for a situation where EPA misses 
the deadline, NPRM v. EPA, 630 F.3d 145, 152-158 (2010), and courts 
have declined to treat a statutory direction that an agency ``shall'' 
act within a specified time period as a jurisdictional limit that 
precludes action later. Id. at 154 (citing Barnhart v. Peabody Coal, 
537 U.S. 149, 158 (2003)). Moreover, the statute here requires that EPA 
regulations ``ensure'' that transportation fuel sold or introduced into 
commerce ``on an annual average basis, contains at least the applicable 
volume of renewable fuel'' specified in the statute. Id. at 152-153. 
Therefore EPA believes it has authority to issue RFS standards for 
calendar year 2013 notwithstanding EPA's delay in issuing this final 
rule, and that it must issue standards that ``ensure'' that the volumes 
specified for 2013 are satisfied. EPA has not chosen any of the 
alternative approaches suggested by commenters, because none of the 
proffered solutions would ensure that the volumes Congress specified 
for 2013 would be used.
    EPA is mindful that the precise contours of obligated parties' 
responsibilities for gasoline and diesel fuel produced in 2013 could 
not be known before issuance of this final rule. However, EPA believes 
that imposition in the final rule of an obligation related to 
production of gasoline or diesel that occurred prior to the effective 
date of this rule is reasonable. First, as noted above, EPA is required 
under the statute to ensure that applicable volumes specified in the 
statute for 2013 are satisfied, so it must take action notwithstanding 
the late date. The statute also provides that the national volumes are 
to be achieved on ``an annual average basis.'' The standards for 
obligated parties are based on a projection from the Energy Information 
Administration of gasoline and diesel use for each calendar year, and 
the obligation for refiners and importers is to be expressed as an 
applicable percentage obligation for a calendar year. Thus, applying 
the standards to production in calendar year 2013 is most consistent 
with the statute.
    Second, obligated parties have been provided reasonable notice that 
EPA would act in approximately the manner specified in the final rule. 
EPA established the required volume of biomass-based diesel in a 
separate rulemaking and, as proposed, has not lowered the applicable 
volumes of total renewable fuel and advanced biofuel below the 
applicable volumes specified in the statute. EPA has, as proposed, 
substantially lowered the required volume of cellulosic fuel below the 
level specified in the statute. Indeed, EPA's final rule requires use 
of less cellulosic biofuel than it proposed, so any change between the 
proposed and final rules in this regard operates to relieve burden on 
obligated parties. Regulated parties also had the benefit of knowing 
how EPA

[[Page 49800]]

has previously approached standards that are finalized after the 
beginning of the calendar year. In the March 2010 final rule revising 
the RFS program regulations, we set the standards for 2010 and made 
them applicable to all gasoline and diesel produced in 2010 despite the 
fact that the rulemaking was not published until March 26, 2010. This 
approach was challenged and upheld in NPRM v. EPA, 630 F.3d 394 (DC 
Cir. 2010). Thus, EPA believes that obligated parties had sufficient 
notice.
    Third, the parties have adequate lead time to comply with the 2013 
RFS standards notwithstanding EPA's delay in issuing the rule. Because 
compliance is achieved by obligated parties purchasing an appropriate 
number of RINs from producers or blenders of the renewable fuel, 
obligated parties do not need lead time for construction or investment 
purposes. They are not changing the way they produce gasoline or 
diesel, do not need to design or install new equipment, or take other 
actions that require longer lead time. Obtaining the appropriate amount 
of RINs involves contractual or other arrangements with renewable fuel 
producers or other holders of RINs. Indeed renewable fuel producers 
have been generating 2013 RINs since the beginning of the calendar 
year. Obligated parties have been acquiring RINs since the beginning of 
2013 in anticipation of the publication of the final applicable 
standards in today's rule. There is also a significant quantity of 2012 
RINs that can be used for compliance with the 2013 standards. To 
facilitate compliance, and provide additional lead time, EPA is 
extending the date by which compliance with the 2013 standards must be 
demonstrated to June 30, 2014. EPA chose this date both to provide 
additional time for a compliance demonstration, and because we 
anticipate issuing a final rule establishing the 2014 RFS standards as 
soon as possible before that date. Establishing a 2013 compliance 
deadline on a date that occurs after promulgation of the final rule 
setting the 2014 standards should allow obligated parties to take their 
2014 obligations into consideration as they determine how to utilize 
RINs for 2013 compliance.
    In response to stakeholder concerns about the lateness of this 
final rule, EPA considered, but rejected, the option of issuing 
numerically higher percentage standards based on just the 2013 
production of gasoline and diesel fuel that took place after issuance 
of the final rule. Such an approach would not provide for standards 
allowing compliance on an ``annual average basis,'' based on ``an 
applicable percentage for a calendar year,'' as envisioned by the 
statute. Also, EPA believes application of the standards in this manner 
would be unfair because it could result in some producers or importers 
having substantially greater or lesser obligations, based on variable 
production or import volumes over the year, than would be the case if 
the standards were based on a full year's production. In essence, such 
an approach would provide a temporal window with no RFS obligation, and 
some parties might receive either a windfall or a substantially greater 
burden than they would have if EPA had issued its standards on time. 
This would be exacerbated by the fact that EPA did not take comment on 
this alternative, so obligated parties would not have been on notice of 
this potential approach. EPA rejected this approach for these reasons.

D. Impacts of Final Actions

    Analyses for the March 26, 2010 RFS final rule indicated the GHG 
benefits from cellulosic biofuels compared to the petroleum-based fuels 
they displace are well above the 60 percent reduction threshold. 
Therefore, EPA expects that the increase in cellulosic biofuel use that 
EPA has projected for 2013 over prior year production levels will have 
directionally beneficial GHG emissions impacts.
    For advanced biofuel and total renewable fuel, we are not reducing 
the applicable volumes below the applicable volumes set forth in the 
statute. All of the impacts of the biofuel volumes specified in the 
statute were addressed in the RFS final rule published on March 26, 
2010.\12\ Today's rulemaking simply sets the percentage standards for 
obligated parties for 2013 advanced biofuel and total renewable fuel, 
where the impacts of the national volumes of those fuels were 
previously analyzed.
---------------------------------------------------------------------------

    \12\ 75 FR 14672.
---------------------------------------------------------------------------

II. Projection of Cellulosic Biofuel Volume for 2013

    In order to project the national production volume of cellulosic 
biofuel in 2013, we considered the EIA projections and collected 
information on individual facilities that have the potential to produce 
qualifying volumes for use as transportation fuel, heating oil, or jet 
fuel in the U.S. in 2013. In light of the delay in issuing the 
standards for 2013 we also sought and received an updated estimate of 
cellulosic biofuel production from EIA to inform our final standards. 
We also considered the comments we received in response to the NPRM. 
This section describes the volumes that we project will be produced or 
imported in 2013 as well as some of the uncertainties associated with 
those volumes.
    Despite significant advances in cellulosic biofuel production 
technology in recent years, RIN-generating production of biofuel from 
cellulosic feedstocks in 2010 and 2011 was zero despite our projections 
that the industry was positioned to produce about 6 mill gal in each of 
those years.\13\ In 2010 the majority of the cellulosic biofuel 
shortfall was met through the use of RINs generated under the initial 
RFS regulations, and since there were excess cellulosic RINs many of 
these RINs were carried over into the 2011 compliance year. The 
remaining cellulosic biofuel requirements in 2011 were met through the 
purchase of cellulosic biofuel waiver credits.\14\ A discussion of the 
reasons for this disparity between our projections and subsequent 
production is provided in Section II.B below.
---------------------------------------------------------------------------

    \13\ In the first half of 2010 when the initial RFS program was 
still effective, some cellulosic biomass ethanol was produced and 
the RINs generated were valid for demonstrating compliance with the 
2010 and 2011 RFS cellulosic biofuel standards. However, the 
cellulosic biomass ethanol that was produced was not made from 
cellulosic feedstocks, but rather was categorized as cellulosic 
because it was produced in plants using waste materials to displace 
90% or more of fossil fuel use under the then-effective definition 
of cellulosic biomass ethanol in CAA Section 211(o)(1)(A). See also 
40 CFR Sec.  80.1101(a)(2).
    \14\ 4,248,338 cellulosic waiver credits were purchased for 2011 
compliance according to the EPA Moderated Transaction System (EMTS) 
Web site (information retrieved from the Web site on December 11, 
2012) at a cost of $1.13 per credit. The ethanol-equivalent volume 
of cellulosic biofuel projected for 2011 and used to calculate the 
percentage standard for that year was 6.0 mill gal.
---------------------------------------------------------------------------

    In 2012 the first cellulosic RINs were generated under the current 
RFS regulations at two small pilot facilities. However, cellulosic 
biofuel production once again fell short of our projections in 2012. 
The 2012 cellulosic standard was challenged in court and based on the 
decision in that case the 2012 cellulosic biofuel standard was 
vacated.\15\ This decision is discussed further in the following 
sections.
---------------------------------------------------------------------------

    \15\ See API v. EPA, 706 F.3d 474 (D.C. Cir. 2013).
---------------------------------------------------------------------------

A. Statutory Requirements

    The national volumes of cellulosic biofuel to be used under the RFS 
program each year through 2022 are specified in CAA 211(o)(2). For 
2013, the statute specifies a cellulosic biofuel applicable volume of 
1.0 bill gal. The statute requires that if EPA determines, based on 
EIA's estimate, that the projected volume of cellulosic biofuel 
production for the following year is less

[[Page 49801]]

than the applicable volume shown in Table II.A-1, then EPA is to reduce 
the applicable volume of cellulosic biofuel to the projected volume 
available during that calendar year.
    In addition, if EPA reduces the required volume of cellulosic 
biofuel below the level specified in the statute, the Act also 
indicates that we may reduce the applicable volumes of advanced 
biofuels and total renewable fuel by the same or a lesser volume. Our 
consideration of the 2013 volume requirements for advanced biofuels and 
total renewable fuel is presented in Section III.
    The United States Court of Appeals for the District of Columbia 
Circuit recently interpreted the statutory requirements for EPA's 
cellulosic biofuel projections, in the context of considering a 
challenge to the 2012 cellulosic biofuel standard. The Court found that 
in establishing the applicable volume of cellulosic biofuel for 2012, 
that EPA had used a methodology in which ``the risk of overestimation 
[was] set deliberately to outweigh the risk of underestimation.'' The 
Court held EPA's action to be inconsistent with the statute because 
this provision required EPA to apply a ``neutral methodology'' aimed at 
providing a prediction of ``what will actually happen''. In all other 
respects the Court upheld EPA's methodology for making cellulosic 
biofuel projections. For example, the Court agreed with EPA that the 
statute requires that EPA treat the EIA estimate with ``great 
respect,'' but ``allowing deviation consistent with that respect''. The 
Court also upheld EPA's reasoned reliance on information provided by 
prospective cellulosic biofuel producers in formulating its 
projections. For a further discussion of the changes we have made to 
our approach in evaluating the information that forms the basis for our 
projection of cellulosic biofuel see Section C below.

B. Status of the Cellulosic Biofuel Industry

    As in previous years, cellulosic biofuel production in the United 
States in 2012 was limited to small-scale research and development, 
pilot, and demonstration-scale facilities. Companies such as Abengoa, 
Blue Sugars, DuPont, KiOR, Poet, and others successfully operated 
small-scale facilities in 2012. Two of these companies, Blue Sugars and 
KiOR, generated a small number of RINs for the fuel they produced. 
Several of these facilities, including all that were part of our 2012 
volume projections, are discussed in more detail in Section II.C below. 
While there were numerous small-scale facilities producing cellulosic 
biofuel in 2012, the total volume of fuel produced was very small. Two 
commercial scale facilities that were expected to begin fuel production 
in 2012 experienced unexpected delays in commissioning, while a third 
was delayed due to difficulties raising required funds.\16\ Although 
information is not available to EPA to quantify the total volume of 
cellulosic biofuel produced in 2012 at these research and development, 
pilot, and demonstration scale facilities if they do not generate RINs, 
based on generally available information we believe that total 
production in the United States was likely less than one mill gal 
across the industry.
---------------------------------------------------------------------------

    \16\ For more information see Section II.C below.
---------------------------------------------------------------------------

    While cellulosic biofuel production in the United States remains 
limited, the industry continues to make significant progress towards 
producing cellulosic biofuel at prices competitive with petroleum 
fuels. From 2007 through the second quarter of 2012 venture capitalists 
invested over $3.4 billion in advanced biofuel companies in North 
America.\17\ Recent advancements in enzyme and catalyst technologies 
are allowing cellulosic biofuel producers to achieve greater yields of 
biofuel per ton of feedstock. These advancements have led to lower 
operational costs as they have driven down the cost for feedstock, 
energy, and other important inputs on a per gallon basis. For example, 
the estimated cost of producing cellulosic ethanol using an enzymatic 
hydrolysis process in 2007 was $4-$8 per gallon.\18\ By 2012 the 
estimated cost of cellulosic ethanol production using the same process 
had fallen to $2-$3.50 per gallon.\19\ The U.S. Department of Energy 
(DOE) similarly reports that advancements in cellulosic ethanol 
technology have resulted in a decrease in modeled costs from 
approximately $4 per gallon (minimum ethanol selling price) in 2007 to 
approximately $2.50 per gallon in 2011.\20\ The same technological 
advances have also lowered the capital costs of cellulosic biofuel 
production facilities per gallon of annual fuel production, as more 
gallons of biofuel can be produced at a facility without additional 
equipment or increased feedstock requirements.
---------------------------------------------------------------------------

    \17\ Solecki M, Dougherty A, Epstein B. Advanced Biofuel Market 
Report 2012: Meeting U.S. Fuel Standards. Environmental 
Entrepreneurs. September 6, 2012. Available Online http://www.e2.org/ext/doc/E2AdvancedBiofuelMarketReport2012.pdf.
    \18\ Nielsen, Peder Holk. ``The Path to Commercialization of 
Cellulosic Ethanol--A Brighter Future.'' PowerPoint Presentation. 
Conference Call. February 22, 2012. Available Online http://www.novozymes.com/en/investor/events-presentations/Documents/Cellic3_conf_call_220212.pdf.
    \19\ Nielsen, Peder Holk. ``The Path to Commercialization of 
Cellulosic Ethanol--A Brighter Future.'' PowerPoint Presentation. 
Conference Call. February 22, 2012.
    \20\ Department of Energy. Biomass Multi-Year Program Plan. 
April 2012. DOE/EE-0702. Available Online http://www1.eere.energy.gov/biomass/pdfs/mypp_april_2012.pdf.
---------------------------------------------------------------------------

    Another area where significant progress has been made is feedstock 
supply for commercial scale cellulosic biofuel production facilities. 
This issue has often been raised as a factor that could hinder the 
development of the cellulosic biofuel industry as many of the proposed 
facilities rely on feedstocks, such as agricultural residues or energy 
crops, for which supply chains have not previously existed. Over the 
past several years both Abengoa and Poet have been working with farmers 
in the regions surrounding their first commercial scale facilities to 
ensure the availability of the necessary feedstock. Because corn cobs 
and stover are only seasonally available, using them as a feedstock for 
a cellulosic biofuel production facility would require significant 
feedstock storage facilities. In the last two years Abengoa and Poet 
completed construction of large scale feedstock storage facilities to 
ensure adequate supply to their cellulosic biofuel production 
facilities throughout the year. Both companies successfully completed 
fall biomass harvests in 2011 and have contracted with local farmers to 
provide feedstock for their cellulosic ethanol facilities. This supply 
chain will not only provide feedstock for their first commercial scale 
facilities, but also a model that can be re-created at future 
production facilities.
    Several cellulosic biofuel producers are planning to use pre-
commercial thinnings, tree residue from tree plantations or the 
cellulosic portions of yard waste as feedstock.\21\ This material has 
many qualities that make it desirable as a cellulosic biofuel 
feedstock. It tends to be relatively inexpensive and is readily 
available in some regions of the United States. It is also available 
year round rather than seasonally, significantly reducing the need for 
large scale feedstock storage facilities. Securing a sufficient 
quantity of this feedstock for a commercial scale facility, however, 
can be challenging. In the summer of 2011 KiOR announced it had signed 
a feedstock agreement with Catchlight Energy to provide all the 
necessary feedstock for their first commercial scale facility. While 
KiOR plans to transition to planted trees for

[[Page 49802]]

future facilities, KiOR now has secured sufficient feedstock such that 
they can produce cellulosic biofuel and cellulosic RINs using an 
existing pathway at their first commercial scale facility. INEOS Bio 
also has a long term agreement with Indian River County to provide 
separated yard waste which will serve as the feedstock for their first 
facility.
---------------------------------------------------------------------------

    \21\ Pre-commercial thinnings and tree residue from tree 
plantations must come from non-federal lands and meet the definition 
of a renewable biomass definition and be eligible to generate RINs.
---------------------------------------------------------------------------

    Another feedstock for cellulosic biofuel production is separated 
municipal solid waste (MSW). MSW is already being collected and 
transported to a centralized facility, is consistently available 
throughout the year, and can be obtained for a very low, or even 
negative, cost. MSW often contains contaminants, however, that may make 
it challenging to process for some cellulosic biofuel technologies. EPA 
also requires that waste separation plans be submitted and approved 
prior to any company generating RINs using separated MSW as a 
feedstock. In June 2012 EPA approved the first waste separation plan 
under the RFS program for Fiberight's facility in Blairstown, Iowa.
    In the early years of the cellulosic biofuel industry several small 
start-up companies announced plans to build large commercial scale 
facilities that were scheduled to begin production in the past few 
years. The construction of many of these facilities was dependent on 
the companies raising additional funding, either from venture 
capitalists, government grants, or loans backed by government 
guarantees. So far, few of the companies that made these early 
announcements have been able to successfully raise the necessary funds 
and begin construction. Securing this funding proved difficult, and 
when it did not materialize the projects were delayed or cancelled. 
However, recently significant progress has also been made by some 
companies towards funding the construction of their first commercial 
scale facilities.
    The funding profiles of the companies included in our projected 
volume for 2013, as well as for many of the companies targeting 
production in 2014, are markedly different than those of the companies 
that were expected to produce the majority of cellulosic biofuel in 
2010 and 2011. Many of these projects have already received, and in 
several cases have closed on loan guarantees and grants offered by DOE 
or USDA. Other companies have filed for and successfully executed IPOs. 
Several cellulosic ethanol projects are being self-financed by large 
companies such as Abengoa and Poet with significant experience in the 
biofuel, petrochemical, and specialty chemical markets. This solid 
financial backing has allowed these companies to proceed with 
construction. Both of the facilities included in our final volume for 
2013 have already completed the construction of their first commercial 
production facilities. KiOR's facility has begun producing RINs and 
INEOS Bio announced that it started commercial production on July 31, 
2013. There is therefore far less uncertainty as to likely production 
from these two facilities than has been present for EPA's earlier 
projections. The next section provides additional details on the 
funding and construction status of the projects included in our 
projected cellulosic biofuel production volumes for 2013.
    If these first commercial scale cellulosic biofuel production 
facilities are successful, the potential exists for a rapid expansion 
of the industry in subsequent years. Having successful commercial scale 
facilities would not only provide useful information to help maximize 
the efficiency of future facilities, but would also significantly 
decrease the technology and scale-up risks associated with cellulosic 
biofuel production facilities and could lead to increased access to 
project funding. Fiberight and ZeaChem both plan to build larger-scale 
facilities (~25 mill gal per year) as soon as they are able to raise 
the necessary funds. INEOS Bio plans to expand production by building 
additional units near sources of inexpensive feedstock ranging in size 
from 8 to 50 mill gal of ethanol per year. They are currently exploring 
expansion possibilities in the United States and internationally. KiOR 
has plans for a second commercial scale facility to be built in 
Natchez, MS, that will be approximately three times larger (~30 mill 
gal per year) than their Columbus, MS, plant and plans to break ground 
at their second facility after their first is fully operational. 
Abengoa currently anticipates construction of additional cellulosic 
ethanol facilities at multiple locations, likely including co-locating 
with some of their existing starch facilities in the US. Poet has a 
similar expansion strategy to build cellulosic ethanol plants at their 
grain ethanol facilities, license their technology for use at other 
grain ethanol facilities, and build cellulosic ethanol facilities that 
use feedstocks such as agricultural residue or energy crops. Poet's 
goal is to be involved in the production of 3.5 bill gal of cellulosic 
ethanol per year by 2022. Several other companies are also targeting 
2014 for the start-up of cellulosic biofuel production facilities and 
would likely look to build additional facilities relatively quickly if 
their first facilities operate successfully. While many of these 
expansion plans are still in the early stages and are subject to 
change, they do point to the potential for cellulosic biofuel 
production to increase very significantly in future years once the 
initial plants become operational.

