Vol. 79 Friday, 

No. 138 July 18, 2014 

Part II 

Environmental Protection Agency 

40 CFR Part 80 

RFS Renewable Identification Number (RIN) Quality Assurance Program; 

Final Rule 

mstockstill on DSK4VPTVN1PROD with RULES2

42078 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 80 

[EPA–HQ–OAR–2012–0621; FRL–9906–55– 

OAR] 

RIN 2060–AR72 

RFS Renewable Identification Number 

(RIN) Quality Assurance Program 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Final rule. 

SUMMARY: Under the Renewable Fuel 

Standard (RFS) program, producers and 

importers of renewable fuel generate 

Renewable Identification Numbers 

(RINs) that are used by petroleum 

refiners and importers to demonstrate 

compliance with their renewable fuel 

volume obligations. Several cases of 

fraudulently generated RINs, however, 

led to inefficiencies and a significant 

reduction in the overall liquidity in the 

RIN market, resulting in greater 

difficulty for smaller renewable fuel 

producers to sell their RINs. Today’s 

action finalizes additional regulatory 

provisions that are intended to assure 

reasonable oversight of RIN generation 

and promote greater liquidity in the RIN 

market, which in turn helps ensure the 

use of the required renewable fuel 

volumes. The rule includes a voluntary 

quality assurance program and related 

provisions intended to meet these goals. 

The program also includes elements 

designed to make it possible to verify 

the validity of RINs from the beginning 

of 2013. Additionally, we are finalizing 

a number of new regulatory provisions 

to ensure that RINs are retired for all 

renewable fuel that is exported and to 

address RINs that become invalid 

downstream of a renewable fuel 

producer. 

DATES: The provisions of this regulatory 

action become effective September 16, 

2014. The incorporation by reference of 

certain publications listed in the rule is 

approved by the Director of the Federal 

Register as of September 16, 2014. 

ADDRESSES: The EPA has established a 

docket for this action under Docket ID 

No. EPA–HQ–OAR–2012–0621. 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: 

Deborah Adler-Reed, Office of 

Transportation and Air Quality, 

Compliance Division, Environmental 

Protection Agency, 2000 Traverwood 

Drive, Ann Arbor, MI 48105; Telephone 

number: 734–214–4223; Fax number: 

734–214–4051; Email address: 

adlerreed.deborah@epa.gov, or the 

information line for the Office of 

Transportation and Air Quality 

Compliance Division; telephone number 

(734) 214–4343; Email address 

complianceinfo@epa.gov. 

SUPPLEMENTARY 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: 

Category NAICS1

codes SIC 2 codes Examples of potentially regulated 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. 

1 North American Industry Classification System (NAICS). 

2Standard 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 action. This table lists 

the types of entities that the EPA is now 

aware could be regulated by this action. 

Other types of entities not listed in the 

table could also be regulated. To 

determine whether your activities 

would 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 EPA 

contact person listed in the preceding 

section. 

Outline of This Preamble 

I. Executive Summary 

A. Purpose of This Final Action 

B. Summary of Major Provisions 

C. Impacts 

II. Description of the Regulatory Provisions 

for QAPs and Response to Comments 

Received 

A. QAP Framework 

1. Finalization of a Single QAP Option 

2. Description of the Affirmative Defense, 

Replacement Obligation, and Limited 

Exemption for the Single QAP 

a. Affirmative Defense 

b. Replacement Obligation for Invalid Q– 

RINs 

c. Limited Exemption for Q–RINs 

3. Administrative Process for Replacement 

of Invalidly Generated RINs 

4. Producer Separation of RINs 

B. Treatment of Interim Period RINs 

C. Provisions of RIN Verification Under 

QAP A During the Interim Period 

D. Provisions of RIN Verification Under 

QAP B During the Interim Period 

E. Provisions for RIN Verification Under 

the QAP 

1. Elements of the QAP 

a. Feedstock-Related Components 

b. Production Process-Related Components 

c. RIN Generation-Related Components 

d. RIN Separation-Related Components 

2. Approval and Use of QAPs 

a. Approval of QAPs 

b. Frequency of Updates/Revisions to 

QAPs 

3. Importers and the Use of a QAP 

F. Auditor Requirements 

1. Who can be an auditor? 

a. Independence 

b. Professionally Qualified To Implement a 

QAP 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42079 

1 75 FR 14670. 

2The EPA’s Criminal Investigation Division and 

Office of Civil Enforcement issued three Notices of 

Violation in 2011–2012 which helped lead to 

criminal convictions against the fraudulent actors. 

EPA continues to vigilantly investigate cases of 

potential generation of fraudulently generated RINs 

as they arise. 

3 78 FR 12158, February 21, 2013. 

c. Errors and Omissions Insurance 

2. Registration Requirements 

3. Other Responsibilities of Auditors 

a. Notifying the Agency When There Are 

Problems 

b. Indentifying Verified RINs in EMTS 

c. Recordkeeping, Reporting, and Attest 

Engagements 

i. Recordkeeping Requirements 

ii. Reporting Requirements 

iii. Attest Engagements 

d. Prohibited Activities for Third-Party 

Auditors 

G. Audit Requirements 

1. Document Review and Monitoring 

2. Buyer/Seller Contacts 

3. On-Site Visits 

4. RIN Verification 

III. Additional Changes Related to the 

Definition and Treatment of Invalid RINs 

A. Export and Exporter Provisions 

1. Exporter RVO 

2. Require Identification of Renewable Fuel 

Content 

3. RIN Retirement Requirements 

B. ‘‘Downstream’’ Invalidation and Product 

Transfer Documents 

1. Designation of Intended Renewable Fuel 

Use 

2. Required Actions Regarding Fuel for 

Which RINs Have Been Generated That 

Is Redesignated for a Non-Qualifying 

Fuel Use 

3. RIN Generation for Fuel Made With 

Renewable Fuel Feedstock 

4. Use of Renewable Fuel in Ocean-Going 

Vessels 

5. Treatment of Improperly Separated RINs 

C. Treatment of Confidential Business 

Information 

1. Proposed Disclosure of Certain 

Registration and Reported Information 

2. Treatment of QAPs and Independent 

Engineering Reviews 

D. Proposed Changes to Section 80.1452— 

EPA Moderated Transaction System 

(EMTS) Requirements—Alternative 

Reporting Method for Sell and Buy 

Transactions for Assigned RINs 

IV. Impacts 

A. Time and Cost Assumptions 

B. Labor Cost Assumptions 

C. Cost Estimate Results 

V. Public Participation 

VI. Statutory and Executive Order Review 

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 (Energy Effects) 

I. National Technology Transfer 

Advancement Act 

J. Executive Order 12898: Federal Actions 

To Address Environmental Justice in 

Minority Populations and Low-Income 

Populations 

K. Congressional Review Act 

VII. 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

The RFS program requires that 

specified volumes of renewable fuel be 

used as transportation fuel, home 

heating oil, or jet fuel each year. To 

accomplish this, the EPA publishes 

applicable percentage standards 

annually that apply to the sum of all 

gasoline and diesel produced or 

imported into the United States. The 

percentage standards are set so that if 

every obligated party (refiners and 

importers of gasoline or diesel 

transportation fuel) meets the 

percentages, then the amount of 

renewable fuel, cellulosic biofuel, 

biomass-based diesel, and advanced 

biofuel used are projected to meet the 

volumes required on a nationwide basis. 

Obligated parties demonstrate 

compliance with the renewable fuel 

volume standards in one of two ways. 

Obligated parties can demonstrate 

compliance either by acquiring the 

required volumes of renewable fuels 

together with the associated Renewable 

Identification Numbers (RINs), which 

are assigned by the renewable fuel 

producer or importer to every batch of 

renewable fuel produced or imported, or 

by acquiring just the RINs without the 

associated fuel. Validly generated RINs 

show that a certain volume of qualifying 

renewable fuel was produced or 

imported. The RFS program also 

includes provisions stipulating the 

conditions under which RINs are 

invalid, the liability carried by a party 

that transfers or uses an invalid RIN, 

and how invalid RINs must be treated. 

In general, all regulated parties are 

liable for transferring or using invalid 

RINs. As a result, all regulated parties 

are responsible to take the steps they 

deem appropriate to verify that the RINs 

they acquire are valid. This is generally 

referred to as a ‘‘buyer beware’’ 

approach to RIN validity for the 

obligated parties. 

A. Purpose of This Final Action 

Several cases of fraudulently 

generated RINs in the last few years 2 led 

some obligated parties to limit their RIN 

purchases to renewable fuel produced 

by those parties that they are confident 

are generating valid RINs. In order to 

ensure that RINs are validly generated, 

individual obligated parties began 

conducting their own audits of 

renewable fuel production facilities. 

The time and effort to conduct such 

activities, as well as the large overall 

number of renewable fuel producers and 

importers, resulted in greater difficulty 

for some of the smallest renewable fuel 

producers to sell their RINs. Initially, 

the overall liquidity of the RIN market 

was significantly reduced. These 

circumstances also created 

inefficiencies in the RIN market, as 

some RINs have been treated as having 

more value and less risk than others. 

The purpose of today’s final action is to 

address these issues by finalizing 

changes to the regulations that assure 

reasonable oversight of the validity of 

RIN generation, promote greater 

liquidity in the RIN market, and assure 

the use of the required renewable fuel 

volumes. 

In today’s final action we are 

finalizing a voluntary quality assurance 

program intended to provide regulated 

parties a structured way to ensure that 

RINs entering commerce are valid. The 

program provides an affirmative defense 

against liability for civil violations 

under certain conditions for the transfer 

or use of invalidly generated RINs, and 

specifies both the conditions under 

which invalid RINs must be replaced 

with valid RINs, and by whom. Quality 

assurance programs enable smaller 

renewable fuel producers to 

demonstrate that their RINs are valid, 

reducing the risk that obligated parties 

believe is associated with such RINs. 

We are finalizing, consistent with the 

proposal, provisions applicable to RINs 

generated in 2013 through December 31, 

2014. 

In today’s final action, in 

consideration of comments received on 

the notice of proposed rulemaking 

(NPRM),3 we are also addressing export 

issues and circumstances in which RINs 

may become invalid subsequent to the 

renewable fuel producer’s introduction 

of the RINs into commerce. For 

instance, exporters of renewable fuel 

mstockstill on DSK4VPTVN1PROD with RULES2

42080 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

4 75 FR 14670, March 26, 2010. 

may not have been retiring an 

appropriate number and type of RINs as 

required under the current regulations. 

In some cases parties may have exported 

diesel fuel containing amounts of 

biodiesel below levels that are currently 

required to be reported in other 

contexts, and are merely labeled as 

diesel fuel. Such exports would not 

have been reported as containing 

renewable fuel, and thus no RINs would 

have been retired. In other cases, 

exporters may have reported that 

renewable fuel had been exported, but 

might sell any RINs received and then 

go out of business before RINs are 

retired. The result of these 

circumstances could be a disparity 

between the RINs generated and the 

renewable fuel volume consumed in the 

U.S. We are finalizing modifications to 

the regulations pertaining to exporters 

of renewable fuel to address these 

issues. We are also finalizing a number 

of other modifications intended to 

address cases in which parties transfer 

or use RINs that have become invalid 

after the producer has introduced them 

into commerce. 

B. Summary of Major Provisions 

Today’s final action includes a 

voluntary third-party quality assurance 

program option for RINs that regulated 

parties may exercise as a supplement to 

the ‘‘buyer beware’’ liability as 

prescribed under existing regulations. 

The program provides a means for 

ensuring that RINs are properly 

generated through audits of renewable 

fuel production conducted by 

independent third-parties using quality 

assurance plans (QAPs), provides an 

affirmative defense for the transfer or 

use of invalid RINs that had been 

verified under an approved QAP, 

defines the conditions when RINs must 

be replaced, and a process for 

determining who will replace the RINs. 

For the interim period only, which 

runs from February 21, 2013 through 

December 31, 2014, we are finalizing 

both of the proposed QAP programs, 

QAP A and QAP B. 

Beginning January 1, 2015, after the 

interim period is over, the program will 

consist of a single QAP, with its 

associated verified RINs referred to as 

Q–RINs. To this end, we are finalizing 

the following for the single QAP: 

• Minimum requirements for a QAP, 

including such things as verification 

of feedstocks, verification that 

volumes produced are consistent with 

amount of feedstocks processed, and 

verification that RINs generated are 

appropriately categorized and match 

the volumes produced 

• Qualifications for independent thirdparty auditors 

• Requirements for audits of renewable 

fuel production facilities, including 

minimum frequency, site visits, 

review of records, and reporting 

• Conditions under which a regulated 

party could assert an affirmative 

defense to civil liability for 

transferring or using an invalid RIN 

• Identification of the party or parties 

who are responsible for replacing 

invalid RINs with valid RINs and the 

timing of such replacement 

• A two percent limited exemption for 

calendar years 2014, 2015, and 2016 

that exempts a small fraction of a 

party’s Renewable Volume Obligation 

(RVO) from the requirement of 

replacement of invalid RINs used for 

compliance if they were RINs verified 

through a QAP 

• Changes to the EPA Moderated 

Transaction System (EMTS) that 

would accommodate the quality 

assurance program 

We are finalizing certain provisions 

exclusive to QAP A in the interim 

period, such as the RIN replacement 

mechanism that provides for invalid A– 

RINs to be replaced, the RIN 

replacement cap for auditor replacement 

of invalid A–RINs, and the elements of 

an affirmative defense specific to A– 

RINs. Additionally, we are finalizing 

provisions exclusive to QAP B in the 

interim period, such as the elements of 

an affirmative defense specific to B– 

RINs, and a two percent limited 

exemption for B–RINs for calendar years 

2013 and 2014. 

We are also finalizing modifications 

to the exporter provisions of the RFS 

program. These modifications will help 

ensure that an appropriate number and 

type of RINs are retired whenever 

renewable fuel is exported. Finally, we 

are finalizing a number of changes to 

other aspects of the RFS regulations 

governing the transfer and use of RINs 

that become invalid downstream of the 

producer. 

C. Impacts 

We anticipate that the quality 

assurance program will help to reduce 

the number of invalidly generated RINs 

in distribution, and thus help ensure 

that valid RINs are traded and used for 

compliance. As a result, it will help to 

ensure that the renewable fuel volumes 

mandated by Congress are actually used. 

In this respect, then, there will be no 

change to the expected impacts of the 

RFS program as projected in the March 

2010 RFS final rulemaking 4 in terms of 

volumes of renewable fuel consumed or 

the associated GHG or energy security 

benefits. The primary impacts of the 

quality assurance program will be 

improved liquidity and efficiency in 

today’s RIN market and improved 

opportunities for smaller renewable fuel 

producers to sell their RINs. 

Likewise, the changes to the 

regulations governing export of 

renewable fuel will ensure that the 

appropriate number and type of RINs 

are retired for every gallon of renewable 

fuel exported, consistent with the intent 

of the program. 

The quality assurance program that 

we are finalizing in today’s action will 

be voluntary. Even though the program 

is voluntary, there will likely be costs 

associated with an individual party’s 

participation in the quality assurance 

program, and in Section IV we have 

provided estimates of some elements of 

the costs of participation. However, the 

fact that the quality assurance program 

will be voluntary means that a decision 

to participate will be made 

independently by each regulated party. 

Making the program voluntary allows 

the regulated parties to choose whether 

any costs incurred by participating will 

be less than the current costs in the 

marketplace resulting from efforts to 

verify, acquire, trade, and use RINs and 

the risk of buying fraudulent RINs 

associated with such activities. 

Although we cannot say that the 

voluntary QAP provisions will reduce 

the cost of the RFS program, we expect 

that parties will only choose to use 

these voluntary provisions if they 

believe doing so will reduce their risk 

of purchasing fraudulent RINs and 

possibly save them money when 

compared to the oversight actions they 

are currently implementing. 

II. Description of the Regulatory 

Provisions for QAPs and Response to 

Comments Received 

A. QAP Framework 

1. Finalization of a Single QAP Option 

The NPRM proposed two new 

compliance options (‘‘Option A’’ and 

‘‘Option B’’) in addition to the existing 

‘‘buyer beware’’ approach. Each of the 

two proposed options contained 

provisions for: A quality assurance plan 

(‘‘QAP’’) that would be created and 

applied by an independent third-party 

auditor to verify the validity of RIN 

generation; an affirmative defense to 

civil liability for transfer or use of a 

verified but invalidly generated RINs; 

identification of the party responsible 

for replacement of verified but invalidly 

generated RINs, and limitations on the 

extent of that responsibility. Under both 

options, verification under an EPAmstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42081 

5See docket document EPA–HQ–OAR–2012– 

0621–0040 at page 9. 

approved QAP would provide the basis 

for the defense to civil liability for any 

prohibited acts premised on the RIN’s 

invalidly generated status. In today’s 

rule, we are finalizing a single QAP 

closely resembling the proposed Option 

B, with its associated verified RINs 

referred to as Q–RINs. Option A and 

Option B are only being finalized with 

respect to interim period RINs, which 

are addressed in section II.B of this 

preamble. 

Under the proposal for Option A, the 

QAP requirements were very stringent, 

requiring for example continuous 

monitoring of renewable fuel 

production facilities and documentation 

of RIN generation. Also under Option A, 

the QAP auditor would be responsible 

for replacing any invalidly generated 

RINs it had verified, if the RIN generator 

itself failed to replace. The auditor’s 

liability for replacement would be 

capped at two percent of the A–RINs it 

had verified in that compliance year and 

the previous four compliance years, and 

the auditor would be required to 

maintain a RIN replacement mechanism 

capable of immediately replacing any 

invalid RINs up to the amount of the 

auditor’s potential liability at any given 

point in time. Under Option B, the QAP 

requirements were less stringent, 

requiring quarterly site monitoring and 

document review, among other features. 

Also under Option B, the obligated 

party bore the responsibility to retire or 

(if already transfered or retired for 

compliance) to replace any invalidly 

generated B–RINs, but only if the 

number of such invalid RINs exceeded 

two percent of the obligated party’s RVO 

for the compliance year in which the 

invalid RINs were generated. A major 

difference between Option A and 

Option B, then, was the identification of 

and parameters for the replacement of 

RINs that were invalidly generated but 

nonetheless verified under an EPAapproved QAP. Under Option A, the 

replacement responsibility rested on the 

QAP auditor, effectively eliminating any 

risk of replacing invalid verified RINs 

for the obligated party, while under 

option B, the obligated party bore the 

risk of having to replace invalid verified 

RINs if the quantity of such RINs was 

greater than two percent of its RVO. 

There were also some important 

differences in the requirements of the 

audit program. 

During the period between 

publication of the NPRM and this final 

rulemaking, the EPA worked with a 

number of potential QAP auditors as 

they developed proposals for their QAPs 

and began implementation of their 

auditing services. To facilitate the 

verification of RINs generated in 2013 

prior to the final rule’s effective date, 

the EPA developed an informal preregistration process. The EPA reviewed 

auditors’ registration information and 

proposed QAPs, and provided guidance 

on whether the plans appeared to satisfy 

the proposed requirements. The EPA 

identified those auditors whose 

submissions were consistent with the 

requirements in the proposed 

regulations as part of this informal preregistration process. RINs audited prior 

to the effective date of the final rule 

through a QAP which the EPA had 

informally pre-registered could be 

informally verified by the auditor, but 

they would only be formally verified 

after the final rule goes into effect, and 

after the EPA approved the QAP that 

was used in the audit process. Several 

auditors made use of this informal 

process. 

Based on these ongoing interactions, 

the EPA collected significant data on the 

potential utility and feasibility of both 

Option A and Option B QAPs. For many 

auditors, a major barrier to development 

of an Option A QAP was the expense 

and risk associated with establishment 

and maintenance of an acceptable RIN 

replacement mechanism. The NPRM 

required, for instance, that the RIN 

replacement mechanism be outside of 

the sole operational control of the QAP 

auditor, requiring a third party’s 

involvement and control. As discussed 

in the NPRM, many traditional forms of 

financial assurance would not be 

suitable for a RIN replacement 

mechanism and those that would fulfill 

the program requirements would likely 

be very expensive for auditors to 

maintain. These difficulties were clearly 

borne out in the experience of auditors 

attempting to set up Option A QAPs in 

the interim period. One of the 

informally pre-registered Option A QAP 

providers suggested that if a producer 

could not afford to have all its RINs 

audited as A–RINs, the same A–RIN 

protocols minus the RIN replacement 

mechanism should be counted as a B– 

RIN audit.5 This comment underscores 

the significant expense associated with 

the RIN replacement mechanism and 

the auditors’ perspective that many 

producers will not be able to utilize the 

Option A system simply because of this 

expense. In addition to the expense of 

the RIN replacement mechanism, one 

commenter also asserted that the RIN 

replacement mechanism could 

artificially skew demand for RINs and 

drive market prices up, if an auditor 

were to stockpile RINs (instead of a cash 

escrow) to fulfill the replacement 

mechanism requirement. Looking 

beyond the RIN replacement 

mechanism, the additional oversight 

and review required in QAP A also 

inflates the cost of providing Option A 

auditing services, when compared to the 

less onerous Option B QAP 

requirements. The challenge of 

installing a continuous monitoring 

system requires significant capital 

investment and ongoing time and 

financial resources. 

Of the four auditors informally preregistering Option A QAPs, only one 

actually used the Option A QAP to 

informally verify RINs in the interim 

period. Further, out of nearly 480 

million RINs informally verified or 

pending informal verification through 

February 2014, less than 20 percent of 

them were Option A RINs (by the one 

informally pre-registered Option A 

auditor). This demonstrates a lower 

level of buy-in and lower utility of the 

Option A QAP when compared to the 

Option B QAP. 

Most obligated party comments on 

Option A were consistent with auditors’ 

experiences in attempting to set up the 

Option A QAPs. They asserted that 

given the increased stringency of the 

Option A auditing requirements and the 

replacement mechanism, the cost of 

these expenses would be passed through 

and reflected in the price of A–RINs. 

While A–RINs would indeed be seen as 

less risky than B–RINs or non-audited 

RINs, the decreased risk might not be 

worth the cost. Many commenters stated 

that the stringency of QAP B would be 

sufficient to guarantee the validity of 

audited RINs and the increased 

stringency of A was ‘‘overly rigorous’’ 

and not worth the additional expense. 

Many small biodiesel producers also 

commented that they feared the Option 

A QAP would be too expensive for them 

to utilize. As discussed in the NPRM, 

the EPA hoped that the Option A QAP 

would improve liquidity for small 

producers on the RIN market, because 

the auditor replacement feature would 

eliminate any fear of a replacement 

obligation for RIN purchasers. Given the 

increased costs required to set up and 

run an Option A QAP program, 

however, many small producers do not 

expect they would be able to afford the 

cost of these services, even considering 

the speculative potential of increased 

value that A–RIN status might give to 

their RINs. 

Given the difficulty experienced by 

auditors in setting up Option A QAPs, 

the apparent lack of use of the Option 

A QAP in the interim period, and the 

overwhelmingly negative comments 

regarding Option A by producers and 

obligated parties alike, we are not 

mstockstill on DSK4VPTVN1PROD with RULES2

42082 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

6As discussed in section II.C, Option A will be 

available for RINs generated during the interim 

period, as discussed at the proposal. This 

recognizes that there has been some informal use 

of this option during the interim period to date, 

even if limited. Finalizing Option A for just the 

interim period will avoid penalizing the parties 

who have informally verified RINs under this 

option to date, and the parties who have purchased 

such RINs. 

7For more information regarding the rationale as 

to why an affirmative defense is being offered, 

please see the NPRM (78 FR 12176–12177 (February 

21, 2013)). 

finalizing Option A as a compliance 

alternative for use after the interim 

period.6 Instead, we are finalizing a 

single QAP for use after the interim 

period that closely resembles the 

proposed Option B. The full description 

of the terms and conditions of this 

compliance program is found in 

sections II.A.2 and II.E of this preamble. 

In addition to the issues raised by 

parties in comment, the EPA also 

considered the higher implementation 

costs for the Agency to administer both 

QAP A and QAP B. While this was not 

the Agency’s primary consideration in 

reaching this decision we do note that 

directionally this decision will also 

reduce the cost to the government to 

implement and provide ongoing 

maintenance of and support for QAP A. 

Lastly, we would note that many of the 

financial features of QAP A can be 

offered through private contracts and 

financial instruments without the need 

for EPA involvement. 

2. Description of the Affirmative 

Defense, Replacement Obligation, and 

Limited Exemption for the Single QAP 

a. Affirmative Defense 

Based on the reasoning and 

discussion detailed below, for the single 

QAP for use after the interim period 

(with its associated verified RINs 

referred to as Q–RINs), the Agency is 

finalizing an affirmative defense to civil 

liability for RIN owners like was 

proposed for QAP B in the NPRM, 

except for the notification element 

which we increased from one to five 

business days. See § 80.1473(e) of the 

regulations for more details. 

The affirmative defense in this final 

rule will be modeled from the proposed 

affirmative defense for QAP B.7 Note 

that there will be an affirmative defense 

for A–RINs and B–RINs informally 

verified during the interim period. See 

§ 80.1473 (c) and (d) of the regulations 

for more details. 

The affirmative defense will only be 

available to RIN owners for RINs that 

were verified by an independent thirdparty auditor using an EPA-approved 

QAP. 

Additionally, it is our intent that the 

affirmative defenses will not be 

available to the generator of an invalid 

RIN. Since the quality assurance 

program will be voluntary, parties could 

still purchase RINs not verified by an 

EPA-approved QAP and transfer or use 

these unverified RINs, but they could 

not assert an affirmative defense if the 

RINs were found to be invalid, 

regardless of their level of good faith. 

Once a RIN has been verified by the 

auditor, any person, other than the 

generator of the RIN, who transfers or 

uses that verified RIN will be eligible to 

assert an affirmative defense if the RIN 

was invalidly generated and the person 

then transferred it to another party or 

used it for compliance purposes. The 

QAPs will be designed to verify valid 

generation of RINs, and the assertion of 

an affirmative defense will be limited to 

the prohibited acts of transferring and 

using invalidly generated RINs. The 

affirmative defense addresses violations 

of 40 CFR 80.1460(b)(2) and the use 

violation of 40 CFR 80.1460(c)(1). 40 

CFR 80.1460(b)(2) prohibits any person 

from transferring to any other person a 

RIN that is invalid. 40 CFR 80.1460(c)(1) 

provides that no person shall use 

invalid RINs to meet the person’s RVO, 

or fail to acquire sufficient RINs to meet 

the person’s RVO. The affirmative 

defense will apply to violations arising 

from a person’s use of invalid RINs 

whether or not his/her use of the invalid 

RINs caused them to fail to acquire 

sufficient RINs to meet their RVOs. 

We finalized new regulations in 

Section III.B to ensure that properly 

generated RINs cannot become invalid 

downstream of the RIN generator. It 

should again be noted that an 

affirmative defense is not available for a 

RIN that was not verified under an EPAapproved QAP. In other words, the 

‘‘buyer beware’’ system as it exists 

under the current regulations will 

continue to be an option for obligated 

parties who do not wish to purchase 

RINs verified through a QAP. 

When we proposed an affirmative 

defense in the NPRM, the Agency stated 

that the affirmative defense mechanism 

would allow any party, other than the 

generator of an invalid RIN, who holds 

invalidly generated RINs verified 

through a QAP to avoid civil liability for 

a prohibited act involving the transfer or 

use of invalid RINs for purposes of 

fulfilling an RVO. This approach is 

similar but not identical to the defense 

mechanisms used in other fuels 

regulation programs, such as the Diesel 

Fuel Sulfur Control regulations, 40 CFR 

80.613(a), and the Reformulated 

Gasoline regulations, 40 CFR 

80.79(b)(1). In order to establish this 

affirmative defense under the QAP, a 

party will be required to prove six 

elements by a preponderance of 

evidence. This means that each element 

was more likely than not to have been 

met. A person asserting an affirmative 

defense also must submit a written 

report to the EPA, along with any 

necessary supporting documentation, 

demonstrating that the elements have 

been met. The written report will need 

to be submitted within 30 days of the 

person discovering the invalidity of the 

RIN. An affirmative defense is a defense 

that precludes liability even if all of the 

elements of a claim are proven, and 

generally is asserted in an 

administrative or judicial enforcement 

proceeding. We have included an 

explicit reporting requirement to allow 

the EPA to evaluate affirmative defense 

claims before deciding whether or not to 

commence an enforcement action. 

In the event that invalidly generated 

Q–RINs are transferred or used, the 

elements that must be established for an 

affirmative defense to the prohibited act 

of transferring or using the invalid Q– 

RINs for compliance with an RVO are as 

follows and are described in § 80.1473: 

1. The RINs in question were verified 

in accordance with an EPA-approved 

QAP as defined in the EPA regulations 

in § 80.1469; 

2. The RIN owner did not know or 

have reason to know that the RINs were 

invalidly generated at the time of 

transfer or use for compliance, unless 

the RIN generator replaced the RIN 

pursuant to § 80.1474; 

3. The QAP provider or RIN owner 

informs the Agency via the EMTS 

technical support line (support@epamtssupport.com) within five business days 

of discovering that the RINs in question 

were invalidly generated; 

4. The RIN owner did not cause the 

invalidity; 

5. The RIN owner did not have a 

financial interest in the company that 

generated the invalid RIN; and 

6. If the RIN owner used the invalid 

RINs for compliance, the RIN owner 

adjusted its records, reports, and 

compliance calculations in which the 

invalid RIN was used as required by 

regulations (see § 80.1431), unless the 

RIN generator replaced the RIN 

pursuant to § 80.1474. 

Further rationale for several of the 

elements required for asserting an 

affirmative defense are discussed in 

more depth below. In regard to element 

2, owners of verified Q–RINs must not 

have known nor had reason to know of 

the invalidity of the RIN at the time they 

either transferred a RIN or used a RIN 

for compliance purposes unless the RIN 

generator had replaced the RIN per the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42083 

8A remedial action is an action taken by a party 

to remedy certain specific RIN violations of the 

RFS2 regulations. See the following link to the 

RFS2 Remedial Action Guidance page of the EPA 

Web site for further information on remedial actions 

as well as specific instructions: http://www.epa.gov/ 

otaq/fuels/renewablefuels/compliancehelp/rfs2

remedialactions.htm. 

regulations. See 40 CFR 80.1474. Since 

the obligated party has the replacement 

obligation under the QAP, it would not 

be appropriate for it to knowingly 

commit a prohibited act but still have an 

affirmative defense to civil liability. 

Similarly, we do not believe it would be 

appropriate to allow a RIN owner to 

transfer an invalid RIN to a third party 

if it knew the RIN was invalid. A 

transfer of the RIN with such knowledge 

would subvert the purpose of the 

quality assurance program, which is to 

help ensure the integrity of the RINs 

used for compliance purposes and to 

promote greater liquidity in the market. 

Knowing transfer of invalid RINs is 

inconsistent with these purposes. For 

these reasons, the owner of an invalid 

but verified Q–RIN cannot assert an 

affirmative defense if it knows or has 

reason to know of its invalidity at the 

time it transfers or uses the RIN for 

compliance purposes. 

In regard to element 3, any party 

attempting to establish an affirmative 

defense will be required to inform the 

Agency within five business days of 

identifying that RINs were invalidly 

generated. This requirement should 

allow a reasonable and adequate amount 

of time for RIN owners to communicate 

this information internally first before 

communicating the discovery to the 

EPA while minimizing the amount of 

time available to capitalize on any 

incentives or financial advantages that 

might be gained from intentionally 

hiding invalidity or waiting to report. 

The Agency’s primary goal to maintain 

and meet the annual RFS volume 

mandates would be frustrated by 

delayed reporting of invalidly generated 

RINs. The reporting requirement will 

therefore be both an element of good 

faith and a practical safeguard to meet 

the annual RFS volume mandates. 

In regard to element 5, requiring that 

the RIN owner did not have any 

financial interest in the RIN generator’s 

company ensures that the RIN owner 

did not receive and had no intention of 

receiving a financial benefit from the 

generation of invalid RINs. In regard to 

element 6, we have determined that the 

affirmative defense for Q–RINs should 

be contingent upon obligated parties 

taking the invalid Q–RINs out of the 

system or demonstrating that the 

producer implemented a remedial 

action 8 by retiring an equivalent 

number of replacement Q–RINs. This 

will help the Agency efficiently ensure 

that the environmental goals of the RFS 

program are achieved. 

Finally, two requirements of an 

affirmative defense are that the RIN was 

verified under an approved QAP, 

element 1, and that the party did not 

cause the invalidity of the RIN in 

question, element 4. 

The Agency did receive comments 

regarding the affirmative defense 

provision. All comments were 

supportive of including an affirmative 

defense to civil liability for RIN owners. 

Some biofuel producers commented 

that the affirmative defense should be 

available to RIN generators as well 

because RINs may be generated 

improperly through no fault of the 

producer due to feedstock supplier 

issues as well as the general complexity 

of the regulations. The EPA is not 

extending the affirmative defense to RIN 

generators. The affirmative defense 

provides protection from civil liability 

in the event that RIN owners performed 

adequate oversight by way of 

implementing a QAP, yet a RIN was 

deemed invalid nonetheless. This is 

appropriate as the person who owns the 

RIN after it has been generated generally 

has no control over the actual 

production of the renewable fuel. 

Renewable fuel producers, however, 

have control over the actual production 

of fuel and are in a much better position 

to know if the RINs associated with that 

fuel are valid. With this greater control 

comes greater responsibility and the 

associated liability to ensure valid 

generation of the RINs. Renewable fuel 

producers still have remedial actions at 

their disposal to correct certain errors 

that occur in regard to RIN generation. 

Some obligated parties commented 

that an affirmative defense should be 

available to unverified RINs as well. 

This would undermine efforts to 

minimize the generation of fraudulent 

RINs, of which the QAP program is an 

important element. The structured 

parameters of the QAP provide a 

framework for a specified degree of 

oversight of RIN generation by RIN 

owners when it comes to the RINs they 

purchase. The Agency defined this 

framework and determined that if this 

degree of oversight and the other 

elements of the affirmative defense are 

met, then an affirmative defense to RIN 

owners for RINs that have been verified 

through an Agency-designed system is 

appropriate. RINs outside of that system 

can be subjected to whatever degree of 

oversight the RIN owner may view as 

appropriate for their own risk 

management. It would not be 

appropriate to provide an affirmative 

defense to unverified RINs that do not 

meet the specified degree of oversight 

provided by the QAP, and have not gone 

through the process that the EPA has 

established for efficient administration 

of the affirmative defense. For example, 

auditors and their QAP plans must be 

approved by the EPA, and the EPA can 

monitor compliance by auditors with 

their responsibilities, providing 

confidence that the oversight will be 

implemented in practice. This does not 

occur outside of the RIN verification 

process established in this rule. It 

should be noted that the EPA considers 

a number of factors when deciding what 

action, if any, to take against a person 

who transfers or uses unverified invalid 

RINs. 

Multiple commenters suggested that 

the EPA extend the timeframe to notify 

the Agency of discovery of a RIN that 

was invalidly generated. In element (3), 

the timeframe for notification was 

proposed to be within the next business 

day. The EPA agrees with extending the 

timeframe. The EPA acknowledges that 

it may take some time for a RIN owner 

to adequately communicate within its 

organizational structure that it is in 

possession of an invalid RIN. Therefore, 

the EPA is extending the notification 

timeframe to five business days. This 

should allow enough time for the 

corporate officers to be informed while 

providing prompt notification to the 

Agency to guard against any incentives 

for delaying reporting for illicit gains. 

There is an administrative process 

detailed in Section II.A.3 that deals with 

many of the concerns of commenters 

regarding whether a RIN is ‘‘potentially’’ 

invalid. Element (3) of the affirmative 

defense arises upon discovery that the 

RIN in possession has definitively been 

deemed ‘‘invalid’’ and it is then that the 

QAP provider or RIN owner must notify 

the Agency for the purposes of the 

affirmative defense. The QAP provider 

and renewable fuel producer still have 

the ability to correct any errors and/or 

perform a remedial action prior to the 

RIN being deemed ‘‘invalid’’ and the 

RIN owner being made aware of this 

fact. 

b. Replacement Obligation for Invalid 

Q–RINs 

Based on the discussion below and 

the comments received, the Agency is 

finalizing a QAP where invalid Q–RINs 

may not be used to demonstrate 

compliance with a Renewable Volume 

Obligation (RVO), just as invalid RINs 

may not be used under the current 

‘‘buyer beware’’ program for unverified 

RINs. It should be noted that the Agency 

is also finalizing an administrative 

process for replacement of invalidly 

mstockstill on DSK4VPTVN1PROD with RULES2

42084 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

9For a more detailed description of the 

calculation of the 2% limited exemption, see the 

NPRM ((78 FR 12184–12187 (February 21, 2013)). 

generated RINs where the RIN generator 

is initially responsible for replacement 

of invalidly generated RINs. The 

administrative process details who has 

the responsibility to replace invalidly 

generated RINs and when those 

responsibilities begin. For RINs that 

have been retired for compliance, 

obligated parties must replace invalidly 

generated RINs when the RIN generator 

has not fulfilled their replacement 

obligation under the administrative 

process in order to remain in 

compliance. See § 80.1474 of the 

regulations for further details on the 

administrative process. 

Regulated parties that purchase Q– 

RINs will not be subject to liability for 

a civil violation if a Q–RIN transferred 

or used for compliance purposes was 

later found to have been invalidly 

generated, if the elements of an 

affirmative defense were successfully 

asserted. See Section II.A.2.a. However, 

obligated parties will be responsible for 

replacing any invalidly generated Q– 

RINs used for compliance purposes. 

