Regulation of Fuels and Fuel Additives:


Renewable Fuel Standard Program


Summary and Analysis of Comments


Chapter 9


Renewable Fuel Production and Use


Assessment and Standards Division 

Office of Transportation and Air Quality 

U.S. Environmental Protection Agency 

EPA420-R-07-006 

April 2007 
RFS Summary and Analysis of Comments 

9 RENEWABLE FUEL PRODUCTION AND USE 

9.1 Ethanol Industry - Future Production/Consumption........................................ 9-1 

9.2 Biodiesel Industry- Future Production/Consumption ...................................... 9-2 

9.2.1 Biodiesel Demand in 2012....................................................................... 9-2 

9.2.2 Biodiesel Production Capacity vs. Projected Use.................................... 9-2 

RFS Summary and Analysis of Comments 

9 RENEWABLE FUEL PRODUCTION AND USE 

What We Proposed: 

The comments in this section correspond to Section VI of the preamble to the 

proposed rule and are targeted at the projected renewable fuel production and use. A 

summary of the comments received, as well as our response to those comments, are 

located below. 

9.1 Ethanol Industry - Future Production/Consumption 

What Commenters Said: 

The American Petroleum Institute (API) took issue with several statements EPA 

made in the draft Regulatory Impact Analysis (DRIA) associated with this rule. The 

commenter believed that the statement “Over the last 25 years, domestic fuel ethanol 

production has steadily increased due to technological advances, environmental 

regulation, and the rising cost of crude oil,” (p.117) was misleading, as the cost of crude 

oil has both increased and decreased over the last 25 years. The commenter also believed 

that the following statement was speculative and should be removed: “record-high crude 

oil prices are expected to continue to drive up demand for ethanol” (p.119). API 

believed that the following statement was also speculative: “However ethanol production 

is not expected to stop here ... If all these plants come to fruition, the combined domestic 

ethanol production could exceed 20 billion gallons...” (p.121). 

Letters:

American Petroleum Institute (API) OAR-2005-0161-0185 

Our Response: 

We have considered API’s comments on crude oil’s impact on ethanol use and 

made some slight modifications to our final rule making text. We have made reference to 

“market demand” where appropriate. We have also elected to maintain some references 

to the impact of crude oil price on ethanol demand. While ethanol market demand is a 

function of many factors (environmental regulation, state MTBE bans, ethanol mandates, 

production subsidies, and retail incentives, to name a few), it is directly affected by the 

price of crude oil. In the Annual Energy Outlook (AEO) 2006, the Energy Information 

Administration (EIA) forecasted 9.6 billion gallons of ethanol use by 2012 based on 

forecasted crude oil pricing of $48/bbl. In the early release of AEO 2007, EIA is 

forecasting increased ethanol use (11.2 billion gallons by 2012) based on an increased 

crude oil forecast ($52/bbl). While EIA’s linear programming (LP) model used to 

determine future ethanol consumption is dependent on many factors (e.g., feedstock 

availability and how fast plants could feasibly come online), crude oil price is certainly 

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Chapter 9: Renewable Fuel Production and Use 

one of them. The higher the crude oil price, the more attractive ethanol blending 

becomes. 

9.2 Biodiesel Industry- Future Production/Consumption 

9.2.1 Biodiesel Demand in 2012 

What Commenters Said: 

EPA received two comments related to our estimates of biodiesel demand in 

2012. Both commenters stated that EPA’s estimate, 300 million gallons, was low. 

FutureFuel believed that biodiesel sales were supply limited, not demand limited. The 

commenter cited National Biodiesel Board data that suggested that the biodiesel industry 

itself believes demand currently is substantially greater than 300 million gallons, and 

stated that it believes EPA should take this into consideration. A private citizen noted that 

if the Biodiesel Blender's Tax Credit is not extended beyond 2008, biodiesel production 

would likely be attenuated unless energy prices are much higher than our analysis 

assumed. Nonetheless, the commenter believed it would be appropriate to use a scenario 

that assumed continued incentives for biodiesel production at both the federal and state 

levels. 

Letters: 

FutureFuel OAR-2005-0161-0198 

Private Citizen OAR-2005-0161-0158, -0159 

Our Response: 

We realize that the 2012 biodiesel demand forecast of 300 million gallons 

generated by EIA seems conservative, but this may be reasonable considering the 

expiration of key tax incentives. We agree that the fraction of the growing methyl ester 

production capacity that will be sold as biodiesel will be largely dependent on extension 

of tax incentives and implementation of state mandates (similar to the history of ethanol 

blending). However, lacking any more certain estimate for the analysis of inputs for the 

final rule, we have continued to utilize the EIA forecast estimate of 300 million gallons. 

9.2.2 Biodiesel Production Capacity vs. Projected Use 

What Commenters Said: 

One private citizen commented on the discrepancy between the 2005 domestic 

capacity for biodiesel production, 290 million gallons, and actual production of 91 

million gallons. 

9-2
RFS Summary and Analysis of Comments 

Letters:

Private Citizen OAR-2005-0161-0158, -0159 

Our Response: 

Biodiesel production plants can sell methyl esters into various chemical markets 

and have been doing so for years. They are a valuable feedstock in the manufacture of 

lubricants, polymers, detergents, soaps, and other common products. Therefore, we 

believe it is useful to keep in mind that biodiesel competes with other uses for the methyl 

esters from these facilities based on price and demand. This helps to explain the 

discrepancy in biodiesel production capacity and its projected use as fuel. 

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