*** Interagency Working Comments on Draft Language under EO13563 and 12866 Interagency 

Review. Subject to Further Policy Review. Draft, Do Not Cite, Quote, or Release During OMB 

Review ***

XXXX-XX-X

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2015-0111; FRL-XXXX-XX-OAR]

[RIN 2060-AS22]

Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and BiomassBased Diesel Volume for 2017

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

SUMMARY: Under section 211 of the Clean Air Act, the Environmental Protection Agency 

(EPA) is required to set renewable fuel percentage standards every year. This action establishes 

the annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, 

and total renewable fuel that apply to all motor vehicle gasoline and diesel produced or imported 

in the years 2014, 2015, and 2016. The EPA is establishing a cellulosic biofuel volume for all 

three years that is below the applicable volume specified in the Act, and is also rescinding the 

cellulosic biofuel standard for 2011. Relying on statutory waiver authorities, the EPA is 

adjusting the applicable volumes of advanced biofuel and total renewable fuel for all three years. 

The 2016 standards are expected to spur further progress in overcoming current constraints in 

renewable fuel distribution infrastructure, which in turn is expected to lead to substantial growth 

over time in the production and use of higher-level ethanol blends and advanced biofuels. In this 

action, we are also establishing the applicable volume of biomass-based diesel for 2017. Finally, 

we are setting the compliance and attest reporting deadlines for the years 2013, 2014, and 2015, 

as well as finalizing regulatory amendments to clarify the scope of the existing algal biofuel 

pathway.

DATES: This final rule is effective on [Insert date of publication in the Federal Register]. 

ADDRESSES: The EPA has established a docket for this action under Docket ID No. EPA-HQOAR-2015-0111. All documents in the docket are listed on the http://www.regulations.gov web 

site. 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, is not placed in the electronic docket and will be publicly available only in hard copy 

form. Publicly available docket materials are available electronically through 

http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of Transportation 

and Air Quality, Assessment and Standards Division, Environmental Protection Agency, 2000 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 2 of 189

Traverwood Drive, Ann Arbor, MI 48105; telephone number: 734-214-4131; email address: 

macallister.julia@epa.gov.

SUPPLEMENTARY INFORMATION: 

I. General Information

A. 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, biodiesel, renewable diesel, and biogas. Potentially regulated categories 

include: 

Category NAICS1

Codes

SIC2

Codes

Examples of Potentially Regulated Entities

Industry

Industry 

Industry 

Industry 

Industry 

Industry

Industry

Industry

324110

325193

325199

424690

424710

424720

221210

454319

2911

2869

2869

5169

5171

5172

4925

5989

Petroleum Refineries

Ethyl alcohol manufacturing

Other basic organic chemical manufacturing

Chemical and allied products merchant wholesalers

Petroleum bulk stations and terminals

Petroleum and petroleum products merchant 

wholesalers

Manufactured gas production and distribution

Other fuel dealers

1 North American Industry Classification System (NAICS)

2 Standard 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 

EPA is now aware could potentially be regulated by this action. Other types of entities not listed 

in the table could also be regulated. To determine whether your entity is 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 person listed 

in the FOR FURTHER INFORMATION CONTACT section. 

Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. Chapter 5, generally 

provides that rules may not take effect earlier than 30 days after they are published in the Federal 

Register. EPA is issuing this final rule under section 307(d)(1) of the Clean Air Act, which 

states: “The provisions of section 553 through 557 . . . of Title 5 shall not, except as expressly 

provided in this section, apply to actions to which this subsection applies.” Thus, section 553(d) 

of the APA does not apply to this rule. EPA is nevertheless acting consistently with the policies 

underlying APA section 553(d) in making this rule effective on date of publication. Section 5 

U.S.C. 553(d)(3) allows an effective date for a rule less than 30 days after publication for good 

cause. The purpose of the 30-day waiting period prescribed in APA section 553(d)(3) is to give 

affected parties a reasonable time to adjust their behavior and prepare before the final rule takes 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 3 of 189

effect. In light of the establishment of new compliance dates for the 2013 standards (which do 

not alter the standards themselves), promulgation of standards applicable to 2015 and 2016 close 

to the end of 2015, and considering that the earliest compliance demonstration deadline for each

standard being set in this rule occurs no sooner than June 1, 2016, EPA finds good cause to make 

this rule effective on the date of publication.

Outline of this preamble

I. Executive Summary................................................................................................................. 7

A. Purpose of This Action ...................................................................................................... 12

B. Summary of Major Provisions in This Action................................................................... 18

1. Final Approach to Setting Standards for 2014, 2015, and 2016 18

2. Advanced Biofuel and Total Renewable Fuel 19

3. Biomass-Based Diesel 20

4. Cellulosic Biofuel 21

5. Annual Percentage Standards 22

6. Response to Requests for a Waiver of the 2014 Standards 22

7. Changes to Regulations 24

8. Assessment of Aggregate Compliance Approach 24

C. Authority for Late Action and Applicability of the Standards .......................................... 25

D. Outlook for 2017 and Beyond............................................................................................ 27

II. Advanced Biofuel and Total Renewable Fuel Volumes for 2014 - 2016............................. 29

A. Fulfilling Congressional Intent to Increase Use of Renewable Fuels................................ 29

B. Statutory Authorities for Reducing Volume Targets......................................................... 32

1. Cellulosic Waiver Authority 33

2. General Waiver Authority 35

3. Assessment of Past Versus Future Supply 43

4. Combining Authorities for Reductions in Total Renewable Fuel 43

5. Inability to Reach Statutory Volumes44

6. Inability to Reach Volumes Using Only the Cellulosic Waiver Authority 51

C. 2014 Advanced Biofuel and Total Renewable Fuel Volume Requirements..................... 54

D. 2015 Advanced Biofuel and Total Renewable Fuel Volume Requirements..................... 59

E. Total Renewable Fuel Volume Requirements for 2016 .................................................... 62

1. Renewable Fuel Market Challenges and Opportunities 64

2. Projecting Ethanol Supply 70

i. Ethanol Supply as E10 in 2016 72

Deleted: all

Deleted: s

Deleted: do 

Commented [A1]: Using “all” makes it seem as if June 1, 

2016 is the compliance deadline for each standard.

Deleted: not 

Deleted: until

Commented [A2]: Please check page numbering for 

II.B.4. header. One commenter stated that the page number 

should be 43 as opposed to 44.

Deleted: 23

Deleted: 26

Deleted: 44
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 4 of 189

ii. The Impact of RIN Prices on E85 Retail Prices 74

iii. Ethanol Supply as E85 in 2016................................................................................... 78

iv. E0 Demand in 2016 81

v. Ethanol Supply as E15 in 2016 83

vi. Total Ethanol Supply in 2016..................................................................................... 86

3. Biodiesel and Renewable Diesel 87

i. Feedstock availability................................................................................................. 89

ii. Biodiesel and Renewable Diesel Production Capacity............................................... 91

iii. Biodiesel and Renewable Diesel Import Capacity ..................................................... 92

iv. Biodiesel and Renewable Diesel Distribution Capacity............................................. 95

v. Biodiesel and Renewable Diesel Retail Infrastructure Capacity................................ 97

vi. Biodiesel and Renewable Diesel Consumption Capacity........................................... 98

vii. Biodiesel and Renewable Diesel Consumer Response............................................. 100

viii. Projected Supply of Biodiesel and Renewable Diesel in 2016 ................................ 101

4. Projecting the Supply of Other Renewable Fuels 105

5. Total Renewable Fuel Supply in 2016 105

F. Advanced Biofuel Volume Requirements for 2016........................................................ 107

G. Market Responses to the 2016 Advanced Biofuel and Total Renewable Fuel Volume 

Requirements .......................................................................................................................... 112

H. Treatment of Carryover RINs......................................................................................... 118

1. Summary of Proposal 119

2. Summary of Public Comments 120

3. EPA Decision and Responses 121

I. Impacts of Final Standards on Costs............................................................................... 125

III. Final Biomass-Based Diesel Volumes for 2014 -2017....................................................... 130

A. Statutory Requirements................................................................................................... 130

B. BBD Production and Compliance Through 2013........................................................... 131

C. BBD Volumes for 2014 .................................................................................................. 132

D. Determination of Applicable Volume of Biomass-Based Diesel for 2015 – 2017......... 135

1. Implication of Nested Standards 135

2. Biomass-Based Diesel as a Fraction of Advanced Biofuel 138

3. Ensuring Growth in Biomass-Based Diesel and Other Advanced Biofuel 140

4. Final BBD Volume for 2015 141

5. Final Volumes for 2016 – 2017 141

E. Consideration of Statutory Factors for 2014-2017 ......................................................... 144
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 5 of 189

1. Assessment for 2014 and 2015 Biomass-Based Diesel Applicable Volume 144

2. Primary and Supplementary Statutory Factors Assessment for 2016 and 2017 BiomassBased Diesel Applicable Volumes 145

IV. Final Cellulosic Biofuel Volume for 2014-2016 ................................................................ 148

A. Statutory Requirements................................................................................................... 149

B. Cellulosic Biofuel Industry Assessment......................................................................... 149

1. Potential Domestic Producers150

2. Potential Foreign Sources of Cellulosic Biofuel 151

3. Summary of Volume Projections for Individual Companies 151

C. Projection from the Energy Information Administration................................................ 154

D. Cellulosic Biofuel Volume for 2014............................................................................... 154

E. Cellulosic Biofuel Volume for 2015............................................................................... 156

F. Cellulosic Biofuel Volume for 2016............................................................................... 164

G. Rescission of the 2011 Cellulosic Biofuel Standards..................................................... 166

V. Percentage Standards......................................................................................................... 168

A. Background..................................................................................................................... 168

B. Calculation of Standards................................................................................................. 168

1. How Are the Standards Calculated? 168

2. Small Refineries and Small Refiners 170

3. Final Standards 171

VI. Amendments to Regulations............................................................................................... 173

A. Changes to the Algal Biofuel Pathways.......................................................................... 173

B. Annual Compliance Reporting and Attest Engagement Deadlines under the RFS Program

173

VII. Assessment of Aggregate Compliance ........................................................................... 177

A. Assessment of the Domestic Aggregate Compliance Approach .................................... 177

B. Assessment of the Canadian Aggregate Compliance Approach..................................... 178

VIII. Public Participation......................................................................................................... 179

IX. Statutory and Executive Order Reviews............................................................................. 180

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: 

Improving Regulation and Regulatory Review ...................................................................... 180

B. Paperwork Reduction Act (PRA).................................................................................... 180

C. Regulatory Flexibility Act (RFA)................................................................................... 180

D. Unfunded Mandates Reform Act (UMRA) .................................................................... 182

E. Executive Order 13132: Federalism ............................................................................... 182
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 6 of 189

F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments

182

G. Executive Order 13045: Protection of Children from Environmental Health Risks and 

Safety Risks ............................................................................................................................ 183

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect 

Energy Supply, Distribution, or Use....................................................................................... 183

I. National Technology Transfer and Advancement Act (NTTAA).................................. 183

J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority 

Populations, and Low-Income Populations ............................................................................ 183

K. Congressional Review Act (CRA).................................................................................. 183

X. Statutory Authority ............................................................................................................. 185
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 7 of 189

I. Executive Summary

The Renewable Fuel Standard (RFS) program began in 2006 pursuant to the requirements 

in Clean Air Act (CAA) section 211(o) that 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, 2010.1,2 EISA’s stated goals include 

moving the United States toward “greater energy independence and security, to increase the 

production of clean renewable fuels.” Since the initial promulgation of the RFS program 

regulations in 2007, domestic production and use of renewable fuel (also referred to as biofuel) 

in the U.S. has increased substantially. According to the Energy Information Administration 

(EIA), fuel ethanol production in the U.S. more than doubled in volume from approximately 6.5 

billion gallons in 2007 to about 14.3 billion gallons in 2014.3 Growth in biodiesel and renewable 

diesel production in the U.S. has increased more than two and a half times, from approximately 

0.5 billion gallons in 2007 to 1.46 billion gallons in 2014.4 Today, nearly all of the 

approximately 139 billion gallons of gasoline used for transportation purposes contains 10 

percent ethanol (E10).

The fundamental objective of the RFS provisions under the CAA is clear: to increase the 

use of renewable fuels in the U.S. transportation system every year through at least 2022 in order 

to reduce greenhouse gases (GHGs) and increase energy security. Further, these renewable fuels 

must be better performing in terms of their greenhouse gas emissions, as compared on a lifecycle 

basis, to the petroleum based fuels they are replacing. Cellulosic biofuels are required to have 60 

percent or greater greenhouse gas (GHG) emissions benefits on a lifecycle basis than the 

petroleum based fuels they replace; advanced biofuels (including biomass-based diesel) must 

have a 50 percent or greater benefit; and conventional biofuels (other than grandfathered 

facilities) must have a 20 percent or better benefit. Increased use of renewable fuels means less 

use of fossil fuels, which generally results in lower GHG emissions over time, especially when 

advanced biofuel production and use becomes more commonplace. By aiming to diversify the 

country’s fuel supply, Congress also intended to increase the nation’s energy security. 

Renewable fuels represent an opportunity for the U.S. to move away from fossil fuels towards a 

set of lower GHG transportation fuels, and a chance for a still-developing low GHG technology 

sector to grow. These lower GHG renewable fuels include corn starch ethanol, the predominant 

renewable fuel in use to date, but Congress envisioned the majority of growth over time to come 

from advanced biofuels, as the non-advanced (conventional) volumes remain constant in the 

statutory volume tables starting in 2015 while the advanced volumes continue to grow. 

The statute includes annual volume targets,5and requires EPA to translate those volume 

targets (or alternative volume requirements established by EPA in accordance with statutory 

 

1 75 FR 14670, March 26, 2010.

2 A full description of the statutory basis of the RFS program and EPA's actions to develop and implement the 

regulatory program are provided in a memorandum to the docket. See, "Statutory basis of the RFS program and 

development of the regulatory program," memorandum from Madison Le to EPA docket EPA-HQ-OAR-2015-0111.

3 EIA's Monthly Energy Review, April 2015, Table 10.3.

4 2007 volume represents biodiesel only, from EIA's Monthly Energy Review, April 2015, Table 10.4. 2014 volume 

represents biodiesel and renewable diesel domestic production from EMTS.

5 CAA 211(o)(2)(B)
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 8 of 189

waiver authorities) into compliance obligations that refiners and importers must meet every year. 

In this action, EPA is establishing the annual percentage standards for cellulosic biofuel, 

biomass-based diesel, advanced biofuel, and total renewable fuel that apply to all motor vehicle 

gasoline and diesel produced or imported in the years 2014, 2015, and 2016. We are also 

establishing the applicable volume of biomass-based diesel for 2017. 

In the June 10, 2015 notice of proposed rulemaking (NPRM), we proposed standards 

based on an approach that sought to achieve the Congressional intent of increasing renewable 

fuel use over time in order to address climate change and increase energy security, while at the 

same time accounting for the real-world challenges that have slowed progress toward such 

goals.6 Those constraints have made the volume targets established by Congress for 2014, 2015, 

and 2016 beyond reach. In the NPRM we proposed to use waiver mechanisms that Congress 

provided to allow for the volume targets to be reduced if necessary. The proposed volume 

requirements were lower than the statutory targets but set at a level that we believed would spur 

growth in renewable fuel use, consistent with Congressional intent.

In this action, we are finalizing standards that make use of the statute’s waiver provisions. 

The final standards differ from the proposed standards based on new information, consideration 

of public comments, and corrected calculations. Details of these changes are provided below. 

By finalizing the volume standards for total renewable fuel, advanced biofuel, and cellulosic 

biofuel for 2016 by November 30, 2015, we are returning to the statutory timeline for issuing 

volume standards under the RFS program for these categories.

We received a substantial number of comments on our proposed use of the statute’s 

waiver authorities, with commenters both supporting and opposing our approach. In addition to 

comments on our proposed use of waiver authorities, we received comments on multiple other 

areas of the proposal, including our proposed treatment of carryover RINs, our proposed 

approach to determining the volume requirements, and other areas. We address these comments 

in this preamble as well as in a response-to-comment (RTC) document, which can be found in 

the docket for this action.

While we are using the statutory waiver authorities in establishing final 2014, 2015, and 

2016 standards for cellulosic biofuel, advanced biofuel, and total renewable fuel, as we proposed 

to do, the volumes we are finalizing differ from the proposed volumes in order to reflect updated 

and corrected information. Key updates and changes include:

 Updating the total renewable fuel volume requirement and all of the percentage standards 

to take into account changes in EIA’s projected gasoline and diesel demand for 2016. 

 Correcting an error in determining actual volumes of ethanol supplied in 2014. EPA 

acknowledged this error in July 2015 by placing a memo in the docket.7 Correcting the 

error leads to a higher 2014 total renewable fuel volume requirement than the level in the 

NPRM.

 

6 See 80 FR 33100.

7 See Docket Item No. EPA–HQ– OAR–2015–0111-1219.

Commented [A3]: What about for the 2017 BBD 

standard? Will it also be meeting to the statutory timeline?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 9 of 189

 Accounting for higher than expected supply of conventional biodiesel and renewable 

diesel in 2015, providing a basis for expecting similar growth in biodiesel and renewable 

diesel volumes in 2016.

For 2016, we are finalizing volume requirements that are significantly higher than 

proposed, and that represent significant growth compared to actual renewable fuel use in 2015. 

While some stakeholders commented that reductions from the statutory targets would lead to a 

stagnation in growth, we disagree with this view. We proposed a 2016 volume requirement for 

total renewable fuel that was 1.1 billion gallons greater than the proposed 2015 volume 

requirement – a significant level of growth in one year. Our final 2016 volume requirements are 

also ambitious, with substantial growth in all four categories relative to 2015. The final volume 

requirements are shown in Table I-1 below.

Table I-1

Final Volume Requirementsa

2014 2015 2016

Cellulosic biofuel (million gallons) 33 123 230

Biomass-based diesel (billion gallons) 1.63 1.73 1.90

Advanced biofuel (billion gallons) 2.67 2.88 3.80

Renewable fuel (billion gallons) 16.28 16.93 18.10

a All values are ethanol-equivalent on an energy content basis, except for BBD which is biodieselequivalent.

We are also finalizing a BBD volume requirement of 2.0 billion gallons for 2017.

Our decision to finalize volumes for total renewable fuel that rely on exercising the 

general waiver authority is based on the same fundamental reasoning we relied upon in the June 

10, 2015 proposal. Despite significant increases in renewable fuel use in the United States, realworld constraints, such as the slower than expected development of the cellulosic biofuel 

industry and constraints associated with the infrastructure needed to supply certain biofuels to 

consumers, have made the timeline laid out by Congress impossible to achieve. These 

challenges remain, even as we recognize the success of the RFS program over the past decade in 

boosting renewable fuel use, and the recent signs of progress towards development of increasing 

volumes of advanced, low GHG-emitting fuels, including cellulosic biofuels.

We believe that the RFS program can and will drive renewable fuel use and, indeed, we 

have considered the ability of the market to respond to the standards we set when we assessed 

the amount of renewable fuel that can be supplied. Therefore, while this final rule applies the 

tools Congress provided to make adjustments to the statutory volume targets in recognition of the 

constraints that exist today, we believe the standards we are finalizing today will drive growth in 

renewable fuels, particularly advanced biofuels, which achieve the lowest lifecycle GHG 

emissions. Further, we believe this approach establishes the expected path for growth in future 

years. In our view, while Congress recognized that supply challenges may exist as evidenced by 

the waiver provisions, it did not intend growth in the renewable fuels market to be stopped by 

Commented [A4]: The commenter raises the question 

regarding the appropriateness of using this justification for 

the increases in 2016? The 2015 increases were due to 

higher-than-forecasted gasoline and diesel consumption. But 

in other parts of the final rule, the justification for the 2016 

volumes seems to be a desire to grow the market. Should 

this be made consistent or removed?

Commented [A5]: Suggest adding a 2017 column to the 

table and including just the BBD volume.

Commented [A6]: Could the agency be more clear about

its intent for future rulemakings or remove all instances 

altogether? Given the concerns about pass-through and the 

RIN bank being depleted—especially in light of the 

decreasing gasoline consumption forecasted by EIA—this 

commenter questions whether this is a credible signal to 

send. The RIN market responds very clearly with changes in 

expectations, so it would be useful to be extremely confident 

in the expected path if this is going to be stated (especially as 

early as on page 9).
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 10 of 189

those challenges, including those associated with the "E10 blendwall."8 The fact that Congress 

chose to mandate increasing and substantial amounts of renewable fuel clearly signals that it 

intended the RFS program to create incentives to increase renewable fuel supplies and overcome 

constraints in the market. The standards we are finalizing will provide those incentives.

The final volume requirements will push the fuels sector to produce and blend more 

renewable fuels in 2016 in a manner that is consistent with the goals Congress envisioned. The 

final volumes are less than the statutory targets for 2016 but higher than what the market would 

produce and use in the absence of such market-driving standards. The 2016 standards are 

expected to spur further progress in overcoming current challenges and lead to continued growth 

in the production and use of qualifying renewable fuels, including higher-level ethanol blends. 

In this regard the final standards are intended to fulfill the spirit and intent of Congress and 

provide guidance to market participants. 

Various commenters in the biofuels industry disagreed with our assessment that the 

approach described in the NPRM, in which we proposed to reduce the statutory targets using the 

available waiver authorities, would nevertheless support growth in renewable fuels. We address 

these comments throughout this notice and the RTC document. We emphasize, however, that 

our fundamental goal is to implement the RFS program in such a way as to ensure growth of 

renewable fuel use over time, consistent with Congressional intent, albeit on a more measured 

schedule. We have conducted significant technical analysis, both in the proposed rule and in this 

final rule, to better understand and characterize the renewable fuels market and the RFS program, 

all in an effort to implement the program on a schedule that matches as nearly as possible that set 

forth in the statute.9 We believe the approach taken in this final rule – in which we use the 

general waiver authority only to the extent necessary in light of real world constraints to make 

the requirements reasonably achievable – will achieve that goal. 

The RFS program can be thought of as a market forcing policy. The objective of the 

program is to introduce increasing volumes of renewable fuels, with a focus on cellulosic and 

other advanced renewable fuels – into the marketplace. Congress made the decision that this is

an appropriate policy objective, and put in place a program to achieve that policy goal. A key 

issue in implementing any program designed to advance new technologies, however, is the 

question of lead time. Technologies are typically phased in over time – in many cases over many 

years – to allow for the development of the technology and the steady growth in penetration of 

that technology into the marketplace. New technologies do not typically start at 90 or 100 

percent penetration rates; they can take time to overcome investment, technical, and market 

constraints to their development, deployment and use. The greater the number and type of these 

challenges, the longer the lead time must be to achieve the desired policy goal. In establishing 

the RFS program, Congress not only recognized that biofuels would need to phase in over time, 

and thus established a ramp-up of fuel use targets over time, but also established provisions in 

the law allowing EPA to waive in whole or in part implementation of those targets under certain 

circumstances. Our exercising of those waiver authorities is not an attempt to undermine 

 

8 The “E10 blendwall” represents the volume of ethanol that can be consumed domestically if all gasoline contains 

10% ethanol and there are no higher-level ethanol blends consumed such as E15 or E85.

9 See, for example, the Burkholder memo from NPRM, as well as follow-up work released with this final rule 

regarding the impact of RIN prices on retail price of E85.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 11 of 189

program growth, as some commenters argue, but rather a recognition of real world constraints 

that necessitate an adaptive approach to managing the program. Growth will, and must, continue 

under the law, but Congress recognized that in some cases, driving the introduction of a new 

technology requires an acknowledgment that new technologies can in some cases require longer 

lead times to achieve success. Trying to force growth at rates that prove infeasible would only 

undermine the certainty in the RFS program that is needed to sustain long-term growth. 

As stated in the NPRM, this final rule comes during a period of transition for the RFS 

program. In the program’s early years, compliance with the advanced biofuel and total 

renewable volume requirements could be readily achieved in large part by blending increasing 

amounts of ethanol into gasoline and biodiesel into diesel fuel. As the program progresses, 

however, significantly increasing renewable fuel volumes will require pushing beyond current 

constraints on ethanol and biodiesel use and will require sustained growth in the development 

and use of advanced, non-ethanol renewable fuels, including drop-in renewable fuels. This final 

rule acknowledges this transition by finalizing volume requirements based not only on the 

volumes of renewable fuels that have already been achieved in 2014 and the months in 2015 

leading up to this final action, but also on the volumes that can be supplied in 2016 as the market 

addresses infrastructure and other constraints. Our final rule includes volumes of renewable fuel 

that will require either ethanol use at levels significantly beyond the level of the E10 blendwall, 

or significantly greater use of non-ethanol renewable fuels than has occurred to date, depending 

on how the market responds to the standards we set. The standards we are finalizing for 2016 in 

particular are consistent with the purpose of the statute: to significantly increase the amount of 

renewable fuel used in the supply of transportation fuel over time, particularly renewable fuels 

with the lowest lifecycle GHG emissions. 

Since the amount of renewable fuel that can be produced and imported is larger than the 

volume that can be consumed due to limited demand for transportation fuel and constraints on 

supply of renewable fuels to vehicles and engines, there is necessarily competition among 

biofuels for retail consumption in the United States. In setting the biomass-based diesel volume 

requirement we have worked to achieve an appropriate and reasonable balance between setting a 

volume requirement that would provide support for the established BBD industry, while also 

providing opportunities under the advanced biofuel volume requirement to incentivize continued 

development and production of emerging biofuels. The approach we have used to determine the 

final volumes is consistent with Congressional intent in establishing the RFS program in that it 

provides an opportunity for a diverse array of renewable fuel types to be used for compliance. 

Competition is good for market participants, including obligated parties and consumers, as it 

permits the market to determine the most efficient, lowest cost, best performing fuels for meeting 

the increasingly higher volume requirements anticipated over time under the program. However, 

it is also important to provide support to existing successful biofuels and to provide incentives 

for those fuels, especially advanced biofuels, which produce the greatest reductions in GHGs. 

To this end, as discussed in Section III, we are finalizing specific volume requirements for 

biomass-based diesel (BBD).

As indicated in the NPRM, in establishing the standards for 2014, we must acknowledge 

that the compliance year has passed and any standard EPA sets for 2014 can no longer influence 

renewable fuel production or use in that year. Therefore, we are issuing a final rule for 2014 that 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 12 of 189

reflects those volumes of renewable fuel that were actually supplied in 2014. Details regarding 

how we calculated the final “actual” volumes used in 2014 are discussed in Section II.C below. 

With regard to 2015, the proposed volume requirements were based in part on actual 

volumes supplied in the first part of the year, and in part based on a determination of growth that 

was possible (and which could be incentivized through the NPRM) in the balance of the year. 

Actual data on supply after release of the June 10, 2015 NPRM indicates that the market 

responded to the NPRM by increasing supply in comparison to the period prior to the release of 

the NPRM. The final standards for 2015 have been set based on updated production and 

consumption data available as of issuance of this final rule, and a projection of what is expected 

to be produced and used through the end of 2015. 

For 2016, our approach is to set final volumes that take into account both the constraints 

in the supplies that exist, and the ability of the RFS program to incentivize growth. Where 

appropriate we also take into consideration other factors such as the impact of the BBD standard 

on incentivizing the production and use of other advanced biofuels, and the benefits provided by 

advanced biofuels in backfilling some of the volume that Congress envisioned would be 

provided in 2016 by cellulosic biofuels. 

This final rule represents EPA's commitment and continued support for steady growth in 

renewable fuel use. We recognize that the RFS standards are only one element among many that 

factor into the success of renewable fuel development and use over time. The standards that 

EPA sets each year are an important part of the overall picture, but this program is 

complemented and supported by programs managed by the U.S. Departments of Agriculture 

(USDA) and Energy (DOE), as well as myriad of efforts and initiatives at the regional and local 

level and within the private sector. DOE has invested considerable resources to help deploy the 

advanced technologies needed to achieve the statutory aims of lower carbon fuels, and has 

leveraged several billion dollars more in private support for development of advanced renewable 

fuels. USDA’s Biofuel Infrastructure Partnership program will provide $100 million in grants 

for the expansion of renewable fuel infrastructure, and their Biorefinery Assistance Program has 

provided loan guarantees for the development and construction of commercial scale biorefineries 

with a number of the new projects focused on producing fuels other than ethanol. Greater GHG 

benefits are expected to be realized as the production and use of advanced biofuels accelerates, 

and the volume requirements that we are finalizing support this goal. 

A. Purpose of This Action

The national volume targets of renewable fuel that are intended to be achieved under the 

RFS program each year (absent an adjustment or waiver by EPA) are specified in CAA section 

211(o)(2). The statutory volumes for 2014, 2015, and 2016 are shown in Table I.A-1. The 

cellulosic biofuel and BBD categories are nested within the advanced biofuel category, which is 

itself nested within the total renewable fuel category. This means, for example, that each gallon 

of cellulosic biofuel or BBD that is used to satisfy the individual volume requirements for those 

fuel types can also be used to satisfy the requirements for advanced biofuel and total renewable 

fuel.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 13 of 189

Table I.A-1

Applicable Volumes Specified in the Clean Air Act (billion gallons)a

2014 2015 2016

Cellulosic biofuel 1.75 3.0 4.25

Biomass-based diesel ≥1.0 ≥1.0 ≥1.0

Advanced biofuel 3.75 5.5 7.25

Renewable fuel 18.15 20.5 22.25

a All values are ethanol-equivalent on an energy content basis, except values for BBD 

which are given in actual gallons.

Under the RFS program, EPA is required to determine and publish annual percentage 

standards for each compliance year. The percentage standards are calculated to ensure use in 

transportation fuel of the national “applicable volumes” of the four types of biofuel (cellulosic 

biofuel, BBD, advanced biofuel, and total renewable fuel) that are set forth in the statute or 

established by EPA in accordance with the Act’s requirements. The percentage standards are 

used by obligated parties (generally, producers and importers of gasoline and diesel fuel) to 

calculate their individual compliance obligations. Each of the four percentage standards is 

applied to the volume of non-renewable gasoline and diesel that each obligated party produces or 

imports during the specified calendar year to determine their individual volume obligations with 

respect to the four renewable fuel types. The individual volume obligations determine the 

number of RINs of each renewable fuel type that each obligated party must acquire and retire to 

demonstrate compliance.

Today EPA is establishing the annual applicable volume requirements for cellulosic 

biofuel, advanced biofuel, and total renewable fuel for 2014, 2015, and 2016, and for BBD for 

2014, 2015, 2016, and 2017. Table I.A-2 lists the statutory provisions and associated criteria 

relevant to determining the national applicable volumes used to set the percentage standards in 

this final rule.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 14 of 189

Table I.A-2

Statutory Provisions for Determination of Applicable Volumes
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 15 of 189

Applicable volumes Clean Air Act 

reference

Criteria provided in statute for determination 

of applicable volume

Cellulosic biofuel 211(o)(7)(D)(i)

211(o)(7)(A)

Required volume must be lesser of volume 

specified in CAA 211(o)(2)(B)(i)(III) or 

EPA’s projected volume in coordination with 

other federal agencies.

EPA may waive the statutory volume in 

whole or in part if implementation would 

severely harm the economy or environment 

of a State, region, or the United States, or if 

there is an inadequate domestic supply.

Biomass-based diesel10 211(o)(2)(B)(ii) 

and (v)

211(o)(7)(A)

Required volume for years after 2012 must 

be at least 1.0 billion gallons, and must be 

based on a review of implementation of the 

program, coordination with other federal 

agencies, and an analysis of specified factors.

EPA may waive the statutory volume in 

whole or in part if implementation would 

severely harm the economy or environment 

of a State, region, or the United States, or if 

there is an inadequate domestic supply.

