[Federal Register Volume 87, Number 113 (Monday, June 13, 2022)]
[Proposed Rules]
[Pages 35711-35718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12375]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[EPA-HQ-OAR-2022-0434; FRL-9821-01-OAR]
RIN 2060-AV72
Renewable Fuel Standard (RFS) Program: Alternative RIN Retirement
Schedule for Small Refineries
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency (EPA) is proposing an
alternative renewable identification number (RIN) retirement schedule
for small refineries under the Renewable Fuel Standard (RFS) program
for the 2020 compliance year. To provide small refineries with more
time to comply with their 2020 RFS obligations (including any RIN
deficits from 2019 carried forward into the 2020 compliance year), EPA
is proposing a quarterly RIN retirement schedule by which a small
refinery must comply with certain percentages of its 2020 RFS
obligations. EPA is proposing this action because small refineries need
more time to plan for compliance with their RFS obligations given EPA's
delay in deciding small refinery exemption (SRE) petitions and setting
the associated compliance deadlines.
DATES:
Comments. Comments must be received on or before July 28, 2022.
Public hearing. EPA will hold a virtual public hearing on June 28,
2022. Please refer to the SUPPLEMENTARY INFORMATION section for
additional information on the public hearing.
ADDRESSES:
Comments. You may send your comments, identified by Docket ID No.
EPA-HQ-OAR-2022-0434, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov
(our preferred method) Follow the online instructions for submitting
comments.
Email: [email protected]. Include Docket ID No. EPA-
HQ-OAR-2022-0434 in the subject line of the message.
Mail: U.S. Environmental Protection Agency, EPA Docket
Center, Air Docket, Mail Code 28221T, 1200 Pennsylvania Avenue NW,
Washington, DC 20460.
Hand Delivery or Courier (by scheduled appointment only):
EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution
Avenue NW, Washington, DC 20004. The Docket Center's hours of
operations are 8:30 a.m.-4:30 p.m., Monday-Friday (except Federal
Holidays).
Instructions: All submissions received must include the Docket ID
No. for this rulemaking. Comments received may be posted without change
to https://www.regulations.gov, including any personal information
provided. For the full EPA public comment policy, information about
confidential business information (CBI) or multimedia submissions, and
general guidance on making effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.
Public hearing. The virtual public hearing will be held on June 28,
2022. The hearing will begin at 9:00 a.m. Eastern Daylight Time (EDT)
and end when all parties who wish to speak have had an opportunity to
do so. All hearing attendees (including even those who do not intend to
provide testimony) should register for the public hearing by June 21,
2022. Information on how to register can be found at https://www.epa.gov/renewable-fuel-standard-program/proposed-alternative-rin-retirement-schedule-small-refineries. Additional information regarding
the hearing
[[Page 35712]]
appears below under SUPPLEMENTARY INFORMATION.
FOR FURTHER INFORMATION CONTACT: For questions regarding this action,
contact Karen Nelson, Office of Transportation and Air Quality,
Compliance Division, Environmental Protection Agency, 2000 Traverwood
Drive, Ann Arbor, MI 48105; telephone number: (734) 214-4657; email
address: [email protected]. For questions regarding the public
hearing, contact Nick Parsons at (734) 214-4479 or [email protected].
SUPPLEMENTARY INFORMATION:
Does this action apply to me?
Entities potentially affected by this proposed rule are those
involved with the production, distribution, and sale of transportation
fuels, including gasoline, diesel, and renewable fuels such as ethanol,
biodiesel, renewable diesel, and biogas. Potentially affected
categories include:
------------------------------------------------------------------------
Examples of potentially
Category NAICS \1\ code affected entities
------------------------------------------------------------------------
Industry....................... 324110 Petroleum refineries.
Industry....................... 325193 Ethyl alcohol
manufacturing.
Industry....................... 325199 Other basic organic
chemical
manufacturing.
Industry....................... 424690 Chemical and allied
products merchant
wholesalers.
Industry....................... 424710 Petroleum bulk stations
and terminals.
Industry....................... 424720 Petroleum and petroleum
products merchant
wholesalers.
Industry....................... 221210 Manufactured gas
production and
distribution.
Industry....................... 454319 Other fuel dealers.
------------------------------------------------------------------------
\1\ North American Industry Classification System (NAICS).
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be affected by this
action. This table lists the types of entities that EPA is now aware
could potentially be affected by this action. Other types of entities
not listed in the table could also be affected. To determine whether
your entity would be affected 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 FOR FURTHER INFORMATION
CONTACT section.
Participation in Virtual Public Hearing
Please note that EPA is deviating from its typical approach because
the President has declared a national emergency. Because of current CDC
recommendations, as well as state and local orders for social
distancing to limit the spread of COVID-19, EPA cannot hold in-person
public meetings at this time.
Information on how to register for the hearing can be found at
https://www.epa.gov/renewable-fuel-standard-program/proposed-alternative-rin-retirement-schedule-small-refineries. The last day to
pre-register to speak at the hearing will be June 21, 2022.
Each commenter will have 3 minutes to provide oral testimony. EPA
may ask clarifying questions during the oral presentations, but will
not respond to the presentations at that time. Written statements and
supporting information submitted during the comment period will be
considered with the same weight as oral comments and supporting
information presented at the public hearing.