Obligated parties will be free to contract 

with producers, independent third-party 

auditors, or other parties, such as 

brokers, to limit their exposure for 

replacement of invalidly generated Q– 

RINs. Obligated parties will not be 

permitted to transfer or use Q–RINs they 

know or have reason to know have been 

invalidly generated. Any such transfer 

or use will be a prohibited act, pursuant 

to § 80.1460. 

The QAP provides flexibility for 

obligated parties, producers, and thirdparty auditors to minimize the cost of 

verification services for RINs. Obligated 

parties that want the protection of an 

affirmative defense but would rather 

contract on their own terms regarding 

replacement of invalidly generated RINs 

should find this approach more flexible 

and appealing. Additionally, smaller 

producers could be drawn to this 

because the cost to participate in the 

quality assurance program under the 

QAP would be relatively small. 

The Agency received comments from 

obligated parties and their trade 

associations that they should never have 

to replace invalid RINs that were a 

result of another party’s malfeasance. 

The EPA is rejecting this approach, as 

retaining the replacement obligation is 

important to both ensure compliance 

with the renewable fuel volumes 

specified by Congress and to ensure that 

obligated parties take responsibility to 

make sure compliant fuel is purchased 

and introduced into commerce by either 

introducing compliant fuel themselves 

or by validating RIN integrity before 

buying RINs. QAP RIN replacement by 

obligated parties is meant to create the 

same ‘‘buyer beware’’ type of scrutiny of 

third-party auditor performance by 

obligated parties. By retaining the 

replacement obligation under the QAP, 

obligated parties have the incentive to 

provide significant robust oversight of 

the quality of third-party auditors, 

which in turn increases the likelihood 

of valid RINs and compliant fuel being 

introduced into the marketplace. 

The Agency also received numerous 

comments mirroring the EPA’s view on 

replacement obligation discussed above. 

Commenters noted that for the RFS 

program to properly function, the 

obligated parties needed to retain the 

obligation to replace invalid RINs, 

which would ensure that their 

individual RVOs would be met as well 

as the renewable fuel volumes specified 

by Congress. 

c. Limited Exemption for Q–RINs 

Based on the discussion below and 

the comments received, we are 

finalizing a two percent limited 

exemption for the QAP as was proposed 

for QAP B, except for the fact that it will 

only apply in calendar years 2014, 2015, 

and 2016. 

The limited exemption exempts a 

small fraction of a party’s RVO from the 

requirement for RIN replacement if QAP 

RINs up to the limit later turn out to be 

invalid. Given the perceived concerns 

about RINs generated by the smallest 

producers, a limited exemption, during 

the beginning of the program while 

auditors are learning to implement 

QAPs, could make obligated parties 

more willing to buy RINs from smaller, 

less well known biofuel producers. The 

limited exemption will be available only 

to obligated parties that are required to 

replace invalid RINs, not renewable fuel 

producers that are required to replace 

invalid RINs. 

As described at proposal, we are 

setting the limit on the limited 

exemption for invalid Q–RIN 

replacement at two percent based on the 

uncertainty inherent in the gasoline/

diesel production market as determined 

by comparing EIA’s Short Term Energy 

Outlook projections versus actual 

production of the same year.9 We have 

concluded this level of exemption is 

both rational relative to the uncertainty 

inherent in the standards process and 

sufficient to incentivize the use of 

QAPs. 

The limited exemption will apply 

separately to each of the four standards 

under the RFS program: cellulosic 

biofuel; biomass-based diesel; advanced 

biofuel; and total renewable fuel. 

The limited exemption will apply 

separately to each obligated party that is 

responsible for replacing invalid Q– 

RINs rather than to the industry as a 

whole. For instance, an obligated party 

would apply the two percent limited 

exemption to each of its four Renewable 

Volume Obligations (RVOs) to 

determine the number of Q–RINs of 

each of the four types that would not 

need to be replaced should they be 

found to be invalidly generated. 

The limited exemption is a threshold 

below which invalid RINs will not be 

required to be replaced; it is not a trigger 

that determines when all invalid RINs 

must be replaced. Under this threshold 

approach, an obligated party will know 

at the beginning of each year that two 

percent of the RINs needed to meet each 

of its RVOs will not need to be replaced 

if those RINs were Q–RINs and were 

determined to be invalidly generated. 

Under this threshold approach, the 

number of Q–RINs that an obligated 

party will be required to replace will be 

those in excess of the applicable limited 

exemption (LE) as calculated. See 

§ 80.1474(f) for more details on 

calculation of the limited exemption. 

Finally, the limited exemption will be 

applicable for Q–RINs verified under 

the QAP during the calendar years of 

2014, 2015, and 2016 of the quality 

assurance program. We think the 

limited exemption is an important 

incentive, but at the same time we also 

recognize it may reduce the total 

volume of renewable fuel produced 

under the program. As noted below, we 

intend to monitor the use of the 

provision during these years and will 

propose to extend its use in the future 

if we decide, based on the experience 

gained from 2014–2016, that the limited 

exemption, on balance, is valuable to 

the overall success of the RFS program. 

Generally, obligated parties and small 

producers supported the limited 

exemption and its methodology. Other 

comments the Agency received 

regarding a limited exemption included: 

The limited exemption should apply to 

unverified RINs as well, and the limited 

exemption should be made permanent 

as the uncertainty it is based on will not 

cease after two years. The Agency did 

receive a comment from a producer 

trade association that said that the 

limited exemption exceeded the EPA’s 

authority and would effectively be a 

waiver. 

The Agency believes that it would not 

be appropriate to apply the limited 

exemption to RINs that are not verified 

by an EPA-approved independent 

auditor. The limited exemption for RIN 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42085 

replacement is a useful component of 

the voluntary QAP process and other 

measures aimed at achieving a 

regulatory structure that facilitates 

reasonable oversight of RIN generation, 

adequate assurance that invalid RINs 

will be replaced, and a market for RINs 

where the opportunity to produce and 

sell RINs is spread broadly across 

producers, including small producers. 

Outside of the QAP program, the limited 

exemption does not facilitate any of the 

functions and benefits achieved by the 

QAP process. Outside the QAP program, 

obligated parties retain full discretion to 

conduct the oversight they deem 

appropriate, and to establish 

appropriate contract indemnification or 

other risk reduction measures. There is 

no clear reason that a limited exemption 

is needed under these circumstances to 

provide relief to obligated parties, and 

providing the limited exemption outside 

the QAP program would provide none 

of the benefits from facilitating the 

introduction period of the QAP 

program. Thus the EPA is not expanding 

the limited exemption outside of the 

QAP program. 

Additionally, in response to making 

the limited exemption permanent, we 

expect regulated parties to be working to 

optimize implementation of the quality 

assurance program for several years. The 

limited exemption can help to ensure 

that the RIN market is more liquid as the 

program starts up. But as the program 

matures, we believe that there will be 

much less need for a limited exemption 

as obligated parties will gain experience 

in the first few years of the program 

with the QAP, and we would expect 

their confidence in the validity of Q– 

RINs to grow over this timeframe as 

well. Accordingly, the Agency sees the 

work needed by industry to optimize 

implementation of the QAP continuing 

for some time past the proposed 2014 

sunset, but not permanently. The 

Agency is committed to monitoring the 

situation surrounding the limited 

exemption and its use. We will assess 

whether the provision is working as 

intended and whether it has encouraged 

the use of small producer RINs. We will 

evaluate based on the circumstances 

whether it is appropriate to extend the 

limited exemption past 2016. In 

response to the comment that the 

limited exemption exceeded the EPA’s 

authority because it would effectively be 

a waiver, the Agency views 

implementing a limited exemption over 

several years as falling under the 

Agency’s ability to use reasonable 

discretion to ensure that volume 

mandates are met. There remains an 

obligation on the renewable fuel 

producer to replace the RIN. A limited 

exemption will properly incentivize 

obligated parties to use the QAP, which 

in turn will increase the likelihood of 

valid RINs and compliant fuel being 

introduced into the marketplace. This is 

a reasonable way to ensure compliance 

with the volume mandates. It is not a 

waiver of a national volume or a waiver 

of the standards; instead it is a 

reasonable, temporary mechanism for 

determining compliance by an 

individual party with their individual 

RVO. 

3. Administrative Process for 

Replacement of Invalidly Generated 

RINs 

Based on the discussion below and 

the comments received, the Agency is 

finalizing the administrative process for 

replacement of invalidly generated RINs 

as proposed with minor changes and 

clarification. The Agency is changing 

the notification window from 24 hours 

to ‘‘within five business days’’. The 

Agency understands that identification 

may occur on a weekend, a holiday, or 

other period of time when the 

responsible corporate official is 

unavailable. This revision accounts for 

those situations where notification 

within 24 hours would not be 

practicable. Additionally, the Agency is 

clarifying that it is only asking for email 

notification of potentially invalid RINs 

(‘‘PIRs’’) via the EMTS support line 

(support@epamts-support.com), along 

with a brief initial explanation of why 

the RIN is believed to be a PIR. The 

Agency understands that resolution of 

the problem will take additional time in 

most instances, thus the requirement 

that the RIN generator has 30 days upon 

self-identification or notification by the 

QAP auditor of a PIR to take a corrective 

action, which still includes the remedial 

actions currently available to industry. 

See § 80.1474 of the regulations for 

details of the administrative process for 

replacement of invalid RINs. 

The administrative process for 

replacement of invalid RINs places 

initial responsibility to replace invalidly 

generated RINs on the RIN generator 

responsible for causing the invalidity, 

regardless of who actually owns the 

invalid RINs at the time that the 

invalidity is discovered. In the event 

that the RIN generator does not replace 

the invalidly generated RINs according 

to the administrative process, the 

obligated party will be required to 

replace the invalid RINs if the RINs 

were verified under the QAP or were 

unverified. Thus, for invalidly generated 

RINs verified by a QAP and for 

unverified RINs, the obligated party 

who owns the RINs will bear the 

replacement responsibility. The 

administrative process for replacement 

of invalid RINs does not, in any way, 

limit the ability of the United States to 

exercise any other authority to bring an 

enforcement action under Section 211 of 

the Clean Air Act, or the fuels 

regulations at 40 CFR part 80. Thus, in 

the event that regulated parties fail to 

implement the administrative process 

for replacement of any RINs, the EPA 

could bring an enforcement action 

seeking injunctive relief and civil 

penalties against any or all of the parties 

that were required to replace the invalid 

RINs. The EPA understands obligated 

parties would retain the ability to 

contest the invalidity of RINs in any 

enforcement action commenced. 

As an example, the process (fully 

detailed in the regulations in § 80.1474) 

for replacing invalidly generated RINs, 

whether Q–RINs or unverified, is 

outlined below. In general, verified 

potentially invalid RINs cannot be 

transferred or used for compliance 

purposes. 

In the event that the EPA or the 

independent third-party auditor 

identifies a RIN that may have been 

invalidly generated, the RIN will be a 

PIR. The RIN generator will be required 

to take one of three possible corrective 

actions within 30 days of being notified 

of the PIR: 

• If the RIN generator no longer has 

the PIR in its possession, it must retire 

a valid RIN of the same D-code as the 

PIR, either by purchasing it or by 

generating a new valid RIN and 

separating it from the physical volume 

it represents; 

• If the RIN generator still has the PIR 

in its possession, it must retire the PIR; 

or 

• If the RIN generator believes the PIR 

was in fact validly generated, it must 

submit a written demonstration 

providing a basis for its claim of validity 

to the third-party auditor and the EPA. 

If the third-party auditor determines 

that the demonstration is sufficient, the 

RIN will no longer be a PIR, and will not 

need to be replaced; however, the EPA 

will reserve the right to make a 

determination regarding the validity of 

the RIN. If the EPA determines that the 

demonstration is sufficient, the RIN will 

not need to be replaced. However, if the 

third-party auditor determines the 

demonstration is not sufficient and if 

the EPA confirms that determination, or 

if the EPA determines the 

demonstration is not sufficient, it will 

notify the RIN generator of that finding 

and again require the RIN generator to 

replace the invalid RIN within 30 days. 

In order to allow a producer to replace 

a PIR with a new valid RIN from 

mstockstill on DSK4VPTVN1PROD with RULES2

42086 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

renewable fuel that it has generated, we 

are finalizing a new provision in 

§ 80.1429 that will permit producers to 

separate RINs from volume they 

produced for the specific purpose of 

retiring RINs to replace a PIR deemed 

invalid. If the RIN generator retired a 

valid RIN to replace a PIR deemed 

invalid, the invalid RIN that it replaced 

can continue to be transferred or used 

for compliance by any party. However, 

if the RIN generator for any reason failed 

to replace the PIR deemed invalid, the 

RIN owner will be notified of the failure 

and will be required to retire the invalid 

RIN within 60 days. If the PIR deemed 

invalid had already been used for 

compliance with its RVO, the obligated 

party will be required instead to correct 

its compliance reports by removing the 

invalid RINs from its reports and 

replacing the invalid RINs with valid 

RINs. Unless and until the PIR deemed 

invalid is replaced, either by the RIN 

generator or the obligated party, it will 

remain an invalid RIN and cannot be 

transferred or used for compliance 

purposes. 

When an auditor or the EPA 

determines that a PIR is invalid, the RIN 

generator will be notified directly. At 

this point, the process of retiring an 

appropriate valid RIN will begin. 

There will be two forms of invalid 

RIN replacement: 

(1) If a party that is required to replace 

an invalid verified RIN owns the RIN in 

question, it may be retired through 

EMTS in the same way that invalid RINs 

under the current regulations are 

retired. 

(2) If a party that is required to replace 

an invalid verified RIN does not own 

the RIN in question, or the RIN has 

already been used for compliance, the 

party will be required to acquire a valid 

RIN and retire it in place of the invalid 

RIN. In this case, since it will be a valid 

RIN that is being retired, a new 

retirement code reason has been created 

in EMTS for this purpose. 

The Agency received multiple 

comments regarding one particular 

element of the administrative process 

for replacement of invalidly generated 

RINs. In the administrative process, RIN 

generators and independent third-party 

auditors are required to notify the EPA 

of their identification of PIRs within 24 

hours. The commenters felt that 24-hour 

notice of PIRs to the EPA was too short 

of a window and did not allow 

sufficient time for proper investigation 

of the PIR and subsequent resolution of 

the problem. Commenters suggested 

being allowed anywhere between three 

and 30 days to notify the EPA of a PIR. 

The Agency’s goal of this element is 

simply identification and notification of 

the PIR to the EPA, not resolution of the 

problem, if one exists, with the PIR. 

Therefore, the Agency is changing the 

notification window from 24 hours to 

‘‘within five business days’’. The 

Agency understands that identification 

may occur on the weekend or holidays 

or while the responsible corporate 

official is unavailable. This revision 

accounts for those situations where 

notification within 24 hours would not 

be practicable. 

Multiple commenters suggested that 

the administrative process should 

revolve around ‘‘confirmed’’ problems 

with RIN validity as opposed to 

‘‘potential’’ problems with RIN validity. 

Commenters reasoned that if it applied 

to ‘‘confirmed’’ problems as opposed to 

‘‘potential’’ problems, auditors and 

producers would have time to fix any 

associated problems and that many 

‘‘potential’’ problems do not result in 

invalid RINs. The Agency is clarifying 

that it is only asking for email 

notification of PIRs via the EMTS 

support line, along with a brief initial 

explanation of why the RIN is believed 

to be a PIR. The goal of this element is 

simply identification and notification of 

the PIR to the EPA, not resolution of the 

problem, if one exists, with the PIR. The 

Agency understands that resolution of 

the problem will take additional time in 

most instances; thus the requirement 

that the RIN generator has 30 days upon 

identification or notification of a PIR to 

take a corrective action, which still 

includes the remedial actions currently 

available to industry. Additionally, only 

once the ‘‘potential’’ problem is 

‘‘confirmed’’ and the RIN is invalid 

would the owner of that RIN be notified, 

so there will be no effect on liquidity in 

the market or any market disruptions for 

notifying the EPA of potential problems 

with RIN validity. 

Additionally, the Agency originally 

proposed that an invalid verified RIN 

must be replaced by a valid verified RIN 

of the same D code. After receiving and 

reviewing several comments that any 

valid RIN, whether verified or 

unverified, should be able to replace an 

invalid verified RIN as long as they were 

of the same D code, the Agency agrees 

with this assessment. The purpose of 

replacement of invalid RINs is to ensure 

that a valid RIN has been retired in its 

stead to meet an RVO. The key is the 

validity of the RIN, not whether it was 

verified or not. Therefore, the Agency is 

finalizing that replacement of invalid 

verified RINs may be completed with 

either valid verified RINs of the same D 

code or valid unverified RINs of the 

same D code. 

4. Producer Separation of RINs 

We did not propose but requested 

comment on a regulatory change in 

which renewable fuel producers would 

be prohibited from separating RINs. 

Based on the discussion below and 

comments received, the Agency is 

keeping the separation provisions of the 

regulations as currently written, and 

producers will retain the ability to 

separate RINs under the limited 

circumstances specified in 

§ 80.1429(b)(4). 

Under the current regulations, RINs 

generally cannot be separated from the 

wet gallons they represent until the 

point of fuel blending or fuel purchase 

by an obligated party. However, a 

renewable fuel producer can separate 

RINs from their associated volumes of 

renewable fuel under the limited 

conditions specified in § 80.1429(b)(4), 

including where the fuel in question has 

been designated for a conforming use 

(i.e., for transportation fuel, heating oil 

or jet fuel) and is in fact used for such 

a conforming use, without further 

blending. In this circumstance, any 

owner of the RIN and associated gallon 

(including the producer of the fuel) may 

separate the RIN from the fuel. The 

intent of this provision was to avoid 

situations in which RINs were never 

separated from renewable fuel due to its 

use in neat form or some atypical blend. 

In the fraud cases that occurred in 

2011–2012, some registered biodiesel 

producers exploited this provision and 

generated, separated, and sold invalid 

RINs without an associated volume of 

renewable fuel. Some have argued that 

removing this option and prohibiting 

producers from separating RINs from 

the volumes they produce would reduce 

the ability of producers to generate 

fraudulent RINs without the knowledge 

of other parties in the RIN market. 

While this mechanism might reduce 

the problem of producer fraud (of the 

type already seen), it would not 

eliminate the number of other ways 

invalid RINs could be generated at the 

point of production. Moreover, it could 

create new concerns, as legitimate cases 

of producers separating RINs from 

volume would be prohibited. This 

would only be a partial solution to the 

problem of fraud and invalid RIN 

production. We solicited comment on 

the benefits of producers’ ability to 

separate RINs from wet gallons in the 

limited circumstances that are currently 

permitted, and whether these benefits 

outweigh the potential added risk of 

fraudulent RINs in the market. 

The Agency received comments from 

obligated parties that removing 

producers’ ability to separate RINs 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42087 

would greatly reduce the ability of 

producers to generate fraudulent RINs. 

The Agency also received comments 

from producers, particularly small 

producers, as well as their trade 

associations, that the ability of small 

producers to separate RINs is vital to 

their livelihood. These comments stated 

that many of the gallons sold by small 

producers, particularly in local and 

regional markets, are sold to end-users 

who use the biodiesel directly and are 

not obligated parties under the RFS and 

do not want to be in the business of 

owning or selling RINs. These small 

producers often sell fuel directly to 

farmers or municipalities, and separate 

the RIN from the wet gallon so the 

buying party does not have to deal with 

the RIN. The producer comments also 

noted that allowing producers to 

separate RINs allows for easier 

compliance with the RFS volume 

requirements as the fuel can be used 

locally rather than shipped to obligated 

parties. The Agency agrees that allowing 

producers, particularly small producers, 

to separate RINs under certain 

circumstances is critical to their keeping 

their businesses viable. 

The Agency notes that the percentage 

of RIN separations for neat use is 

extremely small when compared to the 

percentage of RIN separations by 

obligated parties and blenders. For 

example, through September 2013, for 

biomass-based diesel (D4 RINs), the 

percentage of RIN separations attributed 

to neat use was 1.7%, while the 

percentage of RIN separations attributed 

to obligated parties and blenders was 

92.2%. Additionally, the 

implementation of QAPs will provide 

an added layer of scrutiny on producers 

to ensure they are producing actual 

gallons of fuel with the associated RINs. 

Overall, the EPA believes the benefits of 

continuing to allow producer separation 

of RINs under the conditions specified 

in the regulations outweighs the 

reduction in risk of invalid RIN 

generation. 

B. Treatment of Interim Period RINs 

In the proposed rulemaking, the EPA 

set forth guidelines for an informal ‘‘preregistration’’ process to facilitate the 

development and implementation of 

QAPs in the interim period between 

publication of the NPRM and the final 

rule’s effective date. The EPA reviewed 

auditors’ registration information and 

proposed QAPs, and provided guidance 

on whether the plans appeared to satisfy 

the proposed requirements. The EPA 

identified those auditors whose 

submissions were consistent with the 

requirements in the proposed 

regulations as part of this informal preregistration process. RINs audited prior 

to the effective date of the final rule 

through a QAP which the EPA had 

informally pre-registered could be 

informally verified by the auditor, but 

they would only be formally verified 

after the final rule goes into effect, and 

after the EPA approved the QAP that 

was used in the audit process. Several 

auditors made use of this informal 

process. The names of those auditors 

and QAPs whose submissions were 

consistent with the applicable 

requirements in the proposed 

regulations were published on the EPA’s 

Web site (http://www.epa.gov/otaq/

fuels/renewablefuels/qap.htm). 

Furthermore, given the short time 

period of RIN generation at issue in the 

period between publication of the 

NPRM and the final rule’s effective date 

and the desire to have QAP plans start 

up as quickly as possible, the EPA 

allowed auditors to verify RINs 

generated before the date the audit was 

completed. This ‘‘retrospective’’ RIN 

verification was only available prior to 

the effective date of the final rule, was 

only allowed for auditors whose QAPs 

were already in place and fully 

operational, and could only be 

performed once per producer. In other 

words, the one-time retrospective audit, 

if used, had to be completed prior to the 

effective date of the final rule. These 

limitations were intended to ensure that 

auditors were not inappropriately 

misusing this flexibility by doing all 

retrospective audits until the final rule’s 

effective date. Instead, they were 

encouraged to get QAP-based audits up 

and running in their intended 

prospective form as soon as possible, 

while allowing reasonable flexibility to 

account for the start-up lag. 

The EPA’s review of proposed QAPs 

and the informal pre-registration 

process was not a final agency decision 

or approval of any auditor or QAP. The 

EPA’s initial review of auditors’ 

proposed QAPs provided guidance as to 

whether the EPA had any concerns 

about the plans and whether they were 

consistent with the requirements in the 

proposed regulations. Publication of the 

auditors’ names and available QAPs was 

intended to provide useful information 

for outside parties who were evaluating 

the risk associated with RINs audited 

prior to the effective date of the final 

rule. The EPA’s guidance or feedback to 

the auditors conferred no legal rights or 

privileges to the auditors, or to the 

production facilities and RINs they 

reviewed prior to the final rule’s 

effective date. 

Through this pre-registration process, 

the auditors began to market their QAP 

services and review RINs for purchasers, 

with a great deal of confidence that 

those RINs would receive all the 

benefits of QAP-verified RINs after the 

final rule became effective. We noted in 

the NPRM that if the requirements or 

structure of the QAP program should be 

altered in the final rule, we expected 

that RINs reviewed by auditors prior to 

the final rule according to the 

requirements set out in the NPRM 

would still be eligible for treatment as 

QAP-verified RINs. 

Since publication of the NPRM, the 

EPA received and reviewed a number of 

QAP plans from prospective auditors 

and informally pre-registered six of 

them. These auditors have been 

developing a clientele of producers and 

RIN purchasers and applying their QAP 

procedures to RINs. The review and 

development of the proposed QAPs has 

been an iterative process between the 

EPA and the potential auditors. This 

process has been extremely useful both 

for the auditors in developing a QAP 

that is consistent with the NPRM’s 

standards and also for the EPA in 

developing the final rule. Both QAP A 

and QAP B procedures were developed 

and applied to RINs during this period, 

with the vast majority being QAP B 

RINs. 

As further discussed in section II.A.1 

of this preamble, we are finalizing only 

a single QAP for use as of January 1, 

2015, with RIN owners retaining 

replacement obligation for invalid 

verified RINs. However, any RINs 

audited and informally verified 

according to a QAP A or QAP B as 

proposed in the NPRM prior to the final 

rule’s effective date will still receive the 

treatment proposed for QAP A or QAP 

B RINs in the NPRM if the auditor’s 

registration and QAP are approved by 

the EPA after the final rule is effective. 

The EPA will review all pre-registered 

QAPs after the final rule’s effective date 

and any RINs that were informally 

verified under a pre-registered QAP by 

a registered auditor will be treated 

consistently with the proposed 

provisions for A–RINs and B–RINs in 

the NPRM. Also, any RINs generated 

from the effective date of the final rule 

through December 31, 2014 that are 

audited and verified according to a 

registered QAP A or B will also receive 

the treatment proposed for QAP A or 

QAP B RINs in the NPRM. In other 

words, all RINs verified by a QAP that 

is registered as an A or B QAP after the 

effective date of the final rule and that 

are generated prior to January 1, 2015, 

are considered ‘‘interim RINs’’ because 

the ‘‘interim period’’ is defined as the 

period from publication of the NPRM 

through December 31, 2014. We 

determined that in order to facilitate a 

mstockstill on DSK4VPTVN1PROD with RULES2

42088 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

10Please see 78 FR 12158 (February 21, 2013) for 

a detailed description of QAP A as proposed. 

11Please see 78 FR 12158 (February 21, 2013) for 

a detailed description of QAP B as proposed. 

smooth transition to EMTS and allow 

sufficient time for user testing and 

development, the interim period (in 

which auditors can continue to verify 

RINs according to an Option A or 

Option B QAP) would have to be 

extended beyond the effective date of 

the final rule. Auditors applying Option 

A and Option B QAPs will continue to 

maintain records of their activities and 

of RINs verified through their QAPs, just 

as they did in the period before the final 

rule’s effective date. A–RINs and B– 

RINs will not be reflected in any way in 

EMTS reporting. If the EMTS system is 

capable of fully handling the ‘‘tagging’’ 

of RINs as Q–RINs prior to the end of 

the interim period, the EPA may offer 

auditors the opportunity to begin 

verifying RINs under the final ‘‘Q–RIN’’ 

protocol prior to January 1, 2015. 

For A–RINs generated in the interim 

period, the applicable provisions, 

discussed further in section II.C of this 

preamble, include an affirmative 

defense to civil penalties for owners of 

invalid QAP-verified RINs who 

unknowingly transferred or retired the 

RINs for compliance with their RVOs. 

They also include the auditor’s 

replacement responsibility for any 

invalid verified A–RINs that are not 

replaced by the producer up to a two 

percent cap, and the RIN owner’s 

corresponding lack of replacement 

responsibility for those RINs. Auditors 

who verified these interim period A– 

RINs are obligated to maintain the 

replacement mechanism sufficient to 

meet their potential replacement 

responsibility, as set forth in the NPRM. 

Auditors who marketed and applied 

Option A QAP procedures during the 

interim period are not required to 

submit their QAP as an Option A QAP 

after the final rule, but may submit it as 

an Option B QAP. This may be 

preferable if, for instance, the auditor 

does not wish to maintain the 

replacement mechanism responsibility 

for the required 5 year period. The 

Option A QAP requirements set out in 

the NPRM were inclusive of all Option 

B requirements, so any QAP fulfilling 

the Option A requirements would also 

fulfill the Option B requirements. 

RINs audited and informally verified 

according to a QAP B during the interim 

period will receive the treatment 

proposed for B–RINs in the NPRM, 

which is the same treatment proscribed 

generally for verified ‘‘Q–RINs’’ in the 

final rule. Once the EPA registers a QAP 

B auditor and approves their QAP, then 

any RINs that were informally verified 

during the interim period by that 

auditor using that QAP will be treated 

as QAP B verified RINs under the final 

rule, and will receive the benefits for 

QAP B verified RINs, including an 

affirmative defense to civil penalties for 

owners of invalid B–RINs who 

unknowingly transferred or retired the 

RINs for compliance with their RVOs. 

They also include a limited exemption 

for the RIN owner’s obligation to replace 

up to two percent of the invalid verified 

RINs, if the producer does not replace 

them first. These provisions are further 

described in section II.D of this 

Preamble. 

C. Provisions of RIN Verification Under 

QAP A During the Interim Period 

Given that there will be only a single 

QAP finalized, the provisions and 

elements of QAP A that were proposed 

in the NPRM will be finalized for a QAP 

A used in the interim period. A number 

of comments were raised regarding QAP 

A which has led the Agency to not 

finalize it outside of the interim period. 

However, in considering those same 

comments for the interim period, we 

have concluded that it is appropriate to 

finalize QAP A as proposed since any 

benefits to changing QAP A in response 

to comments would not be outweighed 

by the significant complexity it would 

entail. This is especially true when 

considering parties have already 

implemented QAP A as proposed 

during the interim period. The 

discussion for why only a single QAP is 

being finalized is discussed in Section 

II.A.1. 

We are finalizing the provisions of 

RIN verification under a QAP A used 

during the interim period as was 

proposed in the NPRM except for one 

element of the affirmative defense.10 For 

consistency in affirmative defense 

elements of QAP A and the single QAP 

after the effective date of this final rule, 

the Agency is increasing the notification 

timeframe for QAP A from ‘‘within 24 

hours’’ to ‘‘within five business days’’ as 

it did for the single QAP. A QAP A used 

during the interim period will include 

an affirmative defense (see § 80.1473(c) 

of the regulations), a RIN replacement 

mechanism held by the auditor (see 

§ 80.1470(b) of the regulations), a cap on 

auditor replacement of invalid A–RINs 

(see § 80.1470(c) of the regulations), and 

a process for determining who will 

replace any invalid RINs (see § 80.1474 

of the regulations). 

With regard to the required RIN 

replacement mechanism, it must 

provide coverage for two percent of each 

D code of A–RINs verified by an auditor 

in the current year and (up to) the 

previous four years. For example, the 

RIN replacement mechanism for A–RINs 

verified during the interim period in 

2013 should be capable of replacing 

those A–RINs until the end of 2017. 

Likewise, the RIN replacement 

mechanism for A–RINs verified during 

the interim period in 2014 should be 

capable of replacing those A–RINs until 

the end of 2018. Note that the interim 

period for verifying RINs under QAP A 

ends December 31, 2014. However, the 

RIN replacement mechanism must be 

capable of replacement of A–RINs until 

the aforementioned dates. 

We also believe it is appropriate to 

cap the number of A–RINs that each 

auditor must replace at two percent of 

the A–RINs it has verified in the interim 

period. In other words, the RIN 

replacement cap should be equal to the 

minimum replacement coverage 

required for Option A auditors. Given 

that QAP A is only available during the 

interim period and will cease after 

December 31, 2014, the cap will apply 

to all A–RINs that have been verified by 

an auditor during the interim period. 

D. Provisions of RIN Verification Under 

QAP B During the Interim Period 

Given that there will be only a single, 

new QAP finalized after the interim 

period, the provisions and elements of 

QAP B that were proposed in the NPRM 

will be finalized for a QAP B used 

during the interim period. The majority 

of commenters did not address 

individual elements of QAP B, and were 

in favor of the affirmative defense and 

limited exemption provisions. For 

consistency in affirmative defense 

elements of QAP B and the single QAP 

after the effective date of this final rule, 

the Agency is increasing the notification 

timeframe for QAP B from ‘‘within 24 

hours’’ to ‘‘within five business days’’ as 

it did for the single QAP. As a result, in 

the final rule, the Agency is finalizing 

a single new QAP that incorporates the 

majority of the characteristics of QAP B 

(there will be one additional verification 

component under RIN generation). The 

finalization of QAP B for the interim 

period reflects the fact that parties have 

already implemented QAP B as 

proposed during the interim period. The 

discussion for why only a single QAP is 

being finalized is discussed in Section 

II.A.1. 

Again, we are finalizing the 

provisions of RIN verification under a 

QAP B used during the interim period 

as was proposed in the NPRM.11 A QAP 

B used during the interim period will 

include an affirmative defense (see 

§ 80.1473(d) of the regulations), a two 

percent limited exemption in calendar 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42089 

years 2013 and 2014 (see § 80.1474(e) of 

the regulations), and a process for 

determining who will replace any 

invalid RINs (see § 80.1474 of the 

regulations). 

E. Provisions for RIN Verification Under 

the QAP 

1. Elements of the QAP 

We are finalizing the elements for the 

QAP based on QAP B as proposed with 

one additional element. See Section 

II.E.1.c, RIN generation-related 

components, for this additional element. 

We are also removing the requirement 

that the production process is consistent 

with the D code being used. The 

existence of the element requiring that 

the production process is consistent 

with what is reported in EMTS (see 

Table II.D.1.b–1, element 2–1) renders it 

unnecessary. The QAP will be used by 

EPA-approved independent third-party 

auditors to audit renewable fuel 

production. The QAP will have to 

include a list of elements that the 

auditor will check to verify that the 

RINs generated by a renewable fuel 

producer or importer are appropriate 

given the feedstock, production process 

and fuel for which RINs were generated. 

Therefore, each QAP must identify the 

specific RIN-generating pathway from 

Table 1 to § 80.1426 or a petition 

granted pursuant to § 80.1416 that it is 

designed to audit. 

We requested comment on these 

proposed elements, including detailed 

descriptions of any elements not 

mentioned below. We also requested 

comment on whether quarterly 

monitoring is appropriate, or whether 

different components could or should 

be subject to different schedules (e.g., 

monthly, biannually, etc.), and what 

those schedules should be, and why. 

Some commenters were against the 

quarterly requirement for various 

components of the QAP, stating that 

there is no reason to review 

documentation more frequently than 

annually if it does not change regularly. 

The EPA disagrees with these 

comments, as verifying quarterly that 

procedures and processes have not 

changed is an essential part of the QAP. 

Since RINs will be verified only for the 

period following an audit, allowing 

more time between reviews may 

increase the likelihood of fraud and 

reduce the effectiveness of the QAP. The 

one exception to this is the annual attest 

report, which is submitted annually, 

and therefore can be reviewed annually. 

Other comments expressed concern over 

the QAP covering elements of 

production that were not required under 

RFS2. We feel that the requirements are 

balanced and give assurance that the 

production process from feedstock to 

RIN generation was performed 

appropriately, and thus, are finalizing 

all requirements for the single, new 

QAP as were proposed for QAP B. 

Additional comments and the 

required elements of the QAP are 

discussed below. 

a. Feedstock-Related Components 

There are eight required elements in 

the QAP designed to ensure that the 

feedstocks used in the production of 

renewable fuel qualify to generate RINs. 

First, for each batch of renewable fuel, 

the QAP must verify that feedstocks 

meet the definition of ‘‘renewable 

biomass,’’ and identify which renewable 

biomass per § 80.1401. 

There are specific required elements 

depending on the type of feedstock. For 

instance, if the feedstock is separated 

yard waste, separated food waste, or 

separated MSW, the QAP must verify 

that a separation plan has been 

submitted and accepted or approved, as 

applicable, as part of the registration 

requirements under § 80.1450, and 

meets the requirements of 

§ 80.1426(f)(5), and that all feedstocks 

being processed meet the requirements 

of the separation plan. If the renewable 

fuel producer claims that the feedstocks 

qualify under the aggregate compliance 

approach, the QAP will verify that the 

feedstocks are planted crops or crop 

residue that meet the requirements of 

§ 80.1454(g). 

The QAP must verify that the 

feedstocks used to produce renewable 

fuel are valid for the D code being 

claimed under § 80.1426 (or have an 

approved petition under § 80.1416) and 

must be consistent with the information 

reported in EMTS. The QAP will verify 

that the feedstock used to produce 

renewable fuel is not a renewable fuel 

from which RINs were already 

generated, unless the fuel is produced 

pursuant to an EPA-approved petition 

under § 80.1416 and the petition and 

approval includes an enforceable 

mechanism to prevent double counting 

of RINs. 

Finally, the QAP must verify the 

accuracy of all feedstock-related factors 

used in calculation of the feedstock 

energy used under § 80.1426(f)(3)(vi) or 

(f)(4), as applicable, including the 

average moisture content of the 

feedstock, in mass percent, and the 

energy content of the components of the 

feedstock that are converted to 

renewable fuel, in Btu/lb. The 

feedstock-related elements required for 

the QAP are shown in the table below. 

All items will be required to be 

monitored on a quarterly basis. 

TABLE II.E.1.A–1—QAP MONITORING

FREQUENCY—FEEDSTOCK-RELATED

Component 

1–1 .... Feedstocks are renewable biomass. 

1–2 .... Separation plan for food or yard 

waste submitted and accepted. 

1–3 .... Separation plan for municipal solid 

waste submitted and approved. 

1–4 .... Feedstocks meet separation plan. 

1–5 .... Cropand/or crop residue feedstocks 

meet land use restrictions. 

1–6 .... Feedstock valid for D code, consistent with EMTS. 

1–7 .... Feedstock is not renewable fuel 

where RINs generated. 

1–8 .... Accuracy of feedstock energy calculation. 

b. Production Process-Related 

Components 

There are four required elements in 

the QAP designed to ensure that the 

renewable fuel production process is 

appropriate for the RINs being 

generated. Auditors submitting QAPs 

for EPA approval will be required to 

provide a list of specific steps they will 

take to audit all four elements. 

First, the QAP must verify that 

production process technology and 

capacity used matches information 

reported in EMTS and in the facility’s 

RFS2 registration. The QAP also must 

verify that the production process is 

capable of producing, and is producing, 

renewable fuel of the type being 

claimed, i.e., is consistent with the D 

code being used as permitted under 

Table 1 to § 80.1426 or a petition 

approved through § 80.1416. 