Advanced biofuel 211(o)(7)(D)(i) If applicable volume of cellulosic biofuel is 

reduced below the statutory volume to the 

projected volume, EPA may reduce the 

advanced biofuel and total renewable fuel 

volumes in CAA 211(o)(2)(B)(i)(I) and (II) 

by the same or lesser volume. No criteria 

specified.

211(o)(7)(A) EPA may waive the statutory volume in 

whole or in part if implementation would 

severely harm the economy or environment 

of a State, region, or the United States, or if 

there is an inadequate domestic supply.

Total renewable fuel 211(o)(7)(D)(i) If applicable volume of cellulosic biofuel is 

reduced below the statutory volume to the 

projected volume, EPA may reduce the 

advanced biofuel and total renewable fuel 

volumes in CAA 211(o)(2)(B)(i)(I) and (II) 

by the same or lesser volume. No criteria 

specified.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 16 of 189

211(o)(7)(A) EPA may waive the statutory volume in 

whole or in part if implementation would 

severely harm the economy or environment 

of a State, region, or the United States, or if 

there is an inadequate domestic supply.

By re-proposing the 2014 standards along with a proposed rule for the 2015 and 2016 

standards, we were not only able to formulate a proposed rule for public comment that takes into 

account the fact that 2014 is over, but we were also able to coordinate the treatment of 2014 with 

the treatment of 2015, where part of the year has likewise already passed. We therefore 

withdrew the November 29, 2013, NPRM,11 and the June 10, 2015, NPRM replaced and 

superseded that earlier proposed rule. The timing of this final rule is being issued consistent with 

terms of a final consent decree entered into by the EPA on April 10, 2015. This consent decree 

resolves pending litigation concerning EPA’s failure to establish standards for 2014 and 2015 by 

the statutory deadlines and includes a requirement for EPA to promulgate final standards for 

2014 and 2015 by November 30, 2015.12 

As shown in Table I.A-2, the statutory authorities that provide direction to EPA for how 

to modify or set the applicable standards differ for the four categories of renewable fuel. Under 

the statute, EPA must annually determine the projected volume of cellulosic biofuel production 

for the following year. If the projected volume of cellulosic biofuel production is less than the 

applicable volume specified in section 211(o)(2)(B)(i)(III) of the statute, EPA must lower the 

applicable volume used to set the annual cellulosic biofuel percentage standard to the projected 

volume of production during the year. In Section IV of this final rule, we present our analysis of 

cellulosic biofuel production and the final applicable volumes for 2014, 2015, and 2016. This 

analysis is based on an assessment of actual cellulosic biofuel supply in 2014 and parts of 2015, 

estimates from EIA, an evaluation of producers’ production plans and progress to date following 

discussions with cellulosic biofuel producers, and review of comments we received in response 

to the NPRM.

With regard to BBD, CAA section 211(o)(2)(B) specifies the applicable volumes of BBD 

to be used in the RFS program only through year 2012. For subsequent years the statute sets a 

minimum volume of 1 billion gallons, and directs EPA to set the required volume after review of 

the renewable fuels program, consultation with USDA and DOE as well as consideration of a 

number of factors. In Section III of this preamble we discuss our assessment of statutory and 

other relevant factors and our final volume requirements for BBD for 2014, 2015, 2016, and 

2017. We are finalizing growth in the required volume of BBD in such a way that both the BBD 

market and other advanced biofuels will grow.

 

10 Section 211(o)(7)(E) also authorizes EPA to issue a temporary waiver of applicable volumes of BBD where EPA 

determines that there is a significant feedstock disruption or other market circumstance that would make the price of

BBD fuel increase significantly.

11 See 78 FR 71732 (November 29, 2013) and 79 FR 73007 (December 9, 2014).

12 See American Fuel and Petrochemical Manuf. et al v. EPA (No. 15-cv-394, D.D.C.). The consent decree also 

requires that EPA respond by November 30, 2015 to the plaintiffs’ petition seeking a waiver in part of the 2014 

statutory volume targets.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 17 of 189

Regarding advanced biofuel and total renewable fuel, Congress provided several 

mechanisms through which those volumes could be reduced if necessary. If we lower the 

applicable volume of cellulosic biofuel below the volume specified in CAA 211(o)(2)(B)(i)(III), 

we also have the authority to reduce the applicable volumes of advanced biofuel and total 

renewable fuel by the same or a lesser amount. We refer to this as the "cellulosic waiver 

authority." We may also reduce the applicable volumes of any of the four renewable fuel types 

under the "general waiver authority" provided at CAA 211(o)(7)(A) if EPA finds that 

implementation of the statutory volumes would severely harm the economy or environment of a 

State, region, or the United States, or if there is inadequate domestic supply. Section II of this 

final rule describes our use of the cellulosic waiver authority to reduce volumes of cellulosic, 

advanced biofuel and total renewable fuel and the general waiver authority to further reduce 

volumes of total renewable fuel. Exercise of our waiver authorities is necessary to address 

important realities, including:

• Substantial limitations in the supply of cellulosic biofuel, 

• Insufficient supply of other advanced biofuel to offset the shortfall in cellulosic 

biofuel, and 

• Practical and legal constraints on the supply of renewable fuels to the vehicles 

that can use them. 

We believe these realities justify the exercise of the authorities Congress provided us to 

waive the statutory volumes. At the same time, we are mindful that the primary objective of the 

statute is to increase renewable fuel use over time. For the total renewable fuel requirement in 

this rule, we are using the waiver authorities only to the extent necessary to derive applicable 

volumes that reflect the maximum supply that can reasonably be expected to be produced and 

consumed by a market that is responsive to the RFS standards. This is a very challenging task 

not only in light of the myriad complexities of the fuels market and how individual aspects of the 

industry might change in the future, but also because we cannot precisely predict how the market 

will respond to the volume-driving provisions of the RFS program. Thus the determination of 

the final total renewable fuel volume requirement is one that we believe necessarily involves 

considerable exercise of judgment. Based on our assessment of available supply, and after 

consultation with the Departments of Agriculture and Energy, we believe that adjustments to the 

statutory targets for total renewable fuel are warranted for 2014, 2015, and 2016. While the final 

volume requirements for 2014 and 2015 are either equal to actual supply or (for 2015) a 

projection from actual supply, the volume requirement for 2016 will lead to growth in supply 

beyond the levels achieved in the past, based on the expectation that the market can and will 

respond to the standards we set. 

For the advanced biofuel volume requirements, we are using the cellulosic waiver 

authority to derive a volume requirement for 2014 that is based on actual supply; a volume 

requirement for 2015 that is based on actual supply during months for which data are available, 

and a projection from those levels for the remaining months in the year; and a volume 

requirement for 2016 that is reasonably attainable and which to a significant extent will result in 

Commented [A7]: Add cellulosic? 

Deleted: the
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 18 of 189

backfilling the shortfall in cellulosic biofuel volumes with advanced biofuels that have a very 

substantial GHG-reducing benefits.13 

On the basis of the authorities provided in the statute, we have evaluated the supply of 

total renewable fuels in light of the three constraints described above and the attainable volume 

of advanced biofuel on these same constraints as well as other factors and comments we received 

in response to the NPRM. 

B. Summary of Major Provisions in This Action

This section briefly summarizes the major provisions of this final rule. We are 

establishing applicable volume requirements for cellulosic biofuel, BBD, advanced biofuel, and 

total renewable fuel for 2014, 2015, and 2016, as well as the applicable volume requirement for 

BBD for 2017. This action also includes a final response to several requests we received in 2013 

for a waiver of the 2014 standards. We are also finalizing an amendment to the regulations 

designed to clarify the scope of the algal biofuel pathway. Finally, we are establishing new 

deadlines for annual compliance reporting and attest reporting for the 2013, 2014 and 2015 

compliance years.

1. Final Approach to Setting Standards for 2014, 2015, and 2016

Because 2014 has passed, this final rule cannot alter the volumes of renewable fuel 

produced and consumed during 2014. We believe it is appropriate, therefore, that the standards 

we establish for 2014 reflect the actual supply of renewable fuel in 2014. Although we believe 

that the standards we set for advanced biofuel and total renewable fuel must be ambitious to be 

consistent with the intent of Congress in establishing the RFS program, we also recognize that 

the final standards we set cannot affect the past. Therefore, in this action we are basing the 

applicable volume requirements for 2014 on actual renewable fuel use, as determined by data on 

the number of Renewable Identification Numbers (RINs) generated from the EPA-Moderated 

Transaction System (EMTS), minus the number of RINs retired to account for renewable fuel 

export as reported by the Census Bureau, or retired for other purposes unrelated to demonstrating 

compliance with the annual standards as reported through EMTS.14 While this approach would 

result in exactly the number of 2014 RINs available for compliance that would be needed for 

compliance with the 2014 standards, we recognize that it does not guarantee that every 

individual obligated party will have the exact number of 2014 RINs needed for compliance with 

its individual RVOs. Thus there may be some costs associated with the reallocation of 2014 

RINs to those obligated parties that need them. However, such variations in RIN holdings 

between obligated parties can occur in any year. We do not believe it would be appropriate to 

 

13 As discussed in Section II.B.1, EPA has considerable discretion in exercising the cellulosic waiver authority, and 

is not constrained to consider any particular factor or list of factors in doing so. 

14 A RIN is a unique number generated by the producer and assigned to each gallon of a qualifying renewable fuel 

under the RFS program, and is used by refiners and importers to demonstrate compliance with the volume 

requirements under the program. RINs may be retired for a number of reasons, including to account for renewable 

fuel spills or to correct for RIN generation errors. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 19 of 189

exercise our waiver authority to reduce the 2014 standards below the number of 2014 RINs 

available for compliance. Rather, we believe that we should rely on the market to sort out the 

distribution of RINs among obligated parties as was the intent in establishing the RIN trading 

mechanism. We are revising the deadline for obligated parties to demonstrate compliance with 

the RFS standards to afford obligated parties additional time to engage in transactions to acquire 

the RINs they need for compliance.15 

For the 2015 standards, we proposed volume requirements in the June 10, 2015 NPRM 

that projected growth in renewable fuel use over the calendar year, even though the proposed 

volume requirements were issued mid-way through the year. The market appears to have 

responded to the proposal as monthly supply after the NPRM was about 5% higher than monthly 

supply before the NPRM. We believe that the final rule, however, will be issued too late in the 

year to have any further effect on supply in 2015. Therefore, in deriving the final 2015 volume 

requirements we used the data on actual supply that is available to us (through September 2015), 

along with a projection of supply for the remaining months of 2015 based on actual supply in the 

months for which we have data and historical trends regarding seasonal renewable fuel supply. 

In other words, the 2015 volume requirements are based on a combination of actual volumes 

supplied and an extrapolation of likely volumes for the remainder of the year that assumes that 

our final standards are issued too late in the year to have further influence on the renewable fuel 

supply. 

For 2016, our final volume requirements are issued on the statutory schedule, allowing a 

full year for obligated parties and the market to react to the standards we set. Therefore, we 

assume that the standards can influence greater renewable fuel use than would be the case in the 

absence of the standards. For advanced biofuel and total renewable fuel, our assessment of 2016 

supply simultaneously reflects the statute's purpose to drive growth in renewable fuels, while 

also accounting for constraints in the market that make the volume targets specified in the statute 

beyond reach, as described more fully in Section II. Our determination regarding the BBD 

volume requirement has been based on consultation with USDA and DOE and an analysis of a 

set of factors stipulated in CAA 211(o)(2)(B)(ii), as described in more detail in Section III. 

Finally, as described in Section IV, the cellulosic biofuel volume requirement is based on a 

projection of production in 2016 that reflects a neutral aim at accuracy. 

2. Advanced Biofuel and Total Renewable Fuel

Since the EISA-amended RFS program began in 2010, we have reduced the applicable 

volume of cellulosic biofuel each year in the context of our annual RFS standards rulemakings to 

the projected production levels, and we have considered whether to also reduce the advanced 

biofuel and total renewable fuel statutory volumes pursuant to the waiver authority in section 

211(o)(7)(D)(i). In the past we have determined that reductions of advanced and total renewable 

fuel statutory volumes were not necessary. However, for 2014 and later years this is not the case. 

For 2014, this final rulemaking is too late to influence the market, and renewable fuel supply 

must necessarily be determined based on historical data. This is also largely the case for 2015, 

 

15 Other compliance flexibilities also exist, including use of carryover RINs and the ability for parties that do not 

have a 2013 compliance deficit to carry a 2014 deficit forward into 2015.

Deleted: such 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 20 of 189

though we have included a projection for the latter part of the year for which data on actual use is 

not available. For both of these years, the supply of advanced and total renewable fuels was 

insufficient to satisfy the statutory targets. 

For 2016 we have determined that the volume of ethanol in the form of E10 or higher 

ethanol blends that can be supplied to vehicles, together with the volume of non-ethanol 

renewable fuels that can be supplied to vehicles, is insufficient to attain the statutory targets for 

either total renewable fuel or advanced biofuel. As a result we are using the waiver authorities 

provided in CAA 211(o)(7) to set lower volume requirements for these renewable fuel categories 

in 2016 than the statutory volume targets. While we are using this waiver authority for the 2016 

standard, we expect future standards to both reflect and anticipate progress of the industry and 

market in providing for continued expansion in the supply of renewable fuels. 

Our determination in this final rule that the required volumes of advanced biofuel and 

total renewable fuel should be reduced from the statutory targets is based on a consideration of 

the ability of the market to supply such fuels through domestic production or import; the ability 

of available renewable fuels to be used as transportation fuel, heating oil, or jet fuel; and the 

ability of the standards to bring about market changes.16 The renewable fuel supply system is 

very complex, including such diverse elements as feedstock (e.g. corn, soybeans) production and 

transport, renewable fuel production and import facilities, distribution capacity (e.g., pipeline, 

rail, barge, and tank truck), terminal storage, facilities at terminals to blend renewable fuel into 

gasoline and diesel, and vehicles/engines designed to use renewable fuel. A constraint anywhere 

in this system can lead to shortfalls in renewable fuel supply in comparison to the statutory 

targets. As described in more detail in Section II.B, we believe that the availability of qualifying 

renewable fuels and constraints on their supply to vehicles that can use them are valid 

considerations under both the cellulosic waiver authority under section 211(o)(7)(D)(i) and the 

general waiver authority under section 211(o)(7)(A). We are using the waiver authorities in a 

limited way that reflects our understanding of how to reconcile real marketplace constraints with 

Congress’ intent to cause growth in renewable fuel use over time.

We have projected applicable volumes for advanced biofuel and total renewable fuel for 

2016 that would result in significant volume growth over the levels supplied in previous years, 

and which, in our judgment, are as ambitious as can reasonably be justified. The final volume 

requirements for 2016 reflect the growth rates that can be attained under a program explicitly 

designed to be “market-driving.”

3. Biomass-Based Diesel

As for advanced and total renewable fuel in 2014 and 2015, we believe that it is 

appropriate to establish the 2014 and 2015 volume requirements of BBD to reflect actual supply 

(including a projection for the latter part of 2015 that is primarily based on supply in the earlier 

part of the year for which data is available). For 2016 and 2017, to preserve the important role 

 

16 While the fuels that are subject to the percentage standards are currently only non-renewable gasoline and diesel, 

renewable fuels that are valid for compliance with the standards include those used as transportation fuel, heating 

oil, or jet fuel.

Commented [A8]: Recommend defining or clarifying this 

term.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 21 of 189

that BBD plays in the RFS program, as well as to ensure that higher volume requirements for 

advanced biofuel can be reached, we believe that it is appropriate to increase the BBD volume 

requirement for each year. However, we also believe that it is of ongoing importance that 

opportunities for other types of advanced biofuel, such as renewable diesel co-processed with 

petroleum, renewable gasoline blendstocks, and heating oil, as well as others that are under 

development be incentivized and expanded. Thus, based on a review of the implementation of 

the program to date and all the factors required under the statute, we are not only finalizing the 

2014 and 2015 BBD volume requirement at the actual volumes of 1.63 and 1.73 billion gallons, 

respectively, but we are also finalizing increases in the applicable volume of BBD to 1.9 and 2.0 

billion gallons for years 2016 and 2017, respectively. We believe that these increases support 

the overall goals of the program while also maintaining the incentive for development and 

growth in production of other advanced biofuels. We believe establishing the volumes at these 

levels will encourage BBD producers to manufacture higher volumes of fuel that will contribute 

to the advanced biofuel and total renewable fuel requirements, while also leaving considerable 

opportunity within the advanced biofuel mandate for investment in and production of other types 

of advanced biofuel with comparable or potentially superior environmental or other benefits. 

4. Cellulosic Biofuel

The cellulosic biofuel industry continues to transition from research and development 

(R&D) and pilot scale operations to commercial scale facilities, leading to significant increases 

in production capacity. RIN generation from the first commercial scale cellulosic biofuel facility 

began in March 2013. Cellulosic biofuel production increased substantially in 2014, with over 

33 million gallons in that year. Last year also saw a significant number of cellulosic biofuel 

RINs generated using cellulosic CNG/LNG from biogas through a new pathway approved by 

EPA in 2014.17 For 2014 we are finalizing a cellulosic biofuel standard of 33 million gallons, 

consistent with the total number for RINs generated in 2014 that may be used toward satisfying 

an obligated party’s cellulosic biofuel obligation (both cellulosic biofuel (D3) and cellulosic 

diesel (D7) RINs). We are also finalizing a cellulosic biofuel standard of 123 million ethanolequivalent gallons for 2015 and 230 million ethanol-equivalent gallons in 2016 based on the 

information we have received regarding individual facilities’ capacities, production start dates 

and biofuel production plans, as well as input from other government agencies, and EPA's own 

engineering judgment.

As part of estimating the volume of cellulosic biofuel that will be made available in the 

U.S. in 2015 and 2016, we researched all potential production sources by company and facility. 

This included sources still in the planning stages, facilities under construction, facilities in the 

commissioning or start-up phases, and facilities already producing some volume of cellulosic 

biofuel. Facilities primarily focused on R&D were not the focus of our assessment, as 

production from these facilities represents very small volumes of cellulosic biofuel, and these 

facilities typically have not generated RINs for the fuel they have produced. From this universe 

of potential cellulosic biofuel sources, we identified the subset that is expected to produce 

commercial volumes of qualifying cellulosic biofuel for use as transportation fuel, heating oil, or 

jet fuel by the end of 2016. To arrive at projected volumes, we collected relevant information on 

 

17 See 79 FR 42128 (July 18, 2014).

Commented [A9]: Recommend clarification on the growth

of BBD volumes. Does the text indicate growth should 

continue going forward or only for the 2016 and 2017 

volumes?

Commented [A10]: Suggest rephrasing to clarify that the 

2015 volume is not the “actual” volume, but also includes a 

projection. Similar language describing the projection can 

be found in the paragraphs above.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 22 of 189

each facility. We then developed projected production ranges based on factors such as the 

current and expected state of funding, the status of the technology being used, progress towards 

construction and production goals, facility registration status, production volumes achieved, and 

other significant factors that could potentially impact fuel production or the ability of the 

produced fuel to qualify for cellulosic biofuel RINs. We also used this information to group 

these companies based on production history and to select a value within the aggregated 

projected production ranges that we believe best represents the most likely production volumes 

from each group for each year. EPA also received a projection of liquid cellulosic biofuel 

production in 2016 from EIA, which helped form the basis of our production for these types of 

cellulosic biofuels. Further discussion of these factors and the way they were used to determine 

our final cellulosic biofuel projections for 2014, 2015, and 2016 can be found in Section IV.

5. Annual Percentage Standards

The renewable fuel standards are expressed as a volume percentage and are used by each 

producer and importer of fossil-based gasoline or diesel to determine their renewable fuel 

volume obligations. The percentage standards are set so that if each obligated party meets the 

standards, and if EIA projections of gasoline and diesel use for the coming year prove to be 

accurate, then the amount of renewable fuel, cellulosic biofuel, BBD, and advanced biofuel 

actually used will meet the volumes required on a nationwide basis. 

Four separate percentage standards are required under the RFS program, corresponding to 

the four separate renewable fuel categories shown in Table I.A-1. The specific formulas we use 

in calculating the renewable fuel percentage standards are contained in the regulations at 40 CFR 

80.1405 and repeated in Section V.B.1. The percentage standards represent the ratio of 

renewable fuel volume to projected non-renewable gasoline and diesel volume. The volume of 

transportation gasoline and diesel used to calculate the final percentage standards was provided 

by EIA. The final percentage standards for 2014, 2015, and 2016 are shown in Table I.B.5-1. 

Detailed calculations can be found in Section V, including the projected gasoline and diesel 

volumes used.

Table I.B.5-1

Final Percentage Standards

2014 2015 2016

Cellulosic biofuel 0.019% 0.069% 0.128%

Biomass-based diesel 1.41% 1.49% 1.59%

Advanced biofuel 1.51% 1.62% 2.12%

Renewable fuel 9.19% 9.52% 10.09%

6. Response to Requests for a Waiver of the 2014 Standards

Commented [A11]: Suggest also including the 2017 BBD 

percentage by adding a column.

Does EPA give the estimated percentage range of ethanol 

that is expected to blended for 2014, 2015, and 2016? 

Would be helpful to show the range in the appropriate 

section of the preamble. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 23 of 189

Concurrently with the November 29, 2013, proposed rule for 2014 RFS standards, we 

also published a separate Federal Register Notice18 indicating that the American Petroleum 

Institute (API) and the American Fuel & Petrochemical Manufacturers (AFPM) had submitted a 

joint petition requesting a partial waiver of the 2014 applicable RFS volumes, and that several 

individual refining companies had also submitted similar petitions. We noted that any additional 

similar requests would also be docketed and considered together with requests already received. 

EPA has subsequently received additional waiver petitions, including those submitted by nine 

Governors.19

The petitions generally asserted that for 2014 there is an inadequate domestic supply of 

renewable fuel and therefore RINs, due both to the E10 blendwall and constraints on the supply 

of higher-level ethanol blends, and of non-ethanol renewable fuels. Many of the petitioners 

argued that this inadequate supply of renewable fuel (and RINs) will lead to an inadequate 

supply of gasoline and diesel, because refiners and importers, faced with a shortage of RINs, will 

reduce their production of gasoline and diesel for the domestic market. They argued that this 

will in turn severely harm the economy.

As calendar year 2014 has passed, we believe it is appropriate to set the applicable 

volume requirements at the volumes that were actually supplied in 2014. We do not believe that 

use of 2014 renewable fuel volumes severely harmed the economy, and we believe that it is 

straightforward to conclude that there was an adequate supply of the volumes of renewable fuel 

that were actually used in 2014. Therefore, we do not believe that adequate justification exists 

for setting the 2014 volume requirements at levels below those actually supplied. We have 

considered the possibility of setting the 2014 volume requirements at a higher level, reflecting 

the availability of carryover RINs. However, as described in detail in Section II.H., we do not 

interpret carryover RINs to be part of the “supply” of renewable fuel for purposes of assessing 

whether an inadequate domestic supply exists to justify a waiver under Section 211(o)(7)(A) and, 

although they are a relevant consideration in determining whether or not we should exercise our 

discretion to grant a waiver, we have determined that the current bank of carryover RINs serves 

important program functions, and that the requirements for 2014-2016 should not be 

intentionally set at levels that would require a draw-down in the current bank of carryover RINs. 

Therefore, we have determined that supply would be inadequate for 2014 volume requirements 

higher than we have established today. 

To the extent that EPA’s independent action to reduce statutory volumes satisfies the 

petition requests, those requests are now moot and EPA is taking no further action with respect 

to them. EPA is denying the waiver petitions to the extent they seek differing reductions in 

applicable volumes than are set forth in this final rule. We believe it is unnecessary to evaluate 

concerns raised by certain petitioners that implementation of the statutory applicable volumes 

 

18 78 FR 71732 (November 29, 2013) and 78 FR 71607 (November 19, 2013), respectively.

19 EPA has received, to date, waiver petitions from Governors Deal (GA), Fallin (OK), Perry (TX), Otter (ID), 

LePage (ME), Martinez (NM), McCrory (NC), Herbert (UT), and Haley (SC). In addition to the waiver petition 

from API/AFPM, EPA has also received waiver petitions from the following companies: Delek, ExxonMobil, Holly 

Frontier, Lion Oil Petroleum, Marathon Oil, NCRA, PBF Holding Company, Phillips 66, and Tesoro. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 24 of 189

would cause severe economic harm, since such concerns were predicated on underlying concerns 

of inadequate domestic supply and such supply concerns are directly addressed by this final rule. 

7. Changes to Regulations

In addition to finalizing the aforementioned volume requirements and associated 

percentage standards, we are also finalizing amendments to the RFS requirements to address two 

issues. First, we are finalizing changes with respect to the previously-approved algal oil 

pathways in Table 1 to 40 CFR 80.1426 to clarify that only biofuels produced from oil from 

algae grown photosynthetically qualify for the RFS program under these pathways. Since EPA 

assumed that algae would be grown photosynthetically when it evaluated the lifecycle 

greenhouse gas emissions associated with the existing algal oil pathways, we are clarifying the 

regulatory description of these pathways to align with EPA’s technical assessment and 

interpretation of the scope of the pathways.

We are aware of companies that plan to produce biofuels from algae that use nonphotosynthetic types of metabolism. Companies wishing to produce biofuels from algae grown 

with a non-photosynthetic stage of growth must apply to EPA for approval of their pathway 

pursuant to 40 CFR 80.1416.

We are also finalizing revisions to the annual compliance reporting deadlines for 

obligated parties and renewable fuel exporters, and the attest engagement reporting deadlines for 

obligated parties, RIN-generating renewable fuel producers and importers, other parties holding 

RINs, renewable fuel exporters, and independent third-party auditors for the 2013, 2014, and 

2015 compliance years. The deadlines vary for each of these parties depending on the applicable 

compliance period, and some parties will be required to submit partial annual reports 

representing a portion of the 2014 compliance year. A detailed description of our changes to 

reporting deadlines can be found in Section VI.B.

8. Assessment of Aggregate Compliance Approach

By November 30 of each year we are required to assess the status of the aggregate 

compliance approach to land-use restrictions under the definition of renewable biomass for both 

the U.S. and Canada. In today's action we are providing the final announcements for these 

administrative actions.

As part of the RFS regulations, EPA established an aggregate compliance approach for 

renewable fuel producers who use planted crops and crop residue from U.S. agricultural land. 

This compliance approach relieved such producers (and importers of such fuel) of the individual 

recordkeeping and reporting requirements otherwise required of producers and importers to 

verify that such feedstocks used in the production of renewable fuel meet the definition of 

renewable biomass. EPA determined that 402 million acres of U.S. agricultural land was 

available in 2007 (the year of EISA enactment) for production of crops and crop residue that 

would meet the definition of renewable biomass, and determined that as long as this total number 

Deleted: existing 

Commented [A12]: Is cynobacteria one of the approved 

pathways that is being referenced here? What is meant by 

“these pathways”? 

Does EPA currently have an approved pathway for the use of 

bacteria processing waste biogas feedstock developed by 

companies such as LanzaTech? 

Commented [A13]: Did EPA receive any adverse 

comment regarding this clarification? Does the nonphotosynthetic type of metabolism not meet the lifecycle 

GHG threshold for advanced biofuels? 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 25 of 189

of acres is not exceeded, it is unlikely that new land has been devoted to crop production based 

on historical trends and economic considerations. We indicated that we would conduct an 

annual evaluation of total U.S. acreage that is cropland, pastureland, or conservation reserve 

program land, and that if the value exceed 402 million acres, producers using domestically 

grown crops or crop residue to produce renewable fuel would be subject to individual 

recordkeeping and reporting to verify that their feedstocks meet the definition of renewable 

biomass. Based on data provided by the USDA, we have estimated that U.S. agricultural land 

reached XXX million acres in 2014, and thus did not exceed the 2007 baseline acreage. Since 

the U.S. agricultural land has not expanded over the 2007 baseline, the aggregate compliance 

provision can continue to be used in the U.S. for calendar years 2014, 2015, and 2016.

On September 29, 2011, EPA approved the use of a similar aggregate compliance 

approach for planted crops and crop residue grown in Canada. The Government of Canada 

utilized several types of land use data to demonstrate that the land included in their 124 million 

acre baseline is cropland, pastureland or land equivalent to U.S. Conservation Reserve Program 

land that was cleared or cultivated prior to December 19, 2007, and was actively managed or 

fallow and nonforested on that date (and is therefore RFS2 qualifying land). The total 

agricultural land in Canada in 2014 is estimated at XXX million acres. The total acreage 

estimate of XXX million acres does not exceed the trigger point for further investigation. This 

assessment means that the aggregate compliance provision can continue to be used in Canada for 

calendar years 2014, 2015, and 2016.

C. Authority for Late Action and Applicability of the Standards

Under CAA 211(o)(3)(B)(i), EPA must determine and publish the annual percentage 

standards by November 30 of the preceding year, and it must establish applicable volumes for 

biomass-based diesel 14 months in advance of the compliance year. EPA did not meet the 

statutory deadline for the 2014 or the 2015 percentage standards, nor the deadline for the 2014, 

2015, and 2016 BBD applicable volumes. Nevertheless, the percentage standards established 

through this rulemaking would apply to all gasoline and diesel produced or imported in calendar 

years 2014, 2015, or 2016 as applicable. 

We acknowledge that this rule is being finalized later than the statutory deadlines noted 

above. However, since the RFS program is a continuous program with parties producing and 

using renewable fuels, generating and acquiring RINs for compliance even in the absence of the 

annual standards being in place, it is important that there not be a lapse in applicable standards 

being in place, even though the years are over. The delay does not deprive EPA of authority to 

issue applicable volumes and standards for these calendar years. The United States Court of 

Appeals for the District of Columbia Circuit upheld the 2013 RFS standards even though they 

were issued more than eight months after statutory deadline. Monroe Energy v. EPA, 750 F.3.d 

909 (D.C. Cir. 2014). The court noted that it had resolved the question of EPA’s authority to 

issue RFS standards after the statutory deadline for issuing the annual RFS standards in NPRA v. 

EPA, 630 F.3d 145 (D.C. Cir. 2010). In that case, the court explained that courts have declined 

to treat a statutory direction that an agency “shall” act within a specified time period as a 

jurisdictional limit that precludes action later. Id. at 154 (citing Barnhart v. Peabody Coal, 537 

Deleted: This assessment means that 

Commented [A14]: One commenter recommended

rephrasing the text on U.S. agricultural land to reflect the 

ability of existing agricultural land to meet the needs of both 

food and fuel.

What is the number provided by USDA? 

Did EPA receive any adverse comment regarding any 

changes in agricultural land usage?

Does the statute provide for increases in the total U.S. 

acreage baseline from 2007 due to population growth? 

What is the trigger point for Canadian acres that would 

signal a change?

Commented [A15]: Is EPA still waiting on land use 

numbers? Is that why they're not filled in? Why is it okay to 

use 2014 data for all three years? 80. 1454(g) says EPA 

needs to make the determination by Nov 30th of the prior 

year. So shouldn’t the agency use 2015 data for 2016 and 

2013 data for 2014?

Commented [A16]: If issuing the rule by November 30, 

2015, will EPA have met the 2017 BBD statutory timeline?

Deleted: M
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 26 of 189

U.S. 149, 158 (2003)). Moreover, the court noted that the statute here requires that EPA 

regulations “ensure” that transportation fuel sold or introduced into commerce "on an annual 

average basis, contains at least the volumes of renewable fuel" that are required pursuant to the 

statute. Id. at 152-153. This statutory directive requires EPA action, even if late. Therefore EPA 

believes it has authority to issue RFS standards for calendar years 2014 and 2015, and BBD 

applicable volumes for 2014-2016, notwithstanding EPA’s delay.