Please note that any updates made to any aspect of the hearing will
be posted online at https://www.epa.gov/renewable-fuel-standard-program/proposed-alternative-rin-retirement-schedule-small-refineries.
While EPA expects the hearing to go forward as set forth above, please
monitor the website or contact the person listed in the FOR FURTHER
INFORMATION CONTACT section to determine if there are any updates. EPA
does not intend to publish a document in the Federal Register
announcing updates.
If you require the services of a translator or special
accommodations such as audio description, please pre-register for the
hearing and describe your needs by June 21, 2022. EPA may not be able
to arrange accommodations without advance notice.
Outline of This Preamble
I. Background
A. Small Refineries and RFS Compliance
B. Unique Small Refinery Compliance Challenges
C. Overview of Proposed Compliance Approach
II. Alternative RIN Retirement Schedule for Small Refineries for the
2020 Compliance Year
III. 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 (PRA)
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act (UMRA)
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 (NTTAA) and
1 CFR Part 51
J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
IV. Statutory Authority
I. Background
A. Small Refineries and RFS Compliance
The RFS program sets annual, nationally applicable volume targets
for renewable fuel. EPA translates those volume targets into compliance
obligations that obligated parties must meet each year. EPA has
designated refiners and importers of gasoline and diesel fuel used as
transportation fuel to be those obligated parties.\1\ Small refineries,
a subset of refiners, are defined by the Clean Air Act (CAA or ``the
Act'') as ``refiner[ies] for which the average aggregate daily crude
oil throughput for a calendar year . . . does not exceed 75,000
barrels.'' \2\ At the start of the RFS program, Congress initially
granted all eligible small refineries a temporary exemption from the
obligations of the RFS program until 2011.\3\ Under EPA's regulations,
small refineries that were producing either ``gasoline'' under RFS1 \4\
or ``transportation fuel'' under RFS2 \5\ were required to notify EPA
that they qualified for the temporary exemption
[[Page 35713]]
by submitting verification letters stating their average crude oil
throughput rate during the applicable qualification period.\6\ The CAA
provides that a small refinery may at any time petition EPA for an
extension of the exemption from the obligations of the RFS program for
the reason of disproportionate economic hardship (DEH).\7\ In
evaluating such petitions, the EPA Administrator, in consultation with
the Secretary of Energy, will consider the findings of a Department of
Energy (DOE) study and other economic factors.\8\
---------------------------------------------------------------------------
\1\ 40 CFR 80.1406(a).
\2\ CAA section 211(o)(1)(K).
\3\ CAA section 211(o)(9)(A)(i).
\4\ 72 FR 23900, 23926 (May 1, 2007).
\5\ 40 CFR 80.1441(a)(1).
\6\ 72 FR 23900, 23925-26 (May 1, 2007); 40 CFR 80.1441(b).
EPA's regulations allowed small refineries that had submitted
verification letters to qualify for the original statutory exemption
under EPAct/RFS1 to not have to submit an additional verification
letter to qualify under the SRE provisions in EISA/RFS2.
\7\ CAA section 211(o)(9)(B)(i).
\8\ CAA section 211(o)(9)(B)(ii).
---------------------------------------------------------------------------
On December 7, 2021, EPA proposed to deny 65 pending SRE petitions
for the 2016-2021 compliance years \9\ and took public comment via a
Federal Register Notice.\10\ That proposal included proposed changes to
EPA's interpretation of the SRE provisions in the CAA that were
informed by the holdings of the U.S. Court of Appeals for the Tenth
Circuit in Renewable Fuels Association et al. v. EPA (RFA) \11\ and
EPA's long-held findings regarding RFS compliance costs being passed
through ultimately to wholesale purchasers (generally referred to as
RIN cost passthrough). Consistent with that proposal, on April 7, 2022,
EPA announced the April 2022 SRE Denial,\12\ which denied 36
previously-decided SRE petitions for the 2018 compliance year that had
been remanded to EPA for reconsideration by the U.S. Court of Appeals
for the D.C. Circuit.\13\ Then, on June 3, 2022, EPA announced the June
2022 SRE Denial,\14\ which denied 69 SRE petitions for the 2016-2021
compliance years that were still pending.\15\
---------------------------------------------------------------------------
\9\ ``Proposed RFS Small Refinery Exemption Decision,'' EPA-420-
D-21-001, December 2021.
\10\ 86 FR 70999 (December 14, 2021).
\11\ Renewable Fuels Ass'n et al. v. EPA, 948 F.3d 1206 (10th
Cir. 2020). The court held that (1) the disproportionate economic
hardship required in order to receive an SRE under the CAA must be
caused by RFS compliance, (2) EPA acted arbitrarily and capriciously
when it granted the SREs at issue without reconciling those
decisions with the Agency's previous findings on RIN cost
passthrough, and (3) ``extension'' as used in the CAA SRE provisions
required continuity, such that small refineries were only eligible
for SREs if they had been continuously exempted from the outset of
the RFS program. On September 4, 2020, the small refineries filed a
petition for a writ of certiorari from the Supreme Court requesting
review only of the holding regarding the meaning of ``extension,''
which was granted on January 8, 2021, and following oral argument,
was decided on June 25, 2021, in HollyFrontier Cheyenne Refining,
LLC et al. v. Renewable Fuels Ass'n et al., 114 S.Ct. 2172 (2021)
(HollyFrontier). The Supreme Court held in HollyFrontier that
``extension'' as used in the SRE provisions of the CAA does not
require continuous exemption. The other holdings in RFA were not
appealed.