For each batch of renewable fuel, the 

QAP requires mass and energy balances 

of the production process, and must 

verify that the results match 

expectations for the type of facility 

being audited (e.g., biodiesel from 

soybean oil may have different 

expectations than biodiesel from nonfood grade corn oil) based on typical 

values from prior input/output values, 

or similar facilities if prior values are 

not available. Energy inputs from on-site 

energy creation (e.g., propane, natural 

gas, coal, biodiesel, heating oil, diesel, 

gasoline, etc.) and/or energy bills, and 

mass inputs/outputs such as feedstocks, 

additional chemicals, water, etc., are 

required as part of the mass and energy 

balances. 

Finally, the QAP must verify the 

accuracy of all process-related factors 

used in calculation of the feedstock 

energy (FE) under § 80.1426(f)(3)(vi) or 

(f)(4), as applicable. The production 

process-related elements for the QAP 

are shown in the table below. All items 

shall be monitored on a quarterly basis. 

mstockstill on DSK4VPTVN1PROD with RULES2

42090 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

TABLE II.E.1.B–1—QAP MONITORING

FREQUENCY—PRODUCTION PROCESS-RELATED

Component 

2–1 .... Production process consistent with 

EMTS. 

2–2 .... Mass and energy balances appropriate. 

2–3 .... Accuracy of process-related factors 

used in feedstock energy (FE) calculation. 

c. RIN Generation-related Components 

There are eight required elements in 

the QAP designed to ensure that the 

renewable fuel being produced qualifies 

to generate RINs, and that the number 

of RINs generated is accurate. In 

finalizing the elements for the QAP, we 

have added one requirement to the 

regulations that we proposed. The 

additional requirement is that auditors 

must verify that RIN generation is 

consistent with wet gallons produced. 

See the discussion below for more 

information. 

For each batch of renewable fuel, the 

QAP must verify that volumes of 

renewable fuel for which RINs are being 

generated are designated for use as 

transportation fuel, heating oil, or jet 

fuel in the 48 contiguous states and 

Hawaii. This verification should also 

take into account the additional Product 

Transfer Document (PTD) designation 

requirements for all renewable fuels, 

and registration, reporting and 

recordkeeping requirements for fuels 

not typically used as transportation fuel, 

heating oil, or jet fuel. See section III.B.1 

of this preamble for further discussion 

of these additional requirements. 

The QAP must verify a number of 

things related to the fuel type. For 

instance, the QAP will include 

verification of the existence of 

certificates of analysis demonstrating 

that the renewable fuel being produced 

meets any applicable specifications and/ 

or definitions in § 80.1401, and verify 

contracts with lab(s) for certificates of 

analysis, unless a facility has an on-site 

laboratory. If on-site, the QAP must 

verify lab procedures and test methods. 

The QAP must verify that renewable 

fuel being produced at the facility and 

that can be produced, matches 

information in RFS2 registration in 

terms of chemical composition, and 

must sample and test the final fuel and 

compare to any applicable 

specifications. The QAP must verify that 

renewable fuel being produced matches 

the D code being claimed under 

§ 80.1426, or approved petition under 

§ 80.1416. 

The QAP must verify a number of 

things related to the volume of 

renewable fuel produced, including a 

check to ensure that volume 

temperature correction procedures are 

followed correctly. The QAP must verify 

that the volume of renewable fuel 

produced matches expectations for the 

amount of feedstock being processed. 

The QAP also must verify the accuracy 

of all fuel-related factors used in 

calculation of the feedstock energy, as 

applicable, including equivalence value 

for the batch of renewable fuel and the 

renewable fraction of the fuel as 

measured by a carbon-14 dating test 

method. 

The QAP must verify that the 

production volume being claimed 

matches storage and/or distribution 

capacity and that actual volume 

production capacity matches the value 

specified in the facility’s RFS 

registration. Finally, the QAP must 

verify that appropriate RIN generation 

calculations are being followed under 

§ 80.1426(f)(3), (4), or (5) as applicable, 

and that RIN generation was consistent 

with wet gallons produced. We are also 

specifying in the regulations that the 

auditor must verify that RIN generation 

was consistent with wet gallons 

produced. While this was discussed in 

the proposal (see 78 FR 12182), it was 

not explicit in the regulations. We are 

making it explicit in the final 

regulations. The RIN generation-related 

elements for QAPs are shown in the 

table below. All items will be required 

to be monitored on a quarterly basis. 

TABLE II.E.1.C–1—QAP MONITORING

FREQUENCY—RIN GENERATION-RELATED

Component 

3–1 .... Renewable fuel designated for qualifying uses. 

3–2 .... Certificates of analysis. 

3–3 .... Renewable fuel matches D code or 

petition. 

3–4 .... Renewable content R is accurate. 

3–5 .... Equivalence value EV is accurate, 

appropriate. 

3–6 .... Volume production capacity is consistent with registration. 

3–7 .... RIN generation calculations. 

3–8 .... RIN generation consistent with wet 

gallons. 

d. RIN Separation-Related Components 

There are three required elements in 

the QAP to verify that RINs were 

separated properly. First, under the 

limited circumstances where a 

renewable fuel producer or importer 

separates RINs, the QAP will be 

required to verify that any RIN 

separation being done by the producer 

was done according to the requirements 

of § 80.1429, was reported to EMTS 

accurately and in a timely manner, and 

is supported by records. The QAP will 

be required to ensure that renewable 

fuel producers who export renewable 

fuel, or cause the export of renewable 

fuel, do not generate RINs, or 

alternatively that any RINs generated 

were appropriately retired. Finally, the 

QAP must verify the accuracy of the 

annual attestation. 

The RIN separation-related elements 

for the QAP are shown in the table 

below. All items must be monitored on 

a quarterly basis, except for the annual 

attestation review, which must be 

monitored yearly. 

TABLE II.E.1.D–1—QAP MONITORING

FREQUENCY—RIN SEPARATION-RELATED

Component 

4–1 .... Verify RIN separation. 

4–2 .... Exported fuel not used to generate 

RINs. 

4–3 .... Verify accuracy of annual attestation. 

2. Approval and Use of QAPs 

a. Approval of QAPs 

A third-party auditor choosing to 

verify RINs under the quality assurance 

program must submit a QAP to the EPA 

for approval. A separate QAP is required 

for each different feedstock/production 

process/fuel type combination (i.e., 

pathway). A QAP for a given pathway 

may be used for multiple facilities for 

which that pathway applies. A QAP 

must be submitted for approval 

annually. A QAP will be deemed valid 

for one year from the date the EPA 

notifies the submitting party that its 

QAP has been approved. Only an EPAapproved QAP can be used by a thirdparty auditor to provide audit services 

to renewable fuel producers. 

b. Frequency of Updates/Revisions to 

QAPs 

We are finalizing a ‘‘general’’ and 

‘‘pathway-specific’’ QAP arrangement, 

where the general QAP will cover the 

common elements of the QAP and the 

pathway-specific QAP will cover 

elements that require additional 

verification steps outside of the general 

QAP. We are also finalizing that QAP 

plans are pathway-specific, and auditors 

may verify RINs for any facility that 

uses a pathway for which they have 

been approved. This is consistent with 

what was proposed in the NPRM, and 

is simply a clarification of the method 

for implementation. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42091 

We requested comment on what 

changes would require a new QAP to be 

submitted for approval. Specifically, we 

requested comment on whether a new 

QAP should be required to be submitted 

to the EPA if the audited facility 

changes operations, feedstock, fuel type, 

etc. Based on comments received, we 

would like to clarify the process for 

updating and/or revising a QAP. 

Potential QAP auditors must submit a 

‘‘general’’ QAP to the agency that 

outlines the plan for verifying each of 

the elements of the QAP. In addition to 

the general QAP, a ‘‘pathway-specific’’ 

QAP must be submitted for each of the 

pathways they intend to audit. For 

example, a general QAP might outline 

the steps the auditor will use to verify 

that equivalence value is appropriate for 

all producers, whereas a pathwayspecific QAP may outline the steps to 

verify that a separated food waste plan 

has been submitted for producers using 

used cooking oil as a feedstock to 

produce biodiesel. If an auditor feels 

that a section of the general or pathwayspecific QAP does not apply, they may 

indicate ‘‘Not Applicable’’ in that 

section of their QAP. An example might 

be an auditor that does not intend to 

audit any facilities that require testing of 

renewable content according to 

§ 80.1426(f)(9), and would therefore 

indicate in the general QAP that it did 

not apply. 

Once general and pathway-specific 

plans have been approved for a 

potential auditor by the agency, the 

auditor may verify production for any 

facility using one of their approved 

pathways. The auditor does not need to 

submit any additional information to 

the agency if they add producers who 

use a pathway for which they are 

approved. If, however, a producer 

chooses to use a pathway for which the 

auditor does not have approval, then 

any RINs generated by that producer 

will not be verified until the auditor 

submits an application for that pathway, 

and it is subsequently approved. 

Renewable fuel produced prior to the 

acceptance of a pathway for a QAP 

auditor may later be verified, as long as 

the QAP auditor followed the 

verification steps outlined in the 

submitted pathway-specific QAP, and 

the fuel is still within the eligible RIN 

generation window. 

If an auditor finds that it is necessary 

to make a change to their QAP, they 

may submit an updated plan to the EPA 

for approval. In an effort to avoid 

penalizing producers for being proactive 

in their ongoing QAP development, 

submitting a change to the EPA will not 

affect the status of any current QAP 

plans. Rather, the change will be 

queued, and the current QAP will 

remain in effect until approval or 

rejection of the updated submittal. If the 

agency chooses to reject the update, the 

existing QAP will remain in place and 

be unaffected by the attempt to update. 

If no QAP is in place, then RINs may not 

be verified until the QAP is approved. 

3. Importers and the Use of a QAP 

We are finalizing that foreign 

producers may participate in the QAP 

under the same production 

requirements as a domestic producer, 

although the method of implementation 

for each of the requirements may vary 

based on circumstances for each 

producer, domestic or foreign. 

We requested comment on the 

likelihood of such producers 

participating in the quality assurance 

program, any difficulties to participating 

they might encounter, and any issues 

that could affect the integrity of the 

proposed program. 

The quality assurance program will 

also apply to RINs generated for foreignproduced renewable fuel. Foreign 

producers of renewable fuel must be 

approved by the EPA and must meet all 

requirements applicable to non-foreign 

producers, i.e., the provisions of 

Subpart M. Such producers can engage 

a registered third-party auditor to audit 

their facility in accordance with the 

proposed quality assurance program. 

However, RINs generated from imported 

fuel will only be considered verified 

under the quality assurance program if 

both the associated foreign renewable 

fuel production facility, and the 

corresponding importer, are audited 

under the same EPA-approved QAP. If 

multiple auditors are involved in the 

verification process, the procedure for 

verification must be explicitly spelled 

out in a single associated QAP. In 

addition, the party submitting the QAP 

must accept responsibility for the entire 

QAP process, even if sections are 

performed by a partner organization. If 

a pre-determined arrangement is not a 

part of the QAP, then RINs from foreign 

producers may not be audited by 

multiple parties (for example, Auditor A 

verifies the foreign renewable fuel 

production and Auditor B verifies the 

importer RIN generation). 

Some commenters indicated that 

foreign producers should be allowed to 

use existing documentation to prove the 

validity of fuel produced. While the 

EPA does not intend to place any 

additional burdens on foreign producers 

above what is required for domestic 

producers, we do intend to require 

foreign producers to be bound by the 

same QAP guidelines and verification 

requirements as domestic producers, 

although implementation for these 

elements (such as the verification of RIN 

generation) may vary considerably. For 

example, an auditor verifying 

production for a foreign RIN generating 

producer will need to ensure that the 

recordkeeping and bond requirements 

under §§ 80.1466 and 80.1467 are being 

met. It will also include verifying any 

certificates of fuel transfer, as well as 

port of entry testing, none of which are 

required for domestic RIN generation. 

This is by no means an exhaustive list, 

but rather an example to show that there 

may be significant differences in the 

requirements to verify a RIN, based on 

the location of the producer and the 

type of RIN generation. With these 

additional requirements, we believe 

foreign-produced RINs verified through 

a QAP can be treated in the same 

manner as any RINs verified from 

domestically produced fuel. 

F. Auditor Requirements 

In the NPRM, we outlined a number 

of proposed requirements for the 

independent third-party auditors that 

use approved quality assurance plans 

(QAPs) to audit renewable fuel 

production to verify that RINs were 

validly generated by the producer. We 

recognized that qualified, independent 

third-party auditors are integral to the 

successful implementation of the 

quality assurance program. Therefore, 

based on feedback from public 

comments and reasons discussed below, 

we are finalizing several requirements 

for third-party auditors in today’s 

rulemaking. First, all third-party 

auditors are required to annually 

register with the EPA. We also will 

require that third-party auditors have 

professional liability errors and 

omissions insurance (E&O insurance). 

After the EPA has approved a QAP and 

registered the third-party auditor, the 

auditor can flag RINs in EMTS as 

verified and notify the EPA of 

potentially invalid RINs as QAPs are 

implemented. Finally, in order to ensure 

that QAPs are appropriately 

implemented, we are also finalizing 

recordkeeping, reporting, and attest 

engagement requirements on third-party 

auditors consistent with similar 

requirements on other parties in RFS. 

1. Who can be an auditor? 

One key element of the QAP process 

is the minimum qualifications that the 

auditors conducting facility visits must 

have. In the NPRM, we proposed three 

minimum qualifications for an auditor 

in order to implement a QAP and verify 

RINs. First, as is required of 

independent third-parties that conduct 

engineering reviews for renewable fuel 

mstockstill on DSK4VPTVN1PROD with RULES2

42092 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

producers under RFS, we proposed that 

auditors be independent of the 

renewable fuel producers that they are 

auditing. Second, we proposed that 

auditors have the professional expertise 

to effectively implement QAPs by 

having a professional engineer 

participate in the implementation of an 

EPA-approved QAP. Third, we 

proposed that third-party auditors carry 

E&O insurance. The EPA continues to 

believe that these key qualifications 

provide reasonable assurances that 

auditors can successfully implement 

QAPs and help avoid the generation of 

invalid RINs at the fuel producer level. 

a. Independence 

One of the most important 

requirements for auditors is that they 

remain independent of renewable fuel 

producers. Independence of the auditor 

from RIN generators is necessary to 

ensure that RINs are not inappropriately 

validated due to a conflict of interest 

between the third-party auditor and the 

renewable fuel producer. In the NPRM, 

we proposed that third-party auditors be 

subject to the same independence 

definition that exists for independent 

professional engineers that conduct 

engineering reviews. In the March 2010 

RFS final rule, we defined an 

independent third-party as a party that 

was not operated by the renewable fuel 

producer (or any subsidiary or employee 

of the producer) and free from any 

interest in the renewable fuel producer’s 

business (See 75 FR 14670, March 26, 

2010). 

Recognizing the importance of 

preventing conflicts of interest to the 

successful implementation of the QAP 

program, we sought comment on 

whether our proposed definition of 

independence should be expanded to 

ensure that third-party auditors were 

free from interests from other parties 

regulated by the RFS (e.g., RIN owners 

and obligated parties). We also sought 

comment on whether we should 

preclude parties that have performed 

other services, like engineering reviews, 

attest engagements or acting as an agent 

for the RIN generator, from also 

implementing QAPs for the same RIN 

generator. For example, we recognized 

that portions of the QAP may involve 

investigating previous services provided 

by a third-party auditor to RIN 

generators, and third-party auditors may 

be hesitant to highlight issues that call 

into question their professional 

reputations creating a potential conflict 

of interest. We did not propose further 

requirements, however, as we did not 

believe they were necessary, they could 

interfere with existing efforts to ensure 

compliance, and there could be 

problems given the limited number of 

parties that could be available for 

approval as an auditor. 

Public comments overwhelmingly 

agreed that ensuring the independence 

of third-party auditors is paramount to 

the successful implementation of 

effective QAPs. Commenters noted that 

third-party auditors that had conflicts of 

interests with audited producers and 

importers or direct or indirect financial 

interest in RIN markets more generally 

could undermine the QAP program and 

potentially the entirety of the RFS 

program by failing to report potential 

issues and potentially participating in 

the perpetuation of fraudulent activities. 

Commenters noted that the EPA should 

do whatever it could to ensure that 

third-party auditors remained 

independent by providing meaningful 

oversight and limiting the services that 

third-party auditors may provide for 

audited RIN generators. 

We received several comments asking 

that we expand the scope of 

independence to include independence 

from various parties and activities 

outside of audited RIN generators. 

Almost all comments that addressed the 

question of third-party auditor 

independence stated that the third-party 

auditors should be precluded from 

owning and trading RINs. Many 

commenters expressed concerns that 

RIN ownership may provide a clear 

financial incentive for third-party 

auditors to not report potential issues, 

especially if they owned RINs from 

facilities they are auditing. 

Additionally, commenters argued that 

allowing third-party auditors to own 

RINs would add one more source of 

uncertainty in an already turbulent RIN 

market and that the EPA should 

preclude third-party auditors from 

owning and trading RINs. Some 

commenters argued further that thirdparty auditors should not only be 

precluded from owning RINs, but 

should also be free from interest in 

parties that own RINs since an auditor 

could improperly verify RINs to allow 

the owners of those RINs to enjoy the 

benefits of the QAP program despite the 

fact that those RINs may be invalid. On 

the other hand, one commenter urged 

the EPA to allow third-party auditors to 

trade RINs since that would make them 

statutorily responsible for the validity of 

the RINs. The commenter argued that 

the potential civil liabilities from being 

convicted of RIN fraud would outweigh 

the EPA’s conflict of interest concerns. 

We agree with commenters that 

allowing third-party auditors to own or 

trade RINs could lead to a potential 

conflict of interest that may inhibit an 

auditor’s ability to effectively 

implement a QAP. The benefits to the 

auditor from allowing third-party 

auditors to own and trade RINs does not 

outweigh our conflict of interest 

concerns since third-party auditors are 

in the best position to identify 

potentially invalid RINs and without the 

proper implementation of a QAP, 

invalid or fraudulent RINs may never be 

identified, especially if the third-party 

auditor has an incentive to ignore 

potential issues because they have a 

financial interest in whether RINs are 

valid. Third-party auditors could also 

use their access to confidential business 

information for a number of RIN 

generators to speculate on unverified 

RINs from audited RIN generators. 

Therefore, we are finalizing 

requirements that preclude third-party 

auditors from owning and trading of 

RINs. 

Some commenters argued that the 

EPA should expand the independence 

criterion for third-party auditors to 

include conflicts of interest with 

obligated parties. In the NPRM, the EPA 

suggested that it did not want to 

interfere with existing efforts by 

obligated parties or other intermediaries 

that may ensure compliance with RFS 

requirements and that such interference 

may hamper existing efforts by industry 

to mitigate invalid RIN generation. One 

commenter argued against this by 

pointing out that the EPA initially 

created the QAP program to be 

voluntary so that obligated parties could 

decide between the level of assurance in 

the quality of RINs outside the QAP 

program (i.e. under ‘‘buyer beware’’) or 

participate in the QAP program. They 

conclude that in order to promote 

consistency in the review for which an 

affirmative defense is available, thirdparty auditors must be independent 

even from obligated parties. We also 

received comments that suggested that 

we should allow the quality assurance 

efforts of an obligated party to be used 

in lieu of a QAP provided by an 

independent third-party auditor if the 

obligated party’s quality assurance 

efforts satisfied all the elements of a 

QAP. 

Although we recognize that obligated 

parties have historically implemented 

similar downstream quality assurance 

programs with great success, we also 

recognize the potential for conflict of 

interests to arise if obligated parties 

implemented a QAP for a producer or 

importer. If we treated RINs verified 

outside of a QAP by the obligated 

parties themselves the same as RINs 

verified by an approved QAP, there is a 

clear potential for the obligated party to 

verify RINs that are invalid to take 

advantage of the affirmative defense 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42093 

12For purposes of this preamble, agents are 

persons that act on behalf of a regulated party, in 

this case RIN generators, to complete requirements 

under the RFS program (e.g. generate RINs, submit 

periodic compliance reports, etc.). 

elements and take advantage of, and 

possible even exploit, the flexibility of 

the limited exemption for RIN 

replacement. This is not an appropriate 

situation, and the EPA is not providing 

for it. Under the voluntary program 

adopted in this rulemaking, obligated 

parties will have to determine whether 

their existing quality assurance 

measures provide them adequate 

assurance to purchase RINs under the 

‘‘buyer beware’’ program or in the 

alternative they can contract the 

services of independent third-party 

auditors to provide QAP services and 

take advantage of today’s QAP program. 

For the same reasons, we are requiring 

that QAP auditors be independent from 

obligated parties the same way they are 

required to be independent from the 

RIN generator. 

We also specifically sought comment 

on whether third-party auditors could 

act as agents for RIN generators that they 

were auditing.12 We received many 

comments across the spectrum of 

support for auditor agency. Many 

commenters argued that allowing such a 

relationship between third-party 

auditors and audited RIN generators 

could increase the likelihood for the 

verification of invalid RINs. Some 

commenters pointed out that an auditor 

acting as an agent for an audited RIN 

generator could over generate RINs in 

collusion with the RIN generator since 

there may be little policing of QAP 

providers and the QAP provider could 

financially gain from the sale of the 

additional RINs. Other commenters 

stated that providing these services on 

behalf of RIN generators financially tied 

third-party auditors too closely to the 

continued success and potentially 

expansion of audited RIN generators, 

which may inhibit the ability for thirdparty auditors to impartially implement 

a QAP. 

Other comments supported the notion 

that third-party auditors should be 

allowed to serve as agents for audited 

RIN generators since being an associated 

agent would allow the third-party 

auditor to have full access to oversee 

RIN generation data to compare with 

ongoing QAP implementation. This 

access would also allow third-party 

auditors to help producers with 

corrective actions as they are identified 

via QAPs. This would allow producers 

to reduce compliance costs. Some 

commenters argued even further 

suggesting that the EPA require that 

third-party auditors serve as agents to 

take advantage of the benefits of being 

an associated agent for an audited RIN 

generator. 

Some commenters suggested that the 

EPA stop short of allowing third-party 

auditors to act as agents in a RIN 

generating capacity for audited RIN 

generators, but allow third-party 

auditors to submit compliance reports 

on behalf of audited RIN generators so 

long as the RIN generator signs off on 

the report. Such an approach would 

avoid the potential for collusion by 

allowing third-party auditors to generate 

RINs while saving time and reducing 

costs for audited RIN generators. 

We believe, and one commenter also 

noted, that third-party auditors need not 

be agents of audited RIN generators to 

obtain access to RIN generation data 

since we can provide ‘‘read-only’’ access 

to auditors in EMTS which should 

provide enough information for auditors 

to effectively implement a QAP. 

Additionally, in the NPRM, we 

identified serious concerns about 

whether third-party auditors would be 

free from conflicts of interest if they 

were allowed to generate RINs for 

audited RIN generators. However, the 

EPA recognizes that submitting 

compliance reports, with assurances 

from the RIN generator of the accuracy 

and authenticity of required reported 

information, may provide an 

opportunity to reduce overall 

compliance costs for RIN generators 

without jeopardizing the independence 

of third-party auditors. Therefore, we 

are not allowing third-party auditors to 

generate RINs for audited RIN 

generators, but we are allowing thirdparty auditors to submit periodic 

compliance reports on behalf of audited 

RIN generators. 

Some commenters noted that however 

the EPA designs the QAP program, 

auditors have an inherent conflict of 

interest since RIN generators must pay 

third-party auditors to enjoy the benefits 

of the program. This creates an 

incentive for auditors to ensure that 

their customers continue to produce 

RINs by not reporting potential issues 

arising from audits. The comment 

suggested that we should expand our 

definition to include that auditors 

should avoid even the appearance of a 

conflict of interest. 

One commenter suggested that we 

adopt the conflict of interest standard 

outlined under rule 101 of the American 

Institute of CPAs. The commenter stated 

that the central articulation of this rule 

is that an auditor may have no direct or 

material indirect financial interest in the 

client. They argued that this clear and 

well-established requirement should be 

observed since it would better preserve 

the integrity of the QAP program 

compared to the proposed requirement. 

We agree that today’s QAP program 

imposes an implicit conflict of interest 

since third-party auditors’ services are 

paid for by RIN generators, or for that 

matter any similar situation that applies 

to any independent party required 

under the RFS regulations (e.g. 

engineering reviews and attest 

engagements). We do not agree that the 

independence criterion for third-party 

auditors should be limited to strictly 

direct and indirect financial conflicts of 

interest. We believe by interpreting 

conflict of interest more broadly, we 

will raise the standard of independence 

in the QAP program to a higher level 

than that seen in other portions of the 

EPA regulations, especially considering 

the importance of maintaining an 

effective QAP. Therefore, we are 

modifying the independence 

requirements for third-party auditors to 

preclude the appearance of a conflict of 

interest. This does not preclude thirdparty auditors from being paid by RIN 

generators to provide auditing services. 

An example of a situation that serves as 

a potential appearance of a conflict of 

interest is if a third-party auditor has 

provided consultative engineering 

services in the development and 

construction of a renewable fuel 

production facility and then later is 

selected to implement a QAP at the 

same facility. Several elements of the 

QAP would require the third-party 

auditor to verify services previously 

provided to the producer that owned the 

facility and would appear to be a 

conflict of interest since the third-party 

auditor may not wish to tarnish its 

reputation by reporting potential issues 

related to its previous engineering 

services. Furthermore, as discussed in 

greater detail below, we are finalizing 

requirements to try to mitigate the 

inherent conflict of interest in the QAP 

program to provide both the EPA and 

third-party oversight of third-party 

auditors. 

We received many comments that 

addressed the potential for conflict of 

interests to arise from a singular party 

that offered a variety of services 

including a QAP for a RIN generator. 

Some commenters pointed out that 

many parties that may serve as thirdparty auditors have acted or currently 

act as consultants for RIN generators 

and this would equate to a vested 

interest by the auditor in the continued 

success of the RIN generators being 

audited. Other commenters highlighted 

that some potential third-party auditors 

have provided numerous services to a 

single RIN generator including initial 

engineering reviews, annual attest 

mstockstill on DSK4VPTVN1PROD with RULES2

42094 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

engagements, the submission of periodic 

compliance reports on behalf of RIN 

generators, and serving as an agent to 

generate RINs on behalf of the RIN 

generator. These comments argue that 

allowing a single party to provide 

‘‘cradle to grave’’ services that will now 

include the verification of RINs via a 

QAP for a RIN generator provides a 

substantial financial incentive for thirdparty auditors to ignore potential issues 

that may have occurred during prior 

services and identified through a QAP. 

A third-party auditor that reported such 

potential issues may call into question 

the validity of all prior work for other 

RIN generators creating a possibility for 

cascading losses for the auditor and RIN 

generators. Ultimately, these 

commenters concluded that such 

incentives could possibly undermine 

the QAP program and lead to more RIN 

fraud. 

The commenters generally offered two 

suggestions for the EPA in the final rule. 

First, these comments suggested that the 

EPA limit the services a third-party 

auditor can from provide a RIN 

generator if they are implementing a 

QAP for a RIN generator. Comments 

varied on which services an auditor 

should be precluded from providing. 

For example, some comments suggested 

that third-party auditors not be allowed 

to have conducted the initial 

engineering review. Others suggested 

that different independent parties 

should provide each separate 

requirement in RFS that calls for an 

independent third-party to conduct an 

action. Other comments argued even 

further that auditors only be allowed to 

implement a QAP and therefore, not 

allowed to provide any other service 

involving RFS requirements for a RIN 

generator. This would include providing 

consultation services to aid RIN 

generators with registration paperwork, 

submitting compliance reports to the 

EPA or otherwise acting as an agent for 

RIN generators. 

Second, these comments generally 

advocated that the EPA ensure that a 

system of checks and balances or a 

‘‘check the checker’’ program exist to 

help ensure that auditors are 

appropriately implementing QAPs and 

free from conflicts of interest. 

On the other hand, other comments 

argued that RIN generators that 

participate in the QAP program should 

receive relief from requirements that 

they believed would be duplicated by 

the implementation of a QAP at a 

facility. For example, many commenters 

felt that the burdensome periodic 

facility audits and documentation 

reviews should displace existing 

requirements for the triennial 

engineering reviews and annual attest 

engagements since much of the 

information gleaned from these 

activities will be available through QAP 

implementation at a facility. These 

commenters pointed out that providing 

relief for these requirements would 

decrease overall compliance costs to 

facilities participating in the QAP 

program which may ultimately increase 

participation by facilities in the QAP 

program. One commenter suggested that 

the EPA not go as far as to eliminate 

triennial engineering review 

requirements, but rather allow third 

party auditors to incorporate the 

engineering review within periodic 

facility audits to reduce some of the 

compliance burden on audited RIN 

generators. 

Commenters also alluded to the EPA’s 

stated concern in the NPRM that 

excluding third-party auditors that had 

conducted initial engineering reviews 

for a facility from providing auditing 

services would limit the number of 

qualified independent-third parties with 

appropriate knowledge of the RFS 

program, which may delay the adoption 

of QAPs by facilities. Some comments 

pointed out that this may harm existing 

third parties and provide an advantage 

to late entry third parties since many of 

the most knowledgeable third-party 

firms have historically provided 

engineering review and/or annual attest 

requirements. These comments 

concluded that establishing new 

relationships with third-party auditors 

with limited RFS expertise could 

increase compliance costs for 

participating RIN generators and 

decrease the overall quality of assurance 

provided by the QAP program. 

We are not removing the annual attest 

engagement and triennial engineering 

review requirements for audited 

producers and importers. We believe, as 

some commenters pointed out, that 

these requirements differ substantially 

from QAP audits enough that there is 

significant value in the information 

provided in these activities that are not 

captured as part of a QAP. 

We continue to be concerned that 

allowing one party to perform most if 

not all regulatory requirements 

involving a separate party including 

engineering reviews, attest engagements, 

and QAP implementation will tie an 

auditor’s financial interests too closely 

to the RIN generators being audited. We 

do not want a program that incentivizes 

third-party auditors to fail to report 

potentially invalid RINs. Furthermore, 

even if a third-party did not intend to 

verify a potentially invalid RIN due to 

a potential conflict of interest, having 

more than one independent party 

provide required services under RFS 

serves to ‘‘check the checker’’ promoting 

better quality assurance and ensuring 

that the goals of the RFS continue to be 

met. However, we also want to promote 

the participation of RIN generators in 

this program because we believe that an 

effectively implemented QAP will also 

help fulfill RFS goals. Additionally, we 

do not want to exclude potential thirdparty auditors that have significant 

knowledge of the RFS program and 

renewable fuel production facilities 

from participating in the QAP program 

by establishing provisions that exclude 

such parties from implementing QAPs. 

Therefore, in general we are not 

precluding third-party auditors from 

providing QAP services to a RIN 

generator such as initial engineering 

reviews and annual attest engagements. 

We are, however, prohibiting third-party 

auditors from continuing to provide 

both annual attest engagements and 

QAP implementation to the same 

audited RIN generator. This means that 

annual attest engagements and QAP 

implementation must be performed by 

two separate independent parties, i.e. 

the QAP auditor can perform one but 

not both of these services. For initial 

and triennial engineering reviews, a 

third-party auditor may conduct 

engineering reviews and QAP auditing 

services to the same RIN generator, and 

to reduce costs to the RIN generator, the 

third-party auditor may perform 

engineering reviews as part of a site visit 

required under the QAP. 

For the reasons discussed above, we 

are finalizing independence 

requirements for third-party auditors 

based on the proposal with some 

amendments. We are expanding the 

independence requirement to include a 

prohibition on the buying and trading of 

RINs by third-party auditors. We are 

also modifying the definition of conflict 

of interest to include even the 

appearance of a conflict of interest 

between a third-party auditor and an 

audited RIN generator. This modified 

definition of conflict of interest will 

preclude third-party auditors from 

generating RINs for audited RIN 

generators. However, third-party 

auditors may still submit periodic 

compliance reports. Additionally, in 

order to both ‘‘check the checker’’ and 

preclude a single entity from providing 

all RFS services to a producer or 

importer, third-party auditors shall not 

be the same party that provides annual 

attest engagement services to producers 

or importers under § 80.1464. Having 

previously provided an attest 

engagement for a producer or importer 

does not preclude the third-party 

auditor from implementing a QAP for 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42095 

13For this preamble, qualified professionals refers 

to certified professional engineers and certified 

public accountants that work for or that are acting 

on behalf of a third-party auditor to implement a 

QAP. 

14For example, ISO 17024 provides a standard for 

the professional certification of greenhouse gas 

emissions. 

that producer or importer. Third-party 

auditors can continue to provide 

engineering review services for audited 

producers and importers and may 

integrate those services with QAP 

implementation to the same producer or 

importer to reduce costs. We feel that 

this approach strikes the correct balance 

of maintaining auditors that are truly 

independent from producers and 

importers being audited while not 

excluding knowledgeable and capable 

potential third-party auditors from 

providing valuable QAP services. 

b. Professionally Qualified to Implement 

a QAP 

Another key element to ensure the 

effective implementation of QAPs at 

renewable fuel production facilities is 

that auditors have the necessary 

professional expertise and credentials. 

We require that each renewable fuel 

production facility undergo an 

engineering review by a licensed 

professional engineer as part of 

registration. In the NPRM, we proposed 

a similar requirement for auditors since 

the verification of production 

capabilities of a quality assurance 

program should be similar to the type of 

review conducted in the engineering 

review process for RFS registration. We 

proposed that independent third-party 

auditors would demonstrate that they 

possess the required professional 

expertise during registration. We also 

proposed to not require that companies 

that register as a third-party auditor be 

solely constituted of professional 

engineers to implement an EPAapproved QAP and conduct facility 

audits; however, a licensed professional 

engineer must supervise and or work in 

a team with other employees of the 

third-party auditing company. We also 

sought comment on whether we should 

require additional expertise (e.g. have 

third-party auditors have a certified 

public accountant on staff or under 

contract) and whether to establish a RFS 

competency requirement similar to 

requirements outlined in voluntary 

consensus standards (established by a 

voluntary consensus standards body) for 

greenhouse gas verification. 

One commenter suggested that the 

QAP audits be designed by a 

professional engineer while the audit 

can be conducted by a team supervised 

by a professional engineer. While many 

commenters pointed out that although 

some portions of the facility site visits 

require similar expertise to engineering 

reviews (i.e. would require the services 

of a certified professional engineer), 

reviewing bills of lading and other 

records would require the expertise of a 

certified public accountant. Other 

commenters suggested that having a 

breadth of expertise on audit teams will 

increase the overall effectiveness of 

third-party auditors’ ability to 

implement QAPs. Some argued further 

that the periodic hiring of a third-party 

auditor to help supervise or conduct site 

visits would be prohibitively costly to 

audited producers and importers. On 

the other hand, one commenter 

expressed concern about allowing the 

third-party auditor to only be required 

to have a professional engineer design 

the audits, but not supervise or attend 

the audit. This commenter highlighted 

that such a responsibility may be 

delegated to personnel not qualified to 

successfully implement a QAP and 

ultimately undermine the integrity of a 

QAP. 

We agree that there are certain 

elements of the QAPs that would better 

be served by third-party auditors with 

appropriate professional backgrounds in 

recordkeeping auditing such as a 

certified public accountant. Some of the 

elements required as a part of a QAP 

resemble, but do not mimic entirely, 

elements that are currently part of 

annual attest engagements, for which we 

require an independent certified public 

accountant. However, some elements 

more closely resemble the elements 

required under engineering reviews and 

thus necessitating a professional 

engineer. Since an effective QAP 

involves the technical experiences of 

both professional engineers and 

certified public accountants, we are 

finalizing requirements that third-party 

auditors have both the qualifications of 

a professional engineer and a certified 

public accountant. 

We also recognize that third-party 

auditors may incur substantial cost if 

they have to tender the services of both 

a professional engineer and a certified 

public accountant for every periodic site 

visit or records review.13 We did not 

intend that every member of a team be 

constituted of professional engineers or 

certified public accountants, but rather 

that these qualified professionals would 

oversee the development and 

conducting of site visits and record 

reviews. We believe that qualified 

professionals will naturally take an 

active interest and participate in 

auditing activities since it is their 

professional reputations on the line and 

they may be liable for potential 

violations specified in the prohibited 

activities section at § 80.1460 and for 

making false statements to the 

government under 18 U.S.C. 1001. 

Therefore, although we are not requiring 

qualified professionals on-site to 

conduct audits at facilities, they do need 

to certify audit reports generated from 

those site visits. 

One commenter suggested that each 

member of audit teams have a four-year 

college degree. We disagree with this 

comment since professional licensure 

and E&O insurance requirements for 

those supervising should serve as a 

check to help ensure that auditing teams 

are composed of competent personnel. 

The technical nature of auditing in 

general and auditing renewable fuel 

production facilities under RFS 

necessitates an appropriate educational 

background. 

One commenter suggested that audit 

teams collectively have at least 20 years 

experience in RFS or related fields to 

perform audits. Although we feel that it 

is most beneficial to the program to have 

experience in RFS or related fields to 

perform audits, a 20 year experience 

requirement would be very difficult to 

monitor and enforce. The existing 

professional engineer requirements 

already include language that a 

professional engineer must have 

professional experience in the chemical 

engineering field or related to renewable 

fuel production. Based on our 

experience with third-party auditors 

that have informally pre-registered 

through the interim period and 

discussions with other potential thirdparty auditors, we believe that any 

third-party auditor would have to have 

a significant amount of experience in 

RFS or related fields to simply put 

together a QAP that satisfies today’s 

requirements. Therefore, we are not 

adopting a minimum experience 

threshold for third-party auditor 

qualification. 