C. Cellulosic Biofuel Volume Assessment for 2013

    In 2012 the first cellulosic biofuel RINs under the current 
regulations were generated. Small quantities of RINs, a total of 
approximately 22,000, were generated by Blue Sugars and KiOR from their 
respective demonstration facilities. The small volumes of fuel produced 
from these two facilities are typical for R&D and pilot facilities 
whose primarily purpose is to prove the technology is viable, provide 
information for scale-up design, and provide fuel for testing purposes 
rather than to generate income from commercial volumes of fuel. 
However, national cellulosic biofuel production once again fell far 
short of the cellulosic biofuel standards. Two of the companies 
expected to begin producing fuel in 2012 experienced unexpected 
difficulties in commissioning their commercial scale production 
facilities following successful demonstration and pilot scale work, 
resulting in biofuel production being delayed until 2013. A third 
commercial facility was unable to secure the funds needed to convert an 
existing corn ethanol production facility to a cellulosic biofuel 
production facility, despite having secured a conditional loan 
guarantee from the United States Department of Agriculture (USDA). The 
remaining facilities that were included in our projected production 
volume for 2012 were small demonstration facilities that similarly 
experienced delays or significantly reduced production volumes for a 
variety of reasons.
    There are several factors indicating that larger volumes of 
cellulosic biofuel will be produced in 2013. Commercial scale 
cellulosic biofuel projects from INEOS Bio and KiOR are structurally 
complete, KiOR's facility began producing cellulosic biofuel in the 
Spring of 2013, and INEOS Bio announced it began production at the end 
of July. Both facilities plan to achieve steady state production and 
achieve production rates at or near their nameplate capacities by the 
end of 2013. Another commercial scale facility backed by Abengoa, a 
large company with significant experience in biofuel production, is 
also scheduled to begin producing cellulosic biofuel in late 2013 or 
early 2014. These facilities are

[[Page 49803]]

indicative of a shift across the cellulosic biofuel industry from 
small-scale R&D and demonstration facilities often operated by small 
start-up companies to large commercial scale facilities backed by large 
companies, many of which have substantial experience in related 
industries.
    In order to project cellulosic biofuel production for 2013, we 
tracked the progress of more than 100 biofuel production facilities. 
From this list of facilities we used publicly available information, as 
well as information provided by DOE, EIA, and USDA, to make a 
preliminary determination of which facilities are the most likely 
candidates to produce cellulosic biofuel and generate cellulosic 
biofuel RINs in 2013. Each of these companies was investigated further 
in order to determine the current status of their facilities and their 
likely cellulosic biofuel production and RIN generation volumes for the 
coming years. Information such as the funding status of these 
facilities, current status of the production technologies, announced 
construction and production ramp-up periods, and annual fuel production 
targets were all considered when we met with senior level 
representatives of each company to discuss cellulosic biofuel target 
production levels for 2013. Throughout this process EPA is in regular 
contact with EIA to discuss relevant information and assessment of 
potential cellulosic biofuel producers. Our projection of the 
cellulosic biofuel production in 2013 is based on the estimate we 
received from EIA, information we received from EIA, DOE, and USDA, the 
individual production projections that emerged from these discussions, 
and comments we received on the NPRM. A brief description can be found 
below for each of the companies we believe will produce cellulosic 
biofuel and make it commercially available in 2013.
    To project the available volume of cellulosic biofuel, we have 
continued to obtain information from the potential producers of 
cellulosic biofuels to help inform our annual projection. We have, 
however, made several changes to the way that we used the information 
we gather in projecting cellulosic biofuel production to ensure 
consistency with the ruling of the DC Circuit Court and help ensure a 
neutral projection that aims at accuracy. Several of the more 
significant changes are:
     Volumes from pilot and demonstration scale facilities are 
not included in our projections. Very few of these facilities are 
registered to generate RINs, and production volumes at those that are 
historically have been so small that they have no significant impact on 
our total volume projection for 2013.
     Facilities with start-up dates near the end of the year 
are not included in our projections. There is a realistic possibility 
that minor delays could result in no production of cellulosic biofuel 
from such facilities in 2013, and even if these facilities start up as 
expected production volumes from the first month of production are 
expected to be very small.
     Benchmarks for how quickly new facilities ramp up to full 
production, and for production volumes during this ramp-up period in a 
best case scenario have been established and used to assess the 
reasonableness of the production estimates received from producers. 
Production projections from companies that exceed the volumes 
calculated using this benchmark are not considered credible, even as 
the high end of a possible range of production. While we have 
considered ramp-up rates for cellulosic biofuel production facilities 
in the past we have added best case scenario benchmarks to assess the 
reasonableness of the ramp-up schedules we received from potential 
biofuel producers.
     In considering all factual information and projections we 
have weighted uncertainty neutrally, with the aim of providing an 
accurate projection rather than one intended to provide an incentive 
for growth in the cellulosic biofuel industry.
    In our proposed rule we projected 14 million ethanol-equivalent 
gallons of cellulosic biofuel production in 2013. Since this time we 
have considered comments received on the proposed rule, updated 
information from EIA including a new projection of cellulosic biofuel 
production for 2013,\22\ and updated information from the companies 
expected to produce cellulosic biofuel. The sections that follow 
discuss the comments we received, the updated information from EIA, and 
the current status of the cellulosic production facilities that are 
relevant in setting the cellulosic biofuel standard for 2013. Based on 
this information we are setting the cellulosic biofuel standard at 6 
million ethanol-equivalent gallons (4 million actual gallons) based on 
our current projection of cellulosic biofuel production in 2013.\23\
---------------------------------------------------------------------------

    \22\ Letter from A. Michael Schaal, Director, Office of 
Petroleum, Natural Gas, and Biofuels Analysis, EIA to Christopher 
Grundler Director, Office of Transportation and Air Quality, EPA, 
May 8, 2013.
    \23\ The difference between actual volume and ethanol-equivalent 
volume stems from the fact that cellulosic gasoline and diesel fuels 
generate a greater number of RINs than the actual gallons produced 
because of their higher energy content. The number of RINs generated 
per gallon of fuel produced is based on the energy content of the 
fuel relative to ethanol.
---------------------------------------------------------------------------

1. Comments on the Proposed Rule
    EPA received many comments on the projected available cellulosic 
biofuel volumes in our proposed rule. Several commenters, including 
biofuel trade organizations and cellulosic biofuel production companies 
supported EPA's methodology for projecting available cellulosic biofuel 
volumes. Some of these commenters further stated that EPA had 
appropriately assessed the status of the cellulosic biofuel industry 
and that the projected volume (14 million ethanol-equivalent gallons) 
was likely to be achieved. Others, while affirming EPA's methodology 
encouraged EPA to consider new information available since the 
publication of our proposed rule, particularly delays in the start-up 
of INEOS Bio and new production guidance from KiOR, and to adjust our 
projected volume accordingly. EPA has considered this information and 
believes the volume projected in today's final rule (6 million ethanol-
equivalent gallons) accurately represents the volume of cellulosic 
biofuel likely to be produced in 2013 based on the best available 
information.
    Conversely, EPA also received several comments stating that the 
projected available volume of cellulosic biofuel should be based on 
historical production rather that projections of future production. 
Using this methodology would result in a cellulosic biofuel standard 
for 2013 near zero. In effect the commenters argued that past 
production is the best and most sure indicator for future production. 
Adopting this methodology would be inconsistent with EPA's charge to 
set the applicable volume for cellulosic biofuel through a neutral 
projection of the volume projected to be produced that aims at 
accuracy. Basing this projection solely on past production would not 
neutrally aim at accuracy, as it would require EPA to ignore 
significant real world information that is relevant to project 
production for 2013. It would also require EPA to ignore the production 
estimates we receive from EIA, which we are required to consider with 
great respect. Additionally, it would be unusual to base a future 
projection solely on past performance, effectively assuming no growth 
in the cellulosic biofuel industry.
    Several commenters also stated that the methodology used by EPA in 
setting the applicable volume for cellulosic biofuel is the same as 
that used in

[[Page 49804]]

previous years and that this is inappropriate in light of the API v. 
EPA decision vacating the 2012 cellulosic biofuel standard. The process 
used by EPA to gather information on the relevant companies and their 
likely production is indeed similar. We continue to consider 
information received directly from potential cellulosic biofuel 
producers and the cellulosic and advanced biofuel trade associations. 
As noted above, we have made several changes to how we evaluate this 
information. We work closely with EIA in developing our volume 
projection and give their production estimate great weight. Indeed, 
this year we are projecting the same volume of cellulosic biofuel as 
the most recent estimate provided by EIA.\24\ Consistent with the 
Court's directive, we are not weighing uncertainty in any element of 
our projection in a manner that favors a higher or a lower volume 
projection.
---------------------------------------------------------------------------

    \24\ In their letter to EPA on May 8, 2013, EIA did not specify 
an ethanol-equivalent volume projection, nor did they specify 
production volumes from individual companies that would allow EPA to 
calculate an ethanol-equivalent volume from their projection of 
physical gallons. However, the EPA and EIA projection of physical 
gallons of cellulosic biofuel production for 2013 are identical.
---------------------------------------------------------------------------

    EPA believes the information and methods used to project the 
production of cellulosic biofuel for 2013 described in the preceding 
sections appropriately takes neutral aim at accuracy. EPA has 
established a benchmark for the expected production ramp-up timeframe 
that has been used to assess the reasonableness of production estimates 
received from companies. We did not receive any comments suggesting 
that this benchmark was inappropriate. We have appropriately considered 
the history of delays for the cellulosic industry as a whole and the 
companies included in our projection in particular in projecting these 
volumes. We have not included any volumes from pilot or demonstration 
scale facilities, nor have we included any volume from companies 
currently lacking a valid pathway to produce cellulosic biofuel--
despite their claims that they can and intend to generate cellulosic 
biofuel RINs in 2013--due to the highly uncertain nature of this 
production. Given the timing of this final rule this seems particularly 
appropriate for 2013. Finally, we have not used best case scenarios for 
the companies considered in determining our volume projection for 2013, 
and have not attempted to use this process to either promote or impede 
growth within the cellulosic biofuel industry. Of the seven companies 
and potential fuel producing pathways listed in Table II.C.6-1 that 
have the potential to produce cellulosic RINs in 2013 we have only 
included two in our volume projection. For the two facilities 
considered we have reduced their projected volume from the maximum 
possible production calculated from the start-up date and nameplate 
capacity taking into account expected ramp-up schedules and delays 
experienced at the two facilities. After using this information to 
establish projected ranges of production we selected a combined volume 
that represents production at the mid-point of our established ranges, 
as a shortfall in expected production from either company can be made 
up for by the other companies in Table II.C.6-1 exceeding their 
projected production. We believe our volume projection of 6 million 
ethanol-equivalent gallons of cellulosic biofuel in 2013 and the 
methodology utilized to arrive at this projection are our best 
assessment of production that will actually happen in 2013.
2. Projections From the Energy Information Administration
    Section 211(o)(3)(A) of the Clean Air Act requires EIA to ``. . . 
provide to the Administrator of the Environmental Protection Agency an 
estimate, with respect to the following calendar year, of the volumes 
of transportation fuel, biomass-based diesel, and cellulosic biofuel 
projected to be sold or introduced into commerce in the United 
States.'' EIA provided these estimates to us on October 18, 2012.\25\ 
With regard to cellulosic biofuel, the EIA estimated that the available 
volume in 2013 would be 9.6 million actual gallons (13.1 million 
ethanol-equivalent gallons). A summary of the commercial scale plants 
they considered and associated production volumes is shown below in 
Table II.C.2.
---------------------------------------------------------------------------

    \25\ Letter from Adam Sieminski, EIA Administrator to Lisa 
Jackson, EPA Administrator October 18, 2012.

                                   Table II.C.2--Cellulosic Biofuel Plants Expected To Generate Biofuel RINs for 2013
                                                                       [From EIA]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                EIA Forecast
                                                                                                                  --------------------------------------
                                                                                                         Design                                Ethanol-
      Mechanical  completion               Company              Location               Product          capacity   Utilization     Actual     equivalent
                                                                                                                    (percent)    production   production
                                                                                                                                 (mill gal)   (mill gal)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012..............................  INEOS Bio...........  Vero Beach, FL......  Ethanol.............            8           50          4.0          4.0
2012..............................  KiOR................  Columbus, MS........  Liquids.............           11           50          5.5          9.0
Various...........................  Various Pilot Plants  Various.............  Ethanol.............            1           10          0.1          0.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Capacity and Production for 2013..........................................................           20           48          9.6         13.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Several commenters noted a Today in Energy article that appeared on 
EIA's Web site on February 26, 2013 that stated that cellulosic biofuel 
production ``could grow to more than 5 mill gal in 2013, as operations 
ramp up at several plants.'' \26\ The commenters stated that as this 
article was more recent than the letter EPA received in October 2012 it 
represented an updated volume projection from EIA and that EPA should 
base our volume projection on this smaller volume (5 million actual 
gallons). A significant amount of time has passed since we received 
EIA's initial cellulosic biofuel volume projections and any changes in 
projected volumes since this time should be considered as we determine 
the appropriate cellulosic biofuel volume projection. To ensure that we 
are using the most up to date information EPA requested and received 
from EIA an updated projection of

[[Page 49805]]

cellulosic biofuel production in 2013 on May 8, 2013.\27\ In this 
letter EIA projected that 4 million actual gallons of cellulosic 
biofuel would be produced in 2013.
---------------------------------------------------------------------------

    \26\ ``Cellulosic biofuels begin to flow but in lower volumes 
than foreseen by statutory targets.'' Today in Energy. EIA, February 
26, 2013. http://www.eia.gov/todayinenergy/detail.cfm?id=10131
    \27\ Letter from A. Michael Schaal, Director, Office of 
Petroleum, Natural Gas, and Biofuels Analysis, EIA to Christopher 
Grundler Director, Office of Transportation and Air Quality, EPA, 
May 8, 2013.
---------------------------------------------------------------------------

    EIA's projection of cellulosic biofuel production in 2013 is very 
similar to EPA's projection discussed above and summarized in Section 
II.C.6 below. The lists of companies (KiOR and INEOS Bio) that EIA and 
EPA expect to generate cellulosic biofuel RINs in 2013 are the same. 
EIA's estimate also no longer includes volumes from pilot facilities 
due to their highly uncertain production and the fact that these 
facilities are unlikely to generate RINs in 2013 for any fuel they do 
produce. While the total volume of cellulosic biofuel that EIA expects 
will be produced in 2013 is identical to the volume projected by EPA (4 
million actual gallons), EIA does not specify how much of this 
production will be ethanol and how much will be renewable hydrocarbons. 
Because of this EPA is unable to calculate the ethanol-equivalent 
volume represented by EIA's projection. Since this volume includes 
renewable gasoline and diesel produced by KiOR, however, EIA's 
projection represents an implied ethanol-equivalent volume greater than 
4 mill gal and is consistent with EPA's 6 million ethanol-equivalent 
gallon projection.
    The approach we have taken in setting the applicable volume for 
cellulosic biofuel for 2013 is appropriate. Section CAA 211(o)(7)(D) 
vests the authority for making the projection with EPA. As described in 
past rulemakings, the statute provides that the projection is 
``determined by the Administrator based on the estimate provided [by 
EIA].'' Congress did not intend that EPA simply adopt EIA's projection 
without an independent evaluation. EPA's consideration of EIA's 
estimate in developing this final rule is consistent with EPA's 
consideration of EIA's estimate in the past rulemakings involving a 
reduction of the volume standard for cellulosic biofuel. EPA's 
interpretation and implementation of the obligation to base its 
projection on the EIA estimate recently was upheld in API v. EPA, 706 
F.3d at 478 (DC Cir. 2013).
3. Current Status of Cellulosic Biofuel Production Facilities
    In the January 9, 2012, final rule that established the applicable 
volume of cellulosic biofuel for 2012, we identified six production 
facilities that we projected would produce cellulosic biofuel and make 
that fuel commercially available in 2012. Five of these production 
facilities are currently structurally complete and one is planning to 
retrofit an existing corn ethanol plant with construction beginning in 
the summer of 2013. The current status of each of these facilities, 
including target production levels for each facility in 2013, is 
discussed below. Two additional facilities that are expected to begin 
producing cellulosic biofuel near the end of 2013 or in early 2014 are 
also discussed.
API
    American Process Inc. (API) is developing a project in Alpena, 
Michigan capable of producing up to 900,000 gallons of cellulosic 
ethanol per year from pre-commercial thinnings and tree residue from 
tree plantations. This facility will use a technology developed by API 
called GreenPower+TM. This technology extracts the 
hemicellulose portion of woody biomass using hot water and hydrolyzes 
it into sugars. These sugars are then converted to ethanol or other 
alcohols, while the remaining portion of the woody biomass, containing 
mostly cellulose and lignin, is processed into wood paneling at a co-
located facility. At future, larger-scale facilities API anticipates 
burning the residual biomass in a boiler to produce steam and 
electricity as well as cellulosic biofuel.
    In January 2010 API received a grant from DOE for up to $18 million 
for the construction of their demonstration facility. Construction of 
the Alpena, Michigan facility began in March 2011 and API began 
commissioning operations at their facility in the summer of 2012. API 
encountered several unexpected difficulties in commissioning their 
facility resulting in production delays; however they anticipate 
production of cellulosic biofuel from this facility in 2013. EPA has 
not included production from API in our projections due to the 
facility's history of delays, uncertain start-up date, and small 
potential production volume.
Fiberight
    Fiberight uses an enzymatic hydrolysis process to convert the 
biogenic portion of separated MSW and other waste feedstocks into 
ethanol. They have successfully completed five years of development 
work on their technology at their small pilot plant in Lawrenceville, 
Virginia. In 2009 Fiberight purchased an idled corn ethanol plant in 
Blairstown, Iowa with the intention of making modifications to this 
facility to allow for the production of 6 mill gal of cellulosic 
ethanol per year from separated MSW and industrial waste streams. These 
modifications were scheduled to be completed in 2011, but difficulties 
in securing funding have resulted in construction at this facility 
being delayed. In January 2012 Fiberight was offered a $25 million loan 
guarantee from USDA. Closing on this loan would provide substantially 
all of the remaining funds required for Fiberight to complete the 
required modifications at their Blairstown facility. Fiberight plans to 
begin construction in the second quarter 2013. Fiberight expects that 
it will take approximately 6 months to complete construction and that 
fuel production will begin in early 2014. Additionally, Fiberight's 
waste separation plan for this facility was approved in June 2012 
allowing Fiberight to generate RINs for the cellulosic ethanol they 
produce using separated MSW as a feedstock. Fiberight is also currently 
developing a second commercial scale project based on their MSW ``hub 
and spoke'' concept. They anticipate that this facility will produce 
approximately 25 mill gal of cellulosic ethanol per year when fully 
built out. Since Fiberight currently does not expect cellulosic biofuel 
production to begin until 2014 no volume from their facility has been 
included in EPA's projections.
INEOS Bio
    INEOS Bio has developed a process for producing cellulosic ethanol 
by first gasifying cellulosic feedstocks into a syngas and then using 
naturally occurring bacteria to ferment the syngas into ethanol. In 
January 2011 USDA announced a $75 million loan guarantee for the 
construction of INEOS Bio's first commercial facility to be built in 
Vero Beach, Florida. This loan was closed in August 2011. This was in 
addition to the grant of up to $50 million INEOS Bio received from DOE 
in December 2009. At full capacity, this facility will be capable of 
producing 8 mill gal of cellulosic biofuel as well as 6 megawatts 
(gross) of renewable electricity from a variety of feedstocks including 
yard, agricultural, and wood waste. The facility also plans to use a 
limited quantity of separated MSW as a feedstock after initial start-
up.
    On February 9, 2011, INEOS Bio broke ground on this facility. INEOS 
Bio completed construction on this facility in June 2012 and began full 
commissioning of the facility. In August 2012 INEOS Bio received 
approval from EPA for their yard waste separation plan

[[Page 49806]]

and successfully registered their Vero Beach, FL facility under the RFS 
program. In September 2012 the facility began producing renewable 
electricity. In April 2013 comments to the proposed rule INEOS Bio 
stated that their facility was in the final start-up phase and that 
they expected to produce cellulosic ethanol at full production rates by 
the end of the year. The company issued a press release on July 31, 
2013, stating that they had begun commercial production. For this final 
rule we project 0-1 mill gal of cellulosic ethanol from INEOS Bio in 
2013. Applying the six month straight-line ramp-up period, which we 
consider a best case scenario as discussed above, with a start-up date 
in August results in a projection of approximately 1 mill gal in 2013. 
EPA believes this is a reasonable benchmark to use as a best case 
scenario when assessing the ramp-up of cellulosic biofuel facilities. 
When compared to the expected ramp-up rates of grain ethanol 
facilities, which are generally 1-2 months this is a conservative 
benchmark, but one we believe is appropriate given the challenges of 
scaling up new technologies. Given the uncertainty in the first 
production from INEOS Bio's facility and the history of delays for this 
facility, EPA believes a further discount to a projected volume of 0-1 
mill gal is warranted. \28\ INEOS Bio is also exploring several 
opportunities for additional cellulosic biofuel production facilities, 
both in the United States and internationally. INEOS Bio is targeting 
sources of inexpensive feedstock, primarily waste materials, and sees a 
market for plants with production capacities ranging from 8 to 50 mill 
gal per year per facility.
---------------------------------------------------------------------------

    \28\ Given the recent start-up of the INEOS Bio facility, we do 
not expect that zero gallons would be produced in 2013. However, we 
have decided to base our projections (including ranges) in million 
gallon increments in 2013, since uncertainty does not allow a more 
precise worst-case projection. Our projection for INEOS Bio, 
therefore, remains between zero and 1 million gallons, recognizing 
that zero could only occur in the unlikely event that they chose not 
to generate RINs for volume already produced.
---------------------------------------------------------------------------

KiOR
    KiOR is using a technology that converts biomass to a biocrude 
using a process they call Biomass Fluid Catalytic Cracking (BFCC). BFCC 
uses a catalyst developed by KiOR in a process similar to Fluid 
Catalytic Cracking currently used in the petroleum industry. The first 
stage of this process produces a renewable crude oil which is then 
upgraded to produce primarily gasoline, diesel, and jet fuel as well as 
a small quantity of fuel oil, all of which are nearly identical to 
those produced from petroleum.
    KiOR's first commercial scale facility is located in Columbus, 
Mississippi and is capable of producing approximately 11 mill gal of 
gasoline, diesel, and jet fuel per year. Construction on this facility 
began in May 2011 and was completed in September 2012. This facility is 
funded, in large part, with funds acquired through private equity and 
supplemented by KiOR's $150 million IPO in June 2011. KiOR announced 
that the first renewable transportation fuel produced at this facility 
was shipped to customers on March 18, 2013. KiOR had intended to begin 
producing fuel at their Columbus facility in 2012. Unexpected 
difficulties during the commissioning of this facility, due in large 
part to an interruption in electricity supply to the facility during 
commissioning resulted in delays in fuel production. KiOR's current 
expectations at their Columbus facility are for a start-up period 
lasting 9-12 months. During this period they estimate fuel production 
will average 30%-50% of the facility capacity after which they plan to 
approach full production rates at the facility. KiOR's expected 
production from their Columbus facility in 2013, recently confirmed in 
their quarterly update on May 9th, 2013, is between 3 and 5 million 
actual gallons of cellulosic gasoline and diesel. KiOR has feedstock 
supply agreements in place to supply all of the required feedstock for 
their Columbus facility with slash and pre-commercial thinning. They 
also have off-take agreements with several companies for all of the 
fuel that will be produced. KiOR has also announced plans to begin work 
on their second commercial scale biofuel production facility in 
Natchez, Mississippi upon the successful start-up of their first 
facility. It is unlikely this second facility will begin production of 
biofuel in 2013. For 2013 our production projection is for 3-4 million 
actual gallons (5-6 million ethanol-equivalent gallons) of cellulosic 
biofuel from KiOR's Columbus facility. This volume is significantly 
lower than the volume of fuel that would be produced assuming our best 
case scenario benchmark of a 6 month straight-line ramp-up period 
starting in mid March (~9 million ethanol-equivalent gallons). However, 
EPA believes this lower projection is appropriate based on the guidance 
received from KiOR and the progress achieved at their facility to date.
Blue Sugars
    Blue Sugars, formerly KL Energy, has developed a process to convert 
cellulose and hemicellulose into sugars and ethanol using a combined 
chemical/thermal-mechanical pretreatment process followed by enzymatic 
hydrolysis, co-fermentation of C5 and C6 sugars, and distillation to 
fuel-grade ethanol. This production process is versatile enough to 
allow for a wide variety of cellulosic feedstocks to be used, including 
woody biomass and herbaceous biomass such as sugarcane bagasse. In 
August 2010 Blue Sugars announced a joint development agreement with 
Petrobras America Inc. As part of the agreement Petrobras has invested 
$11 million to modify Blue Sugars' 1.5 mill gal per year demonstration 
facility in Upton, Wyoming to allow it to process bagasse and other 
biomass feedstocks. The modifications to Blue Sugars' facility were 
completed in the spring of 2011. In April 2012 Blue Sugars generated 
approximately 20,000 cellulosic biofuel RINs, the first RINs generated 
under the RFS program for fuel made from cellulosic feedstock. Blue 
Sugars has indicated, however, that the cellulosic ethanol they 
produced was exported to Brazil for promotional efforts at the Rio +20 
conference in Brazil. These RINs therefore had to be retired and were 
not be available to obligated parties to meet their cellulosic biofuel 
requirements in 2012. In October 2012 Western Biomass Energy LLC, a 
subsidiary of Blue Sugars that owned the Upton, Wyoming demonstration 
facility, filed for Chapter 11 bankruptcy. This was changed to Chapter 
7 bankruptcy on May 2, 2013 and was followed by a Chapter 7 bankruptcy 
filing for Blue Sugars on May 10th.
ZeaChem
    ZeaChem successfully completed construction of their demonstration-
scale facility in Boardman, Oregon, in October 2012, allowing for the 
production of ethanol from sugars derived from cellulose and hemi-
cellulose. On March 12, 2013 they announced that they had successfully 
produced ethanol from cellulosic feedstocks at their biorefinery, which 
has a nameplate capacity of 250,000 gallons of cellulosic ethanol per 
year. ZeaChem's production process uses a combination of biochemical 
and thermochemical technologies to produce ethanol and other renewable 
chemicals from cellulosic materials. The feedstock is first 
fractionated into two separate streams, one containing sugars derived 
from cellulose and hemicellulose and the other containing lignin. The 
sugars are fermented into an intermediate chemical, acetic acid, using 
a naturally occurring acetogen.