EPA is exercising its authority to issue standards applicable to past time periods in a 

reasonable way. Thus, for 2014, EPA is establishing renewable fuel obligations that reflect 

actual renewable fuel used as transportation fuel, heating oil, or jet fuel during that time period, 

and the final June 1, 2016 compliance deadline for 2014 allows time for obligated parties to 

complete necessary transactions to meet obligations. For 2015 we are similarly taking into 

account actual renewable fuel use during the time that has already passed in 2015, and 

establishing an extended compliance demonstration deadline of December 1, 2016. Renewable 

fuel producers generated RINs throughout 2014, and have also been generating 2015 RINs since 

the beginning of the calendar year. To varying degrees, obligated parties have been acquiring 

RINs since the beginning of 2014 in anticipation of the final volume requirements and standards. 

While we acknowledge the uncertainty that the market has experienced due to the delay, our 

final rule bases the applicable volume requirements for 2014 and 2015 on an assessment of past 

production. As a result, there will be an adequate quantity of RINs available to satisfy those 

portions of the final requirements. In addition, there are a number of program flexibilities that 

will facilitate compliance. There is a bank of carryover RINs that can be used to comply with a 

portion of the 2014 RVOs, and to the extent it is not used, that bank of carryover RINs can be 

rolled forward to assist in compliance with 2015 and 2016 requirements. We acknowledge that 

there is a theoretical possibility that parties that accumulate RINs through their own blending 

activities could decide to bank the maximum quantity of RINs for their own future use or for 

future sale, and that if this practice were widespread that there could be a shortfall in available 

RINs for parties who do not engage in renewable fuel blending activities themselves and have 

not entered into sufficient contracts with blenders or other parties to acquire sufficient RINs. 

Such practices are possibilities in any competitive marketplace, and we believe that obligated 

parties have had sufficient experience with the RFS program to have taken precautionary 

measures to avoid such results and to be prepared to comply with applicable standards 

potentially as high as the statute requires. Even where they have not done so, and find 

compliance with a given year’s standards infeasible, they may avail themselves of the option of 

carrying a compliance deficit forward for that compliance year to the next. Some commenters 

asserted that BBD volume requirements for 2014 and 2015 should be set at the level proposed in 

November, 2013, rather than levels actually supplied in those years. As described in Section III, 

EPA disagrees with these commenters that obligated parties lacked notice that EPA could set 

final BBD volume requirements for these years higher than proposed in 2013, or that setting the 

requirements to reflect actual supply would pose an unreasonable burden on obligated parties, 

particularly in light of the nested nature of the standards. Sufficient BBD RINs were generated 

in these years to allow compliance, and carryover RINs, deficit carryforwards and delayed 

compliance demonstration deadlines are all in place to facilitate compliance. In sum, we believe 

that EPA’s final approach is authorized and reasonable, though late.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 27 of 189

D. Outlook for 2017 and Beyond

We recognize that a number of challenges must be overcome in order to fully realize the 

potential for greater use of renewable fuels in the United States. We also recognize that the RFS 

program plays a central role in creating the incentives for realizing that potential. The standards 

being finalized today require that significant progress is made in overcoming those challenges. 

We expect future standards to both reflect and anticipate progress of the industry and market in 

providing for continued expansion in the supply of renewable fuels. 

We believe that the supply of renewable fuels can continue to increase in the coming 

years despite the constraints associated with shortfalls in cellulosic biofuel production and other 

advanced biofuels, and constraints associated with supplying renewable fuels to the vehicles and 

engines that can use them. As described in Section II.E, we believe that the market is capable of 

responding to ambitious standards by expanding all segments of the market needed to increase 

renewable fuel supply and modify fuel pricing to provide incentives for the production and use 

of renewable fuels. While we do not believe that the statutory volumes can be reached within the 

next few years, the market is capable of attaining volumes significantly higher than in the past. 

We expect substantial progress to be made over the coming years towards alleviating the market 

barriers that currently necessitate the use of the general waiver.

In future years, we would expect to use the most up-to-date information available to

project the growth that can realistically be achieved considering the ability of the RFS program 

to spur growth in the volume of ethanol, biodiesel, and other renewable fuels that can be supplied 

and consumed by vehicles. In particular we will focus on the emergence of advanced biofuels 

including cellulosic biofuel consistent with the statute. Many companies are continuing to invest 

in efforts ranging from research and development to the construction of commercial-scale 

facilities to increase the production potential of next generation biofuels. We will continue to 

evaluate new pathways especially for advanced biofuels and respond to petitions, expanding the 

availability of feedstocks, production technologies, and fuel types eligible under the RFS 

program. 

In particular, we will be initiating action to allow the production of a biofuel to occur in 

steps at more than one facility. Partial conversion of a renewable feedstock into a so-called 

“biointermediate” at remote facilities for subsequent final processing into renewable biofuel at 

the primary production facility has been identified by several industry members as an important 

option to reduce the cost and enhance the availability of cellulosic and other advanced biofuels. 

However, under the existing RFS regulations, renewable fuels must be produced from renewable 

feedstocks at a single facility in order to be eligible to generate RINs. We are currently working 

on a rulemaking that would propose amendments to the RFS program to allow for more

favorable treatment of such biointermediates. We believe a rulemaking, as opposed to guidance, 

is necessary to provide clarity for stakeholders and for proper compliance and enforcement 

oversight.

We believe that the use of biointermediates to produce renewable fuels holds 

considerable promise for the future growth in production of the cellulosic and advanced biofuels 

required under the RFS program. While near-term production may be modest, significant 

Commented [A17]: If appropriate, recommend including 

language to indicate EPA’s path forward on the RFS 

reflecting the market to alleviate the barriers that have 

justified the use of the general waiver.

Commented [A18]: The commenter supports initiating 

action to allow the production of biofuel where production 

steps occur at more than one facility to qualify for RIN 

generation and offers support to determine best practices for 

eligibility.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 28 of 189

potential for further growth in the long-term exists, as these technologies can lower the cost of 

utilizing cellulosic and other feedstocks for the production of renewable fuels by reducing the 

storage and transportation costs associated with cellulosic biomass and taking advantage of 

existing ethanol and petroleum refinery assets to convert the biomass to renewable fuel. This 

makes biointermediates a critical component of the growth of the RFS program in the future and 

in particular the growth of the cellulosic biofuel volumes envisioned in the statute.

In addition to ongoing efforts to evaluate new pathways for advanced biofuel production, 

we are aware that other actions can also play a role in improving incentives provided by the RFS 

program to overcome challenges that limit the potential for increased volumes of renewable 

fuels. A number of commenters provided ideas in this regard, including suggestions that EPA 

take regulatory action to modify the administration of the cellulosic waiver credit (CWC) 

program to better provide stronger support for actual volume purchases, and to change the RFS 

program’s point of obligation from its current focus on producers and importers of gasoline and 

diesel. Both of these issues are beyond the scope of this rulemaking. With respect to the CWC 

program, Congress clearly intended for cellulosic biofuel volumes to grow significantly over 

time, and the CWC provisions of the RFS program play an important role in accomplishing this. 

We will continue to actively monitor the functioning of the market, assess all relevant data, and 

review our options as necessary.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 29 of 189

II. Advanced Biofuel and Total Renewable Fuel Volumes for 2014 - 2016

The national volume targets of advanced biofuel and total renewable fuel to be used 

under the RFS program each year through 2022 are specified in CAA section 211(o)(2). 

However, two statutory provisions authorize EPA to reduce these volumes under certain 

circumstances. EPA may reduce these volumes to the extent that we reduce the applicable 

volume for cellulosic biofuel pursuant to CAA 211(o)(7)(D), or if the criteria are met for use of 

the general waiver authority under CAA 211(o)(7)(A). We have evaluated the capabilities of the 

market and have concluded, as we did in the proposed rule, that the volumes for advanced 

biofuel and total renewable fuel specified in the statute cannot be achieved in 2014, 2015, 

and2016. As a result we are exercising our discretion under these statutory provisions to reduce 

the applicable volumes of advanced biofuel and total renewable fuel to address constraints on the 

supply of renewable fuels that are driven by both limitations in production or importation of 

these fuels and factors that limit supplying them to vehicles that can consume them. 

While we are using our waiver authorities under the law to reduce applicable volumes 

from the statutory levels, we are setting the final volume requirements at levels that are intended 

to drive significant growth in renewable fuel use beyond what would occur in the absence of 

such requirements, as Congress intended. The final volume requirements recognize the ability of 

the market to respond to the standards we set while staying within the limits of feasibility. The 

net impact of these final volume requirements is that the necessary volumes of both advanced 

biofuel and conventional (non-advanced) renewable fuel would significantly increase over levels 

used in the past. The volumes that we are finalizing today are shown below.

Table II-1

Final Volume Requirements (billion gallons)

2014 2015 2016

Advanced biofuel 2.67 2.88 3.80

Total renewable fuel 16.28 16.93 18.10

A. Fulfilling Congressional Intent to Increase Use of Renewable Fuels 

Although there is scant legislative history for the Energy Independence and Security Act 

(EISA) to confirm the facts that were considered by Congress at the time of enactment, we 

believe that when Congress specified the renewable fuel volume targets that the RFS program 

was to attain, that it likely was with the understanding that the growth reflected in the statutory 

tables of applicable volumes would be well beyond any previously demonstrated ability of the 

industry to produce, distribute, and consume renewable fuels. For example, the annual average 

growth reflected in the statutory volumes for the time period between 2009 and 2022 is 1.6 

billion gallons per year for advanced biofuel and 1.9 billion gallons per year for total renewable 

fuel. However, in the period 2001 to 2007 leading up to enactment of EISA, annual average 

supply growth rates were far lower: 0.8 billion gallons per year for ethanol (what has to date 

been the principal non-advanced renewable fuel under the RFS program), and 0.07 billion 

Deleted: -

Commented [A19]: Suggest writing out all years covered.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 30 of 189

gallons per year for biodiesel (the principal advanced biofuel to date under the RFS program).20 

The supply of other renewable fuels during this timeframe was close to zero. In other words, 

Congress set targets that envisioned growth at a pace that far exceeded historical growth and 

prioritized that post-2013 growth as occurring principally in advanced biofuels (contrary to 

historical growth patterns). It is apparent, therefore, that Congress intended changes in the extent 

and pace of growth of renewable fuel use that would be unlikely to occur absent the new 

program. 

Moreover, it is highly unlikely that Congress expected the very high volumes that it 

specified in the statute to be reached only through the consumption of E10; indeed the statute 

does not explicitly require the use of ethanol at all. At the time EISA was passed in 2007, EIA's 

Annual Energy Outlook for 2007 (AEO2007) projected that 17.3 billion gallons of ethanol was 

the maximum that could be consumed in 2022 if all gasoline contained E10 and there was no E0, 

E15, or E85.21 EISA also significantly raised fuel economy standards, a change not reflected in 

AEO2007 that would reduce future fuel consumption. However, 17.3 billion gallons is far less 

than the 36 billion gallons of renewable fuel that Congress targeted for use in 202222. Thus, if 

the statutory targets for 2022 were to be achieved, 18.7 billion gallons of renewable fuel would 

need to be consumed in 2022 either as higher level ethanol blends (E11 - E85), or as non-ethanol 

fuels. Such levels were far beyond the industry's abilities at the time of EISA’s enactment, 

strongly suggesting that Congress expected the RFS program to drive substantial industry 

changes in a relatively short period of time.

Some commenters stated that EPA would be acting in a manner inconsistent with 

Congressional intent to increase renewable fuel use if we finalized volumes below the statutory 

volume targets. These commenters believed Congress set these targets at a level that would help 

incentivize investments such as building out new and existing capacity, installing 

storage/distribution infrastructure and advancing technology -- all of which would help to 

increase volumes and achieve the targets within the specified timeframe in the statute. We agree 

that Congress set ambitious volume targets as a mechanism to push renewable fuel volume 

growth under the RFS program. However, Congress also provided EPA with waiver authority, 

in part to address the situation where supply of renewable fuel does not match these ambitious 

target levels. As a result we disagree with commenters who asserted that any EPA action to 

lower applicable volumes is not aligned with Congressional intent. The final volume 

requirements are set consistent with the Congressionally-established waiver authorities. The 

volumes required by this rule are ambitious and to attain them will require new investments and 

a responsive market. 

 

20 Based on data from the Energy Information Administration.

21 Assumes that AEO2007's 2022 demand for gasoline energy was fulfilled entirely by E10. AEO2007 however, 

projected that considerably less gasoline used in 2022 would be E10. We have converted the projected 2022 

gasoline energy demand into an equivalent volume of E10 to determine the maximum volume of ethanol that could 

have been consumed in 2022, based on the AEO2007, if all gasoline was E10.

22 Congress specified that a minimum of 1 billion gallons of the 2022 total would be biomass-based diesel, but did 

not otherwise specify what specific fuel types would comprise the total. For example, although Congress envisioned 

substantial growth in cellulosic biofuels, that fuel category is defined by reference to the feedstock used and the 

GHG reductions obtained; finished cellulosic biofuels could include such diverse products as ethanol, renewable 

gasoline, naphtha, compressed natural gas, or electricity, 

Commented [A20]: Recommend adding to highlight that 

the growth was intended to prioritize advanced biofuels in 

later years of the program

Commented [A21]: The commenter requests a change to 

the text on page 29 regarding AEO2007 to note that it did 

not reflect the fuel economy standards that were also enacted 

in EISA. The desired change is consistent with past agreed 

language and also strengthens the point that EPA is making.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 31 of 189

Congress did not explicitly indicate, in EISA or in any other document associated with 

the legislation, the sort of changes that may have been expected to occur to reach 36 billion 

gallons by 2022. Today we know that the changes needed to significantly expand renewable fuel 

use fall into a number of areas, including:

• Increased use of E15 in model year 2001 and later vehicles,

• Increased use of E85 or other higher level ethanol blends in flex-fuel vehicles 

(FFVs),

• Increased production and/or importation of non-ethanol biofuels (e.g., biodiesel, 

renewable diesel, renewable gasoline, and butanol) for use in conventional 

vehicles and engines,

• Increased use of biogas in CNG vehicles,

• Increased use of renewable jet fuel and heating oil,

• Increased use of cellulosic and other non-food based feedstocks, and

• Co-development of new technology vehicles and engines optimized for new fuels.

Some commenters stated that the changes in these areas (which were also noted in the NPRM) 

cannot help to achieve growth in renewable fuel use within the timeframe necessary to help meet 

the 2015 and 2016 volumes requirements. Commenters further stated that some of these ideas 

should not be supported at all, such as increasing imports of biofuels because doing so would be 

inconsistent with Congressional intent to increase energy security through domestic biofuels. We 

agree with commenters that we will not see dramatic changes in every area we highlighted in the 

timeframe necessary to increase renewable fuel supply by 2016, but we believe that 

developments in some of these areas have been and will continue to occur, and that such changes 

will contribute to attaining the volumes finalized in this rule. We disagree with commenters that 

supporting imports of biofuels is inconsistent with Congressional intent. The statute does not 

discriminate between domestically-produced and imported biofuels and an increased diversity of 

fuels, including those imported from a variety of countries, helps improve energy security while 

also reducing GHGs in the transportation sector. For further discussion of imports, see Sections 

II.E.3.iii and II.F.

In the near term we expect that increases in E85 and biodiesel will dominate efforts to 

increase the use of renewable fuel, with smaller roles played by other renewable fuels (e.g., 

increased E15 use and other non-ethanol renewable fuels such as naphtha). In the longer term, 

sustained ambitious volume requirements are necessary to provide the certainty of a guaranteed 

future market that is needed by investors; the development of new technology won't occur unless 

there is clear profit potential, and it requires multiple years to build new production, distribution, 

and consumption capacity. We believe that the approach we take to setting the standards must 

be consistent with Congress' clear goal of ambitiously increasing the use of renewable fuel over 

time. To this end, the approach presented in this action makes use of the statutory waiver 

authorities only in a limited way; for example reductions in total renewable fuel are limited to 

those needed to result in volumes that are reasonably achievable.

We believe that over time use of both higher level ethanol blends and non-ethanol 

biofuels can and will increase, consistent with Congress’ intent in enacting EPAct and EISA. As 

stated above, while Congress provided waiver authority to account for supply and other 

Commented [A22]: Is there any reason why EPA did not 

include a reference to GHG emissions associated with

imported biofuel (e.g. due to slightly lower GHG reductions 

due to transporting the fuel compared to domestically 

produced fuel). If appropriate, recommend strengthening

this argument by including GHG reductions achieved 

through imported biofuels in addition to the energy security 

benefits. 

Commented [A23]: Recommend defining this term or 

rephrasing.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 32 of 189

challenges, we do not believe that Congress intended that the E10 blendwall or any other 

particular limitation would present a barrier to the expansion of renewable fuels. The fact that 

Congress set volume targets reflecting increasing and substantial amounts of renewable fuel use 

clearly signals that it intended the RFS program to create incentives to increase renewable fuel 

supplies and overcome supply limitations. Notwithstanding these facts, Congress also 

authorized EPA to adjust statutory volumes as necessary to reflect situations where only partial 

progress had been made towards eliminating supply limitations, as well as to address situations 

involving unexpected severe economic or environmental harm resulting from program 

implementation. 

B. Statutory Authorities for Reducing Volume Targets

Congress specified increasing annual volume targets in the statute for total renewable 

fuel, advanced biofuel, and cellulosic biofuel for every year through 2022, and for biomass-based 

diesel (BBD) through 2012, and authorized EPA to set volume requirements for subsequent 

years after consideration of several specified factors. However, Congress recognized that 

circumstances could arise that might require a reduction in the volume targets specified in the 

statute as evidenced by the waiver provisions in CAA 211(o)(7). As described below, we 

believe that limitations in production and importation of cellulosic biofuels provide EPA with 

authority to waive volumes of cellulosic biofuel, total renewable fuel, and advanced biofuel 

volumes pursuant to 211(o)(7)(D). In addition, limitations in the production and importation of 

qualifying renewable fuels, along with factors that limit supplying those fuels to the vehicles that 

can consume them constitute circumstances that warrant a waiver of the total renewable fuel 

requirement under section 211(o)(7)(A). 

With regard to ethanol, a number of market factors combine to place significant 

restrictions on the volume of ethanol that can be supplied to vehicles at the present time. These 

factors include a decrease in total gasoline consumption in recent years that has resulted in a 

corresponding and proportional decrease in the maximum amount of ethanol that can be 

consumed if all gasoline was E10, the limited number and geographic distribution of retail 

stations that offer higher ethanol blends such as E15 and E85, and the number of FFVs that have 

access to E85. Additionally, available information indicates that biodiesel use was constrained 

in 2013, and likely continues to be so. Constraints on the availability of biodiesel to U.S. 

consumers could include competing uses for feedstocks, international competition for biodiesel, 

the inconsistent nature of the biodiesel subsidy, limited investments to ensure quantity and 

quality of biodiesel product, limited infrastructure to distribute and blend biodiesel, and the 

limited ability of the market to consume biodiesel. Based on our assessment of the maximum 

amount of renewable fuel that can be supplied in 2014, 2015 and 2016 in light of these 

constraints, we believe that circumstances exist that warrant a reduction in the statutory 

applicable volumes of total renewable fuel for 2014, 2015 and 2016.

EPA is separately using two complementary legal authorities to set required volumes of 

advanced biofuel and total renewable fuel at levels below the volume targets provided in the 

statute: the cellulosic waiver authority under CAA section 211(o)(7)(D)(i), and the general 

waiver authority under CAA section 211(o)(7)(A). This section discusses both of these statutory 

Commented [A24]: Recommend clarifying that although 

gasoline consumption has declined over the last few years, 

EIA’s projections cited in the rule project gasoline 

consumption to increase in 2015 compared to 2014 and 

increase slightly in 2016 compared to 2015.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 33 of 189

authorities and briefly describes how we have used them to determine appropriate reductions in 

advanced biofuel and total renewable fuel in comparison to the statutory volumes. 

1. Cellulosic Waiver Authority

Under CAA section 211(o)(7)(D)(i), if EPA determines that the projected volume of 

cellulosic biofuel production for the following year is less than the applicable volume provided 

in the statute, then EPA must reduce the applicable volume of cellulosic biofuel to the projected 

volume available during that calendar year. We refer to this provision as the agency’s “cellulosic 

wavier authority” under the statute. 

Section 211(o)(7)(D)(i) also provides that “[f]or any calendar year in which the 

Administrator makes such a reduction, the Administrator may also reduce the applicable volume 

of renewable fuel and advanced biofuels requirement established under paragraph (2)(B) by the 

same or a lesser volume.” Using this authority, the reductions in total renewable fuel and 

advanced biofuel can be less than or equal to, but no more than, the amount of reduction in the 

cellulosic biofuel volume. In prior actions EPA has interpreted this provision as authorizing 

EPA to reduce both total renewable fuel and advanced biofuel, by the same amount, if EPA 

reduces the volume of cellulosic biofuel.23 

The cellulosic waiver provision was discussed by the United States Court of Appeals for 

the District of Columbia Circuit, in the context of its review of EPA’s 2013 annual RFS rule. As 

the Court explained, 

[T]he Clean Air Act provides that if EPA reduces the cellulosic biofuel 

requirement, as it did here, then it “may also reduce” the advanced biofuel and 

total renewable fuel quotas “by the same or a lesser volume.” 42 U.S.C. 

7545(o)(7)(D)(i). There is no requirement to reduce these latter quotas, nor does 

the statute prescribe any factors that EPA must consider in making its decision. 

See id. In the absence of any express or implied statutory directive to consider 

particular factors, EPA reasonably concluded that it enjoys broad discretion 

regarding whether and in what circumstances to reduce the advanced biofuel and 

total renewable fuel volumes under the cellulosic biofuel waiver provision. 

Monroe v. EPA, 750 F.3d 909, 915 (DC Cir. 2014). 

 

23

 See 74 FR 24914-15, and 78 FR 49794, August 15, 2013. As EPA explained, the basis for its interpretation that 

the volume reductions should be the same for both advanced biofuel and total renewable fuel when exercising the 

cellulosic waiver authority was concern that in light of the GHG reduction objectives of the statute and clear 

Congressional intent to promote the development and use of advanced biofuels, that it would be inappropriate to 

reduce the applicable volume of total renewable fuel by a lesser amount than the applicable volume of advanced 

biofuels. In this action, EPA is using a combination of waiver authorities to reduce the total renewable fuel volume 

target by a greater amount than the advanced biofuel volume target. EPA believes that in such circumstances a 

differential reduction in volume reductions using the cellulosic waiver authority may be appropriate; however, in 

light of its exercise of the general waiver authority to provide greater reductions in the total renewable fuel, 

applicable volume, a differential reductions using the cellulosic waiver authority is not necessary. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 34 of 189

For the 2013 RFS rule, the Court determined that EPA had reasonably declined to use the 

cellulosic waiver authority to reduce the advanced and total renewable fuel statutory 

applicable volumes by analyzing “the availability of renewable fuels that would qualify 

as advanced biofuel and renewable fuel, the ability of those fuels to be consumed, and 

carryover RINs from 2012.” Id. at 916. 

Some stakeholders commented that EPA may only exercise the cellulosic waiver 

authority to reduce total and advanced volumes in circumstances described in Section 

211(o)(7)(A) (that is, where there is inadequate domestic supply or severe harm to the 

environment or economy), or that it must in considering use of the cellulosic waiver authority 

consider the factors specified in Section 211(o)(2)(B)(ii) that are required considerations when 

EPA sets applicable volumes for years in which the statute does not do so. Contrary to these 

comments, the D.C. Circuit found in Monroe that the statute does not prescribe any factors that 

EPA must consider in making its decision; EPA has broad discretion under Section 

211(o)(7)(D)(i) to determine when and under what circumstances to reduce the advanced and 

total renewable fuel volumes when it reduces the statutory applicable volume of cellulosic 

biofuel. 

In general, we do not believe that it would be consistent with the energy security and 

greenhouse gas reduction goals of the statute to reduce the applicable volumes of renewable fuel 

set forth in the statute absent a substantial justification for doing so. When using the cellulosic 

waiver authority, we believe that there would be a substantial justification in circumstances 

where qualifying renewable fuels are not available to meet the statutory targets. The cellulosic 

waiver authority is also appropriately used to provide adequate lead time and ramp-up period for 

non-cellulosic biofuels to fill the gap presented by a shortfall in cellulosic biofuels. As discussed 

in Section IV, we are reducing the applicable volume of cellulosic biofuel for 2014, 2015, and 

2016, and thus are authorized to reduce the required volumes of advanced biofuel and total 

biofuel by the same amount under the provisions of section 211(o)(7)(D)(i).24 For this 

rulemaking, we have identified the availability of other advanced biofuel to satisfy some of the 

cellulosic biofuel volume shortfall and have noted the constraints that limit the use of these other 

advanced biofuels to completely fill the cellulosic volume shortfall. In exercising our cellulosic 

waiver authority, we are setting the advanced biofuel volume to level that is reasonably 

attainable.25

We are also using this authority to reduce total renewable volumes by the same amount. 

However, this level of reduction is insufficient to address all of the supply limitations associated 

with total renewable fuel. Therefore, we are also using the general waiver authority as 

 

24 EPA had proposed to use both the cellulosic waiver authority and the general waiver authority as a basis for 

reducing the advanced biofuel applicable volume. However, such an approach is unnecessary given that the 

reductions in advanced biofuel volumes in 2014, 2015 and 2016 are less than the reductions in cellulosic biofuel 

applicable volumes in those years. Thus, for the final rule, EPA is relying only on the cellulosic waiver authority in 

211(o)(7)(D) as a basis for its reductions in the advanced biofuel applicable volumes. 

25 We have considered the possible role of carryover RINs in avoiding the need to reduce the statutory applicable 

volumes, as we did in setting the 2013 RFS standards. However, we have determined that the current volume of the 

carryover RIN bank is needed to ensure flexibility to address unforeseen circumstances, and so should not be used as 

a basis for setting volume requirements higher than can be achieved through renewable fuel production and use. For 

further discussion of our assessment of the use of carryover RINs, see Section II.H.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 35 of 189

justification for further reductions in total renewable fuel volumes, as discussed in the next 

section. 26 

Some commenters argued that to the extent volume reductions are needed at all, EPA 

could rely solely on the cellulosic waiver authority to provide such reductions.27 These 

commenters suggested that a reduction of the total renewable fuel and advanced biofuel volumes 

by the full amount of the waiver of cellulosic biofuel targets would result in volumes that are 

“reasonably achievable,” and that consequently reductions under the general waiver authority 

would be unnecessary. However, commenters’ interpretation of a “reasonably achievable” 

volume assumed that a large number of carryover RINs would be used, and largely ignored the 

practical and legal constraints on the consumption of renewable fuel. As discussed in Section 

II.E, we have determined that we should not set standards for the 2014-2016 time period so as to 

intentionally draw down the current bank of carryover RINs. We also present a detailed 

discussion of the constraints on renewable fuel supply in this and subsequent sections. 

Additionally, we believe that a reduction of the advanced biofuel volume by the full amount of 

the waiver of cellulosic biofuels is not necessary; higher advanced volumes can be attained by 

substituting other advanced biofuels for the shortfall in cellulosic biofuel, and moreover 

requiring their use at higher levels furthers the GHG reduction objectives of the Act. What 

commenters suggested would result in increased volumes of conventional renewable fuel, and 

decreased volumes of advanced fuels as compared to the levels EPA is finalizing today. Given 

the superior GHG performance of advanced biofuels, and the important role of the current 

volume of carryover RINs to RFS program operation, EPA does not believe that the 

commenters’ suggested approach would be either an appropriate exercise of its waiver 

authorities or be in the best interest of the RFS program. 

2. General Waiver Authority

CAA 211(o)(7)(A) provides that EPA, in consultation with the Secretary of Agriculture 

(USDA) and the Secretary of Energy (DOE), may waive the applicable volume specified in the 

Act in whole or in part based on a petition by one or more States, by any person subject to the 

requirements of the Act, or by the EPA Administrator on her own motion. Such a waiver must 

be based on a determination by the Administrator, after public notice and opportunity for 

comment, that: 

• Implementation of the requirement would severely harm the economy or the 

environment of a State, a region, or the United States; or 

• There is an inadequate domestic supply.

In today’s final action, we are using the general waiver authority based on the statute's 

authorization for the Administrator to act on her own motion on a finding of inadequate domestic 

 

26 The volume reduction for advanced biofuels is not larger than the final reduction in the applicable volume of 

cellulosic biofuel, thus, EPA could rely on only the cellulosic waiver authority for its final action with respect to 

advanced biofuel. 

27 See, e.g., Comments from Growth Energy, RFA, POET, Novozymes, The Andersons, ACORE 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 36 of 189

supply.28 As required by statute, we have consulted with both USDA and DOE in taking this 

action. We are using this authority as the sole authority for an additional increment of volume 

reduction for total renewable fuel. 

Because the general waiver provision provides EPA the discretion to waive the volume 

requirements of the Act "in whole or in part," we interpret this section as granting EPA authority 

to waive any or all of the four applicable volume requirements in appropriate circumstances. 

Thus, for example, unlike the cellulosic waiver authority, a reduction in total renewable fuel 

pursuant to the general waiver authority is not limited to the reduction in cellulosic biofuel. 

EPA has had only limited opportunity to date to interpret and apply the waiver provision 

in CAA section 211(o)(7)(A)(ii) related to "inadequate domestic supply," and has never before 

done so in the context of deriving an appropriate annual RFS standard. 29 As explained in greater 

detail below, we believe that this ambiguous provision is reasonably and best interpreted to 

encompass the full range of constraints that could result in an inadequate supply of renewable 

fuel to the ultimate consumers, including fuel infrastructure and other constraints. This would 

include, for instance, factors affecting the ability to produce or import qualifying renewable fuels 

as well as factors affecting the ability to distribute, blend, dispense, and consume those 

renewable fuels in vehicles. 

The waiver provision at CAA 211(o)(7)(A)(ii) is ambiguous in several respects. First, it 

does not specify what the general term "supply" refers to. The common understanding of this

term is an amount of a resource or product that is available for use by the person or place at 

issue.30 Hence the evaluation of the supply of renewable transportation fuel, a product, is best 

understood in terms of the person or place using the product. In the RFS program, various 

parties interact across several industries to make renewable transportation fuel available for use 

by the ultimate consumers as transportation fuel. Supplying renewable fuel to obligated parties 

and terminal blenders is one part of this process, while supplying renewable fuel to the ultimate 

consumer as part of their transportation fuel is a different and later aspect of this process. For 

example, the renewable fuels ethanol and biodiesel are typically supplied to obligated parties or 

 

28 We note that there are also pending requests pursuant to CAA 211(o)(7(A) from a number of parties for EPA to 

exercise its waiver authorities to reduce applicable volumes for 2014. While the Administrator is acting on her own 

motion, she also resolves those petitions through and/or consistent with the final rule establishing 2014 volume 

requirements. 

29 Several commenters referred to EPA’s 2010 RFS2 rule where we stated that “... it is ultimately the availability of 

qualifying renewable fuel, as determined in part by the number of RINs in the marketplace, that will determine the 

extent to which EPA should issue a waiver of RFS requirements on the basis of inadequate domestic supply,” as in 

contrast to our interpretation in this rule. We disagree that our approach today is inconsistent with this prior 

statement. As noted in the quotation, as well as in our final rule establishing the 2013 RFS standards, carryover 

RINs are an important consideration in determining whether a waiver is appropriate. Our position on this has not 

changed. In today’s rule, however, we have assessed the size of the bank of carryover RINs and other factors 

described in Section II.H., and have determined that in this instance, the availability of the current RIN bank does 

not support setting the annual RFS volume requirement at a level higher than the supply of renewable fuels and 

associated RINs that can be produced during the compliance years in question. 