A few commenters supported 

requiring third-party auditors to adhere 

to a standards established by a 

voluntary consensus standard body 14 or 

that the Agency create its own thirdparty auditor competency standard. 

Others noted that EPA could develop a 

periodic examination of RFS standards 

to gauge the expertise of third-party 

auditors. However, while supportive, 

many commenters noted that the 

development of such a standard, which 

currently does not exist, could 

significantly delay the implementation 

of the QAP program. As we noted in the 

NPRM, ‘‘several independent thirdparties have developed sufficient 

expertise with RFS to provide useful 

mstockstill on DSK4VPTVN1PROD with RULES2

42096 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

15See 78 FR 12188 (February 21, 2013). 

validation services. . .and we believe 

that there exist adequate incentives for 

parties to ensure that third-party 

auditors understand the RFS program 

sufficiently.’’ 15 We believe that based 

on our experience informally preregistering third-party auditors, that 

most potential auditors have an 

appropriate amount of experience to 

successfully implement a QAP. In 

addition, while we believe that it is 

generally good to have professional 

competency standards, it would take a 

significant amount of time to develop 

such standards, which would hinder the 

development of today’s QAP program. 

Therefore, we will continue to monitor 

the quality and expertise of third-party 

auditors that register to implement 

QAPs, and may revisit the idea of 

establishing a professional competency 

standard or exam in the future. 

For reasons discussed above, we are 

finalizing professional licensure 

qualifications to include that third-party 

auditors have access to both a 

professional engineer and certified 

public accountant. We feel that this 

combination of expertise would allow 

third-party auditors to most effectively 

implement QAPs. We are also not 

finalizing other professional 

competency standards at this time (i.e. 

those specified in a standard established 

by a voluntary consensus standard 

body). We will continue to monitor the 

effectiveness of third-party auditors 

through the annual registration 

renewable process discussed below, and 

may revisit the idea of incorporating 

additional third-party auditor 

professional qualifications or 

competency exams if necessary. 

c. Errors and Omissions Insurance 

Based on the comments received and 

the discussion below, the Agency is 

finalizing a requirement of Errors and 

Omissions (‘‘E&O’’) insurance for 

independent third-party auditors from 

an insurance provider that possess a 

financial strength rating in the top four 

categories from either Standard & Poor’s 

or Moody’s (i.e., AAA, AA, A or BBB for 

Standard & Poor’s and Aaa, Aa, A, or 

Baa for Moody’s). Auditors will obtain 

coverage as they see fit to cover their 

professional liability exposure. 

Additionally, auditors will be required 

to disclose the level of E&O coverage 

they possess in a clause in every 

contract they enter into when providing 

RIN verification services. 

We proposed that to ensure the 

effective implementation of QAPs at 

renewable fuel production facilities, 

independent third-party auditors would 

be required to maintain professional 

liability insurance (commonly known as 

E&O insurance) if offering a QAP. The 

amount of insurance was proposed to 

be, at a minimum, equal to two percent 

of the RINs the auditor verifies in a year 

to cover the replacement of any RINs 

verified by an auditor that turn out to be 

invalid as a result of auditor error, 

omission, or negligence. Additionally, 

we proposed that independent thirdparty auditors would be required to use 

insurance providers that possess a 

financial strength rating in the top four 

categories from either Standard & Poor’s 

or Moody’s (i.e., AAA, AA, A or BBB for 

Standard & Poor’s and Aaa, Aa, A, or 

Baa for Moody’s). We explained that 

requiring E&O insurance would help to 

achieve the level of professionalism 

necessary for the quality assurance 

program to work as intended. 

Possession of E&O insurance would 

lend business and financial credibility 

to a potential QAP auditor. 

The Agency received multiple 

comments in support of the requirement 

that auditors maintain E&O insurance. 

There were several comments regarding 

the levels at which it should be 

maintained and how those levels should 

be calculated. One comment suggested a 

minimum of $1,000,000 in E&O 

insurance, with increases in coverage 

tied to increases in the number of RINs 

an auditor verifies. Another commenter 

suggested that E&O coverage be grouped 

into ‘‘buckets’’. For example, if an 

auditor verifies less than 10MM RINs, 

coverage should be $2MM, and if the 

auditor verifies between 10MM and 

50MM RINs, coverage should be $5MM, 

etc. Commenters suggested that given 

the volatility in the prices of RINs, the 

amount of coverage should be tied to 

number of RINs verified as opposed to 

an amount equal to a percentage of RINs 

verified, which would vary based on the 

current price of RINs. The Agency 

agrees with this comment that any 

specified coverage would be better tied 

to the number of RINs verified as 

opposed to a set percentage of RINs 

verified. 

In response to comments, the Agency 

sees the possession of E&O insurance 

primarily as an additional layer of 

auditor scrutiny. In order to obtain E&O 

insurance, auditors will have to undergo 

a robust underwriting examination that 

will look at the auditor’s business 

expertise and financial status, among 

other factors. It may be that not all 

prospective auditors will be able to 

obtain a policy from an insurance 

provider with the required financial 

strength rating. This will help ensure 

that the auditors that do provide QAP 

services are qualified and have a track 

record of success as a company. 

Moreover, the Agency views E&O 

coverage as a market business decision 

that should be in the hands of the 

participants in the market. Auditors can 

assess the level of professional liability 

insurance they feel comfortable 

maintaining and their customers can 

judge that level accordingly in deciding 

whether to employ their service or 

choosing another competing auditor. 

The Agency feels it is best that it does 

not prescribe a certain level of E&O 

coverage, but rather simply require that 

a QAP provider disclose the level of 

E&O coverage they possess in a clause 

in every contract they enter into when 

providing RIN verification services. 

Customers of QAPs will be fully 

informed at the time of entering into a 

service agreement exactly what level of 

professional liability the QAP provider 

possesses. The disclosure of the level of 

coverage would increase transparency of 

auditors and boost the integrity of the 

burgeoning RIN verification market. 

Finally, by only requiring possession of 

E&O coverage, the Agency will not be 

tasked with continually calculating and 

monitoring the level of E&O coverage 

maintained by auditors offering a QAP, 

and will thus be better able to focus on 

effective implementation of other key 

parts of the quality assurance program. 

2. Registration Requirements 

In order to implement and enforce the 

new quality assurance program, we 

proposed that third-party auditors 

become regulated parties under the RFS 

program. To do this, we proposed 

registration, recordkeeping, and 

reporting requirements on third-party 

auditors to ensure that appropriate 

QAPs are executed according to the 

requirements specified in the 

regulations. This would allow the EPA 

and affected parties to monitor and have 

confidence that third-party auditors are 

implementing QAPs appropriately. 

These requirements are similar to those 

that we require for other regulated 

parties under the RFS program. We 

proposed that during initial registration 

third-party auditors would provide 

basic company information, copies of 

E&O insurance policies, certification of 

professional qualifications, QAPs for 

EPA approval, and a signed affidavit 

that states that the third-party auditor is 

independent of and free from any 

conflicts of interest with any renewable 

fuel producer for which they intend to 

verify RINs. We also proposed that 

during registration third-party auditors 

would also identify which facilities they 

intended to audit, if known, and that 

auditors would update their registration 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42097 

information each time they intend to 

provide QAP services for a new facility. 

Recognizing that foreign third-party 

auditors may have unique challenges 

compared with domestic third-party 

auditors, we proposed additional 

registration requirements for foreign 

third-party auditors. In the March 2010 

RFS rulemaking (75 FR 14670, March 

26, 2010), we outlined a number of 

requirements that applied to foreign RIN 

owners (see 40 CFR 80.1467). These 

additional requirements are designed to 

ensure enforcement of RFS regulations 

at the foreign RIN owner’s place of 

business and are similar to requirements 

for foreign parties under other fuels 

regulations. For example, foreign RIN 

owners must submit reports in English 

and provide translated documents in 

English upon demand from the EPA 

inspectors or auditors, must submit 

themselves to administrative and 

judicial enforcement powers and 

provisions of the United States without 

limitation based on sovereign immunity, 

and post a bond covering a portion of 

the gallon-RINs that a foreign RIN owner 

owns. 

We also proposed that third-party 

auditors would have to renew their 

registration on an annual basis. The 

effectiveness of this program is 

contingent on the integrity of the thirdparty auditors and their ability to 

competently implement approved 

QAPs. The registration process is 

designed to help ensure that QAPs are 

implemented by competent, qualified 

and independent third-party auditors. A 

third-party auditor may only verify RINs 

under the voluntary quality assurance 

program if the auditor is registered with 

the EPA. The renewed registration 

submissions must include updates to 

information required for initial 

registration and an affidavit by the 

auditor that it is in full compliance with 

applicable QAP regulations. The 

affidavit would include a specific 

certified statement that the third-party 

auditor: (1) Has only verified RINs that 

it reviewed under an EPA-approved 

QAP, (2) has informed the EPA and RIN 

generators of all potentially invalid RINs 

that it discovered, and (3) has fulfilled 

its RIN replacement obligation if 

applicable. Third-party auditors that fail 

to accurately and completely renew 

their registrations will no longer be 

registered and therefore can no longer 

implement QAPs and verify RINs. 

Finally, we proposed requirements 

that would preclude the hiring by thirdparty auditors of persons that had 

formerly been employed by a third-party 

auditor whose registration had been 

revoked. We believed that such a 

provision was necessary to ensure that 

third-party auditors employed 

competent persons of integrity. We also 

reserved the right to revoke a third-party 

auditor’s registration at any time if we 

determine that the third-party auditor 

has failed to meet its regulatory 

requirements. 

We received a number of comments 

on all aspects of the registration process 

for third-party auditors. Several 

commenters were concerned that the 

annual registration renewal process for 

third-party auditors would overburden 

the Agency and that the Agency would 

have difficulty approving many auditors 

before the start of new calendar years. 

This could potentially disrupt the 

verification of RINs at facilities that had 

an EPA-approved QAP implemented by 

a previously registered third-party 

auditor. These commenters suggested 

that the EPA should alter the 

requirements to automatically approve 

registration renewals for third-party 

auditors if the auditor had not heard 

back from the Agency after a period of 

time, for example 30 or 60 days. This 

would help ensure the continued 

implementation of QAPs and the 

verification of RINs. We agree that this 

would provide more certainty to audited 

RIN generators and third-party auditors; 

therefore, we are modifying the annual 

registration renewal requirements to 

automatically approve third-party 

auditor registration renewals if a 

previously registered third-party auditor 

has not received notice of a deficiency 

from the EPA regarding its registration 

renewal materials. 

Many commenters noted that in most 

ways foreign third-party auditors should 

be treated similarly to domestic thirdparty auditors. Several comments called 

upon the EPA to recognize foreign 

credentials (i.e., foreign professional 

engineer certifications) of potentially 

third-party auditors. Others supported 

the EPA’s proposal to have similar 

bonding and English language 

requirements to those required by 

foreign RIN owners. We agree that 

foreign professional credentials can be 

used to satisfy the professional 

competency requirements outlined 

above, and we are finalizing the 

additional foreign third-party auditor 

requirements as proposed. 

One commenter suggested that the 

requirement for third-party auditors to 

submit a signed affidavit declaring their 

independence from audited RIN 

generators is superfluous. Another 

commenter suggested that we expand 

the affidavit requirement to include any 

documentation to support statements in 

the affidavit and make clear that the 

affidavit must be under oath. Such an 

approach would allow the EPA to go 

under the covers of the affidavit 

statements to ensure that all potential 

conflicts of interest are disclosed. 

The affidavit requirement declaring 

independence is an important piece of 

registration and potentially valuable if 

we have to pursue actions arising from 

alleged conflicts of interests. We also 

recognize that there are concerns that 

some parties that have informally preregistered during the interim period 

contract or subcontract out significant 

amount of auditing services, and that a 

simple affidavit that only applies to the 

third-party auditor’s company may not 

cover the parties responsible for actually 

conducting much of the QAP 

implementation work. Therefore, we are 

expanding the independence affidavit 

requirement to include that third-party 

auditors assert that contractors and 

subcontractors employed to facilitate 

QAP implementation also adhere to the 

same conflict of interest standards in 

today’s action. 

One commenter asked for clarification 

about the list of facilities that needed to 

be supplied during registration that an 

auditor intended to audit. The 

commenter correctly noted that it would 

be unreasonable for a third-party auditor 

to anticipate all facilities they may audit 

during a year since they may sign up 

new clients. To clarify, we intend for 

the auditor to report at the time of 

registration only facilities that they 

know they will audit and for which they 

are seeking to have an EPA-approved 

QAP. Auditors will make updates to 

their registration information in 

accordance with the regulations when 

they sign up new clients and report that 

information during annual registration 

renewals. 

Some commenters expressed concerns 

about the ability of the EPA to deny the 

registration of third-party that employ 

persons that were previously employed 

by an auditor whose registration was 

revoked. These commenters were 

worried that the EPA would unduly 

deny the registration of third-party 

auditors simply for hiring employees 

previously employed by an auditor with 

a revoked QAP even though the person 

in question may have had nothing to do 

with the circumstances that resulted in 

the revocation of the a registration for a 

previous employer. These commenters 

suggested further that the EPA only 

deny registrations for third-party 

auditors if a third-party auditor hires an 

employee where the preponderance of 

data demonstrates that the person was 

directly responsible for the revocation of 

the previous third-party auditor’s QAP. 

We agree that some employees of 

former third-party auditors whose 

registrations had been revoked may not 

mstockstill on DSK4VPTVN1PROD with RULES2

42098 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

have had any direct involvement in the 

questionable activities that led to the 

revocation of the former third-party 

auditor’s registration. The purpose of 

this provision was to ensure through 

registration that qualified professionals 

or other employees that were 

responsible for the EPA revoking a 

third-party auditor’s QAP or registration 

did not simply go work for another 

third-party auditor. However, we 

believe that we have enough flexibility 

through our authority to revoke 

registrations and QAPs for cause, e.g. if 

a third-party auditor and its employees 

or contractors fail to appropriately 

implement a QAP, to help ensure that 

only reputable and qualified third-party 

auditors are registered to implement a 

QAP. Additionally, we believe that the 

potential liability for violations of RFS 

requirements of third-party auditors and 

its contractors and subcontractors will 

also adequately deter third-party 

auditors from failing to meet their 

applicable requirements. Therefore, for 

reasons discussed above, the EPA is not 

finalizing regulatory language granting it 

the discretion to deny the registration of 

a third-party auditor for the hiring or 

contracting with prior employees or 

contractors of auditors whose 

registrations were revoked. 

3. Other Responsibilities of Auditors 

a. Notifying the Agency When There 

Are Problems 

As discussed in section II.A.4, we are 

requiring that third-party auditors notify 

the EPA and the renewable fuel 

producer of potentially invalid RINs, 

including but not necessarily limited to 

fraud, errors, and/or omissions, by the 

next business day after a problem has 

been identified. 

b. Identifying Verified RINs in EMTS 

In the NPRM, we proposed to require 

that third-party auditors be responsible 

for tagging RINs as having been 

‘‘verified’’ in a way that is clearly visible 

in EMTS after they have been generated. 

In the NPRM, we explained that thirdparty auditors needed to identify RINs 

as having been verified so that 

downstream parties could know which 

RINs have been subjected to review by 

an auditor and thus can be eligible for 

an affirmative defense. We also 

proposed that the verification of a RIN 

in EMTS would be prospective, 

meaning that a RIN can only be verified 

after an auditor has audited a facility in 

accordance with an approved QAP and 

that RINs generated during the interim 

period will not be flagged as verified in 

EMTS. Finally, we proposed that thirdparty auditors would have the ability to 

stop verification of newly generated 

RINs should a problem arise during the 

QAP implementation process. Since 

third-party auditors are in the best 

position to identify potentially invalid 

RINs, allowing third-party auditors this 

flexibility is necessary to ensure that 

problems with invalid RINs are quickly 

identified and corrected. 

In general, comments received 

regarding the identification of RINs as 

verified in EMTS were supportive. 

Several commenters expressed the 

desire for the EPA to have EMTS fully 

functional by the effective date of the 

rulemaking and ensure that EMTS 

development provides an opportunity 

for affected parties to beta test and 

provide feedback on the development 

and deployment of EMTS. In 

recognition of these concerns, verified 

A–RINs and B–RINs may still be 

generated outside of EMTS through 

December 31, 2014. Additionally, once 

EMTS is able to accommodate Q–RIN 

transactions, parties will have the 

ability to generate and input verified Q– 

RINs within EMTS. Based on current 

development pace, this should occur 

prior to the January 1, 2015 single QAP 

start date. 

One commenter suggested that we 

should not require third-party auditors 

to verify RINs in EMTS since this would 

further distinguish between RINs 

generated from small producers, which 

they anticipated would be verified 

through a QAP, and larger producers, 

which they argued would not be 

verified through a QAP. The comment 

argued further that the EMTS currently 

allows parties wishing to buy and sell 

RINs to specify which producers they 

would like to purchase or sell to and 

that verification in EMTS is 

unnecessary. We disagree with this 

comment. Partially based on our 

experience with the informal 

verification of RINs through the interim 

period, keeping track of verified RINs 

outside of EMTS is quite burdensome 

on third-party auditors and obligated 

parties that wish to purchase verified 

RINs and on the Agency when we need 

to follow up on potential issues. We 

believe that ‘‘flagging’’ RINs in EMTS is 

the most cost effective way for obligated 

parties to quickly know that RINs being 

purchased have been verified by an 

EPA-approved QAP and will promote 

the use of the QAP program. 

Therefore, we are finalizing 

requirements that third-party auditors 

verify RINs in EMTS as proposed. 

c. Recordkeeping, Reporting, and Attest 

Engagements 

i. Recordkeeping Requirements 

We proposed that third-party auditors 

would be required to maintain records 

of all verification and validation 

activities related to the implementation 

of a quality assurance program. We 

explained that these records would 

serve to demonstrate that a QAP was 

appropriately implemented if invalid 

RINs are reported at a later date. 

Although most comments were 

generally supportive of requiring thirdparty auditors to maintain records 

similar to other regulated parties under 

RFS requirements, one comment sought 

clarification of the proposed 

recordkeeping requirements. This 

comment argued that as proposed, the 

recordkeeping requirements would be 

too broad, would include potentially 

confidential business information and 

that much of this information would be 

duplicative of records already 

maintained by other regulated parties 

under RFS (e.g. RIN generators). 

We believe that renewable fuel 

producers and importers can address 

concerns about the inappropriate 

disclosure of confidential information 

obtained by a third-party auditor 

through a QAP through private 

agreements with the third-party auditor. 

We also recognize that some 

information may be duplicative of 

records already maintained by other 

regulated parties. However, most 

recordkeeping requirements will not be 

kept by other regulated parties under 

RFS since they are specific to the QAP 

implementation activities of third-party 

auditors. Therefore, we are finalizing 

third-party auditor recordkeeping 

requirements as proposed. 

ii. Reporting Requirements 

Under the existing RFS program, 

obligated parties, exporters of renewable 

fuel, producers and importers of 

renewable fuels, and any party who 

owns RINs must report appropriate 

information to the EPA on a regular (e.g. 

quarterly and/or annual) basis. 

Similarly, the third-party auditors are 

required to submit quarterly reports, in 

line with RFS quarterly reporting 

deadlines, identifying how many RINs 

the auditor has verified the previous 

quarter. In addition, independent thirdparty auditors must include the 

facilities audited and the dates of those 

audits. This information allows the EPA 

to compare a third-party auditor’s 

reported activity to information gleaned 

from EMTS to ensure that third-party 

auditors are appropriately implementing 

QAPs. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42099 

16Attest engagements are used in many of the 

Agency’s fuels programs and are similar to financial 

audits. Attest engagements consist of an 

independent, professional review of compliance 

records and reports. 

Most comments we received 

supported quarterly reporting 

requirements for third-party auditors. 

One comment also expressed concerns 

that third-party auditor quarterly 

reporting was overly burdensome and 

that the information we proposed to 

require that third-party auditors report 

is duplicative of information already 

reported to the EPA via reports from 

other parties. 

We continue to believe that periodic 

reports provides a useful compliance 

tool to better ensure that third-party 

auditors are effectively implementing 

QAPs since failure to fulfill reporting 

requirements constitutes a violation to 

the Clean Air Act and may subject the 

responsible party to the penalties 

discussed below. Although third-party 

auditor reporting requirements may 

partially overlap with some information 

already reported by other parties, much 

of the information reported by third 

party auditors (e.g., the dates facilities 

were audited, the number of RINs 

verified by a third-party auditor, etc.) is 

specific to auditing activities that 

currently are not captured in existing 

reports. Therefore, we are still going to 

require that third-party auditors submit 

quarterly reports that will capture their 

auditing activities. However, due to the 

addition of an annual attest engagement 

requirement for third-party auditors 

(discussed below) and to accommodate 

the flexibility of allowing third-party 

auditors to use a representative sample 

of batches to implement QAPs (also 

discussed below), we needed to make 

minor revisions to third-party auditors’ 

quarterly reporting requirements. Thus, 

we are finalizing quarterly reporting 

requirements for third-party auditors as 

proposed with minor modifications. 

iii. Attest Engagements 

In the NPRM, we sought comment on 

whether to require third-party auditors 

to have an annual attest engagement 

similar to those required of other parties 

required under § 80.1464.16 We 

explained that attest engagements may 

be an appropriate means of verifying the 

accuracy of the information reported to 

us by the third-party auditors similar to 

those we require of other parties in RFS. 

The public comments we received 

generally supported the imposition of 

annual attest engagement requirements 

on third-party auditors. Many comments 

highlighted the utility to the Agency 

with additional oversight of third-party 

auditors through an annual attest 

requirement. Such measures would help 

‘‘check the checker’’ and would overall 

increase the reliability of verified RINs. 

Other commenters noted that since the 

EPA is creating a new regulated party in 

the RFS program, they should have 

similar requirements including annual 

attest requirements to that of other 

parties regulated under RFS. Lastly, one 

comment suggested that the EPA should 

outline the attest engagement procedure 

for third-party auditors in more detail in 

the final rulemaking. 

One commenter suggested that thirdparty auditor annual attest requirements 

and more broadly a ‘‘check the checker’’ 

program was not necessary and overly 

burdensome. The commenter did not 

provide explanation on why such a 

requirement was unnecessary or too 

burdensome. 

We agree with comments that thirdparty auditors should undergo an 

annual attest engagement by an 

independent third-party. This will help 

improve the Agency’s oversight of thirdparty auditors. Having another thirdparty conduct the annual attest 

engagement for the third-party auditor 

will mitigate some of the conflict of 

interests concerns with third-party 

auditors providing additional services 

(e.g. engineering reviews and 

completing quarterly compliance 

reports for RIN generators) discussed 

above, which will help ensure that 

verified RINs under the QAP program 

are valid. 

Therefore, consistent with the nearly 

overwhelming response from public 

comments, in today’s final rulemaking 

we are including a requirement that 

third-party auditors undergo annual 

attest engagements similar to that of 

other parties regulated under RFS. The 

attest engagements will consist of an 

outside certified public accountant 

following procedures outlined in 

§ 80.1464 to determine whether 

underlying records, reported items, and 

transactions agree. 

d. Prohibited Activities for Third-Party 

Auditors 

Since third-party auditors are integral 

to the successful implementation of 

voluntary quality assurance programs, 

we proposed new prohibition and 

liability provisions applicable to thirdparty auditors. The prohibitions and 

liability provisions on third-party 

auditors are similar to those for other 

parties in the RFS and other fuels 

programs. Specifically, we proposed the 

following prohibited acts: Failing to 

properly implement an EPA-approved 

QAP; failing to timely notify RIN 

generators and the EPA of potentially 

invalid RINs; failing to replace invalid 

RINs, if applicable; and verifying RINs 

that are invalid. 

We also proposed that third-party 

auditors subject to an affirmative 

requirement under this rule be liable for 

a failure to comply with the 

requirement. For example, third-party 

auditors would be liable for separate 

violations for failing to comply with the 

registration, reporting and 

recordkeeping requirements. Like other 

fuels programs, if the third-party auditor 

causes another person to violate a 

prohibition or fail to comply with a 

requirement, the third-party auditor 

may be found liable for the violation. 

Finally, we noted that third-party 

auditors would be subject to the penalty 

and injunction provisions in section 

211(d) of the Clean Air Act and thirdparty auditors may be subject to civil 

penalties of $37,500 for every day of 

each such violation and for the amount 

of economic benefit or savings resulting 

from the violation. We sought public 

comment on the proposed prohibited 

activities and liability provisions 

specific for third-party auditors. 

We received few public comments on 

the prohibited activities for third-party 

auditors and those public comments 

generally supported the proposed 

prohibited activities. However, one 

public comment noted that the 

proposed regulatory language at 

§ 80.1460(i)(3), which proposed to hold 

third-party auditors liable for verifying 

RINs that were later determined to be 

invalid under § 80.1431, was too broad. 

The comment argued that such broadbased language unfairly imposed 

liability on third-party auditors that may 

have been misled by undetectably false 

information or documentation provided 

by a RIN generator. The comment 

concluded that imposing such a 

potential liability on third-party 

auditors may deter qualified auditing 

and accounting firms from participating 

in the QAP program. 

We agree with concerns that the 

proposed language at § 80.1460(i)(3) is 

overly broad and we are therefore 

modifying the proposed language to 

more fairly hold third-party auditors 

liable for verifying invalid RINs. In the 

NPRM, we proposed that third-party 

auditors would be prohibited from 

‘‘identify[ing] a RIN as verified in 

accordance with § 80.1471(e) that is 

invalid under § 80.1431.’’ The intent of 

this language was to help ensure that 

third-party auditors reported all 

potentially invalid RINs uncovered by 

an approved QAP to the EPA. Under 

Option A, we were concerned that thirdparty auditors would verify RINs that 

may have been invalid to avoid the 

potential of having to replace those RINs 

mstockstill on DSK4VPTVN1PROD with RULES2

42100 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

since such a cost would be quite high. 

In light of our decision to not place a 

replacement obligation on third-party 

auditors, we are modifying the language 

of this prohibited act to prohibit thirdparty auditors from verifying a RIN 

without ensuring that every applicable 

requirement in an approved QAP was 

met. We believe the newly worded 

prohibited activities focuses more on 

the activities of the auditor instead of 

punishing the auditor for misleading 

information and documentation 

supplied by audited RIN generators. 

For reasons discussed above, the EPA 

is finalizing the proposed prohibited 

activities with modification to the 

proposed regulatory language at 

§ 80.1460(i)(3). The final prohibitive 

activities coupled with the provisions 

that require third-party auditors to 

register annually and the authority we 

have to revoke an auditor’s QAP for 

cause will ensure that third-party 

auditors will appropriately implement 

EPA-approved QAPs. 

G. Audit Requirements 

Under the quality assurance program, 

an auditor will use an approved QAP as 

the basis for the verification of 

renewable fuel produced and RINs 

generated at a facility. In order to verify 

production, the auditor must review 

documents, monitor facility activity, 

and conduct on-site visits. These 

components, when taken together, are 

what constitute an audit of the facility. 

An on-site visit to a facility is not in and 

of itself an audit. Rather, an audit 

encompasses all the elements of a QAP, 

i.e., document review, monitoring of 

facility activity, the on-site visit (when 

required), etc. The elements of the QAP 

are discussed in some detail in section 

II.E. The following provides some 

additional detail on the elements of an 

audit. As with other provisions of the 

RFS program, the use of a QAP and the 

associated audit will also be available to 

foreign producers of renewable fuel. 

1. Document Review and Monitoring 

The auditor must ensure that the 

producer has fulfilled all applicable 

record-keeping requirements of 

§ 80.1454. We expect the auditor to 

evaluate quarterly reports submitted to 

the EPA, and that the reports be year-todate, as applicable, and from the 

previous year, for comparison. These 

include Activity Reports, RIN 

transaction reports, RIN generation 

reports, and Renewable Fuel producer 

Co-product reports. The third-party 

engineering review and annual 

attestation report must also be reviewed. 

Reports submitted to the EPA must be 

cross-checked with other records. For 

instance, the auditor must have access 

to certificates of analysis. The auditor 

must check recent feedstock receipts (if 

the producer uses a variety of 

feedstocks, then the auditor should be 

provided with receipts for each 

feedstock). Integrated facilities may not 

have internal sales receipts for feedstock 

use, so an alternative paper trail will 

likely be required. Similar to the 

feedstock document review and 

crosscheck, renewable fuel and coproduct delivery documentation must 

be part of any audit. 

For all documentation reviews, we 

expect the auditor to analyze reports to 

determine whether a producer is 

reporting volumes consistently, and to 

require (from the producer) explanation 

for missing or inaccurate reports. The 

auditor must investigate discrepancies 

between volumes reported and 

processed. Other reports the auditor 

must consider as part of its review 

include the EIA M22 Survey, any state 

reports, federal and state tax returns, 

and association dues reports. The 

auditor must also determine if there is 

any import or foreign biofuel producer 

documentation. 

Of prime concern to the quality 

assurance program is the verification of 

RINs, and there are many aspects to this 

part of the audit. The auditor must 

evaluate monthly RIN generation reports 

submitted through EMTS, verify that 

RINs generated match wet gallons sold, 

determine if the facility purchases or 

separates RINs, and review product 

transfer documents for all RIN activity. 

We are finalizing that verification 

elements for the audit may be checked 

for a representative sample of batches of 

renewable fuel according to the 

sampling requirements in § 80.127. 

However, based on the documentation 

provided by the producer, the auditor 

can decide to review all documentation 

for all batches. We requested comment 

on the level of detail required for 

document review. A number of 

commenters indicated that requiring 

100% document review would 

negatively impact producers and that a 

high confidence level could be achieved 

through random sampling. We agree 

with the spirit of these comments, and 

are finalizing the program using the 

criteria for the representative sampling 

of batches of renewable fuel in 

accordance with sampling guidelines 

that have already been established in 

§ 80.127, and are effectively used as part 

of the annual attest report. 

Furthermore, and in order to ensure 

that renewable fuel producers will 

maintain their records in a manner that 

will allow third-party auditors and the 

EPA to efficiently evaluate whether 

RINs were properly generated, we are 

amending § 80.1426 to state that RINs 

may only be generated for fuel that the 

producer has demonstrated, pursuant to 

all applicable recordkeeping 

requirements of § 80.1454, was 

produced in accordance with the 

applicable pathway listed in Table 1 to 

§ 80.1426(f) or a petition approved by 

the EPA pursuant to § 80.1416. 

Furthermore, RIN generation is only 

appropriate for renewable fuels that 

carry the appropriate designation on 

their product transfer documents, 

according to the new provisions of 

§ 80.1453(a)(12). See Section III of this 

preamble for further discussion of PTD 

requirements. 

2. Buyer/Seller Contacts 

We are finalizing a flexibility that 

allows for the random sampling of 

feedstock supplier invoices and 

contracts to provide a representative 

sample of renewable fuel batches, 

according to § 80.127. This is an 

appropriate method for feedstock 

verification, as it gives high confidence 

that the producer was in fact purchasing 

renewable biomass as feedstock. We are 

also finalizing that random sampling of 

product transfer documents and other 

sales-related receipts for a 

representative sample of batches of 

renewable fuel, according to § 80.127, is 

an appropriate method for ensuring that 

the renewable fuel was sold for 

transportation purposes. 

We proposed that at the end of an 

audit, the auditor should know all 

customers of and suppliers to the 

facility, and all parties that distribute 

feedstock to and fuel from the facility. 

We proposed that the auditor contact all 

of the customers and suppliers in order 

to verify sales and purchases in 

accordance with the requirements under 

the QAP. We envisioned this proposed 

requirement as a ‘‘spot check;’’ the 

auditor should be able to provide a 

reason for such calls regarding the entity 

called, questions asked, etc. 

We received numerous comments, 

particularly from biodiesel producers 

who collect used cooking oil from 

thousands of restaurants, that contacting 

every supplier would be especially 

burdensome. Some commenters 

indicated that feedstock suppliers who 

have multiple auditors contact them for 

verification may be less willing to sell 

feedstock to parties participating in the 

RFS2 program. Since these suppliers are 

not regulated under RFS2, they are 

under no obligation to provide this 

information, which could place an 

auditor in a difficult situation. We also 

received comments indicating that 

aggregate compliance is sufficient, and 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42101 

17Note that there are 4 site visits for a QAP A or 

QAP B used during the interim period. See 

§ 80.1472(b) of the regulations. 

18The only exception to the issuance of verified 

RINs only after the audit has occurred is the limited 

provision for verification of RINs issued prior to the 

audit, during the interim period, as discussed in 

section II.B. 

records such as EMTS transactions, 

receipts, and product transfer 

documents would further prove that 

appropriate feedstocks were used and 

sales were completed properly. 

Moreover, there was not a single 

comment in favor of this provision. 

Therefore, the Agency is not finalizing 

the requirements of direct contact with 

all feedstock suppliers and direct 

contact with all purchasers of renewable 

fuel but rather a representative sample 

of contacts. 

3. On-Site Visits 

The goal of the on-site visit is to verify 

that the plant has the technology to 

produce, store, and blend biofuels at 

registered levels, is operating in 

accordance with the facility’s 

registration, and that the RINs generated 

since the last visit are valid. The auditor 

will likely use plant 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 and quarterly 

production of the facility, and whether 

the facility has quality process controls 

in place (e.g., are ASTM International 

specifications being followed where 

appropriate). 

We believe that mass and energy 

balances on the facility are critical 

components of any audit. Because 

integrated facilities will likely have 

energy use that is not directly related to 

biofuel production, the auditor should 

have alternate means of assessing and 

correlating energy use to production. 

We proposed that an auditor conduct at 

least four (4) on-site visits per year for 

QAP B, or every three (3) months.17

The majority of commenters indicated 

that quarterly on-site visits would 

impose an undue burden on both the 

auditor as well as the producer. They 

noted that the cost of such visits would 

be excessively high, and there would be 

little to no benefit, given the amount of 

other data collected as part of the audit 

process. Other commenters 

recommended a tiered system that 

consisted of more frequent audits during 

the first year, followed by some form of 

phase-out for site visits thereafter. A few 

commenters indicated that quarterly onsite visits were appropriate. In 

considering these comments, the agency 

determined that the cost for the 

producer of adhering to a rule that 

required quarterly visits outweighed the 

benefits provided by the additional onsite visits. Therefore, for the single new 

QAP, we are finalizing that the auditor 

must conduct at least two on-site visits 

per year or at least one on-site visit 

along with ongoing remote monitoring. 

If an auditor elects to conduct remote 

monitoring as a substitute for one of the 

two required on-site visits per year, the 

remote monitoring procedures must be 

approved by EPA prior to use. The 

remote monitoring setup may include 

equipment such as video cameras, tank 

level sensors and/or infrared cameras 

that clearly show tank levels where 

level sensors are not in place. 

Modifications may not be done to 

remote monitoring systems after the 

EPA review, unless the EPA has preauthorized the changes in writing. In no 

instance shall a facility go more than 

380 days between physical on-site visits 

overseen by a licensed professional 

engineer. For new production facilities, 

the first on-site visit must be part of an 

audit, and the audit must be completed 

prior to the verification of RINs. 

We expect that each on-site visit 

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. 

Auditors are free to perform more onsite visits than the minimum required if 

deemed necessary. 

4. RIN Verification 

RINs will be verified only for a 

specified period following an audit. 

Although an audit of any entity usually 

certifies what was done, audits are 

prospective in that the audits are 

verifying that past practices and 

procedures have been followed, and are 

currently in place for future RINs that 

will be generated. RINs generated after 

the completion of the audit can then be 

verified until the next audit is 

completed, but for no longer than 100 

days after completion of the previous 

audit. (Note that there may not be more 

than 200 days between on-site visits, 

unless remote monitoring is used, in 

which case there may not be more than 

380 days between on-site visits). We 

believe this prospective approach is 

appropriate for the quality assurance 

program because the audit would be 

verifying the starting point from which 

future RINs would be generated. In that 

sense, the upcoming period of RIN 

generation is starting with a verified set 

of conditions. In addition, it could place 

a serious impediment in the market for 

RINs if their verification followed RIN 

generation by any significant period of 

time.18

To allow for some flexibility around 

the standard audit schedule (i.e., 

quarterly, or roughly every 90 days), 

RINs generated for up to 100 days after 

the last audit can be verified, unless the 

real time monitoring data or other 

information obtained by the QAP 

auditor prior to the on-site audit 

indicated that RINs were invalid. If 

another audit was not conducted within 

100 days, RINs could no longer be 

verified for that facility until a new 

audit was conducted. 

We are finalizing that the on-site visit 

schedule remain the same, regardless of 

findings during the audit. Some 

commenters indicated that lower audit 

frequency levels should be allowed after 

a significant period of time with no 

invalidly generated RINs. We feel that 

by reducing the overall number of 

audits required, it sufficiently decreases 

the burden on auditors and producers, 

while at the same time, maintains the 

integrity of the program. 

III. Additional Changes Related to the 

Definition and Treatment of Invalid 

RINs 

A. Export and Exporter Provisions 

In the NPRM, we proposed a number 

of regulatory changes regarding how 

RINs should be handled when 

renewable fuel is exported. Our intent 

was to ensure that exported renewable 

fuel is not included in meeting the 

mandated domestic annual renewable 

fuel volume requirement. We received a 

number of comments, primarily in 

support of these changes, and have 

made some minor changes to the 

proposed amendments in this final rule. 