\12\ ``April 2022 Denial of Petitions for RFS Small Refinery
Exemptions,'' EPA-420-R-22-006, April 2022.
\13\ Sinclair Wyoming Refining Co. v. EPA, No. 19-1196 (D.C.
Cir.), Dec. 8, 2021 Order, Doc. No. 1925942.
\14\ ``June 2022 Denial of Petitions for RFS Small Refinery
Exemptions,'' EPA-420-R-22-011, June 2022.
\15\ More information about SREs is available at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
---------------------------------------------------------------------------
B. Unique Small Refinery Compliance Challenges
We understand that some small refineries that recently received
denial decisions may not be prepared to comply with their renewable
volume obligations (RVOs or ``RFS obligations'') for the 2020
compliance year by the applicable compliance deadlines, likely because
they received SREs in recent years and assumed they would continue.
Additionally, the compliance deadlines have been compressed \16\ and
some small refineries have stated that they have been unable to acquire
the RINs they need to comply with their RFS obligations.\17\ For these
reasons, EPA believes it is appropriate to allow small refineries to
carryforward their 2019 RIN deficits into the 2020 compliance year (as
they are already able to do pursuant to 40 CFR 80.1427(b)), then elect
to use the alternative RIN retirement schedule proposed today to meet
their 2020 RFS obligations. This will give the small refineries
additional time and open a broader range of RIN vintages to acquire and
retire the RINs needed to demonstrate compliance for the 2020
compliance year.
---------------------------------------------------------------------------
\16\ The RFS regulations establish deadlines for obligated
parties--including small refineries--to comply with their annual
RVOs; the deadlines provide the dates by which obligated parties
must retire sufficient RINs to comply with those RVOs and submit
associated compliance reports. Under the existing RFS regulations,
small refineries must comply with their 2019 RVOs by the first
quarterly reporting deadline that is after the effective date of the
2021 RFS percentage standards. The 2020 compliance deadline is then
tied to the next quarterly reporting deadline after the 2019
compliance deadline for small refineries, such that the annual
compliance deadlines remain sequential. 40 CFR
80.1451(f)(1)(i)(B)(1) and (2). The effective date of the 2021 RFS
percentage standards is generally expected to be 60 days after
publication of the action establishing the 2021 standards in the
Federal Register.
\17\ See, e.g., Comments on 2020-2022 RFS Rule from the Small
Refinery Coalition, Docket Item No. EPA-HQ-OAR-2021-0324-0570.
---------------------------------------------------------------------------
C. Overview of Proposed Compliance Approach
For the reasons provided herein, we are proposing to make an
alternative RIN retirement schedule available to small refineries for
the 2020 compliance year to facilitate their transition into full
compliance with the RFS program. This proposed alternative RIN
retirement schedule would decrease the number of RINs that small
refineries must acquire in the near term, extend the time period over
which small refineries can plan and implement their RIN transactions,
and allow the use of RINs generated in future compliance years, thereby
reducing the immediate financial impacts on small refineries, as well
as the impacts on the RIN market and the RFS program as a whole. While
we are here proposing specific dates for the alternative RIN retirement
schedule, these proposed dates presume that the annual RFS compliance
deadlines will be established according to the structure in 40 CFR
80.1451(f)(1)(i)(B).\18\ However, the final rule that established those
regulations is currently the subject of litigation.\19\ Thus, the
reporting deadlines upon which the proposed alternative RIN retirement
schedule is based may again become uncertain.
---------------------------------------------------------------------------
\18\ 87 FR 5696 (February 2, 2022).
\19\ Wynnewood Refining Co., LLC, et al. v. EPA, Consol. Case
Nos. 22-1015, 22-1051 & 22-1053 (D.C. Cir. 2022).
---------------------------------------------------------------------------
We are proposing to allow any refinery that meets the definition of
``small refinery'' \20\ for the 2020 compliance year to use this
alternative RIN retirement schedule, regardless of whether it submitted
an SRE petition for 2020 or recently received an SRE denial. We are
doing so because almost all small refineries submitted an SRE petition
for 2020 that was denied in the June 2022 SRE Denial. We further
believe that the proposed alternative RIN retirement schedule should be
provided to all small refineries because the previous uncertainty
surrounding the availability of SREs potentially affected all small
refineries, which ``may at any time petition'' for an SRE.\21\
---------------------------------------------------------------------------
\20\ CAA section 211(o)(1)(K), 40 CFR 80.1401, and
80.1441(e)(2)(iii).
\21\ CAA section 211(o)(9)(B)(i).