30

 For example, see http://oxforddictionaries.com/us/definition/american_english/supply (a stock of a resource from 

which a person or place can be provided with the necessary amount of that resource: "There were fears that the 

drought would limit the exhibition’s water supply.”); 

http://www.macmillandictionary.com/us/dictionary/american/supply (“A limited oil supply has made gas prices 

rise.” and “Aquarium fish need a constant supply of oxygen.”). 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 37 of 189

blenders as a neat fuel, but in almost all cases are supplied to the consumer as a blend with 

conventional fuel (ethanol blended in gasoline or biodiesel blended in diesel). The waiver 

provision does not specify what product is at issue (for example, neat renewable fuel or 

renewable fuel that is blended with transportation fuel) or the person or place at issue (for 

example, obligated party, blender or ultimate consumer), in determining whether there is an 

"inadequate domestic supply."

We believe that our interpretation is consistent with the language of section 211(o), and 

Congressional intent in enacting the program. It is evident from section 211(o) that Congress’s 

intent was not simply to increase production of renewable fuel, but rather to provide that certain 

volumes of renewable fuel be used by the ultimate consumer as a replacement for the use of 

fossil-based transportation fuel in the United States. The very definition of “renewable fuel” 

requires that the fuel be “used to replace or reduce the quantity of fossil fuel present in a 

transportation fuel.” CAA section 211(o)(1)(I); see also CAA 211(o)(1)(A) (definition of 

“additional renewable fuel”). The RFS program does not achieve the desired benefits of the 

program unless renewable fuels are actually used to replace fossil-based transportation fuels in 

the United States.31 For example, the greenhouse gas reductions and energy security benefits 

that Congress sought to promote through this program are realized only through the use by 

consumers of renewable fuels that reduce or replace fossil fuels present in transportation fuel in 

the United States. Imposing RFS volume requirements on obligated parties without 

consideration of the ability of the obligated parties and other parties to deliver the renewable fuel 

to the ultimate consumers would achieve no such benefits and would fail to account for the 

complexities of the fuel system that delivers transportation fuel to consumers. We do not believe 

it would be appropriate to interpret the RFS general waiver provision in such a narrow way and 

limit EPA's consideration of the distribution and use of renewable fuels by the ultimate 

consumers of these fuels. We are thus interpreting “inadequate domestic supply” in light of the 

definition of “renewable fuel” that requires that the fuel be “used to replace or reduce the 

quantity of fossil fuel present in a transportation fuel” in the United States. 

The waiver provision also does not specify what factors are relevant in determining the 

adequacy of the supply. Adequacy of the supply would logically be understood in terms of the 

parties who use the supply of renewable transportation fuel. Adequacy of supply could affect 

various parties, including obligated parties, blenders, and consumers. Adequacy of supply with 

respect to the consumer might well involve consideration of factors different from those involved 

when considering adequacy of supply to the obligated parties. We believe that interpreting this 

waiver provision as authorizing EPA to consider the adequacy of supply of renewable 

transportation fuel to all of the relevant parties, including the adequacy of supply to the ultimate 

consumer of renewable fuel blended into transportation fuel, is consistent with the common 

understanding of the terms used in this waiver provision, especially in the context of a fuel 

program that is aimed at increasing the use of renewable transportation fuel by consumers. In 

 

31 For this reason, EPA’s implementing regulations require that fuels with multiple possible end uses, such as biogas 

or electricity, are not considered to be renewable fuels absent a demonstration that they will be used by the ultimate 

consumers as transportation fuel. For instance, see 40 CFR 80.1426(f)(10)(i)(C) and (f)(10)(ii)(C). Similarly, our 

regulations require the retirement of RINs representing renewable fuel that is exported as they are not supplied as 

transportation fuel in the U.S.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 38 of 189

our view, this is the most reasonable and appropriate construction of this ambiguous language in 

light of the overall policy goals of the RFS program.

EPA has reviewed other fuel related provisions of the Clean Air Act with somewhat 

similar waiver authorities, and they highlight both the ambiguity of the RFS general waiver 

authority and the reasonableness of applying it broadly to include adequacy of supply to the 

ultimate consumer of transportation fuel. For example, CAA section 211(k)(6) provides EPA 

with authority for EPA to defer the application of reformulated gasoline (RFG) in states seeking 

to opt-in to the program. There are two categories of states that may opt-in: those with 

nonattainment classifications indicating a more serious and/or longstanding air quality problem 

(leading to classification as a Marginal, Moderate, Serious or Severe nonattainment area) and 

those that do not have such serious concerns, but which are nevertheless within the “ozone 

transport region” established by CAA section 184(a). For the states with more serious problems 

that seek to opt-in to the RFS program, section 211(k)(6)(A)(ii) allows EPA to defer application 

of RFG requirements if EPA determines that "there is insufficient domestic capacity to produce

reformulated gasoline." (Emphasis added.) However, for states with less serious ozone 

nonattainment concerns that are part of the ozone transport region, EPA may defer application of 

RFG requirements if EPA finds that there is "insufficient capacity to supply reformulated 

gasoline." (Emphasis added.) We believe Congress likely intended the “capacity to supply” 

RFG as being broader in scope than the “capacity to produce” RFG. This is consistent with the 

common understanding of the word “supply” noted above as the amount of a resource or product 

that is available for use by the person or place at issue. Thus, while a source can have a 

“capacity to produce,” regardless of whether it has a market for its product, the concept of 

“supply” does not occur in isolation, but in reference to the person intending to make use of the 

product. The term “capacity to supply” would therefore be expected to include consideration of 

the infrastructure needed to deliver RFG to vehicles in the state within the ozone transport region 

that is seeking to opt in to the program. This distinction in the context of CAA section 211(k)(6) 

is logical, since Congress can be expected to have put a higher premium on use of RFG in states 

with the more serious ozone nonattainment issues, thereby constraining EPA discretion to defer 

RFG requirements to the limited situation where there is “insufficient capacity to produce” RFG. 

For states with less serious problems, it would be logical for Congress to have provided EPA 

with somewhat more latitude to defer application of RFG, and Congress referred to this broader 

set of circumstances as situations where there is an “insufficient capacity to supply” RFG. The 

language of the RFS general waiver provision, in comparison, involves use of a single 

ambiguous phrase, "inadequate domestic supply," without elaboration or clarification as to 

whether it refers solely to production capacity or also includes additional factors relevant to the 

ability to supply the renewable transportation fuel to various persons such as the ultimate 

consumer. As in the RFG provision, however, the adequacy of supply referred to in the RFS 

general waiver provision can logically - and we believe should - be read to include factors 

beyond capacity to produce that impact the ability of consumers to use the fuel as a 

transportation fuel.32 This would be consistent with Congress’s apparent intent in using the term 

“supply” in the context of the RFG provision.

 

32 The reasons why we believe the statute should be interpreted in this way can be illustrated by examining the 

differences between the RFG opt-in situation and the RFS program. Limiting EPA’s consideration to “capacity to 

produce” in the context of deferring RFG implementation in a state with serious air quality concerns is not likely to 

cause implementation problems because: (1) infrastructure upgrades necessary to shift from use of conventional 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 39 of 189

CAA section 211(c)(4)(C)(ii) provides EPA with waiver authority to address "extreme 

and unusual fuel or fuel additive supply circumstances ... which prevent the distribution of an 

adequate supply of the fuel or fuel additive to consumers." The supply circumstances must be 

the result of a natural disaster, an Act of God, a pipeline or refinery equipment failure or another 

event that could not reasonably have been foreseen, and granting the waiver must be "in the 

public interest." In this case, Congress clearly specified that the adequacy of the supply is 

judged in terms of the availability of the fuel or fuel additive to the ultimate consumer, and 

includes consideration of the ability to distribute the required fuel or fuel additive to the ultimate 

consumer. The RFS waiver provision does not contain any such explicit clarification from 

Congress, thus its broad and ambiguous wording provides EPA the discretion to reasonably 

interpret the scope of the RFS waiver provision as relating to supply of renewable fuel (in neat or 

blended form) to the ultimate consumer. 

CAA section 211(m)(3)(C) allows EPA to delay the effective date of oxygenated gasoline 

requirements for certain carbon monoxide nonattainment areas if EPA finds "an inadequate 

domestic supply of, or distribution capacity for, oxygenated gasoline .... or fuel additives" needed 

to make oxygenated gasoline. Here, Congress chose to expressly differentiate between

"domestic supply" and "distribution capacity," indicating that each of these elements was to be 

considered separately. This would indicate that the term inadequate supply, although ambiguous 

for the reasons discussed above, could in appropriate circumstances be read as more limited in 

scope. In contrast to the RFS waiver provision, the section 211(m) waiver provision includes 

additional text that makes clear that EPA’s authority includes consideration of distribution 

capacity - reducing the ambiguity inherent in using just the general phrase "inadequate domestic 

supply." Presumably this avoids a situation where ambiguity would result in an overly narrow 

administrative interpretation. The oxygenated gasoline waiver provision is also instructive in 

that it clarifies that it applies separately to both finished oxygenated fuel and to oxygenated fuel 

blending components. That is, there could be an adequate supply of the oxygenate, such as 

ethanol, but not an adequate supply of the blended fuel which is sold to the consumer. The RFS 

waiver provision employs the phrase "inadequate domestic supply" without further specification

or clarification, thus providing EPA the discretion to determine whether the adequacy of the 

supply of renewable fuel can reasonably be judged in terms of availability for use by the ultimate 

consumer, including consideration of the capacity to distribute the product to the ultimate 

consumer. In contrast to the section 211(m) waiver provision, Congress arguably did not 

mandate that the RFS waiver provision be interpreted as providing authority to address problems 

 

gasoline to RFG are relatively modest, (2) the statute provides for up to one year between EPA’s receipt of an optin request and the effective date of a rule requiring use of RFG, allowing time for the needed infrastructure 

upgrades, and (3) opt-ins typically occur one state at a time, allowing available infrastructure expansion resources to 

be focused in a relatively small geographic area. In contrast allowing RFS waivers only where there is insufficient 

“capacity to produce” renewable fuel would be extremely problematic because: (1) the ethanol industry has the 

ability to produce far more ethanol than can currently be consumed in the U.S., (2) ethanol is already being supplied 

at E10 levels, and any further growth in ethanol use requires the time consuming installation of costly new E15 or 

E85 pumps and tanks, (3) the number of vehicles that can use higher ethanol bends is limited, (4) the statute 

envisions only one month between establishment of annual standards and the start of a compliance year, allowing 

limited time for infrastructure enhancements, and (5) the RFS is a nationwide program, and infrastructure 

improvements would be needed throughout the country at the same time to increase the nation’s ability to consume 

renewable fuels at levels corresponding with production capacity. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 40 of 189

affecting the supply of renewable fuel to the ultimate consumer. However, given the ambiguity 

of the RFS provision, we believe that it does provide EPA the discretion to adopt such an 

interpretation, resulting in a policy approach consistent with that required by the less ambiguous 

section 211(m) waiver provision.33

As the above review of various waiver provisions in Title II of the Clean Air Act makes 

clear, Congress has used the terms "supply" and "inadequate supply" in different waiver 

provisions. In the RFS general waiver provision, Congress spoke in general terms and did not 

address the scope of activities or persons or places that are the focus in determining the adequacy 

of supply. In other cases, Congress provided, to varying degrees, more explicit direction. 

Overall, the various waiver provisions lend support to the view that it is permissible, where 

Congress has used just the ambiguous phrase "inadequate domestic supply" in the general waiver 

provision, to consider supply in terms of distribution of renewable transportation fuel in the 

United States and use by the ultimate consumer, and that the term "inadequate supply" of a fuel 

need not be read as referring to just the capacity to produce renewable fuel or the capacity to 

supply it to obligated parties and blenders. 

We are aware, as a number of commenters pointed out, that prior to final adoption of the 

Energy Independence and Security Act of 2007, Congress had before it bills that would have 

provided for a waiver in situations where there was "inadequate domestic supply or distribution 

capacity to meet the requirement."34 EPA is not aware of any conference or committee reports, 

or other legislative history, explaining why Congress ultimately enacted the language in EISA in 

lieu of this alternative formulation. There is no discussion, for example, of whether Congress did 

or did not want EPA to consider distribution capacity, whether Congress believed the phrase 

"inadequate domestic supply" was sufficiently broad that a reference to distribution capacity 

would be unnecessary or superfluous, or whether Congress considered the alternative language 

as too limiting, since it might suggest that constraints other than “distribution capacity” on 

delivering renewable fuel to the ultimate consumer should not be considered for purposes of 

granting a waiver.35 Given the lack of interpretive value typically given to a failure to adopt a 

legislative provision, and the lack of explanation in this case, we find the legislative history to be 

uninformative with regard to Congressional intent on this issue. It does not change the fact that 

the text adopted by Congress, whether viewed by itself or in the context of other fuel waiver 

provisions, is ambiguous. 

We believe that it is permissible under the statute to interpret the term "inadequate 

domestic supply" to authorize EPA to consider the full range of constraints, including legal, fuel 

infrastructure and other constraints, that could result in an inadequate supply of renewable 

transportation fuels to consumers in the United States. Under this interpretation, we would not 

limit ourselves to consideration of the capacity to produce or import renewable fuels but would 

 

33

 In CAA section 211(h)(5)(C)(ii), Congress authorized EPA to delay the effective date of certain changes to the 

federal requirements for Reid vapor pressure in summertime gasoline, if the changes would result in an "insufficient 

supply of gasoline" in the affected area. As with the RFS general waiver provision, Congress did not specify what 

considerations would warrant a determination of insufficient supply. EPA has not been called upon to apply this 

provision to date and has not interpreted it. 

34 H.R. 6 and S. 606 as reported by Senate Envt. & Public Works in Senate Report 109-74

35 There are, for example, legal constraints on the amount of certain renewable fuels that may be blended into 

transportation fuels. These are discussed in Section II.E.1.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 41 of 189

also consider practical and legal constraints affecting the volume of qualifying renewable 

transportation fuel supplied to the ultimate consumer in the United States. 

As described in more detail in Section II.A.E below, although at least for 2014 and 

possibly 2015 and 2016, there is no shortage of ethanol and other types of renewable fuel that 

could be used to satisfy the statutory applicable volume of total renewable fuel, there are 

practical and legal constraints on the ability of ethanol to be delivered to and used as 

transportation fuel by vehicles in the United States. Legal requirements limit ethanol content of 

most gasoline to 10% (which is delivered as E10), but some subsets of vehicles allow up to either 

15% ethanol (for 2001 and newer light-duty vehicles) or up to 85% ethanol (for flex fuel 

vehicles).36 In addition there are marketplace and infrastructure constraints, including access to 

limited numbers of retail fuel pumps, that limit the use of higher level (>10%) ethanol blends. 

These considerations prevent the fuel market from supplying vehicles the volumes of ethanol 

needed to meet the statutory level of total renewable fuel, and as such they result in an 

inadequate domestic supply of renewable fuel that can actually be delivered to consumers and 

used as transportation fuel in the United States. We have evaluated this situation, and in this 

final rule are using the general waiver authority to address this inadequate domestic supply 

situation. 

A number of stakeholders disagreed that a review of other CAA waiver authorities 

supports the conclusion that the term “inadequate domestic supply” is ambiguous, and that it can 

be interpreted to include consideration of infrastructure and other constraints related to the 

delivery and use of renewable fuel by vehicles. They argued that inadequate domestic supply 

unambiguously refers to the production capacity of renewable fuels. Commenters also focused 

on section 211(m)(3)(C)(i), which provides for a waiver of the requirement to use oxygenated 

gasoline in certain carbon monoxide nonattainment areas where there is “an inadequate domestic 

supply of, or distribution capacity for, oxygenated gasoline.” They argued that this provision 

demonstrates that infrastructure considerations are distinct from supply, and that Congress would 

have used similar language in section 211(o)(7)(A) if it intended EPA to consider infrastructure 

and other constraints as a basis for an RFS waiver. These stakeholders asserted that there can be 

no inadequate domestic supply if there is sufficient qualifying renewable fuel produced and 

available for purchase by obligated parties and, consequently, that any difficulty that obligated 

parties may experience in delivering renewable fuels to consumers is irrelevant under CAA 

section 211(o)(7)(A). However, EPA believes that these stakeholders’ analysis has merit only 

when sections 211(m)(3)(C)(i) and 211(o)(7)(A) are viewed in isolation, and that their argument 

is not persuasive when all of the CAA provisions containing similar waiver provisions are 

considered. For example, as discussed above, in section 211(k)(6) Congress used the term 

“capacity to produce” in one RFG waiver context for opt-in states and “capacity to supply” in 

another context. This suggests that the term “supply” does not unambiguously mean the same 

thing as “produce,” as these commenters argue. The term “supply” can mean something 

different, and logically does in the context of section 211(k)(6) where the two waiver provisions 

at issue use these different terms and apply in different contexts, to states with considerably 

different levels of air quality concern. The different ways that the term “supply” is used in the 

various CAA provisions indicates that in section 211(o)(7)(A), where the term is used in 

 

36 See, e.g., EPA partial waiver decisions at 75 Fed. Reg. 68,094 (Nov. 4, 2010) and 76 Fed. Reg. 4662 (Jan. 26, 

2011).

Commented [A25]: Recommend quantifying the 

percentage of vehicles on the road that comprise the subset 

of vehicles that are 2001 or newer as well as FFVs
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 42 of 189

isolation, the word “supply” is ambiguous and may reasonably be interpreted consistent with the 

Act’s objectives. 

Some stakeholders have asserted that interpreting the general waiver authority to allow 

consideration of all constraints on the use of ethanol by the ultimate consumer would amount to 

focusing on “demand” rather than “supply” and would, therefore, be impermissible under the 

Act. EPA does not agree that a broad consideration of such factors as physical limitations in 

infrastructure (e.g., availability of E15 and E85 pumps), legal barriers to use of renewable fuel, 

or ability of vehicles to use renewable fuel at varying concentrations, represent consideration of 

“demand” rather than “supply.” These factors operate as practical and legal limits to how much 

renewable transportation fuel can be distributed to and used by consumers in the United States, 

and therefore clearly relate to how much renewable transportation fuel can be “supplied” to 

them. Although there may be some element of consumer preference (i.e., demand) reflected in 

the historic growth patterns of renewable fuel infrastructure and the current status of the 

infrastructure, it is nevertheless the case as of today that there are a limited number of fueling 

stations selling high-ethanol blends, and as a result, the number of stations operates as a 

constraint on how much ethanol can be delivered. Similarly, only flex fuel vehicles (FFVs) can 

legally use fuel with ethanol concentrations greater than 15 percent. The population of FFVs has 

grown considerably in recent years, but is still only a small fraction of the passenger vehicle fleet 

and there is an even smaller number of FFVs that have ready access to an E85 retail outlet. As a 

result, the number of FFVs with access to E85 also operates as a constraint on how much ethanol 

can be delivered. These constraints limit the supply of ethanol to vehicles in the 2014-2016 time 

period and, we believe, are appropriately considered in evaluating the need for an RFS waiver 

under section 211(o)(7)(A).

 Some stakeholders have stated that even if the term “inadequate domestic supply,” were 

ambiguous, EPA’s final interpretation is not reasonable because it would either reward obligated 

parties for their intransigence in planning to supply the volumes set forth in the statute, or 

because EPA’s interpretation would effectively enshrine the status quo, and would prevent the 

growth in renewable fuel use that Congress sought to achieve in establishing the program. We 

agree that obligated parties have had years to plan for the E10 blendwall and that there clearly 

are steps that obligated parties could take to increase investments needed to increase renewable 

fuel use above current levels, as we have noted in prior actions, and note in Section II.B.5.37 We 

also note, however, that biofuel producers were not precluded from taking appropriate measures, 

and biofuel producers have had and continue to have pathways to independently market E85 or

could refocus efforts on the production of non-ethanol renewable fuels. The regulatory structure 

created in the RFS1 program places the responsibility on producers and importers to ensure that 

transportation fuel sold or introduced into commerce contains the required volumes of renewable 

fuel, but does not require obligated parties to take specific actions other than acquiring RINs. 

EPA agrees that its approach to interpreting the term ‘inadequate domestic supply’ should be 

consistent with the objectives of the statute to grow renewable fuel use over time by placing 

appropriate pressure on all stakeholders to act within their spheres of influence to increase 

renewable fuel production and use, while also providing the relief to obligated parties that was 

intended through the statutory waiver authorities to address supply difficulties that cannot be 

 

37 See, for instance, 77 FR 70773 (November 27, 2012), column 1.

Commented [A26]: Suggest including the number of 

stations that provide E85. 

Commented [A27]: Recommend including a citation on 

the FFVs which have access to E85 retail outlets. 

Deleted: could also have taken 

Deleted: that nothing precludes 

Deleted: from independently

Deleted: marketing

Deleted: increasing

Commented [A28]: This is too broad of a statement. 

Recommend rewording as shown.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 43 of 189

remedied in the time period over which a waiver would apply. We believe that our final action 

appropriately reflects these concepts. 

3. Assessment of Past Versus Future Supply

EPA is taking somewhat different approaches for its assessment of renewable fuel supply 

for past time periods covered by this rule as compared to future time periods. For 2014 and most 

of 2015, our assessment of the “supply” available for RFS compliance must necessarily focus on 

the number of RINs actually generated that are available for compliance with the applicable 

standards because this final rule cannot influence the volumes of renewable fuel produced and 

consumed in the past. To set the volume requirements at a higher level would require either 

noncompliance, which EPA deems an unreasonable approach, or the drawdown of the bank of 

carryover RINs. Although the availability of carryover RINs is a relevant consideration in 

determining the extent to which a waiver is justified, see Monroe 750 F.3d at 917, we believe 

that the current bank of carryover RINs serves an important function under the program, 

including providing a means of compliance in the event of natural disasters and other unforeseen 

circumstances, and that in the present circumstances EPA should not set the annual standards at 

levels that would clearly necessitate a reduction in the current bank of carryover RINs. See 

Section II.H for further discussion of our consideration of carryover RINs in this final rule. 

For 2014, we have set the volume requirements for renewable fuel as equal to the number 

of RINs generated that are available for compliance. With respect to 2015, because this final 

rule is being signed at the end of November, it cannot influence renewable fuel use during prior 

months, and, given lead-time considerations cannot reasonably be expected to influence 

renewable fuel use in the remaining month of the year. Accordingly, we have assessed the 

supply of total renewable fuel in 2015 by determining the number of RINs generated and 

available for compliance in the part of 2015 for which data are available and projecting that 

renewable fuel will be used at the same rate for the remainder of the year. 38 

In the context of a forward-looking annual RFS standards rulemaking issued consistent 

with the statutory schedule, such as for 2016 in this rule, we believe that the evaluation of 

“supply” for purposes of determining the appropriate volume reduction under 211(o)(7)(A) 

should compare the statutory targets, and the ability of the market to both produce and consume 

renewable fuels, in the context of a market that is responsive to the standards that we set. In the 

context of this assessment, while we have examined the circumstances and issues related to 

individual sources of renewable fuel, our determination of the final volume requirements is based 

on an assessment of overall volumes that can be achieved given the interactions that occur 

between individual sources under the influence of the standards we set.

4. Combining Authorities for Reductions in Total Renewable Fuel

 

38 We projected that our NPRM would incentivize some growth in renewable fuel use during the latter half of 2015, 

and available data indicates that indeed the monthly average supply after the NPRM was released was about 5% 

higher than the monthly average supply in the first half of the year. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 44 of 189

EPA is reducing the applicable volumes of total renewable fuel for 2014, 2015 and 2016 

based on two separate authorities. We are making an initial reduction in total renewable fuel that 

represents the amount of advanced biofuel that is unavailable to backfill for the reduction in 

cellulosic biofuel under the cellulosic waiver authority.39 We also are reducing volumes based on 

a determination of inadequate domestic supply, including consideration of both the limitations in 

the availability of qualifying renewable fuels and factors that constrain supplying available 

volumes to the vehicles that can consume them. These considerations are relevant forms of 

inadequate domestic supply, which authorize reductions under the general waiver authority. We 

believe that reducing the applicable volumes of total renewable biofuel in these years is an 

appropriate response to these circumstances. We are using the cellulosic biofuel waiver 

authority to reduce the statutory volumes for total renewable fuel by an initial increment of 1.08 

billion gallons in 2014, 2.62 billion gallons in 2015 and 3.45 billion gallons in 2016. In addition, 

as the volume reduction required to address supply limitations for total renewable fuel is greater 

than can be achieved using the cellulosic waiver authority, we are using the general waiver 

authority exclusively as the basis for further reducing the applicable volume of total renewable 

fuel by an additional 0.79 billion gallons in 2014, 0.95 billion gallons in 2015 and 0.70 billion 

gallons in 2016. 

Table II.B.4-1

Final Total Volume Requirements (billion gallons)

2014 2015 2016

Statutory Applicable Volumes 18.15 20.5 22.25

Initial Use of Cellulosic Waiver 

Authorities 17.07 17.88 18.80

Use of General Waiver Authority 16.28 16.93 18.10

5. Inability to Reach Statutory Volumes

In order to use the general waiver authority in CAA 211(o)(7)(A) to reduce the applicable 

volumes of total renewable fuel, we must make a determination that there is either "inadequate 

domestic supply" or that implementation of the statutory volumes would severely harm the 

economy or environment of a State, a region or the United States. This section summarizes our 

determination that there is an inadequate domestic supply of total renewable fuel in the time 

period 2014-2016, and thus that the statutory volume targets are not achievable with volumes 

supplied in these three years. Additionally, this determination that the statutory volume targets 

are not achievable with volumes supplied also supports our use of the cellulosic waiver authority 

under CAA 211(o)(7)(D) to reduce the applicable volumes of advanced and total renewable fuel.

As described in Section II.C below, actual supply of renewable fuel in 2014, determined 

by an assessment of RINs generated minus RINs retired for non-compliance reasons such as 

 

39 Based in part on comments received, we have decided to use our cellulosic waiver authority only to make the 

initial reduction in the total renewable fuel volume, but note that this reduction could also be justified under the 

general waiver authority due to inadequate domestic supply.

Formatted: Left, Tab stops: 1.14", Left
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 45 of 189

exports of renewable fuel or spills, was below the applicable volume targets in the statute. For 

total renewable fuel, actual supply was 1.87 billion gallons below the applicable volume target of 

18.15 billion gallons, while for advanced biofuel, actual supply was 1.08 billion gallons below 

the applicable volume target of 3.75 billion gallons. As we noted in the NPRM, the requirements 

we establish at this time for 2014 cannot change what occurred in the past, and as a result our 

assessment of the “supply” available for RFS compliance during 2014 must necessarily focus on 

actual renewable fuel use. While many stakeholders agreed with this position, some did not. 

Those that disagreed generally pointed to the bank of carryover RINs as additional “supply” that 

could be used to increase the 2014 standards above actual wet gallon supply in 2014, or to the 

fact that renewable fuel volumes that were exported in 2014 would have been available for 

compliance purposes if EPA had set the 2014 standards by the statutory deadline of November 

30, 2013. As described in Section II.H, we do not believe it would be appropriate to 

intentionally reduce the bank of carryover RINs to increase the applicable 2014 volume 

requirements above the supply of wet gallons to consumers in 2014. Regarding exports of 

renewable fuels, many of those volumes were produced specifically for the purpose of export 

rather than being produced for general domestic distribution. Stakeholders who suggested that 

they would have been used for compliance purposes provided no evidence that they would have 

been available for compliance given export agreements and/or contracts. Furthermore, as 

discussed in Section II.E.1, legal and practical constraints on the domestic use of renewable fuel 

are operating in the 2014-2016 time period to limit renewable fuels that have been produced 

from actually being supplied to consumers. Finally, regardless of any possibility that they could 

have been used if EPA had acted by the statutory deadline to establish RFS requirements for 

2014, it is undisputed that RINs representing fuel exported in 2014 are not currently available for 

compliance, and it is the current circumstances that are relevant in determining what the 

applicable volume requirements for 2014 should be. Thus, we do not believe that these 

arguments warrant an increase in the applicable 2014 volume requirements above the volume of 

wet gallons actually supplied to consumers in 2014. In sum, we have determined that there was 

a 1.87 billion gallon shortfall in the supply of total renewable fuel in 2014, and that a waiver of 

the 2014 statutory target for total renewable fuel is therefore warranted pursuant to 211(o)(7)(A) 

on the basis of inadequate domestic supply. In addition, we believe the same set of facts support 

a waiver of the total renewable fuel applicable volume using the cellulosic waiver authority in 

211(o)(7)(D), and we are also asserting that waiver authority in support of 1.08 billion gallons of 

this volume reduction (which is equal to the reduction in the advanced biofuel volume using the 

cellulosic waiver authority, as described below). 

Because this final rulemaking is being released after most of 2015 has passed, the factual 

situation for 2015 is essentially the same as it is for 2014: the requirements we establish at this 

time for 2015 cannot change what occurred in the past, and in addition it is being issued too late 

to influence the fuels market in the remaining month of the year. Therefore, our assessment of 

the “supply” available for RFS compliance during 2015 is based on actual renewable fuel use for 

the months for which data are available, together with a projection for the remainder of the year. 

In sum, we have concluded that the statutory volumes for 2015 cannot be met with available 

supply, and that a waiver is justified.

The statute sets a target of 22.25 billion gallons of total renewable fuel in 2016. We have 

determined that this volume cannot be achieved under even the most optimistic assumptions 

Commented [A29]: Is the agency making a legal 

argument here?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 46 of 189

given current and near-future circumstances. To make this determination, we first assumed that 

every gallon of gasoline would contain 10% ethanol, and also assumed production and use of 

BBD volumes at the highest annual historical level, which occurred in 2014. When these 

supplies of renewable fuel are taken into account, a significant additional volume of renewable 

fuel would still be needed for the statutory volume targets to be met.

Table II.B.5-1

Additional Volumes Needed in 2016 to Meet Statutory Target for Total Renewable Fuel

(million ethanol-equivalent gallons)

Statutory target for total renewable fuel 22,250

Maximum ethanol consumption as E10a- 13,920

Historical maximum biomass-based diesel supplyb- 2,490

Additional volumes needed 5,840

a Derived from projected gasoline energy demand from EIA's Short-Term Energy Outlook (STEO) 

from September 2015

b Represents the 1.63 billion gallons of biodiesel and renewable diesel supplied in 2014

Based on the current and near-future capabilities of the industry, we expect that only a 

relatively small portion of the additional volumes needed would come from non-ethanol 

cellulosic biofuel, non-ethanol advanced biofuels other than BBD, and non-ethanol conventional 

renewable fuels; non-ethanol supply other than BBD was 237 million gallons in 2013, 165 

million gallons in 2014, and 323 million gallons in 2015. In total these sources could account for 

several hundred million gallons, as demonstrated by supply of these sources in previous years.40 

Aside from these relatively small sources, renewable fuel that could fulfill the need for 5.84 

billion gallons in 2016 would be ethanol or BBD. If it was BBD, it would be in addition to the 

1.63 billion gallons supplied in 2014. If it was ethanol, it would be consumed as higher ethanol 

blends such as E15 and E85.41 In either case, more than 80% of those additional ethanolequivalent volumes would need to be advanced biofuel in order to meet the statutory volume 

requirement for advanced biofuel.42 

If all of the additional volumes needed were biodiesel, the industry would need to supply 

a total of about 5.5 billion physical gallons in 2016. As described more fully in Section II.D, 

actual supply of biodiesel through the end of 2015 is expected to be about 1.73 billion gallons. 

While this final rule will be released before 2016, we nevertheless do not believe that the market 

could supply 5.5 billion gallons of biodiesel in 2016; as described more fully in Section II.E.3 

below, the constraints on biodiesel supply are such that 5.5 billion gallons is beyond reach. For 

instance, there currently exist only about 2.7 billion gallons of registered biodiesel production 

capacity in the U.S. In addition to expanding the registered production capacity, the industry 

would need to restart all idled facilities, secure sufficient feedstocks including diverting them 

from current uses, implement significantly expanded distribution, blending, and retail sales 

infrastructure, and establish new contracts for distribution and sales. 

