SUPPORTING STATEMENT FOR

RENEWABLE FUEL STANDARD (RFS2) VOLUNTARY RIN QUALITY ASSURANCE PROGRAM ( FINAL RULE ) A. JUSTIFICATION 1. Id entification of the Information Collection a. Title: RFS2 Voluntary RIN Quality Assurance Program, EPA I CR No. 2473.0 3 , OMB Control Number 2060 - 0688 . b. Short characterization: The Renewable Fuel Standard (RFS) program began in 2006 pursuant to the requirements in Clean Air Act (CAA) section 21 1(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 (EI SA), resulting in the promulgation of major revisions to the regulatory requirements on March 26, 2010 1

. The RFS program requires that specified volumes of renewable fuel be used as transportation fuel, heating oil, and/or jet fuel each year . To accomplish this, the Environmental Protection Agency

( EPA ) p ublishes applicable percentage standards annually that appl y to the sum of all gasoline and diesel produced or imported . The 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 . Obligated parties demonstrate c ompliance with the standards through the acquisition of unique Renewable Identification Numbers (RINs) assigned by the producer or importer to every batch of renewable fuel produced or imported . Validly generated RI

N s show that a certain volume of qualifying renewable fuel was produced or imported . The RFS program also includes provisions stipulating the conditions under which RI Ns are invalid, the liability carried by

a party that transfers or uses an invalid RI N, and how invalid RI

Ns must be treated. The RIN s ys tem within the RFS program contains unique features that make it somewhat challenging for the obligate d parties that need RINs for compliance purposes to verify that those RI Ns have been validly

generated . Several cases of fraudulentl y generated RI Ns have compelled some obligated parties to limit their business relationships to only those parties that appe ar most trustworthy . This reaction by the obligated parties made it more difficult for smaller renewable fuel producers to sell their RINs and reduced the overall liquidity of the RIN market . T o ensure that RI Ns are validly

generated, individual obligated parties are now conducting their own audits of renewable fuel production facilities, potentially duplicating one another's efforts . These 1 75 FR 146702

circumstances have created inefficiencies in the RIN market, prompting requests for an additional regulatory

mechanism that would reduce the risk of potentiall y invalid RI Ns , return liquidity to the RIN market, and reduce the cost of verifying the validity of RI Ns. The EPA finalized the voluntary quality assurance program on July 18, 2014 (79 FR 42078) to provide a more structured way to assure that the RI

Ns entering commerce are valid . The program provide s an affirmative defense against violations under certain conditions for the transfer or use of invalid RI Ns, and specif

ies both the conditions under which invalid RI Ns must be replaced with valid RINs, and b y whom . The voluntary program enable s smaller renewable fuel producers to demonstrate that their RINs are valid, reducing the risk that obligated parties believe is associated with such RINs. The voluntary

quality assurance program for RINs provide s a means for regulated parties to ensure that RINs are properl y generated , through audits of production facilities conducted by independent third parties using quality assurance plans (QAPs) . To this end, we are promulgating the following:

• Minimum requirements for QAPs, including such things as verification of feedstock ty pe(s) , verification that volumes produced are consistent with amount of feedstocks processed, and verification that RI Ns generated are approp riatel y categorized and match the volumes produced

• Qualifications for independent third - party auditors

• Requirements for audits of renewable fuel production facilities, including minimum frequency , site visits, review of records, and reporting

• Changes to EMTS that accommodate the quality assurance program We believe that the costs associated with this voluntary quality assurance program are warranted to ensure the viability of the renewable fuel and RIN markets . This cost assessment includes the c ost of performing audits, to both the fuel producer and the auditor, and the cost to the Agency

in implementing this program. There are approximately

485 biofuel producers operating more than 600 biofuel production facilities . These numbers are expected to increase as the biofuel market expands . While it is unlikely

that all biofuel producers will opt to implement a QAP, that was the assumption for these cost estimates in order to reflect the maximum potential cost of the program. No comments were recei ved during the Notice of Proposed Rulemaking (NPRM ) comment period on the ICR statement or on the description of impacts and expected costs described in the preamble . This I CR has been updated to reflect changes made to the proposed QAP, particularl y a red

uction in the required number of facility site visits and related recordkeeping and reporting burden . Most assumptions regarding cost and burden for the final QAP program remain the same as those described for the proposed program.3

2 . Need For, and Use of, the Collection a. Authority

for the Collection Sections 114 and 208 of the Clean Air Act (CAA), 42 U.S.C. §§ 7414 and 7542, authorize the EPA to require recordkeeping and reporting regarding enforcement of the provisions of Title II of the CAA . b. Practical Utility