---------------------------------------------------------------------------
We believe that it is appropriate to propose this alternative RIN
retirement schedule only for small refineries for their 2020 RFS
obligations because it responds to the unique circumstances affecting
small refineries at this time. First, the June 2022 SRE Denial only
affects the RFS obligations of small refineries. Second, the
uncertainty regarding how EPA would decide the SRE petitions, created
by the protracted
[[Page 35714]]
litigation and the opinions in RFA and HollyFrontier, impacted only
small refineries' compliance obligations. Third, some small refineries
have stated that they have not been acquiring RINs ratably while
producing transportation fuels that incur an RFS obligation in
anticipation of EPA granting their SRE petitions, a result that did not
manifest.\22\ Currently, the available RINs small refineries need for
compliance with their 2020 RVOs are being held in large part by other
obligated parties that likely intend to use these RINs for compliance
with their own RFS obligations, and those parties may not be willing to
sell them.\23\ For these reasons, many small refineries may not be
prepared to comply by the 2020 compliance deadline. Therefore, we are
proposing to provide small refineries with more time to acquire RINs
and allow the use of a broader range of RIN vintages through the
proposed alternative RIN retirement schedule, which we believe would
help resolve some of the obstacles small refineries may currently be
facing.
---------------------------------------------------------------------------
\22\ We note, however, that the RIN cost passthrough analysis
presented in the April 2022 and June 2022 SRE Denials puts small
refineries on notice regarding the high burden they bear when
petitioning for an SRE to demonstrate that their alleged DEH is
caused by compliance with the RFS program. Thus, absent a compelling
demonstration that a small refinery experiences DEH caused by
compliance with the RFS program, a small refinery should have no
reasonable expectation that its SRE petition will be granted in the
future and has no reason to again delay the acquisition of RINs to
demonstrate compliance with its RFS obligations. This is a long-held
position by EPA; for example, in its December 6, 2016, SRE guidance
document, EPA stated that ``[p]etitioning small refineries should
always presume that they are subject to the requirements of the RFS
program and include RFS compliance in their overall planning.''
Accordingly, as has been true in the past, every small refinery
should plan and prepare to demonstrate compliance with their RFS
obligations unless and until they receive an exemption.
\23\ RIN-holding data indicates that just four obligated
parties--which represented approximately 40 percent of the 2019
total RVO--currently hold over half of all available 2019 RINs, and
nine obligated parties--which represent approximately 55 percent of
the 2019 total RVO--hold over three-quarters of all available 2019
RINs. Similarly, just five obligated parties currently hold over
half of all available 2020 and 2021 RINs, and 11 obligated parties
hold over three-quarters of all available 2020 and 2021 RINs. See
``EMTS RIN Holding Data as of May 12, 2022,'' available in the
docket for this action. RIN holdings are presented in relation to
the 2019 total RVO because this is the most recent year for which
EPA has compliance data.
---------------------------------------------------------------------------
II. Alternative RIN Retirement Schedule for Small Refineries for the
2020 Compliance Year
The proposed alternative RIN retirement schedule is an extended
period over which small refineries must acquire and retire RINs to
demonstrate compliance with their 2020 RFS obligations. We are
proposing a RIN retirement schedule that includes five quarterly RIN
retirement deadlines that extend into the 2024 calendar year, thereby
allowing small refineries to potentially use 2021, 2022, 2023, and 2024
RINs to satisfy a portion of their 2020 RVOs. We are proposing this
schedule to allow over 18 months between the June 2022 SRE Denial and
the final 2020 RVO quarterly RIN retirement deadline of February 1,
2024, for small refineries to satisfy, in full, their 2020 RVOs. Table
II.1 provides the proposed RIN retirement schedule and RIN vintages
that can be used for each quarterly RIN retirement deadline, along with
illustrative annual compliance reporting deadlines:
Table II.1--Proposed 2020 RVO Alternative RIN Retirement Schedule With Illustrative Annual Compliance Reporting
Deadlines
----------------------------------------------------------------------------------------------------------------
RIN vintage
Milestone Deadline --------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024
----------------------------------------------------------------------------------------------------------------
2019 Compliance Deadline...... September 1, 2022 C X ....... ....... ....... ....... .......
2020 Compliance Deadline...... December 1, 2022. ....... C X ....... ....... ....... .......
2020 RVO RIN Retirement 1 February 1, 2023. ....... ....... X X X X .......
(20%).
2021 Compliance Deadline...... March 31, 2023... ....... ....... C X ....... ....... .......
2020 RVO RIN Retirement 2 May 1, 2023...... ....... ....... ....... X X X .......
(40%).
2020 RVO RIN Retirement 3 August 1, 2023... ....... ....... ....... X X X .......
(60%).
2022 Compliance Deadline...... September 1, 2023 ....... ....... ....... C X ....... .......
2020 RVO RIN Retirement 4 November 1, 2023. ....... ....... ....... ....... X X .......
(80%).
2020 RVO RIN Retirement 5 February 1, 2024. ....... ....... ....... ....... X X X
(100%).
2023 Compliance Deadline...... March 31, 2024... ....... ....... ....... ....... C X .......
----------------------------------------------------------------------------------------------------------------
X = RINs of this vintage may be used in any amount.
C = RINs of this vintage may be used to satisfy up to 20 percent of the RVO, per 40 CFR 80.1427(a)(5).