 

40 Details of actual supply in 2013, 2014, and 2015 can be found in the docket.

41 Carryover RINs could also be used to satisfy some of the shortfall. However, as described in Section II.H, we 

have evaluated this possibility and determined that the current carryover RIN bank should not be intentionally drawn 

down in the context of standard setting in the 2014-2016 time period.

42 Assumes that all ethanol consumed as E10 in Table II.A.5-1 is conventional (non-advanced).
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 47 of 189

Just as importantly, biodiesel volumes on the order of 5.5 billion physical gallons in 2016 

are far in excess of what could actually be consumed in this short timeframe. This volume of 

BBD would constitute about 10% of the diesel pool in 2016.43 Although most medium and 

heavy-duty engine manufacturers warrant the use of blends up to B20 in their more recent 

models, some light-duty engine manufacturers do not, and many highway and nonroad diesel 

engines that were produced in the past but are still in use today are warranted for no more than 

5% biodiesel.44 Also, as pointed out by CountryMark Cooperative Holding Corporation, 

biodiesel concentrations in the winter months are sometimes kept to lower levels by engine 

owners due to cold weather operability and storage concerns, and some parties avoid selling 

biodiesel at all during winter months. Constraints on the use of biodiesel at concentrations above 

5% due to engine warranty limitations, plus resistance on the part of some parties to using 

biodiesel in winter months, means that a nationwide average of 10% biodiesel in the diesel pool, 

for an entire calendar year, is not reasonably achievable in 2016. We acknowledge that the 

National Biodiesel Board has extensive efforts underway working with the vehicle and engine 

manufacturers to continue to expand product offerings capable of operating on B20, working 

with their membership to improve fuel quality, expanding infrastructure to address cold 

temperature issues, and working with dealers and technicians to clear away obstacles standing in 

the way of expanding biodiesel acceptance in the marketplace.45 There are also efforts to 

increase the use of biodiesel in heating oil. These will continue to bear fruit, allowing the 

biodiesel volume to continue to rise over time, but not to the levels that would be needed in 2016 

if 5.5 billion gallons of biodiesel were to be required. 

Alternatively, if all of the additional volumes shown in Table II.B.5-1 were ethanol, the 

U.S. would need to consume volumes of E85 far higher, in our estimation, than the market is 

capable of supplying: in 2016 it would need to be about 8.8 billion gallons.46,47 These volumes 

are about 60 times higher than actual E85 consumption in 2014, and would require many of 

those FFVs that do not have an E85 retail outlet anywhere close by (due to the fact that only 2% 

of retail stations currently offer E85) to use it.48 While this is sufficient to conclude that the 

statutory target for total renewable fuel in 2016 cannot be achieved if all the additional volumes 

were ethanol, an additional constraint on supply arises from limits on production and import of 

ethanol. A majority of the additional ethanol would need to be advanced, and currently the only 

substantial source of advanced ethanol is imported sugarcane ethanol from Brazil which has 

recently increased its own ethanol use requirements.49 In order to meet the statutory volume 

 

43 Based on EIA's October 2015 Short-Term Energy Outlook (online interactive table), nationwide diesel 

consumption is projected to be 56.3 bill gal in 2015 and 57.7 bill gal in 2016.

44 While some stakeholders provided information on when certain manufacturers began permitting the use of 

biodiesel blends higher than B5 in their engines, stakeholders provided no data on which models or model years 

were affected, nor did any stakeholder provide an analysis of the fraction of the current in-use fleet whose warranties 

specifically permit the use of B5 versus higher blend levels. See further discussion of this issue in Section II.E.3.

45 "NBB Technical Update for EPA, April 30, 2015" in docket EPA-HQ-OAR-2015-0111. See also comments 

submitted by NBB in response to the June 10, 2015 NPRM.

46 In general when discussing efforts to increase the use of ethanol beyond the blendwall we focus on the volume of 

E85 that is consumed, since volumes of E15 are likely to be small by comparison. See additional discussion of this 

issue in Section II.E.2.iv below.

47 Due to relative ethanol content (74% versus 10%) and the fact that E85 displaces some E10, each gallon of 

ethanol above the E10 blendwall requires the use of 1.51 gallons of E85.

48 Further discussion of E85 can be found in Section II.E.2.v.

49 "Brazil Hikes Ethanol Blend in Gasoline to 27%," DownstreamBusiness.com, March 12, 2015.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 48 of 189

requirement for advanced biofuel, the U.S. would need to import at least 4.7 billion gallons in 

2016.50 Although UNICA has indicated in their comments that Brazil could supply as much as 2 

billion gallons of sugarcane ethanol to the U.S. in 2016, we note that this would be a very large 

increase over the highest recorded sugarcane ethanol imports of 680 million gallons in 2006. 

Moreover, even if 2 billion gallons could be supplied by Brazil, that volume would fall far short 

of the volume of advanced ethanol that would be needed to meet the statutory target for 

advanced biofuel in 2016 in the absence of BBD in excess of the 1.63 billion gallons supplied in 

2014. Further discussion of sugarcane ethanol can be found in Section II.F.

The additional volume of 5.8 billion gallons in 2016 could also be satisfied through 

production and use of a combination of BBD and E85. However, even in this case the volumes 

are untenable. For instance, one possible combination for 2016 would be 4.4 billion gallons of 

E85 and 3.6 billion gallons of biodiesel. While both of these volumes are considerably less than 

the maximums that would be required if the market supplied only one or the other, nevertheless 

both levels are beyond the reach of the market under current circumstances.51 Based on this 

assessment, we do not believe that the statutory volumes for advanced biofuel and total 

renewable fuel can be met in 2016. 

In response to the NPRM, some parties said that EPA had not sufficiently described why 

the statutory target for advanced biofuel cannot be reached in 2016. In the NPRM we did point 

out that more than 70% of the additional ethanol-equivalent volumes that would be needed to 

reach the statutory targets would need to be advanced biofuel, and discussed the impracticability 

of attaining those volumes; after a consideration of comments received, we have determined that 

for our final volume requirements for 2016, more than 80% would need to be advanced biofuel.52 

However, we agree that it is appropriate to elaborate on the limitations in the supply of advanced 

biofuel that have led us to conclude that the statutory target for advanced biofuel cannot be 

reached in 2016. A more detailed discussion of constraints on supply of advanced biofuel can be 

found in Section II.F.

The RINs available for meeting the advanced biofuel standard include all cellulosic 

biofuel RINs, all biomass-based diesel RINs, and all advanced biofuel RINs. Cellulosic biofuel 

that is expected to be available, including all biogas, is accounted for within the context of the 

determination of the cellulosic biofuel standard as discussed in Section IV. While there are some 

opportunities for moderate growth through the end of 2016 in such advanced biofuels as 

domestically-produced ethanol, heating oil, naphtha, and renewable diesel, it is possible that only 

about a hundred million gallons will be available from these sources.53 Thus the primary sources 

of advanced biofuel that are in a position to help meet the advanced biofuel standard are 

imported sugarcane ethanol and biomass-based diesel.

 

50 The balance of the additional volumes needed, as shown in Table II.B.5-1, would most likely be corn-ethanol.

51 See further discussion of E85 in Section II.E.2.v and further discussion of biodiesel in II.E.3.

52 Assumes that all ethanol consumed as E10 in Table II.B.5-1 is conventional (non-advanced).

53 The total ethanol-equivalent volume of advanced biofuel other than imported sugarcane ethanol was 87 in 2013, 

79 in 2014, and projected to be 53 in 2015. We expect some growth in the industries providing these fuels, such that 

supply is likely to be somewhat higher in 2016 than it was in the recent past. If the maximum historic production 

rate were doubled in 2016, this would amount to no more than a couple of hundred million gallons.

Commented [A30]: Typo in footnote 53. Also seems a bit 

contradictory to say only modest growth and then talk about 

doubling production rate in the same sentence. 

Deleted: ill gal
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 49 of 189

The statutory target for advanced biofuel in 2016 is 7.25 billion gallons. After 

accounting for cellulosic biofuel, the BBD volume requirement, and potential other advanced 

biofuels, the total volume of advanced biofuel that would be needed to meet the statutory target 

of 7.25 billion gallons is 4.07 billion gallons.

Table II.B.5-2

Additional Volumes Needed to Meet Statutory Targets for Advanced Biofuel in 2016

(million ethanol-equivalent gallons)

Statutory target for advanced biofuel 7,250

Requirement for cellulosic biofuel 230

Requirement for biomass-based diesel 2,850a

Potential other advanced 100

Additional volumes needed 4,070

a Represents 1.9 bill gal of biodiesel

We do not believe that 4.07 billion gallons of additional advanced biofuel can be supplied 

in 2016, even if the burden of meeting this requirement were shared between biomass-based 

diesel and imports of sugarcane ethanol. For instance, if sugarcane ethanol imports reached 1.5 

billion gallons in 2016, the total volume of BBD would need to be 3.6 billion gallons.54 We do 

not believe that either of these levels is achievable in 2016. Notwithstanding UNICA's 

comments to the contrary as discussed in Section II.F, imports of sugarcane ethanol have been 

highly variable in the past and appear to be highly dependent on factors others than the RFS 

program. Moreover, as explained in the NPRM, the highest volume of sugarcane ethanol that 

has ever been imported to the U.S. was 680 million gallons in 2006, and since that time 

international demand has increased substantially. Similarly, we do not believe that 3.6 billion 

gallons of BBD are possible in 2016. The total amount of domestic biodiesel production 

capacity in the U.S. that is registered under the RFS program is about 2.7 billion gallons.55 Not 

only would the market need to supply 900 million gallons more than existing registered capacity, 

but substantial feedstocks would need to be diverted from the current uses to the production of 

biodiesel. Even if some portion of the increase were supplied from imports, the total volume of 

biodiesel supplied to diesel engines would more than double in comparison to that supplied in 

2014, requiring that distribution, blending, storage, and dispensing routes would need to be 

expanded in an extremely short period. We do not believe that this is possible in 2016. As a 

result, we do not believe that the statutory target for advanced biofuel can be met in 2016.

In response to the NPRM, a number of stakeholders placed the blame for the market's 

inability to meet the statutory targets on both the EPA for not meeting the statutory deadlines for 

setting standards and obligated parties for not investing sufficiently in the required infrastructure. 

While we agree that the delay in setting standards has created some uncertainty and could have 

led to a slowdown in investment in both production capacity and infrastructure for blending and 

dispensing renewable transportation fuels, we do not believe that the statutory targets could have 

been met in 2014, 2015, and 2016 if only EPA had established the applicable standards on the 

statutory schedule. Stakeholders who took the position that the statutory targets were achievable 

 

54 (4.07 bill gal needed - 1.5 bill gal sugarcane ethanol)/1.5 = 1.71 bill gal biodiesel + 1.9 bill gal BBD requirement 

= 3.6 bill gal biodiesel needed. The 1.5 factor used in this equation represents the equivalence value of biodiesel.

55 See "Registered biodiesel production capacity as of 8-24-15" in EPA docket EPA-HQ-OAR-2015-0111.

Commented [A31]: Isn't there a third option? Entities can 

file a deficit for 2016 and still be in compliance assuming 

they weren't in a deficit situation for the same obligation in 

2015.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 50 of 189

in 2014 and 2015 generally based that position on the potential for a substantial draw-down in 

the bank of carryover RINs. As described in the NPRM and in Section II.H, we believe that it 

would be inappropriate to intentionally drawn down the current bank of carryover RINs in order 

to raise the applicable volume requirements above the levels that could be met with RINs 

generated for actual renewable fuel supplied in 2014, 2015, and 2016. Many of these same 

stakeholders also argued that the statutory targets could be met if the EPA merely set the 

standards at the statutory levels. They argued, in essence, that the market's ability to respond to 

the standards EPA sets is effectively unlimited and that the market will rise to meet the 

expectations placed upon it. As described in Section II.E.1, we believe that the market is in fact 

limited in its ability to respond to the standards that EPA sets for 2016. Setting the volume 

requirements at the statutory targets would not compel the market to respond with sufficient 

changes in production levels, infrastructure, and fuel pricing at retail to result in the statutory 

volumes actually being consumed in 2016, but would instead lead to noncompliance and/or 

additional petitions for a waiver of the standards. 

Many stakeholders also decried obligated parties' failure to invest in the infrastructure 

needed to permit expanded use of higher ethanol blends such as E15 and E85. They argued that 

EPA should not reward obligated parties for their recalcitrance by reducing the applicable 

volume requirements below the statutory targets. In taking these positions, stakeholders cited 

both the statutory requirement that obligations be placed on "refineries, blenders, and importers, 

as appropriate" and EPA's regulations which (with limited exceptions) further narrow the 

applicability of the obligations to producers and importers of gasoline and diesel. Suggestions in 

the NPRM that renewable fuel producers could contribute to efforts to expand infrastructure 

were generally met by these commenters with references to the statutory language and their 

belief that all responsibility for investing in expanded infrastructure rests on obligated parties. 

We agree that the statutory language, in combination with the regulatory structure, 

generally places the responsibility on producers and importers of gasoline and diesel to ensure 

that transportation fuel sold or introduced into commerce contains the required volumes of 

renewable fuel. Obligated parties have a variety of options available to them, both to increase 

volumes in the near term (i.e. through the period being addressed by this final rule) and the 

longer term. The standards that we are establishing today reflect both the responsibility placed 

on obligated parties as well as the short-term activities available to them, and we expect 

obligated parties to be taking actions now that will help to increase renewable fuel volumes in 

future years. However, this general responsibility does not require obligated parties to take 

actions specific to E15 and/or E85 infrastructure, as the RFS program does not require ethanol 

specifically. Moreover, we do not believe the statute should be interpreted to require that 

refiners and importers change the nature of their businesses so as to comply with RFS 

requirements, as this would be a far-reaching result that Congress can be expected to have clearly 

specified if it was intended. For example, to the extent that commenters imply that refiners 

should be required to build or purchase renewable fuel production facilities, take ownership of 

retail stations, produce or sell cars capable of using high-ethanol blends, or plant cropland to 

provide feedstock for increased renewable fuel production, we would disagree. Rather, if other 

parties engaged in these activities fail to adjust those activities to allow the statutory volume 

targets to be met, we believe the result is an inadequate domestic supply of renewable fuel that 

justifies granting a waiver pursuant to 211(o)(7)(A). The primary role that obligated parties play 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 51 of 189

in the RFS program is to acquire RINs, and it is this demand for RINs that in turn drives demand 

for renewable fuel and which should stimulate other parties to increase their activities to supply 

it.

Nevertheless, there are actions that obligated parties can take that are more directly 

related to their roles as importers and refiners, such as investing in or otherwise influencing 

business practices in such a way as to promote increases in renewable fuel use. We noted several 

ways in which this could happen in the NPRM.56 In response, obligated parties described why 

the suggestions were not practical or would not provide any benefits for 2016. We disagree. 

There are actions that obligated parties can take in the near-term to increase renewable fuel use 

and which are consistent with their current businesses. These could include modifying their 

requirements for branded retail stations to make it easier to offer and advertise sales of E15, E85, 

and biodiesel, creating a consortium to pool funds for investment in infrastructure at retail, and 

co-processing renewable biomass with fossil fuel in their existing facilities to produce a fuel that 

is partly renewable. These are certainly not the only options available to obligated parties, and 

we expect them to make ongoing efforts to further the goals of the RFS program. It would also 

be in the interests of renewable fuel producers to take similar, related, and/or complementary 

steps to increase the ability of the marketplace to supply their products to the vehicles and 

engines that can use them, notwithstanding the fact that the legal and regulatory responsibility 

for the purchase of RINs rests upon obligated parties.

6. Inability to Reach Volumes Using Only the Cellulosic Waiver Authority

In the NPRM we proposed that for each of years 2014, 2015, and 2016 we would reduce 

both the advanced biofuel and total renewable fuel volumes by the same amount using the 

cellulosic waiver authority, and then further reduce the total renewable fuel volumes using just 

the general waiver authority.57 However, we requested comment on whether it would be 

appropriate in the final rule to use the cellulosic waiver authority alone, notwithstanding the fact 

that using only the cellulosic waiver authority is not sufficient to permit the statutory targets for 

2014 and 2015 to be reduced to the level of actual supply in those years. In response to the 

NPRM, a number of parties agreed that some reductions from the statutory targets are warranted, 

but, they suggested that reductions under the cellulosic waiver authority would be sufficient, and 

that the market would be capable of meeting the applicable volume requirements using this 

approach with the use of carryover RINs to meet any shortfalls in actual renewable fuel supply. 

Stakeholders who suggested this approach included Growth Energy and the Renewable Fuels 

Association, among others.

With regard to 2014 and 2015, we continue to believe that the applicable standards 

should be based on available information on actual renewable fuel supplied in those years, as 

described more fully in Sections II.C and II.D below. We do not believe it would be appropriate 

to intentionally draw down the bank of carryover RINs as a means for increasing the applicable 

volume requirements for 2014 and 2015, as discussed in Section II.H. Since the appropriate 

 

56 See Third column of page 33129 of the June 10, 2015 NPRM.

57 We are also using both the general waiver authority and the cellulosic waiver authority to justify our reduction in 

total renewable fuel volumes.

Commented [A32]: In theory, this works for more 

diversified companies but not all obligated parties. Not all 

obligated parties have retail locations, and they're 

competitors so why does EPA think they’re going to pool 

funds to invest in infrastructure at retail? Why would 

branding and advertising these fuels help in particular if 

they’re more expensive? Or in the case of B5 where you’re 

not even obligated to label it at the pump – why would they 

spend money on that? 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 52 of 189

volume reductions in total renewable fuel for 2014 and 2015 can only be achieved through the 

use of the general waiver (absent requiring a substantial draw down of the carryover RIN bank), 

we continue to believe that it would be inappropriate to use only the cellulosic waiver authority 

for those two years.

 

Stakeholders that supported the use of the cellulosic waiver authority alone differed in 

whether the advanced biofuel and total renewable fuel requirements ought to be reduced by the 

full amount permitted under the cellulosic waiver authority, or instead only the amount needed to 

bring the advanced biofuel volume requirement to a level consistent with projected supply. 

Those supporting the former view pointed out that advanced biofuels in excess of the advanced 

biofuel standard can be used to meet the non-advanced portion of the total renewable fuel 

standards. While we agree that this is the case, explicitly and intentionally establishing a volume 

requirement for advanced biofuel that is below the level that we believe is reasonably attainable 

would be inconsistent with the goals of the RFS program. Since advanced biofuels have 

significantly superior GHG reduction performance, we believe we should structure our decision 

so as to promote the production and use of advanced biofuel volumes that can be reasonably 

supplied. Therefore, our assessment of the use of the cellulosic waiver authority alone focused 

on a case in which advanced biofuel and total renewable fuel are both reduced only to the degree 

necessary to yield an appropriate volume of advanced biofuel (i.e., both are reduced by a lesser 

amount than the reduction in cellulosic biofuel).

Using the advanced biofuel volume requirement of 3.80 billion gallons that we have 

determined to be reasonably attainable in 2016, and which we are finalizing today, represents a 

volume reduction of 3.45 billion gallons in comparison to the statutory target of 7.25 billion 

gallons. A corresponding reduction in the statutory target for total renewable fuel would result in 

a total volume of 18.8 billion gallons. 

Table II.B.6-1

Hypothetical 2016 Volume Requirements Using

Only the Cellulosic Waiver Authority (billion gallons)

Advanced biofuel

 Volume Requirement

 Statutory Target

 Reduction

3.80

7.25

3.45

Total renewable fuel

 Volume Requirement

 Statutory Target

 Reduction

18.80

22.25

3.45

Using only the cellulosic waiver authority, the need for non-advanced (conventional) renewable 

fuel would be 15.0 billion gallons (18.80 - 3.80). If all ethanol used in 2016 was used to supply 

this volume of conventional renewable fuel (rather than to comply with the cellulosic biofuel or 

advanced biofuel requirements), more than 1.6 billion gallons of E85 would be required.58 This 

 

58 It is also possible that the use of E15 could rise to help provide a means for consuming 15.0 bill gal of ethanol. 

However, as described in Section II.E.2.v, it is highly unlikely that increases in E15 could rise high enough to 

significantly reduce the amount of E85 needed. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 53 of 189

level is in excess of what we believe is possible in 2016 under even the most optimistic 

assumptions as described more fully in Section II.E.2.iii. Accounting for expected 2016 volumes 

of cellulosic ethanol and other advanced ethanol would make it even more difficult for 15 billion 

gallons of conventional ethanol to be used. 

Under a hypothetical scenario wherein reductions were made only under the cellulosic 

waiver authority, we recognize that the 15.0 billion gallons of non-advanced fuel that could be 

satisfied with conventional renewable fuel would not necessarily be filled with only ethanol. 

Therefore, we considered an alternative possibility for how the market might respond. Assuming 

E85 volumes reached 400 million gallons, a very high but perhaps possible level, there would 

need to be 812 million ethanol-equivalent gallons of non-ethanol supplied, equivalent to about 

540 million gallons of biodiesel (the predominant source of non-ethanol renewable fuel, which in 

this case could be either advanced biofuel or conventional renewable fuel). 

Table II.B.6-2

Meeting a 15.0 Billion Gallon Allowance for Conventional Renewable Fuel

with Both E85 and Biodiesel (million gallons)

E10 138,916a

E85 400b

Total ethanol 14,188

Non-ethanol (ethanol-equivalent) 812

Non-ethanol (biodiesel-equivalent) 540

Total renewable fuel 15,000

a This level is less than the amount of ethanol that can be used as E10 

in all 2016 gasoline, because some of that gasoline is used in this 

scenario to make E85.

b Assumed to contain 74% denatured ethanol.

In 2014, nearly all conventional biodiesel was imported. If the 540 million gallons of 

conventional biodiesel were to be imported in 2016, it would exceed 2014 imports of 

conventional biodiesel by a factor of about 7. Given the highly variable and uncertain nature of 

imports, we do not believe that this is a level that can be achieved in 2016 with any confidence. 

Alternatively, if the need for 540 million gallons of biodiesel were met with domesticallyproduced advanced biodiesel, the domestic biodiesel industry would need to supply a total of up 

to 2.8 billion gallons in 2016.59 Again, this level of biodiesel supply is higher than we believe is 

achievable in 2016 given the many constraints as discussed in Section II.E.3. For example, 

attaining this volume of biodiesel supply would require that all of the idled registered biodiesel 

capacity in the U.S. be brought into production at the beginning of 2016, with the attendant 

hiring of workers, arranging for feedstock purchases including diverting many feedstocks from 

existing uses, and arranging routes for distribution, blending, and sale of the finished product. In 

combination with other constraints as described in Section II.E.3, it is highly unlikely that 2.8 

billion gallons of biodiesel supply could be achieved in 2016. It would also involve the use of 

advanced biofuel to meet that portion of the total renewable fuel volume requirement that is not 

advanced. As described earlier, even if the biodiesel industry were able to grow at this rate in 

 

59 Assuming that biodiesel is also used to meet the entire non-cellulosic advanced biofuel volume requirement of 

3.80 billion gallons.

Commented [A33]: Recommend clarifying the calculation 

used to determine the 400 million gallons of E85 or 

providing citation. Reviewers note that Pouliot and Babcock 

(2014. The demand for E85: Geographical location and retail 

capacity constraints) estimate 800 million gallons of E85 

could be consumed under current conditions (current FFVs 

with proximity to existing fueling stations). 

Commented [A34]: How much was imported in 2014? 

What is the estimated total import potential for conventional 

biodiesel?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 54 of 189

2016 (which we do not believe to be the case), given the greater number of fuel types that can be 

used to satisfy the non-advanced portion of the total renewable fuel volume requirement, we do 

not believe this scenario would provide the needed certainty to the biodiesel industry to engage 

in the needed expansion. Especially when combined with the fact that 400 million gallons of 

E85 is possible but unlikely, we do not believe that this scenario is tenable.

We note that even under this scenario, we believe that domestic use of corn-ethanol 

would be essentially no different than it would be under the volume requirements we are 

finalizing today using both the cellulosic waiver authority and the general waiver authority. This 

is due to the fact that the legal and practical constraints on the supply of ethanol to consumers are 

not likely to be relieved to a greater extent with higher standards than they are with the standards 

we are adopting today, as described more fully in Section II.E.2 below. While the supply of 

renewable fuel, including ethanol, can increase over time under the influence of the standards we 

set, the volume requirements for 2016 would not be achievable if only the cellulosic waiver 

authority were used. Thus we believe that using the cellulosic waiver authority alone would 

provide no practical advantage to the corn-ethanol industry, but instead would simply lead to a 

draw-down in the bank of carryover RINs and/or noncompliance. 

C. 2014 Advanced Biofuel and Total Renewable Fuel Volume Requirements

In the NPRM, we proposed to base the applicable volume requirements for 2014 on the 

number of RINs supplied in 2014 that are expected to be available for use in complying with the 

standards. We based this approach on the notion that the standards we set cannot affect actual 

supply of renewable fuel in 2014, and that consequently the only result of setting a higher 

standard would be to require a draw-down in the bank of carryover RINs, which we explained 

would not be in the best interests of the program. 

While many stakeholders agreed with our proposed approach, some did not. The primary 

objection was that carryover RINs should be counted as part of the “supply” available for 

compliance with the 2014 standards and, therefore, that the 2014 statutory volume targets cannot 

or should not be waived so long as the existing supply of RINs generated in 2014 plus carryover 

RINs is sufficient to attain the statutory targets. As described in Section II.H below, we continue 

to believe that it would be imprudent and contrary to the long term objectives of the program to 

intentionally set renewable fuel volume requirements at a level higher than the estimated supply 

of renewable fuel based on an intentional draw down of the current bank of carryover RINs to 

achieve compliance. The statute does not define the term “supply,” and it is logical to interpret 

the term to mean the supply of actual renewable fuel to the vehicles that can use it. However, in 

assessing whether this supply is “inadequate,” and whether EPA should use its discretion to 

waiver the statutory targets, it is appropriate to consider the extent to which the available bank of 

carryover RINs can be drawn down without negatively impacting program operation.60 Thus, we 

do not interpret carryover RINs to be part of the “supply” referenced in the term “inadequate 

domestic supply.” And, as described in detail in Section II.H, we have assessed the number of 

 

60 The statute provides that EPA “may” waive the statutory volume targets if it finds inadequate domestic supply or 

other conditions justifying a waiver under CAA 211(o)(7)(A). Thus, exercise of the waiver authority is 

discretionary.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 55 of 189

carryover RINs available at the current time, and have determined that this bank of carryover 

RINs should not be intentionally drawn down by setting volume requirements at a level higher 

than the supply of renewable fuel in the 2014-2016 time period. In other words, for purposes of 

this rule, we have determined that the availability of carryover RINs does not provide a good 

basis for EPA to either decline to exercise its discretion to reduce volumes under the general 

waiver authority in CAA 211(o)(7)(A), or to use that authority to set volume requirements for 

total renewable fuel at a level higher than the supply of renewable fuel in 2014.61 

A secondary objection to setting the 2014 volume requirements at the level of actual 

supply focused on our proposed calculation of the number of RINs generated in 2014 that would 

actually be available for compliance with the standards. Specifically, some parties argued that 

all RINs generated in 2014 should be counted as being available for compliance regardless of 

whether some were retired for purposes other than compliance with the annual percentage 

standards by obligated parties. In addition to exports, such "non-compliance" RIN retirements 

could occur for a variety of reasons, such as:

 Spills

 Contaminated or spoiled fuel

 Enforcement obligation

 Fuel not used as transportation fuel, heating oil, or jet fuel

 Improperly generated or otherwise invalid RINs

 Volume corrections

Parties taking this position argued that, had the 2014 standards been in place by the statutory 

deadline of November 30, 2013, at least some of the RINs retired for non-compliance reasons 

would instead have been used for compliance purposes. We disagree. The earlier issuance of 

2014 standards would not have changed events such as spills, improperly generated RINs, or 

enforcement obligations, and is very unlikely to have resulted in fuel being used as transportation 

fuel, heating oil, or jet fuel rather than for some non-qualifying use. It is theoretically possible 

that qualifying renewable fuel that was exported in 2014 might instead have been used in the 

U.S. had the applicable standards been in place and had been at a level that discouraged exports. 

However, even if this were so, it would nevertheless be inappropriate to identify exported 

renewable fuel as being available for compliance since the standards that we set now cannot 

cause a change in 2014 exports. If we were to include exported renewable fuel in the volume 

available for compliance with the 2014 standards, obligated parties would be forced to draw 

down the bank of carryover RINs to account for those exports. As described above and in 

Section II.H, we do not believe this would be appropriate.

Some stakeholders who argued for the consideration of carryover RINs in setting the 

2014 standards did so recognizing that 2014 supply of renewable fuel would be unaffected, but 

said that doing so might actually increase supply in 2015 or 2016 above levels that would occur 

otherwise. More specifically, these stakeholders expressed concern that obligated parties would 

respond to increasing volume requirements in 2015 and 2016 by using carryover RINs rather 

 

61 For the same reasons, EPA has not assumed a draw-down in the current bank of carryover RINs in deciding the 

extent to which it should exercise its discretion under CAA 211(o)(7)(D) to reduce the statutory targets for advanced 

biofuel and total renewable fuel.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 56 of 189

than entering into contracts or other arrangements to increase the actual supply of renewable 

fuel. Given the value of carryover RINs to obligated parties as a compliance flexibility tool that 

is available to address unforeseen RIN shortfalls such as those that may be caused by natural 

disasters and other supply problems, and considering that obligated parties are likely to consider 

that increasing RFS requirements in the future could make compliance more difficult in coming 

years, we do not believe it is likely that obligated parties would intentionally draw down their 

carryover RIN banks as an alternative to purchasing RINs generated from increasing supplies of 

renewable fuel. As described further below, we are setting the applicable volume requirements 

for 2014, 2015, and 2016 at levels that we believe can be supplied by actual gallons of renewable 

fuel used in those years, without the need for carryover RINs.

In the NPRM, we explained that the total number of RINs that will be retired to cover 

exports of renewable fuel in 2014 will only be recorded in EMTS after the compliance 

demonstration deadline for 2014 has passed. As described in Section VI.B, we are amending the 

current rules in this action to specify June 1, 2016 as the deadline for demonstrating compliance 

with those 2014 RVOs not already satisfied. Since we recognized in the NPRM that the 

compliance deadline for all 2014 RIN exports would not have passed by the time we issued the 

final 2014 standards, we proposed estimating likely RIN retirements for renewable fuel exports 

by using renewable fuel export information from EIA. Ethanol export data reported by EIA is 

derived from surveys collected by the Census Bureau. These surveys distinguish between 

ethanol that is denatured and ethanol that is undenatured, with approximately 460 million gallons 

being described as denatured and approximately 350 million gallons being described as 

undenatured for 2014. In the NPRM we assumed that all 810 million gallons of ethanol exported 

in 2014 had been denatured in the United States. We based this approach on the expectation that 

ethanol producers had an incentive to denature all ethanol for tax purposes, and thus would only 

sell undenatured ethanol if it was contractually designated for export. Given that most ethanol 

producers are located far from the coasts, we believed it was unlikely that ethanol producers 

were engaged in direct export of any significant quantity of undenatured ethanol, and as a result 

we treated the Census Bureau survey data as being reliable for the total volume of exported 

ethanol but unreliable with respect to whether exported batches were denatured or undenatured. 

Moreover, because denatured ethanol meets the regulatory definition of renewable fuel, we 

assumed that RINs had been generated for this entire volume, and that an equal number of RINs 

would need to be retired by the exporters of this renewable fuel. RINs retired for exported 

renewable fuel are not available for use by obligated parties in complying with their 2014 

obligations. Thus we calculated the supply of renewable fuel for 2014 by subtracting the 

exported volumes represented by both categories of ethanol from the amount of RINs generated 

for domestic production or imports of renewable fuel in 2014. 