[[Page 49807]]

The acetic acid is then converted into ethyl acetate, which can then be 
hydrogenated into ethanol. The hydrogen necessary for this process is 
produced by gasifying the lignin stream from the cellulosic biomass.
    ZeaChem's process is flexible and is capable of producing a wide 
range of renewable chemicals and fuels from many different feedstocks. 
They plan to use both agricultural residues and pre-commercial 
thinnings and tree residue from tree plantations at their demonstration 
facility and have contracts in place for these feedstocks, as well as 
planted trees from tree plantations, at their first commercial scale 
facility.\29\ In January 2012 ZeaChem announced that they had received 
a $232.5 million conditional loan guarantee offer from USDA for the 
construction of their first commercial scale facility, which will have 
a capacity of at least 25 mill gal per year. ZeaChem currently has 
agreements in place to provide all of the necessary feedstock for this 
facility. This facility, however, is not expected to begin producing 
cellulosic biofuel until late 2014 at the earliest. We therefore have 
not included any volume for this facility in our 2013 projection.
---------------------------------------------------------------------------

    \29\ EPA has not yet approved planted trees from tree 
plantations as a RIN generating feedstock. Unless and until EPA 
approves a pathway using planted trees from tree plantations as a 
feedstock ZeaChem will be unable to generate RINs for any biofuel 
produced using this feedstock.
---------------------------------------------------------------------------

Abengoa
    Abengoa has developed an enzymatic hydrolysis technology to convert 
corn stover and other agricultural waste feedstocks into ethanol. After 
successfully testing and refining their technology at a pilot scale 
facility in York, Nebraska as well as in a demonstration-scale facility 
in Salamanca, Spain, Abengoa is now working towards the completion of 
their first commercial scale cellulosic ethanol facility in Hugoton, 
Kansas. Abengoa has contracts in place to provide the majority of 
feedstocks necessary for this facility for the next 10 years and 
successfully completed their first biomass harvest in the fall of 2011. 
Construction at this facility, which began in September 2011, is 
expected to take approximately 24 months and be completed in the fourth 
quarter of 2013. All of the major process equipment for this project 
has been purchased and all of the required permits for construction 
have been approved. Abengoa's Hugoton facility is being partially 
funded by a $132 million Department of Energy (DOE) loan guarantee.
    When completed, the Hugoton plant will be capable of processing 700 
dry tons of corn stover per day, with an expected annual ethanol 
production capacity of approximately 24 mill gal. Abengoa plans to 
begin ramping up production at the facility shortly after completing 
construction in late 2013 and to be producing fuel at rates near the 
nameplate capacity in the summer of 2014. After successfully proving 
their technology at commercial scale in Hugoton, Abengoa currently 
plans to construct additional similar cellulosic ethanol production 
facilities, either on greenfield sites or co-locating these new 
facilities with their currently existing starch ethanol facilities 
around the United States. While this facility could produce a small 
volume of cellulosic ethanol in 2013, commissioning of the facility is 
expected to last through the first quarter of 2014, during which only 
small volumes of ethanol will be produced. Given the small volume 
potential and high degree of uncertainty of production from this 
facility in 2013, we have not included any of this volume in our 
projected available volume for 2013.
Poet
    Poet has also developed an enzymatic hydrolysis process to convert 
cellulosic biomass into ethanol. Poet has been investing in the 
development of cellulosic ethanol technology for more than a decade and 
began producing small volumes of cellulosic ethanol at pilot scale at 
their plant in Scotland, SD in late 2008. In January 2012, Poet formed 
a joint venture with Royal DSM of the Netherlands called Poet-DSM 
Advanced Biofuels to commercialize and license their cellulosic ethanol 
technology.
    The joint venture's first commercial scale facility, called Project 
LIBERTY, will be located in Emmetsburg, Iowa. This facility is designed 
to process 770 dry tons of corn cobs, leaves, husks, and some stalk per 
day into cellulosic ethanol. The facility is projected to have an 
annual production capacity beginning at approximately 20 mill gal per 
year, increasing over time to 25 mill gal per year. In anticipation of 
the start-up of this facility, Poet constructed a 22-acre biomass 
storage facility and had its first commercial harvest in 2010, 
collecting 56,000 tons of biomass.
    Site prep work for Project LIBERTY began in the summer of 2011, and 
vertical construction of the facility began in the spring of 2012. Poet 
was awarded a $105 million loan guarantee offer for this project from 
DOE in July 2011, but with the joint venture decided to proceed without 
the loan guarantee. This project is expected to be completed in the 
first half of 2014. After the completion of Project LIBERTY, Poet plans 
to build additional cellulosic ethanol facilities at many of their 
existing corn ethanol plants. They are also planning to license their 
technology for use at other grain ethanol plants, as well as build 
additional plants that will process wheat straw, rice hulls, woody 
biomass or herbaceous energy crops. By 2022 Poet has a goal of 
producing 3.5 bill gal of cellulosic ethanol per year. Given the 
projected completion date of 2014 for the Emmetsburg, Iowa facility, we 
have not included any of this volume ion our projected available volume 
for 2013.
Other Companies
    There are several more companies planning to begin producing 
cellulosic biofuel from commercial scale facilities in 2014 including 
Cool Planet Biofuels, DuPont, and Ensyn. Along with the companies 
discussed above, these facilities represent approximately 100 mill gal 
of additional cellulosic biofuel production capacity. Most of these 
companies have already begun to develop plans for their successive 
facilities to follow after the successful completion of their initial 
projects.
4. Other Potential Sources of Domestic Cellulosic Biofuel
    Each of the companies listed in the previous two sections is 
planning to generate cellulosic biofuel RINs using one of the valid 
RIN-generating pathways listed in Table 1 to 40 CFR Sec.  80.1426. To 
generate RINs, each company must comply with all applicable 
registration, recordkeeping, and reporting requirements in the RFS 
regulations, including requirements to verify that the feedstocks used 
are renewable biomass and are sourced from approved land. EPA is not 
approving any additional feedstocks or processes in today's rule. We 
are also aware of several companies that may be in a position to 
produce cellulosic biofuel in 2013 but intend to use a production 
pathway that is not currently approved for RIN generation. Pathways 
that are currently under evaluation by EPA include transportation fuels 
derived from landfill biogas such as CNG, cellulosic ethanol produced 
from corn kernel fiber and cellulosic heating oil. If these or other 
cellulosic biofuel pathways are approved by EPA, they may be used to 
generate on the order of 3 million cellulosic biofuel RINs in 2013. 
Because EPA has not yet made a final determination on these pathways no 
volume of cellulosic fuel from these

[[Page 49808]]

pathways has been included in our 2013 cellulosic biofuel projection.
5. Imports of Cellulosic Biofuel
    While domestically produced cellulosic biofuels are the most likely 
source of cellulosic biofuel available in the United States in 2013, 
imports of cellulosic biofuel produced in other countries may also 
generate RINs and participate in the RFS program. While the demand 
provided by the RFS program provides a financial incentive for 
companies to import cellulosic biofuels into the United States, the 
combination of local demand, financial incentives from other 
governments, and transportation costs for the cellulosic biofuel has 
resulted in no cellulosic biofuel being imported to the United States 
thus far. We believe this situation is likely to continue in the near 
future and have not included any cellulosic biofuel imports in our 
projections of available volume in 2013.
    As in the United States, the production of cellulosic biofuels 
internationally is mostly limited to small-scale research and 
development, pilot, and demonstration facilities at this time. This is 
likely to continue to be the case throughout 2013. Two notable 
exceptions are facilities built and operated by Beta Renewables and 
Enerkem. Beta Renewables completed construction of their first 
commercial scale facility located in Crescentino, Italy in the summer 
of 2012. This facility is currently in a commissioning phase and is 
designed to produce approximately 20 mill gal of cellulosic ethanol per 
year. Beta Renewables uses an enzymatic hydrolysis process to produce 
ethanol from local agricultural residues and herbaceous energy crops.
    Enerkem is also in the process of building their first commercial 
scale facility in Edmonton, Alberta and plans to begin operations in 
2013. Enerkem's facility will use a thermochemical process to produce 
syngas from MSW and then catalytically convert the syngas to methanol. 
The methanol can then be sold directly or upgraded to ethanol or other 
chemical products. At full capacity this facility will be capable of 
producing 10 mill gal of cellulosic ethanol per year. At this point, 
neither Beta Renewables nor Enerkem have registered their facilities 
under the RFS program, a necessary step that must be completed before 
these companies can generate RINs for any fuel they import into the 
United States. Both are planning to locate additional plants in the 
United States in the future and are likely to generate RINs for 
production from domestic facilities in future years.
6. Summary of Volume Projections
    The information we have gathered on cellulosic biofuel producers, 
described above, allows us to project production volumes for each 
facility in 2013. For the purposes of this final rulemaking we have 
focused on commercial scale cellulosic biofuel production facilities. 
We believe our focus on commercial scale facilities is appropriate as 
the industry transitions from small-scale R&D and pilot facilities to 
large scale commercial production. It is likely that several small-
scale facilities such as API, DuPont, ZeaChem, and others will also 
produce some cellulosic biofuel in 2013. While RINs may be generated 
for any cellulosic biofuel produced from these small R&D and pilot 
facilities, historically many have chosen not to do so for a variety of 
reasons. We are therefore not including a volume projection from these 
facilities.
    In 2013 as many as seven cellulosic biofuel companies have the 
potential to produce fuel at commercial scale. Each of these facilities 
is discussed above, and the facility production targets for each are 
summarized in Table II.C.6-1 below. Of the two companies from which we 
are basing our 2013 cellulosic biofuel projection one has already begun 
producing cellulosic biofuel at their commercial scale facility and the 
other is expected to begin production soon. This gives us increased 
confidence in their production capabilities as they have already 
achieved significant milestones. The other companies that have the 
potential to produce cellulosic biofuel in 2013, Abengoa, EdeniQ, 
Ensyn, Fiberight, and companies producing biogas from landfills for 
transportation use, either do not yet have a valid RIN generating 
pathway or are not planning on beginning fuel production until late 
2013 or early 2014. Even a small delay in their expected production 
timeline could result in their failure to produce any cellulosic 
biofuel in 2013 and any volumes of fuel produced are likely to be very 
small. For this final rule, therefore, we are not projecting production 
from these facilities in 2013 consistent with EIA's projection. The 
fact that our projection only includes volumes from facilities that 
have already completed construction of commercial scale facilities is 
in large part due to the delay in finalizing the RFS standards for 2013 
and is not intended to set a precedent for future rulemakings. Volumes 
from facilities that have not yet completed construction may be 
considered in EPA's volume projections in future rulemakings if 
appropriate under the circumstances, recognizing that EPA's goal is a 
projection of what will actually happen in the year at issue, taking a 
neutral aim at accuracy.
    When considering together all the potential sources of cellulosic 
biofuel, the total projected production volume from commercial scale 
production facilities in the United States in 2013 is 4 million actual 
gallons (6 million ethanol-equivalent gallons). This is the mid-point 
of the range of values projected for the two facilities. This number 
represents EPA's projection of expected cellulosic RIN production in 
2013, taking into account the EIA estimates and the many factors 
described in detail above.

                                             Table II.C.6-1--Projected Available Cellulosic Biofuel for 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                 2013
                                                                                                                                    2013      Projected
                                                                                                                                 Projected    available
                                                                                               Design       First production     available      volume
    Company name             Location               Feedstock                 Fuel            capacity        (projected)          actual      (million
                                                                                               (MGY)                               volume      ethanol-
                                                                                                                                 (Mill gal)   equivalent
                                                                                                                                               gallons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Abengoa.............  Hugoton, KS...........  Corn Stover..........  Ethanol..............           24  1st Quarter 2014\b\..            0            0
EdeniQ\a\...........  Various...............  Corn Kernel Fiber....  Ethanol..............           10  4th Quarter 2013\b\..            0            0
Ensyn\a\............  Rhinelander, WI;        Woody Biomass........  Heating Oil..........            4  Currently Producing..            0            0
                       Ontario, CA.
Fiberight...........  Blairstown, IA........  MSW..................  Ethanol..............            6  1st Quarter 2014\b\..            0            0
INEOS Bio...........  Vero Beach, FL........  Vegetative Waste.....  Ethanol..............            8  Mid 2013\b\..........          0-1          0-1
KiOR................  Columbus, MS..........  Wood Waste...........  Gasoline and Diesel..           11  March 18, 2013.......          3-4          5-6

[[Page 49809]]

 
Various\a\..........  N/A...................  Landfill Biogas......  Biogas...............          N/A  Currently Producing..            0            0
Various Pilot/Demo    Various...............  Various..............  Various..............      Various  Various..............            0            0
 Plants.
                     -----------------------------------------------------------------------------------------------------------------------------------
    Total...........  ......................  .....................  .....................           49  .....................            4            6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Companies do not currently have valid pathways for RIN generation.
\b\ Start-up dates for these facilities are projections.

D. Cellulosic Biofuel Volume for 2013

    In today's final rule we are setting the applicable volume for 
cellulosic biofuel for 2013 that is based on EIA's estimate, projected 
production volumes developed in consultation with the companies 
expected to produce cellulosic biofuel from commercial scale facilities 
in 2013, comments we received in response to the NPRM, and EPA's 
judgment. Many factors have been taken into consideration in developing 
these projections, such as the EIA estimate, the current status of 
project funding, the status of the production facility, anticipated 
construction timelines, the anticipated start-up date and ramp-up 
schedule, feedstock supply, intent to generate RINs, and many others. 
Moreover, all of the companies included in our 2013 volume projections 
have invested a significant amount of time and resources developing 
their technologies at R&D and demonstration-scale facilities prior to 
the design and construction of their first commercial scale facilities. 
The projects have solid financial backing. We believe the sum of these 
individual projected available volumes (6 million ethanol-equivalent 
gallons) is a reasonable projection of expected actual production. This 
projection reflects EPA's best estimate of what will actually happen in 
2013.

III. Assessment of Advanced Biofuel and Total Renewable Fuel for 2013

    As described in Section I, the volumes of renewable fuel required 
for use under the RFS program each year (absent an adjustment or waiver 
by EPA) are generally specified in CAA 211(o)(2) through 2022. For 
2013, the applicable volume of advanced biofuel is 2.75 bill gal, and 
the applicable volume of total renewable fuel is 16.55 bill gal.
    In the NPRM, we proposed a reduction in the applicable volume of 
cellulosic biofuel. Under section 211(o)(7)(D)(i), when EPA reduces the 
volume of cellulosic biofuel EPA may reduce the applicable volume of 
total and advanced biofuel by an amount up to the reduction in 
cellulosic biofuel. We proposed no reduction in the volumes of advanced 
biofuel and total renewable fuel for 2013. However, we requested 
comment on whether the advanced biofuel and total renewable fuel 
requirements should be reduced under section 211(o)(7)(D)(i) to account 
for uncertainty in availability of advanced biofuel, specifically 
asking whether a reduction of 200 mill gal would be appropriate. We 
also requested comment on whether the blendwall \30\ would present any 
difficulty in terms of compliance with the volume requirements in 2013.
---------------------------------------------------------------------------

    \30\ In general, the term ``blendwall'' refers to the total 
volume of ethanol that can be consumed as either E10 or higher 
ethanol blends given various constraints.
---------------------------------------------------------------------------

    No stakeholders supported the specific reduction of 200 mill gal in 
the advanced biofuel and total renewable fuel volume requirements on 
which we sought comment in our proposal. Instead, stakeholders were 
generally in favor of either much larger reductions or no reduction at 
all. Those requesting much larger reductions most commonly pointed to 
the authority under the cellulosic waiver authority to reduce advanced 
biofuel and total renewable fuel by up to the same amount as the 
reduction in cellulosic biofuel, which was 986 mill gal in the NPRM. 
Depending on the stakeholder, justifications for such large reductions 
included cost, availability, and the E10 blendwall. Some went further, 
suggesting that the required volume of total renewable fuel should be 
reduced more than 986 mill gal since reductions in advanced biofuel 
would likely be insufficient to address the E10 blendwall. Of those 
that cited the E10 blendwall as a reason to reduce the required 
volumes, most requested that the total volume of ethanol demand created 
by the standards be no more than 10% of all gasoline, though some 
conceded that accounting for reasonably achievable volumes of E15-E85 
would be appropriate.
    Those stakeholders requesting that the applicable standards be 
based on the statutory volumes without any reductions typically cited 
sufficiency of available biofuels and opportunities for growth in 
consumption of E15-E85. Some also pointed to the need to promote growth 
in the advanced biofuel and non-ethanol markets and expressed concern 
that any reductions in the standards would jeopardize investments.

A. Statutory Authorities for Reducing Volumes

1. Cellulosic Waiver Authority
    Under CAA section 211(o)(7)(D)(i), if EPA determines that the 
projected volume of cellulosic biofuel production for the following 
year is less than the applicable volume provided in the statute, then 
EPA must reduce the applicable volume of cellulosic biofuel to the 
projected volume available during that calendar year. Under such 
circumstances, EPA also has the discretion to reduce the applicable 
volumes of advanced biofuel and total renewable fuel by an amount not 
to exceed the reduction in cellulosic biofuel.
    Section 211(o)(7)(D)(i) provides that ``For any calendar year in 
which the Administrator makes such a reduction, the Administrator may 
also reduce the applicable volume of renewable fuel and advanced 
biofuels requirement established under paragraph (2)(B) by the same or 
a lesser volume.'' Thus Congress authorized EPA to reduce the

[[Page 49810]]

volume of total renewable fuel ``and'' advanced biofuels. As EPA has 
discussed before, this indicates a clear Congressional intention that 
EPA may reduce both the total renewable and advanced biofuel volume 
together, not one or the other.
    As described in the May 2009 NPRM for the RFS regulations, we do 
not believe it would be appropriate to lower the advanced biofuel 
standard but not the total renewable standard, as doing so would allow 
conventional biofuels to effectively be used to meet the standards that 
Congress specifically set for advanced biofuels. See 74 FR 24914-15. We 
interpret this provision as authorizing EPA to reduce both total 
renewable fuel and advanced biofuel, by the same amounts, if EPA 
reduces the volume of cellulosic biofuel. Using this authority the 
reductions in total renewable fuel and advanced biofuel can be up to 
but no more than the amount of reduction in the cellulosic biofuel 
volume.
    The National Biodiesel Board (NBB) commented that the language of 
CAA 211(o)(7)(D)(i) does not require advanced biofuel and total 
renewable fuel volumes to be reduced together. NBB cited several other 
legal decisions to support their assertion that advanced biofuel and 
total renewable fuel could be reduced by different amounts under the 
cellulosic waiver authority. While we agree that in some other contexts 
wording similar to that in 211(o)(7)(D)(i) has taken on a different 
meaning, in none of those other contexts was there a nested set of 
requirements such as there are in the RFS program. In the RFS program, 
cellulosic biofuel is also used to satisfy the advanced biofuel 
standard and the total renewable fuel standard. Similarly, advanced 
biofuel is used to satisfy the volume obligation for total renewable 
fuel. Thus any reductions in the applicable volume of cellulosic 
biofuel will also simultaneously affect the means through which 
obligated parties comply with these two other standards, and any 
reductions in advanced biofuel volume will affect the means through 
which obligated parties comply with the total renewable fuel volume. 
Congress structured the volumes such that total renewable fuel volume 
requirements were increasing in coordination with the increase in 
advanced biofuel. Congress established the volume requirements for 
advanced biofuel and total renewable fuel as interrelated standards. 
Therefore it is appropriate to consider a possible reduction in both 
the advanced biofuel and total renewable fuel applicable volumes when 
EPA reduces the cellulosic biofuel volume below the applicable volume 
for cellulosic biofuel set forth in the statute. Thus to the extent 
circumstances warrant a reduction in advanced biofuel and total 
renewable fuel based on the reductions in cellulosic biofuel pursuant 
to section 211(o)(7)(D)(i), we believe it will best reflect the goals 
and objectives of the Act for the advanced biofuel and total renewable 
fuel volumes to both be reduced by the same amount, maintaining the 
volume relationship between the two renewable fuel categories. In this 
way, if the circumstances in a specific year warrant not reducing the 
advanced biofuel and total renewable fuel volumes by the amount that 
the cellulosic biofuel volume is reduced, then to the extent that the 
shortfall in cellulosic biofuel production is replaced it would be 
through advanced biofuel, which comes significantly closer to the GHG 
reductions achieved by cellulosic biofuel. It is important to note, 
however, that this discussion does not address whether or under what 
circumstances the advanced and total volume requirements should be 
reduced under section 211(o)(7)(D)(i), but solely whether any such 
reductions would be for both categories of fuel under section 
211(o)(7)(D)(i).
    NBB also argued that any consideration of a reduction in advanced 
biofuel should be accompanied by an equivalent reduction in total 
renewable fuel, but that the reverse was not true. We agree that a 
reduction in the total renewable fuel requirement that is considered 
under the general waiver authority at 211(o)(7)(A) need not necessarily 
be accompanied by an equivalent reduction in the advanced biofuel 
requirement. It is possible that there could be an inadequate supply of 
total renewable fuels that would justify a waiver of the total 
renewable fuel standard, for example, without there also being an 
inadequate supply of advanced biofuels. However, we are currently 
setting the annual RFS standard and are not responding to a petition 
that we assert the general waiver authority.
    In 2013, the applicable volume of cellulosic biofuel specified in 
the statute represents more than a third of the advanced biofuel volume 
(1.0 bill gal out of 2.75 bill gal), a higher fraction than in any 
previous year. A substantial reduction in the applicable volume of 
cellulosic biofuel could potentially also have a substantial impact on 
the sufficiency of volumes to meet the advanced biofuel and total 
renewable fuel standards. As described in Section II.D above, we are 
establishing an available volume of cellulosic biofuel for 2013 of 6 
mill ethanol-equivalent gallons, significantly below the statutory 
applicable volume of 1.0 bill gal. As a result, we have the discretion 
under CAA section 211(o)(7)(D)(i) to reduce the advanced biofuel and 
total renewable fuel applicable volumes by up to 994 mill gallons 
(ethanol-equivalent).
    The statute does not provide any explicit criteria that must be met 
or factors that must be considered when making a determination as to 
whether and to what degree to reduce the advanced biofuel and total 
renewable fuel applicable volumes based on a reduction in cellulosic 
biofuel volumes under CAA section 211(o)(7)(D)(i). In comments on the 
NPRM, stakeholders differed in their views about which factors EPA 
should consider when making a determination about whether and to what 
degree to reduce volumes of advanced biofuel and total renewable fuel 
under the cellulosic waiver authority. Some indicated that the only 
factor that should be considered is whether the volumes in question are 
available. Others indicated that the criteria that apply under the 
general waiver authority at section 211(o)(7)(A) should also apply to 
the cellulosic waiver authority at section 211(o)(7)(D)(i). The Clean 
Air Task Force and the Union of Concerned Scientists both suggested 
that the criteria in section 211(o)(2)(B)(ii), which are required to be 
used to determine applicable volumes for years not specified in the 
statute, should also be considered in the context of the cellulosic 
waiver authority. The criteria in section 211(o)(2)(B)(ii) are 
described more fully in Section III.A.3 below.
    We agree that nothing in the Act precludes EPA from considering the 
criteria described in sections 211(o)(2)(B)(ii) and 211(o)(7)(A) in 
determining appropriate reductions in advanced biofuel and total 
renewable fuel under the cellulosic waiver authority at section 
211(o)(7)(D)(ii). Moreover, it may be appropriate to do so in certain 
circumstances, as described more fully below. However, we do not 
believe that there is any legal requirement to apply the criteria of 
those provisions as binding criteria for purposes of section 
211(o)(7)(D)(ii). It is clear that these three statutory provisions are 
separate and independent provisions, with no cross-references. Congress 
did not include the criteria in those other waiver provisions in the 
separate waiver provision for cellulosic biofuel. In the case of the 
general waiver authority at section 211(o)(7)(A), we do not agree with 
the comment that it

[[Page 49811]]

provides criteria that must be met in order to reduce cellulosic and 
advanced volumes under 211(o)(7)(D)(i). If it did, the waiver language 
in 211(o)(7)(D)(i) would be superfluous, since 211(o)(7)(A) would 
already provide the discretionary authority to reduce advanced biofuel 
and total renewable fuel in the circumstances where the criteria in 
211(o)(7)(A) are satisfied. Moreover, if the criteria in 211(o)(7)(A) 
apply to the cellulosic waiver authority in 211(o)(7)(D)(i), then it 
would also logically apply to the biomass-based diesel waiver authority 
in 211(o)(7)(E)(ii), also rendering that section superfluous. We do not 
believe that the Act can or should be interpreted in this manner.
    We believe that the applicable volumes for total and advanced 
biofuel identified in the statute should be retained for 2013 as there 
are reasonably available volumes of renewable fuel to achieve the 
statutory volumes. EPA has also considered the comments concerning 
factors other than availability, as discussed below. EPA has determined 
that under the circumstances discussed below for 2013, it is 
appropriate to retain the statutory volumes.
    One stakeholder suggested that uncertainty in potential imports of 
sugarcane ethanol from Brazil should not be a factor when projecting 
the volumes expected to be available to meet the statutory volume 
requirements for advanced biofuel. The stakeholder pointed to a recent 
decision from the U.S. Court of Appeals indicating that EPA need not 
present specific numerical projections of available volumes of advanced 
biofuel if it did not intend to reduce the required volumes below the 
volumes specific in the statute. In that case the court stated that:

    Nothing in the text of Sec.  7545(o)(7)(D)(i), or any other 
applicable provision of the Act, plainly requires EPA to support its 
decision not to reduce the applicable volume of advanced biofuels 
with specific numerical projections. This stands in contrast to the 
Act's explicit instructions that EPA make a numerical projection for 
cellulosic biofuel. Certainly EPA must provide a reasoned 
explanation for its actions, but rationality does not always imply a 
high degree of quantitative specificity.