We are proposing these specific RIN retirement deadlines so that
they would not overlap with other RFS compliance reporting
deadlines.\24\ We believe this approach would allow EPA staff to
implement and oversee the RIN retirements more effectively and mitigate
the potential for confusion on the part of participating small
refineries that would have overlapping compliance reporting
requirements. We are proposing specific dates for these deadlines--as
opposed to tying them to the effective date of this or another RFS-
related action--to provide greater certainty regarding the RIN
retirement deadlines under the proposed alternative RIN retirement
schedule.\25\
---------------------------------------------------------------------------
\24\ The actual annual compliance reporting deadlines upon which
this proposal is based may change based on the effective date of the
2021 RFS percentage standards. See 40 CFR 80.1451(f)(1)(i)(B).
Should the actual 2020 compliance deadline differ from the date
listed in Table II.1, we intend that the first RIN retirement
deadline would not occur until after the actual 2020 compliance
deadline.
\25\ It should be noted that the specific dates proposed herein
have been calculated relying on the compliance deadlines established
in 40 CFR 80.1451(f)(1)(i)(B), which is now the subject of
litigation in the D.C. Circuit in Wynnewood Refining Co., LLC, et
al. v. EPA, Consol. Case Nos. 22-1015, 22-1051, & 22-1053. Depending
on the outcome of that litigation, the dates proposed herein for the
alternative RIN retirement schedule may again become uncertain.
---------------------------------------------------------------------------
We are proposing the five quarterly RIN retirement deadlines
because this would allow small refineries additional time to acquire
RINs, as well as provide small refineries with access to additional
later RIN vintages, as any valid RIN at the time of retirement could be
used to demonstrate compliance. In this way, the proposed alternative
RIN retirement schedule strikes a balance between easing the compliance
burden for small refineries while not indefinitely postponing their
compliance demonstrations. The extended RIN retirement schedule and
expanded RIN retirement flexibility will help individual small
refineries fully comply, and in so doing will strengthen
[[Page 35715]]
the entire RFS program following the recent rulemaking and SRE petition
decision delays.
Under the proposed alternative RIN retirement schedule, a small
refinery would be obligated to retire at least 20 percent of its 2020
RVOs by the first quarterly RIN retirement deadline, at least 40
percent by the second quarterly RIN retirement deadline, and so on, as
laid out in Table II.1 above, such that the full 2020 RVOs must be met
on the final RIN retirement deadline of February 1, 2024. For example,
under this proposed alternative RIN retirement schedule, if a small
refinery retired RINs sufficient to meet 30 percent of its 2020 RVOs by
the 2020 compliance deadline of December 1, 2022, then it would not be
obligated to retire additional RINs towards its 2020 RVOs until the
second quarterly RIN retirement deadline (i.e., May 1, 2023), at which
time it would be obligated to retire RINs equal to at least 40 percent
of its 2020 RVOs.
We are also proposing to allow small refineries to use any valid
RINs at the time of retirement for compliance, including RIN vintages
after 2020 (i.e., 2021, 2022, 2023, and 2024 RINs) until such RIN
vintages expire (e.g., 2021 RINs expire after the 2022 compliance
deadline). This approach would allow small refineries access to
additional RINs while maintaining compliance with our regulations
regarding the validity and expiration of RINs.\26\ Given the relatively
small proportion of the overall demand for RINs that is represented by
all small refineries (i.e., less than 10 percent of the total RVO for
any given year) and that there is likely only a limited number of small
refineries that would utilize the proposed alternative RIN retirement
schedule, we do not anticipate that this action will have any
significant impact on the overall RIN market in future years.
---------------------------------------------------------------------------
\26\ The regulations at 40 CFR 80.1428(a) note that any RIN that
is not used for compliance purposes for the calendar year in which
it was generated, or for the following calendar year, will be
considered an expired RIN. Pursuant to 40 CFR 80.1431(a), an expired
RIN will be considered an invalid RIN. We are not reopening these
regulations, nor the regulations associated with which RIN vintages
are available for compliance under 40 CFR 1427(a). Any comments
relating to these issues will be treated as beyond the scope of this
action.
---------------------------------------------------------------------------
We are proposing to require small refineries to notify EPA of their
intent to use the alternative RIN retirement schedule on or before the
2020 compliance deadline. This notice would inform EPA as to which
small refineries intend to use the alternative RIN retirement schedule
and would allow EPA to monitor and track the progress of the small
refineries towards full compliance with their 2020 RVOs. We are
proposing to require a small refinery to send us a letter signed by the
responsible corporate officer expressing their intent to comply using
the alternative RIN retirement schedule. We intend to acknowledge
receipt of the small refinery's notification of their intent to comply
using the alternative RIN retirement schedule.
Under this proposal, we would still require that participating
small refineries submit a 2020 annual compliance report by the 2020
compliance deadline. The 2020 annual compliance report would be
necessary to establish a small refinery's 2020 RVOs, which would be
used by the small refinery to determine minimum RIN retirements for
each installment under the alternative RIN retirement schedule, and for
EPA to verify that the small refinery is meeting its quarterly RIN
retirement obligations.