In response to the NPRM, some stakeholders indicated that they believed we had erred in 

assuming that all exported ethanol was denatured in the U.S., and had RINs generated for it prior 

to export. Based on further investigation into the manner in which the Census Bureau data are 

collected, along with indications from private firms who produce ethanol for export, we believe 

that the Census Bureau survey data are likely to be more reliable than we previously believed 

with regards to whether exported batches were denatured or undenatured. That is, it appears that 

some ethanol is indeed exported in undenatured form, and RINs are unlikely to have been 

generated for such ethanol. Moreover, we believe the Census Bureau data provides the best 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 57 of 189

information available on the amount of denatured versus undenatured ethanol that was exported 

in 2014. Therefore, the volume of undenatured ethanol the Census Bureau reported as exported 

in 2014 should not be subtracted from the total number of RINs generated for fuel ethanol in 

2014 for purposes of calculating the available supply of renewable fuel for 2014. We have made 

this correction to the calculation of 2014 supply by only subtracting the approximately 460 

million gallons of exported denatured ethanol from those generated in 2014, rather than the full 

volume of about 810 million gallons of denatured and undenatured ethanol exported.

Several stakeholders raised a similar issue with respect to biodiesel exports, contending 

that producers never generated RINs for some biodiesel that was exported, and thus all biodiesel 

exports should not have been subtracted from the number of biodiesel RINs generated in 2014 in 

assessing the 2014 domestic supply of biodiesel. These parties based their argument on 

comparisons between EIA export data and biodiesel RINs separated from biodiesel intended for 

export as recorded in EMTS for previous years. As pointed out by these stakeholders, a 

comparison of data from EMTS and EIA for 2011 through 2013 does appear to suggest 

incongruous measurements of biodiesel exports.

Table II.C-1

Biodiesel Exports (million gallons)

2011 2012 2013

EMTS 15 46 106

EIA 73 128 196

Difference 58 82 91

However, we do not believe that these discrepancies can credibly be used to assess the volume of 

exported biodiesel for which RINs were not generated. Data collected in EMTS include RIN 

separations for exported biodiesel, but EMTS does not report RIN retirements for exported 

biodiesel. Since exporters can receive biodiesel without assigned RINs and can retire RINs to 

address exports of renewable fuel using RINs acquired on the open RIN market, the number of 

RINs separated from biodiesel as shown in the table above is likely to underestimate the actual 

number of RINs retired for exports. Also, the discrepancy between EMTS data on biodiesel 

RINs separated for biodiesel intended for export and EIA data on biodiesel exports is much 

smaller for 2014 than it was for previous years - the difference is only 10 million gallons.62 We 

also note that almost all biodiesel that is produced in the U.S. qualifies for RIN generation, 

unlike the situation for ethanol where RINs may be generated for denatured ethanol, but not for 

undenatured ethanol. In sum, we conclude that there are imperfect data with respect to the 

number of RINs generated and retired for biodiesel that is exported. However, we believe it is 

likely for the above reasons that RINs were generated and then retired for most of the exported 

biodiesel. Commenters have not suggested a more accurate means of assessing the situation than 

our proposed approach of assuming that RINs were generated and retired for all biodiesel exports 

reported by EIA. 

Finally, some parties argued that their operations for 2014 vis-a-vis acquisition of RINs 

were based on the standards that were proposed in the November 29, 2013 NPRM, and that it 

 

62 Because exporters of renewable fuel can separate RINs immediately from fuels that are exported, this estimate is 

unlikely to change by the time that they submit their compliance demonstrations for 2014.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 58 of 189

would be inappropriate for EPA to set applicable percentage standards for advanced biofuel and 

total renewable fuel for 2014 that are more stringent than those proposed in November 2013. 

We disagree. Obligated parties have always been aware that the final volume requirements can 

differ from those proposed, and moreover the November 2013 NPRM explicitly provided both a 

range of possible volume requirements for advanced biofuel and total renewable fuel as well as 

an indication that the final volume requirements could include a modification of those ranges.63 

While we proposed volumes representing the mean within the ranges, we also took comment on 

alternative approaches to selecting final values from within those ranges. More importantly, we 

are setting the applicable volume requirements for 2014 at levels consistent with the number of 

RINs generated in 2014 that are available for compliance. While it is true that the 2014 RINs 

available for compliance may not currently be distributed among obligated parties according to 

their individual compliance obligations, they are nevertheless available for compliance, and 

obligated parties can buy and sell RINs in order to ensure compliance. This process is exactly 

how the RIN system was designed to operate when originally established in 2007. Obligated 

parties have had since at least the time of publication of the June 10, 2015 NPRM to understand 

with greater certainty their likely obligations under today’s final rule, and this period should have 

been sufficient for obligated parties to ready themselves for compliance. To the extent 

individual obligated parties may still have difficulty acquiring sufficient RINs for compliance, 

they can avail themselves of the deficit carry-forward provision in the regulations.64 In addition, 

we note that the availability of carryover RINs should help to render the RIN market fluid.

The total number of RINs generated in 2014 that are available for compliance includes 

those that were generated for renewable fuel produced or imported in 2014 as recorded in the 

EPA-Moderated Transaction System (EMTS), minus any RINs that have already been retired for 

non-compliance reasons or would be expected to be retired to cover exports of renewable fuels. 

As described in the NPRM, the total number of RINs actually retired to cover exports of 

renewable fuel in 2014 will only be recorded in EMTS after the compliance demonstration 

deadline for 2014 has passed. Since the compliance deadline for all 2014 RIN exports has not 

yet passed, we have based our estimate of RIN retirements for renewable exports on renewable 

fuel export information from EIA.65 

Actual supply in 2014 is shown in Table II.C-2 below. Further details are provided in a 

memorandum to the docket.66 Since EIA does not distinguish exports by D code, we assumed 

that all ethanol exports represent D6 ethanol, and all biodiesel exports represent D4 BBD, since 

the vast majority of ethanol available for export was produce from corn and the vast majority of 

biodiesel available for export was produced to meet the requirements of advanced biofuel. As a 

result, we expect that any errors introduced by these assumptions will be very small.

 

63 See 78 FR 71777.

64 Although the deficit carry-forward provision would not be available for parties who carried forward a deficit from 

2013, such parties have known well in advance that they would be required to satisfy both their 2013 and 2014 

obligations in 2014, so should have planned early to acquire a sufficient volume of RINs to cover all contingencies 

regarding possible 2014 requirements. Any excess 2014 RINs purchased could be banked for use in complying with 

2015 requirements. 

65 http://www.eia.gov/dnav/pet/pet_move_expc_a_EPOORDB_EEX_mbbl_m.htm

66 "2014 RIN Supply," docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 59 of 189

Table II.C-2

2014 Actual Supply (million RINs)

D codea Domestic 

productionc

Importsc Adjustmentsb,c Exports Net supply

3 & 7 33 0 0 0 33

4 2,214 496 92 126 2,492

5 79 64 0 0 143

6 14,017 336 287 457 13,609

All advanced biofuel

(D3+D4+D5+D7) 2,326 560 92 126 2,669

All Renewable fuel

(D3+D4+D5+D6+D7) 16,344 897 380 582 16,278

a D3 and D7 represent cellulosic biofuel. D4 represents biomass-based diesel. D5 represents advanced 

biofuel that is not cellulosic biofuel or biomass-based diesel. D6 represents non-advanced (conventional) 

renewable fuel.

b As described earlier in this section, adjustments represent spills, enforcement obligations, etc. 

c Values in this table differ from those in the NPRM due to ongoing retrospective corrections that are made 

to data recorded in EMTS.

Based on these volumes, we are setting the applicable volume requirements for advanced biofuel 

and total renewable fuel for 2014, as shown in Table II.C-3 below. Additional discussion of the 

final cellulosic biofuel and BBD volume requirements for 2014 can be found in Sections IV.D 

and III.C, respectively.

Table II.C-3

Final Volume Requirements for 2014 (billion gallons)

Advanced biofuel 2.67

Total renewable fuel 16.28

D. 2015 Advanced Biofuel and Total Renewable Fuel Volume Requirements

In the NPRM, we said that we expected that the market could achieve some growth in 

2015 in comparison to 2014 volumes despite the fact that the proposal was being released well 

into 2015. Our proposed volumes for 2015 represented moderate growth in supplies of both 

advanced biofuel and total renewable fuel based on annual growth in previous years, but 

tempered by the fact that the market would not have the lead-time envisioned by the statute. 

Although the proposed volumes could not be construed as requirements, we believed that they 

would provide signals to the market concerning the levels that EPA believed were achievable, 

and that the market would respond to these signals. In fact this appears to have been the case, as 

monthly supply in the months following release of the NPRM was higher than monthly supply 

prior to the NPRM.

This final rule is being released after 11 months of the year has passed. As was the case 

for 2014, the final standards that we set for 2015 cannot affect supply that occurred over the 

previous 11 months, and there is insufficient lead time available to impact renewable fuel use in 

the remaining one month. Thus we believe that the basic approach we have taken in this final 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 60 of 189

rule to establishing 2014 requirements should also be applied to 2015, with differences only to 

account for there being an incomplete data set for 2015. The more general issues (e.g., 

consideration of carryover RINs, determination of export volumes, etc.) that were raised by 

stakeholders for the determination of the 2014 volume requirements, and our assessment of those 

issues, also apply to 2015. As for 2014, the final volume requirements for 2015 for advanced 

biofuel and total renewable fuel effectively represent what the market actually achieved (for 

months for which data are available) and a projection of supply based on historical information 

for the remaining months where data are not available. 

While this final rule is being released after 11 months of the year has passed, the data for 

determining actual supply was only available for the first 8 to 9 months of the year. EMTS data 

on RIN generation and various adjustments for RINs that cannot be used for obligated party 

compliance was available through September, while data on renewable fuel exports from the 

Census Bureau was available through August.67 In order to determine total supply for 2015, it 

was necessary to estimate supply for the remaining months of the year using the data on actual 

supply that is available for 2015 and supply trends from 2013 and 2014. These supply trends 

were used to identify seasonal variations in supply that allowed us to project supply in those 

months in 2015 for which actual supply data are not available. Details of this assessment are 

provided in the docket, and are summarized below.68

Table II.D-2

Projected Supply for 2015 (million ethanol-equivalent gallons)

RINs 

generated Adjustments Exports Net supply

Advanced biofuel 3,121 92 145 2,884

Total renewable fuel 17,815 379 504 16,931

In the NPRM we requested comment on whether the volume requirements that we were 

proposing for 2015 appropriately reflected challenges associated with increasing the use of 

higher ethanol blends such as E15 and E85 and limitations in production and import capabilities, 

as well as the ability of the market to respond to the rulemaking in the time available. Parties 

that believed we should set the applicable volume requirements for 2014 at the statutory targets 

typically said the same for the 2015 volume requirements, arguing that carryover RINs could 

meet any shortfall in the supply of renewable fuel. Others agreed that the proposed 2015 volume 

requirements were reasonable and pointed to the fact that the situation for 2015 was essentially 

the same as for 2014 in that the standards would be set after most of the year had passed and 

beyond a date where the final rule could influence renewable fuel use. 

 

67 We determined that using records from EMTS on 2015 RINs retired for exports would provide an inaccurate 

estimate of actual 2015 RINs retired for export in specific months. Exporters can record their RIN retirements at 

any time within the 30 days following an export of renewable fuel. As a result, exports that occurred in August 

2015 may be recorded in EMTS in August or September, and exports that occurred in September 2015 may be 

recorded in EMTS in September or October. Given this, we believe that the Census Bureau data on exports 

provided a more accurate estimate of exports in specific months.

68 "Projection of annual renewable fuel supply in 2015," memorandum from David Korotney to docket EPA-HQOAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 61 of 189

In general, it is our assessment that comments provided by stakeholders did not include 

any compelling arguments or information that would lead us to believe that the final volume 

requirements for 2015 should be set higher than actual supply (including a projection of actual 

supply for months where data are not available). While some stakeholders expressed a belief 

that higher standards can influence market dynamics in 2015, we do not believe that this is the 

case given that this final rule is being released after 11 months of the year has passed. The only 

possible basis for setting the final volume requirements higher than actual supply would be the 

availability of carryover RINs, which as described in Section II.H we believe should not be 

intentionally drawn down at this time. 

Some obligated parties argued that the final percentage standards for 2015 should be set 

at the proposed levels since they were using the proposed percentage standards to guide their 

acquisition of RINs in the second half of the year. These parties made a similar argument 

regarding the 2014 percentage standards. However, all regulated parties were aware that the 

final standards could differ from those we proposed based on comments we received, new 

information that became available, and new or different EPA analysis. Moreover, the statutory 

volume targets (which a number of commenters argued should be the basis for the final 2014 

standards) provided notice of the maximum volumes that EPA could require in finalizing the 

rule. As with 2014, we are using the cellulosic waiver authority as the basis for reductions in 

advanced biofuel, and for an equal reduction in the total renewable fuel volume requirement. 

For total renewable fuel, we are also using the general waiver authority, based on a 

determination of inadequate domestic supply, to provide an additional increment of volume 

reduction to result in a volume requirement equal to our assessment of RINs generated in 2015 

that will be available for compliance. 

Table II.D.3

Final Volume Requirements for 2015 (billion gallons)

Advanced biofuel 2.88

Renewable fuel 16.93
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 62 of 189

E. Total Renewable Fuel Volume Requirements for 2016

The proposed 2016 volume requirement of 17.40 billion gallons was intended to 

represent the total supply of renewable fuel for use as transportation fuel in the United States, 

including both domestic production and imports of renewable fuel, in light of a policy that is 

intended to induce significant change. In determining the proposed 2016 volume requirements, 

we targeted substantial growth compared to 2014 and 2015, consistent with the fact that they are 

being set prospectively, on the schedule contemplated by Congress, and therefore can be 

expected to influence the increased production and use of renewable fuels in 2016.

Responses to the proposed 2016 volume requirement for total renewable fuel were 

mixed. Some stakeholders, such as The American Council on Renewable Energy and Trestle 

Energy, indicated that the proposed volumes appeared to be reasonable given the challenges 

associated with increasing supply. Stakeholders who were obligated parties, petroleum 

marketers and retailers, livestock owners, or engine owners typically said that the proposed 

volumes were too high. These stakeholders typically pointed to expected high costs, adverse 

impacts on vehicles or engines, or a general inability of the market to supply the proposed 

volumes. Many treated the constraints associated with the E10 blendwall as representing a firm 

barrier that could not or should not be crossed. In contrast, renewable fuel producers and farmers 

generally believed the proposed volumes to be too low. These stakeholders typically pointed to 

production capacity and available feedstocks to support their views, and often argued that the 

power of the market to respond to the standards EPA sets is essentially unlimited in its ability to 

overcome any potential constraints on supply. 

In general, we did not find arguments for reducing the volume requirements below the 

proposed levels compelling. Our response to comments associated with the E10 blendwall, 

demand for E0, and the use of higher ethanol blends such as E15 and E85 are discussed in more 

detail in Section II.E.2 below. In short, stakeholders provided no compelling evidence that a 

nationwide average ethanol concentration in gasoline cannot exceed 10.0% in 2016. Moreover, 

the RFS program will not force consumers to use E15 in engines where compatibility may be a 

concern, such as nonroad engines or vehicles manufactured before 2001, as some commenters

suggested, and the flexibility inherent in the program will continue to permit the use of E0 if 

there is demand for it, addressing concerns about misfueling with higher ethanol blends. 

Potential impacts on fuel costs or agricultural feedstock prices that were quantified were 

generally small. Further discussion of these issues can be found in the Response to Comments 

document.

While we do not believe that the total renewable fuel volume requirement for 2016 

should be reduced below the proposed level, we continue to believe that challenges associated 

with growth in the supply of renewable fuels precludes attainment of the statutory volumes in 

2016. Constraints including but not limited to the E10 blendwall, are real and can only be 

partially overcome by a responsive market in the near term. We acknowledged in the NPRM 

that the market would need to respond by increasing domestic production and/or imports of those 

renewable fuels that have fewer distribution constraints, by expanding the infrastructure for

distributing and consuming renewable fuel, and by improving the relative pricing of renewable 

fuels and conventional transportation fuels at the retail level to ensure that they are attractive to 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 63 of 189

consumers. However, we also stated our belief in the NPRM that the market is not unlimited in 

its ability to respond to the standards we set, particularly over the relevant timeframe. Thus 

while there can be significant growth in renewable fuel supply between 2015 and 2016, we 

continue to believe that the statutory target for total renewable fuel cannot be reached in 2016. 

In making a determination to exercise our authority to waive volumes, our objective is to 

exercise the general waiver authority only to the extent necessary to address the inadequacy in 

supply.69,70 As explained in the NPRM, we are seeking to determine the “maximum” volumes of 

renewable fuel that are reasonably achievable in light of supply constraints. To clarify, we are 

not aiming to identify the absolute maximum domestic supply that could be available in an ideal 

or unrealistic situation, or a level that might be anticipated under conditions that are possible, but 

unlikely to occur. Rather, we are attempting to identify what we think is the most likely 

maximum volume that can be made available under real world conditions, taking into account 

the ability of the standards we set to cause a market response and result in increases in the supply 

of renewable fuels. This is a very challenging task not only in light of the myriad complexities 

of the fuels market and how individual aspects of the industry might change in the future, but 

also because we cannot precisely predict how the market will respond to the volume-driving 

provisions of the RFS program. Thus the determination is one that we believe is not given to 

precise measurement and necessarily involves considerable exercise of judgment. To this end, 

we are setting achievable volumes of total renewable fuel in this package that reflect our best 

judgment as to the domestic supply of renewable fuels in 2016. There are a number of 

indications, described below, that the volumes we are finalizing today represent a reasonable 

estimate of this level. 

In the NPRM we explained that our approach to determining the applicable volumes of 

total renewable fuel included estimating the market potential for overcoming the various 

constraints at play. This approach was based on consideration of the potential future 

contributions from sources of renewable fuel, including ethanol, biodiesel and renewable diesel, 

and other types of renewable fuels, in the aggregate rather than individually, and in the context of 

a market that is responsive to the standards that we set. We explained that we believed this 

approach to be more straightforward and more likely to provide a correct projection of the 

available domestic supply of renewable fuels in 2016 than the proposed approach we described 

in the November 29, 2013 proposal for the 2014 standards. 

In response to the NPRM, many parties presented alternative suggestions for volume 

requirements for total renewable fuel in 2016, either higher or lower than the 17.40 billion 

gallons that we proposed, and generally based these suggestions on an approach more akin to 

that used in our November 29, 2013 proposal. That is, they made their own estimates of the 

achievable levels of various types of renewable fuels that could be produced or renewable fuel 

blends that could be consumed and used these estimates as the basis for suggesting higher or 

lower volume requirements. We recognize that an assessment of the contribution that individual 

sources can make to the total can be valuable in demonstrating both the achievability of the 

volume requirements and the extent to which they represent the supply of renewable fuels in 

 

69 211(o)(7)(A) says, "The Administrator...may waive the requirements..." [emphasis added]

70 As discussed in Section II.B.1, EPA has considerable discretion in exercising the cellulosic waiver authority, and 

is not constrained to consider any particular factor or list of factors in doing so.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 64 of 189

2016. In the November 2013 proposal we took a very granular approach to assessing the 

potential supply of renewable fuels by assessing the potential for growth of individual renewable 

fuels, quantifying the uncertainty around each assessment, and using a monte carlo simulation to 

assimilate the individual assessments. In our June 2015 proposal we took a much more holistic 

approach to assessing renewable fuel supply, recognizing that the individual components of the 

supply are interconnected and do not operate in isolation. We received many comments 

suggesting that the holistic approach was too broad, that the methodology EPA used in deriving 

the volume requirements was not sufficiently clear, and that and that EPA should more closely 

evaluate potential for growth in the use of individual fuel types as part of its analysis. We 

continue to believe that because of the complexities of the fuels market, the structure of the 

standards, and the inherent difficulties associated with predicting which of the many possible 

scenarios the market will choose to meet any given standard, a very granular approach is not 

likely to produce an accurate representation of the maximum volume that can reasonably be 

achieved. At the same time, we recognize the value in better identifying the information on 

which our technical judgements are based in making an overall assessment of the volume of 

renewable fuel that can be supplied in 2016. 

For the final rule, therefore, we are individually analyzing the potential for growth in 

broad categories of renewable fuel; ethanol, biodiesel, and other types of renewable fuels. We 

believe that these assessments have helped us to better estimate the most likely maximum 

achievable volume of renewable fuel that can be supplied in 2016 and, as described below, the 

revised approach, together with technical corrections, has led to a final volume for total 

renewable fuel that is somewhat larger than the volume in our proposed rule. The following 

sections discuss the state of the renewable fuel market in general, our evaluation of the supply of 

broad categories of renewable fuel in 2016, and our conclusions regarding the most likely 

maximum achievable supply of renewable fuel in 2016.

1. Renewable Fuel Market Challenges and Opportunities

The fuels marketplace in the United States is large, diverse, and complex, made up of 

many different players with different, and often competing, interests. Substantial growth in the 

renewable fuel volumes beyond current levels in 2016 and beyond will require action by many 

different parts of the fuel market, and a constraint in any one part of the market can limit the 

growth in renewable fuel supply. Whether the primary constraint is in the technology 

development and commercialization stage, as has been the case with cellulosic biofuels, or 

instead related to the infrastructure build out and fuel consumption, as is recently the case with 

ethanol in the United States, the end result is that these constraints limit the available supply of 

renewable fuel. 

The constraints on supply range from legal limitations on the ethanol concentration that 

can be used in different types of gasoline-powered vehicles to market-based constraints 

associated with production, distribution, and use of renewable fuels. A list of the many factors 

that affect the growth of renewable fuel supply in the United States in 2016 and beyond is shown 

in Table II.E.1-1 below.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 65 of 189

Table II.E.1-1

Factors That Affect the Supply of Renewable Fuel

 Feedstock availability

o For existing feedstocks

 Increases in production

 Diversion from food and other uses, including renegotiation of existing contracts

 Expansion of distribution and storage infrastructure

o For new feedstocks

 Research and development of new feedstocks

 Development of new harvesting equipment and practices

 Development of new distribution and storage infrastructure

 Contracts to enable reliable delivery

 Renewable fuel production

o Technology research and development

o Commercialization of new technology

o Investment in new and expanded production facilities

o Restarting idle facilities

 Renewable fuel imports

o Investment in new and expanded production facilities abroad

o Diversion from domestic and other foreign markets

 Renegotiation of existing contracts

 Satisfying competing mandates and incentives abroad

 Changes in currency valuation domestically and abroad

o Expansion of foreign distribution and export capacity

o Expansion of US import capacity and distribution from ports

 U.S. renewable fuel distribution infrastructure expansion

o Barge, rail car, tanker truck, and pipeline expansion

o Terminal tankage addition or displacement of existing product offerings

o Terminal blending capacity expansion

 Refueling infrastructure availability

o Expansion of retail outlets that offer renewable fuels blends

o Addressing insurance and liability risks

 Consumption capacity

o Existence of and expansion of vehicles/engines capable of using the fuel (e.g., FFVs, 

natural gas vehicles, and engines designed to be compatible with higher biodiesel 

blends)

o Existence and expansion of qualifying non-transportation uses (e.g., heating oil)

o Total transportation fuel use in the United States

 Consumer Behavior

o Vehicle warranties (e.g., E15, B20)

o Consumer choices between fuels containing various levels of renewable fuel
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 66 of 189

None of the market components listed in Table II.E.1-1 are in and of themselves an 

insurmountable barrier to growth of renewable fuels. Rather, they are challenges that can be 

overcome in a responsive marketplace given enough time and in many cases with considerable 

investment. In this regard the key question is not whether renewable fuel volumes can increase, 

but rather how quickly. Moreover, the speed with which the market can engage in actions to 

overcome these constraints is a function of whether and how effectively parties involved in 

renewable fuel supply respond to the incentives provided by the RFS and other programs 

designed to incentivize renewable fuel use.

To a certain degree, the RFS standards themselves can help provide certainty and help 

drive the necessary investments up and down the supply chain by creating expectation for what 

overall demand will be. However, the RFS standards are still limited in this regard in that they 

are issued on an annual basis immediately prior to the compliance year (thus offering little leadtime) and provide only an indirect signal to the various components of the marketplace. First, in 

order for volumes of many of the renewable fuels to grow it requires a rather complicated series 

of investments decisions and actions by a wide range of independent businesses in the 

marketplace, often by companies that are in direct competition with one another. This can make 

it difficult for the market to increase supply quickly. Fuels that are or have been more easily 

integrated into the marketplace (e.g., ethanol at 10 volume percent or renewable diesel that is 

fungible with diesel fuel) face fewer challenges to overcome to increase their supply and thus 

have generally been more attractive to investors than those that might require new and unique 

changes to the fuel distribution infrastructure and/or vehicle fleet. The greater market certainty 

associated with these more easily integrated fuels has allowed them to increase relatively 

quickly. This is consistent with our past experience under the RFS program where we saw rapid 

growth in E10 ethanol blends, low level biodiesel blends, and more recently CNG/LNG derived 

from biogas. However, introducing new types of biofuels and higher biofuel concentrations into 

the marketplace requires new production technology, new vehicles, and/or new retail and 

distribution system infrastructure, and thus have been slower to expand.

Second, the signal from the RFS standard is for the general categories of cellulosic 

biofuel, biomass-based diesel, advanced biofuel, and total renewable fuels. With the exception 

of the biomass-based diesel standard, the standards are not specific to a fuel type (e.g., ethanol, 

biodiesel, renewable diesel, biobutanol, biogas, etc.), feedstock (e.g., corn, soy oil, wood chips), 

or technology (e.g., biochemical vs thermochemical). This is a strength of the RFS program, as 

it lets the market, rather than EPA, decide which fuel hold the most promise for future growth. 

As a result, however, the market is still left to determine which fuels to invest in, requiring action 

by multiple parties involved in fuel supply to ensure growth. We believe that the market can and 

will make these decisions, particularly as the picture as to which fuels and technologies hold the 

greatest potential for growth becomes clearer, but it will take time.

In addition to the market needing time to sort out its investment decisions, it should also 

be emphasized that it takes time for the market to implement investment decisions it has already 

made. Each market segment has a certain degree of implementation time associated with it. For 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 67 of 189

instance, diverting relatively small amounts of feedstocks from existing uses could occur in a 

matter of weeks or months, whereas diverting larger amounts or bringing some new feedstocks 

to market (e.g., energy crops such as switchgrass) could require years. Restarting existing 

biofuel production facilities could likewise occur relatively quickly, while developing a new 

renewable fuel production technology (e.g., cellulosic ethanol) takes years, and once developed it 

takes years more to produce commercial volumes of renewable fuel from them. Displacing some 

fuels with others in distribution and storage can often occur in a matter of weeks, but adding new 

distribution and storage capacity can take months or years. Using compatible fuels in the 

existing fleet of vehicles can occur almost seamlessly, but developing and expanding a new fleet 

of purpose-built vehicles will take years. Since this final rulemaking establishes standards for 

2016 that will apply to gasoline and diesel fuel produced just one month from the signature of 

this rule, we do not believe that there is sufficient time for the 2016 standards to lead to dramatic 

changes in renewable fuel supply that are not already underway. But we do believe that the 2016 

standards can drive some growth in the near term while setting the stage for greater growth in the 

longer term. As a result, the best opportunity for market growth is likely to be for those fuels 

where the market is already taking action to address any relevant constraints listed in Table 

II.E.1-1 above.

 

Cellulosic biofuel provides an example. Growth in cellulosic biofuel volumes and their 

contribution to the advanced biofuel standard has been limited, and certainly less than Congress 

envisioned, since the outset of the RFS program due to challenges related to technology 

development and commercialization. Despite a number of years and billions of dollars spent in 

research and development of cellulosic biofuel technologies, and several attempts at 

commercializing these technologies, deriving liquid fuels from cellulosic feedstocks has lagged 

well behind not only the statutory targets, but even our annual projections. These technologies 

are just now beginning to introduce significant volumes of liquid cellulosic biofuels to the 

market as described in Section IV. In contrast, more rapid growth has occurred with CNG/LNG 

derived from biogas, which was recategorized as a cellulosic biofuel in 2014. Biogas did not 

face the same renewable fuel production challenger as liquid biofuels, and since it could also 

utilize the existing natural gas distribution, vehicle, and refueling infrastructure use of 

CNG/LNG derived from biogas as transportation fuel has increased rapidly since 2014. The 

inclusion of cellulosic biogas in our projections has allowed total cellulosic biofuel volumes to 

grow rapidly through 2015 and into 2016. However, even this significant and short term growth 

will become limited as cellulosic biogas will soon face constraints associated with sufficient 

consumption capacity since the fleet of natural gas vehicles that use CNG/LNG derived from 

biogas as a transportation fuel, while it can increase over time, is not unlimited.

Even with the RFS standards in place to drive growth, the market itself still has 

considerable uncertainty in terms of how it will respond to those standards and whether and to 

what degree it can overcome the various constraints within the next year. These facts make it 

challenging for the Agency to project the supply of renewable fuel in 2016, as we cannot predict 

with precision the progress that can be made for every component in the market for all the 

different fuels, or for the renewable fuel supply as a whole. Every existing and potential 

renewable fuel is impacted by a number of factors that may limit the renewable fuel’s growth 

potential over the coming year. If EPA were to establish standards that cannot be achieved it 

would likely result in a significant increase in renewable fuel and RIN prices, and obligated 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 68 of 189

parties would be forced into RIN deficits or even non-compliance. This could serve to erode the 

certainty and stability for renewable fuel volume growth that the RFS standards are intended to 

provide. At the same time, there are also reasons for optimism that significant progress can be 

made in overcoming some of the constraints on renewable fuel use in the coming year. We do 

not think it would be appropriate to ignore either the potential for growth, or potential challenges 

on growth, in making our assessment of potential volumes. Because the RFS program allows for 

a variety of different paths to contribute to overall compliance with the standards, that significant 

growth overall is possible in the coming year even if there is less certainty that individual paths 

might be able to grow significantly.

In the NPRM we discussed the fact that renewable fuel supply in 201371 and 2014 fell 

short of the statutory targets, and that we believed that the constraints on supply that contributed 

to those shortfalls were very likely to continue in 2015 and 2016. Indeed supply in the first half 

of 2015 has also fallen short of what would be required on an annualized basis to meet the 

statutory targets, though it was larger than supply in 2014. In response, many stakeholders 

suggested that the only reason the statutory targets were not reached in 2013 and 2014 was 

because EPA missed the statutory deadlines for setting RFS standards for those years. They also 

cited the November 29, 2013 NPRM as establishing an expectation among regulated parties that 

EPA would not require the statutory targets to be met in 2014 and 2015, and that the market 

merely responded in the manner of a self-fulfilling prophecy. 

In providing these comments, these stakeholders took the view that the market is 

essentially unlimited in its ability to respond to the standards that EPA sets. That is, if EPA were 

to establish the applicable volume requirements at the statutory targets and by the statutory 

deadlines, the market would be able to meet those volume requirements. We disagree. The 

constraints discussed above, and in greater detail in the following sections, are both real and are 

expected to continue for at least the next several years, even as volumes produced and used are 

expected to grow. Our investigations clearly demonstrate that the market is not unlimited in its 

ability to respond to the standards that we set.

A review of the market response to the RFS standards in 2013 demonstrates that 

constraints on supply are real. In 2013 EPA had never used its waiver authorities to lower the 

statutory advanced and total renewable fuel volumes, and had not proposed to do so in its NPRM 

for the 2013 standards published on February 7, 2013. The market could have reasonably 

anticipated that EPA would maintain the statutory applicable volumes for calendar year 2013. 

