November 26, 2012

The Honorable Lisa P. Jackson, Administrator United States Environmental Protection Agency 1200 Pennsylvania Avenue, NW Washington, DC 20460

Re: Request for Reconsideration of EPA’s Final Rulemaking “2013 Biomass

- Based Diesel Renewable Fuel Volume” issued on September 27, 2012 (Docket ID No. EPA

- HQ

- OAR

- 2010

- 0133).

Dear Administrator Jackson:

The American Petroleum Institute (“API”) submits this petition for administrative reconsideration of the final rule entitled “Regulation of Fuels and Fuel Additives: 2013 Biomass

- Based Diesel Renewable Fuel Volume ” published at 77 Federal Register 59458 (September 27, 2012) pursuant to section 307(d)(7)(B) of the Clean Air Act, 42 U.S.C. § 7607(d)(7)(B). It was impractical for API to raise the objections detailed in t his petition during the public comment period

- because they became known after the period for public comment

- and these objections are of central relevance to the outcome of the rule.

API is a national trade association representing more than 500 comp anies involved in all aspects of the oil and natural gas industry , including those that are the o bligated p arties under the Renewable Fuel Standard (“RFS”). Our industry supports the use of biofuels including biodiesel, but our specific concerns with EPA’s determination of the 2013 biomass

- based diesel standard merit reconsideration.

Section 211(o ) of the Cle an Air Act requires EPA to determine the applicable volume of biomass

- based diesel to be used when setting annual percentage standards under the RFS. EPA proposed a 2013 requirement of 1.28 billio n gallons on July 1, 2011. The proposal was part of a larg er proposed rulemaking to establish the annual percentage standards under the RFS for 2012. EPA published its final rule for the 2012 annuals standards on January 9 , 2012, but the agency failed to include the 2013 biomass

- based diesel standard. 1 API comm ented on several aspects of the proposed rulemaking, including the proposed biomass based diesel standard, recommending that EPA retain the minimum statutory volume of 1.0 billion gallons.

In the thirteen months between closing of the public comment perio d and the issuance of a Final Rule for the 2013 biomass

- based diesel standard , significant events have taken place for the biodiesel market that could not have been raised in comments to the rule. At least three biomass

- based diesel producers have been ac cused of fraudulently generating Renewable Identification Number (“RINs”) credit s, which

1 In violation of the clear requirement of Section 211(o)(2)(B)(ii) of the Clean Air Act, EPA failed to promulgate the 2013 biomass

- based diesel standard at least 14 months before the standard’s effective date. Robert L. Greco, III Group Director Downstream & Industry Operations

1220 L Street, NW Washington, DC 20005

- 4070 USA Telephone 202

- 682

- 8167 Fax 202

- 682

- 8051 Email greco @api.org www.api.org

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are used to demonstrate compliance with the standard . Some or all of the credits generated by these companies have been invalidated by EPA, totaling over 140 million RINs 2 . In addition, news reports indicate more violations relating to fraudulently generated RINs are likely to surface.

The problems associated with RIN fraud have prompt ed EPA to develop a voluntary process to verify the authenticity of RINs generated by participating companies. 3 API encourages EPA’s efforts to address the problem but API also believe s that EPA should recognize that the invalid RIN problem casts doubt on the rationale for m aintaining the proposed 1.28 billion gallon standard. The volume of RINs invalidated by EPA total approximately 12% of the 2011 RFS mandate for biomass

- based diesel, or 5% of the combined biomass

- based diesel mandates f ro m 2009

- 2011. EPA relied on biodie sel producers’ estimat es of production capacity , but those volumes appear to be inflated by the allegedly fraudulent market participants. Significant uncertainty continues to exist as to how many additional RINs have yet to be invalidated by EPA. News re ports have informed the public that additional facilities have been raided by federal enforcement officials and lawsuits have been filed relating to RIN fraud
, for which EPA has yet to announce additional invalid RIN violations. 4 These unknown volumes of additional RINs that are likely to be invalidated have not been addressed by the agency and could have an equally significant impact on the ability to meet t he 1.28 billion gallon standard in 2013.

The RIN fraud scandal has significantly impacted the abil ity of some biodiesel producers to market their products, and in some cases, to remain in business. 5 EPA acted aggressively in setting a 1.28 billion gallon standard
, and any potential shortfall in production could dramatically impact EPA’s estimate of bi omass

- based diesel production in 2013, and industry’s ability to comply with the standard.

In conclusion, the fraudulent RIN scandal is having, and will continue to have
, significant impacts on the biodiesel marketplace. This issue is exacerbated by the uncertainty of potential new violations resulting in additional invalid RINs. Because EPA failed to give this issue any consideration in the Final Rule, and API is ask ing the agency to reconsider the 1.28 billion gallon standard for biomass

- based diesel in 2013

. If you have any questions or concerns regarding these comments, please call me at (202) 682

- 8167

.
Sincerely,

Robert L. Greco, III Group Director Downstream and Industry Operations

2 http://www.epa.gov/enforcement/air/renewable

- fuels/fuel

- novs.html
3 http://www.epa.gov/otaq/fuels/renewablefuels/documents/420b12063.pdf
4 http://www.northjersey.com/news/153816845_FBI_raids_Park_Ridge_renewable_energy_company.html http://newsandinsight.thomsonreuters.com/New_York/News/2012/09_

- September/Trading_giant_Cargill_sues_over_alleged_biofuel_credit_fraud/
5 http://democrats.energycommerce.house.gov/sites/default/files/image_uploads/Sprague.Testimony.pdf