We are also proposing that, as a condition to use the proposed
alternative RIN retirement schedule, the obligated party that owns/
operates the small refinery must, on its annual RFS compliance report,
provide the individual-small refinery RVO for the 2020 compliance year
(i.e., comply on a refinery-basis for that small refinery). Under the
RFS program, obligated parties must either comply with their RVOs on an
individual-refinery basis or an aggregated basis (i.e., they combine
the RVOs from all of their refineries). If an obligated party owns
other refineries with RVOs in addition to the small refinery and
complies on an aggregated basis, it would be unclear what portion of
the aggregated RVOs apply to only the small refinery and whether the
obligated party has met the RIN retirement quotas under the proposed
alternative RIN retirement schedule. Therefore, as a condition for a
small refinery to use the proposed alternative RIN retirement schedule,
we are proposing that it must demonstrate compliance on an individual
basis so that RINs can be retired for the specific small refinery's
RVOs. Similarly, we are proposing that if an obligated party carries
forward a RIN deficit from 2019 into 2020, that obligated party would
need to comply on an individual-refinery basis for the 2019 compliance
year as well. This condition would allow EPA to track the small
refinery's progress towards compliance with its 2020 obligations more
effectively, and would not unduly hinder obligated parties in making
their compliance demonstrations.
We are not proposing any changes to the regulatory provisions
governing the use of cellulosic waiver credits (CWCs). The regulations
currently state that CWCs ``may only be used for an obligated party's
current-year cellulosic biofuel RVO and not towards any prior year
deficit cellulosic biofuel volume obligations.'' \27\ We believe this
approach is appropriate because, in recent years, the use of CWCs has
decreased as obligated parties have largely been complying with their
cellulosic RVO through RIN retirements.\28\ Accordingly, small
refineries wishing to use CWCs for their 2020 cellulosic biofuel RVO
must purchase and use CWCs by the 2020 compliance deadline.\29\
Additionally, allowing small refineries to use CWCs to meet their
cellulosic biofuel RVO through the alternative RIN retirement schedule
(i.e., after the 2020 compliance deadline) would introduce logistical
challenges for EPA and small refineries that would complicate the
implementation of the proposed alternative RIN retirement schedule.
Moreover, it is unlikely that modifications to the CWC regulations
would provide small refineries with a meaningful benefit in complying
with their RFS obligations, when viewed in light of what we have
already proposed in this alternative RIN retirement schedule.
---------------------------------------------------------------------------
\27\ 40 CFR 80.1456(b)(4).
\28\ See Table 4: RFS2 RIN Retirements in EMTS Nested by RVO and
Table 6: Cellulosic Waiver Credits Purchased Annually at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/annual-compliance-data-obligated-parties-and.
\29\ 40 CFR 80.1456(c)(2).
---------------------------------------------------------------------------
We are proposing that a participating small refinery would not be
permitted to carry forward a RIN deficit from 2021 or a subsequent year
into the following compliance year unless it had fully complied with
its 2020 RFS obligations. We are proposing this condition as a
prerequisite to carrying forward a future RIN deficit because we want
to prevent the scenario in which a small refinery continuously accrues
annual RIN deficits, placing it in the position where it is no longer
capable of complying with its accrued RFS obligations. The proposed
alternative RIN retirement schedule is intended to support small
refineries in achieving and maintaining full compliance with their RFS
obligations and get them on track for future compliance, not to permit
them to indefinitely delay their compliance demonstrations.
We note that all of the already existing regulatory flexibilities
for small refineries--including the ability to satisfy up to 20 percent
of their 2019 RVOs using 2018 carryover RINs under 40 CFR 80.1427(a)(5)
and the ability to
[[Page 35716]]
carry forward a RIN deficit from 2019 to 2020 if they did not carry
forward a RIN deficit from 2018 under 40 CFR 80.1427(b)--would continue
to be available under the proposed alternative RIN retirement schedule.
It should also be noted that other current RFS regulations will also
remain in effect, including that small refineries that use 2018 RINs to
meet up to 20 percent of their 2019 RVOs must do so by the 2019
compliance deadline because 2018 RINs expire after the 2019 compliance
deadline and become invalid.\30\ Similarly, any 2019 RINs that a small
refinery uses to satisfy up to 20 percent of its 2020 RVOs must be
retired for compliance by the 2020 compliance deadline because 2019
RINs expire after the 2020 annual compliance deadline and become
invalid.\31\ We are not proposing to modify these regulations and any
comments suggesting that EPA make changes to these provisions will be
considered beyond the scope of this action.
---------------------------------------------------------------------------
\30\ 40 CFR 80.1427(a)(6), 80.1428(c).
\31\ 40 CFR 80.1427(a)(6).
---------------------------------------------------------------------------
As described above, participating small refineries would still be
able to use any valid RINs at the time of retirement under the proposed
alternative RIN retirement schedule. We believe that this proposed
approach would encourage participating small refineries to retire a
maximum number of 2019 RINs for their 2020 RVOs while providing
flexibility for small refineries to obtain and retire valid RINs for
2021, 2022, 2023, and 2024 to satisfy their 2020 RVOs.
To help implement the alternative RIN retirement schedule for
participating small refineries, we intend to assist parties with
procedures for submitting forms that they would use. For example, we
plan to leverage existing forms and procedures for the submission of
reports and transactions under our e-reporting systems. Due to the
limited number of small refineries, we plan to work individually with
participating small refineries. To further help communicate this
alternative RIN retirement schedule for small refineries, we also
intend to post the deadlines for the final alternative RIN retirement
schedule on our website.\32\
---------------------------------------------------------------------------
\32\ Information related to annual compliance and attest
engagement reporting is available at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/reporting-fuel-programs.