API v. EPA, 706F.3d at 481 (D.C. Cir 2013)
    In the 2012 RFS standards rule at issue in the referenced Court 
decision, EPA did not present individual numeric projections of 
available volumes of advanced biofuel, but instead described historical 
data, production capacity, competing publicly-available projections and 
qualitative information to conclude that sufficient volumes could be 
produced without lowering the applicable volume set forth in the 
statute. The Court upheld EPA's approach as reasonable. However, the 
Court decision does not preclude EPA from deriving and seeking comment 
on numeric projections where EPA believes it is appropriate to do so. 
In this case EPA believed it would facilitate its decision-making to 
derive and seek comment on a numeric projection of sugarcane ethanol 
imports for 2013. This approach is consistent with the statute and the 
API opinion.
2. General Waiver Authority
    Under CAA 211(o)(7)(A), EPA can reduce the amount of any of the 
four volume requirements specified in the statute if one of the 
following determinations is made:
     Implementation of the requirement would severely harm the 
economy or the environment of a State, a region, or the United States;
     There is an inadequate domestic supply.

In order to make such a reduction in the required volumes, EPA would 
need to consult with the Secretary of Agriculture and the Secretary of 
Energy, and would need to provide public notice and opportunity for 
comment.
3. Modification of Applicable Volumes for 2016 and Beyond
    Under certain specified conditions, CAA section 211(o)(7)(F) 
requires EPA to modify the applicable volume provided in the statute 
for calendar years 2016 and beyond if EPA has waived a volume 
requirement using the waiver authorities provided in CAA section 
211(o)(7)(A), (D), or (E). This requirement to modify the applicable 
volumes is triggered when one of the following occurs:

 EPA waives at least 20 percent of the applicable volume 
requirement for two consecutive years
 EPA waives at least 50 percent of the applicable volume 
requirement for a single year

This requirement to modify the applicable volumes applies separately 
for each of the four volume requirements in CAA section 211(o)(2)(B),

    Volume modifications made pursuant to CAA 211(o)(7)(F) would differ 
from waivers in several important ways. First, while waivers leave the 
statutory volume mandates at CAA 211(o)(2)(B)(i) intact and merely 
reduce them for the purposes of calculating the applicable annual 
percentage standards for that year, the volume modifications under 
211(o)(7)(F) would instead modify the applicable volumes that are 
provided in the statute. Once modified, the new volumes would replace 
those in the statute for the applicable years. Second, waivers are 
generally determined and applied for one year at a time, while the 
volume modifications could be done at one time for multiple years after 
2015. Third, CAA 211(o)(7)(F) provides explicit direction concerning 
those factors that EPA must consider in modifying the statutory volumes 
for 2016 and beyond, incorporating by reference the requirements in CAA 
section 211(o)(2)(B)(ii):
     The impact of the production and use of renewable fuels on 
the environment, including on air quality, climate change, conversion 
of wetlands, ecosystems, wildlife habitat, water quality, and water 
supply;
     The impact of renewable fuels on the energy security of 
the United States;
     The expected annual rate of future commercial production 
of renewable fuels, including advanced biofuels in each category 
(cellulosic biofuel and biomass-based diesel);
     The impact of renewable fuels on the infrastructure of the 
United States, including deliverability of materials, goods, and 
products other than renewable fuel, and the sufficiency of 
infrastructure to deliver and use renewable fuel;
     The impact of the use of renewable fuels on the cost to 
consumers of transportation fuel and on the cost to transport goods; 
and
     The impact of the use of renewable fuels on other factors, 
including job creation, the price and supply of agricultural 
commodities, rural economic development, and food prices.

To modify the required volumes under 211(o)(7)(F), EPA is also required 
to coordinate with the Secretary of Energy and the Secretary of 
Agriculture and review the implementation of the program to date. Any 
modification under this provision would be made through rulemaking.

    In response to the NPRM, one stakeholder requested that EPA use the 
authority under CAA 211(o)(7)(F) as soon as possible, or by 2014, to 
modify the required future volumes for cellulosic biofuel as a way of 
providing more long-term certainty to the market. However, we do not 
believe that taking action sooner would provide such long-term 
certainty since the authority under CAA 211(o)(7)(D) would continue to 
apply and we would still be required to reduce the applicable volume of 
cellulosic biofuel if the volume

[[Page 49812]]

projected to be available for any one calendar year was less than the 
volumes for that calendar year as modified under CAA 211(o)(7)(F).

B. Available Volumes of Advanced Biofuel in 2013

    In the NPRM we discussed the cellulosic waiver authority provided 
in CAA 211(o)(7)(D)(i), which provides that EPA may reduce the 
applicable volume of advanced biofuel and total renewable fuel up to 
the amount of the reduction in required cellulosic biofuel volumes (986 
mill gal in the NPRM). We clarified that, if we were to reduce the 
required volume of advanced biofuel under this statutory authority, we 
would also reduce the required volume of total renewable fuel by the 
same amount, with the net effect being that the volume of non-advanced 
biofuel needed to meet the statutory required volumes would be 
unchanged. In the NPRM we did not discuss reductions in any of the 
statutory volume requirements under the general waiver authority.
    Our focus in the NPRM was on the availability of advanced biofuel 
in comparison to the volume needed to meet the statutory volume of 2.75 
bill gal in light of the substantial reduction in cellulosic biofuel. 
Based on our assessment of availability of advanced biofuel, we 
proposed no reduction in the advanced biofuel and total renewable fuel 
volumes. We continue to believe that the availability of advanced 
biofuel is a critical component in determining whether the statutory 
volume requirement of 2.75 bill gal should be reduced. However, we 
recognize that we can also consider other factors in this 
determination. For instance, in response to our request for comment on 
whether the E10 blendwall might present difficulty in meeting the 
statutory volume requirements, a number of stakeholders indicated that 
we should use one of the statutory waiver authorities to reduce the 
required volumes of advanced biofuel and total renewable fuel to 
account for limitations in the volume of ethanol that can be consumed. 
Other stakeholders suggested that we reduce advanced and total volumes 
because of environmental or cost concerns.
    We have the discretion under 211(o)(7)(D)(i) to reduce the advanced 
biofuel and total renewable fuel volumes by up to the amount we reduce 
the applicable volume of cellulosic biofuel, and such a reduction would 
contribute to reducing complications associated with the E10 blendwall. 
The net effect of such a change would be that the volume of non-
advanced biofuel needed to meet the required volumes for total 
renewable fuel would be unaffected. We discuss the E10 blendwall and 
the treatment of total renewable fuel in Section III.C below, and we 
discuss a longer-term strategy for combining considerations of biofuel 
availability and the ethanol blendwall in Section III.E. In this 
section we focus on the availability of advanced biofuels in our 
determination of whether to reduce the advanced biofuel and total 
renewable fuel volumes using the cellulosic waiver authority.\31\
---------------------------------------------------------------------------

    \31\ Any exercise of the general waiver authority requires 
notice and the opportunity for comment. The NPRM did not propose a 
waiver under the general waiver authority, and only discussed volume 
adjustments made under the cellulosic waiver authority. We are not 
in a position to address in this final rule all of the issues that 
would be relevant under a notice and comment proceeding under the 
general waiver provisions. This final rule thus focuses on the 
exercise of our authority under the cellulosic biofuel waiver 
provision.
---------------------------------------------------------------------------

    Renewable fuels that can be used to meet the standard for advanced 
biofuel include those with Renewable Identification Number (RIN) codes 
of 3, 4, 5, or 7. Table III.B-1 shows the number of each of these types 
of RIN that was generated in 2012.

             Table III.B-1--2012 RINs That Qualified To Meet the 2012 Advanced Biofuel Standard \32\
                                      [Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                     Renewable      Biogas and
            D code                  Category          Ethanol        Biodiesel        diesel        heating oil
----------------------------------------------------------------------------------------------------------------
3.............................  Cellulosic                  0.02               0               0               0
                                 biofuel.
4.............................  Biomass-based               0              1,579             147               0
                                 diesel.
5.............................  Advanced biofuel          588                  0              20               3
7.............................  Cellulosic                  0                  0               0               0
                                 diesel.
                               ---------------------------------------------------------------------------------
    Total.....................                                2,337
----------------------------------------------------------------------------------------------------------------


---------------------------------------------------------------------------

    \32\ 2012 data from the EPA-Moderated Transaction System (EMTS).
---------------------------------------------------------------------------

The total of 2,337 mill ethanol-equivalent gallons is higher than the 
2,000 mill gal of advanced biofuel required in 2012. This result 
supports our projection in the rulemaking setting the 2012 standards 
\33\ that there was no need to reduce the 2012 advanced biofuel 
requirement despite the significant reduction in the applicable volume 
of cellulosic biofuel.

    \33\ 77 FR 1320, published on January 9, 2012.
---------------------------------------------------------------------------

    The applicable volume in the statute for advanced biofuel in 2013 
is 2,750 mill gal, an increase of 750 mill gal over the 2012 
requirement of 2,000 mill gal, and 413 mill gal above the volume 
actually produced or imported in 2012. In order to determine the 
sufficiency of advanced biofuel volumes to meet a requirement for 2,750 
mill gal in 2013, we first accounted for biomass-based diesel and 
cellulosic biofuels that would be required under the standards we are 
setting today. As shown in Table III.B-2, the result is that there 
would need to be 824 mill ethanol-equivalent gallons of other advanced 
biofuels in order to meet the total advanced biofuel requirement of 
2,750 mill gal.

           Table III.B-2--Necessary Volume of Advanced Biofuel
                      [Mill gal ethanol-equivalent]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2013 Advanced biofuel applicable volume.......................     2,750
Cellulosic biofuel requirement................................         6
Biomass-based diesel requirement..............................       \a\
                                                                   1,920
Necessary volume of additional advanced biofuel...............       824
------------------------------------------------------------------------
\a\ We have assumed that the 1.28 bill gal requirement is composed
  entirely of biodiesel with an equivalence value of 1.5 based on
  historical production. If significant quantities of renewable diesel,
  with an equivalence value of 1.6 or 1.7 are used to satisfy the
  biomass-based diesel requirement this number will be larger.

We have identified a variety of sources of advanced biofuel that could 
meet the need for 824 mill gal of additional

[[Page 49813]]

advanced biofuel, including the following:

 Biodiesel in excess of that required to meet the volume 
requirement of 1.28 bill gal
 Domestically produced advanced biofuels such as renewable 
diesel that does not qualify as biomass-based diesel, biogas from 
landfills, sewage waste treatment plants, and manure digesters, heating 
oil, sorghum ethanol produced at dry mill facilities using specified 
forms of biogas for both process energy and most electricity 
production, and ethanol and other qualifying renewable fuels from 
separated food wastes
 Imports of advanced biofuels, including sugarcane ethanol and 
renewable diesel
Taken together, and as discussed in more detail below, there is the 
potential for well over 1.0 bill gal of these additional advanced 
biofuels in 2013. Moreover, there are also a significant number of 
carryover RINs from 2012 that could be used to fulfill part of the 2013 
advanced biofuel requirement. These carryover RINs alone could meet 
more than 500 mill gal of the 824 mill gal volume shown in Table III.B-
2.

   Table III.B-3--Advanced Biofuel Carryover RINs From 2012 into 2013
                                (million)
------------------------------------------------------------------------
                                                       D Code     RINs
------------------------------------------------------------------------
Biomass-Based Diesel................................         4       353
Advanced Biofuel....................................         5       196
------------------------------------------------------------------------

1. Biomass-Based Diesel
    In a separate action, we have finalized a biomass-based diesel 
volume of 1.28 bill gal for 2013.34 35 However, biomass-
based diesel volumes above 1.28 billion physical gallons are possible. 
As of February 2013, the aggregate production capacity of registered 
biodiesel plants in the U.S. was 2.8 bill gal per year across 171 
facilities.\36\ Of this production capacity, 2.4 bill gallons is 
represented by companies that actually produced some biodiesel in 2012. 
For all facilities that produced biodiesel at 20% or more of their 
capacity in 2012, the total production capacity is 1.6 bill gallons.
---------------------------------------------------------------------------

    \34\ 77 FR 59458, September 27, 2012
    \35\ Assuming most of this volume will be comprised of 
biodiesel, the required volume of 1.28 bill gal equates to 
approximately 1.92 bill ethanol-equivalent gallons.
    \36\ The complete list of biodiesel production companies and 
their associated production capacities is provided in the docket. It 
is based on an aggregation of plant lists from the National 
Biodiesel Board, EIA, and EPA's registration database, and includes 
both operational facilities and those that are not. For comparison, 
EIA's data derived from their EIA-22 survey yielded 116 operating 
biodiesel facilities that are operational with a total capacity of 
2.2 billion gallons.
---------------------------------------------------------------------------

    The biodiesel industry has demonstrated that it can increase 
production quickly under appropriate circumstances. Total domestic 
production of biomass-based diesel in 2011 exceeded 1.0 bill gal, 
compared to a 2010 production of about 380 mill gallons.\37\ In 
response to the NPRM on the 2012 RFS standards that was published on 
July 1, 2011, some stakeholders expressed doubts that the industry 
could substantially increase production over historic levels in order 
to permit compliance with the proposed 2012 advanced biofuel standard 
of 1.0 bill gal.\38\ Nevertheless, the industry responded to RFS 
mandates with substantial production increases. Based on the single-
year increase of more than 600 mill gal in 2011 and the total capacity 
of existing plants described above, we believe it is possible that the 
industry could, if the statutory applicable volume of advanced biofuel 
is not reduced, achieve increases in production above the 280 mill 
gallon increment that is reflected in the biomass-based diesel 
requirement for 2013.
---------------------------------------------------------------------------

    \37\ All values from EMTS. 2010 estimate consists of 
approximately 209 mill gallons as recorded through EMTS for volume 
produced under the RFS2 regulations in July through December of 
2010, and approximately 171 mill gallons as recorded through RIN 
generation reports submitted by producers for volume produced under 
the RFS1 regulations in January through June of 2010.
    \38\ See comments in docket EPA-HQ-OAR-2010-0133 from the 
American Petroleum Institute, Marathon Petroleum Company, and the 
National Petrochemical Refiners Association.
---------------------------------------------------------------------------

    Recently, the tax credit for biodiesel was reinstated after having 
expired at the end of 2011.\39\ This tax credit, applicable 
retroactively to 2012 and through the end of 2013, may provide 
additional incentive to produce and consume biodiesel volumes in excess 
of the 1.28 bill gal requirement. While one party commented that the 
biodiesel tax credit should not be a relevant factor, the existence of 
a tax credit affects the likelihood that biodiesel volumes in excess of 
1.28 bill gal will be produced. Therefore, it is a relevant 
consideration in determining whether there are likely to be sufficient 
volumes of advanced biofuel available to meet the statutory volume 
requirement of 2.75 bill gal.
---------------------------------------------------------------------------

    \39\ ``Congress Votes to Reinstate Biodiesel Tax Incentive,'' 
January 2, 2013. http://biodiesel.org/news/biodiesel-news/news-display/2013/01/02/congress-votes-to-reinstate-biodiesel-tax-incentive.
---------------------------------------------------------------------------

    Because the 2013 volume requirement of 1.28 bill gal for biomass-
based diesel was established in a final rulemaking published on 
September 27, 2012, we did not take comment on this volume in the NPRM. 
Nevertheless, in their comments on the NPRM, several refiners and their 
associations requested that the 2013 volume requirement for biomass-
based diesel be reduced from 1.28 bill gal to the statutory minimum of 
1.0 bill gal. They cited concerns about the industry's ability to 
produce this volume and pointed to a DOE study indicating that 2012 
production was below the 1.0 bill gal requirement.\40\ However, 
according to EMTS \41\ the total volume of RIN-generating biodiesel 
produced in 2012 was 1.05 bill gal.
---------------------------------------------------------------------------

    \40\ EIA's ``Monthly Biodiesel Production Report'' published on 
March 28, 2013 indicates that total 2012 production of biodiesel was 
969 mill gal. The same report indicates that 2011 production was 967 
mill gal.
    \41\ EMTS, or EPA's Moderated Transaction System is the system 
established by EPA to track all RIN generation information and other 
RIN transactions.
---------------------------------------------------------------------------

a. Feedstocks
i. Feedstock Availability
    In response to the NPRM, some parties expressed concern that there 
would not be sufficient feedstocks available for production of biomass-
based diesel in excess of 1.28 bill gal in 2013. Recognizing that there 
was some uncertainty regarding production in excess of 1.28 bill gal, 
we did not make a specific numerical projection in the NPRM. 
Nevertheless, we continue to believe that the availability of 
qualifying feedstocks is not likely to be a hindrance to excess 
biodiesel production in 2013.
    According to EMTS, in 2012 nearly 90% of biomass-based diesel was 
produced from soybean oil and waste oils/fats/greases.\42\
---------------------------------------------------------------------------

    \42\ EIA indicates that about 80% of biomass-based diesel was 
produced from soybean oil and waste oils/fats/greases in 2012, with 
the majority being from soybean oil. The difference between the EIA 
and EMTS values is likely due to the categorization of some canola 
and/or corn oil as waste oils/fats/greases. See EIA Monthly 
Biodiesel Production Report released on June 27, 2013.

  Table III.B.1.a.i-1--Feedstocks Used To Make Biodiesel and Renewable
                             Diesel in 2012
------------------------------------------------------------------------
                                                            Fraction of
                                                               2012
                                                            production
                                                             (percent)
------------------------------------------------------------------------
Soybean oil.............................................              47
Biogenic waste oils/fats/greases........................              41
Canola oil..............................................               8
Non-food grade corn oil.................................               2
Oil from annual covercrops..............................               1
Non-cellulosic portions of separated food wastes........               1
------------------------------------------------------------------------

    Since the supply of waste oils/fats/greases is generally considered 
to be

[[Page 49814]]

inelastic, it is reasonable to assume that any increases in biomass-
based diesel production after 2012 will come from soybean oil. Overall 
production and use of soybean oil in 2012 is shown below.

     Table III.B.1.a.i-2--Production and Use of Soybean Oil in 2012
                               [Mill gal]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Domestic production of soy oil................................     2,471
Net exports of soy oil........................................       254
Soy oil used to make biodiesel................................       524
Soy oil used for non-biodiesel purposes.......................     1,693
------------------------------------------------------------------------
Source: USDA/ERS, Oil Crops Yearbook, Table 5. Assumes 7.68 lb/gal.
  http://www.ers.usda.gov/data-products/oil-crops-yearbook.aspx.