1. Exporter RVO (ERVO) 

A volume of any renewable fuel 

which is exported, either neat or 

blended, requires the exporter to 

calculate an RVO and retire a like 

number and type of RINs as were 

generated for the exported renewable 

fuel. We proposed and are finalizing a 

minor change to the regulations to 

address concerns that some regulated 

parties may be misinterpreting the 

existing regulations and only 

establishing an RVO for exported 

renewable fuel that is in its neat form or 

blended with gasoline or diesel. The 

opening clause of 40 CFR 80.1430(a) 

provides that an RVO must be satisfied 

by any party that exports ‘‘any amount 

mstockstill on DSK4VPTVN1PROD with RULES2

42102 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

19See EISA, section 205(b). 

20See 73 FR 40155 (July 11, 2008), ‘‘Federal 

Trade Commission Automotive Fuel Ratings, 

Certification and Posting; Final Rule.’’ 

of renewable fuel,’’ and 40 CFR 

80.1430(f) also states that ‘‘each exporter 

of renewable fuel’’ must satisfy an RVO. 

The portion of § 80.1430(a) stating that 

the regulation applies ‘‘whether [the 

exported renewable fuel] is in its neat 

form or blended with gasoline or diesel’’ 

was intended to point out through 

specific examples that the regulation 

applies to both neat and blended 

renewable fuels, not to limit the fuel 

blends to gasoline and diesel. It was not 

intended to exclude other exported 

renewable fuel blends, such as biodiesel 

blended into fuel oils, from the scope of 

the regulation. We are amending 40 CFR 

80.1430(a) to simply state that the 

requirement to establish an RVO applies 

whether the exported renewable fuel is 

in its neat form or blended. Commenters 

on the proposed rule unanimously 

supported this change. 

We also sought comment on whether 

the EPA should eliminate exporter RVO 

obligations in two situations: (1) Where 

exporters can document that no RINs 

were generated for the exported fuel, or 

(2) where exporters can demonstrate 

that any RINs generated for the fuel 

were previously retired ‘‘upstream’’ of 

the exporter. Regarding the first 

situation, most commenters supported 

the idea that renewable fuel for which 

RINs were not generated should not 

create an RVO for the fuel exporter. The 

EPA believes this change is consistent 

with the fundamental purpose of the 

exporter RVO; i.e., RINs are retired so 

the RINs generated for the fuel do not 

artificially inflate the RIN market and 

misrepresent the amount of renewable 

fuel produced for domestic use. If the 

renewable fuel is never intended for 

domestic use and no RINs are generated 

for it, then there is no reason for RINs 

to be retired upon export. Renewable 

fuel produced in the U.S. for export 

only can be clearly labeled as such on 

product transfer documents and RINs 

need not be generated for it. An exporter 

who exports renewable fuel for which 

RINs were never generated will not 

incur an RVO for such export, provided 

certain conditions are met. This final 

rule amends 40 CFR 80.1430 to set out 

this allowance, and to add the 

conditions that any exporter who does 

not incur an RVO for exported 

renewable fuel because no RINs were 

generated for it only does so for volumes 

purchased directly from the fuel 

producer. Further, the exporter must be 

able to show that no RINs were 

generated for the exported renewable 

fuel. This demonstration is made 

through fulfillment of the conforming 

recordkeeping requirement at 40 CFR 

80.1454(a)(6) that the exporter must 

maintain an affidavit or affidavits from 

the renewable fuel producer of the RINless exported fuel, attesting that no RINs 

were generated for the specific volume 

of exported fuel. These requirements are 

intended to further the programmatic 

goal of generating RINs only for fuel that 

is intended for domestic production and 

retiring any RINs associated with 

renewable fuel that is ultimately 

exported. 

Regarding the second situation, while 

one commenter supported the idea of 

eliminating the RVO where the exporter 

can document that RINs were already 

retired (but not retired for compliance 

with an RVO) for the exported volume, 

another commenter asserted that such 

an allowance would complicate the 

RIN-tracking system and make it more 

difficult for the EPA to establish how 

much renewable fuel is being exported. 

The EPA believes such a provision 

would also complicate the retirement 

and compliance reporting requirements. 

Also, it is unlikely, given the 

functioning of the RIN market, that RINs 

would be retired by someone upstream 

of the exporter but not for compliance 

with an RVO. For these reasons, the 

EPA has decided not to add a provision 

allowing an exemption from the 

exporter RVO for renewable fuel for 

which RINs have already been retired 

(but not for compliance with an RVO) 

upstream. 

In summary, the exporter RVO is 

incurred only for fuel for which RINs 

were generated and must be fulfilled 

only by the exporter and not by any 

upstream parties. 

2. Require Identification of Renewable 

Fuel Content 

Pursuant to Section 205 of the EISA, 

fuel blends containing up to five percent 

biodiesel or up to five percent biomassbased diesel, and that meet ASTM D975 

(‘‘Standard Specification for Diesel Fuel 

Oils’’), need not be labeled as containing 

biofuel. Fuel blends containing more 

than five but less than twenty percent 

biodiesel or biomass-based diesel must 

be labeled ‘‘contains biomass-based 

diesel or biodiesel in quantities between 

5 percent and 20 percent’’ and blends 

containing more than twenty percent 

must be labeled ‘‘contains more than 20 

percent biomass-based diesel or 

biodiesel.’’ 19 Under current FTC 

regulations, blends containing more 

than 20 percent biodiesel or biomassbased diesel must also be labeled with 

the precise blend level.20 Since all 

renewable fuel volumes for which RINs 

were generated, including any quantity 

blended into conventional fuel, trigger 

an RVO on export, exporters must be 

aware if any part of their fuel volume is 

renewable fuel. Given the lack of 

disclosure for blends of up to five 

percent and the non-specific disclosure 

for 5–20 percent blends, there is 

growing concern that renewable fuel 

may be exported without the required 

exporter RVO being calculated and 

fulfilled. 

In the NPRM, we proposed that a 

person transferring any biomass-based 

diesel blend or biodiesel blend to any 

other person (including blends of less 

than five percent) shall include in the 

PTD a disclosure of the specific 

renewable fuel blend level. The PTD 

disclosure would include the name of 

the transferor, the name of the 

transferee, the date of transfer, the 

volume in gallons of the product 

transferred, and either the volume in 

gallons or the percentage of biomassbased diesel or biodiesel that is 

contained in the blended product. 

We received a number of comments 

on this issue. Many commenters 

opposed the mandatory disclosure of 

renewable content blend level, asserting 

that it would disrupt the existing fuel 

transportation and pipeline system in 

place and prove costly, impractical, and 

unnecessary. Currently, some blended 

renewable fuel is shipped through 

fungible distribution systems, such as a 

common carrier pipeline. This diesel 

has some percentage of renewable fuel 

in it, as allowed by ASTM D975 and the 

pipeline’s specification requirements, 

but the precise amount of renewable 

fuel is immaterial to the quality of the 

fuel. If the proposed PTD provisions 

were finalized, these commenters 

generally argued that the carriers could 

have to ship distinct, segregated batches 

of fuel based on different renewable fuel 

content ratings. This could be both 

expensive (requiring additional holding 

tanks and other physical improvements 

to the system, as well as requiring 

additional testing of the fuel) and time 

consuming (delaying shipments 

downstream). Commenters also 

suggested that the proposed PTD 

requirements would be contrary to the 

idea of allowing blended diesel to 

operate as a drop-in fuel, which 

encourages the development and 

purchase of biodiesel. Commenters also 

stated that it is not easy, at the terminal 

level, to determine the precise content 

of a blend and would cause delay and 

a ripple effect of increased costs to the 

terminal operators and downstream 

buyers. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42103 

21Under § 80.1427(b), an obligated party or 

exporter of renewable fuel may under certain 

conditions carryover a renewable volume obligation 

deficit until the end of the following compliance 

year. 

Some commenters supported the idea 

of requiring a general label of renewable 

fuel content if less than five percent, but 

still opposed disclosure of the specific 

blend level. One commenter supported 

the disclosure of blend level, but 

suggested that residential heating oil 

should be exempt from the requirement 

because heating oil trucks would be 

unable to print all the required 

information on the tickets they generate 

for fuel sold. Some commenters 

suggested that below a de minimis level, 

e.g., one percent or some other level, the 

renewable fuel content should not need 

to be disclosed on the PTD or that 

disclosure should only be required 

where a party has actual knowledge of 

the renewable fuel content. Commenters 

also noted that the proposal lacks 

specificity as to how the requirements 

would be enforced, what degree of 

accuracy is required for testing the 

blend level, and the specific language to 

be used on the PTDs. 

Other commenters supported the 

proposal to require disclosure of precise 

renewable fuel blend level in PTDs. 

These commenters stated that such 

disclosure would improve the safety of 

the marketplace for buyers, both with 

respect to RIN validity and the physical 

properties of the fuel. If a renewable fuel 

blend of five percent or less is not 

labeled, a blender might add in up to 

five percent more biodiesel or biomassbased diesel and sell it onward still 

without a label, though the resulting 

blend would be greater than five 

percent. This process could 

theoretically occur multiple times, 

resulting in significant concentrations of 

biodiesel or biomass-based diesel in 

diesel without notice to purchasers. 

Such concentrations would also result 

in the missed retirement of RINs for 

such renewable content upon export. 

Having considered all comments on 

this issue, we are not finalizing the 

requirements for disclosure of specific 

blend levels for any blend volume of 

any renewable fuel beyond what is 

already required by EISA and other 

regulations, noted above. This will 

relieve the potential burden and 

disruptions that may have occurred in 

the fuel distribution system and 

marketplace. 

However, since the underlying 

purpose of these proposed requirements 

was to ensure that exporters are aware 

of their responsibility to fulfill an 

exporter RVO by making them aware of 

the renewable fuel content of their 

exports, we are taking this opportunity 

to remind exporters of their obligations 

under 40 CFR § 80.1430(e). If followed 

appropriately, this paragraph already 

provides the needed structure and 

directions for exporters to determine the 

renewable fuel content of their exported 

volumes and calculate their RVOs, 

regardless of whether the blend level is 

specified in PTDs of the fuel they 

receive. 40 CFR 80.1430(e) states that 

the exporter shall determine the volume 

of renewable fuel blended with other 

fuel at the time of export by one of three 

methods. The regulation makes it clear 

that this is not a discretionary 

determination by the exporter, and the 

exporter must use one of these three 

methods for determining renewable fuel 

content of any exported fuel blend. 

First, the type of renewable fuel and 

blend level may be specified in 

documents provided by the seller, 

according to § 80.1430(e)(1). This will 

usually be in the form of a product 

transfer document. For example, as 

discussed above, renewable diesel and 

biodiesel blends above 20 percent will 

most likely contain the specific blend 

level, per current FTC requirements, 

and blends between one percent and 20 

percent may be labeled with the specific 

blend level, though this specific 

disclosure is not required by regulation 

or law. If the blend type and level is 

specifically stated by the supplier, the 

exporter may rely on such a statement 

to determine the volume of renewable 

fuel being exported and the exporter 

RVO. 

The second way the renewable fuel 

content may be determined by the 

exporter is by testing the fuel for 

renewable fuel content using method B 

or C of ASTM 6866 or an alternative test 

method as approved by the EPA, per 

§ 80.1430(e)(2). 

The third way the exporter may 

determine the renewable fuel content of 

any exported fuel is by assuming the 

fuel contains the maximum 

concentration of renewable fuel allowed 

by law and/or regulation, per 

§ 80.1430(e)(3). Therefore, for diesel that 

is not labeled as containing renewable 

fuel, the exporter must assume the 

volume contains five percent biodiesel 

or biomass-based diesel because that is 

the maximum concentration currently 

allowed without label by regulation. For 

diesel labeled as containing between 

five percent and 20 percent renewable 

diesel or biodiesel, the exporter must 

assume the fuel contains 20 percent 

because 20 percent is the maximum 

concentration that could be contained in 

that volume. If the exporter does not 

wish to assume the maximum 

percentage allowed by law (be it five 

percent or 20 percent), then it can use 

the testing method allowed in 

§ 80.1430(e)(2) to determine the precise 

fuel content. Importantly, and as noted 

above, the exporter is responsible for 

determining the renewable fuel content, 

even when the content is not necessarily 

stated on the PTD for diesel. 

Regardless of which method is used to 

determine the renewable fuel content of 

exported volumes, the exporter must 

report their exported volume and RVO 

annually, per the existing regulations at 

40 CFR 80.1451(a). Records 

demonstrating the method used to reach 

that determination (including any 

applicable testing results) must be 

maintained per 40 CFR 80.1454(a). 

By clarifying that the exporter RVO is 

five percent of the exported volume for 

diesel not carrying a renewable fuel 

content label and is 20 percent of the 

exported volume for diesel labeled as 

containing between five percent and 20 

percent renewable diesel or biodiesel, 

we have greater confidence that the 

underlying policy goal—to retire an 

appropriate number and type of RINs for 

any volume of exported renewable 

fuel—will be fulfilled. At the same time, 

if the exporter does not want to assume 

that maximum level, he or she can test 

the fuel at the time of export to 

determine if there is no renewable fuel 

content or some content less than five 

percent or less than 20 percent, and 

accordingly reduce the exporter RVO. 

Keeping the burden on exporters to 

determine the volume of renewable fuel 

they export and clarifying that they 

must assume the maximum percentage 

allowed by law where no percentage is 

specifically labeled on the PTD 

documents is the most straightforward 

way to remove RINs associated with 

exported fuel from the marketplace 

while alleviating the concerns expressed 

regarding the proposed specific blendlevel PTD disclosure. 

3. RIN Retirement Requirements 

The current RFS regulations require 

exporters to demonstrate compliance 

with their ERVOs on an annual basis, in 

the same way that obligated parties 

fulfill their RVOs. We proposed in the 

NPRM that a shorter deadline for 

exporters’ fulfillment of their RVOs and 

eliminating the deficit carryover 

provision 21 for exporters may ease 

concerns related to uncertainty in the 

export market. Reducing the amount of 

time available for exporters to meet their 

RVOs is intended to discourage ‘‘shell 

companies’’ being formed for the 

purpose of exporting renewable fuel 

without retiring appropriate RINs and 

then folding before the retirement 

deadline in order to avoid the cost of 

mstockstill on DSK4VPTVN1PROD with RULES2

42104 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

meeting the RVO. They would also 

reduce incentives for exporters to profit 

from selling RINs received with 

renewable fuel to obligated parties at a 

time of high RIN prices and then 

purchasing and retiring RINs to meet 

their RVO when prices drop. We also 

suggested, as an option, that exporters 

could be required simply to demonstrate 

on a quarterly basis that they have 

acquired RINs sufficient to cover their 

RVO in that quarter. 

We received a number of comments 

regarding these suggestions, the majority 

of which were in favor of eliminating 

the deficit carryover allowance for 

exporters and reducing the time 

available for compliance with the RVO 

after export. Some commenters 

suggested the RVO should be met 

‘‘immediately’’ upon export, while 

others suggested thirty days, quarterly, 

sixty days or annual retirement to meet 

the exporter’s RVO. Some suggested that 

RINs still attached to exported fuel 

should be immediately retired, whereas 

for fuel purchased without RINs still 

attached, the exporter should be given 

more time to fulfill its RVO. Many 

commenters cited ongoing concerns of 

exporters gaming the system by retiring 

RINs late (if at all) and suggested that 

shortening the time frame for 

compliance would tighten up this 

‘‘loose’’ area of the RIN market and 

improve all other participants’ 

understanding of what RINs are 

available for purchase at a given point 

in time. Other commenters suggested 

leaving the exporter RVO provisions as 

they are, because the exporter market 

has ‘‘calmed down’’ and exporters need 

the flexibility to carryover RIN 

retirement obligations to the next 

compliance year if needed. 

Having considered all the comments 

on this issue, the EPA believes the 

advantages of requiring more immediate 

and ongoing fulfillment of the exporter 

RVO and elimination of the deficit 

carryover provision for exporters far 

outweigh the potential disadvantages 

and burdens on exporters. While the 

EPA does not believe that ‘‘immediate’’ 

retirement is required upon export, we 

believe 30 days is a reasonable deadline 

by which to require the retirement of 

RINs of the same number and type as 

were originally generated for the 

exported renewable fuel. This final rule 

therefore includes a provision at 40 CFR 

80.1430(f) to set the retirement deadline 

for fulfilling the exporter’s RVO at thirty 

(30) days from the date of export. It also 

removes the deficit carryover provision 

for exporters from the RVO formulae at 

§ 80.1430(b) and from 80.1427. In order 

to ensure that 2014 ERVOs incurred 

after December 31, 2013 and prior to the 

effective date of the final rule are still 

fulfilled, the final rule also includes a 

new provision at § 80.1430(g) that all 

2014 ERVOs existing and unfulfilled as 

of the effective date of the final rule 

must be satisfied by the compliance 

demonstration deadline for the 2013 

compliance period. This will give 

exporters sufficient time to retire RINs 

in fulfillment of their existing ERVOs, 

which may include previously reported 

carryover ERVOs from the previous 

year. The requirement for exporters to 

report all such retirements in quarterly 

reports and annual reports remains the 

same as is currently written in 40 CFR 

80.1451(c)(2) and 80.1451(a)(1), 

respectively. 

B. ‘‘Downstream’’ Invalidation and 

Product Transfer Documents 

In the NPRM, the EPA proposed to 

clarify and expand existing 

requirements regarding the designation 

of qualifying renewable fuel, in 

response to concerns that properly 

generated RINs may become invalid if 

the fuel is not ultimately used in or as 

transportation fuel, heating oil, or jet 

fuel. We also proposed additional PTD 

and tracking requirements for renewable 

fuels that are not generally expected to 

be used for a qualifying purpose, i.e., as 

transportation fuel, heating oil or jet 

fuel. We received numerous comments 

regarding these changes, and are 

finalizing them as proposed with only 

minor changes. 

1. Designation of Intended Renewable 

Fuel Use 

In the NPRM we proposed that all 

renewable fuel producers and importers 

must designate all RIN-generating 

renewable fuel as transportation fuel, 

heating oil or jet fuel on the PTDs 

prepared to accompany a fuel shipment. 

The NPRM stated that designations of 

intended use must be made in good 

faith; in other words, parties designating 

fuel for a qualifying use who in fact 

know or have reason to know that the 

fuel would likely not be used in or as 

transportation or jet fuel or heating oil 

would be in violation of the regulation, 

and subject to civil penalties. 

Many commenters supported these 

PTD requirements, while some 

suggested that fuel traditionally used for 

conforming purposes (e.g. biodiesel) 

should not be required to meet the 

additional PTD designation 

requirements. Some commenters 

believed the extra language on PTDs 

would cause unnecessary expense and 

burden on producers and others 

involved in further transfers of the 

renewable fuel, and that the language 

was especially unnecessary if the PTD 

was also required to include a 

disclosure of any renewable fuel 

content, as discussed above in section 

III.A.2. 

After considering these comments, the 

EPA believes the additional PTD 

designations of intended use will cause 

minimal burden on regulated parties 

while providing useful information to 

blenders and end users downstream of 

the producer. Given that we are not 

finalizing the provisions requiring 

disclosure of specific blend levels for all 

renewable fuels, this basic PTD 

language will provide at least a basic 

disclosure that a blended fuel contains 

renewable content. There is therefore no 

redundancy in the disclosure, and it 

provides useful information to all 

potential purchasers. 

We have made two minor adjustments 

in the required PTD language in the 

final rule. First, we removed any 

implication that there are negative 

consequences for the fuel’s end user if 

the fuel is used for an improper 

purpose, i.e., not as transportation fuel, 

heating oil or jet fuel. The purpose of 

the PTD is to state the fuel’s intended 

and appropriate end use and creates no 

burden or obligation on the end user. 

The second change is the addition of a 

sentence declaring that any person 

exporting the renewable fuel is subject 

to the provisions of § 80.1430. This 

statement creates no new right or 

obligation for exporters, but simply 

gives exporters additional notice that 

they are subject to the RFS, specifically 

the provisions requiring retirement of 

RINs for any RIN-generating fuel they 

export. 

In addition to the PTD requirements, 

we also proposed that parties generating 

RINs for any renewable fuel not 

typically sold for use in or as 

transportation fuel, jet fuel, or heating 

oil must collect and submit documents 

certifying the fuel’s appropriate end use. 

The EPA believes that denatured 

ethanol, biodiesel, and renewable diesel 

that meets ASTM 975–13a Grade No. 1– 

D or No. 2–D specifications are highly 

likely to be used as transportation fuel, 

heating oil or jet fuel and are therefore 

not subject to the additional 

documentation requirements. For all 

other renewable fuels, we proposed 

limiting the opportunity for RIN 

generation to circumstances where the 

RIN generator has taken actions to 

ensure that the fuel is used for 

transportation fuel, heating oil or jet 

fuel. Where the producer or importer 

has fulfilled the applicable registration 

requirements, at § 80.1450(b)(1)(ix), 

RINs generated for such fuel will remain 

valid regardless of the fuel’s ultimate 

use. In the final rule, we are adding 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42105 

renewable gasoline to the list of fuels 

that are highly likely to be used for a 

conforming purpose and renewable 

gasoline is therefore not subject to the 

additional requirements for all other 

RIN-generating renewable fuels. 

There are two ways for the RIN 

generator to demonstrate that the fuel is 

sold for use as transportation fuel, 

heating oil or jet fuel. First, if the RIN 

generator uses the fuel itself as a 

blendstock or additive for gasoline or 

diesel fuel, it must maintain 

contemporaneous records 

demonstrating that it used the fuel as a 

blendstock or additive and that the final 

product is a transportation fuel, heating 

oil or jet fuel that met all applicable 

standards. Second, if the RIN generator 

does not use the fuel itself as a 

blendstock or additive for gasoline or 

diesel fuel, it may enter into a sales 

contract (or show a string of contracts) 

that requires the ultimate purchaser to 

use the fuel as a blendstock or additive 

for gasoline or diesel fuel, and that 

meets certain requirements designed to 

assure that the end user does, in fact, 

use the fuel as a blendstock or additive 

in a transportation fuel, heating oil or jet 

fuel that meets all applicable standards. 

We sought comment on these 

requirements generally, and also how 

these new registration requirements 

should apply to currently registered 

entities. 

One commenter agreed that the 

proposed requirements would help 

ensure that the fuels are used for the 

appropriate RFS purposes and no other 

purposes, and suggested that the 

requirements should apply immediately 

to currently registered entities who 

should update their registrations as soon 

as practicable. Other commenters, 

however, disagreed with the proposal, 

stating that the producers’ involvement 

with the fuel should end at the time of 

sale and that such tracking is beyond 

the appropriate scope of the QAP 

system. Another commenter suggested 

that providing affidavits of appropriate 

use should be a burden placed on the 

end user, not the producer or RIN 

generator. Another commenter stated 

that these requirements only complicate 

an already complicated system. 

After considering all comments, the 

EPA is finalizing the proposed 

registration, reporting and 

recordkeeping requirements for fuels 

not typically used as transportation fuel, 

heating oil or jet fuel as proposed. We 

believe that the RIN-generators are in 

the best position to collect and submit 

information regarding end use, because 

they are already regulated and registered 

parties, and they are the ones receiving 

the financial benefits of RIN generation. 

Therefore, it is appropriate to require 

RIN generators to be able to 

demonstrate, through the affidavits of 

third-party end users, that the 

renewable fuel they produce is indeed 

being used or is intended for use for a 

qualifying purpose. While we recognize 

that this will require additional 

paperwork collection and submission, 

the benefits of such additional work 

outweigh the potential burdens on RIN 

generators. 

Given the lag time between 

publication of this rule and the effective 

date of the final rule, we have 

determined that for parties already 

registered to generate RINs for these 

fuels, registrations must be updated as 

of the effective date of this rule. This 

should provide sufficient time for the 

initial collection of end user affidavits. 

In determining which fuels are 

typically sold for use in or as 

transportation fuel, jet fuel, or heating 

oil, we realized that some fuels 

currently meeting the definition of 

‘‘renewable diesel’’ should be subject to 

the same additional requirements to 

demonstrate appropriate end use. Some 

renewable fuel producers are currently 

generating RINs for fuel that they claim 

meets the existing definition of 

renewable diesel, but which is not 

chemically equivalent to a petroleum 

diesel fuel and is therefore not a dropin fuel. This product is primarily 

composed of triglycerides that have not 

been chemically converted to a 

hydrocarbon, through simple filtration 

of vegetable oils. It cannot be used as a 

drop-in transportation fuel but can only 

be used at blend levels with diesel fuel 

that are approved under 40 CFR part 79. 

To address this issue, we proposed to 

amend the definition of ‘‘non-ester 

renewable diesel’’ so that qualifying 

fuels must be approved under 40 CFR 

part 79 at specific blend levels with 

diesel fuel. This would explicitly allow 

those renewable fuels that are not 

fungible in their neat form with 

petroleum-based fuels to qualify as 

renewable diesel, while specifying that 

the end product must be fungible with 

petroleum diesel. 

We also suggested that in order to 

differentiate between the two types of 

renewable diesel (‘‘drop in’’ and other) 

we could limit the definition of 

renewable diesel to fuels that meet the 

ASTM D 975 Grade No. 1–D or No. 2– 

D specifications, and that are 

homogenous hydrocarbons. We could 

then refer to all other fuels that meet the 

current definition of renewable diesel as 

viscous non-ester renewable diesel, 

effectively removing these ‘‘other’’ fuels 

from the definition of renewable diesel. 

We received a number of comments in 

support of altering the definition to 

distinguish between renewable diesel 

that is fungible with conventional diesel 

and that which is not. One commenter 

additionally suggested that fuel not 

qualifying under the limited definition 

of renewable diesel should not qualify 

for RIN generation at all, or should have 

to petition for a new pathway in order 

to generate RINs. Other commenters 

suggested that triglycerides should 

never be considered renewable fuel 

capable of generating RINs. 

After considering all comments on 

this issue, we determined that it is 

clearer to distinguish between fungible 

drop-in renewable diesels meeting 

ASTM D 975–13a Grade No. 1–D or No. 

2–D specifications and other renewable 

fuels that can be blended at levels 

allowed under 40 CFR part 79 to create 

a product fungible with transportation 

fuel (petroleum diesel). However, the 

final rule creates this distinction within 

the definition of ‘‘renewable diesel’’ 

instead of creating a new definition of 

‘‘viscous non-ester renewable diesel,’’ to 

avoid further complicating the system 

and creating a new class of renewable 

fuel. We are therefore amending the 

definition of renewable diesel to include 

two classes of renewable diesel, one that 

meets ASTM D975–13a Grade No. 1–D 

or No. 2–D specifications and one that 

does not. Both classes of renewable 

diesel must not be mono-alkyl esters. 

The first class of renewable diesel must 

meet the ASTM D 975–13a Grade No. 1– 

D or No. 2–D specifications and must be 

suitable for use in an engine designed to 

operate on conventional diesel. The 

second class of renewable diesel must 

be a fuel or fuel additive registered 

under 40 CFR part 79 and be intended 

for use in an engine designed to operate 

on conventional diesel. As discussed 

above, any renewable diesel that does 

not meet the ASTM D975–13a Grade 

No. 1–D or No. 2–D specifications, i.e. 

that is in the second class of the new 

definition of renewable diesel, is subject 

to the additional registration, 

recordkeeping and reporting 

requirements for fuels not typically sold 

for an RFS qualifying use. We do not 

find it necessary, as some suggested, to 

prohibit RIN generation for renewable 

diesel not meeting an ASTM 

specification. The increased 

recordkeeping and tracking 

requirements for renewable diesel not 

meeting the ASTM D975–13a Grade No. 

1–D or 2–D specifications are designed 

to ensure the fuel is used for an RFS 

qualifying use and therefore is properly 

eligible for RIN generation. 

In the NPRM, we also proposed new 

requirements at § 80.1433 for any party 

mstockstill on DSK4VPTVN1PROD with RULES2

42106 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

selling or transferring a volume of 

renewable fuel for which RINs were 

generated, if that party knew or had 

reason to know that the volume would 

ultimately be used for a non-conforming 

purpose. We proposed that such a party 

would be obligated to redesignate the 

fuel (by removing the PTD designation 

of intended use) and to retire a like 

quantity and type of RINs as were 

originally generated for the volume. We 

also proposed a new prohibited act 

provision at § 80.1460(g) that 

established a failure to retire RINs when 

the designation of an RFS intended use 

was removed as a prohibited act. Upon 

further consideration, we have 

determined that these new retirement 

and redesignation requirements and the 

associated prohibited act provision are 

not needed to meet the program goal of 

ensuring that RIN-generating renewable 

fuel is used for an RFS qualifying fuel 

use, i.e., as transportation fuel, heating 

oil or jet fuel in the United States. 

Having added the requirements for 

‘intended use’ PTD language to 

accompany all volumes of renewable 

fuel for which RINs were generated and 

new requirements for tracking and 

recordkeeping of actual end use for fuels 

not traditionally used for a qualifying 

use, we feel that the program goal of 

ensuring appropriate end use is already 

addressed and managed through the 

regulations. We are therefore not 

finalizing the proposed § 80.1433 and 

conforming prohibited act provision for 

sellers and transferors of RIN-generating 

renewable fuel. 

2. Required Actions Regarding Fuel for 

Which RINs Have Been Generated That 

Is Redesignated for a Non-Qualifying 

Fuel Use 

Section 80.1429(f) of the existing 

regulations provides that any person 

who uses or designates a renewable fuel 

for an application other than 

transportation fuel, heating oil or jet fuel 

(i.e., a non-qualifying fuel use) must 

retire any RINs received with that 

renewable fuel. This approach, 

however, places the burden of using fuel 

for a qualifying use on the end user 

(who may under the existing regulations 

have no idea of the appropriate use 

requirements) when the fuel already 

should have been redesignated 

upstream and the use restriction 

removed. In other words, once the fuel 

reaches the end user, it should be 

clearly designated either for use as a 

transportation fuel, heating oil or jet fuel 

and sold as such, or should have been 

redesignated for a non-qualifying fuel 

use and the redesignator should have 

retired an appropriate number of RINs. 

Redesignation in this context simply 

means the removal of the PTD statement 

of intended end use required under 

section 1453(a)(12). A party removing 

this designation might also include a 

statement that the fuel is intended for 

some other specific use, but such 

additional or other specifications are not 

required under the regulations. 

As noted above in section III.B.1, a 

transferor who uses the PTD language 

designating the fuel for use as 

transportation fuel, heating oil or jet fuel 

must not know or have reason to know 

that the fuel will be used for some other 

purpose. To do so would be a prohibited 

act and subject the transferor to civil 

penalties. Any person redesignating fuel 

for which RINs have been generated for 

a non-qualifying use must make the RIN 

system whole by retiring an equivalent 

number and type of RINs. The end user, 

on the other hand, has no obligation 

under the RFS to use fuel in a particular 

way or to retire RINs if the fuel is used 

for a non-qualifying purpose. The 

original producer or RIN generator for 

the fuel is similarly protected under this 

system, because the RINs are not 

invalidated by an improper end use. If 

RINs were generated for the fuel and it 

is sold for use as a transportation fuel, 

heating oil, or jet fuel (and any other 

additional requirements are met for 

special fuel types, see section III.B.1 of 

this Preamble), then the RINs generated 

for that fuel are valid and cannot be 

invalidated by any action of the end 

user. 

To ensure that RINs generated with 

renewable fuels are retired if the fuel is 

redesignated for a non-qualifying fuel 

use, we proposed and are finalizing new 

requirements for any party that 

redesignates a renewable RIN-generating 

fuel for a non-qualifying fuel use. To 

accomplish this, we are removing and 

reserving § 80.1429(f) of the regulations 

and adding a new § 80.1433 to require 

parties that designate fuel for which 

RINs were generated for a nonqualifying fuel use, i.e. for something 

other than transportation fuel, heating 

oil, or jet fuel, to retire an appropriate 

number and type of RINs. We are also 

adding a new § 80.1460(g) which 

prohibits a person from designating a 

qualifying renewable fuel for which 

RINs were generated for a nonqualifying fuel use, unless the 

requirements of § 80.1433 have been 

met, i.e. an appropriate number and 

type of RINs were retired when the fuel 

was redesignated. These changes will 

relieve end users of the obligation to 

retire RINs. 

Commenters on this issue supported 

the proposed changes for redesignators 

and removal of the retirement 

requirement for end users. Based on our 

initial rationale and the lack of any 

comments to the contrary, we are 

finalizing these changes as proposed. 

One commenter considered the 

proposed 10 day retirement deadline too 

short and suggested it should be 

extended to 15 days, starting on the date 

the fuel is re-designated or sold. The 

EPA foresees no harm in extending the 

deadline for § 80.1433 retirements, so is 

finalizing a 15 day deadline. 

3. RIN Generation for Fuel Made With 

Renewable Fuel Feedstock 

The existing regulations do not 

provide a pathway for the generation of 

RINs for a fuel produced using another 

renewable fuel as a feedstock. Parties 

seeking to do so, however, may submit 

a petition requesting approval pursuant 

to § 80.1416. 40 CFR 80.1426(c)(6)(ii) 

sets forth certain prohibitions that 

would apply if, in the future, the EPA 

approved a pathway that allowed a 

party to generate RINs for a fuel that was 

produced using another renewable fuel 

as a feedstock. These prohibitions are 

designed to prevent parties from 

generating more than one RIN for the 

same volume of renewable fuel. In the 

NPRM, the EPA proposed to modify 

§ 80.1426(c)(6) to prohibit a party from 

generating RINs for a fuel made from a 

renewable fuel feedstock, where the 

feedstock was produced by another 

party, unless the EPA approves a 

petition under § 80.1416 and the 

petition and approval include an 

enforceable mechanism to prevent 

double counting of RINs. Having 

received no adverse comments on this 

proposal, we are finalizing the new 

paragraph as proposed. 

We also proposed to amend 

§ 80.1426(f)(4) to address the potential 

for ‘‘double discounting’’ for nonrenewable feedstocks when renewable 

fuel is produced by co-processing 

renewable biomass and non-renewable 

feedstocks to produce a fuel that is 

partially renewable. To correct this 

problem, we proposed to add a new 

paragraph (f)(4)(iii) so that for purposes 

of § 80.1426(f)(4) only, the equivalence 

value does not include a discount for 

non-renewable feedstocks. Having 

received no adverse comments on this 

proposal, we are finalizing the new 

paragraph as proposed. 

4. Use of Renewable Fuel in OceanGoing Vessels 

Another issue the Agency is aware of 

concerns the use of renewable fuelcontaining Motor Vehicle, Nonroad, 

Locomotive and Marine diesel fuel 

(MVNRLM) in ocean-going vessels. The 

definition of ‘‘transportation fuel’’ 

specifically excludes ‘‘fuel for use in 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42107 

22This does not change the fact that the blend of 

fuel that results from blending MVNRLM or NRLM 

with ECA marine fuel would still be ECA marine 

fuel and subject to the sulfur limits that apply to 

such fuel. 

ocean-going vessels’’. See 40 CFR 

80.1401. In the preamble to the March 

26, 2010 RFS rule, the Agency stated 

that ‘‘‘fuels for use in ocean-going 

vessels’ means residual or distillate 

fuels other than MVNRLM intended to 

be used to power large ocean-going 

vessels.’’ 75 FR 14670, 14721 (March 26, 

2010). The rule also defines ‘‘fuel for 

use in ocean going vessels’’ as including 

ECA marine fuel. See 40 CFR 80.1401. 

Some parties have questioned whether 

MVNRLM that is blended into ECA 

marine fuel is ‘‘fuel for ocean going 

vessels’’ such that RINs generated for 

the renewable fuel component of 

MVNRLM become invalid upon that 

use. It is the Agency’s interpretation that 

the definition of ‘‘fuel for use in an 

ocean-going vessel’’ in § 80.1401 does 

not include MVNRLM that is blended 

into ECA marine fuel. This is based on 

the definitions of fuel for use in an 

ocean-going vessel and of ECA marine 

fuel, as explained in the March 2010 

rulemaking.22 Therefore, RINs that have 

been or are properly generated for any 

renewable fuel component of MVNRLM 

that is blended to produce ECA fuel 

remain valid. The EPA notes that the 

vast majority of MVNRLM is used for 

qualifying RFS purposes, and that only 

a trivial quantity of such fuels is used 

to produce ECA fuel for ocean-going 

vessels. Given the complexity and 

regulatory burden that would be 

involved in tracking trivial quantities of 

MVNRLM that may be used in ECA fuel, 

the RFS regulations appropriately treat 

all properly generated RINs for 

renewable fuel blended into MVNRLM 

as valid, regardless of the possible 

downstream blending of MVNRLM with 

ECA fuel. In addition, new regulatory 

requirements designed to ensure that 

renewable fuel is put to a qualifying use 

would be imposed on certain types of 

renewable fuel, as discussed above. 

These new requirements would further 

limit the quantity of renewable fuel that 

could ultimately be blended with ECA 

fuel used in ocean going vessels. 

We sought comment on whether our 

interpretation of ‘‘fuel for use in an 

ocean-going vessel’’ created any 

potential problems. The Agency 

received several supportive comments 

and no comments against the proposed 

interpretation of ‘‘fuel for use in an 

ocean-going vessel’’. Therefore, the 

Agency is finalizing the proposed 

interpretation. 

5. Treatment of Improperly Separated 

RINs 

Under existing regulations, a RIN that 

was improperly separated pursuant to 

§ 80.1429 is invalid and obligated 

parties may not use any invalid RINs for 

compliance purposes. In the NPRM, the 

EPA proposed to remove the provision 

that improperly separated RINs are 

invalid, and to add a provision 

identifying the improper separation of 

RINs as a prohibited act. The net effect 

of these changes would allow obligated 

parties to use RINs that were improperly 

separated for compliance purposes, 

since the RINs would no longer be 

considered invalid. However, improper 

RIN separation would continue to be a 

prohibited act under the regulations. We 

received a number of comments in 

support of this approach and therefore 

are finalizing it as written. 