---------------------------------------------------------------------------
We are requesting comment on all aspects of the proposed
alternative RIN retirement schedule for small refineries as described
and defined in this notice. For example, we seek comment on the
appropriate number and size of the RIN retirement installments included
in the schedule (e.g., whether five quarterly installments are too many
or too few or whether we should require a different percentage of RIN
retirements at each deadline). We also seek comment on the proposed
condition that participating small refineries may not carry forward a
RIN deficit for future years until their 2020 RVOs have been fully
satisfied.
III. Statutory and Executive Order Reviews
Additional information about these statutes and Executive orders
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review
This action is a significant regulatory action that was submitted
to the Office of Management and Budget (OMB) for review because it
raises novel legal or policy issues. Any changes made in response to
OMB recommendations have been documented in the docket.
B. Paperwork Reduction Act (PRA)
The information collection activities in this proposed rule have
been submitted for approval to the Office of Management and Budget
(OMB) under the PRA. The Information Collection Request (ICR) document
that the EPA prepared has been assigned EPA ICR number 2718.01. You can
find a copy of the ICR in the docket for this rule, and it is briefly
summarized here.
The information to be collected is necessary to implement the
proposed alternative RIN retirement schedule for small refineries. As
part of this proposal, a participating small refinery would submit a
notification to EPA indicating that the small refinery would use the
proposed alternative RIN retirement schedule and maintain records
related to the determination and retirement of RINs under the proposed
alternative RIN retirement schedule. We estimate that 13 small
refineries would use the proposed alternative RIN retirement schedule.
Respondents/affected entities: small refineries.
Respondent's obligation to respond: Mandatory in order to receive
compliance flexibility under section 80.1444 of this proposed rule.
Estimated number of respondents: 39.\33\
---------------------------------------------------------------------------
\33\ We note that under this proposed alternative RIN retirement
schedule, each participating small refinery would have to submit a
notification letter, keep records of the submitted notification
letter, and keep records of the methods and variables used to
determine RIN retirements under the proposed alternative RIN
retirement schedule. For purposes of estimating burden associated
with reporting and recordkeeping as a result of this proposal, we
count each small refinery three times. Because we estimate that 13
small refineries would elect to take advantage of the proposed
alternative RIN retirement schedule, we estimate that the total
number of respondents under this collection would be 39.
---------------------------------------------------------------------------
Frequency of response: Notification letters would typically be a
one-time response. Recordkeeping is performed on occasion, and as
needed.
Total estimated burden: 19 hours (per year). Burden is defined at 5
CFR 1320.3(b).
Total estimated cost: $1,710, all of which is labor costs, and
which includes $0 annualized capital or operation & maintenance costs.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for the
EPA's regulations in 40 CFR are listed in 40 CFR part 9.
Submit your comments on the Agency's need for this information, the
accuracy of the provided burden estimates and any suggested methods for
minimizing respondent burden to the EPA using the docket identified at
the beginning of this rule. The EPA will respond to any ICR-related
comments in the final rule. You may also send your ICR-related comments
to OMB's Office of Information and Regulatory Affairs using the
interface at www.reginfo.gov/public/do/PRAMain. Find this particular
information collection by selecting ``Currently under Review--Open for
Public Comments'' or by using the search function. OMB must receive
comments no later than August 12, 2022.
C. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, EPA concludes that the impact of concern for
this proposed rule is any significant adverse economic impact on small
entities and that the agency is certifying that this rulemaking will
not have a significant economic impact on a substantial number of small
entities if the proposed rule has no net burden on the small entities
subject to the proposed rule. This action reduces burden to small
refineries by creating an alternative RIN retirement schedule for their
2020 RVOs. As small refineries have no obligation to use the proposed
alternative RIN retirement schedule, there is no additional cost to
small refineries if they simply comply with
[[Page 35717]]
the existing regulatory schedule. We do not anticipate that there will
be any costs associated with these changes and that the alternative RIN
retirement schedule may reduce costs. We have therefore concluded that
this action will have no net regulatory burden for all directly
regulated small entities.
D. Unfunded Mandates Reform Act (UMRA)
This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. This action imposes
no enforceable duty on any state, local or tribal governments.
Requirements for the private sector do not exceed $100 million in any
one year.
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.
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have tribal implications as specified in
Executive Order 13175. This proposed rule only affects RFS obligated
parties. 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 Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that EPA has reason to believe may disproportionately affect children,
per the definition of ``covered regulatory action'' in section 2-202 of
the Executive order. This action is not subject to Executive Order
13045 because it does not concern an environmental health risk or
safety risk.
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution or use of energy. This action proposes to provide small
refineries with an alternative RIN retirement schedule to meet their
2020 RVOs. There are no additional costs for sources in the energy
supply, distribution, or use sectors.