/Uses of the Data The recordkeeping and reporting requirements of this regulation will allow the EPA to monitor compliance with the RFS program . The quality assurance program help s to ensure that the RI N s ys tem operat es as originally intended . The primary

impacts of the quality

assurance program are improved liquidity in the RIN market and improved opportunities for smaller renewable fuel producers to sell their RI Ns . The data generated by the QAP program will assist obligated parties and smaller renewable fuel producers in compl ying with the requirements of the RFS program b y supporting the validity of RINs. The quality

assurance program is voluntary . As a result, there are no obligatory costs . There are costs associated with an individual party's participation in the quality assurance program, and in Section 6 we have provided estimates of the costs of participation . These estimates are supported by data provided by

several QAP vendors . It is worthwhile to note that , as this is a voluntary

program intended to support a current market s ys tem, any costs incurred would only

be borne if the industry

believe s that those costs would be less than current costs in the marketplace resulting from efforts to verify , acquire, and trade RINs . 3 . Non - duplication, Consultation, and other Collection Criteria a. Non - duplication Efforts have been made to eliminate duplication in this information collection. The QAP may substitute for data previ ously required in RFS data collection and reporting regulations. b. Public Notice We describe the recordkeeping and reporting requirements for the voluntary QAP program in the final rulemaking and are providing this supporting statement to assist parties potentially considering participation in the program . c. Consultations We met with seven (7) parties who are already developing RIN validation programs for the biofuels industry . We have also met with several industry groups and obligated parties which have been affected b y RIN fraud . These parties all provided informal estimates of the costs4

associated with this ty

pe of quality

assurance program which w ere used to inform the cost calculations made for this statement. d. Effects of Less Frequent Data Collection We have designed the reporting schedule to coincide with existing reporting deadlines . Because this is a quality assurance program, more frequent data collection is more likely to ensure the validity

of the RI Ns audited . The program is structured to allow the market to balance the benefits of the program with the costs . Less frequent collection of data would jeopardize the validity of audited RINs and would negativel y impact the entire RIN market . e. General Guidelines All Office of Management and Budget ( OMB ) guidelines are met . f. Confidentiality We inform respondents that they may assert claims of confidential business information (CBI) for the information they submit. We require that actual RINs not be treated as confidential business information under RFS2, as they are necessary

identifiers to accompany renewable fuels . In order to ensure transparency in the RIN validation program, as much of the associated data as possible should be made publicl y accessible . Any information claimed as confidential will be treated in accordance with 40 CFR Part 2 and established Agency procedures . In formation that is received without a claim of confidentiality may be made available to the public without further notice to the submitter under 40 CFR § 2.203. g. Sensitive Information This information collection does not require submission of any sensitive information. 4. The Respondents and the Information Requested a. Respondents/with NAI CS and SI C Codes The respondents to this information collection fall into the following general industry categories: petroleum refineries (324110/2911), ethyl alcohol manufacturers (325193/2869), other basic organic chemical manufact uring (325110/2869), chemical and allied products merchant wholesalers (426990/5169), petroleum bulk stations and terminals (422710/5171), petroleum and petroleum products merchant wholesalers (422720/5172), and other fuel dealers (454319/5989) . b. In formation Requested For those biofuel producers who opt into the QAP, each biofuel production facility must be visited and assessed as part of any audit conducted under the quality assurance program . An5

auditor must use an approved QAP as the basis f or the verification of biofuel produced and RINs generated at a facility . In order to verify production, the auditor must conduct site visits, review documents, and contact entities that do business with the facility . The required components of audits are discussed below. Elements of a QAP Audit :  Phy sical Examination of Facility and Operations The goal of the onsite visit is to verify that plant has the technology to produce, store, and blend biofuels at registered levels . The auditor will likely use p lant maps and photos as part of this analysis, and should compare and contrast the plant’s infrastructure with the third party

engineering review reports on file with the EPA . The auditor should note the size and number of storage and blending tanks, and observe the measurement of volume in the tanks . The auditor should determine whether the process rate is consistent with annual production of the facility , and whether the facility has qu ality process controls in place. We believe that mass and energy bal ances on the facility

are critical components of any audit . Because integrated facilities will likely have energy

usage that is not directly related to biofuel production, the auditor should have alternate means of assessing and correlating energy usage to production.