The EPA sought comment on whether 

the RFS regulations should instead 

maintain § 80.1431(a)(1)(viii), but also 

require a more comprehensive and 

robust mechanism to allow parties that 

acquire separated RINs and the EPA to 

evaluate whether the RINs were 

properly separated and used in or for a 

qualifying fuel. We received one 

comment in support of the proposal but 

a number of comments in opposition to 

this alternative idea, asserting that the 

RIN-related regulations are already 

complex and this would add additional 

complexity without a significant benefit 

in return. The simpler proposed 

alternative (above) was widely favored. 

The EPA is therefore not finalizing any 

additional requirements for tracking of 

separation events and separated RINs. 

Additionally, the EPA requested 

comment on whether we should require 

RIN separators to include with their 

quarterly reports additional records 

related to qualifying separation events 

that are already required to be reported 

in basic form in quarterly reports. 

Enhanced reporting requirements for 

RIN separators could facilitate the EPA’s 

ability to investigate and prosecute 

persons who engage in RIN separation 

violations. The EPA sought comment on 

the type and scope of reporting that 

would most likely assist the EPA in 

identifying RIN separation violators. We 

received no comments on this issue and 

are not prepared at this time to finalize 

additional reporting requirements 

regarding RIN separation. We intend to 

continue to evaluate this question and 

will take up the issue in a subsequent 

action if we determine it is warranted. 

As we are not finalizing a change, RIN 

separators will continue to be required 

to provide in quarterly reports a list and 

certain details of all RIN separation 

events occurring in that quarter, per 40 

CFR 80.1451(c)(1). 

C. Treatment of Confidential Business 

Information 

1. Proposed Disclosure of Certain 

Registration and Reported Information 

Due to the high level of interest in 

RFS compliance information since 

implementation of the RFS program, the 

EPA proposed to make certain RFS 

registration and reporting information 

public. The release of this information 

was intended to improve the integrity of 

information submitted for RFS 

compliance and deter fraudulent 

behavior, and was part of a broader 

effort to increase transparency and 

provide information to the public that 

would promote greater liquidity in the 

RIN market. We solicited comments on 

all aspects of the proposed information 

releases, and in particular whether there 

are unique circumstances where 

disclosing this information would cause 

substantial harm to a company’s 

competitive position. 

We received a substantial number of 

comments on our proposed Confidential 

Business Information (CBI) 

determination, many of which raised 

legitimate concerns regarding the 

appropriateness and lawfulness of the 

EPA releasing the proposed information. 

Given our desire to finalize the 

proposed QAP program in a timely 

manner and the significant serious 

issues raised on the CBI question, we 

are not finalizing a CBI determination in 

this action. We intend to continue to 

evaluate the issues raised in comment 

and if appropriate will make a CBI 

determination in a future action. 

The EPA proposed to summarize and 

publish two classes of information: 

Registration information and 

information from quarterly reports. 

First, we proposed to publish 

registration and QAP information 

required under 40 CFR 80.1450(b), (c), 

and (g) from independent third-party 

auditors and renewable fuel producers 

and importers registered with the RFS 

program, by facility and on a monthly 

basis. For each facility, we would 

publish the company name, facility 

name, facility type/fuel product, total 

permitted capacity, production volume, 

production process type, feedstocks, DCode, and any co-products. After 

publishing these monthly registration 

reports, we proposed to summarize and 

update the information in quarterly and 

annual registration reports of the same 

type of information. 

Second, we proposed to publish 

monthly, quarterly and/or annual report 

of information reported to the EPA 

mstockstill on DSK4VPTVN1PROD with RULES2

42108 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

under 40 CFR § 80.1452(b) by renewable 

fuel producers and importers, on a 

facility-by-facility basis. This 

information included: 

• The name of the renewable fuel 

producer or importer and associated 

registration information (i.e., name, 

address, feedstock, process, fuel type, DCode). 

• The EPA company and facility 

registration numbers and the associated 

registration information of the 

renewable fuel producers, foreign 

ethanol producers and importers that 

generated RINs in EMTS during the 

applicable time period(s). 

• The D-code of RINs generated by 

the facility during the time period (40 

CFR 80.1452(b)(6)). For each D-code 

generated at a facility, the number of 

RINs generated (40 CFR 80.1452(b)(12)), 

volume of fuel produced (40 CFR 

80.1452(b)(10)), fuel type (40 CFR 

80.1452(b)(9)), production process (40 

CFR 80.1452(b)(7)), feedstocks (40 CFR 

80.1452(b)(13)), and co-products (40 

CFR 80.1452(b)(15)). 

• The volume of denaturant (for 

ethanol), applicable equivalence value, 

and whether all the feedstocks used 

during the time period were claimed to 

have met the definition of renewable 

biomass (40 CFR 80.1452(b)(11) and 

80.1452(b)(14)). 

The EPA believed that these data were 

not entitled to confidential treatment 

because we believed much of this 

information was already publicly 

available and widely known, for 

example renewable fuel producers’ 

company names, facility names, RINgenerating names, locations, production 

years, fuel product types, RIN D-Codes, 

production volumes, production process 

types, feedstocks, equivalence values, 

and number of RINs generated. We also 

believed that disclosing this information 

was not likely to cause substantial harm 

to the competitive position of the 

business required to report these 

information elements under Part 80 

because these elements of information 

do not reveal any proprietary 

information, or any other information 

that would likely provide insight for 

competitors to gain an advantage. 

Furthermore, because these information 

elements would be aggregated to the 

facility level and further aggregated for 

the time period of the EPA-published 

report, we did not believe the 

information could be used by a 

competitor to gain a competitive 

advantage. 

We received a number of comments 

on this proposal. Many commenters 

noted that the most sensitive aspects of 

the information proposed for release are 

not already publicly available or widely 

known. The EPA’s assumption on this 

point was mistaken. Further, many 

commenters discussed at length the 

ways in which release of the data could 

cause competitive harm. For example, 

release of actual production volumes 

over time could reveal a company’s 

market share and position, percent 

capacity production rate, marketing 

strategy and business partnerships with 

other entities such as feedstock 

suppliers. Feedstock type and 

production process type, in concert with 

other released data, could be reverseengineered to reveal the producers’ 

process efficiencies, feedstock use rates 

and other proprietary information. Some 

commenters asserted that release of the 

data would have a disproportionately 

large negative impact on small 

producers, whose processes and 

business relationships are typically 

more sensitive and guarded than large 

producers’. 

Given the recognition that much of 

this information is not already public or 

widely available and the many concerns 

expressed about potential harm to 

competitive position, the EPA is not 

finalizing the proposed release of 

registration and reported information. 

The decision not to finalize the 

proposed release of data is not a 

determination that the information 

proposed for release necessarily 

deserves confidential treatment, for 

example in response to a FOIA request. 

Such requests will continue to be 

evaluated on a case-by-case basis. The 

EPA will continue its current practice to 

treat as CBI any registration or reported 

information claimed as confidential, 

unless a specific determination to the 

contrary is made in a given case. 

Today’s decision is simply a 

determination that, at this time, we are 

not prepared to make a class 

determination that the information 

proposed for release in the NPRM is not 

CBI. 

2. Treatment of QAPs and Independent 

Engineering Reviews 

For QAP plans and independent 

engineering reviews that are claimed as 

CBI, the EPA proposed to require 

submission of two versions of those 

documents: One clearly marked ‘‘CBI 

version,’’ with appropriate areas 

denoted as CBI, and a second ‘‘public 

version,’’ with CBI information 

redacted. Based on the Agency’s 

experience with the RFS program, the 

EPA noted that certain information 

should not fall under a claim of CBI 

because it is generally available to the 

public or widely-known within the 

industry, and disclosure would not 

likely cause harm to the competitive 

position of any submitting renewable 

producer, importer, or any other party to 

a RIN transaction. If the EPA receives a 

Freedom of Information Act (FOIA) 

request for the CBI version of an 

engineering review or QAP plan, the 

EPA would process the FOIA request 

pursuant to its CBI regulations under 40 

CFR part 2, subpart B. Submission of the 

two versions of QAP plans and 

engineering reviews (CBI and public 

versions) would allow the Agency to 

clearly understand what information is 

claimed as CBI, and would also allow 

the Agency to make public versions 

available to the public without 

unnecessary delay. We received no 

adverse comments on this approach and 

are finalizing as proposed. 

D. Proposed Changes to Section 

80.1452—EPA Moderated Transaction 

System (EMTS) Requirements— 

Alternative Reporting Method for Sell 

and Buy Transactions for Assigned RINs 

In the NPRM, we suggested 

alternative reporting and PTD 

requirements found in §§ 80.1452 and 

80.1453, respectively, which would 

allow buyers and sellers of assigned 

RINs flexibility concerning the invoice 

date reported to EMTS through the use 

of a unique identifier identified in 

advance between buying and selling 

parties. Some buyers and sellers of 

assigned RINs have expressed concerns 

with these requirements, stating they 

have difficulty determining the date of 

transfer since title of the renewable fuel 

is not transferred until the fuel 

physically reaches the buyer. Some 

transactions, for example those by rail 

or barge, may take several weeks, and 

their current accounting systems do not 

include a means for capturing the 

buyer’s receipt date. We noted that such 

an alternative method would require 

substantial modification to the EMTS to 

accept such transactions. 

We received a number of comments in 

support of adding flexibility in the 

reporting and PTD requirements. 

However, we did receive one comment 

from an obligated party stating that they 

and other parties had spent a substantial 

amount of resources in developing 

accounting systems to implement the 

current regulatory provisions and that 

such a change in flexibility would 

necessitate a major overhaul of 

accounting systems that have been 

functioning adequately for the past 

several years at significant cost to 

industry. 

We believe that it is important to note 

that such changes to EMTS incur 

significant costs to both the Agency and 

industry. We also understand both the 

need for flexibility and the potential 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42109 

costs to industry when we allow new 

flexibility in our reporting systems. 

While we agree that there may be some 

value in adding flexibility to make 

buying and selling transaction function 

more smoothly in EMTS, we are not 

prepared at this time to institute such a 

change to EMTS. Nor do we wish to 

disrupt the significant cost borne by 

industry to comply with existing 

reporting and PTD requirements. 

Therefore, we are not finalizing the 

proposed changes to the reporting and 

PTD requirements in §§ 80.1452 and 

80.1453. However, we may consider 

further action on this at a later date. 

IV. Impacts 

The quality assurance program that 

we are finalizing in today’s final 

rulemaking provides a voluntary 

mechanism for regulated parties to 

verify that RINs are validly generated, 

provides an affirmative defense against 

violations if a regulated party transfers 

an invalidly generated RIN or uses it for 

compliance, and provides clarity 

regarding the responsibility of regulated 

parties to replace invalidly generated 

RINs. The program does not change the 

volume requirements of the RFS 

program, but instead helps to ensure 

that those volume requirements are met. 

Likewise, the changes to the regulations 

governing export of renewable fuel, 

separation of RINs from wet gallons, and 

qualifying uses of renewable fuel are 

also intended to ensure that the RFS 

volume requirements are met with 

qualifying renewable fuel. As a result, 

there is no change to the expected 

impacts of the RFS program in terms of 

volumes of renewable fuel consumed or 

the associated GHG or energy security 

benefits. Instead, the primary impacts of 

the quality assurance program will be 

improved liquidity in the RIN market 

and improved opportunities for smaller 

renewable fuel producers to sell their 

RINs. 

The quality assurance program 

finalized today is voluntary. As a result, 

there are no obligatory costs. There will 

be costs associated with an individual 

party’s participation in the quality 

assurance program. However, the fact 

that the quality assurance program is 

voluntary means that a decision to 

participate will be made independently 

by each regulated party. Furthermore, 

any costs incurred will only be borne if 

the industry believes that those costs are 

less than current costs in the 

marketplace resulting from efforts to 

verify, acquire, and trade RINs. 

Regulated parties face high costs if 

they unintentionally purchase invalid 

RINs (including civil penalties as well 

as the cost of purchasing additional 

RINs to meet their RVOs). Although 

they may make expenditures to 

implement the QAPs, they are making 

that investment to reduce the risk of 

incurring those future costs. As rational 

actors, the EPA anticipates that 

regulated parties will not spend more on 

QAPs than the costs they intend to 

avoid. Therefore, the EPA estimates that 

this rule will result in a net reduction 

in social costs. 

As of June 2014, there are 559 biofuel 

producers operating more than 754 

biofuel production facilities. Of these, 

there are 244 biomass-based diesel 

producers operating 261 biomass-based 

diesel production facilities. These 

numbers are expected to increase as the 

biofuel market expands. While it is 

unlikely that all biofuel producers will 

opt to participate in the quality 

assurance program, that was the 

assumption for the upper cost estimate 

range in order to reflect the maximum 

potential cost of the program. 

The EPA staff consulted with a variety 

of parties who are expected to be 

involved in developing RIN validation 

programs for the biofuels industry. 

These parties include current and 

potential RIN auditors, conventional 

and biofuel industry groups, and 

obligated parties which have been 

affected by RIN fraud. These parties all 

provided informal estimates of the costs 

associated with this type of quality 

assurance program which were used to 

inform our cost calculations. 

For those biofuel producers who opt 

into the quality assurance program, each 

biofuel production facility must be 

visited and assessed as part of any audit 

conducted under the quality assurance 

program. An auditor will use an 

approved QAP as the basis for 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 proposed 

components of audits are described in 

Section II. 

For producers choosing to take 

advantage of the QAPs, we require that 

production facilities be visited on a 

semi-annual basis. New production 

facilities shall be visited prior to 

verification of any RINs and 

subsequently according to the RFS QAP 

schedule. We estimate that each visit 

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. 

Tables IV–1, IV–2, and IV–3 below 

itemize the activities anticipated for 

each biofuel production facility audit. 

The estimates include costs incurred by 

the biofuel producer (Table IV–1), the 

auditor (Table IV–2), and the EPA 

(Table IV–3). While we project costs for 

the QAP auditors, we expect they will 

recoup their costs by charging the 

producers in most cases for their audit 

and RIN verification services. 

TABLE IV–1—COSTS TO THE BIOFUEL PRODUCER FOR IMPLEMENTING A QAP 

Category Manager 

time 

Prof./tech. 

time 

Clerical 

time 

Number 

per yr. Capital $ Total hours Total $ 

Site Visit ....................... 1 16 4 2 ........................ 42 3,588 

Reporting ...................... 2 12 4 2 ........................ 36 3,040 

Recordkeeping ............. 0 0 2 2 ........................ 4 148 

Total ...................... ........................ ........................ ........................ ........................ ........................ 82 6,776 

TABLE IV–2—COSTS TO THE QAP AUDITOR FOR IMPLEMENTING A QAP 

Category Manager 

time 

Prof./tech. 

time 

Clerical 

time 

Number 

per yr. Capital $ Total hours Total $ 

Auditor .......................... ........................ ........................ ........................ ........................ ........................ ........................ ........................

Contract Init .................. 4 4 2 1 530 10 1,428 

Site Visit ....................... 4 16 0 1 1,060 20 3,036 

Follow-up ...................... 2 24 10 2 1,060 72 5,778 

mstockstill on DSK4VPTVN1PROD with RULES2

42110 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

TABLE IV–2—COSTS TO THE QAP AUDITOR FOR IMPLEMENTING A QAP—Continued 

Category Manager 

time 

Prof./tech. 

time 

Clerical 

time 

Number 

per yr. Capital $ Total hours Total $ 

Monitoring .................... 2 50 0 ........................ ........................ 52 5,020 

Consultants .................. ........................ ........................ ........................ 1 1,000 ........................ 1,000 

Reporting ...................... 0 4 12 2 ........................ 32 1,656 

QAP Prep ..................... 2 8 4 2 ........................ 28 2,272 

EMTS ........................... 0 25 0 ........................ ........................ 25 2,400 

Recordkeeping ............. 0 12 25 ........................ ........................ 37 2,077 

Total ...................... ........................ ........................ ........................ ........................ ........................ 276 24,667 

TABLE IV–3—COSTS TO THE EPA FOR IMPLEMENTING A QAP 

Category Manager 

time 

Prof./tech. 

time 

Clerical 

time Capital $ Total hours Total $ 

Implementation ......................................... ........................ 3 ........................ ........................ 3 267 

EMTS Data Management ........................ ........................ 1 ........................ ........................ 1 89 

Total .................................................. ........................ 4 ........................ ........................ 4 356 

A. Time and Cost Assumptions 

The specific times estimated for each 

task are shown in Tables IV–1, IV–2, 

and IV–3. These estimates are based on 

a number of basic assumptions. An 

initial site visit of the facility to be 

audited is assumed to require two days, 

and include estimated travel and per 

diem costs. For simplicity, we have 

estimated an average $600 for airfare, 

$150 for lodging, and $80 for the per 

diem expenses. It is assumed that a 

plant manager would meet briefly with 

the auditor, and that a plant chemist or 

other professional would escort the 

auditor throughout the visit. Some 

clerical support would be required to 

locate files for the related document 

reviews. 

It was assumed that an auditor would 

travel and spend half a day on contract 

initiation. Any follow up site visits were 

assumed to be shorter in duration, as the 

auditor would now be familiar with the 

facility and its normal operation. A 

substantial amount of the auditor’s time 

would be spent in follow up 

documentation of the facility, such as 

checking feedstock suppliers, process 

fuel suppliers, doing volume and mass 

balances, and monitoring the ongoing 

operation of the facility. It was assumed 

that an auditor would employ a 

specialized consultant and/or local 

agent to perform some portion of the 

audit support. 

In addition to tracking facility 

operation, an auditor would also be 

responsible for preparing the QAP, 

maintaining recordkeeping, monitoring 

and/or brokering activities on EMTS, 

and assisting with RFS reporting 

requirements. 

B. Labor Cost Assumptions 

The labor costs used in this cost 

estimation are average mean wages for 

each labor category, as provided in the 

Bureau of Labor and Statistics Report 

dated May 2011. Based on this data, we 

used the following hourly wages for 

each employee type: 

Managerial $55.04 per hour 

Technical/Professional $47.81 per 

hour 

Clerical $18.35 per hour 

Doubling to account for company 

overhead and benefits, and for 

convenience, rounding to the dollar, 

gives the following hourly rates: 

Managerial $110 per hour 

Technical/Professional $96 per hour 

Clerical $37 per hour 

For the Agency costs, the work was 

assumed to be performed by a GS–13 

technical employee, doubled and 

rounded up, for an hourly rate of $89. 

C. Cost Estimate Results 

We considered two scenarios to 

provide a range of cost estimates with 

the first estimate assuming that all 

currently registered biofuel production 

facilities participate in the program and 

the second estimate assuming that just 

the biomass-based diesel production 

facilities participate. The first estimate 

represents our maximum total cost 

estimate based on the number of 

registered biofuel producers as of June 

2014. This assumption of total 

participation by all biofuel producers 

equates to 559 RIN generators with 754 

biofuel production facilities. This 

results in a maximum total cost for the 

program, including recordkeeping and 

reporting costs, of $22,386,702. If all 

parties are participating in the program 

and all RINs are verified, this results in 

a per-RIN cost of less than $0.01. 

However, we do expect that the per-RIN 

cost would vary depending on the 

number of RINs generated by each fuel 

producer since the effort involved in 

validating many aspects of renewable 

fuel production is the same regardless of 

the size of the facility. 

We do not expect that the costs of 

participation in the quality assurance 

program will vary significantly by the D 

code of RINs. While RINs with different 

D codes may command different prices 

in the market, the verification process 

for each RIN is expected to be similar 

regardless of D code, with the biggest 

cost differences in feedstock 

verification. For this reason we use the 

same estimated unit costs for the second 

estimate, where we assume that only the 

biomass-based diesel production 

facilities participate in the QAP 

program. There are currently 244 

biomass-based diesel producers 

operating 261 biomass-based diesel 

production facilities. The total cost for 

the program, including recordkeeping 

and reporting costs, if just these 

facilities participated is estimated to be 

$8,091,431. 

V. Public Participation 

Many interested parties participated 

in the rulemaking process that 

culminates with this final rule. This 

process provided an opportunity for 

submitting written public comments 

following the proposal that we 

published on February 21, 2013 (78 FR 

12158). We also held a public hearing 

on April 18, 2013, at which a number 

of parties provided both verbal and 

written testimony. All comments 

received, both verbal and written, are 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42111 

available in the EPA docket EPA–HQ– 

OAR–2012–0621 and were considered 

in developing the final rule. Public 

comments and the EPA responses are 

discussed throughout this preamble. 

VI. Statutory and Executive Order 

Review 

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 and policy issues. 

Accordingly the EPA submitted this 

action to the Office of Management and 

Budget (OMB) for review under 

Executive Orders 12866 and 13563 and 

any changes made in response to OMB 

recommendations have been 

documented in the docket for this 

action. 

This action is being finalized today as 

a result of several cases of fraudulently 

generated RINs. As discussed above, 

several biodiesel production companies 

have been identified as having 

generated RINs that did not represent 

qualifying renewable fuel. While these 

invalid RINs represented a very small 

amount (about five percent) of the 

nationwide biodiesel volume in the 

2009–2011 timeframe, the net result is 

that this fraud has impacted the 

liquidity of the biodiesel RIN market as 

some biodiesel RINs are perceived as 

having less value than others. In 

addition, as a result of fraudulent 

activities, obligated parties have been 

subject to monetary penalties and the 

additional cost of purchasing new RINs 

to cover the invalid RINs, even though 

they purchased the original RINs in 

good faith believing that they were 

valid. The EPA believes it is necessary 

to put in place an additional regulatory 

mechanism that provides an alternative, 

voluntary way to assure that RINs used 

for compliance are valid to restore 

confidence in the RIN market and level 

the playing field for large and small 

producers. 

B. Paperwork Reduction Act 

The information collection 

requirements in this final rule have been 

submitted for approval to the Office of 

Management and Budget (OMB) under 

the Paperwork Reduction Act, 44 U.S.C. 

3501 et seq. The Information Collection 

Request (ICR) document prepared by the 

EPA has been assigned EPA ICR number 

2473.02, OMB control number 2060– 

0688. The information collection 

requirements are not enforceable until 

OMB approves them. 

The RFS program requires that 

specified volumes of renewable fuel be 

used as transportation fuel, heating oil, 

and/or jet fuel each year. Obligated 

parties demonstrate compliance with 

the RFS 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 RINs show 

that a certain volume of qualifying 

renewable fuel was produced or 

imported. The RFS program also 

includes provisions stipulating the 

conditions under which RINs are 

invalid, the liability carried by a party 

that transfers or uses an invalid RIN, 

and how invalid RINs must be treated. 

In this action we are promulgating a 

voluntary quality assurance program 

intended to provide a more structured 

way to assure that the RINs entering 

commerce are valid. The voluntary 

quality assurance program for RINs 

provides a means for regulated parties to 

ensure that RINs are properly generated, 

through audits of production facilities 

conducted by independent third parties 

using quality assurance plans (QAPs). 

The annual public reporting and 

recordkeeping burden for this collection 

is estimated to be 320 hours per 

response. A document entitled 

‘‘Supporting Statement for Renewable 

Fuels Standard (RFS2) Voluntary RIN 

Quality Assurance Program (Final 

Rule)’’ has been placed in the public 

docket. The supporting statement 

provides a detailed explanation of the 

Agency’s estimates by collection 

activity. The EPA did not receive any 

comment on the proposed burden 

collection. The estimates contained in 

the supporting statement are briefly 

summarized here: 

Total No. of Respondents: 559. 

Total Burden Hours: 74,386. 

Total Cost to Respondents: $ 

4,596,774. 

Burden is defined at 5 CFR 1320.3(b). 

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. 

C. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

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 this 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 (see table 

below); (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. The following 

table provides an overview of the 

primary SBA small business categories 

potentially affected by this regulation: 

Industry Defined as small entity by SBA if: NAICSa codes 

Petroleum refineries .................................................................. ≤1,500 employees .................................................................... 324110 

a North American Industrial Classification System. 

The program finalized in today’s 

action is a voluntary quality assurance 

program intended to provide a more 

structured way to assure that RINs 

entering commerce are valid. As a result 

of the fraud issue, obligated parties have 

been reluctant to purchase RINs from 

smaller refiners because of the 

uncertainty of their validity. While this 

voluntary program may be beneficial for 

both larger and smaller refineries, it will 

be particularly beneficial for smaller 

petroleum refineries if they choose to 

participate. In the current climate, these 

smaller producers have been forced to 

offer their RINs at a significant discount 

relative to RINs from larger producers, 

assuming they can find obligated parties 

or distributors willing to purchase them 

at all. While there is some cost to opt 

into the program, we believe these costs 

will be offset by leveling the playing 

field between larger producers and 

small producers, allowing small 

mstockstill on DSK4VPTVN1PROD with RULES2

42112 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

producers to effectively compete in the 

market. 

After considering the economic 

impacts of this action on small entities, 

I certify that this action will not have a 

significant economic impact on a 

substantial number of small entities. 

This action will not impose any 

requirements on small entities. 

D. Unfunded Mandates Reform Act 

This rule does not contain a Federal 

mandate that may result in expenditures 

of $100 million or more for State, local, 

and tribal governments, in the aggregate, 

or the private sector in any one year. 

The agency has determined that this 

action does not contain a Federal 

mandate that may result in expenditures 

of $100 million or more for the private 

sector in any one year. Because the 

program outlined in this rule is 

optional, entities subject to this rule 

have the flexibility to participate or not. 

Thus, 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 the UMRA because it contains no 

regulatory requirements that might 

significantly or uniquely affect small 

governments. 

E. Executive Order 13132 (Federalism) 

Executive Order 13132, entitled 

‘‘Federalism’’ (64 FR 43255, August 10, 

1999), requires the EPA to develop an 

accountable process to ensure 

‘‘meaningful and timely input by State 

and local officials in the development of 

regulatory policies that have federalism 

implications.’’ ‘‘Policies that have 

federalism implications’’ is defined in 

the Executive Order to include 

regulations that 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.’’ 

This action does not have federalism 

implications. It does 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 rule 

applies to manufacturers of 

transportation fuels and not to state or 

local governments. Thus, Executive 

Order 13132 does not apply to this 

action. 

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 rule will be implemented at 

the Federal level and impose 

compliance costs only on fuel producers 

who elect to participate in the program. 

Thus, Executive Order 13175 does not 

apply to this rule. 

G. Executive Order 13045: Protection of 

Children From Environmental Health 

Risks and Safety Risks 

The EPA interprets Executive Order 

13045 as applying only to those 

regulatory actions that are based on 

health or safety risks, such that the 

analysis required under section 5–501 of 

the Order has the potential to influence 

the regulation. This rule is not subject 

to Executive Order 13045 because it 

does not establish an environmental 

standard intended to mitigate health or 

safety risks. 

H. Executive Order 13211 (Energy 

Effects) 

This action is not a ‘‘significant 

energy action’’ as defined in Executive 

Order 13211 (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. 

We have concluded that any energy 

impacts of this rule will be negligible 

because the voluntary QAP audit 

process will ensure that the volume 

consumption goals of the statute are met 

while addressing the unique features of 

the RFS program that have resulted in 

inefficiencies and poor liquidity in the 

RIN market. 

I. National Technology Transfer 

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 the agencies 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 the 

EPA to provide Congress, through OMB, 

explanations when the EPA decides not 

use available and applicable voluntary 

consensus standards. 

This rulemaking involves technical 

standards. The EPA has decided to use 

ASTM International (‘‘ASTM’’) D 975– 

13a, entitled ‘‘Standard Specification for 

Diesel Fuel Oils’’ approved on 

December 1, 2013, to change its 

definition of renewable diesel in the 

RFS program. The rationale for this 

action is discussed in section III.B.1. of 

this preamble. Information about this 

standard may be obtained through the 

ASTM Web site (http://www.astm.org) 

or by calling ASTM at (610) 832–9585. 

This rulemaking does not change this 

voluntary consensus standard, and does 

not involve any other technical 

standards. Therefore, the EPA is not 

considering the use of any voluntary 

consensus standards other than the one 

described above. 

J. Executive Order 12898: Federal 

Actions To Address Environmental 

Justice in Minority Populations and 

Low-Income Populations 

Executive Order 12898 (59 FR 7629, 

February 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. 

Today’s action finalizes a voluntary 

set of regulatory provisions that provide 

regulated parties with a specific 

mechanism for demonstrating that they 

have conducted due diligence to verify 

the validity of RINs. Therefore, the EPA 

has determined that this action will not 

have disproportionately high and 

adverse human health or environmental 

effects on minority or low-income 

populations. 

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. The 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 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42113 

‘‘major rule’’ as defined by 5 U.S.C. 

804(2). 

VII. Statutory Authority 

Statutory authority for the rule 

finalized today can be found in section 

211 of the Clean Air Act, 42 U.S.C. 

7545. Additional support for the 

procedural and compliance related 

aspects of today’s rule, including the 

recordkeeping requirements, come from 

Sections 114, 208, and 301(a) of the 

Clean Air Act, 42 U.S.C. 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, 

Incorporation by reference, Oil imports, 

Petroleum. 

Dated: July 2, 2014. 

Gina McCarthy, 

Administrator. 

For the reasons set forth in the 

preamble, title 40, chapter I of the Code 

of Federal Regulations is amended as 

follows: 

PART 80—REGULATION OF FUELS 

AND FUEL ADDITIVES 

■ 1. The authority citation for part 80 

continues to read as follows: 

Authority: 42 U.S.C. 7414, 7542, 7545, and 

7601(a). 

Subpart M—[Amended] 

■ 2. Section 80.1401 is amended as 

follows: 

■ a. By revising the definition of ‘‘Nonester renewable diesel’’. 

■ b. By adding the definitions of ‘‘A– 

RIN’’, ‘‘B–RIN’’, ‘‘Independent thirdparty auditor’’, ‘‘Interim period’’, ‘‘Nonqualifying fuel use’’, ‘‘Q–RIN’’, ‘‘Quality 

assurance audit’’, ‘‘Quality assurance 

plan’’, and ‘‘Verified RIN’’ in 

alphabetical order. 

The added and revised text read as 

follows: 

§ 80.1401 Definitions. 

* * * * * 

A–RIN means a RIN verified during 

the interim period by a registered 

independent third-party auditor using a 

QAP that has been approved under 

§ 80.1469(a) following the audit process 

described in § 80.1472. 

* * * * * 

B–RIN means a RIN verified during 

the interim period by a registered 

independent third-party auditor using a 

QAP that has been approved under 

§ 80.1469(b) following the audit process 

described in § 80.1472. 

* * * * * 

Independent third-party auditor 

means a party meeting the requirements 

of § 80.1471(b) that conducts QAP 

audits and verifies RINs. 

Interim period means the period 

between February 21, 2013 and 

December 31, 2014. 

* * * * * 

Non-ester renewable diesel, also 

known as renewable diesel, means 

renewable fuel that is not a mono-alkyl 

ester and that is either: 

(1) A fuel or fuel additive that meets 

the ASTM D 975–13a (incorporated by 

reference, see § 80.1468) Grade No. 1–D 

or No. 2–D specifications and can be 

used in an engine designed to operate 

on conventional diesel fuel; or 

(2) A fuel or fuel additive that is 

registered under 40 CFR part 79 and can 

be used in an engine designed to operate 

using conventional diesel fuel. 

* * * * * 

Non-qualifying fuel use means a use 

of renewable fuel in an application 

other than transportation fuel, heating 

oil, or jet fuel. 

* * * * * 

Q–RIN means a RIN verified by a 

registered independent third-party 

auditor using a QAP that has been 

approved under § 80.1469(c) following 

the audit process described in § 80.1472. 

Quality assurance audit means an 

audit of a renewable fuel production 

facility conducted by an independent 

third-party auditor in accordance with a 

QAP that meets the requirements of 

§ 80.1469 and requirements of 

§ 80.1472. 

Quality assurance plan, or QAP, 

means the list of elements that an 

independent third-party auditor will 

check to verify that the RINs generated 

by a renewable fuel producer or 

importer are valid. A QAP includes both 

general and pathway specific elements. 

* * * * * 

Verified RIN means a RIN generated 

by a renewable fuel producer that was 

subject to a QAP audit executed by an 

independent third-party auditor, and 

determined by the independent thirdparty auditor to be valid. Verified RINs 

includes A–RINs, B–RINs, and Q–RINs. 

* * * * * 

■ 3. Section 80.1426 is amended as 

follows: 

■ a. By revising paragraph (a)(1). 

■ b. By revising paragraphs (c)(1) and 

(c)(6). 

■ c. By revising paragraphs (f)(4)(i)(A)(1) 

and (f)(4)(i)(B). 

■ d. By adding paragraph (f)(4)(iii). 

■ e. By revising paragraph (f)(12). 

■ f. By revising paragraph (f)(14). 

The additions and revisions read as 

follows: 

§ 80.1426 How are RINs generated and 

assigned to batches of renewable fuel by 

renewable fuel producers or importers? 

(a) * * * 

(1) To the extent permitted under 

paragraphs (b) and (c) of this section, 

producers and importers of renewable 

fuel must generate RINs to represent 

that fuel if all of the following occur: 

(i) The fuel qualifies for a D code 

pursuant to § 80.1426(f), or the EPA has 

approved a petition for use of a D code 

pursuant to § 80.1416. 

(ii) The fuel is demonstrated to be 

produced from renewable biomass 

pursuant to the reporting requirements 

of § 80.1451 and the recordkeeping 

requirements of § 80.1454. 

(A) Feedstocks meeting the 

requirements of renewable biomass 

through the aggregate compliance 

provision at § 80.1454(g) are deemed to 

be renewable biomass. 

(B) [Reserved] 

(iii) Was produced in compliance 

with the registration requirements of 

§ 80.1450, the reporting requirements of 

§ 80.1451, the recordkeeping 

requirements of § 80.1454, and all other 

applicable requirements of this subpart 

M. 

(iv) The renewable fuel is designated 

on a product transfer document (PTD) 

for use as transportation fuel, heating 

oil, or jet fuel in accordance with 

§ 80.1453(a)(12). 

* * * * * 

(c) * * * 

(1) Fuel producers and importers may 

not generate RINs for fuel that does not 

satisfy the requirements of paragraph 

(a)(1) of this section. 

* * * * * 

(6) A party is prohibited from 

generating RINs for a volume of fuel that 

it produces if the fuel has been 

produced by a process that uses a 

renewable fuel as a feedstock, and the 

renewable fuel that is used as a 

feedstock was produced by another 

party, except that RINs may be 

generated for such fuel if allowed by the 

EPA in response to a petition submitted 

pursuant to § 80.1416 and the petition 

approval specifies a mechanism to 

prevent double counting of RINs. 

* * * * * 

(f) * * * 

(4) * * * 

(i) * * * 

(A) * * * 

(1) VRIN shall be calculated according 

to the following formula: 

mstockstill on DSK4VPTVN1PROD with RULES2

42114 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

VRIN = EV * Vs * FER/(FER + FENR) 

Where: 

VRIN = RIN volume, in gallons, for use in 

determining the number of gallon-RINs 

that shall be generated for the batch. 

EV = Equivalence value for the batch of 

renewable fuel per § 80.1415, subject to 

qualification in paragraph (f)(4)(iii) of 

this section. 

Vs = Standardized volume of the batch of 

renewable fuel at 60 °F, in gallons, 

calculated in accordance with paragraph 

(f)(8) of this section. 

FER = Feedstock energy from renewable 

biomass used to make the transportation 

fuel, in Btu. 

FENR = Feedstock energy from non-renewable 

feedstocks used to make the 

transportation fuel, heating oil, or jet 

fuel, in Btu. 

* * * * * 

(B) Method B. VRIN shall be calculated 

according to the following formula: 

VRIN = EV * Vs * R 

Where: 

VRIN = RIN volume, in gallons, for use in 

determining the number of gallon-RINs 

that shall be generated for the batch. 

EV = Equivalence value for the batch of 

renewable fuel per § 80.1415, subject to 

qualification in paragraph (f)(4)(iii) of 

this section. 

Vs = Standardized volume of the batch of 

renewable fuel at 60 °F, in gallons, 

calculated in accordance with paragraph 

(f)(8) of this section. 

R = The renewable fraction of the fuel as 

measured by a carbon-14 dating test 

method as provided in paragraph (f)(9) of 

this section. 

* * * * * 

(iii) In determining the RIN volume 

VRIN according to paragraph (f)(4)(i)(A) 

or (f)(4)(i)(B) of this section, the 

equivalence value used to determine 

VRIN which is calculated according to 

§ 80.1415 shall use a value of 1.0 to 

represent R, the renewable content of 

the renewable fuel. 

* * * * * 

(12)(i) For purposes of this section, 

any renewable fuel other than ethanol, 

biodiesel, or renewable diesel that meets 

the ASTM D 975–13a Grade No. 1–D or 

No. 2–D specifications (incorporated by 

reference, see § 80.1468) is considered 

renewable fuel and the producer or 

importer may generate RINs for such 

fuel only if all of the following apply: 

(A) The fuel is produced from 

renewable biomass and qualifies for a D 

code in Table 1 to this section or has 

been otherwise approved by the 

Administrator; 

(B) The fuel producer or importer 

maintains records demonstrating that 

the fuel was produced for use as a 

transportation fuel, heating oil or jet fuel 

by: 

(1) Blending the renewable fuel into 

gasoline or diesel fuel to produce a 

transportation fuel, heating oil or jet fuel 

that meets all applicable standards; 

(2) Entering into a written contract for 

the sale of a the renewable fuel, which 

specifies the purchasing party shall 

blend the fuel into gasoline or diesel 

fuel to produce a transportation fuel, 

heating oil or jet fuel that meets all 

applicable standards; or 

(3) Entering into a written contract for 

the sale of the renewable fuel, which 

specifies that the fuel shall be used in 

its neat form as a transportation fuel, 

heating oil or jet fuel that meets all 

applicable standards. 