Indeed, EPA’s final rule, published in August of 2013, maintained the proposed approach, and 

set percentage standards requiring the use of the statutory applicable volumes of advanced and 

total renewable fuel. Furthermore, unlike some other years when the biodiesel tax credit has 

been enacted late in a calendar year, and made retroactive to fuel produced in that year, in 2013 

the tax credit was enacted in January 2013 and, therefore, was in place to incentivize the 

production of biodiesel throughout the calendar year.72 Thus, in 2013, both tax policy and RFS 

signals were in place to incentivize large growth in renewable fuel use. As shown in the figures 

below, there was no sudden increase in supply after the 2013 standards were released on August 

 

71 Although EPA did not waive any renewable fuel requirements in 2013, EPA estimates that obligated parties will 

only be able to achieve compliance through substantial reliance on carryover RINs. 

72 Public Law 112-240
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 69 of 189

15, 2013, consistent with the indications that the market expected EPA to finalize standards 

requiring use of the statutory applicable volumes. There was a moderate increase in the supply 

of BBD at the end of 2013, which was coincident with both the expiration of the biodiesel tax 

credit and the end of the 2013 RFS compliance year. Supply of ethanol (the predominate source 

of D6 RINs) was essentially no different after August than it was before, and the supply of D5 

RINs actually decreased after August. The market had an opportunity to increase supply in order 

to reach the applicable 2013 standards, but did not do so in the timeframe that was available.73 

Figure II.E.1-1

Monthly Supply of D4 RINs in 2013

Figure II.E.1-2

Monthly Supply of D5 RINs in 2013

 

73 We have considered the possibility that the market did not fully respond to the 2013 RFS standards despite the 

availability of the biodiesel tax credit in 2013 because of the availability of carryover RINs. We believe that the 

benefit to obligated parties of maintaining their banks of carryover RINs in 2013 – especially in light of everincreasing RFS volume requirements in future years and uncertainty regarding how EPA may interpret its waiver 

authorities – would have led obligated parties to strongly favor use of 2013 RINs over banked carryover RINs. 

Thus, we do not believe that the availability of 2013 carryover RINs undermines our conclusion that the renewable 

fuel market was constrained in 2013.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 70 of 189

Figure II.E.1-3

Monthly Supply of D6 RINs in 2013

Some stakeholders said that the volume requirements for 2014, 2015, and 2016 that we 

proposed in the June 2015 NPRM reflected EPA's view that the various constraints represent 

absolute barriers to the expanded use of ethanol specifically or renewable fuel in general. This 

was not the view we expressed in the NPRM and it is not our view now. Instead, these 

constraints mean that increasing the supply of renewable fuel will require time, and that the 

statutory volumes cannot be met according to the schedule reflected in the statute. As stated in 

the NPRM, we do believe that markets have a demonstrated ability to overcome some constraints 

with the appropriate policy drivers in place given sufficient time, and that the RFS program can 

drive renewable fuel use. However, the market's ability to overcome constraints is not unlimited, 

nor do we think change can be instantaneous, and thus it is appropriate to consider both the 

potential of the market to respond to the standards we set when we assess the amount of 

renewable fuel consumption that can be achieved, and the limitations in that potential in 2016. 

Thus, we are setting the total renewable fuel volume requirement for 2016 at a level that takes 

into account both the constraints on supply and the ability of the RFS program to incentivize 

RFS stakeholders to overcome those constraints. 

The following sections discuss in further detail our assessment of broad categories of 

renewable fuel expected to contribute to the total supply of renewable fuel in 2016. We also 

discuss the particular constraints that we expect will be relevant in projecting the supply of these 

renewable fuels in 2016.

2. Projecting Ethanol Supply

Ethanol is the most widely produced and consumed biofuel, both domestically and 

globally. Since the beginning of the RFS program, the total volume of renewable fuel produced 

and consumed in the United States has grown substantially each year, primarily due to the 

increased production and use of corn ethanol. Prior to 2013 the primary constraints to the supply 

of ethanol were the amount of ethanol that could be produced and imported into the United 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 71 of 189

States, and the ability of the market to distribute the ethanol across the country. Virtually all 

existing retail infrastructure and vehicles were compatible with gasoline containing up to 10% 

ethanol, and therefore the ethanol supply grew with the production capacity of the domestic 

ethanol industry and the rapid build-out of the ethanol distribution and terminal blending 

capacity to supply E10. A combination of factors, including the demand certainty provided by 

the RFS and the ability to profitably market ethanol in E10 blends due to relatively high gasoline 

prices, relatively low corn prices, and the blenders tax credit (available through 2011), provided 

the economic incentive for the investment that led to rapid increases in ethanol production and 

distribution capacity, dramatically increasing the total supply of ethanol to vehicles.

However, as the gasoline market became saturated with E10 in 2013 and 2014, the 

constraints on the supply of ethanol began to change. The supply of ethanol supplied depends on 

the overall demand for gasoline as well as the percentage of ethanol blended into gasoline. In 

order for the supply of ethanol to increase it now needs to be sold in higher level blends, such as 

E15 or E85. These fuels are not compatible with much of the existing retail infrastructure and 

cannot be used in all vehicles. The low number of retail stations selling these higher level 

ethanol blends, along with poor price advantages for these higher level blends compared to E10, 

a limited number of FFVs, and less-than-ideal consumer interest in these fuels represent the 

biggest challenges to the continued growth of the supply of ethanol as a transportation fuel in the 

United States. As can be seen in Figure II.E.2-1 below, the rate of growth in the use of ethanol 

as a percentage of the motor gasoline market decreased dramatically as it reached an average 

concentration of 10% nationwide.

Figure II.E.2-1

Ethanol Concentration of Gasoline

Source: EIA's Short Term Energy Outlook

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

E10 blendwall
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 72 of 189

Since 2013, the number of FFVs in the fleet and the number of retail stations offering 

E15 and E85 have grown, and we believe that this growth has been influenced in part by the RFS 

program. However, this growth has been very modest. The number of retail stations offering 

E85 was about 3,000 by the end of 2014, representing only about 2% of stations nationwide.74 

There were about 14 million FFVs in the fleet in 2014, representing about 6% of all light-duty 

cars and trucks. However, with only about 2% of retail stations offering E85 only a minority of 

those FFVs had an E85 refueling station nearby. Additionally, with E85 generally priced higher 

than E10 on a cost per mile basis, only a fraction of the FFV owners with access to a refueling 

station offering E85 chose to purchase this fuel.75 These constraints are unlikely to change 

significantly in 2016, though we do expect some growth in each of these areas under the 

influence of the standards we set under the RFS program, and as a result of a recent USDA 

program that will provide $100 million to develop infrastructure for higher ethanol blends, as 

discussed in Section II.E.2.v. 

While the price of the RIN that is generated and assigned to a gallon of ethanol 

theoretically should allow E85 to be priced at a level to encourage consumers to purchase these 

fuel blends when available (cheaper than E10 on a per mile basis), data EPA has reviewed 

suggest this is unlikely in 2016. In the sections that follow we first discuss the data supporting 

our conclusion that the RIN is currently an inefficient mechanism for reducing the price for 

higher level ethanol blends at retail, and therefore unlikely to be able to significantly impact the 

supply of ethanol in the United States in 2016. We then discuss in detail our projected supply of 

E0 (which impacts the supply of ethanol by reducing the gasoline pool into which ethanol can be 

blended), E10, E15, and E85. We note that throughout this discussion we do not differentiate 

between ethanol produced from corn, sugarcane, or any other feedstock. This is because we 

believe that the supply of ethanol in 2016 will not be limited by the amount or types of ethanol 

produced, but rather by other constraints as discussed below. Therefore, in projecting the 

ethanol supply for the purpose of setting the total renewable fuel volume requirement, the 

feedstocks used to produce the ethanol and any particular constraints related to these individual 

feedstocks are not relevant considerations.

i. Ethanol Supply as E10 in 2016

Based on comments received in response to the NPRM, it is clear that the E10 blendwall 

is viewed differently by different stakeholders. Some stakeholders, most notably refiners, 

expressed the belief that the constraints on sales of higher ethanol blends such as E15 and E85 

are so substantial, and the time available to address those constraints for 2016 is so limited, that 

exceeding a pool-wide ethanol content of 10% is either unattainable or could occur only at great 

cost with corresponding increases in fuel prices and disruption to fuel supplies. Other 

stakeholders, primarily ethanol proponents, instead argued that substantially higher volumes of 

E15 and/or E85 can be reached in 2016 with available infrastructure, despite insufficient efforts 

in the past to expand infrastructure for E15 and E85. These stakeholders generally argued that 

higher standards would result in higher RIN prices, which in turn would result in greater price 

 

74 Source: DOE's Alternative Fuels Data Center.

75 E85 would need to be priced at least 22% below E10 to be equivalent on a cost per mile basis. Instead, E85 price 

discounts have been less than 18% for the last several years according to E85prices.com.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 73 of 189

discounting for E15 and E85 in comparison to E10 and thus higher sales of those higher ethanol 

blends. They further argued that higher RIN prices, even if significant, would not result in 

higher fuel prices to consumers.

Our view of the E10 blendwall falls between these two viewpoints. We believe that there 

are real constraints on the ability of the market to exceed a pool-wide ethanol content of 10%. 

However, these constraints do not have the same significance at all levels above 10% ethanol. 

Instead, for the state of infrastructure that can be available in 2016, the constraints represent a 

continuum of mild resistance to growth at the first increments above 10% ethanol and evolve to 

significant obstacles at higher levels of ethanol. This gradual nature of the impacts of the 

constraints is due to the fact that small increases in ethanol volumes above 10% are likely to be 

possible with changes in RIN prices, while larger increases are only possible with changes to 

infrastructure that cannot occur as quickly. The transition from mild resistance to significant 

obstacles occurs by degrees rather than all at once, and overcoming the constraints will likely 

require different solutions over different time periods. It is difficult to identify the precise 

boundary between volumes that can be achieved with mild difficulty in 2016 and those that 

likely cannot be achieved in that timeframe. Ultimately the market will determine the extent to 

which compliance with the annual standards is achieved through the use of greater volumes of 

ethanol or other, non-ethanol renewable fuels.

The volume requirements that we are setting today, particularly for 2016, are intended to 

result in pressure on the market to exceed the E10 blendwall, but we do not believe the 2016 

standards are capable of overcoming all constraints. Whether the market will respond to the 

standards we set by increasing the use of E15 - E85 is unclear, as it is a function of actions taken 

by various fuel market participants, including obligated parties, renewable fuel producers, 

distributors and marketers, gasoline and diesel retailers, and consumers. Nevertheless, the 

standards we are setting acknowledge that opportunities exist to exceed the E10 blendwall as 

described more fully in Section II.G below.

Many stakeholders, regardless of their views on whether the E10 blendwall can or should 

be a consideration in the determination of applicable volume requirements, made the implicit 

assumption in their comments that the total volume of ethanol that would be used was identical 

to the volume of non-advanced (i.e. conventional) renewable fuel that would be necessary. Not 

only is this assumption incorrect, but it oversimplifies the true nature of the standards and the 

process of determining appropriate levels for those standards. While the portion of the 2016 

cellulosic biofuel standard that we expect to be ethanol is only 20 million gallons, significantly 

larger volumes of ethanol may be used to meet the advanced biofuel volume requirement. 

Depending on how the market responds to the standards we set, total volumes of advanced 

ethanol could possibly reach several hundred million gallons as discussed in Section II.F. It is 

also likely that a portion of the renewable fuel pool that is not required to be advanced biofuel 

will be non-ethanol as evidenced by production and imports of conventional biodiesel and 

renewable diesel in the past. 

The amount of ethanol associated with the E10 blendwall (the volume of ethanol that 

could be consumed if all gasoline was E10) is driven by the total demand for gasoline, and thus, 

if all other considerations are equal, ethanol consumption will tend to increase if gasoline 

Commented [A35]: This sentence is problematic and not 

quite correct in light of the evidence of passthrough from 

RIN prices to E85 prices.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 74 of 189

consumption increases and ethanol consumption will tend to decrease if gasoline consumption 

decreases. In the NPRM we used a projection of 2016 gasoline demand from the May, 2015 

version of EIA's Short-Term Energy Outlook (STEO), as this was the most recent version 

available at that time. For this final rule we have used the October, 2015 version of the STEO, 

again because it is the most recent data available.76 As shown in the table below, projected 2016 

gasoline demand increased by about 1.4% between May and October, most likely driven by 

lower crude oil prices.

Table II.E.2.i-1

Projected 2016 Gasoline Demand and the E10 Blendwall

May, 2015 October, 

2015 

Difference

Demand for gasoline energy (Quad Btu) 16.617 16.852 +0.235

Equivalent volume of E10 (bill gal) 137,282 139,230 +1,948

E10 Blendwall (bill gal) 13,728 13,923 +195

In response to our proposed intention to use gasoline projections from EIA, several 

stakeholders indicated that EIA's projections of gasoline demand have historically tended to be 

lower than actual demand. They requested that we make an adjustment to EIA's projections to 

ensure that they are as accurate as possible. We investigated this issue and determined that by 

and large EIA's projections of gasoline demand have not, in fact, been lower than actual demand. 

As described in a memorandum to the docket, projected gasoline demand has more often been 

higher than actual demand, though the errors in demand projections were highly variable.77 Even 

so, we do not believe it would be appropriate for EPA to make adjustments to EIA projections to 

account for potential over- or underestimation of projected gasoline demand. EIA staff are the 

experts in the analyses required for these particular projections, and EPA does not have the data 

or expertise necessary to suggest changes to them.

ii. The Impact of RIN Prices on E85 Retail Prices

The RIN system is the mechanism established by EPA for obligated parties to 

demonstrate compliance with the standards, and is designed to provide obligated parties 

flexibility in the means they use to achieve compliance. The RFS program, acting through the 

mechanism of the RIN system, operates to provide an incentive for renewable fuel producers to 

increase the production of renewable fuels by, in effect, increasing the price blenders and 

obligated parties are willing to pay for renewable fuels.78 Under the RFS program, renewable 

fuel producers sell not only the fuels they produce, such as ethanol or biodiesel, but also the 

 

76 We received 2015 and 2016 transportation fuel demand projections from EIA's Adam Sieminski on September 16, 

2015, which included gasoline demand projections from the September 2015 STEO. However, we believe it is more 

appropriate to use gasoline demand projections from the more recent October 2015 STEO.

77 "Analysis of historical errors in projections of gasoline and distillate demand from EIA," David Korotney, 

memorandum to EPA docket EPA-HQ-OAR-2015-0111.

78 This is the case for years when the RFS standards are binding, or causing the market to consume renewable fuels 

in volumes beyond what they would otherwise choose to use, such as 2013. In years prior to 2013 where the RFS 

standard for total renewable fuel were not binding, the RINs generally reflect transaction costs. 

Deleted: STEO

Deleted: STEO

Commented [A36]: EIA does not publish STEO data on 

gasoline demand in Quads. STEO data are published in 

million barrels per day. The commenter could not replicate 

the calculations of 2016 Demand for gasoline energy in 

quads or Equivalent volume of E10 in billion gallons from 

the STEO data in May and October 2015. EPA should 

remove STEO from the column headings in the table (as 

shown in strikeout below) and source the table as “EPA 

calculations from STEO.”

Commented [A37]: Recommend including in the 

discussion of RIN prices and their impact on E85 retail 

prices, that blenders, which are often owned by obligated 

parties, play an important role in making RIN prices an 

inefficient mechanism to stimulate E85 sales.

The commenter asks whether there can be a discussion of 

ways to get the passthrough rate from RINs to E85 retail 

prices to increase (this reviewer appreciates the discussion 

on page 76, but would like it to include the Knittel et al. 

(2015) NBER Working Paper, which is probably the best 

evidence on pass-through available.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 75 of 189

RINs that are “assigned” to the renewable fuel. As the demand for RINs increases based on the 

obligations applicable to producers and importers of gasoline and diesel, the willingness of the 

market to pay for renewable fuels and the RINs assigned to them also increases. When working 

efficiently, this system allows renewable fuel producers to continue to profitably market 

renewable fuel at times that would otherwise result in negative margins, such as when the price 

of feedstock or other inputs to renewable fuel production are unusually high, the price of the 

petroleum fuels that renewable fuels replace is unusually low, or when market demand for 

renewable fuel is low. In this way the RFS program, through the RIN system, also assists 

renewable fuel producers seeking to finance the construction of new facilities, especially 

facilities capable of producing cellulosic or advanced biofuels, by providing certainty that there 

will be a market for increasing volumes of renewable fuels.

The RIN system should also incentivize the development of the renewable fuel 

distribution infrastructure by helping to decrease the net cost of renewable fuels. As mentioned 

above, when fuel blenders or obligated parties purchase renewable fuel directly from renewable 

fuel producers this fuel generally comes with an assigned RIN. When a fuel blender blends the 

renewable fuel with petroleum-based fuel to create finished transportation fuel, the blender is 

able to separate and sell the RIN that was previously assigned to the renewable fuel. Whatever 

price the fuel blender or obligated party receives when they sell the separated RIN can be 

thought of as reducing the net purchase price of the renewable fuel. For example, if a fuel 

blender purchases a gallon of ethanol with an attached RIN for $1.50 and, after blending the 

ethanol to create transportation fuel, sells the RIN for $0.50, the blender has effectively paid 

$1.00 for the gallon of ethanol without the RIN. The higher the price received for the RIN, the 

lower the effective cost of the renewable fuel. Higher RIN prices therefore enable fuel blenders 

to market finished fuels that contain renewable fuel components at lower prices by allowing 

them to purchase renewable fuels for a lower effective price. A fuel blender can choose not to 

reduce the price of the blended fuel and keep the value associated with the RIN as profit, or they 

can attempt to increase their sales volumes and market share by passing along the lower effective 

purchase price of the renewable fuel to the customers in the price of their fuel blends.79 By 

increasing the potential profitability of blending renewable fuels, higher RIN prices can 

incentivize the build out of the infrastructure necessary to blend and distribute renewable fuel 

blends as parties seek to enter or expand their position within this market.80

Finally, the RFS program, operating through the RIN system should also increase the 

consumption of renewable fuels by ultimately decreasing the cost of renewable fuel blends to 

consumers relative to the cost of fuel blends that do not contain renewable fuels. RIN prices can 

be used by blenders to decrease the effective cost of renewable fuel used to create transportation 

fuel. As more market participants enter the renewable fuel blending and distribution 

marketplace, and consumers learn to accurately compare the cost of E10 and other higher-level 

 

79 In competitive markets, such as the market for E10, fuel blenders must reflect the lower effective prices of 

renewable fuel (ethanol) in the price of the E10. For emerging markets, such as E85, there may be greater 

opportunities for fuel blenders to withhold profit due to a lack of market competition until such a time as other 

parties enter the E85 market.

80 Although not directly relevant to the establishment of the final standards, for further background information on 

EPA’s understanding of the RIN and renewable fuel market dynamics see "A Preliminary Assessment of RIN 

Market Dynamics, RIN Prices, and Their Effects," Dallas Burkholder, Office of Transportation and Air Quality, US 

EPA. May 14, 2015, EPA Air Docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 76 of 189

ethanol blends, over some period of time the competition among renewable fuel blenders and 

distributors should result in a greater portion of the reduced effective cost of renewable fuel 

blends enabled by the sale of the RIN to be passed on to fuel consumers. Retail prices for 

transportation fuel that contains renewable fuels should then reflect these cost reductions relative 

to transportation fuel containing lower volumes of renewable fuel (or no renewable fuel) in 

proportion to their renewable fuel content; transportation fuel containing a greater percentage of 

renewable fuels should be priced lower than transportation fuel containing a lesser percentage of 

renewable fuel. Motivated by the lower fuel prices for transportation fuel containing greater 

renewable fuel content (such as E85) relative to fuels containing less renewable fuel (such as 

E10), consumers who own flexible fuel vehicles (FFVs) will then choose to purchase increasing 

volumes of renewable fuel. If the price discount for renewable fuels is great enough for a long 

enough period of time, more consumers may also be motivated to purchase vehicles capable of 

utilizing fuels containing higher percentages of renewable fuels, such as FFVs.

Several commenters pointed to the ability of RIN prices to reduce the price of fuels 

containing higher concentrations of renewable fuels, such as E85, as a primary justification for 

establishing a higher total renewable fuel standard. They claimed that if EPA established a 

higher standard than proposed, RIN prices would rise, retail prices for E85 would fall relative to 

those for gasoline, and consequently consumers would purchase greater volumes of E85. In 

effect, these comments said, the RIN mechanism would ensure that greater volumes of 

renewable fuel would be consumed, the renewable fuels market would expand, and sufficient 

RINs would be generated to meet the higher standards. Some commenters also noted that since 

EPA agreed that higher RIN prices would not be expected to impact E10 prices there would be 

no economic harm in setting a higher total renewable fuel standard, and that this action was 

necessary in order to drive renewable fuel consumption beyond the E10 blendwall. In contrast, 

other commenters claimed that higher RIN prices would not have the desired effect of increasing 

the consumption of renewable fuels, at least not in the short term, and that high RIN prices could 

have adverse economic impacts, including higher diesel fuel prices, as EPA has already 

acknowledged.

If higher RIN prices, which would likely result from a higher total renewable fuel 

standard, are to lead to substantial increases in E85 consumption, two independent events must 

occur. First, the higher RIN prices must lead to lower E85 retail prices. If this does not happen 

consumers would have no incentive to purchase additional volumes of E85 as a result of higher 

RIN prices. Second, FFV owners must respond to these lower prices by purchasing E85 instead 

of E10 when E85 is available. Authors such as Babcock and Pouliot, who have written about the 

ability for RINs to drive significant increases in E85 sales volumes, make optimistic assumptions 

about the pass-through of RIN prices to E85 prices and the responsiveness of consumers to E85 

prices.81

EPA examined available data in an attempt to determine whether or not higher RIN 

prices resulted in lower E85 prices at retail, and whether lower E85 retail prices lead to 

substantial increases in E85 sales, as economic theory would suggest would be the case when 

FFV owners receive better value for purchasing E85 rather than E10. However, our analysis 

 

81 Babcock, Bruce A. and Sebastien Pouliot. Feasibility and Cost of Increasing US Ethanol Consumption Beyond 

E10. Card Policy Briefs, January 2014. 14-PB 17.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 77 of 189

suggests that the market was not sufficiently responsive to higher RIN prices to drive large 

increases in E85 sales volumes. For instance, we found that between January 2013 and July 

2015 only 44% of the RIN value was passed on to E85 customers in the form of lower E85 retail 

prices.82 We also found that while sales volumes of E85 did increase as the price discount for 

E85 relative to E10 increased, these sales increases were both less dramatic than many have 

assumed, and perhaps more importantly, did not increase sharply when the price discount 

exceeded energy parity, as others, including Babcock and Pouliot have assumed.83 These 

observations lead us to conclude that if EPA were to increase the total renewable fuel volume 

requirement significantly, we would expect to see sharply higher RIN prices, but sales volumes 

of E85 would be expected to see only modest increases. Moreover, setting the 2016 volume 

requirement for total renewable fuel at the statutory target would very likely result in the supply 

of renewable fuels falling far short of that target.

While economic theory and the illustrations above support the idea that RINs can serve as 

a mechanism to increase the production, distribution, and consumption of renewable fuels, it is 

important to note that this result is dependent on the marketplace working both efficiently and 

quickly. In reality, there is a timing component associated with each of the steps outlined above. 

Renewable fuel producers and investors must see a sustained, profitable market for renewable 

fuels before they will be willing to invest in the construction of additional fuel production 

capacity, which may take years to construct and bring online. Fuel blenders and distributors 

must see sustained profit opportunities before they are willing to invest in new infrastructure to 

increase their capacity to blend and distribute renewable fuels. Market competition must 

increase before fuel blenders and distributors are willing to pass along the reduced effective price 

of renewable fuel (in essence, the value of RINs) to consumers at retail. New fueling 

infrastructure will need to be built to facilitate the growth in sales of fuels containing an 

increasing percentage of renewable fuel. And as exposure to renewable fuels increases, it will 

take some time for consumers to learn to identify value in fuel blends containing higher 

proportions of renewable fuels, as well as their vehicle’s ability to handle these fuel blends and 

where they are available for purchase.

This suggests that while the RFS program can be effective at increasing the renewable 

content of transportation fuels over time, it likely cannot substantially increase the available 

supply of renewable transportation fuels to consumers in the United States to the volumes 

envisioned by Congress in the short term. The program, as Congress clearly indicated, is 

intended to grow over a period of years. Market participants require long term certainty in 

EPA’s approach to establishing renewable fuel standards to allow them to effectively plan for the 

most efficient and least costly ways to provide the needed fuels and comply with the standards. 

EPA remains committed to promoting renewable fuel production and use in the United States,

and we believe the RFS program will be effective in achieving this end. Due to the current state 

 

82

 “An Assessment of the Impact of RIN Prices on the Retail Price of E85,” Dallas Burkholder, Office of 

Transportation and Air Quality, US EPA. November 2015. EPA Air Docket EPA-HQ-OAR-2015-0111.

83 Because E85 contains approximately 22% less energy per gallon than E10, economic theory would suggest that 

minimal volumes of E85 would be sold when the price discount for E85 relative to E10 was less than 22% and that 

sharply increasing sales volumes would occur when the price discount exceeds 22%. For more information on the 

observed relationship between E85 retail pricing and E85 sales volumes, see "Correlating E85 consumption volumes 

with E85 price," memorandum from David Korotney to EPA Docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 78 of 189

of the renewable fuel production, distribution, and consumption marketplace, we believe the 

required volumes of renewable fuel must be reduced below the statutory levels in the immediate 

near term. An approach that acknowledges supply constraints when determining the appropriate 

volume requirements is necessary, is consistent with the statute and Congressional intent, and is 

the intended outcome of this action.

iii. Ethanol Supply as E85 in 2016

While the use of one gallon of E15 can increase the amount of ethanol used by about 

50% in comparison to an energy-equivalent gallon of E10, the use of one gallon of E85 can 

increase the amount of ethanol over that in an energy-equivalent gallon of E10 by about a factor 

of nine.84 As a result, many stakeholders focused on the potential for increases in sales of E85 to 

quickly and significantly increase total ethanol consumption. Stakeholders who believed that our 

proposed volume requirements were too high similarly focused on E85 as being an impractical 

means of exceeding the E10 blendwall.

All stakeholders agreed that actual sales of E85 in the past have been low. A number of 

parties referenced certain E85 estimates from EIA of about 77 million gallons in 2014. This 

estimate was based on data collected from two sources: refiners and blenders, and ethanol 

production facilities.85 After further investigation, however, we believe that the EIA estimate is 

lower than actual E85 use. EIA’s Bulk Terminal and Blender Report is administered only to 

entities with at least 50,000 barrels of product storage capacity, so production at terminals, 

ethanol production facilities, or blenders that do not meet this threshold is not reported to EIA. 

EIA also does not collect information on E85 produced using reformulated gasoline or natural 

gasoline as the petroleum based component.86 We believe that E85 produced using these 

petroleum blendstocks represents a significant portion of the total E85 produced in 2014. When 

considering the E85 production volumes reported to EIA in 2014 in light of the potential for 

production of E85 not covered by EIA’s surveys, we believe that actual E85 sales were closer to 

about 150 million gallons in 2014. Details of our analysis can be found in a memorandum to the 

docket.87

Although 150 million gallons is about twice as high as data calculated from EIA, it still 

does not indicate an overall preference among FFV owners for E85 when E85 has been 

available. Indeed, based on other comments received it is clear that the experience at retail has 

been mixed. Some retailers, such as 3G Energy, found that E85 sales were good and they were 

 

84 We have assumed that the ethanol content of E85 is 74% on average, consistent with the approach taken by EIA. 

One gallon of E85 would replace 0.79 gallon of E10 due to the energy content difference. Ethanol content of one 

gallon of E85 would be 0.74 gal, while ethanol content of 0.79 gal of E10 would be 0.079 gal. 0.74/0.079 = 9.4.

85 See EIA-810 form, Part 5, where refiners and blenders indicate production of Finished motor gasoline, 

Conventional, Greater than ED55, htt://www.eia.gov/survey/form/eia_810/form.pdf, and EIA-819 form, Part 6, 

where ethanol producers report blending to produce motor fuel, conventional, greater than Ed55, 

http://www.eia.gov/survey/form/eia_819/form.pdf.

86 As evidence for the underestimate of E85 production at ethanol production facilities, we note that the estimate for 

E85 production in 2009 was -228 thousand barrels. 

87 “Estimating E85 Consumption in 2013,” Dallas Burkholder, Office of Transportation and Air Quality, US EPA. 

November 2015. EPA Air Docket EPA-HQ-OAR-2015-0111.

Deleted: the estimate provided by

Commented [A38]: EIA did not provide an E85 

estimate. It is our understanding that EPA has not drafted 

the docket document identified in footnote 85 titled "2014 

E85 estimate from EIA?” Suggest referencing what is in the 

EIA forms instead.

Deleted: "2014 E85 estimate from EIA," docket EPA-HQOAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 79 of 189

able to make a profit from selling it. Others, such as U.S. Ethanol, found E85 sales to be very 

poor and have consequently converted E85 tanks to other uses. There was no consistent trend 

among comments provided by parties attempting to sell E85 on the attractiveness of the product 

to FFV owners.

Most stakeholders agreed that one important factor in low historical sales of E85 is the 

small number of retail stations offering it. According to DOE's Alternative Fuels Data Center, 

the number of E85 stations reached 2,941 in August of 2015. While the growth in E85 stations 

was substantial in late 2010 and early 2011 - equivalent to about 400 new stations per year - in 

the last several years growth in the number of E85 stations has been considerably slower at about 

120 per year. 

A number of stakeholders cited a recent grant program sponsored by USDA that is 

designed to provide a total of $100 million for updated and expanded infrastructure at retail for 

higher level ethanol blends.88 This is an important program that not only demonstrates the U.S. 

commitment to expanding the use of renewable fuels, but helps to boost private investment in 

infrastructure by providing matching funds. It will undoubtedly increase the number of retail 

stations offering E85, but it is unclear how many new E85 stations would result from it in 2016. 

Based on the criteria for applicants, the monies can be used for either blender pumps or 

dedicated E15 or E85 pumps, or for installing new underground storage tanks. And while the 

infrastructure changes are required to be completed by the end of 2016, there are also 

opportunities for extensions of up to two additional years. If the full program were focused on 

increasing the number of retail stations offering E85, it might be possible to increase the number 

of E85 stations in 2016 by an amount that rivals the dramatic increases seen in 2010 - 2011 –

about 400 new E85 stations per year. This would bring the total number of stations to about 

3,300. However, USDA has indicated that the primary focus of the program is blender pumps 

for E15, not E85.89 Thus it is not possible to make a precise projection at this time of the impacts 

of this grant program on the number of E85 stations that will be in operation in 2016.

Even if the number of E85 stations did reach 3,300 in 2016, it would represent an 

increase of only 12% in comparison to those in operation as of August, 2015. Absent a more 

robust analysis of how access to E85 affects sales, it would be reasonable to assume that a 12% 

increase in the number of E85 stations would result in overall sales of E85 increasing by 12%, all 

other things being equal. However, many stakeholders pointed to the power of high-priced RINs 

to motivate consumers to use more E85 and argued that larger growth was possible from the 

impact of high-priced RINs than from the growth in the number of E85 stations. More 

specifically, many ethanol proponents claimed that increasing the volume requirements above 

the levels proposed in the NPRM, even up to the statutory targets, would increase RIN prices, 

which in turn would translate into a larger retail price discount for E85 in comparison to 

gasoline. This larger price discount would make E85 more attractive to FFV owners, and thus 

sales of E85 would increase beyond a level that is merely proportional to the number of E85 

stations.