 Document Review The auditor should ensure that the producer has and is fulfilling the EPA recordkeeping requirements at §80.1454(c)(1)(i)(A) - (B) and (ii) . We expect the auditor to evaluate reports submitted to the EPA, and that these repor ts should be year- to - date, as applicable, and from the previous year, for comparison . These include activity reports, RI N transaction reports, RI

N generation reports, and renewable f uel producer c o - product reports . The third - party engineering review and annual attestation report should also be reviewed . In addition to the above reports, EPA has developed eight forms to help with compliance for the QAP collection. They are as follows: Form Name Agency Form # RFS 1400

– RFS Renewable Fuel Producers Reporting Fuels 5900 - 354 RFS 1500

– RFS Renewable Fuel producers Reporting Fuels (Finished Fuel Blending) 5900 - 355 RFS 1600

– RFS Renewable Fuel producers Reporting Fuels (Blending Contact) 5900 - 356 RFS 2000

– RFS Independent Third Party Batch Veri fication 5900 - 357 RFS 2100

– RFS Independent Third Party Batch Verification Aggregate RIN Verification 5900 - 358 RFS 2200

– RFS Independent Third Party On - Site Audit Report 5900 - 359 RFS 2300

– RFS Independent Third Party List of Potentially Invalid RINs 5900 - 360 RFS 2400 - Independent Third Party Mass Balance 5900 - 361 Reports submitted to the EPA as required under § 80.1469 should be cross checked with other records . For instance, the auditor should have access to certificates of anal ys is f or all batches of feedstocks . The auditor might consider spot - checking recent feedstock receipts (if the producer uses a variety of feedstocks, then the auditor should be6

provided with receipts for each feedstock) . Integrated facilities may not have internal sales receipts for feedstock usage, so an alternative paper trail will likely be required . Similar to the feedstock document review and crosscheck, renewable fuel and co - product delivery documentation should be part of any audit .  Review and Repo rting We expect the auditor to contact the biofuel producer’s customers and suppliers in order to verify

sales and purchases . This will likely require ongoing monitoring of the biofuel production facilities by auditor staff or consultants . Inaddition, a uditors are likel y to need to track RINs on EMTS . This will ensure that the verified RINs are being reported accuratel y . Auditors will be responsible for preparing the QAP and submitting it to the EPA . 5. The Information Collected, Agency Activities, Col lection Methodology , and Information Management a. Agency

Activities

 Respond to inquiries on QAP requirements and options  Provide copies of the regulations  Acknowledge receipt of qualifying QAPs  Assist EMTS users with new functions in s ys tem related to QAPs  Refer violations to enforcement personnel  Contact reporting parties if there is a problem with their submission b. Collection and Methodology and Management We will be receiving data in a simplified and secure fashion via the Agency's Central Data Exchange ( CDX) . Information claimed as CBI will be stored in appropriately controlled areas . Auditors will collect data in a wide variety of way s, as is appropriate to the specific production facility, as indicated in the Information Collected section above . Many of the auditors consulted plan to use electronic , remote sensing, and /or web - based s ys tems to make data collection as efficient as possible. c. Small Entity

Flexibility This collection will not adversel y affect small entities . The final r ulemaking describes flexible provisions available to small entities . This program was specifically designed with the small biofuel producer in mind, as they have been the most negativel y impacted b y the RIN fraud to date.7

d. Collection Schedule We are requiring that an auditor conduct at least two ( 2 ) onsite visits per year, or every six ( 6 ) months . New production facilities should be audited before startup and, subsequentl y, according to the standard semi - annual schedule. We expect that each vis it could take from one to several days, depending on the size and complexity of the facility , the availability of records, changes since the last audit, etc . For some components of the audit we require real - time, or batch - level monitoring . The QAP is required to provide details of the means for collection and evaluation of the data collected in real - time. 6. Estimating the Burden and Cost of Collection a. Estimating the Respondent Universe We based our estimated number of respondents for this program using the current number of biofuel producers (RIN generators) registered in EMTS plus the total number of registered renewable fuel production facilities. It is unlikely that all biofuel producers will choose to utilize the QAP, in which case the number o f respondents would be less th an the number assumed here. Inorder to estimate the maximum cost of this data collection request, we assumed that all parties would opt to use the QAP . Itis highl y unlikel y that all biofuel producers will make this choice, and therefore the costs will likely be lower than those estimated here . Note that the costs are expected to be linear; i.e. there are no economies of scale assumed, based on the number of respondents. b. Estimating the Respondent Burden and Cost Respondent c osts associated with the RI N quality assurance program include recordkeeping and reporting costs as well as other costs associated with the auditing of renewable fuel production and RIN verification (for example, contract negotiation, site visits, and document review). W e expect there will be some start - up/capital costs for auditors who choose to offer the use of remote monitoring, but the Agency is not able to provide any capital cost estimate s at this time as doing so could reveal confidential business information. We estimate the total annual hourly burden for respondents to be 263,744 hours. Three labor categories are involved: managerial, technical/professional, and clerical. The estimates use the Bureau of Labor Stati stics mean average wages for relevant employee categories ( May

2011) . T he following wages and benefits appl y b y category: Wages and Benefits Managerial $5 5 . 04 per hour Technical $ 47 . 81 per hour Clerical $ 18 . 35 per hour8