    According to USDA, domestic soybean production is expected to 
increase by 13% in the 2013 soybean marketing year compared to the 2012 
marketing year, or about 3% for calendar year 2013.\43\ If this occurs, 
then domestic production of soy oil would increase by about 80 mill 
gal. Combined with the soy oil that could be diverted from exports to 
biodiesel production and the fact that biodiesel production in 2012 was 
1.05 bill gal, we project that the requirement for 1.28 bill gal of 
biodiesel in 2013 could be met and exceeded by about 100 mill gal while 
having essentially no impact on the volume of soy oil used for non-
biodiesel purposes.
---------------------------------------------------------------------------

    \43\ Pete Riley, ``Grains and Oilseeds Outlook; 2013 
Agricultural Outlook Forum,'' USDA/Farm Service Agency, February 22, 
2013. The increased production of soy oil in 2013 is projected on a 
crop year with the 2013/14 marketing year being October 2013 through 
September 30, 2014. Consequently, the 13% increase in production 
would only begin to be available to the market beginning in October 
2013.
---------------------------------------------------------------------------

    In addition to soy oil, it is also possible that other qualifying 
feedstocks could be available to produce biodiesel in excess of 1.28 
bill gal in 2013. For instance, while production of non-food grade corn 
oil has been relatively constant over the last several years, exports 
have risen over this same time period. In 2012, more than one third of 
the 320 mill gal of corn oil produced was exported instead of being 
used domestically. These exports could be diverted to biodiesel 
production depending on relative prices and other factors. Taken 
together, the use of both soy oil and corn oil could potentially 
provide about 300 mill ethanol-equivalent gal of biodiesel in excess of 
the 1.28 bill gal requirement.
ii. Impacts From Feedstock Use
    A number of stakeholders commented that the NPRM overly relies on 
biofuel production availability as a criterion for setting the 
standards and fails to consider other criteria and potential impacts. 
With respect to biodiesel, for example, commenters argued that 
maintaining the advanced standard at statutory levels could lead to 
increased production and use of biodiesel for compliance purposes, and 
that this increased biodiesel would likely be produced from soybean 
oil. Commenters argued that EPA failed to consider the follow-on, or 
indirect, effects, namely that world demand for other replacement food-
grade oils, particularly for palm oil, would increase.\44\ Commenters 
asserted that the net impact of these indirect impacts would be an 
increase in lifecycle GHG emissions associated with soy biodiesel 
production. They further claimed that because EPA failed to assess or 
properly model such impacts, soy biodiesel shouldn't qualify as an 
advanced biofuel.
---------------------------------------------------------------------------

    \44\ See comments from Union of Concerned Scientists, 
International Council on Clean Transportation, Clean Air Task Force, 
Grocery Manufacturers Association, Actionaid, NRDC and the National 
Wildlife Federation.
---------------------------------------------------------------------------

    In making this argument, commenters made a number of assertions 
with respect to the modeling and lifecycle analysis EPA conducted as 
part of the March 2010 final RFS rulemaking. For example, commenters 
argued that EPA did not adequately account for substitutions in the 
vegetable oil markets, and therefore did not fully account for the 
potential GHG emissions associated with clearing of forests and 
draining of peat lands in Malaysia or Indonesia. Commenters also 
asserted that market data suggests the increase in biodiesel production 
has had more of an impact on global palm oil production than increased 
U.S. soybean production, as modeled in EPA's March 2010 lifecycle 
analysis of soybean oil biodiesel.
    Commenters further argued that EPA's modeling for the March 2010 
final rule was based on volume projections that are inconsistent with 
the potential growth in advanced biofuels, including biodiesel, should 
EPA determine that the advanced and total required volumes should not 
be reduced. As a result, commenters stated, EPA's assessments of the 
lifecycle GHG emissions associated with various advanced biofuels are 
flawed, and relying on them is inappropriate. If we were to reassess 
soybean oil lifecycle impacts, as at least one commenter recommended, 
commenters argued that such an analysis would show soybean oil 
biodiesel not meeting the statutory 50 percent reduction threshold in 
lifecycle GHGs needed to qualify as an advanced biofuel under the RFS 
program.
    With respect to commenters' arguments regarding the GHG impacts of 
biodiesel, we note that the lifecycle GHG threshold determinations 
conducted for various categories of biofuels (as required by statute) 
were completed as part of the March 2010 final RFS rule. We made the 
determination in that rulemaking that biomass-based diesel from soy oil 
meets the greenhouse gas reduction threshold for advanced biofuel. We 
are not revisiting that determination as part of this action. Instead 
this rulemaking addresses the applicable volume requirements for the 
various categories of renewable fuels, in the context of applying the 
provision for a waiver of the cellulosic biofuel volumes. Thus we are 
not reconsidering or reopening the GHG threshold determinations made in 
the 2010 RFS final rule. Instead, we are considering this comment 
solely in the context of exercising our discretion under CAA section 
211(o)(7)(D)(i).
    We disagree with commenters' assertion that the indirect effects of 
using biodiesel have not been accurately accounted for in the 2010 
lifecycle determination for biomass-based diesel. In response, we first 
note that we here discuss the 2010 lifecycle GHG emissions analysis for 
the purpose of assessing the 2013 volume standards; this discussion is 
not intended for purposes of reexamining the lifecycle analysis that 
led to the GHG determinations. When conducting our GHG emissions 
lifecycle analysis in 2010, we used the FAPRI-Iowa State model to 
examine the impacts that an increase in biomass-based diesel in the 
U.S. would have on world demand for oils. That analysis specifically 
allowed for the ability for palm oil production to respond to increased 
soybean biodiesel demand. Our analysis showed that the increased demand 
for soybean based biodiesel led primarily to an increase in soybean 
production, though the results also showed some increase in palm oil 
production. Taking all the GHG impacts of these effects together, the 
analysis showed lifecycle GHG emissions associated with soy biodiesel 
production and use met the 50 percent threshold required for qualifying 
as an advanced biofuel under the RFS program. The data provided by 
commenters does not isolate the impact that changes in biodiesel demand 
have on vegetable oil markets, which are driven by multiple factors, 
including population growth, changes in eating habits, and economic 
growth. Commenters do not provide new

[[Page 49815]]

information that would change our lifecycle emissions analysis. The 
March 2010 analysis captured the long-term market reaction to a 
sustained higher demand over many years for biomass-based diesel in the 
U.S., which primarily resulted in an increase in soybean oil biomass-
based diesel production. We continue to believe that over the long-
term, expansion of soybean production is a realistic reaction to 
increased demand for biodiesel in the U.S., thus supporting our 
analysis that soybean biodiesel reduces GHG emissions over the long 
run.
    Commenters also stated that the volumes of advanced biofuels that 
would be needed to fill the cellulosic void are larger than the volumes 
EPA modeled in the 2010 lifecycle analysis. EPA notes that we analyzed 
1.7 billion gallons of biodiesel in our 2010 analysis, which is within 
the range of volumes being considered in this annual rule. Commenters 
also stated that the volumes of advanced biofuels that would be needed 
to fill the cellulosic void are larger than the volumes EPA modeled in 
the 2010 lifecycle analysis. EPA notes that we analyzed 1.7 billion 
gallons of biodiesel in our 2010 analysis, which is within the range of 
volumes being considered in this annual rule. In addition, commenters 
suggested that EPA quantify the impacts for the criteria described in 
section 211 (o)(2)(B)(ii) of the Clean Air Act. However, conducting 
such a comprehensive quantification was not practical for this 
rulemaking. We also note that the RFS program is a long-term program 
aimed at replacing substantial volumes of fossil-based transportation 
fuels with low-GHG renewable fuels over a multi-year period of time. In 
that context, the analysis of various impacts conducted for the March 
2010 final RFS rule considered the effects of the program over the long 
term. Specifically, our analysis focused on quantifying the GHG impacts 
of an increase in biomass-based diesel demand in 2022, when the full 
volumes of the RFS program would be implemented.
    In their comments on the NPRM, the American Cleaning Institute 
(ACI) expressed concern that demand for biodiesel and/or renewable 
diesel could adversely affect the oleochemical industry by diverting 
animal fats away from the production of soaps, detergents, and general 
cleaning supplies. ACI requested that the advanced biofuel volume 
requirement be reduced to ensure that such diversion of animals fats 
does not occur, or alternatively that animal fats be explicitly 
prohibited as a valid feedstock option for the production of biofuels. 
In our response to comments from ACI in the final rule setting the 
required volume biomass-based diesel for 2013,\45\ we pointed out that 
under the statutory definition of renewable biomass, valid feedstocks 
include animal waste material and animal byproducts. We believe that 
animal fats fall into these categories, and as a result we do not have 
the authority to exclude or limit volumes of animal fats that are used 
for production of biofuel. Moreover, ACI did not provide any 
information indicating that a reduction in the required volume of 
biomass-based diesel would result in a reduction in the use of animal 
fats to produce biodiesel. Indeed, as discussed above, volumes of 
biodiesel above the 1.0 bill gal minimum established in the statute may 
be produced from soy oil and corn oil instead of animal fats.
---------------------------------------------------------------------------

    \45\ 77 FR 59463, September 27, 2012.
---------------------------------------------------------------------------

    Since the biomass-based diesel volume of 1.28 bill gal was 
established previously, the NPRM only requested comment on volumes of 
biomass-based diesel in excess of 1.28 bill gal. Although we believe it 
is likely that such excess volumes would be produced from soybean oil 
as described above, it is possible that they could be produced from 
animal fats. The only way to influence whether or not animal fats would 
be used to make excess biodiesel above the 1.28 bill gal biomass-based 
diesel applicable volume would be to reduce the advanced biofuel 
standard to 1.926 bill gal, which is the ethanol-equivalent sum of the 
biomass-based diesel and cellulosic biofuel applicable volumes. Even 
then, it would not prevent animal fats from being used to produce 
biodiesel.
    For the reasons discussed above, we conclude that the volumes of 
excess biomass-based diesel available for use in 2013 as advanced 
biofuel are reasonably projected as 300 mill gal or more. In addition, 
the arguments for reducing the advanced biofuel standard to reduce the 
reliance on excess biomass-based diesel are not of a nature to warrant 
changing the conclusions we would draw.
b. Limitations in the Use of Biodiesel
    While we are not projecting a specific volume of biodiesel in 
excess of 1.28 bill gal for 2013, we do acknowledge that there may be 
potential limitations on biodiesel consumption that could be imposed by 
manufacturer warranties and cold-weather operation.
    Most diesel engines are warranted by their manufacturer to B5. That 
is, the use of biodiesel in concentrations above 5vol% may void these 
commercial warranties. While not a legal limitation on the use of 
biodiesel, it does present a practical limitation. Assuming a total 
diesel consumption volume of about 50 bill gal for 2013, B5 for the 
diesel pool as a whole would correspond to a biodiesel volume of 2.5 
bill gal.
    However, some diesel truck engines have been warranted by their 
manufacturers to consume B20, starting in 2011. Model-specific sales 
data for these vehicles was not available, so we could not directly 
estimate the volume of B20 consumed by these trucks. Nor were we able 
to assess the ability of the retail and distribution system to supply 
higher biodiesel blends for a subset of the fleet. But in the extreme, 
assuming all MY 2011 and newer trucks were designed for operation on 
B20 and that these trucks could always fuel on B20, it would only 
account for approximately 30% of the nationwide biodiesel volume in 
2012.
    At the same time, even B5 blends cannot be utilized year-round due 
to cold weather constraints. If biodiesel was not used at all in the 20 
most northern states from December through March, the nation as a whole 
could still consume 1.9 bill gal annually.\46\ However, this is likely 
to be a conservative estimate of the volume of biodiesel that can be 
consumed since infrastructure does exist in many northern states to 
permit the use of B5 in the winter. Moreover, another estimate of the 
impact of cold temperatures on biodiesel use can be derived from the 
cloud point. The cloud point for B5 soy methyl ester (SME) blended with 
No. 2 diesel is estimated to be approximately 5[emsp14][deg]F. Thus, 
any region wherein temperatures regularly drop below 5[emsp14][deg]F 
would present a difficulty for the use of B5. Assuming that biodiesel 
cannot be blended in such regions during any month where the 
temperature falls below 5[emsp14][deg]F at least 10% of the time would 
result in a reduction of the volume of biodiesel that can be consumed 
annually by only about 3%. Thus, it appears that for 2013, the ability 
to consume biodiesel in the vehicle fleet does not provide a 
constraint.
---------------------------------------------------------------------------

    \46\ Jung, Zoltan, ``Estimating Potential Biodiesel Consumption 
Under Cold Weather Limitations,'' memorandum to docket EPA-HQ-OAR-
2012-0546.
---------------------------------------------------------------------------

2. Domestic Production of Advanced Biofuel Other Than Biomass-Based 
Diesel and Cellulosic Biofuel
    Generic pathways that have been approved for the generation of RINs 
are specified in the regulations in Table 1

[[Page 49816]]

to Sec.  80.1426.\47\ There are currently six pathways through which 
advanced biofuel RINs can be generated. These pathways are shown in 
Table III.B.2-1.
---------------------------------------------------------------------------

    \47\ Pathways may also be approved for RIN generation in 
response to petitions submitted pursuant to 80.1416.

                                 Table III.B.2-1--Pathways for Advanced Biofuel
----------------------------------------------------------------------------------------------------------------
                                                                              Production process
               Fuel type                           Feedstock                     requirements            D-Code
----------------------------------------------------------------------------------------------------------------
H Biodiesel, renewable diesel, jet      Soy bean oil;.................  One of the following:........          5
 fuel and heating oil.                  Oil from annual covercrops;...  Trans-Esterification.........
                                        Trans-Esterification..........  Hydrotreating................
                                        Algal oil;....................  Includes only processes that
                                        Biogenic waste oils/fats/        co-process renewable biomass
                                         greases;.                       and petroleum..
                                        Non-food grade corn oil.......
                                        Camelina sativa oil...........
I Naphtha, LPG........................  Camelina sativa oil...........  Hydrotreating................          5
J Ethanol.............................  Sugarcane.....................  Fermentation.................          5
P Ethanol, renewable diesel, jet fuel,  The non-cellulosic portions of  Any..........................          5
 heating oil, and naphtha.               separated food waste.
Q Biogas..............................  Landfills, sewage waste         Any..........................          5
                                         treatment plants, manure
                                         digesters.
S Ethanol.............................  Grain Sorghum.................  Dry mill process, using only           5
                                                                         biogas from landfills, waste
                                                                         treatment plants, and/or
                                                                         waste digesters for process
                                                                         energy and for on-site
                                                                         production of all
                                                                         electricity used at the site
                                                                         other than up to 0.15 kWh of
                                                                         electricity from the grid
                                                                         per gallon of ethanol
                                                                         produced, calculated on a
                                                                         per batch basis.
----------------------------------------------------------------------------------------------------------------

    In the NPRM, we projected that the total volume of other advanced 
biofuel could be 150 mill gal in 2013. Some stakeholders expressed 
their belief that this was a reasonable volume to project for domestic 
advanced biofuel producers for 2013, and Clean Energy Renewable Fuels 
provided information supporting their view that we had significantly 
underestimated the potential for biogas. Nevertheless, others expressed 
concern that 150 mill gal was too aggressive, pointing to the fact that 
the actual domestic production of other advanced biofuel in 2012 was 
only 50 mill gal. Consistent with our approach to cellulosic biofuel 
projections, we do not believe that future projections of advanced 
biofuel should be based strictly on actual historical production 
volumes. Nevertheless, we agree with stakeholders that expressed 
concern that we based our projections in part on information from 
registered producers that did not submit a Production Outlook Report as 
required under Sec.  80.1449 for all registered producers. For this 
final rule, we have not considered production volumes from a specific 
producer if that producer did not provide a projection for 2013 in a 
Production Outlook Report.
    In order to estimate the volumes of other advanced biofuels that 
could be produced in 2013, we reviewed the most recent set of 
Production Outlook Reports. These reports were submitted in the summer 
of 2012 and contain projections of renewable fuel production for each 
of the next five years.\48\ Based on this review, we identified 
approximately 30 domestic companies that expect to produce advanced 
biofuel (with a D code of 5) in 2013. The total projected production 
volume for these companies in 2013 is 245 million ethanol-equivalent 
gallons, as shown in Table III.B.2-2.
---------------------------------------------------------------------------

    \48\ While the individual reports have not been published since 
they include company-specific information that could impact the 
competitive nature of the industry, we are providing aggregate 
results in this NPRM.

Table III.B.2-2--Projected Domestic Production of Advanced Biofuel\a\ in
                                  2013
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Biogas........................................................        44
Naphtha.......................................................         8
Renewable diesel..............................................        57
Ethanol.......................................................       136
                                                               ---------
    Total.....................................................       245
------------------------------------------------------------------------
\a\ Includes only volumes that would be assigned a D code of 5.

    We recognize that these volumes are higher than the 150 mill gal 
that we projected in the NPRM. Nevertheless, we believe that they 
provide a reasonable estimate of the volumes that can be achieved in 
2013. Because Production Outlook Reports are provided directly to the 
EPA and are not made public (except in the aggregate), producers have 
less incentive to overstate volume projections. These projected volumes 
also do not account for imports of renewable diesel from foreign 
producers which have the capacity to produce hundreds of millions of 
gallons per year. More importantly, the projected volumes in Table 
III.D.2-2 were made in June 2012. Since that time, we have established 
additional valid pathways for the generation of advanced biofuel RINs 
using camelina oil and grain sorghum.\49\ Recent annual production of 
ethanol from grain sorghum was about 350 mill gal, though only a 
minority of these production facilities might be expected to install 
the requisite equipment allowing the use of biogas for process energy 
in 2013, thus allowing them to generate advanced biofuel RINs.
---------------------------------------------------------------------------

    \49\ 78 FR 14190, March 5, 2013.
---------------------------------------------------------------------------

    We also investigated a variety of other potential RIN-generating 
pathways for advanced biofuel that could result in additional volumes 
in 2013. In addition to potential new pathways for cellulosic biofuel 
that would also count towards the advanced biofuel volume requirement 
as discussed in Section II.D, new pathways are also under review that 
may provide additional advanced biofuel volumes in 2013. These include 
pathways for renewable diesel from jatropha oil, ethanol from barley 
and biomass sorghum, and a number of others. We have not yet 
determined, either through rulemaking or approval of an industry 
petition, whether these pathways are valid for the

[[Page 49817]]

generation for advanced biofuel RINs. However, approval of such 
advanced biofuel pathways could potentially result in the production of 
more than 50 million ethanol-equivalent gallons in 2013. Insofar as any 
of these pathways are approved in time to be used in 2013, it would 
increase the volume of domestically-produced advanced biofuels 
available for 2013 compliance above the volumes shown in Table III.B.2-
2.
3. Imported Sugarcane Ethanol
    In the NPRM we projected that the volume of imported sugarcane 
ethanol in 2013 would need to reach about 670 mill gal in order for the 
statutory volume of 2.75 bill gal to be met. Given the availability of 
carryover RINs from 2012, potential for excess biomass-based diesel, 
and domestic production of other advanced biofuel, the amount of 
imported sugarcane ethanol needed to reach the statutory volume of 2.75 
bill gallons could be significantly below 670 mill gal. Here we 
evaluate whether the actual 2012 import volume of 580 mill gal could 
also be imported in 2013.
a. Brazilian Ethanol Export Capacity
    Total exports of ethanol from Brazil depend on ethanol production 
and demand within Brazil and have varied significantly over the last 
decade. The historical maximum occurred in 2008 when 1.35 bill gal was 
exported, and ongoing efforts to upgrade distribution infrastructure 
mean that Brazil has the infrastructure in place to export at least 
this volume annually.
    In response to the NPRM, stakeholders provided widely diverging 
views on the volumes of imported sugarcane ethanol that could be 
expected in 2013. Some stakeholders suggested that the advanced biofuel 
standards should be set based on an assumption that there would be no 
more than a few hundred mill gal of imported sugarcane ethanol 
available in 2013, and others indicated that imported sugarcane ethanol 
should be excluded entirely from consideration. The Brazilian Ministry 
of Mines and Energy (MME) provided a detailed assessment supporting 
their view that Brazil can supply at least 670 mill gal to the U.S. in 
2013, and the Brazilian sugarcane industry association UNICA likewise 
indicated that at least 670 mill gal could be expected \50\ No 
stakeholders supported our suggestion that a 200 mill gal reduction in 
the advanced biofuel requirement might be warranted to account for 
potential uncertainty in the availability of imported sugarcane 
ethanol. To assess Brazil's potential export capacity for 2013, we 
considered multiple factors, including sugarcane and ethanol production 
capacity, Brazilian domestic ethanol demand, and historical data on 
sugarcane ethanol exports.
---------------------------------------------------------------------------

    \50\ Some portion of Brazilian ethanol exports to the U.S. is 
non-fuel ethanol (i.e., for industrial use). U.S. Department of 
Commerce data indicates that of 2012 Brazilian ethanol exports to 
the U.S., 85% were fuel ethanol. http://dataweb.usitc.gov./
---------------------------------------------------------------------------

i. Brazilian Sugarcane and Ethanol Production Capacity
    From the supply perspective, production of sugarcane in Brazil in 
the years just preceding 2013 has been lower than normally expected due 
to two factors. First, adverse weather conditions reduced 
production.\51\ For example, adverse weather conditions are estimated 
to have reduced cane production by about 4% in the 2011/2012 marketing 
year.\52\ Thus, a return to normal weather conditions in the time frame 
that this rulemaking considers by itself would restore approximately 4% 
of production.
---------------------------------------------------------------------------

    \51\ Gain Report BR110016, October 3, 2011, USDA Agricultural 
Service. See http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Sugar%20Semi-annual_Sao%20Paulo%20ATO_Brazil_10-3-2011.pdf.
    \52\ The sugar marketing year in Brazil's center-south sugar-
producing region, where the large majority of production occurs, 
runs from May through April.
---------------------------------------------------------------------------

    Second, the general global economic downturn in recent years made 
obtaining credit more difficult in the Brazilian sugar cane industry, 
resulting in delayed replanting of existing fields. Normally sugarcane 
fields are replanted every five or six years to maximize yield. 
However, the lack of available credit caused some growers to delay the 
expense of this replanting, resulting in older fields losing 
production.\53\ Perhaps in part due to easing credit conditions, as 
noted below, more direct investment in sugar cane production and 
milling in Brazil is occurring.
---------------------------------------------------------------------------

    \53\ On the margin, the high sugar prices may have also 
encouraged some growers to divert their crop from ethanol production 
to sugar production. But most cane growers do not have this 
flexibility with sugarcane mills designed for fixed amounts of 
refined sugar or ethanol so high sugar prices was likely a 
contributing factor but not a major cause of reduced sugarcane 
ethanol production in Brazil.
---------------------------------------------------------------------------

    In the proposal, EPA cited data from September and December 2012 in 
estimating that the South Central region, the dominant region for 
ethanol production in Brazil, would produce a total of 5.56 bill gal 
for the 2012/13 year.\54\ Other regions contributed roughly another 565 
mill gal in 2011/12. Based on this production data, we concluded that 
6.1 bill gal would be a reasonable conservative estimate for total 2013 
production, assuming no growth at all in production outside the South 
Central region. Subsequent to issuance of the proposal, UNICA released 
its final report on the 2012/2013 harvest season, which confirmed an 
increase in the sugarcane harvest relative to 2011/12. That report 
showed that the 2012/2013 harvest for the South Central region was 
approximately 8% larger than the 2011/12 harvest.\55\
---------------------------------------------------------------------------

    \54\ UNICA, ``Estimate for 2012/2013 Sugarcane Harvest of 
Brazilian South-Central Region'', September 20, 2012, http://www.unicadata.com.br/listagem.php?idMn=39.
    \55\ UNICA, ``Final Report of 2012/2013 Harvest Season, South-
Central Region,'' http://www.unicadata.com.br/listagem.php?idMn=83.
---------------------------------------------------------------------------

    Some parties expected a more typical trend in sugarcane ethanol 
production for both the 2012/2013 and 2013/2014 harvest years, with 
replanted fields beginning to boost sugarcane production in existing 
plantations and, in response to increased worldwide demand, a growth in 
the acres planted with sugarcane. Increased production is supported by 
the Brazilian government which announced in February 2012 support for a 
plan to invest over $8 billion annually to boost cane and ethanol 
production.\56\ Private investment in Brazil may also be increasing. 
For example, Usina de Acucar Santa Terezinha, a Brazilian ethanol 
producer, last year announced plans to invest almost $300 million in a 
new mill and sugarcane plantation.\57\ As stated in the proposal, such 
information suggested that sugarcane and ethanol production in the 
2013/14 harvest year could be higher than production over the last two 
years.
---------------------------------------------------------------------------

    \56\ See http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/8987702.
    \57\ See http://www.bloomberg.com/news/2012-03-08/santa-terezinha-invests-283-million-in-brazil-ethanol-projects.html.
---------------------------------------------------------------------------

    The 2012/2013 harvest year in Brazil's South Central region has 
ended, and EPA now has early estimates concerning the 2013/2014 harvest 
year, which began in April 2013. UNICA now projects an increased 2013/
2014 harvest for the South Central region of 10.7% over the 2012/2013 
harvest.\58\
---------------------------------------------------------------------------

    \58\ UNICA, ``South-Central brazil cane crush projected at 
589.60 million tons for 2013/2014,'' http://www.unicadata.com.br/listagem.php?idMn=80.
---------------------------------------------------------------------------

    With respect to ethanol production, analyses supplied in comment to 
the proposal by the Brazilian Ministry of Mines and Energy (MME) 
indicate it is projecting 2013/14 ethanol production to range from 7.2 
to 7.5 bill gal, reflecting improvements in yield, additional acres 
planted and the expected market for sugar from sugarcane. MME's 
projections are in line with other data sources referenced in MME's 
comments that projected ethanol

[[Page 49818]]

production for 2013/14 ranging from 7.1 to 7.2 bill gal. These sources 
include projections by UNICA which in separate comment defended its 
analysis projecting 7.1 bill gal. This production rate would support 
the conclusion that enough ethanol should be available to meet Brazil's 
domestic demand (discussed following) as well as supply 580 mill gal or 
more to the U.S. during calendar year 2013.
ii. Brazilian Domestic Demand for Ethanol
    Brazil's sugarcane ethanol production serves both its domestic 
market as well as the export market. The government of Brazil sets a 
minimum ethanol concentration for its gasoline. In 2011, the Brazilian 
government lowered this concentration to 20%, reflecting in part the 
decrease in domestic ethanol production. However, given the more 
optimistic production outlook, Brazil raised the minimum ethanol 
concentration to 25% effective May 1, 2013.\59\ The ability of the 
Brazilian government to reset the minimum ethanol content introduces 
some uncertainty in projecting future Brazilian demand. However, 
historically, adjustments have been infrequent, relatively small in 
degree (a few percent), and largely been influenced by the price of 
ethanol (high prices leading to a reduction in the minimum). Since 
reinvestment in sugarcane stock is already underway, a considerable 
resurgence in Brazilian ethanol export potential in the 2013 calendar 
year seems likely. Assuming that the 25% blending rate remains in 
effect through the 2013/14 sugarcane season, the analyses referenced 
above by MME and UNICA suggest that more than enough ethanol should be 
available assuming normal weather patterns to allow for at least 580 
mill gallons of exports to the U.S. in 2013.
---------------------------------------------------------------------------

    \59\ Platts, ``Brazil to raise ethanol mix in gasoline to 25% 
from 20% May 1,'' http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/8194390.
---------------------------------------------------------------------------

iii. Additional Market Factors
    Aside from production capability and domestic demand within Brazil, 
market conditions generally determine the amount of sugarcane ethanol 
imported into the U.S. from Brazil. Approved as an advanced biofuel 
pathway, ethanol produced from sugarcane benefits from the RIN value 
associated with advanced biofuel but also has to compete with other 
sources of ethanol used for blending with gasoline in the U.S., most 
notably ethanol made from corn starch (which does not qualify as an 
advanced biofuel). The expiration of the tariff applicable to imported 
ethanol has helped make imported sugarcane ethanol more cost 
competitive in the U.S., and any volumes of Brazilian sugarcane ethanol 
imported into California to meet the requirements of their Low Carbon 
Fuel Standard (LCFS) would also count towards meeting the requirements 
of the RFS program.
b. United States-Brazil Ethanol Trade
    In both calendar years 2011 and 2012 there was some two-way trade 
in ethanol between the United States and Brazil. A number of 
stakeholders raised concerns about this two-way ethanol trade between 
the U.S. and Brazil. Some suggested that we should adjust the advanced 
biofuel standard to reduce or eliminate such outcomes.
    According to currently available Energy Information Administration 
(EIA) data, 2013 U.S. fuel ethanol imports from Brazil through May were 
75.9 million gallons compared to 36.1 million gallons during the same 
period in 2012, a 110% rise.\60\ The U.S. Department of Commerce also 
collects data on U.S. imports of Brazilian fuel ethanol. They too 
report a significant increase in 2013 imports--105 million gallons 
through May 2013, up from 42.6 million gallons through the same period 
in 2012, a 147% increase.\61\ This increase, combined with the fact 
that the majority of Brazilian ethanol exports to the United States 
have historically occurred in the second half of the calendar year, 
suggests that Brazilian ethanol exports to the U.S. are on a trajectory 
that would readily enable Brazil to supply 580 million gallons to the 
U.S. in 2013.\62\
---------------------------------------------------------------------------

    \60\ EIA, U.S. Imports from Brazil of Fuel Ethanol. http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mfeim_nus-nbr_1&f=m.
    \61\ The data from EIA and the U.S. Department of Commerce are 
generally consistent, but slight differences may arise due to 
differences in the survey population, the reporting methodology, the 
reporting schedules, and the timing of updates.
    \62\ In 2012, 90% of the 403 million imported gallons occurred 
in June through December.
---------------------------------------------------------------------------

    2013 exports of fuel ethanol from the U.S. to Brazil have been 
relatively small. EIA data indicates that 26 million gallons of fuel 
ethanol have been exported from the U.S. to Brazil between January 1 
and May 31, 2013.