I. National Technology Transfer and Advancement Act (NTTAA) and 1 CFR
Part 51
This action does not involve technical standards.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
The EPA believes that this action is not subject to Executive Order
12898 (59 FR 7629, February 16, 1994) because it does establish an
environmental health or safety standard. This action addresses the 2020
compliance deadline for small refineries only and does not impact the
RFS standards themselves.
IV. Statutory Authority
Statutory authority for this action comes from section 211(o) of
the Clean Air Act, 42 U.S.C. 7545(o).
List of Subjects in 40 CFR Part 80
Environmental protection, Administrative practice and procedure,
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports,
Oil imports, Penalties, Petroleum, Renewable fuel, Reporting and
recordkeeping requirements.
Michael S. Regan,
Administrator.
For the reasons set forth in the preamble, EPA proposes to amend 40
CFR part 80 as follows:
PART 80--REGISTRATION OF FUELS AND FUEL ADDITIVES
0
1. The authority citation for part 80 continues to read as follows:
Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).
Subpart M--Renewable Fuel Standard
0
2. Add Sec. 80.1444 to read as follows:
Sec. 80.1444 Alternative RIN retirement schedule for small
refineries.
(a) Applicability. The provisions of this section apply to the
following compliance years:
(1) 2020.
(2) [Reserved]
(b) Eligibility. (1) Any obligated party that has a refinery that
meets the requirements for a small refinery under Sec.
80.1441(e)(2)(iii) for the applicable compliance year in paragraph (a)
of this section (hereinafter the ``applicable compliance year'') is
eligible to use the provisions of this section for each small refinery
it operates (hereinafter the ``small refinery'').
(c) Treatment of RVOs. (1) In lieu of retiring sufficient RINs
under Sec. 80.1427(a) to demonstrate compliance with the small
refinery's RVOs for the applicable compliance year by the applicable
compliance deadline, the obligated party must meet all the requirements
of this section and all other applicable requirements of this subpart.
(2) If the obligated party does not meet all of the requirements in
this section, the obligated party is subject to the requirements of
Sec. 80.1427(a).
(d) Individual facility compliance. (1) If the obligated party
carries a deficit into the applicable compliance year from the previous
compliance year, the obligated party must comply with its RVOs for each
refinery it operates on an individual basis (as specified in Sec.
80.1406(c)) for both the previous compliance year and the applicable
compliance year.
(2) If the obligated party does not carry a deficit into the
applicable compliance year from the previous compliance year, the
obligated party must comply with its RVOs for each refinery it operates
on an individual basis (as specified in Sec. 80.1406(c)) for the
applicable compliance year.
(e) Compliance report submission and notification. The obligated
party must do all the following by the annual compliance reporting
deadline specified in Sec. 80.1451(f)(1)(i) for the applicable
compliance year (hereinafter the ``applicable compliance deadline''):
(1) Submit an annual compliance report for the small refinery for
the applicable compliance year.
(2) Notify EPA in a letter signed by the responsible corporate
officer (RCO) or RCO delegate, as specified at 40 CFR 1090.800(d), of
its intent to use the provisions of this section for the small
refinery.
(f) Alternative RIN retirement schedule. The obligated party must
retire sufficient RINs to satisfy the minimum percentages of each and
every RVO for the applicable compliance year (as determined under Sec.
80.1407(a)) according to the following RIN retirement schedule:
(1) 2020 compliance year:
Table 1 to Paragraph (f)(1)--2020 Compliance Year RIN Retirement
Schedule
------------------------------------------------------------------------
Minimum 2020 RVOs percentage RIN
retirement Deadline
------------------------------------------------------------------------
20%................................. February 1, 2023.
[[Page 35718]]
40%................................. May 1, 2023.
60%................................. August 1, 2023.
80%................................. November 1, 2023.
100%................................ February 1, 2024.
------------------------------------------------------------------------
(2) [Reserved]
(g) RIN vintages and retirements. (1) The obligated party may
retire for compliance any valid RINs at the time of retirement towards
the small refinery's RVOs for the applicable compliance year and is
exempt from the requirements in Sec. 80.1427(a)(6)(i).
(2) The obligated party must not retire for compliance any prior-
year RINs for the small refinery's RVOs after the applicable compliance
deadline.
(h) Deficit carry-forward for subsequent compliance years. The
obligated party may not carry forward any deficit under Sec.
80.1427(b) for the small refinery for compliance years after the
applicable compliance year until it has retired sufficient RINs to
satisfy each and every RVO for the applicable compliance year in its
entirety.
(i) Forms and procedures. The obligated party must submit annual
compliance reports and retire RINs under this section using forms and
procedures specified by EPA under Sec. Sec. 80.1451(j) and 80.1452(d).
0
3. Amend Sec. 80.1454 by adding paragraph (a)(7) to read as follows:
Sec. 80.1454 What are the recordkeeping requirements under the RFS
program?
(a) * * *
(7) Any obligated party that uses the provisions of Sec. 80.1444
for a small refinery must keep the following records:
(i) Copies of any notifications submitted to EPA under Sec.
80.1444(e)(2).
(ii) Copies of the methods and variables used to calculate the
number of RINs retired for the alternative RIN retirement schedule
under Sec. 80.1444(f).
* * * * *
[FR Doc. 2022-12375 Filed 6-10-22; 8:45 am]
BILLING CODE 6560-50-P