(C) The fuel was sold for use in or as 

a transportation fuel, heating oil, or jet 

fuel, and for no other purpose. 

(ii) [Reserved] 

(iii) [Reserved] 

* * * * * 

(14) For purposes of Table 1 to this 

section, process heat produced from 

combustion of gas at a renewable fuel 

facility is considered derived from 

biomass if the gas is biogas. 

(i) For biogas directly transported to 

the facility without being placed in a 

commercial distribution system, all of 

the following conditions must be met: 

(A) The producer has entered into a 

written contract for the procurement of 

a specific volume of biogas with a 

specific heat content. 

(B) The volume of biogas was sold to 

the renewable fuel production facility, 

and to no other facility. 

(C) The volume and heat content of 

biogas injected into the pipeline and the 

volume of gas used as process heat are 

measured by continuous metering. 

(ii) For biogas that has been gathered, 

processed and injected into a common 

carrier pipeline, all of the following 

conditions must be met: 

(A) The producer has entered into a 

written contract for the procurement of 

a specific volume of biogas with a 

specific heat content. 

(B) The volume of biogas was sold to 

the renewable fuel production facility, 

and to no other facility. 

(C) The volume of biogas that is 

withdrawn from the pipeline is 

withdrawn in a manner and at a time 

consistent with the transport of fuel 

between the injection and withdrawal 

points. 

(D) The volume and heat content of 

biogas injected into the pipeline and the 

volume of gas used as process heat are 

measured by continuous metering. 

(E) The common carrier pipeline into 

which the biogas is placed ultimately 

serves the producer’s renewable fuel 

facility. 

(iii) The process heat produced from 

combustion of gas at a renewable fuel 

facility described in paragraph (f)(12)(i) 

of this section shall not be considered 

derived from biomass if any other party 

relied upon the contracted volume of 

biogas for the creation of RINs. 

* * * * * 

■ 4. Section 80.1427 is amended as 

follows: 

■ a. By revising paragraph (a)(1) and the 

introductory text of paragraph (b)(1). 

■ b. By adding paragraph (c). 

§ 80.1427 How are RINs used to 

demonstrate compliance? 

(a) Obligated party renewable volume 

obligations. (1) Except as specified in 

paragraph (b) of this section or 

§ 80.1456, each party that is an obligated 

party under § 80.1406 and is obligated 

to meet the Renewable Volume 

Obligations under § 80.1407 must 

demonstrate pursuant to § 80.1451(a)(1) 

that it has retired for compliance 

purposes a sufficient number of RINs to 

satisfy the following equations: 

(i) Cellulosic biofuel. 

(ΣRINNUM)CB,i + (ΣRINNUM)CB,i-1 = 

RVOCB,i

Where: 

(ΣRINNUM)CB,i = Sum of all owned gallonRINs that are valid for use in complying 

with the cellulosic biofuel RVO, were 

generated in year i, and are being applied 

towards the RVOCB,i, in gallons. 

(ΣRINNUM)CB,i-1 = Sum of all owned gallonRINs that are valid for use in complying 

with the cellulosic biofuel RVO, were 

generated in year i-1, and are being 

applied towards the RVOCB,i, in gallons. 

RVOCB,i = The Renewable Volume Obligation 

for cellulosic biofuel for the obligated 

party for calendar year i, in gallons, 

pursuant to § 80.1407. 

(ii) Biomass-based diesel. Except as 

provided in paragraph (a)(7) of this 

section, 

(ΣRINNUM)BBD,i + (ΣRINNUM)BBD,i-1 = 

RVOBBD,i

Where: 

(ΣRINNUM)BBD,i = Sum of all owned gallonRINs that are valid for use in complying 

with the biomass-based diesel RVO, were 

generated in year i, and are being applied 

towards the RVOBBD,i, in gallons. 

(ΣRINNUM)BBD,i-1 = Sum of all owned gallonRINs that are valid for use in complying 

with the biomass-based diesel RVO, were 

generated in year i-1, and are being 

applied towards the RVOBBD,i, in gallons. 

RVOBBD,i = The Renewable Volume 

Obligation for biomass-based diesel for 

the obligated party for calendar year i 

after 2010, in gallons, pursuant to 

§ 80.1407. 

(iii) Advanced biofuel. 

(ΣRINNUM)AB,i + (ΣRINNUM)AB,i-1 = 

RVOAB,i

Where: 

(ΣRINNUM)AB,i = Sum of all owned gallonRINs that are valid for use in complying 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42115 

with the advanced biofuel RVO, were 

generated in year i, and are being applied 

towards the RVOAB,i, in gallons. 

(ΣRINNUM)AB,i-1 = Sum of all owned gallonRINs that are valid for use in complying 

with the advanced biofuel RVO, were 

generated in year i-1, and are being 

applied towards the RVOAB,i, in gallons. 

RVOAB,i = The Renewable Volume Obligation 

for advanced biofuel for the obligated 

party for calendar year i, in gallons, 

pursuant to § 80.1407. 

(iv) Renewable fuel. 

(ΣRINNUM)RF,i + (ΣRINNUM)RF,i-1 = 

RVORF,i

Where: 

(ΣRINNUM)RF,i = Sum of all owned gallonRINs that are valid for use in complying 

with the renewable fuel RVO, were 

generated in year i, and are being applied 

towards the RVORF,i, in gallons. 

(ΣRINNUM)RF,i-1 = Sum of all owned gallonRINs that are valid for use in complying 

with the renewable fuel RVO, were 

generated in year i-1, and are being 

applied towards the RVORF,i, in gallons. 

RVORF,i = The Renewable Volume Obligation 

for renewable fuel for the obligated party 

for calendar year i, in gallons, pursuant 

to § 80.1407. 

* * * * * 

(b) * * * 

(1) An obligated party that fails to 

meet the requirements of paragraph 

(a)(1) or (a)(7) of this section for 

calendar year i is permitted to carry a 

deficit into year i+1 under the following 

conditions: 

* * * * * 

(c) Exporter Renewable Volume 

Obligations (ERVOs). (1) Each exporter 

of renewable fuel that is obligated to 

meet Exporter Renewable Volume 

Obligations under § 80.1430 must 

demonstrate pursuant to § 80.1451(a)(1) 

that is has retired for compliance 

purposes a sufficient number of RINs to 

meet its ERVOs by the deadline 

specified in § 80.1430(f). 

(2) In fulfillment of its ERVOs, each 

exporter is subject to the provisions of 

paragraphs (a)(2), (a)(3), (a)(6), and (a)(8) 

of this section. 

(3) No more than 20 percent of the 

ERVO calculated according to a formula 

at § 80.1430(b) may be fulfilled using 

RINs generated in the year prior to the 

year in which the RVO was incurred. 

■ 5. Section 80.1429 is amended by 

adding paragraph (b)(10) and removing 

and reserving paragraph (f) to read as 

follows: 

§ 80.1429 Requirements for separating 

RINs from volumes of renewable fuel. 

* * * * * 

(b) * * * 

(10) Any party that produces a 

volume of renewable fuel may separate 

any RINs that have been generated to 

represent that volume of renewable fuel 

or that blend if that party retires the 

separated RINs to replace invalid RINs 

according to § 80.1474. 

* * * * * 

(f) [Reserved] 

* * * * * 

■ 6. Section 80.1430 is amended as 

follows: 

■ a. By revising paragraph (a). 

■ b. By revising paragraph (b). 

■ c. By revising paragraph (e) 

introductory text. 

■ d. By revising paragraph (f). 

■ e. By adding paragraph (g). 

§ 80.1430 Requirements for exporters of 

renewable fuel. 

(a) Any exporter of renewable fuel, 

whether in its neat form or blended 

shall acquire sufficient RINs to comply 

with all applicable Renewable Volume 

Obligations under paragraphs (b) 

through (e) of this section representing 

the exported renewable fuel. No 

provision of this section applies to 

renewable fuel purchased directly from 

the renewable fuel producer and for 

which the exporter can demonstrate that 

no RINs were generated through the 

recordkeeping requirements of 

§ 80.1454(a)(6). 

(b) Exporter Renewable Volume 

Obligations (ERVOs). An exporter of 

renewable fuel shall determine its 

Exporter Renewable Volume Obligations 

from the volumes of the renewable fuel 

exported. 

(1) Cellulosic biofuel. 

ERVOCB,k = VOLk* EVk

Where: 

ERVOCB,k = The Exporter Renewable Volume 

Obligation for cellulosic biofuel for 

discrete volume k in gallons. 

k = A discrete volume of renewable fuel that 

the exporter knows or has reason to 

know is cellulosic biofuel that is 

exported in a single shipment. 

VOLk = The standardized volume of discrete 

volume k, in gallons, calculated in 

accordance with § 80.1426(f)(8). 

EVk = The equivalence value associated with 

discrete volume k. 

(2) Biomass-based diesel. 

ERVOBBD,k = VOLk* EVk

Where: 

ERVOBBDI,k = The Exporter Renewable 

Volume Obligation for biomass-based 

diesel for discrete volume k, in gallons. 

k = A discrete volume of renewable fuel that 

is biodiesel or renewable diesel and is 

exported in a single shipment. 

VOLk = The standardized volume of discrete 

volume k calculated in accordance with 

§ 80.1426(f)(8). 

EVk = The equivalence value associated with 

discrete volume k. 

(3) Advanced biofuel. 

ERVOAB,k = VOLk* EVk

Where: 

ERVOAB,k = The Exporter Renewable Volume 

Obligation for advanced biofuel for 

discrete volume k, in gallons. 

k = A discrete volume of renewable fuel that 

is advanced biofuel (including biomassbased diesel, renewable diesel, cellulosic 

biofuel and other advanced biofuel) and 

is exported in a single shipment. 

VOLk = The standardized volume of discrete 

volume k, in gallons, calculated in 

accordance with § 80.1426(f)(8). 

EVk = The equivalence value associated with 

discrete volume k. 

(4) Renewable fuel. 

ERVORF,i = VOLk* EVk

Where: 

ERVORF,i = The Renewable Volume 

Obligation for renewable fuel for discrete 

volume k, in gallons. 

k = A discrete volume of exported renewable 

fuel that is exported in a single 

shipment. 

VOLk = The standardized volume of discrete 

volume k, in gallons, calculated in 

accordance with § 80.1426(f)(8). 

EVk = The equivalence value associated with 

discrete volume k. 

* * * * * 

(e) For renewable fuels that are in the 

form of a blend at the time of export, the 

exporter shall determine the volume of 

exported renewable fuel based on one of 

the following: 

* * * * * 

(f) Each exporter of renewable fuel 

must fulfill its ERVO for each discrete 

volume of exported renewable fuel 

within thirty days of export, and must 

demonstrate compliance with its ERVOs 

pursuant to § 80.1427(c). 

(g) Each exporter of renewable fuel 

must fulfill any 2014 ERVOs existing as 

of September 16, 2014 for which RINs 

have not yet been retired by the 

compliance demonstration deadline for 

the 2013 compliance period, and must 

demonstrate compliance with such 

ERVOs pursuant to § 80.1427(c). 

■ 7. Section 80.1431 is amended by 

removing and reserving paragraph 

(a)(1)(viii) and revising paragraph (b) 

introductory text to read as follows: 

§ 80.1431 Treatment of invalid RINs. 

(a) * * * 

(1) * * * 

(viii) [Reserved] 

* * * * * 

(b) Except as provided in § 80.1473, 

the following provisions apply in the 

case of RINs that are invalid: 

* * * * * 

■ 8. Section 80.1450 is amended as 

follows: 

■ a. By adding paragraph (b)(1)(xii). 

■ b. By revising paragraph (g). 

mstockstill on DSK4VPTVN1PROD with RULES2

42116 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

The revisions and additions read as 

follows: 

§ 80.1450 What are the registration 

requirements under the RFS program? 

* * * * * 

(b) * * * 

(1) * * * 

(xii) For a producer or importer of any 

renewable fuel other than ethanol, 

biodiesel, renewable gasoline, 

renewable diesel that meets the ASTM 

975–13a Grade No. 1–D or No. 2–D 

specifications (incorporated by 

reference, see § 80.1468), biogas or 

renewable electricity all the following: 

(A) A description of the renewable 

fuel and how it will be blended to into 

gasoline or diesel fuel to produce a 

transportation fuel, heating oil or jet fuel 

that meets all applicable standards. 

(B) A statement regarding whether the 

renewable fuel producer or importer 

will blend the renewable fuel into 

gasoline or diesel fuel or enter into a 

written contract for the sale and use of 

a specific quantity of the renewable fuel 

with a party who blends the fuel into 

gasoline or diesel fuel to produce a 

transportation fuel, heating oil or jet fuel 

that meets all applicable standards. 

(C) If the renewable fuel producer or 

importer enters into a written contract 

for the sale and use of a specific 

quantity of the renewable fuel with a 

party who blends the fuel into gasoline 

or diesel fuel to produce a 

transportation fuel, heating oil or jet 

fuel, provide all the following: 

(1) The name, location and contact 

information for the party that will blend 

the renewable fuel. 

(2) A copy of the contract that 

requires the party to blend the 

renewable fuel into gasoline or diesel 

fuel to produce a transportation fuel, 

heating oil or jet fuel that meets all 

applicable standards. 

* * * * * 

(g) Any independent third-party 

auditor described in § 80.1471 must 

register with the EPA as an independent 

third-party auditor and receive an EPA 

issued company identification number 

prior to conducting quality assurance 

audits pursuant to § 80.1472. 

Registration information must be 

submitted at least 30 days prior to 

conducting audits of renewable fuel 

production facilities. The independent 

third-party auditor must provide to the 

EPA all the following: 

(1) The information specified under 

§ 80.76, if such information has not 

already been provided under the 

provisions of this part. 

(2) Documentation of professional 

qualifications as follows: 

(i) For a professional engineer as 

described in § 80.1450(b)(2)(i)(A) and 

(b)(2)(i)(B). 

(ii) For a domestic independent thirdparty auditor or a foreign independent 

third-party auditor, a certified public 

accountant who is licensed by an 

appropriate state agency in the United 

States. 

(iii) For a foreign independent thirdparty auditor, an accountant who is a 

foreign equivalent to a certified public 

accountant licensed in the United 

States. 

(3) Documentation of professional 

liability insurance as described in 

§ 80.1471(c). 

(4) Any quality assurance plans as 

described in § 80.1469. 

(5) Name, address, and company and 

facility identification numbers of all 

renewable fuel production facilities that 

the independent third-party auditor 

intends to audit under § 80.1472. 

(6) An affidavit, or electronic consent, 

from each renewable fuel producer or 

foreign renewable fuel producer stating 

its intent to have the independent thirdparty auditor conduct a quality 

assurance audit of any of the renewable 

fuel producer’s or foreign renewable 

fuel producer’s facilities. 

(7) An affidavit stating that an 

independent third-party auditor and its 

contractors and subcontractors are 

independent, as described in 

§ 80.1471(b), of any renewable fuel 

producer or foreign renewable fuel 

producer. 

(8) The name and contact information 

for each person employed (or under 

contract or subcontract) by the 

independent third-party auditor to 

conduct audits or verify RINs, as well as 

the name and contact information for 

any professional engineer and certified 

public accountant performing the 

review. 

(9) Registration updates—(i) Any 

independent third-party auditor who 

makes changes to its quality assurance 

plan(s) that will allow it to audit new 

renewable fuel production facilities, as 

defined in § 80.1401 that is not reflected 

in the producer’s registration 

information on file with the EPA must 

update its registration information and 

submit a copy of an updated QAP on 

file with the EPA at least 60 days prior 

to producing the new type of renewable 

fuel. 

(ii) Any independent third-party 

auditor who makes any other changes to 

a QAP that will affect the third-party 

auditor’s registration information but 

will not affect the renewable fuel 

category for which the producer is 

registered per paragraph (b) of this 

section must update its registration 

information 7 days prior to the change. 

(iii) Independent third-party auditors 

must update their QAPs at least 60 days 

prior to verifying RINs generated by a 

renewable fuel facility uses a new 

pathway. 

(iv) Independent third-party auditors 

must update their QAPs at least 60 days 

prior to verifying RINs generated by any 

renewable fuel facility not identified in 

their existing registration. 

(10) Registration renewal. 

Registrations for independent thirdparty auditors expire December 31 of 

each calendar year. Previously approved 

registrations will renew automatically if 

all the following conditions are met: 

(i) The independent third-party 

auditor resubmits all information, 

updated as necessary, described in 

§ 80.1450(g)(1) through (g)(7) no later 

than October 31 before the next calendar 

year. 

(ii) The independent third-party 

auditor submits an affidavit affirming 

that he or she has only verified RINs 

using a QAP approved under § 80.1469, 

notified all appropriate parties of all 

potentially invalid RINs as described in 

§ 80.1471(d), and fulfilled all of his or 

her RIN replacement obligations under 

§ 80.1474. 

(iii) The auditor has not received a 

notice of deficiency from the EPA 

regarding its registration renewal 

materials. 

(11) Revocation of registration. (i) The 

Administrator may issue a notice of 

intent to revoke the registration of a 

third-party auditor if the Administrator 

determines that the auditor has failed to 

fulfill any requirement of this subpart. 

The notice of intent shall include an 

explanation of the reasons for the 

proposed revocation. 

(ii) Within 60 days of receipt of the 

notice of intent to revoke, the 

independent third-party auditor may 

submit written comments concerning 

the notice, including but not limited to 

a demonstration of compliance with the 

requirements which provide the basis 

for the proposed revocation. 

Communications should be sent to the 

EMTS support line (support@epamtssupport.com). The Administrator shall 

review and consider any such 

submission before taking final action 

concerning the proposed revocation. 

(iii) If the auditor fails to respond in 

writing within 60 days to the notice of 

intent to revoke, the revocation shall 

become final by operation of law and 

the Administrator shall notify the 

independent third-party auditor of such 

revocation. 

■ 9. Section 80.1451 is amended as 

follows: 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42117 

■ a. By adding and reserving paragraph 

(a)(1)(xv). 

■ b. By adding paragraphs (a)(1)(xvi) 

through (xviii). 

■ c. By revising paragraph (b)(1)(ii)(T). 

■ d. By revising paragraphs (c)(2)(x) 

through (xvi). 

■ e. By adding paragraphs (c)(2)(xvii) 

and (c)(2)(xviii). 

■ f. By revising paragraph (g). 

■ g. By revising paragraphs (h)(1) 

through (5). 

■ h. By adding paragraph (i). 

The revisions and additions read as 

follows: 

§ 80.1451 What are the reporting 

requirements under the RFS program? 

(a) * * * 

(1) * * * 

(xv) [Reserved] 

(xvi) The total current-year RINs by 

category of renewable fuel, as those 

fuels are defined in § 80.1401 (i.e., 

cellulosic biofuel, biomass-based diesel, 

advanced biofuel, renewable fuel, and 

cellulosic diesel), retired for compliance 

that are invalid as defined in 

§ 80.1431(a). 

(xvii) The total prior-year RINs by 

renewable fuel category, as those fuels 

are defined in § 80.1401, retired for 

compliance that are invalid as defined 

in § 80.1431(a). 

(xviii) A list of all RINs that were 

retired for compliance in the reporting 

period and are invalid as defined in 

§ 80.1431(a). 

* * * * * 

(b) * * * 

(1) * * * 

(ii) * * * 

(T) Producers or importers of any 

renewable fuel other than ethanol, 

biodiesel, renewable gasoline, 

renewable diesel that meets ASTM D 

975–13a Grade No. 1–D or No. 2–D 

specifications (incorporated by 

reference, see § 80.1468), biogas or 

renewable electricity, shall report, on a 

quarterly basis, all the following for 

each volume of fuel: 

(1) Total volume of renewable fuel 

produced or imported, total volume of 

renewable fuel blended into gasoline 

and diesel fuel by the producer or 

importer, and the percentage of 

renewable fuel in each batch of finished 

fuel. 

(2) If the renewable fuel producer or 

importer enters into a written contract 

for the sale of a specific quantity of the 

renewable fuel to a party who blends 

the fuel into gasoline or diesel fuel to 

produce a transportation fuel, heating 

oil or jet fuel, or who uses the neat fuel 

for a qualifying fuel use, the name, 

location and contact information for 

each purchasing party, and one or more 

affidavits from that party including all 

the following information: 

(i) Quantity of renewable fuel 

received from the producer or importer. 

(ii) Date the renewable fuel was 

received from producer. 

(iii) A description of the fuel that the 

renewable fuel was blended into and the 

blend ratios for each batch, if 

applicable. 

(iv) A description of the finished fuel, 

and a statement that the fuel meets all 

applicable standards and was sold for 

use as a transportation fuel, heating oil 

or jet fuel. 

(v) Quantity of assigned RINs received 

with the renewable fuel, if applicable. 

(vi) Quantity of assigned RINs that the 

end user separated from the renewable 

fuel, if applicable. 

(c) * * * 

(2) * * * 

(x) The total current-year RINs retired 

that are invalid as defined in 

§ 80.1431(a). 

(xi) The total prior-year RINs retired. 

(xii) The total prior-year RINs retired 

that are invalid as defined in 

§ 80.1431(a). 

(xiii) The number of current-year RINs 

owned at the end of the quarter. 

(xiv) The number of prior-year RINs 

owned at the end of the quarter. 

(xv) The number of RINs generated. 

(xvi) The volume of renewable fuel (in 

gallons) owned at the end of the quarter. 

(xvii) The total 2009 and 2010 retired 

RINs reinstated. 

(xviii) Any additional information 

that the Administrator may require. 

* * * * * 

(g) All independent third-party 

auditors. Any party that is an 

independent third-party auditor that 

verifies RINs must submit to the EPA 

reports according to the schedule, and 

containing all the information, that is 

set forth in this paragraph (g). 

(1)(i) For RINs verified beginning on 

September 16, 2014, RIN verification 

reports for each facility audited by the 

independent third-party auditor shall be 

submitted according to the schedule 

specified in paragraph (f)(2) of this 

section. 

(ii) The RIN verification reports shall 

include all the following information for 

each batch of renewable fuel produced 

or imported verified per § 80.1469(c), 

where ‘‘batch’’ means a discrete 

quantity of renewable fuel produced or 

imported and assigned a unique batchRIN per § 80.1426(d): 

(A) The RIN generator’s name. 

(B) The RIN generator’s EPA company 

registration number. 

(C) The renewable fuel producer EPA 

facility registration number. 

(D) The importer EPA facility 

registration number and foreign 

renewable producer company 

registration number, if applicable. 

(E) The applicable reporting period. 

(F) The quantity of RINs generated for 

each verified batch according to 

§ 80.1426. 

(G) The production date of each 

verified batch. 

(H) The D-code of each verified batch. 

(I) The volume of denaturant and 

applicable equivalence value of each 

verified batch. 

(J) The volume of each verified batch 

produced. 

(K) The volume and type of each 

feedstock used to produce the verified 

batch. 

(L) Whether the feedstocks used to 

produce each verified batch met the 

definition of renewable biomass. 

(M) Whether appropriate RIN 

generation calculations were followed 

per § 80.1426(f)(3), (4), or (5) for each 

verified batch, as applicable. 

(N) The quantity and type of coproducts produced. 

(O) Invoice document identification 

numbers associated with each verified 

batch, if applicable. 

(P) Laboratory sample identification 

numbers for each verified batch 

associated with the generation of any 

certificates of analysis used to verify 

fuel type and quality, if applicable. 

(Q) Any additional information the 

Administrator may require. 

(2) Aggregate RIN verification reports 

shall be submitted to the EPA according 

to the schedule specified in paragraph 

(f)(2) of this section. Each report shall 

summarize RIN verification activities for 

the reporting period. The quarterly 

aggregate RIN verification reports shall 

include all of the following information: 

(i) The submitting party’s name. 

(ii) The submitting party’s EPA 

company registration number. 

(iii) The number of current-year RINs 

verified at the start of the quarter. 

(iv) The number of prior-year RINs 

verified at the start of the quarter. 

(v) The total current-year RINs 

verified. 

(vi) The number of current-year RINs 

verified at the end of the quarter. 

(vii) A list of all facilities including 

the EPA’s company and facility 

registration numbers audited under an 

approved quality assurance plan under 

§ 80.1469 along with the date the 

independent third-party auditor 

conducted the on-site visit and audit. 

(viii) Mass and energy balances 

calculated for each facility audited 

under an approved quality assurance 

plan under § 80.1469. 

(ix) A list of all RINs that were 

identified as Potentially Invalid RINs 

mstockstill on DSK4VPTVN1PROD with RULES2

42118 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

(PIRs) pursuant to § 80.1474, along with 

a narrative description of why the RINs 

were not verified or were identified as 

PIRs. 

(x) Any additional information that 

the Administrator may require. 

(3) All reports required under this 

paragraph (g) must be signed and 

certified as meeting all the applicable 

requirements of this subpart by the 

independent third-party auditor or a 

responsible corporate officer of the 

independent third-party auditor. 

(h) * * * 

(1) Any detected growth of Arundo 

donax or Pennisetum purpureum 

outside the intended planting areas, 

both surrounding the field of production 

and feedstock storage sites, along the 

transportation route, and around the 

biofuel production facility, within 5 

business days after detection and in 

accordance with the Risk Mitigation 

Plan, if applicable. 

(2) As available, any updated 

information related to the Risk 

Mitigation Plan, as applicable. An 

updated Risk Mitigation Plan must be 

approved by the Administrator in 

consultation with USDA and as 

appropriate other federal agencies prior 

to its implementation. 

(3) On an annual basis, a description 

of and maps or electronic data showing 

the average and total size and prior use 

of lands planted with Arundo donax or 

Pennisetum purpureum, the average and 

total size and prior use of lands set aside 

to control the invasive spread of these 

crops, and a description and 

explanation of any change in land use 

from the previous year. 

(4) On an annual basis, the report 

from an independent third party auditor 

evaluating monitoring and reporting 

activities conducted in accordance with 

the Risk Mitigation Plan, as applicable 

subject to approval of a different 

frequency by the EPA. 

(5) Information submitted pursuant to 

paragraphs (h)(3) and (h)(4) of this 

section must be submitted as part of the 

producer or importer’s fourth quarterly 

report, which covers the reporting 

period October-December, according to 

the schedule in paragraph (f)(2) of this 

section. 

(i) All reports required under this 

section shall be submitted on forms and 

following procedures prescribed by the 

Administrator. 

■ 10. Section 80.1453 is amended as 

follows: 

■ a. By revising paragraph (a) 

introductory text. 

■ b. By adding paragraph (a)(12). 

The revisions and additions read as 

follows: 

§ 80.1453 What are the product transfer 

document (PTD) requirements for the RFS 

program? 

(a) On each occasion when any party 

transfers ownership of neat and/or 

blended renewable fuels or separated 

RINs subject to this subpart, the 

transferor must provide to the transferee 

documents that include all of the 

following information, as applicable: 

* * * * * 

(12) Except as provided in § 80.1433, 

for the transfer of renewable fuel for 

which RINs were generated, an accurate 

and clear statement on the product 

transfer document of the fuel type from 

Table 1 to § 80.1426, and designation of 

the fuel use(s) intended by the 

transferor, as follows: 

(i) Ethanol. ‘‘This volume of neat or 

blended ethanol is designated and 

intended for use as transportation fuel 

or jet fuel in the 48 U.S. contiguous 

states and Hawaii. Any person exporting 

this fuel is subject to the requirements 

of 40 CFR 80.1430.’’. 

(ii) Biodiesel. ‘‘This volume of neat or 

blended biodiesel is designated and 

intended for use as transportation fuel, 

heating oil or jet fuel in the 48 U.S. 

contiguous states and Hawaii. Any 

person exporting this fuel is subject to 

the requirements of 40 CFR 80.1430.’’. 

(iii) Renewable heating oil. ‘‘This 

volume of heating oil is designated and 

intended for use as heating oil in the 48 

U.S. contiguous states and Hawaii. Any 

person exporting this fuel is subject to 

the requirements of 40 CFR 80.1430.’’. 

(iv) Renewable diesel. ‘‘This volume 

of neat or blended renewable diesel is 

designated and intended for use as 

transportation fuel, heating oil or jet fuel 

in the 48 U.S. contiguous states and 

Hawaii. Any person exporting this fuel 

is subject to the requirements of 40 CFR 

80.1430.’’. 

(v) Naphtha. ‘‘This volume of neat or 

blended naphtha is designated and 

intended for use as transportation fuel 

or jet fuel in the 48 U.S. contiguous 

states and Hawaii. This naphtha may 

only be used as a gasoline blendstock or 

jet fuel. Any person exporting this fuel 

is subject to the requirements of 40 CFR 

80.1430.’’. 

(vi) Butanol. ‘‘This volume of neat or 

blended butanol is designated and 

intended for use as transportation fuel 

or jet fuel in the 48 U.S. contiguous 

states and Hawaii. This butanol may 

only be used as a gasoline blendstock or 

jet fuel. Any person exporting this fuel 

is subject to the requirements of 40 CFR 

80.1430.’’. 

(vii) Renewable fuels other than 

ethanol, biodiesel, heating oil, 

renewable diesel, naptha or butanol. 

‘‘This volume of neat or blended 

renewable fuel is designated and 

intended to be used as transportation 

fuel, heating oil, or jet fuel in the 48 

U.S. contiguous states and Hawaii. Any 

person exporting this fuel is subject to 

the requirements of 40 CFR 80.1430.’’. 

* * * * * 

■ 11. Section 80.1454 is amended as 

follows: 

■ a. By adding paragraphs (a)(6)(i) and 

(ii). 

■ b. By adding paragraph (b)(9). 

■ c. By revising paragraphs (l) through 

(p). 

■ d. By adding paragraphs (q) and (r). 

The revisions and additions read as 

follows: 

§ 80.1454 What are the recordkeeping 

requirements under the RFS program? 

(a) * * * 

(6) * * * 

(i) For exporters of renewable fuel for 

which no RINs were generated, an 

affidavit signed by the producer of the 

exported renewable fuel affirming that 

no RINs were generated for that volume 

of renewable fuel. 

(ii) [Reserved] 

(b) * * * 

(9) Records, including contracts, 

related to the implementation of a QAP 

under § 80.1469. 

* * * * * 

(l) Requirements for producers or 

importers of any renewable fuel other 

than ethanol, biodiesel, renewable 

gasoline, renewable diesel that meets 

ASTM D 975–13a Grade No. 1–D or No. 

2–D specifications (incorporated by 

reference, see § 80.1468), biogas or 

renewable electricity. A renewable fuel 

producer that generates RINs for any 

renewable fuel other than ethanol, 

biodiesel, renewable gasoline, 

renewable diesel that meets ASTM D 

975–13a Grade No. 1–D or No. 2–D 

specifications (incorporated by 

reference, see § 80.1468), biogas or 

renewable electricity shall keep all of 

the following additional records: 

(1) Documents demonstrating the total 

volume of renewable fuel produced, 

total volume of renewable fuel blended 

into gasoline and diesel fuel, and the 

percentage of renewable fuel in each 

batch of finished fuel. 

(2) Contracts and documents 

memorializing the sale of renewable fuel 

to parties who blend the fuel into 

gasoline or diesel fuel to produce a 

transportation fuel, heating oil or jet 

fuel, or who use the renewable fuel in 

its neat form for a qualifying fuel use. 

(3) Such other records as may be 

requested by the Administrator. 

(m) Requirements for independent 

third-party auditors. Any independent 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42119 

third-party auditor (as described at 

§ 80.1471) must keep all of the following 

records for a period of at least five years: 

(1) Copies of all reports submitted to 

the EPA under § 80.1451(g), as 

applicable. 

(2) Records related to the 

implementation of a QAP under 

§ 80.1469 for each facility including 

records from facility audits and ongoing 

and quarterly monitoring activities. 

(3) Records related to the verification 

of RINs under § 80.1471(e). 

(4) Copies of communications sent to 

and received from renewable fuel 

producers or foreign renewable fuel 

producers, feedstock suppliers, 

purchasers of RINs, and obligated 

parties. 

(5) Copies of all notes relating to the 

implementation of a QAP under 

§ 80.1469. 

(6) List of RINs reported to the EPA 

and renewable fuel producers or foreign 

renewable fuel producers as potentially 

invalidly generated under § 80.1474 

compliance. 

(7) Records related to the professional 

liability insurance requirement under 

§ 80.1471(c). 

(8) Copies of all records related to any 

financial assurance instrument as 

required under § 80.1470 under a 

quality assurance plan implemented 

under § 80.1469(a) during the interim 

period. 

(9) Copies of all records and 

notifications related to the identification 

of a potentially invalid RIN under 

§ 80.1474(b). 

(10) Such other records as may be 

requested by the Administrator. 

(n) The records required under 

paragraphs (a) through (d) and (f) 

through (l) of this section and under 

§ 80.1453 shall be kept for five years 

from the date they were created, except 

that records related to transactions 

involving RINs shall be kept for five 

years from the date of the RIN 

transaction. 

(o) The records required under 

paragraph (e) of this section shall be 

kept through calendar year 2022. 

(p) On request by the EPA, the records 

required under this section and under 

§ 80.1453 must be made available to the 

Administrator or the Administrator’s 

authorized representative. For records 

that are electronically generated or 

maintained, the equipment or software 

necessary to read the records shall be 

made available; or, if requested by the 

EPA, electronic records shall be 

converted to paper documents. 

(q) The records required in paragraphs 

(b)(3) and (c)(1) of this section must be 

transferred with any renewable fuel sent 

to the importer of that renewable fuel by 

any foreign producer not generating 

RINs for its renewable fuel. 

(r) Copies of all reports required 

under § 80.1464. 

■ 12. Section 80.1460 is amended by 

adding paragraphs (h) and (i) to read as 

follows: 

§ 80.1460 What acts are prohibited under 

the RFS program? 

* * * * * 

(h) RIN separation violations. No 

person shall do any of the following: 

(1) Identify separated RINs in EMTS 

with the wrong separation reason code. 

(2) Identify separated RINs in EMTS 

without having a qualifying separation 

event pursuant to § 80.1429. 

(3) Separate more than 2.5 RINs per 

gallon of renewable fuel that has a valid 

qualifying separation event pursuant to 

§ 80.1429. 

(4) Separate RINs outside of the 

requirements in § 80.1452(c). 

(5) Improperly separate RINs in any 

other way not listed in paragraphs 

(h)(1)–(4) of this section. 

(i) Independent third-party auditor 

violations. No person shall do any of the 

following: 

(1) Fail to fully implement a QAP 

approved under § 80.1469. 

(2) Fail to fully, accurately, and timely 

notify all appropriate parties of 

potentially invalid RINs under 

§ 80.1474(b). 

(3) Verify a RIN under § 80.1471(e) 

without verifying every applicable 

requirement in § 80.1469 and verifying 

each element in an approved QAP. 

■ 13. Section 80.1461 is amended by 

revising paragraphs (a)(1) and (a)(2) to 

read as follows: 

§ 80.1461 Who is liable for violations 

under the RFS program? 

(a) * * * 

(1) Any person who violates a 

prohibition under § 80.1460(a) through 

(d) or § 80.1460(g) through (h) is liable 

for the violation of that prohibition. 

(2) Any person who causes another 

person to violate a prohibition under 

§ 80.1460(a) through (d) or § 80.1460(g) 

through (h) is liable for a violation of 

§ 80.1460(e). 

* * * * * 

■ 14. Section 80.1464 is amended by 

adding and reserving paragraph (h), and 

adding paragraph (i), to read as follows: 

§ 80.1464 What are the attest engagement 

requirements under the RFS program? 

* * * * * 

(h) [Reserved] 

(i) Independent third-party auditors. 

The following attest procedures shall be 

completed for any independent thirdparty auditor that implements a quality 

assurance plan in a calendar year: 

(1) Comparing RIN verification reports 

with approved QAPs. 

(i) Obtain and read copies of reports 

required under § 80.1451(g)(1). 

(ii) Obtain and read copies of any 

quality assurance plans approved under 

§ 80.1469. 

(iii) Confirm that the independent 

third-party auditor only verified RINs 

covered by approved QAPs under 

§ 80.1469. Identify as a finding any 

discrepancies. 

(2) Checking third-party auditor’s RIN 

verification. 

(i) Obtain and read copies of reports 

required under § 80.1451(g)(2). 

(ii) Obtain all notifications of 

potentially invalid RINs submitted to 

the EPA under § 80.1474(b)(3). 

(iii)(A) Obtain the database, 

spreadsheet, or other documentation 

used to generate the information in the 

RIN verification reports; 

(B) Obtain all underlying documents 

that the QAP provider relied upon to 

verify the RINs; 

(C) Review the documents that the 

QAP auditor relied on to prepare the 

reports obtained in paragraph (d)(2)(i) of 

this section, verify that the underlying 

documents appropriately reflect the 

information reported to the EPA, and 

identify as a finding any discrepancies 

between the underlying documents and 

the information in the RIN verification 

reports; 

(D) Compute the total number of 

current-year RINs and current-year 

potentially invalid RINs verified at the 

start and end of each quarter, as 

represented in these documents; and 

state whether this information agrees 

with the party’s reports to the EPA; and 

(E) Verify that all parties were 

appropriately notified under 

§ 80.1474(b)(3) and report any missing 

notifications as a finding. 

■ 15. Section 80.1468 is amended by 

adding paragraph (b)(8) as follows. 

§ 80.1468 Incorporation by reference. 

* * * * * 

(b) * * * 

(8) ASTM D 975–13a, Standard 

Specification for Diesel Fuel Oils, 

Approved December 1, 2013; IBR 

approved for §§ 80.1401, 80.1426(f), 

80.1450(b), 80.1451(b), and 80.1454(l). 