Doubling for company overhead beyond wages and benefits, and for convenience, rounding up to the dollar, gives the following rates for this I CR: Total Employer Cost Managerial $1 10 per hour Technical $ 96 per hour Clerical $ 37 per hour We have estimated the amount of time needed f or each labor category , and for each expected step in the QAP development process . These time estimates are shown in Table 1 . c. Estimating the Agency Burden and Cost The EPA must check each QAP submission for completeness . The EPA will be reviewing the qualifications of the QAP providers . Reporting parties must be contacted if there is a problem with their submission . Itis anticipated that the QAP will require minimal additional burden and cost on the EPA, relatively to the effort already undertaken for previous RFS reporting requirements. This supporting statement considers costs associated with accepting QAP submissions . We anticipate that each QAP will require just four hours of review b y one full time GS - 13 technical emplo ye e at a current pay rate of $44.65 per hour . Doubled to account for overhead and benefits, the hourl y agency burden is estimated at $89 . These costs are included in Table 1 with the estimated total agency cost at $268,424 per ye ar . d . Bottom Line Burden Hours and Costs We estimate the following annual totals: **TOTAL NO. OF RESPONDENTS (RIN generators plus total facility audits)**  **: 1313**  **TOTAL BURDEN HOURS (** **RIN generator requirements plus facility audits )**  **: 263,744**  **TOTAL COST TO RESPONDENTS FOR ALL AUDITS**  **: $**  **22,386,702** e . Reason for Change in Burden The change in burden is due to regulations that allow additional RFS reporting .9

f . Burden Statement The annual public reporting and recordkeeping burden for this collection of information is shown in Table 1 . Burden means the total time, effort, or financial resources expended b y persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency . This includes the time needed to review instructions; develop, acquire, install, and utilize technology

and sy stems for the purposes of collecting, validating, and verifyinginformation, processing and maintaining information, and disclosing and providing information; adjust the existing ways to compl y with any previously

appli cable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information . An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it display s a currently valid OMB control number . The OMB control numbers for the EPA's regulations are listed in 40 CFR part 9 and 48 CFR chapter 15 . To comment on the Agency's need for this information, the accuracy of the provided burden estimates, and any suggested methods for minimizing respondent burden, including the use of automated collection techniques, the EPA has established a public docket f or this ICR under Docket ID number EPA - HQ - OAR - 2005 - 0161, which is available for online viewing at www.regulations.gov , or in person viewing at the Air Docket in the EPA Docket Center in Washington, DC (EPA/DC) . Th e docket is located in the EPA West Building, 1301 Constitution Avenue, NW, Room 3334, and is open from 8:30 a.m. to 4:30 p.m., Eastern Time, Monday through Friday , excluding legal holiday s . The telephone number for the Reading Room is (202) 566 - 1744, and the telephone number for the Air Docket is (202) 566 - 1742. You may use www.regulations.gov to submit or view public comments, access the index listing of the contents of the public docket, and to access those documents in the public docket that are available electronically . When in the s ys tem, select “search,” then key in the Docket ID Number EPA - HQ - OAR - 2005 - 0161 . Also, you can send comments to the Office of Information and Regulatory

Affairs, Office of Management and Budget, 725 17th Street, NW, Washin gton, D.C. 20503, Attention: Desk Officer for the EPA . Please include the EPA Docket ID Number EPA - HQ - OAR - 2005 - 0161 and OMB Control Number 2060 - 0688 in any correspondence.10

**Table 1** RIN Verification, Recordkeeping and Reporting Cost Estimate s Time (hrs)

C ategory Mgmt Prof/ Tech Clerical #/y r Other Costs (travel, fees) $ Total Hrs Total $ RIN Generator: Site Visit 1 16 4 2 42 3588 Reporting 2 12 4 2 36 3040 Recordkeeping 0 0 2 2 4 148 **82 6776**  Auditor: Contract Initiation 4 4 2 1 530 10 1428 Site Visit 4 16 0 1 1060 20 3036 Follow - up Visit 1 6 0 1 1060 7 1746 Follow - up Verification 1 16 10 2 54 4032 Feedstock suppliers 0 4 0 2 8 0 Process fuel suppliers 0 4 0 2 8 0 Volume/mass balance 0 4 0 2 8 0 Monitoring 2 50 0 1 52 5020 Consultants 1 1000 0 1000 Reporting 4 49 32 1 85 6328 Recordkeeping 0 12 25 1 37 2077 **289 24667**  EPA: Implementation 4 **4 356** 

Number of RIN Generators: 559 45,838 $ 3,787,784 Number of Audits: 754 217,906 $ 18,598,918 Industry T otal: 1313 263,744 $ 22,386,702 EPA : 754 3,016 $ 268,424 EPA + Industry Total: 530,504 $ 22,655,126