                             Table III.B.3.b-1--U.S. Fuel Ethanol Trade With Brazil
                                                   [Mill gal]
----------------------------------------------------------------------------------------------------------------
                                                                       2008     2009     2010     2011     2012
----------------------------------------------------------------------------------------------------------------
U.S. Fuel Ethanol Imports from Brazil \63\.........................      203        5        0      101      403
U.S. Fuel Ethanol Exports \64\
    Total..........................................................      N/A      N/A      398     1195      742
    To Brazil......................................................      N/A      N/A       23      396       86
----------------------------------------------------------------------------------------------------------------

Both the EIA and U.S. Department of Commerce data consider fuel ethanol 
that is transported directly from Brazil to the United States. However, 
significant volumes of fuel ethanol originating from Brazil and 
imported by the United States pass through Caribbean Basin Initiative 
(CBI) countries for dehydration before continuing on to the U.S. Such 
volumes are not included in the Table III.B.3-1. EIA data indicates 
that the U.S. imported 40 million gallons of fuel ethanol from CBI 
countries in 2012; most of this originated in Brazil, though 
determining the specific quantity is difficult.
---------------------------------------------------------------------------

    \63\ EIA, U.S. Imports from Brazil of Fuel Ethanol.http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mfeim_nus-nbr_1&f=m.
    \64\ EIA, Exports by Destination. http://www.eia.gov/dnav/pet/pet_move_expc_a_EPOOXE_EEX_mbbl_a.htm.

    Comments on this two-way trade focused on associated GHG impacts, 
both direct impacts from transportation-related emissions, and the 
indirect GHG impacts resulting from the market dynamics that could 
potentially result as a consequence of EPA's volume determinations.
i. Direct Transportation Emissions
    With respect to direct emissions, commenters noted that GHG 
emissions occur as a result of shipping sugarcane ethanol to the U.S. 
and shipment of corn-based ethanol to Brazil. We recognize that there 
are GHG emissions

[[Page 49819]]

associated with shipping sugarcane ethanol from Brazil to the U.S. as 
well as the subsequent emissions associated with distributing this fuel 
from the port of entry to likely blending locations. These 
transportation emissions were taken into account as part of the 
lifecycle assessment of sugarcane ethanol adopted as part of the 2010 
final rule, and represent approximately (3%) of total lifecycle 
emissions for sugarcane ethanol. Regarding the emissions associated 
with potential shipments of corn ethanol from the U.S. to Brazil, these 
would be small in magnitude compared to the overall emission reductions 
from the use of sugarcane ethanol, as the transportation emissions are 
a small part of the lifecycle emissions, whether the emissions are for 
fuel imported from Brazil or exported to Brazil. Also, as noted below, 
the commenter provides no basis for EPA to determine the magnitude of 
the emissions they are concerned about, given the multiple factors that 
lead to wide variability in import and export levels of ethanol between 
the U.S. and Brazil.
ii. Indirect Emissions
    Stakeholder's comments regarding sugarcane ethanol and U.S.-Brazil 
trade concern the annual standard-setting process for 2013 and the 
indirect GHG impacts associated with the use of imported sugarcane 
ethanol as an advanced biofuel. Commenters raised two major issues 
associated with the potential GHG impacts associated with sugarcane 
ethanol demand in the U.S. (1) In the long-run (e.g., 2022), if EPA 
were to maintain the full statutory advanced standard while reducing 
the cellulosic standard to levels seen in recent years based on 
availability, more than 10 bill gal of imported ethanol would be 
required to meet the advanced standard. At those volumes, based on 
studies by the OECD and FAPRI-Missouri, commenters state that it is 
likely that a majority of the imported ethanol gallons would be 
diverted from Brazilian consumption of ethanol, and that much of the 
sugarcane ethanol would be backfilled by corn ethanol imports from the 
U.S. As a result, commenters argue that imported sugarcane would not 
meet the 50 percent GHG emissions reductions required for an advanced 
biofuel. (2) In the short-run, commenters claim that there are limited 
options for increasing the supply of sugarcane ethanol, many of which 
would undermine the GHG emission reductions included in EPA's lifecycle 
analysis. Commenters claim that in the 2013 time period, increased 
sugarcane ethanol imports to the U.S. could only be supplied if Brazil 
decreases gasoline consumption, Brazil replaces sugarcane ethanol with 
fossil gasoline, Brazil replaces sugarcane ethanol with another ethanol 
(presumably corn), sugar production in Brazil increases, or stocks of 
sugar are reduced to meet increased demand. Commenters claim that if 
replacement of sugarcane ethanol is with gasoline or corn ethanol, 
sugarcane ethanol would not meet the GHG emission reductions required 
for an advanced biofuel.
    Regarding the first issue, it is premature and would be speculation 
to consider at this time what emissions might result were EPA to 
maintain the statutory advanced standard over the next several years. 
That issue is also not relevant for this rulemaking action. For each 
calendar year, EPA may reduce the required volumes of advanced biofuel 
and total renewable fuel if it reduces the volume required for 
cellulosic biofuel. This rulemaking addresses only calendar year 2013, 
and does not establish or set a precedent for what actions EPA may or 
may not take for future calendar years. Therefore, we believe the 
analysis presented by commenters on future scenarios that rely on 
imported volumes of sugarcane ethanol that exceed current Brazilian 
production are not relevant to this 2013 rulemaking.\65\
---------------------------------------------------------------------------

    \65\ In addition, as discussed below, in this action EPA is not 
revisiting or reopening the determination made in the 2010 RFS final 
rule that imported sugar cane ethanol meets the greenhouse gas 
reductions threshold for advanced biofuel.
---------------------------------------------------------------------------

    The second issue raised in this context pertains to the question of 
how the national applicable volume for advanced biofuel influences 
ethanol production and trade patterns (along with concomitant indirect 
GHG emissions effects) in a given year. A comprehensive analysis of 
those effects is challenging, as there are a variety of economic and 
other factors at play. A thorough analysis of this issue would require 
complex economic and emissions modeling for multiple market sectors, 
which is impractical, particularly for a rule that establishes a yearly 
volume requirement. Furthermore, we do not believe that the data 
commenters submitted provides an adequate basis for drawing the 
conclusion, as commenters do, that retaining the statutory 2013 
advanced biofuel requirement would result in an overall increase in GHG 
emissions due to ethanol trade. For example, in the comments submitted 
by ICCT, no data is provided indicating whether it is more likely that 
increased sugarcane exports will result in increased petroleum gasoline 
consumption or increased corn ethanol imports in Brazil, or if the 
market response will be an increase in sugar production or drawing down 
sugar stocks.
    Each of these different market implications would have 
significantly different GHG emissions impacts. Multiple reasons exist 
for the volume of trade between the US and Brazil beyond the RFS 
program's requirements, including other US demand for sugarcane ethanol 
(e.g., California's LCFS); seasonal production of sugarcane which 
results in off-season demand for ethanol; and regional infrastructure 
constraints in Brazil, which makes it easier for parts of Brazil to 
import corn ethanol in some regions. As shown by Table III.B.3-1 above, 
there is no clear correlation at all between corn ethanol exports to 
Brazil and sugarcane ethanol imports from Brazil. There is no basis to 
assume that each gallon of sugarcane ethanol imported into the U.S. 
would be offset by a gallon of corn ethanol exported to Brazil. 
Furthermore, fluctuations in the sugar markets could lead to increased 
sugarcane ethanol supply without increasing sugarcane production. As 
discussed in the UNICA comments, world sugar prices are currently down 
36% since 2011, which creates an additional incentive for producers, to 
the extent possible, to shift from sugar production to ethanol 
production. In fact, UNICA expects ethanol production to increase by 
18-20% in 2013/2014, even though sugarcane production will only 
increase by 10%. To the extent that the increase in sugarcane ethanol 
to the U.S. results in increased sugarcane production, decreased sugar 
production, or a drawdown of sugar stocks, it is not likely that the 
increase in U.S. imports of sugarcane ethanol would lead to increased 
exports of corn ethanol to Brazil or a significant change in GHG 
emissions.
    We also note that Congress established the RFS as a long-term 
program aimed at replacing substantial volumes of fossil-based 
transportation fuels with low-GHG renewable fuels over time. The annual 
standard-setting process however involves a decision for a single year, 
which may not reflect the long-term effects of the program. For 
example, our emissions analysis conducted for the March 2010 final RFS 
rule focused not on yearly decisions on standards, but rather the 
effects of the program over the long term. That analysis did not 
attempt to answer the question of what the GHG emissions impacts would 
be of increasing or lowering the volume mandates in any one year. 
Instead, our analysis focused on quantifying the GHG impacts of an

[[Page 49820]]

increase in sugarcane ethanol demand in 2022, when the full volumes of 
the RFS program were implemented. The March 2010 analysis captured the 
long-term market reaction to a sustained higher demand over many years 
for sugarcane ethanol in the U.S., which primarily resulted in an 
increase in Brazilian sugarcane production. We continue to believe that 
over the long-term, expansion of Brazilian sugarcane production is a 
realistic reaction to increased demand for sugarcane ethanol in the 
U.S., thus supporting our analysis that sugarcane ethanol reduces GHG 
emissions over the long run.
    In sum, we believe that the import of sugar cane ethanol as an 
advanced biofuel in 2013 should produce reductions in GHGs compared to 
the fossil-based gasoline it will replace, which would not occur if the 
advanced biofuel standard were reduced. While the points raised by 
commenters indicate there is some uncertainty about the magnitude of 
these reductions on a year-by-year basis, the evidence and arguments 
they present do not warrant a conclusion that there would be any 
significant change in GHG benefits. In addition, as noted above, the 
ongoing demand for advanced biofuels is part of a long-term approach to 
achieving major GHG reductions from the RFS program.
    Finally, with respect to commenters' arguments regarding the GHG 
impacts of imported sugarcane ethanol, we note that the lifecycle 
threshold determinations conducted for various biofuels pathways (as 
required by statute) were completed as part of the March 2010 final RFS 
rule. We made the determination in that rulemaking that imported sugar 
cane ethanol meets the greenhouse gas reductions threshold for advanced 
biofuel. We are not revisiting those determinations as part of this 
action. Instead this rulemaking addresses the applicable volume 
requirements for the various categories of renewable fuels, in applying 
the provision for a waiver of the cellulosic biofuel volumes. Thus we 
are not reconsidering or reopening the GHG threshold determinations 
made in the 2010 RFS final rule. Instead, we are considering this 
comment solely in the context of exercising its discretion under CAA 
section 211(o)(7)(D)(i).
    For the reasons discussed above, we conclude that the volumes of 
sugarcane ethanol that are available for use in 2013 as advanced 
biofuel are reasonably projected as at least as much as 580 mill 
gallons. We continue to place primary weight on this factor in 
determining whether to maintain the statutory levels for advanced 
biofuel. In addition, the arguments and reasons for reducing the 
advanced biofuel standard to reduce the reliance on imported sugar cane 
ethanol are not of a nature to warrant changing the conclusions we 
would draw based on the available supply of sugarcane ethanol as an 
advanced biofuel.

C. Compliance With the Total Renewable Fuel Standard in 2013

    As described in Section III.B above, the NPRM addressed potential 
reductions in advanced biofuel and total renewable fuel under the 
cellulosic waiver authority. In this context, any reduction in advanced 
biofuel would be matched gallon-for-gallon (on an ethanol-equivalent 
basis) by reductions in total renewable fuel, effectively having no 
impact on volumes of non-advanced biofuel such as corn ethanol.
    In response to the NPRM, many stakeholders expressed concern about 
the E10 blendwall and the possibility that the applicable standards for 
2013, absent a reduction in the advanced biofuel and total renewable 
fuel volume requirements, could require the consumption of more volumes 
of higher ethanol blends (E15-E85) than can reasonably be absorbed by 
the market.\66\ In order to evaluate these concerns, we estimated the 
volumes of ethanol that could be needed to meet the statutory volume 
requirements in 2013 and whether or not that volume could reasonably be 
used.
---------------------------------------------------------------------------

    \66\ In the proposal, we requested comment on the degree to 
which the E10 blendwall might present a difficulty in meeting the 
applicable volume requirements in 2013.
---------------------------------------------------------------------------

    In the NPRM we proposed a significant reduction in the required 
volume of cellulosic biofuel. For today's final rule we are adjusting 
this volume requirement downward to 6 mill gal as described in Section 
II.D above. We also set a volume requirement for biomass-based diesel 
of 1.28 bill gal in a separate rulemaking.\67\ Table III.C-1 shows what 
the four volume requirements would be without any reductions in the 
statutory volumes of advanced biofuel or total renewable fuel.
---------------------------------------------------------------------------

    \67\ 77 FR 59458, September 27, 2012.

 Table III.C-1--Volumes of Renewable Fuel for 2013 Absent Reductions in
                Advanced Biofuel and Total Renewable Fuel
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
                                      D codes that can
                                       be used to meet   Required volume
                                        this standard
------------------------------------------------------------------------
Cellulosic biofuel..................              3, 7                 6
Biomass-based diesel................              4, 7             1,920
Advanced biofuel....................        3, 4, 5, 7             2,750
                                     -----------------------------------
    Total renewable fuel............     3, 4, 5, 6, 7            16,550
------------------------------------------------------------------------

Based on these volume requirements, we estimated the volumes of both 
ethanol and non-ethanol that could be used to satisfy these standards 
if there were no biomass-based diesel produced in excess of the 1.28 
bill gal requirement. As such, these estimates may overstate the volume 
of ethanol that would have to be consumed because, as discussed above, 
there is significant capacity for biodiesel production beyond the 1.28 
bill gal requirement for 2013. This scenario also does not consider the 
availability of substantial numbers of carryover RINs from 2012, which 
is discussed in greater detail below.

       Table III.C-2--Potential Volumes of Renewable Fuel for 2013
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
                                                                   Non-
                                                D code  Ethanol  ethanol
------------------------------------------------------------------------
Cellulosic biofuel...........................        3        1        5
Biomass-based diesel.........................        4        0      \a\
                                                                   1,920

[[Page 49821]]

 
Other advanced biofuel
  --Domestically produced....................        5  \b\ 136  \b\ 109
  --Imported.................................  .......  \c\ 580        0
Conventional Biofuel.........................        6   13,800        0
                                              --------------------------
    Total....................................  .......   14,517    2,034
------------------------------------------------------------------------
\a\ Based on the applicable volume requirement of 1.28 bill gal, and
  assuming no excess.
\b\ From Production Outlook Reports as listed in Table III.B.2-2.
\c\ Balance of advanced biofuel standard of 2.75 bill gal that is
  estimated to come from imported sugarcane ethanol.

    In order to determine the volume of ethanol that would need to be 
consumed in blends higher than E10 in order to meet this standard, we 
assumed a total 2013 energy consumption for all gasoline-powered 
vehicles and engines of 14.58 Quadrillion Btu.\68\ Based on a denatured 
ethanol energy content of 77,000 Btu/gal and a gasoline energy content 
of 115,000 Btu/gal, we determined that the 14.5 bill gal of ethanol 
shown in Table III.C-2 would require 129.5 bill gal of E10 and 2.1 bill 
gal of E85.\69\ This volume of E85 would contain about 1.6 bill gal of 
ethanol. By contrast, if no E85 were consumed, the total volume of E10 
would be 131.1 bill gal and the maximum volume of ethanol that could be 
consumed would thus be 13.1 bill gal. As shown in Table III.C-2, the 
conventional biofuel volume alone exceeds this level. In the absence of 
carryover RINs from 2012, it would be extremely challenging to meet 
this standard.
---------------------------------------------------------------------------

    \68\ Calculated from EIA Annual Energy Outlook 2013, 
Transportation Table 37 (converted to lower heating value (LHV)).
    \69\ To simplify this analysis we have not assumed any other 
ethanol blend levels and no E0.
---------------------------------------------------------------------------

    In their comments on the NPRM, a number of refiners contended that 
E85 is not a viable strategy for consuming volumes of ethanol in excess 
of the E10 blendwall. Some called for reducing the required volumes of 
renewable fuel so that ethanol would comprise no more than 10% of the 
gasoline fuel pool. We agree that, historically, E85 consumption has 
been very low. In 2012 EIA estimated that E85 consumption was about 40 
mill gal, and in prior years it was less.\70\ In its Annual Energy 
Outlook 2013, EIA projects that E85 consumption may increase to 176 
mill gal in 2013 under the demand pressure created by the RFS program 
and without consideration of carryover RINs from 2012, but even so this 
is still significantly less than the 2.1 bill gal that we estimate 
would need to be consumed under the limitations of the scenario 
described above. We expect that consumption of E85, and perhaps blends 
with other concentrations of ethanol, will grow over time.
---------------------------------------------------------------------------

    \70\ EIA, ``U.S. Refinery and Blender Net Production,'' 3/15/13.
---------------------------------------------------------------------------

    While recent consumption of E85 (approximately 40 mill gal in 2012) 
has been considerably lower than the 2.1 bill gal that would be needed 
in the scenario outlined above, we note that the price of E85 has 
historically only been about 15% lower than the price of E10. Since the 
average volumetric energy content of E85 \71\ is about 22% below that 
of E10, the historical price of E85 has actually been higher than the 
price of E10 on an energy equivalent basis. Moreover, the price gap 
between E10 and E85 may be perceived as larger to consumers who might 
assume that a gallon of E85 will contain 85% ethanol, having an energy 
content 25% lower than E10. Those flex-fuel vehicle (FFV) owners that 
have been purchasing E85 have thus been doing so for reasons other than 
the economic benefit (e.g. personal values or government fleet 
mandates) or because they are unaware of the extent that E85 contains 
less energy than E10. If the price of E85 were to fall relative to the 
price of E10, we would expect consumption of E85 to increase. 
Significant reductions in the price of E85 could result in higher 
volumes of E85 consumption, provided there is adequate availability of 
infrastructure for distribution of E85, availability of FFVs, consumer 
awareness of the availability of E85, its cost in comparison to E10, 
and the energy difference between E85 and E10. Such a reduction in the 
price of E85 could occur with a significant reduction in the price of 
corn relative to the price of oil. Historically during periods of lower 
corn prices the desire to maximize profit has resulted in an increase 
in ethanol blending. With the E10 market saturated, lower corn prices 
could result in lower E85 prices. At higher corn prices, as described 
more fully in Section III.D below, a long-term increase in E85 
consumption would still need to come through a reduction in the price 
of E85 relative to E10, which would entail an increase in the price of 
RINs. Based on this, some increase in volumes of higher ethanol blends 
could be accomplished, with the extent of the required subsidy to E85 
consumers through higher RINs prices depending on E85 infrastructure, 
consumer acceptance, and the price of corn relative to the price of 
oil.
---------------------------------------------------------------------------

    \71\ E85 in this rulemaking is assumed to contain 74% ethanol on 
an annual average basis, consistent with EIA. However, this value 
can vary in-use from 51% to 83%, and greater ethanol content will 
correspond to lower energy content of E85 in comparison to E10.
---------------------------------------------------------------------------

    There are also mechanisms other than increased volumes of E85 
through which obligated parties could comply with the applicable volume 
requirements in the absence of reductions in the advanced biofuel and 
total renewable fuel volume requirements. One of those options is 
carryover RINs from 2012. EMTS was examined after the February 28, 2013 
deadline for compliance with the 2012 standards to determine the total 
number of 2012 RINs that had not been used for compliance in 2012 or 
retired for any other reason. The totals are shown below.

            Table III.C-3--Carryover RINs From 2012 Into 2013
                                [Million]
------------------------------------------------------------------------
                                                       D Code     RINs
------------------------------------------------------------------------
Biomass-Based Diesel................................         4       353
Advanced Biofuel....................................         5       196
Conventional Biofuel................................         6     2,117
                                                     -------------------
    Total...........................................  ........     2,666
------------------------------------------------------------------------

Although the rollover provisions in Sec.  80.1427(a)(5) limit the 
carryover of RINs to 20% of the next year's volume obligations for 
individual obligated parties, the values in Table III.C-3 are less than 
20% of the values shown in Table III.C-1 for the nation as a whole.
    As discussed above, compliance with the statutory volume 
requirements for advanced biofuel and total renewable fuel in 2013 
could in theory be met by the consumption of 2.1 bill gal of E85 
containing about 1.6 bill gal of ethanol. However, given that there are 
over 2.6 bill carryover RINs available, there are more than enough in 
the market to permit compliance with the 2013 advanced biofuel and 
total renewable fuel volume requirements even if E85 consumption does 
not increase in 2013. These carryover RINs are also available to 
address any potential shortfalls in production of corn-based ethanol 
that may result from the 2012 drought.\72\
---------------------------------------------------------------------------

    \72\ Through April 2013 approximately 4.1 billion D6 RINs have 
been produced. This production rate projected through 2013 would 
indicate the production of approximately 12.3 billion D6 RINs. In 
addition, the production rate at ethanol facilities has been 
increasing. EIA's weekly fuel ethanol production data shows that 
ethanol production had dropped to 770, 000 barrels per day in late 
January but had recovered to 875,000 barrels per day by the third 
week of May. This later number projects to an annual production rate 
of approximately 13.4 bill gal of ethanol per year. When considered 
together with the estimated 2.1 billion carry over RINs we project 
there will be sufficient D6 RINs to satisfy the unadjusted total 
renewable fuel standard.