■ 16. A new § 80.1469 is added to 

subpart M to read as follows: 

§ 80.1469 Requirements for Quality 

Assurance Plans. 

This section specifies the 

requirements for Quality Assurance 

Plans (QAPs). 

(a) Option A QAP Requirements, for 

Option A QAPs that were performed 

during the interim period. 

mstockstill on DSK4VPTVN1PROD with RULES2

42120 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

(1) Feedstock-related components. (i) 

Components requiring ongoing 

monitoring: 

(A) Feedstocks are renewable biomass 

as defined in § 80.1401. 

(B) Feedstocks are being separated 

according to a separation plan, if 

applicable under § 80.1426(f)(5)(ii). 

(C) Crop and crop residue feedstocks 

meet land use restrictions, or 

alternatively the aggregate compliance 

provisions of § 80.1454(g). 

(D) If applicable, verify that 

feedstocks with additional 

recordkeeping requirements meet 

requirements of § 80.1454(d). 

(E) Feedstocks are valid for the D code 

being used, and are consistent with 

information recorded in EMTS. 

(F) Feedstock is consistent with 

production process and D code being 

used as permitted under Table 1 to 

§ 80.1426 or a petition approved 

through § 80.1416. 

(G) Feedstock is not renewable fuel 

for which RINs were previously 

generated. 

(ii) Components requiring quarterly 

monitoring: 

(A) Separated food waste or separated 

yard waste plan is accepted and up to 

date, if applicable under 

§ 80.1426(f)(5)(ii). 

(B) Separated municipal solid waste 

plan is approved and up to date, if 

applicable under § 80.1426(f)(5)(ii). 

(C) Contracts or agreements for 

feedstock acquisition are sufficient for 

facility production. 

(D) Feedstock processing and storage 

equipment are sufficient and are 

consistent with the most recent 

engineering review under 

§ 80.1450(b)(2). 

(E) If applicable, accuracy of feedstock 

energy FE calculation factors related to 

feedstocks, including average moisture 

content m and feedstock energy content 

E. 

(2) Production process-related 

components. (i) Components requiring 

ongoing monitoring: 

(A) Production process is consistent 

with that reported in EMTS. 

(B) Production process is consistent 

with D code being used as permitted 

under Table 1 to § 80.1426 or a petition 

approved through § 80.1416. 

(C) Certificates of analysis verifying 

fuel type and quality, as applicable. 

(ii) Components requiring quarterly 

monitoring: 

(A) Mass and energy balances are 

appropriate for type and size of facility. 

(B) Workforce size is appropriate for 

type and size of facility, and sufficient 

workers are on site for facility 

operations. 

(C) If applicable, process-related 

factors used in feedstock energy FE 

calculation are accurate, in particular 

the converted fraction CF. 

(D) Verify existence of quality process 

controls designed to ensure that fuel 

continues to meet applicable property 

and quality specifications. 

(E) Volume production is consistent 

with that reported to the EPA and EIA, 

as well as other federal or state 

reporting. 

(F) Volume production is consistent 

with storage and distribution capacity. 

(G) Volume production capacity is 

consistent with RFS registration. 

(3) RIN generation-related 

components. (i) Components requiring 

ongoing monitoring: 

(A) Standardization of volumes 

pursuant to § 80.1426(f)(8) are accurate. 

(B) Renewable fuel type matches the 

D code being used. 

(C) RIN generation is consistent with 

wet gallons produced or imported. 

(D) Fuel shipments are consistent 

with production volumes. 

(E) If applicable, renewable content R 

is accurate pursuant to § 80.1426(f)(9). 

(F) Equivalence value EV is accurate 

and appropriate. 

(G) Renewable fuel was intended and 

sold for qualifying uses as 

transportation fuel, heating oil, or jet 

fuel. 

(H) Verify that appropriate RIN 

generation calculations are being 

followed under § 80.1426(f)(3), (f)(4), or 

(f)(5), as applicable. 

(ii) Components requiring quarterly 

monitoring: 

(A) Registration, reporting and 

recordkeeping components. 

(B) [Reserved] 

(4) RIN separation-related 

components. (i) Components requiring 

ongoing monitoring: 

(A) If applicable, verify that RIN 

separation is appropriate under 

§ 80.1429(b)(4). 

(B) If applicable, verify that RINs were 

retired for any fuel that the producer 

produced and exported. 

(ii) Components requiring quarterly 

monitoring: 

(A) Verify that annual attestation 

report is accurate. 

(B) [Reserved] 

(b) Option B QAP Requirements, for 

Option B QAPs that were performed 

during the interim period. All 

components specified in this paragraph 

(b) require quarterly monitoring, except 

for paragraph (b)(4)(iii) of this section, 

which must be done annually. 

(1) Feedstock-related components. (i) 

Feedstocks are renewable biomass as 

defined in § 80.1401. 

(ii) If applicable, separated food waste 

or separated yard waste plan under 

§ 80.1426(f)(5)(ii) is accepted and up to 

date. 

(iii) If applicable, separated municipal 

solid waste plan under § 80.1426(f)(5)(ii) 

is approved and current. 

(iv) Feedstocks are being separated 

according to a separation plan, if 

applicable under § 80.1426(f)(5)(ii). 

(v) Crop and crop residue feedstocks 

meet land use restrictions, or 

alternatively the aggregate compliance 

provisions of § 80.1454(g). 

(vi) Feedstock is consistent with 

production process and D code being 

used as permitted under Table 1 to 

§ 80.1426 or a petition approved 

through § 80.1416, and is consistent 

with information recorded in EMTS. 

(vii) Feedstock is not renewable fuel 

for which RINs were previously 

generated. 

(viii) If applicable, accuracy of 

feedstock energy FE calculation factors 

related to feedstocks, including average 

moisture content m and feedstock 

energy content E. 

(2) Production process-related 

components. (i) Production process is 

consistent with that reported in EMTS. 

(ii) Production process is consistent 

with D code being used as permitted 

under Table 1 to § 80.1426 or a petition 

approved through § 80.1416. 

(iii) Mass and energy balances are 

appropriate for type and size of facility. 

(iv) If applicable, process-related 

factors used in feedstock energy FE 

calculation are accurate, in particular 

the converted fraction CF. 

(3) RIN generation-related 

components. (i) Renewable fuel was 

intended and sold for qualifying uses as 

transportation fuel, heating oil, or jet 

fuel. 

(ii) Certificates of analysis verifying 

fuel type and quality, as applicable. 

(iii) Renewable fuel type matches the 

D code being used. 

(iv) If applicable, renewable content R 

is accurate pursuant to § 80.1426(f)(9). 

(v) Equivalence value EV is accurate 

and appropriate. 

(vi) Volume production capacity is 

consistent with RFS registration. 

(vii) Verify that appropriate RIN 

generation calculations are being 

followed under § 80.1426(f)(3), (f)(4), or 

(f)(5), as applicable. 

(4) RIN separation-related 

components. (i) If applicable, verify that 

RIN separation is appropriate under 

§ 80.1429(b)(4). 

(ii) Verify that fuel that is exported 

was not used to generate RINs, or 

alternatively that were generated but 

retired. 

(iii) Verify that annual attestation 

report is accurate. 

(c) QAP Requirements. All 

components specified in this paragraph 

(c) require quarterly monitoring, except 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42121 

for paragraph (c)(4)(iii) of this section 

which must be done annually. 

(1) Feedstock-related components. (i) 

Feedstocks are renewable biomass as 

defined in § 80.1401. 

(ii) If applicable, separated food waste 

or separated yard waste plan under 

§ 80.1426(f)(5)(ii) is accepted and up to 

date. 

(iii) If applicable, separated municipal 

solid waste plan under § 80.1426(f)(5) is 

approved and current. 

(iv) Feedstocks are being separated 

according to a separation plan, if 

applicable under § 80.1426(f)(5). 

(v) Crop and crop residue feedstocks 

meet land use restrictions, or 

alternatively the aggregate compliance 

provisions of § 80.1454(g). 

(vi) Feedstock is consistent with 

production process and D code being 

used as permitted under Table 1 to 

§ 80.1426 or a petition approved 

through § 80.1416, and is consistent 

with information recorded in EMTS. 

(vii) Feedstock is not renewable fuel 

for which RINs were previously 

generated. 

(viii) If applicable, accuracy of 

feedstock energy FE calculation factors 

related to feedstocks, including average 

moisture content m and feedstock 

energy content E. 

(2) Production process-related 

components. (i) Production process is 

consistent with that reported in EMTS. 

(ii) Mass and energy balances are 

appropriate for type and size of facility. 

(iii) If applicable, process-related 

factors used in feedstock energy FE 

calculation are accurate, in particular 

the converted fraction CF, pursuant to 

§ 80.1426(f)(3). 

(3) RIN generation-related 

components. (i) Renewable fuel was 

designated for qualifying uses as 

transportation fuel, heating oil, or jet 

fuel in the 48 contiguous states or 

Hawaii pursuant to § 80.1453. 

(ii) Certificates of analysis verifying 

fuel type and quality, as applicable. 

(iii) Renewable fuel type matches the 

D code being used. 

(iv) If applicable, renewable content R 

is accurate pursuant to § 80.1426(f)(9). 

(v) Equivalence value EV is accurate 

and appropriate. 

(vi) Volume production capacity is 

consistent with RFS registration. 

(vii) Verify that appropriate RIN 

generation calculations are being 

followed under § 80.1426(f)(3), (f)(4), or 

(f)(5), as applicable. 

(viii) RIN generation is consistent 

with wet gallons produced or imported. 

(4) RIN separation-related 

components. (i) If applicable, verify that 

RIN separation is appropriate under 

§ 80.1429(b)(4). 

(ii) Verify that fuel that is exported 

was not used to generate RINs, or 

alternatively that were generated but 

retired pursuant to § 80.1430. 

(iii) Verify that annual attestation 

report is accurate. 

(5) Representative sampling. 

Independent third-party auditors may 

use a representative sample of batches 

of renewable fuel in accordance with 

the procedures described in § 80.127 for 

all components of this paragraph (c) 

except for paragraphs (c)(1)(ii), 

(c)(1)(iii), (c)(2)(ii), (c)(3)(vi), (c)(4)(ii), 

and (c)(4)(iii) of this section. 

(d) In addition to a general QAP 

encompassing elements common to all 

pathways, for each QAP there shall be 

at least one pathway-specific plan for a 

RIN-generating pathway as provided in 

Table 1 to § 80.1426 or as approved by 

the Administrator pursuant to § 80.1416, 

and shall contain elements specific to 

particular feedstocks, production 

processes, and fuel types as applicable. 

(e) Submission and approval of a 

QAP. (1) Each independent third-party 

auditor shall annually submit a general 

and at least one pathway-specific QAP 

to the EPA which demonstrates 

adherence to the requirements of 

paragraphs (a) and (d), (b) and (d), or (c) 

and (d) of this section, as applicable, 

and request approval on forms and 

using procedures specified by the 

Administrator. 

(2) No third-party independent 

auditor may present a QAP as approved 

by the EPA without having received 

written approval from the EPA. 

(3) A QAP is approved on the date 

that the EPA notifies the third-party 

independent auditor of such approval. 

(4) The EPA may revoke its approval 

of a QAP for cause, including, but not 

limited to, an EPA determination that 

the approved QAP has proven to be 

inadequate in practice. 

(5) The EPA may void ab initio its 

approval of a QAP upon the EPA’s 

determination that the approval was 

based on false information, misleading 

information, or incomplete information, 

or if there was a failure to fulfill, or 

cause to be fulfilled, any of the 

requirements of the QAP. 

(f) Conditions for revisions of a QAP. 

(1) A new QAP shall be submitted to the 

EPA according to paragraph (e) of this 

section whenever any of the following 

changes occur at a production facility 

audited by a third-party independent 

auditor and the auditor does not possess 

an appropriate pathway-specific QAP 

that encompasses the changes: 

(i) Change in feedstock. 

(ii) Change in type of fuel produced. 

(iii) Change in facility operations or 

equipment that may impact the 

capability of the QAP to verify that RINs 

are validly generated. 

(2) A QAP ceases to be valid as the 

basis for verifying RINs under a new 

pathway until a new pathway-specific 

QAP, submitted to the EPA under this 

paragraph (f), is approved pursuant to 

paragraph (e) of this section. 

■ 17. A new § 80.1470 is added to 

subpart M to read as follows: 

§ 80.1470 RIN replacement mechanisms 

for Option A independent third party 

auditors. 

(a) Applicability. This section applies 

to independent third-party auditors 

using a QAP approved under Option A 

pursuant to § 80.1469(a) and (d) during 

the interim period. 

(b) Requirements. An independent 

third party auditor must establish or 

participate in the establishment of a RIN 

replacement mechanism. The RIN 

replacement mechanism must fulfill, at 

a minimum, all the following 

conditions: 

(1) The RIN replacement mechanism 

must be capable of fulfilling the 

independent third party auditor’s RIN 

replacement responsibility, as described 

in § 80.1474(b)(5)(i). 

(2) The independent third party 

auditor is responsible for calculating 

and maintaining the minimum coverage 

afforded by the RIN replacement 

mechanism at all times. 

(3) RINs held by the RIN replacement 

mechanism (if any) must be identified 

in a unique EMTS account designated 

for the exclusive use of the replacement 

mechanism. 

(4) Distribution and removal of RINs 

from the replacement mechanism may 

not be under the sole operational 

control of the third-party auditor. 

(5) An originally signed duplicate of 

the agreement or contract establishing 

the RIN replacement mechanism must 

be submitted to the EPA by the 

independent third party auditor in 

accordance with § 80.1450(g)(7). 

(6) Any substantive change to the 

agreement establishing the RIN 

replacement mechanism must be 

submitted to the EPA within 30 days of 

the change. 

(c) Cap on RIN replacement for 

independent third party auditors of A– 

RINs. (1) If required to replace invalid 

A–RINs pursuant to paragraph (b) of this 

section, the independent third party 

auditor shall be required to replace no 

more than the percentage specified in 

paragraph (c)(2) of this section of each 

D code of A–RINs verified by the 

auditor in the current calendar year and 

four previous calendar years. 

(2) The cap on RIN replacement for 

auditors of A–RINs shall be two percent 

mstockstill on DSK4VPTVN1PROD with RULES2

42122 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

for A–RINs generated in the interim 

period. 

(3) The auditor’s potential 

replacement responsibility for a given 

RIN will expire at the end of the fourth 

calendar year after the calendar year in 

which the RIN was verified. 

(d) Applicability of the RIN 

replacement cap. The cap on RIN 

replacement does not apply when 

invalid verified RINs are a result of 

auditor error, omission, negligence, 

fraud, collusion with the renewable fuel 

producer, or a failure to implement the 

QAP properly or fully. 

■ 18. A new § 80.1471 is added to 

subpart M to read as follows: 

§ 80.1471 Requirements for QAP auditors. 

(a) QAP audits conducted pursuant to 

§ 80.1472 must be conducted by an 

independent third-party auditor. 

(b) To be considered an independent 

third-party auditor under paragraph (a) 

of this section: 

(1) The independent third-party 

auditor and its contractors and 

subcontractors shall not be owned or 

operated by the renewable fuel producer 

or foreign ethanol producer, or any 

subsidiary or employee of the renewable 

fuel producer or foreign ethanol 

producer. 

(2) The independent third-party 

auditor and its contractors and 

subcontractors shall not be owned or 

operated by an obligated party or any 

subsidiary or employee of an obligated 

party as defined in § 80.1406. 

(3) The independent third-party 

auditor shall not own, buy, sell, or 

otherwise trade RINs unless required to 

maintain a financial assurance 

mechanism for a QAP implemented 

under QAP Option A pursuant to 

§ 80.1469(a) during the interim period 

or to replace an invalid RIN pursuant to 

§ 80.1474. 

(4) The independent third-party 

auditor and its contractors and 

subcontractors shall be free from any 

interest or the appearance of any 

interest in the renewable fuel producer 

or foreign renewable fuel producer’s 

business. 

(5) The renewable fuel producer or 

foreign renewable fuel producer shall be 

free from any interest or the appearance 

of any interest in the third-party 

auditor’s business and the businesses of 

third-party auditor’s contractors and 

subcontractors. 

(6) The independent third-party 

auditor and its contractors and 

subcontractors shall not have performed 

an attest engagement under § 80.1464 

for the renewable fuel producer or 

foreign renewable fuel producer in the 

same calendar year as a QAP audit 

conducted pursuant to § 80.1472. 

(7) The independent third-party 

auditor and its contractors and 

subcontractors must not be debarred, 

suspended, or proposed for debarment 

pursuant to the Government-wide 

Debarment and Suspension regulations, 

40 CFR part 32, or the Debarment, 

Suspension and Ineligibility provisions 

of the Federal Acquisition Regulations, 

48 CFR part 9, subpart 9.4. 

(c) Independent third-party auditors 

shall maintain professional liability 

insurance, as defined in 31 CFR 50.5(q). 

Independent third-party auditors shall 

use insurance providers that possess a 

financial strength rating in the top four 

categories from either Standard & Poor’s 

or Moody’s, i.e., AAA, AA, A or BBB for 

Standard & Poor’s and Aaa, Aa, A, or 

Baa for Moody’s. Independent thirdparty auditors shall disclose the level of 

professional liability insurance they 

possess when entering into contracts to 

provide RIN verification services. 

(d)(1) In the event that an 

independent third-party auditor 

identifies a RIN that may have been 

invalidly generated, the independent 

third-party auditor shall, within the 

next business day, send notification of 

the potentially invalidly generated RIN 

to the EPA and the renewable fuel 

producer that generated the RIN. 

(2) The independent third-party 

auditor shall provide the notification 

required under paragraph (d)(1) of this 

section in writing (which includes email 

or facsimile) and, if requested by the 

party being notified of a potentially 

invalidly generated RIN, by telephone. 

(e) The independent third-party 

auditor shall identify RINs generated 

from a renewable fuel producer or 

foreign renewable fuel producer as 

having been verified under a QAP. 

(1) For RINs verified under QAP 

Option A pursuant to § 80.1469(a) 

during the interim period, RINs shall be 

designated as A–RINs. 

(2) For RINs verified under QAP 

Option B pursuant to § 80.1469(b), 

during the interim period, RINs shall be 

designated as B–RINs. 

(3) For RINs verified under a QAP 

pursuant to § 80.1469(c), RINs shall be 

designated as Q–RINs and shall be 

identified as having been verified under 

a QAP in EMTS. 

(4) The independent third-party 

auditor shall not identify RINs 

generated from a renewable fuel 

producer or foreign renewable fuel 

producer as having been verified under 

a QAP if a revised QAP must be 

submitted to and approved by the EPA 

under § 80.1469(f). 

(f)(1) Except as specified in paragraph 

(f)(2) of this section, auditors may only 

verify RINs that have been generated 

after the audit required under § 80.1472 

has been completed. 

(i) For A–RINs, ongoing monitoring 

must have been initiated. 

(ii) Verification of RINs may continue 

for no more than 200 days following an 

on-site visit or 380 days after an on-site 

visit if a previously the EPA-approved 

remote monitoring system is in place at 

the renewable fuel production facility. 

(2) Auditors may verify RINs that 

were generated before the audit required 

under § 80.1472 has been completed, 

under the following conditions: 

(i) The RINs in question were 

generated during the interim period. 

(ii) The audit is completed during the 

interim period. 

(iii) The audit is performed in 

accordance with the elements specified 

in a QAP that has been approved by the 

EPA per § 80.1469(e). 

(iv) The audit requirements of 

§ 80.1472 are met for every batch of 

renewable fuel for which RINs were 

generated and are being verified. 

(v) The auditor may not perform more 

than one audit under this subparagraph 

for any single RIN generator. 

(g) The independent third-party 

auditor shall permit any representative 

of the EPA to monitor at any time the 

implementation of QAPs and renewable 

fuel production facility audits. 

(h) Any person who fails to meet a 

requirement under of this section shall 

be subject to a separate violation 

pursuant to § 80.1460(f). 

■ 19. A new § 80.1472 is added to 

subpart M to read as follows: 

§ 80.1472 Requirements for quality 

assurance audits. 

(a) General requirements. (1) An audit 

shall be performed by an auditor who 

meets the requirements of § 80.1471. 

(2) An audit shall be based on either 

an Option A QAP per § 80.1469(a) 

during the interim period, an Option B 

QAP per § 80.1469(b) during the interim 

period, or a QAP per § 80.1469(c). 

(3) Each audit shall verify every 

element contained in an applicable and 

approved QAP. 

(4) Each audit shall include a review 

of documents generated by the 

renewable fuel producer. 

(b) On-site visits—(1) Option A QAP 

during the interim period. (i) The 

auditor shall conduct an on-site visit at 

the renewable fuel production facility at 

least 4 times per calendar year. 

(ii) The on-site visits specified in 

paragraph (b)(1)(i) of this section shall 

occur at least 60 days apart. The 60-day 

period shall start the day after the 

previous on-site ends. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42123 

(iii) The on-site visit shall include 

verification of all QAP elements that 

require inspection or evaluation of the 

physical attributes of the renewable fuel 

production facility, except for any 

physical attribute that is verified 

through remote monitoring equipment 

per the applicable QAP. 

(2) Option B QAP during the interim 

period. (i) The auditor shall conduct an 

on-site visit at the renewable fuel 

production facility at least 4 times per 

calendar year. 

(ii) The on-site visits specified in 

paragraph (b)(2)(i) of this section shall 

occur at least 60 days apart. The 60-day 

period shall start the day after the 

previous on-site ends. 

(iii) The on-site visit shall include 

verification of all QAP elements that 

require inspection or evaluation of the 

physical attributes of the renewable fuel 

production facility. 

(3) QAP. (i) The auditor shall conduct 

an on-site visit at the renewable fuel 

production facility: 

(A) At least two times per calendar 

year; or 

(B) In the event an auditor uses a 

remote monitoring system approved by 

the EPA, at least one time per calendar 

year. 

(ii) An on-site visit specified in 

paragraph (b)(3)(i) of this section shall 

occur no more than: 

(A) 200 days after the previous on-site 

visit. The 200-day period shall start the 

day after the previous on-site visit ends; 

or 

(B) 380 days after the previous on-site 

visit if a previously approved by the 

EPA remote monitoring system is in 

place at the renewable fuel production 

facility. The 380-day period shall start 

the day after the previous on-site visit 

ends. 

(iii) An on-site visit shall include 

verification of all QAP elements that 

require inspection or evaluation of the 

physical attributes of the renewable fuel 

production facility. 

(iv) The on-site visit shall be overseen 

by a professional engineer, as specified 

in § 80.1450(b)(2)(i)(A) and (b)(2)(i)(B). 

■ 20. A new § 80.1473 is added to 

subpart M to read as follows: 

§ 80.1473 Affirmative defenses. 

(a) Criteria. Any person who engages 

in actions that would be a violation of 

the provisions of either § 80.1460(b)(2) 

or (c)(1), other than the generator of an 

invalid RIN, will not be deemed in 

violation if the person demonstrates that 

the criteria under paragraphs (c), (d), or 

(e) of this section are met. 

(b) Applicability of affirmative 

defenses. The following provisions 

apply to affirmative defenses asserted 

under paragraph (a) of this section: 

(1) Affirmative defenses only apply to 

RINs that were invalidly generated and 

verified through a quality assurance 

audit using an EPA-approved QAP. 

(2) Affirmative defenses only apply in 

situations where an invalidly generated 

verified RIN is either transferred to 

another person (violation of 

§ 80.1460(b)(2)) or used for compliance 

for an obligated party’s RVO (use 

violation of § 80.1460(c)(1)). 

(3) Affirmative defenses do not apply 

to the generator of an invalid RIN. 

(c) Asserting an affirmative defense 

for invalid A–RINs verified during the 

interim period. To establish an 

affirmative defense to a violation of 

§ 80.1460(b)(2) or (c)(1) involving 

invalid A–RINs, the person must meet 

the notification requirements of 

paragraph (f) of this section and prove 

by a preponderance of evidence all of 

the following: 

(1) The RIN in question was verified 

through a quality assurance audit 

pursuant to § 80.1472 using an approved 

Option A QAP as defined in 

§ 80.1469(a). 

(2) The person did not know or have 

reason to know that the RINs were 

invalidly generated prior to being 

verified by the independent third-party 

auditor. 

(3) If the person self-identified the 

RIN as having been invalidly generated, 

the person notified the EPA within five 

business days of discovering the 

invalidity. 

(4) The person did not cause the 

invalidity. 

(5) The person did not have a 

financial interest in the company that 

generated the invalid RIN. 

(d) Asserting an affirmative defense 

for invalid B–RINs verified during the 

interim period. To establish an 

affirmative defense to a violation of 

§ 80.1460(b)(2) or (c)(1) involving 

invalid B–RINs, the person must meet 

the notification requirements of 

paragraph (f) of this section and prove 

by a preponderance of evidence all of 

the following: 

(1) The RIN in question was verified 

through a quality assurance audit 

pursuant to § 80.1472 using an approved 

Option B QAP as defined in 

§ 80.1469(b). 

(2) The person did not know or have 

reason to know that the RINs were 

invalidly generated at the time of 

transfer or use for compliance, unless 

the RIN generator replaced the RIN 

pursuant to § 80.1474. 

(3) If the person self-identified the 

RIN as having been invalidly generated, 

the person notified the EPA within five 

business days of discovering the 

invalidity. 

(4) The person did not cause the 

invalidity. 

(5) The person did not have a 

financial interest in the company that 

generated the invalid RIN. 

(6) If the person used the invalid B– 

RIN for compliance, the person adjusted 

its records, reports, and compliance 

calculations in which the invalid B–RIN 

was used as required by § 80.1431, 

unless the RIN generator replaced the 

RIN pursuant to § 80.1474. 

(e) Asserting an affirmative defense 

for invalid Q–RINs. To establish an 

affirmative defense to a violation of 

§ 80.1460(b)(2) or (c)(1) involving 

invalid Q–RINs, the person must meet 

the notification requirements of 

paragraph (f) of this section and prove 

by a preponderance of evidence all of 

the following: 

(1) The RIN in question was verified 

through a quality assurance audit 

pursuant to § 80.1472 using an approved 

QAP as defined in § 80.1469(c). 

(2) The person did not know or have 

reason to know that the RINs were 

invalidly generated at the time of 

transfer or use for compliance, unless 

the RIN generator replaced the RIN 

pursuant to § 80.1474. 

(3) If the person self-identified the 

RIN as having been invalidly generated, 

the person notified the EPA within five 

business days of discovering the 

invalidity. 

(4) The person did not cause the 

invalidity. 

(5) The person did not have a 

financial interest in the company that 

generated the invalid RIN. 

(6) If the person used the invalid Q– 

RIN for compliance, the person adjusted 

its records, reports, and compliance 

calculations in which the invalid Q–RIN 

was used as required by § 80.1431, 

unless the RIN generator replaced the 

RIN pursuant to § 80.1474. 

(f) Notification requirements. A 

person asserting an affirmative defense 

to a violation of § 80.1460(b)(2) or (c)(1), 

arising from the transfer or use of an 

invalid A–RIN, B–RIN, or Q–RIN must 

submit a written report to the EPA via 

the EMTS support line (support@

epamts-support.com), including all 

pertinent supporting documentation, 

demonstrating that the requirements of 

paragraphs (c), (d), or (e) of this section 

were met. The written report must be 

submitted within 30 days of the person 

discovering the invalidity. 

■ 21. A new § 80.1474 is added to 

subpart M to read as follows: 

mstockstill on DSK4VPTVN1PROD with RULES2

42124 Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 

§ 80.1474 Replacement requirements for 

invalidly generated RINs. 

(a) Responsibility for replacement of 

invalid verified RINs. (1) The generator 

of the A–RIN and the independent 

third-party auditor that verified the A– 

RIN are required to replace invalidly 

generated A–RINs with valid RINs 

pursuant to the procedures specified in 

paragraph (b) of this section. 

(2) The generator of the B–RIN and 

the obligated party that owns the B–RIN 

are required to replace invalidly 

generated B–RINs with valid RINs 

pursuant to the procedures specified in 

paragraph (b) of this section. 

(3) The generator of the Q–RIN and 

the obligated party that owns the Q–RIN 

are required to replace invalidly 

generated Q–RINs with valid RINs 

pursuant to the procedures specified in 

paragraph (b) of this section. 

(4) The generator of an unverified RIN 

and the obligated party that owns an 

unverified RIN are required to replace 

invalidly generated and unverified RINs 

pursuant to the procedures specified in 

paragraph (b) of this section. 

(b) Identification and treatment of 

potentially invalid RINs (PIRs). (1) Any 

RIN can be identified as a PIR by the 

RIN generator, an independent thirdparty auditor that verified the RIN, or 

the EPA. 

(2) For PIRs identified by the RIN 

generator, the generator is required to 

notify the EPA via the EMTS support 

line (support@epamts-support.com) 

within five business days of the 

identification, including an initial 

explanation of why the RIN is believed 

to be invalid, and is required to take any 

of the following corrective actions 

within 30 days: 

(i) Retire the PIR. 

(ii) Retire a valid RIN meeting the 

requirements of paragraph (d) of this 

section. 

(3) For PIRs identified by the 

independent third-party auditor that 

verified the RIN, the independent thirdparty auditor is required to notify the 

EPA via the EMTS support line 

(support@epamts-support.com) and the 

RIN generator in writing within five 

business days of the identification, 

including an initial explanation of why 

the RIN is believed to be invalid. 

(4) Within 30 days of being notified 

by the EPA or the independent thirdparty auditor that verified the RIN that 

a RIN is a PIR, the RIN generator is 

required to take one of the following 

actions: 

(i) In the event that the EPA identifies 

a RIN as a PIR, do one of the following: 

(A) Retire the PIR. 

(B) Retire a valid RIN following the 

requirements of paragraph (d) of this 

section. 

(C) Submit a demonstration in writing 

to the EPA via the EMTS support line 

(support@epamts-support.com) that the 

PIR is valid. 

(1) If the EPA determines that the 

demonstration is satisfactory, the RIN 

will no longer be considered a PIR. 

(2) If the EPA determines that the 

demonstration is not satisfactory, the 

PIR will be deemed invalid and the PIR 

generator must retire the PIR or a valid 

RIN following the requirements of 

paragraph (d) of this section within 30 

days of notification by the EPA. 

(ii) In the event that the independent 

third-party auditor identifies a RIN as a 

PIR, do one of the following: 

(A) Retire the PIR. 

(B) Retire a valid RIN following the 

requirements of paragraph (d) of this 

section. 

(C) Submit a demonstration in writing 

to the independent third-party auditor 

and the EPA via the EMTS support line 

(support@epamts-support.com) that the 

PIR is valid. 

(1) If the independent third-party 

auditor determines that the 

demonstration is satisfactory, the PIR 

will be deemed to be a valid RIN; 

however, the EPA reserves the right to 

make a determination regarding the 

validity of the RIN. 

(2) If the independent third-party 

auditor determines that the 

demonstration is not satisfactory, the 

EPA will then make a determination 

whether the demonstration is not 

satisfactory, and if so, the PIR will be 

deemed invalid and the PIR generator 

must retire the PIR or a valid RIN 

following the requirements of paragraph 

(d) of this section within 30 days of 

notification by the EPA. 

(5) Within 60 days of receiving a 

notification from the EPA that a PIR 

generator has failed to perform a 

corrective action required pursuant to 

this section: 

(i) For A–RINs, the independent thirdparty auditor that verified the PIR is 

required to retire valid RINs meeting the 

requirements of paragraph (d) of this 

section. 

(ii) For Q–RINs, B–RINs, and 

unverified RINs, the party that owns the 

invalid RIN is required to do one of the 

following: 

(A) Retire the invalid RIN. 

(B) If the invalid RIN has already been 

used for compliance with an obligated 

party’s RVO, correct the RVO to subtract 

the invalid RIN. 

(c) Failure to take corrective action. 

Any person who fails to meet a 

requirement under paragraph (b)(4) or 

(b)(5) of this section shall be liable for 

full performance of such requirement, 

and each day of non-compliance shall 

be deemed a separate violation pursuant 

to § 80.1460(f). The administrative 

process for replacement of invalid RINs 

does not, in any way, limit the ability 

of the United States to exercise any 

other authority to bring an enforcement 

action under section 211 of the Clean 

Air Act, the fuels regulations at 40 CFR 

part 80, or any other applicable law. 

(d) The following specifications apply 

when retiring valid RINs to replace PIRs 

or invalid RINs: 

(1) When a RIN is retired to replace 

a PIR or invalid RIN, the D code of the 

retired RIN must be eligible to be used 

towards meeting all the renewable 

volume obligations as the PIR or invalid 

RIN it is replacing, as specified in 

§ 80.1427(a)(2). 

(2) The number of RINs retired must 

be equal to the number of PIRs or 

invalid RINs being replaced, subject to 

paragraph (e) or (f) of this section if 

applicable, and § 80.1470(c). 

(e) Limited exemption for invalid B– 

RINs verified during the interim period. 

(1) In the event that an obligated party 

is required to retire or replace an invalid 

RIN that is a B–RIN pursuant to 

paragraph (b) of this section, the 

obligated party will be afforded a 

‘‘limited exemption’’ (LE) equal to two 

percent of its annual Renewable Volume 

Obligation (RVO) for calendar years 

2013 and 2014 during the interim 

period. 

(2) Limited exemptions are calculated 

as follows: 

LECB,i = 0.02 × RVOCB,i

LEBBD,i = 0.02 × RVOBBD,i

LEAB,i = 0.02 × RVOAB,i

LERF,i = 0.02 × RVORF,i

Where: 

LECB,i = Limited exemption for cellulosic 

biofuel for year i. 

LEBBD,i = Limited exemption for biomassbased diesel for year i. 

LEAB,i = Limited exemption for advanced 

biofuel for year i. 

LERF,i = Limited exemption for renewable for 

year i. 

RVOCB,i = The Renewable Volume Obligation 

for cellulosic biofuel for the obligated 

party for calendar year i, in gallons, 

pursuant to § 80.1407. 

RVOBBD,i = The Renewable Volume 

Obligation for biomass-based diesel for 

the obligated party for calendar year i 

after 2010, in gallons, pursuant to 

§ 80.1407. 

RVOAB,i = The Renewable Volume Obligation 

for advanced biofuel for the obligated 

party for calendar year i, in gallons, 

pursuant to § 80.1407. 

RVORF,i = The Renewable Volume Obligation 

for renewable fuel for the obligated party 

for calendar year i, in gallons, pursuant 

to § 80.1407. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 79, No. 138 / Friday, July 18, 2014 / Rules and Regulations 42125 

(3) If the number of invalidly 

generated B–RINs required to be retired 

or replaced in a calendar year is less 

than or equal to LE as calculated in 

paragraph (d)(2) of this section, the 

entire RIN retirement obligation is 

excused. 

(4) If the number of invalidly 

generated B–RINs required to be retired 

or replaced in a calendar year is greater 

than LE as calculated in paragraph (d)(2) 

of this section, the retirement of a 

number of B–RINs equal to two percent 

of the obligated party’s RVO is excused. 

(5) The limited exemption for B–RINs 

applies only in calendar years 2013 and 

2014 during the interim period. 

(f) Limited exemption for invalid Q– 

RINs. (1) In the event that an obligated 

party is required to retire or replace an 

invalid RIN that is a Q–RIN pursuant to 

paragraph (b) of this section, the 

obligated party will be afforded a 

‘‘limited exemption’’ (LE) equal to two 

percent of its annual Renewable Volume 

Obligation (RVO) for calendar years 

2014, 2015, and 2016. 

(2) Limited exemptions are calculated 

as follows: 

LECB,i = 0.02 × RVOCB,i

LEBBD,i = 0.02 × RVOBBD,i

LEAB,i = 0.02 × RVOAB,i

LERF,i = 0.02 × RVORF,i

Where: 

LECB,i = Limited exemption for cellulosic 

biofuel for year i. 

LEBBD,i = Limited exemption for biomassbased diesel for year i. 

LEAB,i = Limited exemption for advanced 

biofuel for year i. 

LERF,i = Limited exemption for renewable for 

year i. 

RVOCB,i = The Renewable Volume Obligation 

for cellulosic biofuel for the obligated 

party for calendar year i, in gallons, 

pursuant to § 80.1407. 

RVOBBD,i = The Renewable Volume 

Obligation for biomass-based diesel for 

the obligated party for calendar year i 

after 2010, in gallons, pursuant to 

§ 80.1407. 

RVOAB,i = The Renewable Volume Obligation 

for advanced biofuel for the obligated 

party for calendar year i, in gallons, 

pursuant to § 80.1407. 

RVORF,i = The Renewable Volume Obligation 

for renewable fuel for the obligated party 

for calendar year i, in gallons, pursuant 

to § 80.1407. 

(3) If the number of invalidly 

generated Q–RINs required to be retired 

or replaced in a calendar year is less 

than or equal to LE as calculated in 

paragraph (d)(2) of this section, the 

entire RIN retirement obligation is 

excused. 

(4) If the number of invalidly 

generated Q–RINs required to be retired 

or replaced in a calendar year is greater 

than LE as calculated in paragraph (d)(2) 

of this section, the retirement of a 

number of Q–RINs equal to two percent 

of the obligated party’s RVO is excused. 

(5) The limited exemption for Q–RINs 

applies only in calendar years 2014, 

2015, and 2016. 

(g) All parties who retire RINs under 

this section shall use the forms and 

follow the procedures prescribed by the 

Administrator. 

[FR Doc. 2014–16487 Filed 7–17–14; 8:45 am] 

BILLING CODE 6560–50–P 

mstockstill on DSK4VPTVN1PROD with RULES2