---------------------------------------------------------------------------

[[Page 49822]]

    We recognize that in some cases carryover RINs from 2012 may not be 
available to an individual obligated party that needs them. There are 
indications from some stakeholders that those who own carryover RINs 
may opt to not sell them, instead carrying them over to help assure 
compliance with their own obligations in a future year. There is no way 
to determine what fraction of carryover RINs may fall into this 
category. However, we note that the 14.5 bill gal of ethanol that might 
need to be consumed in 2013 (Table III.C-2) is only 1.4 bill gal above 
the E10 blendwall. This is significantly less than the number of 
available carryover RINs available. Thus only about half of the 
carryover RINs in existence would need to be made available in order 
for the full statutory volume requirements for advanced biofuel and 
total renewable fuel to be met in 2013.
    In response to the NPRM, one stakeholder indicated that carryover 
RINs should not be considered in the process of setting standards. 
Instead, this stakeholder argued, carryover RINs were intended only to 
provide flexibility to enable companies to remain in compliance in 
years when circumstances such as drought or other biofuel supply 
shortage limit the availability of RINs. However, the final rulemaking 
for the RFS1 program did not describe the purpose of carryover RINs in 
such narrow terms. Droughts were indeed provided as an example of a 
market circumstance that could limit the production of renewable fuels, 
but the RFS1 final rule also described the use of carryover RINs more 
broadly as a means for protecting against any potential supply 
shortfalls that could limit the availability of RINs. The rule also put 
this flexibility in terms of availability of RINs and the potential for 
waivers:

    The availability of excess previous-year RINs would thus provide 
compliance certainty in the event that the supply of current-year 
RINs falls below the RFS program requirements and the Agency does 
not waive any portion of the program requirements. (72 FR 23935, May 
1, 2007)

In addition, carryover RINs are a valid compliance mechanism, and they 
will either be used for compliance purposes or eventually retired. The 
issue here is estimating the adequacy of the availability and use of 
ethanol in 2013 for compliance purposes, and the availability of 
carryover RINs is certainly relevant in analyzing that issue. 
Therefore, we believe that it is appropriate to consider carryover RINs 
in the context of evaluating the comments received on the need for 
further compliance relief to address the E10 blendwall.
    Carryover RINs and increased E85 are not the only available 
mechanisms that obligated parties have for meeting the 2013 standards. 
There are also additional sources for non-ethanol biofuels that could 
potentially be used for compliance in 2013 instead of relying on 
increased volumes of E85. As discussed in Section III.B.1 above, there 
is unused biodiesel production capacity and sufficient feedstocks 
available to permit biodiesel production in excess of 1.28 bill gal if 
demand for it exists. In addition, various feedstocks not currently 
identified in Table 1 to 80.1426 can be used in facilities that have 
been grandfathered under Sec.  80.1403 to produce biodiesel that is 
categorized as renewable fuel, but not advanced biofuel, providing 
these feedstocks meet the definition of renewable biomass.
    Several commenters indicated that the recent rise in D6 RIN prices, 
from approximately 5 [cent]/RIN in early January 2013 to approximately 
70 [cent]/RIN by March 2013 \73\, is evidence that the E10 blendwall 
had been reached and that obligated parties would have significant 
difficulty complying with the proposed renewable fuel volumes. We 
recognize that the approaching E10 blendwall and the related 
anticipation of future scarcity of RINs in the context of currently 
high feedstock prices is the primary driver for these price increases, 
though other factors and market mechanisms may also contribute to the 
increase in the price of D6 RINs. As discussed previously in this 
section, however, we project that there will be sufficient RINs 
available to obligated parties to satisfy their advanced biofuel and 
total renewable fuel obligations in 2013 despite the challenge 
represented by the blendwall.
---------------------------------------------------------------------------

    \73\ RIN prices continued to rise after the comment period for 
the NPRM closed.
---------------------------------------------------------------------------

    One commenter also suggested that this increase in RIN prices would 
increase the cost of transportation fuel to U.S. consumers by about $17 
billion. We do not believe this is a credible program cost increase 
resulting from high RIN prices even if it does represent the market 
value of RINs required for compliance with the RFS program. It is 
incorrect to assume a direct correlation between the increase in RIN 
prices and a rise in average transportation fuel costs. The cost of the 
RFS program is driven by the cost of renewable fuels relative to the 
petroleum fuels they displace. The effect of increasing RIN prices is 
not to increase overall transportation fuel costs, but rather to reduce 
the price of more renewable-fuel intensive fuels (e.g. E85) relative to 
the price of fuels with a lower renewable content (e.g. E10). Since the 
cost of renewable fuels did not increase over this time period, we do 
not believe that recent higher RIN prices have caused a significant 
increase in the total cost of transportation fuels in 2013.\74\
---------------------------------------------------------------------------

    \74\ See also: Irwin, Scott and Good, Darrel. ``High Gasoline 
and Ethanol RINs Prices: Is There a Connection?'' Farmdoc Daily. 
Department of Agricultural and Consumer Economics, University of 
Illinois-Champaign. 27 March 2013. Web. 15 June 2013.
---------------------------------------------------------------------------

    We recognize, however, that high RIN prices may impact individual 
fuel market participants differently. For example, high D6 RIN prices 
are likely to have differing effects on how various levels of gasoline/
ethanol blends and diesel fuel are priced. The refining industry has 
raised concerns that in response to high RIN prices, individual 
refiners may choose to export fuel, and individual importers may reduce 
imports in order to reduce their RIN obligations. These actions could 
increase the cost of transportation fuels if increased exports and/or 
decreased imports significantly reduce the available supply of 
transportation fuel in the United States. We believe this is highly 
unlikely as increased exports or decreased imports by one company would 
provide the opportunity for another obligated party to increase sales 
volumes and market share within the U.S. and offset any change in 
transportation fuel supply. EPA will continue to monitor RIN prices and 
potential impacts closely.
    For all of the reasons discussed above, we conclude that for 2013 
adequate volumes of renewable fuel and carryover RINs are available to 
meet the requirements for total and advanced biofuel, and that the E10 
blendwall is not a barrier to compliance with these volumes given the 
various alternative methods to comply besides the blending of ethanol 
as E10. This conclusion is specific to the circumstances present for 
2013.

D. Final Applicable Volume Requirements for 2013

    As shown in Table III.B-2, in order for an advanced biofuel 
requirement of 2.75 bill gal to be met, there would need to be 824 mill 
gal of advanced biofuels in addition to the volumes that would

[[Page 49823]]

need to be produced or imported to meet the biomass-based diesel and 
cellulosic biofuel requirements. After reviewing the projected 
availability of advanced biofuel volumes from various sources, we have 
determined that it is likely that there will be sufficient volumes 
available to produce or import this 824 mill gal. First, we have 
determined that there are more than 500 million advanced biofuel 
carryover RINs from 2012 that can be used for compliance in 2013. With 
regard to excess biodiesel, we have determined that there could 
potentially be up to 100 mill gal of excess soy oil and up to 100 mill 
gal of excess corn oil available, which together could provide 300 
million or more advanced biofuel RINs. With regard to other advanced 
biofuels, we project that up to 245 mill gal could be produced, and 
another 50 mill gal if pathways under consideration are approved in 
enough time for them to be used by producers in 2013. Finally, we 
project that the volume of imported sugarcane ethanol from Brazil can 
reach the actual import volumes in 2012, which was 580 mill gal, and 
potentially considerably more. It is clear that, in the aggregate, 
these sources of advanced biofuel RINs are substantially more than what 
is needed to meet the advanced biofuel requirement of 2.75 bill gal. 
Therefore, we do not believe that there is a compelling reason to 
reduce the required volume of 2.75 bill gal advanced biofuel for 2013. 
Moreover, we do not believe that the blendwall will represent an 
impediment to compliance in 2013 due to the availability of carryover 
RINs from 2012, opportunities for some increase in consumption of E85, 
and opportunities for non-ethanol biofuels.

E. Volume Requirements for 2014

    As described in the NPRM, we recognize that ethanol will likely 
continue to predominate the renewable fuel pool in the near future, and 
that for 2014 the ability of the market to consume ethanol in higher 
blends such as E85 is constrained as a result of infrastructure- and 
market-related factors. Most stakeholders that submitted comments in 
response to the NPRM made reference to the impending E10 blendwall, 
though they differed on how EPA should address it. A number of 
obligated parties and other stakeholders have communicated to EPA that 
while the E10 blendwall may be manageable in 2013, in 2014 compliance 
is expected to become significantly more difficult. We agree with that 
assessment. In 2014 the applicable volume of total renewable fuel set 
forth in the statute rises to 18.15 billion ethanol-equivalent gallons, 
of which 14.4 bill gal would be non-advanced biofuel comprised 
primarily of corn-ethanol, and 3.75 bill gal would be advanced biofuel. 
A significant portion of the fuel available to meet the advanced 
biofuel requirement would also likely be ethanol, including 
domestically produced cellulosic and advanced ethanol, along with 
advanced ethanol imported from Brazil. However, the maximum volume of 
ethanol that could be consumed as E10 in 2014 is projected to be just 
13.2 bill gal.\75\ Given the history of the market and relevant 
constraints, EPA does not currently foresee a scenario in which the 
market could consume enough ethanol sold in blends greater than E10, 
and/or produce sufficient volumes of non-ethanol biofuels (biodiesel, 
renewable diesel, biogas, etc.), to meet the volumes of total renewable 
fuel and advanced biofuel stated in the statute.
---------------------------------------------------------------------------

    \75\ This volume is calculated using EIA's 2013 Annual Energy 
Outlook assuming ethanol represents 10% of total motor gasoline 
consumption by volume.
---------------------------------------------------------------------------

    Given these challenges, EPA anticipates that in the 2014 proposed 
rule, we will propose adjustments to the 2014 volume requirements, 
including to both the advanced biofuel and total renewable fuel 
categories. We expect that in preparing the 2014 proposed rule, we will 
estimate the available supply of cellulosic and advanced biofuel, 
assess the E10 blendwall and current infrastructure and market-based 
limitations to the consumption of ethanol in gasoline-ethanol blends 
above E10, and then propose to establish volume requirements that are 
reasonably attainable in light of these considerations and others as 
appropriate. EPA believes that the statute provides EPA with the 
authorities and tools needed to make appropriate adjustments in the 
national volume requirements to address these challenges. We are 
currently evaluating a variety of options and approaches consistent 
with our statutory authorities for use in establishing RFS requirements 
for 2014. We will discuss these options in detail in the forthcoming 
NPRM for the 2014 standards and expect to utilize the notice and 
comment process to fully engage the public in consideration of a 
reasonable path forward that appropriately addresses the blendwall and 
other constraints.
    We received a number of comments suggesting that because EPA was 
late in issuing these final RFS standards for 2013, and in light of 
concerns over the blendwall and RIN prices, that the Agency should take 
action to relieve or reduce burdens associated with RFS compliance in 
2013. While we do not believe that it would be appropriate to remove or 
further reduce the statutory volume obligations for 2013 as some 
suggested, we do agree with the commenter who suggested that EPA 
provide additional time for obligated parties to demonstrate compliance 
with the 2013 standards. Knowledge of the volume requirements for 2014 
is crucial to the strategies that obligated parties may implement when 
purchasing RINs and wet gallons of fuel for compliance with their 
individual 2013 RVOs. Given this, EPA's view is that delaying the 
compliance demonstration for the 2013 compliance period would alleviate 
some of the uncertainty and concerns that obligated parties have 
regarding the tardiness of the final rule and its effect on their 
decisions regarding RIN acquisition.
    Therefore, we are extending the RFS compliance deadline for the 
calendar year 2013 RFS standards to June 30, 2014. This change affects 
Sec.  80.1451(a)(1) and adds a new paragraph (a)(1)(xiv). In addition 
to providing obligated parties with more time to demonstrate 
compliance, we believe that this extension will allow obligated parties 
to implement various purchasing and allocation strategies that help 
them comply on an individual basis given the tardiness of this final 
rule. The compliance demonstration deadline extension is for the 2013 
compliance year only, and does not extend the compliance demonstration 
deadline in any subsequent year. Additionally, given the extension of 
the compliance demonstration deadline for the 2013 compliance period, 
we are extending the deadline for submitting reports for the attest 
engagement requirement for the corresponding compliance year until 
September 30, 2014. This change affects Sec.  80.1464(d) and adds a new 
paragraph (g). The attest engagement deadline extension is likewise for 
the 2013 compliance year only, and does not extend the deadline in any 
subsequent year.

IV. Applicable Percentage Standards for 2013

A. Background

    The renewable fuel standards are expressed as volume percentages 
and are used by each refiner, blender, or importer to determine their 
renewable volume obligations (RVO). Since there are four separate 
standards under the RFS2 program, there are likewise four separate RVOs 
applicable to each obligated party. Each standard applies to the sum of 
all gasoline and diesel

[[Page 49824]]

produced or imported. The applicable percentage standards are set so 
that if every obligated party meets the percentages, then the amount of 
renewable fuel, cellulosic biofuel, biomass-based diesel, and advanced 
biofuel used will meet the volumes required on a nationwide basis.
    As discussed in Section II.D, we are projecting a volume of 
cellulosic biofuel for 2013 of 4 million gallons (6 million ethanol-
equivalent gallons). This is the volume we have used as the basis for 
setting the percentage standard for cellulosic biofuel for 2013. We are 
maintaining the advanced biofuel and total renewable fuel volumes at 
the applicable volumes specified in the statute. The biomass-based 
diesel volume for 2013 has been established at 1.28 billion gallons 
through a separate rulemaking. The volumes used to determine the four 
final percentage standards are shown in Table IV.A-1.

     Table IV.A-1-- Final Volumes for Use in Setting the Applicable
                    Percentage Standards for 2013 \a\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel.....................  6 mill gal.
Biomass-based diesel...................  1.28 bill gal.
Advanced biofuel.......................  2.75 bill gal.
Renewable fuel.........................  16.55 bill gal.
------------------------------------------------------------------------
\a\ Due to the manner in which the percentage standards are calculated,
  all volumes are given in terms of ethanol-equivalent except for
  biomass-based diesel which is given in terms of physical volume

    As with previous years' renewable fuels standards determinations, 
the formulas used in deriving the annual standards are based in part on 
estimates of the volumes of gasoline and diesel fuel, for both highway 
and nonroad uses, that are projected to be used in the year in which 
the standards will apply. Producers of other transportation fuels, such 
as natural gas, propane, and electricity from fossil fuels, are not 
subject to the standards, and volumes of such fuels are not used in 
calculating the annual standards. Since the standards apply to 
producers and importers of gasoline and diesel, these are the 
transportation fuels used to set the standards, and then again to 
determine the annual volume obligations of an individual gasoline or 
diesel producer or importer.

B. Calculation of Standards

1. How are the standards calculated?
    The following formulas are used to calculate the four percentage 
standards applicable to producers and importers of gasoline and diesel 
(see Sec.  80.1405):
[GRAPHIC] [TIFF OMITTED] TR15AU13.005


Where:

StdCB,i = The cellulosic biofuel standard for year i, in 
percent.
StdBBD,i = The biomass-based diesel standard (ethanol-
equivalent basis) for year i, in percent.
StdAB,i = The advanced biofuel standard for year i, in 
percent.
StdRF,i = The renewable fuel standard for year i, in 
percent.
RFVCB,i = Annual volume of cellulosic biofuel required by 
section 211(o) of the Clean Air Act for year i, in gallons.
RFVBBD,i = Annual volume of biomass-based diesel required 
by section 211(o) of the Clean Air Act for year i, in gallons.
RFVAB,i = Annual volume of advanced biofuel required by 
section 211(o) of the Clean Air Act for year i, in gallons.
RFVRF,i = Annual volume of renewable fuel required by 
section 211(o) of the Clean Air Act for year i, in gallons.
Gi = Amount of gasoline projected to be used in the 48 
contiguous states and Hawaii, in year i, in gallons.
Di = Amount of diesel projected to be used in the 48 
contiguous states and Hawaii, in year i, in gallons. This value 
excludes diesel used in ocean-going vessels.
RGi = Amount of renewable fuel blended into gasoline that 
is projected to be consumed in the 48 contiguous states and Hawaii, 
in year i, in gallons.
RDi = Amount of renewable fuel blended into diesel that 
is projected to be consumed in the 48 contiguous states and Hawaii, 
in year i, in gallons.
GSi = Amount of gasoline projected to be used in Alaska 
or a U.S. territory in year i if the state or territory opts-in, in 
gallons.
RGSi = Amount of renewable fuel blended into gasoline 
that is projected to be consumed in Alaska or a U.S. territory in 
year i if the state or territory opts-in, in gallons.
DSi = Amount of diesel projected to be used in Alaska or 
a U.S. territory in year i if the state or territory opts-in, in 
gallons.
RDSi = Amount of renewable fuel blended into diesel that 
is projected to be consumed in Alaska or a U.S. territory in year i 
if the state or territory opts-in, in gallons.

[[Page 49825]]

GEi = Amount of gasoline projected to be produced by 
exempt small refineries and small refiners in year i, in gallons, in 
any year they are exempt per Sec. Sec.  80.1441 and 80.1442, 
respectively. For 2013, this value is non-zero. See further 
discussion in Section IV.B.2 below.
DEi = Amount of diesel projected to be produced by exempt 
small refineries and small refiners in year i, in gallons, in any 
year they are exempt per Sec. Sec.  80.1441 and 80.1442, 
respectively. For 2013, this value is non-zero. See further 
discussion in Section IV.B.2 below.

    The Act requires EPA to base the standards on an EIA estimate of 
the amount of gasoline and diesel that will be sold or introduced into 
commerce for that year. The four separate renewable fuel standards for 
2013 are based on the gasoline, ethanol, diesel, and biodiesel 
consumption volumes projected by EIA.\76\ We adjusted these nationwide 
values to represent the 49 states that participate in the RFS program 
(neither Alaska nor any U.S. territory participates).
---------------------------------------------------------------------------

    \76\ Letter, A. Michael Schaal, Director, Office of Petroleum, 
Natural Gas, and Biofuels Analysis, U.S. Energy Information 
Administration, to Christopher Grundler, Director, Office of 
Transportation and Air Quality, U.S. EPA, May 8, 2013.
---------------------------------------------------------------------------

2. Small Refineries and Small Refiners
    In CAA section 211(o)(9), enacted as part of the Energy Policy Act 
of 2005, Congress provided a temporary exemption to small refineries 
(those refineries with a crude throughput of no more than 75,000 
barrels of crude per day) through December 31, 2010. In our initial 
rulemaking to implement the new RFS program,\77\ we exercised our 
discretion under section 211(o)(3)(B) and extended this temporary 
exemption to the few remaining small refiners that met the Small 
Business Administration's (SBA) definition of a small business (1,500 
employees or less company-wide) but did not meet the statutory small 
refinery definition as noted above. 40 CFR 80.1141, 80.1142. Because 
EISA did not alter the small refinery exemption in any way, the RFS2 
program regulations maintained the exemptions for gasoline and diesel 
produced by small refineries and small refiners through 2010 (unless 
the exemption was waived). See 40 CFR 80.1441, 80.1442.
---------------------------------------------------------------------------

    \77\ 72 FR 23900, May 1, 2007.
---------------------------------------------------------------------------

    Congress provided two ways that small refineries can receive a 
temporary extension of the exemption beyond 2010. One is based on the 
results of a study conducted by the Department of Energy (DOE) to 
determine whether small refineries would face a disproportionate 
economic hardship under the RFS program. The other is based on EPA 
determination of disproportionate economic hardship on a case-by-case 
basis in response to refiner petitions.
    In January 2009, DOE issued a study which did not find that small 
refineries would face a disproportionate economic hardship under the 
RFS program.\78\ The conclusions were based in part on the expected 
robust availability of RINs and EPA's ability to grant relief on a 
case-by-case basis. As a result, beginning in 2011 small refiners and 
small refineries were required to participate in the RFS program as 
obligated parties, and there was no small refiner/refinery volume 
adjustment to the 2011 standards as there was for the 2010 standards.
---------------------------------------------------------------------------

    \78\ DOE report ``EPACT 2005 Section 1501 Small Refineries 
Exemption Study'', (January, 2009).
---------------------------------------------------------------------------

    Following the release of DOE's 2009 small refinery study, Congress 
directed DOE to complete a reassessment and issue a revised report. In 
March of 2011, DOE re-evaluated the impacts of the RFS program on small 
entities and concluded that some small refineries would suffer a 
disproportionate hardship.\79\ As a result, EPA exempted these 
refineries from being obligated parties for two additional years, 2011 
and 2012.\80\ The 2012 standards established in the January 9, 2012, 
final rulemaking reflected the exemption of these refineries.
---------------------------------------------------------------------------

    \79\ ``Small Refinery Exemption Study: An Investigation into 
Disproportionate Economic Hardship,'' U.S. Department of Energy, 
March 2011.
    \80\ Since the standards are applied on an annual basis, the 
exemptions are likewise on an annual basis even though the 
determination of which refineries would receive an extension to 
their exemption did not occur until after January 1, 2011.
---------------------------------------------------------------------------

    EPA may also extend the exemption for individual small refineries 
or small refiners on a case-by-case basis if they demonstrate 
disproportionate economic hardship. 40 CFR Sec. Sec.  80.1441(e)(2), 
80.1442(h). EPA has granted some exemptions pursuant to this process 
that apply in 2011 and 2012. EPA has granted one exemption for 2013. 
However, any requests for exemption that are approved after the release 
of today's final rulemaking will not affect the 2013 standards. As 
stated in the final rule establishing the 2011 standards, ``EPA 
believes 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.'' Thus, any additional exemptions for small refineries or 
small refiners that are issued after today will not affect the 2013 
standards.
    EPA requested comment on two areas related to small refiner/
refinery exemptions. The first was whether it would be appropriate to 
extend the two year exemption for small refineries. Two commenters 
stated that EPA should not provide such an extension to small 
refineries. Both referenced the number of years the program has been in 
place, leading to the conclusion that small entities have had time to 
prepare to meet the standards. One of the commenters also stated that 
small refiners likely have been blending renewable fuel for years given 
market incentives. One of these commenters stated that the relief 
provided was meant to be temporary and not ``on-going.'' A third 
commenter suggested that EPA not only continue to provide hardship 
waivers, but extend the opportunity for waivers to mid-size refiners, 
on the basis that these refiners, like small refiners, do not own 
ethanol facilities and have little control of the RIN and ethanol 
markets. In addition, the location of several small and mid-size 
refineries prohibits the export of gasoline, thus reducing their 
compliance options in the face of limited RIN availability. However, it 
is the limited financial resources of such entities that provide 
overarching hardship to such entities, according to the commenter. This 
commenter also stated that EPA's granting of hardship relief is based 
on whether the refinery cannot remain economically viable without said 
relief. The commenter believes the decision point should be based on 
whether the refiner suffers disproportionately to others in the 
industry.
    The Act specifically provides for a temporary RFS exemption for 
small refineries, and for the possibility of extensions of those 
temporary exemptions. EPA used its discretion in the RFS1 program 
regulations, and again in the RFS2 regulations, to extend the temporary 
exemption (and possibility of extensions) to a few small refiners 
meeting criteria established in prior EPA fuels rules based on general 
authority to provide appropriate lead time in establishing implementing 
regulations and based on the language in section 211(o) directing EPA 
to apply RFS requirements to refineries, blenders, distributors, and 
importers ``as appropriate.'' Regarding EPA's use of ``economic 
viability'' (in the commenter's words) as a decision point, the Agency 
has interpreted this to be a

[[Page 49826]]

severe impact--large enough to create a hardship and threaten the 
viability of the company. Thus, absent such hardship, the agency does 
not believe it is appropriate to extend the exemption for small 
refineries.
    EPA also requested comment on whether it is appropriate for the 
agency to change the standards if small refiner exemptions are granted 
after the final rule is issued. As discussed above, EPA has heretofore 
considered and rejected this option for the primary reason of wanting 
to provide certainty to obligated parties regarding the levels of the 
standards. One commenter stated that, though they were opposed to 
further extending exemptions to small entities, that--lawfully, the 
standards must be adjusted whenever a waiver is granted. In the rule 
establishing the 2011 standards, we stated that ``EPA believes the Act 
is best interpreted to require issuance of a single annual standard . . 
. thereby providing advance notice and certainty to obligated parties . 
. .'' The Agency continues to believe that this is the single best 
approach; the commenter did not provide new information to cause us to 
re-evaluate this position.
3. Final Standards
    As specified in the March 26, 2010 RFS2 final rule,\81\ the 
percentage standards are based on energy-equivalent gallons of 
renewable fuel, with the cellulosic biofuel, advanced biofuel, and 
total renewable fuel standards based on ethanol equivalence and the 
biomass-based diesel standard based on biodiesel equivalence. However, 
all RIN generation is based on ethanol-equivalence. More specifically, 
the RFS2 regulations provide that production or import of a gallon of 
qualifying biodiesel will lead to the generation of 1.5 RINs. In order 
to ensure that demand for 1.28 billion physical gallons of biomass-
based diesel will be created in 2013, the calculation of the biomass-
based diesel standard provides that the required volume be multiplied 
by 1.5. The net result is a biomass-based diesel gallon being worth 1.0 
gallon toward the biomass-based diesel standard, but worth 1.5 gallons 
toward the other standards.
---------------------------------------------------------------------------

    \81\ 75 FR 14716, March 26, 2010.
---------------------------------------------------------------------------

    The levels of the percentage standards would be reduced if Alaska 
or a U.S. territory chooses to participate in the RFS2 program, as 
gasoline and diesel produced in or imported into that state or 
territory would then be subject to the standard. Neither Alaska nor any 
U.S. territory has chosen to participate in the RFS2 program at this 
time, and thus the value of the related terms in the calculation of the 
standards is zero.
    Note that because the gasoline and diesel volumes estimated by EIA 
include renewable fuel use, we must subtract the total renewable fuel 
volumes from the total gasoline and diesel volumes to get total non-
renewable gasoline and diesel volumes. The values of the variables 
described above are shown in Table IV.B.3-1.\82\ Terms not included in 
this table have a value of zero.
---------------------------------------------------------------------------

    \82\ To determine the 49-state values for gasoline and diesel, 
the amounts of these fuels used in Alaska is subtracted from the 
totals provided by DOE. The Alaska fractions are determined from the 
most recent (2011) EIA State Energy Data, Transportation Sector 
Energy Consumption Estimates. The gasoline and transportation 
distillate fuel oil fractions are approximately 0.2% and 0.7%, 
respectively. Ethanol use in Alaska is estimated at 11.2% of its 
gasoline consumption (based on the same State data), and biodiesel 
use is assumed to be zero.

    Table IV.B.3-1--Values for Terms in Calculation of the Standards
                               [Bill gal]
------------------------------------------------------------------------
                  Term                                Value
------------------------------------------------------------------------
RFVCB,2013.............................  0.006.
RFVBBD,2013............................  1.28.
RFVAB,2013.............................  2.75.
RFVRF,2013.............................  16.55.
G2013..................................  132.80.
D2013..................................  51.76.
RG2013.................................  13.31.
RD2013.................................  1.23.
GEi....................................  Confidential.\a\
DEi....................................  Confidential.\a\
------------------------------------------------------------------------
\a\ This information is not published because it reflects an exemption
  for a single entity and publishing such information would reveal
  confidential business information.

    Using the volumes shown in Table IV.B.3-1, we have calculated the 
final percentage standards for 2013 as shown in Table IV.B.3-2.

           Table IV.B.3-2--Final Percentage Standards for 2013
------------------------------------------------------------------------
                                                          Cellulosic
                                                 Percent    biofuel   0.004.
-------------------------------------------------------- --------------------
Cellulosic biofuel............................     0.004
Biomass-based diesel..........................      1.13
Advanced biofuel..............................      1.62
Renewable fuel................................      9.74
------------------------------------------------------------------------

V. Annual Administrative Announcements

    In the RFS2 final rule, we stated our intent to make two 
announcements each year:
     Set the price for cellulosic biofuel waiver credits that 
will be made available to obligated parties in the event that we reduce 
the volume of cellulosic biofuel below the applicable volume specified 
in the Clean Air Act (CAA), and
     Announce the results of our annual assessment of the 
aggregate compliance approach for U.S. planted crops and crop residue.
    The biofuel waiver credit price being announced today was 
calculated in accordance with the specifications in Sec.  80.1456(d). 
The manner in which EPA calculates the waiver credit price is precisely 
set forth in EPA regulations, and EPA's assessment of the aggregate 
compliance approach is based on data sources, methodology, and criteria 
that were identified and explained in the preamble to the RFS2 final 
rule. For these reasons we would not typically include these 
administrative announcements in a Notice of Proposed Rulemaking. 
However, given that the NPRM for the 2013 standards was not published 
prior to 2013, we determined that regulated parties would benefit from 
knowing the waiver credit price and our conclusions regarding the 
aggregate compliance approach as soon as possible. Therefore, the 
February 7, 2013 NPRM included both of these administrative 
announcements. In today's rulemaking we are finalizing both 
announcements, and responding to a number of comments we received on 
the aggregate compliance approach.

A. 2013 Price for Cellulosic Biofuel Waiver Credits

    Section 211(o)(7)(D) of the CAA requires that whenever EPA sets the 
applicable volume of cellulosic biofuel at a level lower than that 
specified in the Act, EPA is to provide a number of cellulosic credits 
for sale that is no more than the EPA-determined applicable volume. 
Congress also specified the formula for calculating the price for such 
waiver credits: adjusted for inflation, the credits must be offered at 
the price of the higher of 25 cents per gallon or the amount by which 
$3.00 per gallon exceeds the average wholesale price of a gallon of 
gasoline in the United States. The inflation adjustment is for years 
after 2008. EPA regulations provide that the inflation adjustment is 
calculated by comparing the most recent Consumer Price Index for All 
Urban Consumers (CPI-U) for the ``All Items'' expenditure category as 
provided by the Bureau of Labor Statistics that is available at the 
time EPA sets the cellulosic biofuel standard to the comparable value 
that was reported soonest after December 31, 2008.
    In contrast to its directions to EPA for setting the price of a 
cellulosic biofuel waiver credit, Congress afforded the Agency 
considerable flexibility in designing regulations specifying the

[[Page 49827]]

permissible uses of the credits. The CAA states that EPA regulations 
``shall include such provisions, including limiting the credits' uses 
and useful life, as the Administrator deems appropriate to assist 
market liquidity and transparency, to provide appropriate certainty for 
regulated entities and renewable fuel producers, and to limit any 
potential misuse of cellulosic biofuel credits to reduce the use of 
other renewable fuels, and for such other purposes as the Administrator 
determines will help achieve the goals of this subsection.'' The final 
RFS2 regulations provide a detailed discussion of how we designed the 
provisions for cellulosic biofuel waiver credits in keeping with the 
statutory language. In short, 2013 cellulosic biofuel waiver credits 
(or''waiver credits'') are only available for the 2013 compliance year. 
Waiver credits will only be made available to obligated parties, and 
they are nontransferable and nonrefundable. Further, obligated parties 
may only purchase waiver credits up to the level of their cellulosic 
biofuel RVO less the number of cellulosic biofuel RINs that they own. A 
company owning cellulosic biofuel RINs and cellulosic waiver credits 
may use both types of credits if desired to meet their RVOs, but unlike 
RINs, waiver credits may not be carried over for use in the next 
calendar year. Obligated parties may not use waiver credits to meet a 
prior year deficit obligation. Finally, unlike cellulosic biofuel RINs 
which may also be used to meet an obligated party's advanced and total 
renewable fuel obligations, waiver credits may only be used to meet a 
cellulosic biofuel RVO. An obligated party will still need to 
additionally and separately acquire RINs to meet their advanced biofuel 
and total renewable fuel obligations.
    For the 2013 compliance period, since the applicable volume of 
cellulosic biofuel used to set the annual cellulosic biofuel standard 
is lower than the volume for 2013 specified in the CAA, we are making 
cellulosic waiver credits available to obligated parties for end-of-
year compliance should they need them at a price of $0.42 per credit. 
To calculate this price, EPA first determined the average wholesale 
(refinery gate) price of gasoline using the most recent 12 months of 
data available from the EIA Web site on September 30, 2012. Based on 
this data, we calculated an average price of gasoline for the period 
July 2011 to June 2012 of $2.85. In accordance with the Act, we then 
calculated the difference of the inflation-adjusted value of $3.00, or 
$3.27, and $2.85, which yielded $0.42. Next, we compared the value of 
$0.42 to the inflation-adjusted value of $0.25, or $0.27. The Act 
requires EPA to use the greater of these two values as the price for 
cellulosic biofuel waiver credits.
    The derivation of this value is more fully explained in a 
memorandum submitted to the docket for this rulemaking, and a more 
complete description of the statutory requirements and their 
application can be found in the RFS2 final rule.

B. Assessment of the Domestic Aggregate Compliance Approach

    The RFS2 regulations contain a provision for renewable fuel 
producers who use planted crops and crop residue from U.S. agricultural 
land that relieves them of the individual recordkeeping and reporting 
requirements concerning the specific land from which their feedstocks 
were harvested. To enable this approach, EPA established a baseline 
number of acres for U.S. agricultural land in 2007 (the year of EISA 
enactment) and determined that as long as this baseline number of acres 
was not exceeded, it was unlikely that new land outside of the 2007 
baseline would be devoted to crop production based on historical trends 
and economic considerations. We therefore provided that renewable fuel 
producers using planted crops or crop residue from the U.S. as 
feedstock in renewable fuel production need not comply with the 
individual recordkeeping and reporting requirements related to 
documenting that their feedstocks are renewable biomass, unless EPA 
determines through one of its annual evaluations that the 2007 baseline 
acreage of agricultural land has been exceeded.
    In the final RFS2 regulations, EPA committed to make an annual 
finding concerning whether the 2007 baseline amount of U.S. 
agricultural land has been exceeded in a given year. If the baseline is 
found to have been exceeded, then producers using U.S. planted crops 
and crop residue as feedstocks for renewable fuel production would be 
required to comply with individual recordkeeping and reporting 
requirements to verify that their feedstocks are renewable biomass.
    In response to the NPRM, we received two comments criticizing the 
aggregate compliance approach, including a comment questioning 
transparency surrounding the data and methodology. EPA continues to 
believe that USDA cropland and reserve program acreage data are the 
most appropriate and applicable sources of data on which to base our 
annual evaluation for whether the 2007 baseline has been exceeded for 
aggregate compliance. The USDA data along with a description of our 
evaluation has been provided in the rulemaking dockets for each annual 
RFS standard.
    Based on data provided by the USDA Farm Service Agency (FSA) and 
Natural Resources Conservation Service (NRCS), we have estimated that 
U.S. agricultural land reached approximately 384 million acres in 2012, 
and thus did not exceed the 2007 baseline acreage. This acreage 
estimate is based on the same methodology used to set the 2007 baseline 
acreage for U.S. agricultural land in the RFS2 final rulemaking. 
Specifically, we started with FSA crop history data for 2012, from 
which we derived a total estimated acreage of 384 million acres. We 
then subtracted the amount of land estimated to be participating in the 
Grasslands Reserve Program (GRP) and Wetlands Reserve Program (WRP) by 
the end of Fiscal Year 2012, 230,550 acres, to yield an estimate of 
approximately 384 million acres of U.S. agricultural land in 2012. The 
USDA data used to make this calculation can be found in the docket to 
this rule.

C. Assessment of the Canadian Aggregate Compliance Approach

    On March 15, 2011, EPA issued a notice of receipt of and solicited 
public comment on a petition for EPA to authorize the use of an 
aggregate approach for compliance with the Renewable Fuel Standard 
renewable biomass requirements, submitted by the Government of Canada. 
The petition requested that EPA determine that an aggregate compliance 
approach will provide reasonable assurance that planted crops and crop 
residue from Canada meet the definition of renewable biomass. After 
thorough consideration of the petition, all supporting documentation 
provided and the public comments received, EPA determined that the 
criteria for approval of the petition were satisfied and approved the 
use of an aggregate compliance approach to renewable biomass 
verification for planted crops and crop residue grown in Canada.
    The Government of Canada utilized several types of land use data to 
demonstrate that the land included in their 124 million acre baseline 
is cropland, pastureland or land equivalent to U.S. Conservation 
Reserve Program land that was cleared or cultivated prior to December 
19, 2007, and was actively managed or fallow and nonforested on that 
date (and is therefore RFS2 qualifying land). The total agricultural 
land in Canada in 2012

[[Page 49828]]

is estimated at 120.9 million acres. This total agricultural land area 
includes 97.3 million acres of cropland and summer fallow, 13.8 million 
acres of pastureland and 9.8 million acres of agricultural land under 
conservation practices. This acreage estimate is based on the same 
methodology used to set the 2007 baseline acreage for Canadian 
agricultural land in the RFS2 response to petition. The data used to 
make this calculation can be found in the docket to this rule.

D. Vacatur of 2012 Cellulosic Biofuel Standard

    On January 25, 2013 a DC circuit court ruled that the EPA's 
projection of cellulosic biofuel production was in excess of the 
agency's statutory authority and vacated the cellulosic biofuel 
standards.\83\ Very few cellulosic biofuel RINs were generated in 2012 
and of those that were the majority of these RINs were required to be 
retired when the cellulosic biofuel they represented was exported. EPA 
is therefore eliminating the cellulosic biofuel requirement for 2012 in 
accordance with the order from the DC circuit court. Cellulosic biofuel 
RINs generated in 2012 may still be used to satisfy up to 20% of an 
obligated party's cellulosic biofuel obligation in 2013.
---------------------------------------------------------------------------

    \83\ See API v. EPA, No. 12-1139, slip op. at 5-9 (D.C. Cir. 
January 25, 2013)
---------------------------------------------------------------------------

VI. Comments Outside the Scope of This Rulemaking

    In their comments responding to the NPRM, a number of parties used 
the opportunity to raise concerns that were not directly related to the 
issues and provisions we were addressing in the NPRM, namely the 
determination of the applicable volume requirements and associated 
percentage standards for cellulosic biofuel, biomass-based diesel, 
advanced biofuel, and total renewable fuel. Instead, they addressed 
issues associated with the following:

 EPA's petition process in Sec.  80.1416 for approving new fuel 
pathways and requests that the review of certain pathways be expedited
 Requests for clarification regarding whether certain 
feedstocks qualify as renewable biomass
 Requests for new EPA initiatives to promote FFVs and blender 
pumps
 Possible legislative changes to the RFS program
 E15 waivers and EPA policy on E15
 Requests for new or revised lifecycle GHG assessments
 Impacts of ethanol on small engines
 Impacts of ethanol on air quality and use of corn for food
 Comments on specific regulatory provisions in 40 CFR Part 80, 
Subpart M
 Comments on the 1.28 bill gal volume requirement for biomass-
based diesel

We also received some comments addressing the impacts of ethanol on air 
quality and the use of corn for food. These issues were addressed in 
the RFS2 final rule released in 2010 and were not revisited in the 
February 7, 2013 NPRM.
    While we are taking these comments under consideration as we 
continue to implement the RFS2 program, these comments are outside the 
scope of today's action, and we are not providing substantive responses 
to them at this time. With regard to comments on the 1.28 bill gal 
requirement for biomass-based diesel, we will take them into 
consideration in the context of our response to the petition for 
reconsideration submitted by the American Fuels and Petrochemical 
Manufacturers.

VII. Public Participation

    Many interested parties participated in the rulemaking process that 
culminates with this final rule. This process provided opportunity for 
submitting written public comments following the proposal that we 
published on February 7, 2013 (78 FR 9282), and we also held a public 
hearing on March 8, 2013 at which a number of parties provided both 
verbal and written testimony. All comments received, both verbal and 
written, are available in EPA docket EPA-HQ-OAR-2012-0546 and we 
considered these comments in developing the final rule. Public comments 
and EPA responses are discussed throughout this preamble.

VIII. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is a ``significant regulatory action'' because it raises novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. 
Accordingly, EPA submitted this action to the Office of Management and 
Budget (OMB) for review under Executive Orders 12866 and 13563 (76 FR 
3821, January 21, 2011) and any changes made in response to OMB 
recommendations have been documented in the docket for this action.
    The economic impacts of the RFS2 program on regulated parties, 
including the impacts of the required volumes of renewable fuel, were 
already addressed in the RFS2 final rule promulgated on March 26, 2010 
(75 FR 14670). With the exception of cellulosic biofuel, this action 
proposes the percentage standards applicable in 2013 based on the 
volumes that were analyzed in the RFS2 final rule.

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. 
Burden is defined at 5 CFR 1320.3(b). This final rule does not impose 
any additional reporting requirements on regulated parties beyond those 
already required under the RFS program; therefore, there will not be 
any additional reporting burdens on entities impacted by this 
regulation. This action merely establishes the RFS annual standards for 
2013 as required by section 211(o) of the Clean Air Act.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedure Act or any other statute unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small 
entities, small entity is defined as: (1) A small business as defined 
by the Small Business Administration's (SBA) regulations at 13 CFR 
121.201; (2) a small governmental jurisdiction that is a government of 
a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    Today's rule is an annual rulemaking implementing a long-term 
program that was finalized in 2010. Under that program small refiners 
and small refineries were already granted two years of relief that 
could be extended upon demonstration of ongoing hardship. EPA, with the 
assistance of DOE, has continued to implement these provisions and 
provide relief when warranted.

[[Page 49829]]

    After considering the economic impacts of today's final rule on 
small entities, we certify that this action will not have a significant 
economic impact on a substantial number of small entities. This rule 
sets the annual standard for cellulosic biofuel for 2013 at 6 mill gal. 
Since small refiners and small refineries collectively comprise about 
11.9% of gasoline and 15.2% of diesel production \84\, for an average 
of 12.9% for the entire gasoline + diesel pool, small refiners and 
small refineries would only be required to collectively meet a 
cellulosic biofuel requirement of about 0.8 mill gal (6 x 12.9%). At 
the cellulosic biofuel waiver credit price of $0.42, established in 
this rule for 2013, the cost of complying with this requirement would 
total about $0.33 million for the approximately 60 obligated parties 
that would be affected, or about $5,500 per facility on average.
---------------------------------------------------------------------------

    \84\ Estimates from RFS2 final rule, 75 FR 14867.
---------------------------------------------------------------------------

    The impacts of the RFS2 program on small entities were already 
addressed in the RFS2 final rule promulgated on March 26, 2010 (75 FR 
14670), and this final rule will not impose any additional requirements 
on small entities.

D. Unfunded Mandates Reform Act

    This final action contains no Federal mandates under the provisions 
of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 
U.S.C. 1531-1538 for State, local, or tribal governments or the private 
sector. This action implements mandate(s) specifically and explicitly 
set forth by the Congress in Clean Air Act section 211(o) without the 
exercise of any policy discretion by EPA. Therefore, this action is not 
subject to the requirements of sections 202 or 205 of the UMRA.
    This action is also not subject to the requirements of section 203 
of UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. This final rule 
only applies to gasoline, diesel, and renewable fuel producers, 
importers, distributors and marketers and merely sets the 2013 annual 
standards for the RFS program.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. This action sets the 2013 annual 
standards for the RFS program and only applies to gasoline, diesel, and 
renewable fuel producers, importers, distributors and marketers. Thus, 
Executive Order 13132 does not apply to this rule.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). This final rule 
will be implemented at the federal level and affects transportation 
fuel refiners, blenders, marketers, distributors, importers, exporters, 
and renewable fuel producers and importers. Tribal governments would be 
affected only to the extent they purchase and use regulated fuels. 
Thus, Executive Order 13175 does not apply to this action.

G. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying 
only to those regulatory actions that concern health or safety risks, 
such that the analysis required under section 5-501 of the EO has the 
potential to influence the regulation. This action is not subject to EO 
13045 because it does not establish an environmental standard intended 
to mitigate health or safety risks and because it implements specific 
standards established by Congress in statutes (section 211(o) of the 
Clean Air Act).

H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not a ``significant energy action'' as defined in 
Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355 
(May 22, 2001)) because it is not likely to have a significant adverse 
effect on the supply, distribution, or use of energy. This action 
simply sets the annual standards for renewable fuel under the RFS 
program for 2013.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards.
    This final rulemaking does not involve technical standards. 
Therefore, EPA is not considering the use of any voluntary consensus 
standards.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA has determined that this final rule will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because it does not 
affect the level of protection provided to human health or the 
environment. This action does not relax the control measures on sources 
regulated by the RFS regulations and therefore will not cause emissions 
increases from these source.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2). Therefore, this rule will be effective on the date of 
publication.

[[Page 49830]]

IX. Statutory Authority

    Statutory authority for this action comes from section 211 of the 
Clean Air Act, 42 U.S.C. 7545. Additional support for the procedural 
and compliance related aspects of today's Final rule, come from 
Sections 114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. Sections 
7414, 7542, and 7601(a).

List of Subjects in 40 CFR Part 80

    Administrative practice and procedure, Air pollution control, 
Diesel fuel, Environmental protection, Fuel additives, Gasoline, 
Imports, Oil imports, Petroleum.

    Dated: August 6, 2013.
Gina McCarthy,
Administrator.

    For the reasons set forth in the preamble, 40 CFR part 80 is 
amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 continues to read as follows:

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


0
2. Section 80.1405 is amended by removing and reserving paragraph 
(a)(3)(i) and by adding paragraphs (a)(4) and (d)(4) to read as 
follows:


Sec.  80.1405  What are the Renewable Fuel Standards?

    (a) * * *
    (4) Renewable Fuel Standards for 2013.
    (i) The value of the cellulosic biofuel standard for 2013 shall be 
0.004 percent.
    (ii) The value of the biomass-based diesel standard for 2013 shall 
be 1.13 percent.
    (iii) The value of the advanced biofuel standard for 2013 shall be 
1.62 percent.
    (iv) The value of the renewable fuel standard for 2013 shall be 
9.74 percent.
* * * * *
    (d) * * *
    (4) The 2013 price for cellulosic biofuel waiver credits is $0.42 
per waiver credit.

0
3. Section 80.1451 is amended by revising paragraph (a)(1) introductory 
text and by adding paragraph (a)(1)(xiv) to read as follows:


Sec.  80.1451  What are the reporting requirements under the RFS 
program?

    (a) * * *
    (1) Annual compliance reports for the previous compliance period 
shall be submitted by February 28 of each year except as provided in 
paragraph (xiv) below, and shall include all of the following 
information:
* * * * *
    (xiv) For the 2013 compliance year, annual compliance reports shall 
be submitted by June 30, 2014.
* * * * *

0
4. Section 80.1464 is amended by revising paragraph (d) and by adding 
paragraph (g) to read as follows:


Sec.  80.1464  What are the attest engagement requirements under the 
RFS program?

    (d) For each compliance year, each party subject to the attest 
engagement requirements under this section shall cause the reports 
required under this section to be submitted to EPA by May 31 of the 
year following the compliance year, except as provided in paragraph (g) 
below.
* * * * *
    (g) For the 2013 compliance year, reports required under this 
section shall be submitted to EPA by September 30, 2014.

[FR Doc. 2013-19557 Filed 8-14-13; 8:45 am]
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