 

88 "USDA grant program - Biofuel Infrastructure Partnership", docket EPA-HQ-OAR-2015-0111.

89 "USDA announces state finalists for the Biofuel Infrastructure Partnership," docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 80 of 189

As discussed in more detail in Section II.E.2.ii, we agree generally that the market could 

theoretically be expected to work in this way in response to higher standards. However, we have 

investigated the specific mechanisms involved and have concluded that the process is far more 

constrained in the immediate future than most ethanol proponents believe it to be. These 

constraints, discussed further below, make it inappropriate to estimate total potential E85 

consumption based on the consumption capacity of all FFVs, or even just those FFVs with 

reasonable access to E85. It is similarly inappropriate to assume that the E85 throughput at a 

given retail station can be the same as typical throughput rates for E10. Such estimates 

demonstrate what is physically possible, not what is likely to occur given the way that the market 

actually operates under the influence of high RIN prices. 

Based on an analysis of available data, we have determined that at this point in the 

market’s development, the constraints on the ability of applicable standards to drive increased 

consumption of E85 in 2016 are twofold:

 Higher RIN prices are not likely to produce dollar-for-dollar equivalent reductions in 

E85 retail prices under current circumstances wherein the number of E85 stations is 

too few to compel competition between them

 Reductions in E85 retail prices are associated with only moderate increases in E85 

sales to FFV owners

As discussed in a memorandum to the docket, we found that only a minority of the value of RINs 

has been passed on to FFV owners in the past in the form of lower E85 retail prices.90 This 

effect appears to be due to the fact that there is often little incentive for wholesalers to pass the 

full value of the RIN on to retailers in the form of lower E85 prices, and retailers can maximize 

their overall profits by retaining much of the value of the RIN that they do receive rather than 

passing that value on to customers in an effort to increase sales of E85.

We have also found that greater E85 price discounts relative to gasoline have not been 

associated with the substantial increases in E85 sales volumes that would be needed to reach the 

total E85 consumption levels that some stakeholders said are possible. Based on an analysis of 

E85 consumption in five states and the E85 price reductions relative to gasoline in those states, 

we estimated that, if the estimated relationship between E85 prices and consumption represents 

consumer demand nationally, increasing the E85 price reduction from the 2014 nationwide 

average of 17.5% to 30% would have increased total E85 consumption to about 200 million 

gallons, an increase of only 33%. A recent paper published by Babcock and Pouliot estimated 

similar sales volumes for these price reductions, projecting that consumers would consume about 

250 million gallons of E85 if it was priced at parity on a cost-per-mile basis with E10 

(approximately 22% lower on a price-per gallon basis).91

 

90 “An Assessment of the Impact of RIN Prices on the Retail Price of E85,” Dallas Burkholder, Office of 

Transportation and Air Quality, US EPA. November 2015. EPA Air Docket EPA-HQ-OAR-2015-0111

91 Babcock, Bruce and Sebastien Pouliot. How Much Ethanol Can Be Consumed in E85? Card Policy Briefs, 

September 2015. 15-BP 54.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 81 of 189

Figure II.E.2.iii-1

Estimated Nationwide Relationship Between E85 Price Reductions and Consumption in 2014

It is possible that significant increases in the number of retail stations offering E85 could help to 

increase E85 consumption. It is also possible that the relationship between E85 consumption and 

prices in the five states analyzed is not indicative of consumer responses in other states, but 

instead the consumer responses in other states could be more dramatic. We examined the 

potential impacts of these factors and determined that collectively it may be possible for 

nationwide E85 consumption to reach as high as 400 million gallons in 2016. This volume could 

only occur if all relevant factors were extremely favorable, and we do not consider this to be a 

likely outcome in 2016. Further discussion of these analyses can be found in a memorandum to 

the docket.92

Our observations and analysis lead us to conclude that if EPA were to dramatically 

increase the total renewable fuel volume requirement for 2016 above the level we proposed, in 

the near term we would expect to see sharply higher RIN prices, but this would not translate into 

dramatically higher E85 sales volumes in the near term. However, sustained higher RIN prices 

would, over the longer term, be expected to provide greater incentive for the market to expand 

infrastructure.

iv. E0 Demand in 2016

One of the ways that the RFS program can increase the supply of renewable fuels in the 

United States is by incentivizing the market to continue to transition from E0 (gasoline 

containing no ethanol) to E10 and other higher level ethanol blends. While the RFS program 

provides a significant economic incentive for this transition, the continued availability of E0 in 

certain markets is also something that we believe we must consider in determining the supply of 

ethanol in 2016. E0 continues to be marketed in many parts of the country, often at a significant 

cost premium to E10, including in the Midwest where ethanol is most readily available at the 

lowest cost. In the NPRM we discussed the potential for ongoing use of E0 through 2016 and 

 

92 "Correlating E85 consumption volumes with E85 price," memorandum from David Korotney to EPA Docket 

EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 82 of 189

into the future. We anticipated that E0 use would remain fairly limited and would tend to 

decrease over time given the widening use of ethanol overall. We also high-lighted one 

particular market segment, recreational marine engines, that we believed would be particularly 

difficult to transition from E0. While most nonroad engines in use today can operate on E10, 

recreational marine engines are a potentially special subcategory. Because such engines are used 

in a water environment there is a greater potential for water contamination of the fuel. For 

gasoline that contains ethanol, the water is more likely to separate from the gasoline and cause 

engine damage. As a result, some recreational marine engine owners seek out E0. We believe 

that we should take into consideration the ongoing preference for some E0 in this context.

In the NPRM we discussed our investigation into the volumes of E0 that are in demand 

by owners of recreational marine engines. We expressed our view that it is most likely that any 

recreational marine engines refueled at retail service stations would use only E10 since E0 is 

rarely offered at retail. Moreover, only a small minority of recreational marine engines refuel at 

marinas where E0 is more likely to be available. Based on this assessment, we estimated that 

about 124 million gallons of E0 would be consumed by recreational marine engines in 2016. We 

estimated that the impact of this volume of E0 used in such applications on the total supply of 

renewable fuel in 2016 would be very low, and would likely be offset by the small expected use 

of E15. As a result, we omitted E0 and E15 from the scenarios described in Table II.D.2-2 of the 

NPRM. 

Stakeholders that commented on this topic generally agreed that E0 will continue to exist, 

but argued that our estimates of the likely volumes of E0 were too low. For instance, in their 

joint comments on the NPRM, the American Petroleum Institute and the American Fuel and 

Petrochemical Manufacturers (API/AFPM) suggested that there is ongoing demand for E0 at a 

level of at least 3% of the total gasoline pool. This would be the equivalent of about 4 billion 

gallons of E0, considerably higher than the 124 million gallons we estimated in the NPRM. 

They based this position on data from EIA on the supply of non-ethanol conventional gasoline 

from refineries, importers, and blenders, corrected to account for exports and stock changes. We 

investigated the EIA data on which the API/AFPM comments were based, and concluded that it 

is not an appropriate basis for determining the amount of E0 actually sold at retail, and thus 

cannot be used to estimate likely E0 sales. While the EIA data at issue does take into account the 

production of E10 by large terminals from E0 supplied by refiners, it does not account for E10 

produced downstream at smaller facilities, truck blending, and blending at retail. Given that 

there are a number of states that require the supply of E0 at the wholesale level explicitly to 

permit downstream blending with ethanol, the estimates of E0 supply referenced by API/AFPM 

overestimate the potential demand for E0 at retail.

In response to the NPRM, a number of organizations disagreed with our assessment of 

the potential volume of E0 consumed by recreational marine engines. Several stakeholders 

pointed to EPA's own NONROAD model as providing much higher estimates of total gasoline 

consumption by these engines. We agree that total gasoline consumption by recreational marine 

engines is substantial - about 1.55 billion gallons according to a recent estimate from the EPA's 

NONROAD model.93 However, we disagree that all of this volume is E0, and no stakeholders 

provided any data on actual consumption of E0 by recreational marine engines. Instead, 

 

93 "NONROAD estimate of fuel use in recreational marine," docket EPA-HQ-OAR-2015-0111.

Deleted: EIA 

Commented [A39]: Comment on E0 estimate that is 

attributed to EIA but an EIA estimate does not exist.

Deleted: s
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 83 of 189

stakeholders pointed to anecdotal evidence that owners of recreational marine engines 

preferentially seek out E0. One stakeholder referenced data purporting to show that states with 

the greatest number of retail stations offering E0 tend to also be states with the greatest number 

of registered boats. After reviewing these data we concluded that a weak correlation does exist, 

but that it nevertheless provides no straightforward mechanism to quantitatively determine the 

volume of E0 consumed by recreational marine engines. Notably, the same data suggest that not 

all marinas may offer E0. As described in a memorandum to the docket, we considered several 

different approaches to estimating the volume of E0 consumed by recreational marine engines.94

Based on the information provided by stakeholders and our own analyses, we believe that 

the volume of E0 consumed by recreational marine engines or otherwise demanded by the 

marketplace could be as high as several hundred million gallons in 2016. As a result, we have 

included some estimates of E0 in the volumes scenarios described in Section II.G below. Those 

scenarios demonstrate that our final volume requirements can be met even in cases where some 

volume of E0 remains in the marketplace.

v. Ethanol Supply as E15 in 2016

In the NPRM, we discussed the fact that E15 is approved for use in model year 2001 and 

newer motor vehicles, but that we expected the volume of E15 used in 2016 to be low. We 

based this assessment on the fact that the number of retail stations offering it at the time of the 

NPRM was only about 100 out of the approximately 152,000 retail stations in the U.S. We 

estimated that, at most, the use of E15 in 2016 would increase total ethanol consumption by only 

about 10 million gallons. Since this volume was far lower than the volume requirements under 

consideration, and its impact in our analysis would likely be offset by the small expected use of 

E0, we omitted E0 and E15 from the scenarios described in Table II.D.2-2 of the NPRM. 

While some stakeholders agreed with our assessment, others said that we had 

significantly underestimated the volume of E15 that could be consumed in 2016, and that doing 

so biased our proposed volume requirements low. These stakeholders, including the American 

Coalition for Ethanol and Growth Energy among others, pointed to both the large number of 

vehicles that are legally permitted to use E15 and opportunities for expanding the number of 

retail stations that offer E15.

The number of vehicles that are legally permitted to use E15 is large. Model year 2001 

and later vehicles comprise about 85% of the current in-use fleet, or about 195 million vehicles. 

These vehicles have a total annual gasoline consumption capacity of more than 120 billion 

gallons, so changing their fuel consumption type from E10 to E15 could increase total ethanol 

consumption by more than 6 billion gallons. However, as pointed out by several stakeholders, 

being legally permitted by EPA to operate on E15 for emission compliance purposes under the 

CAA does not necessarily enable expanded use of E15. These stakeholders highlighted that the 

operator's manuals and manufacturer warranties for vehicles manufactured before 2012 make no 

mention of E15 because E15 did not exist at the time that those vehicles were manufactured. 

 

94 "Estimating E0 use in recreational marine engines," memorandum from David Korotney to docket EPA-HQOAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 84 of 189

Manufacturers have been increasingly citing E15 as an acceptable fuel in owner's manuals for 

various models since 2012, but as of today these statements are not universal for all makes and 

models. Whether these facts would cause some vehicle owners to avoid E15 is not clear. This 

situation is similar to the historical situation with E10. E10 has been permitted under the CAA to 

be used in all highway vehicles and nonroad engines for many years. Nevertheless, it took years 

for the vehicle manufacturers, especially the nonroad engine manufacturers, to warrant the use of 

E10 in their products.

Regardless, we do not believe that the number of vehicles that are legally permitted to use 

E15, or the number of 2001 or later model year vehicle owners who would choose to use it, is a 

predominant factor in determining the volume of E15 that is likely to be consumed in 2016. 

Instead, it is the number of retail stations offering E15 in 2016 that is more likely to determine 

how much E15 is actually consumed. In the time since E15 was approved for use, the number of 

retail stations offering E15 has only grown to about 120, or about 0.1% of all retail stations, 

based on information collected by the RFG Survey Association.95 Based on comments received 

from retail station owners, this low number of retail stations offering E15 is most likely due to 

liability concerns. We stated our belief in the NPRM that the number of retail stations offering 

E15 is unlikely to increase dramatically by the end of 2016. While a recently implemented 

program by USDA will increase the number of retail stations offering higher ethanol blends, as 

discussed more fully below, based on other information provided by stakeholders we continue to 

believe that the number of retail stations likely to offer E15 in 2016 is unlikely to increase fast 

enough to provide a significant increase in total ethanol consumption in 2016.

Some stakeholders said that the small number of retail stations currently offering E15 is 

not relevant when making estimates of potential E15 sales for 2016. They claimed that the 

equipment at most retail stations is already compatible with E15, and typically cited two studies 

as the basis for claiming that the number of stations offering E15 could expand significantly in 

2016: one by the National Renewable Energy Laboratory (NREL), and another by Stillwater 

Associates.96,97 These stakeholders argued that the number of retail stations offering E15 could 

expand by many thousands by the end of 2016 if EPA were to create the appropriate incentives 

by setting the applicable volume requirements much higher than proposed.

In evaluating the potential for expansion of E15 offerings at retail, we think it is 

important to consider the views of those whose business entails making determinations about 

which fuels to offer at retail. This perspective was provided by the Petroleum Marketers 

Association of America, the Society of Independent Gasoline Marketers of America, and the 

National Association of Convenience Stores. These stakeholders made it clear that retailers will 

in general offer any fuel that has the potential for generating profit. However, in the specific 

case of E15, there are liability concerns that make it less likely to be offered. 

 

95 "Stations registered to offer E15," docket EPA-HQ-OAR-2015-0111.

96 K. Moriarty and J. Yanowitz, "E15 and Infrastructure," National Renewable Energy Laboratory, May 2015. 

Attachment 3 of comments submitted by the Renewable Fuels Association.

97 Stillwater Associates, "Infrastructure Changes and Cost to Increase RFS Ethanol Volumes

through Increased E15 and E85 Sales in 2016," July 27, 2015. Submitted with comments provided by Growth 

Energy.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 85 of 189

It may be the case that much of the equipment at many retail stations is compatible with 

E15, as argued in the NREL and Stillwater studies. But stakeholders arguing that there is greater 

E15 potential than we assumed in the NPRM oversimplify the situation. In their comments, 

stakeholders representing retail like those mentioned above clarified that compatibility with E15 

is not the same as being approved for E15 use. To be approved, all retail equipment must be 

listed by a nationally recognized testing laboratory as being compatible with the fuel that is being 

stored and dispensed. The use of any unapproved equipment to offer E15, even if that equipment 

is technically compatible with E15, would mean that the retailer is assuming liability for 

equipment damage. Few retailers would be willing to assume such liability, according to 

comments submitted by their national associations. This issue is of particular concern for 

underground storage tanks and associated hardware, as the documentation for their design and 

the types of materials used, and even their installation dates, is often unavailable.

Insofar as equipment can be verified as being compatible with E15 and is approved as 

such by a testing laboratory such as Underwriter's Laboratory, many retailers are still left with 

significant concerns about liability for misfueling. Notwithstanding EPA regulations that require 

pump labeling, a misfueling mitigation plan, surveys, product transfer documents, and approval 

of equipment configurations, retailer associations indicated that many retail stations owners are 

nevertheless concerned about litigation liability for misfueling, either for vehicles manufactured 

before 2001 or for nonroad engines. This concern creates a disincentive for many retailers to 

offer E15. While such disincentives are not insurmountable, they do represent a constraint that 

we must take into consideration.

Apart from retail stations that may already have equipment that could be used to offer 

E15, some stakeholders pointed to the potential for new equipment to be installed at retail. There 

are a number of companies intending to add E15 dispensing capabilities to retail stations. These 

include Kum & Go, Sheetz Convenience Stores, Murphy USA, and MAPCO Express, Inc. 

Cenex, Petro Serve USA, and Protec Fuels. However, even if all planned installations occurred 

by the end of 2016, they would only expand the number of retail stations offering E15 by a few 

hundred. The U.S. Department of Agriculture also has a grant program called the Biofuel 

Infrastructure Partnership (BIP) which will provide $100 million to more than 1,400 retail 

stations to add the equipment necessary to offer higher ethanol blends, primarily E15.98 This 

program not only demonstrates the U.S. commitment to expanding the use of renewable fuels, 

but helps to boost private investment in infrastructure by providing matching funds. However, it 

is not clear how many additional stations will be able to offer E15 as a result of the BIP program 

in 2016 specifically, since the program provides for extensions of the equipment installation 

timelines into 2018. Even if most of those 1,400 retail stations were upgraded to offer E15 by 

the end of 2016, those 1,400 stations would not be offering E15 for all of 2016. Instead, there 

would be a ramp up of stations offering E15 throughout 2016, from the current level of 120 at 

the beginning of the year to about 1,400 by year's end. Effectively, then, only about 700 would 

be offering E15 for all of 2016. If all of these retail stations also offered E10, and the fuel 

 

98 "USDA announces state finalists for the Biofuel Infrastructure Partnership," docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 86 of 189

throughput was the same for both E10 and E15 at each retail station, the total increase in ethanol 

consumption due to increased use of E15 would be about 20 million gallons in 2016.99

We do not believe that the core concerns retailers have with liability over equipment 

compatibility and misfueling would change if the RFS volume requirements were increased 

significantly. Therefore, setting higher volume requirements would be unlikely to result in 

dramatic increases in the number of additional retail stations offering E15 in 2016 beyond those 

that may be upgraded through USDA's BIP program. As a result, we do not believe that the E15 

expansion can occur on the scale and timeframe that ethanol proponents believe it can. 

However, we do believe that retail infrastructure can and will change to offer more E15. To the 

degree that E15 is used, the volume of E85 that might be needed to reach a given volume of 

ethanol supply above the E10 blendwall would be less. Therefore, in the scenarios described in 

Section II.G below, we note that E15 could be used in addition to E85 to result in ethanol use 

above the E10 blendwall.

vi. Total Ethanol Supply in 2016

The total volume of ethanol that can be supplied in 2016 is a function of the respective 

volumes of E10, E15, and E85 that we believe can be supplied, while accounting for some E0. 

Assuming that the total demand for gasoline energy is independent of the amounts of each of 

these types of fuel (16.85 Quadrillion Btu based on the October, 2015 version of EIA's ShortTerm Energy Outlook), estimating the volumes of E0, E15, and E85 that will be supplied 

provides an estimate of the remaining portion of the gasoline fuel pool which is E10. 

As discussed earlier, we continue to believe that the volumes of E0 that are both in 

demand and needed to address potential water contamination in recreational marine engines will

be very small in comparison to total gasoline demand. While information provided by 

stakeholders was not sufficient to permit us to precisely estimate E0 volumes, we investigated 

several different approaches in a memorandum to the docket that resulted in a range of about 100 

- 300 million gallons. For the purposes of estimating total ethanol supply, we have assumed an 

E0 supply of 200 million gallons. Actual volumes of E0 used in recreational marine engines in 

2016 may be higher or lower than this level, but we do not expect them to be significantly 

different than 200 million gallons. This would effectively reduce the total supply of ethanol by 

20 million gallons relative to a scenario where all gasoline contained at least 10% ethanol.

Similarly, we continue to believe that supply of E15 will be very small in 2016. As 

described earlier, the primary limitation in E15 supply is the small number of retail stations 

offering it. While the number of E15 stations can grow significantly in 2016, we do not believe 

that it can reach the many thousands that some stakeholders said was possible given that the total 

number of such stations is about 120 currently and stakeholders representing retail service 

stations have cited potential liability as an ongoing concern. For the purposes of estimating total 

ethanol supply, it might be possible that total E15 supply in 2016 could reach 320 million 

 

99 Per-station annual gasoline throughput is about 916 thousand gallons. If a retail station offers both E10 and E15 

at equivalent pricing on an energy basis, the annual sales of each would be 458 thousand gallons. For 700 stations, 

total E15 sales would be 320 mill gal, which would displace about 315 mill gal E10. 15% × 320 - 10% × 315 = 17.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 87 of 189

gallons, based on an estimate of 1,520 stations offering E15 by the end of 2016 as described in 

Section II.E.2.v. Actual volumes of E15 in 2016 may be higher or lower than this level, but we 

do not expect them to be significantly different than 320 million gallons. This would effectively 

increase the total supply of ethanol by 17 million gallons relative to a scenario where there was 

no E15.

Finally, our detailed analysis of E85 has led us to conclude that the very large volumes 

suggested by some stakeholders are out of reach of the market in 2016, given the various 

constraints. Even if the number of stations offering E85 continues to grow and the price of E85 

continues to fall relative to E10, it is highly unlikely that E85 volumes in 2016 can exceed 

several hundred million gallons. For the purposes of estimating total ethanol supply, we have 

estimated that total E85 supply in 2016 will reach 200 million gallons, based on an estimate of 

growth in the number of E85 stations to about 3,200 and an E85 price discount of 22% relative to 

E10.100 Actual volumes of E85 in 2016 may be higher or lower than this level, but 200 million

gallons represents our best estimate of the most likely maximum volumes that can be attained by 

a market responsive to the RFS standards. This amounts to an increase in ethanol supply of 

about 132 million gallons relative to a scenario where there was no E85.

Based on these estimates of E0, E15, and E85 supply, we have determined that 138.55 

billion gallons of E10 would be supplied in order to ensure that the full gasoline pool provides 

the 16.85 Quadrillion Btu that EIA has projected will be in demand in 2016. The combined 

contributions from E10, E15, and E85 would produce a total ethanol supply in 2016 of 14.05 

billion gallons, equivalent to a poolwide average ethanol content of about 10.15%. This volume 

of ethanol would be composed of cellulosic ethanol, advanced ethanol such as imported 

sugarcane ethanol, and conventional ethanol such as that produced from corn starch.

Table II.E.2.vi-1

Gasoline Volumes Used To Determine Ethanol Supply in 2016

Fuel Volume

(mill gal)

Ethanol Volume

(mill gal)

Energy

(Quad Btu)

E0 200 0 0.03

E10 138,552 13,855 16.77

E15 320 48 0.04

E85 200 148 0.02

Total 139,272 14,051 16.85

We recognize that the market may not necessarily respond to the final volume requirements for 

2016 to produce the volumes of E0, E10, E15 and E85 noted in Table II.E.2.vi-1. However, we 

believe these volumes are reasonable estimates for use in deriving the final total renewable fuel 

volume requirement for 2016.

3. Biodiesel and Renewable Diesel

 

100 A 22% reduction in the price of E85 relative to the price of E10 would ensure that the price of the two fuels are 

equivalent on the basis of energy content.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 88 of 189

While the market constraints on ethanol supply are readily identifiable as being primarily 

in the areas of refueling infrastructure and ethanol consumption, it is more difficult to identify 

and assess the market components that limit potential growth in the use of biodiesel in 2016. 

Nevertheless, a review of the historical supply volumes of biodiesel and renewable diesel, 

particularly in 2013, indicates that the supply of these fuels for use as transportation fuel in the 

United States is constrained.

In 2013 there were two very strong incentives for the increased production, import, and 

use of biodiesel and renewable diesel in the United States. For the first time in the history of the 

RFS program, the total renewable fuel standard could not be satisfied by using the minimum 

amount of biodiesel and renewable diesel required by the BBD volume requirement and blending 

ethanol as E10. Due to the challenges associated with expanding ethanol consumption through 

increased sales volumes of E15 and E85 mentioned above, there was a strong demand for nonethanol fuels. RIN prices for all types of RINs rose as obligated parties sought to meet their RFS 

obligations. In addition to the incentives provided by the RFS requirements and resulting high 

RIN prices, the biodiesel blender’s tax credit was in place throughout 2013. With these strong 

incentives in place, the supply of biodiesel and renewable diesel used as transportation fuel in the 

United States increased significantly in 2013 (see Figure II.E.3-1 below).

Figure II.E.3-1

Biodiesel and Renewable Supply by Year (2011-2015)

Despite these large increases in the supply of biodiesel and renewable diesel, the number 

of RINs available to meet the obligated parties’ renewable volume obligations fell short of the 

required volume by about 820 million RINs. This provides a strong indication that the biodiesel 

and renewable diesel supply in 2013 was limited; if this were not so then we would have 

expected that the strong demand for RINs in 2013 combined with the availability of the biodiesel 

blenders tax credit would have resulted in sufficient production, import, and use of biodiesel and 

renewable diesel to satisfy the 2013 RFS volume requirements. The situation in 2014 and 2015 

more ambiguous, since there were no final RFS standards in place during 2014 and the first 11 

months of 2015 and the availability of the biodiesel blenders tax credit for this years has been 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 89 of 189

very uncertain. Nevertheless, we believe the growth in biodiesel and renewable diesel supplies 

in 2014 and 2015, together with the market performance in 2013, indicates that while there is 

significant opportunities for growth in the supply of biodiesel and renewable diesel, supply will 

be constrained in 2016. The sections that follow discuss the many different factors that may 

constrain the supply of biodiesel and renewable diesel in 2016.

i. Feedstock availability

Biodiesel and renewable diesel are produced from biogenic oils, fats, and greases. These 

can be oils, fats, and greases that are produced as by-products and collected from other 

industries, oils, fats, and greases recovered from waste streams, or virgin vegetable oils. 

Increasing the feedstock available for biodiesel and renewable diesel can be done both by 

diverting feedstocks from other existing uses, increasing the recovery rate of potential feedstocks 

from waste streams, or increasing the global supply of vegetable oils through greater oil crop 

cultivation and yields. 

Several stakeholders claimed that the level of biodiesel feedstock supply that could be 

available in 2016 combined with the biodiesel and renewable diesel production capacity that 

already exists warrant an increase in the required volumes of advanced biofuel and total 

renewable fuel compared to those we proposed in the NPRM. For instance, the National 

Biodiesel Board (NBB), in support of their claim that up to 3.4 billion gallons of biodiesel could 

be available in 2016, submitted a study by LMC International entitled “Current and Future 

Supply of Biodiesel Feedstocks.” This study concluded that feedstock availability is not a 

limiting factor for increasing BBD volumes; there is increased availability of qualifying waste 

fats, greases, and inedible corn oil, as well as soy, canola and other vegetable oils. According to 

the study, in 2015 there is enough qualifying feedstock for 6.8 billion gallons of biodiesel 

globally, and by 2020, there is likely to be sufficient feedstock to support at least 8.5 billion 

gallons of biodiesel. 

The LMC International study did not specifically provide estimates of feedstock available 

for use in the U.S. in 2016, making it difficult to determine how the study might affect our 

determination of applicable volume requirements for 2016. Moreover, we believe the LMC 

International study contains an erroneous assumption which contributes to an overestimation of 

feedstock availability. When estimating availability the study considers the maximum 

theoretical amount of oil that could be extracted from an oilseed, or “oil in seed”, versus the 

amount of oil that is actually expected to be extracted/produced. In reality some amount of the 

soybean supply is not crushed to produce oil but instead is fed directly to livestock, while in 

other instances the soybean is crushed and oil is extracted but the oil is added to feed and thus

does not enter the oil market. Adding additional soy bean crushing capacity is possible, but 

would require a strong market signal and take time to construct and bring online. It is unlikely 

that significant new soy bean oil crushing capacity could be brought online in time to impact the 

feedstock available for biodiesel and renewable diesel production in 2016. These assumptions 

result in oil supply estimates that are in some cases significantly higher than USDA estimates. 

For example, LMC International’s estimates of U.S. soybean oil production is more than 80 

percent greater than that reported by USDA-WASDE for recent years. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 90 of 189

The LCM International study also did not attempt to project the quantity of feedstock that 

would actually be available for biodiesel and renewable diesel production in light of the demand 

for these feedstocks from other industries. Currently there is significant competing demand for 

the feedstocks that can be used to produce biodiesel and renewable diesel from the food, 

livestock feed and oleochemical industries. Existing feedstock supplies are typically already 

under contract and/or already set up for certain distribution pathways to end use. These can and 

do change over time, but they cannot reasonably be expected to do so immediately. 

Furthermore, even when feedstocks are moved into biodiesel and renewable diesel production, it 

often means a shifting around of feedstocks, rather than an overall growth in total feedstock 

production. The existing competing demand for these feedstocks does not go away. If, for 

example, soy oil feedstocks are drawn away from food use to biodiesel use in response to the 

recent FDA regulations (as discussed below), it may result in other oil that was being used to 

produce biodiesel, such as palm or canola oil, now shifting to food use.

Finally, the LMC study did not take into consideration the volumes of feedstocks already 

devoted to biodiesel and renewable diesel production in the U.S. and abroad. For perspective, 

according to Statista, 2014 production of biodiesel from the top 15 producing countries was 6.8 

billion gallons.101 This indicates that a considerable amount of the available global feedstock 

estimated by LMC is already being used for biofuel production, and that much of that biofuel is 

being used in countries outside the US. In essence, the study provides a hypothetical upper limit 

of BBD oil supply worldwide, not an assessment of the feedstocks available to be used to 

produce biodiesel and renewable diesel for consumption in the United States in 2016.102 

The American Soybean Association similarly provided information on higher potential 

volumes of biodiesel feedstock in 2016. They pointed out that demand for U.S. soybean oil for 

food use began to decline following the U.S. Food and Drug Administration’s (FDA) action in 

2003 to require food manufacturers to include trans-fats on nutrition labels. They stated that the 

likely continued displacement of additional soy oil from food use would make additional soy oil 

available for biodiesel feedstock. We acknowledge the trend of declining soybean oil use in 

food, and believe it will continue as a result of a June 2015 FDA determination requiring the 

elimination by 2018 of all partially hydrogenated oil in food use. To the extent that soy oil is 

being phased down for food purposes, some supply of soy oil will likely become available for 

other uses, such as biodiesel production. However, the impact on biodiesel production volumes 

is not likely to be substantial, particularly for 2016, for two reasons. First, the FDA action will 

not be complete until 2018. Second, as mentioned above, the removal of some soy oil from food 

will be offset by an increase in the use of other oils in food, with a corresponding reduction in the 

availability of those other oils for use in making biodiesel. As a result there may be no net 

impact on biodiesel feedstock supply but rather just a shifting of oils used for different purpose. 

 

101 The world's biggest biodiesel producers in 2014, by country. Statista, Accessed 9/22/2015

http://www.statista.com/statistics/271472/biodiesel-production-in-selected-countries/ 

102 We note that a significant portion of the global biodiesel production uses palm oil as a feedstock, which is not a 

qualifying feedstock in the RFS program. This this production volume is not directly comparable with 6.8 billion 

gallons of qualifying biodiesel feedstock identified in the LCM International study.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 91 of 189

We also received comments challenging the availability of additional biodiesel 

feedstocks and thus the opportunity for increased BBD production. The International Council on 

Clean Transportation and the Union of Concerned Scientists submitted a study “Projections of 

U.S. Production of Biodiesel Feedstock” by Professor Brorsen at the University of Oklahoma. 

Professor Brorsen considered all the major sources of U.S. biodiesel feedstock and developed 

projections of their availability through 2019. The conclusion of the study is that the potential to 

expand biodiesel production from the feedstocks in the U.S. is quite limited without substantially 

increasing feedstock prices. The study estimated that the U.S. agricultural sector can increase 

production of fats/oils beyond 2014 levels by 30 million gallons in 2015, 29 million gallons for 

2016, and 25 million gallons in 2017. Thus, according to the study, higher volumes of biodiesel 

in 2016 beyond the approximately 30 million gallons from the U.S. agricultural sector would 

have to come from diverting existing feedstocks from current uses, increasing the supply of 

recovered waste feedstocks, or increasing imports of feedstock or finished biodiesel or renewable 

diesel, which the study did not address. 

While diverting biodiesel and renewable diesel feedstocks from current uses and 

increasing total feedstock availability will take time, we acknowledge that the world supply of 

oils, fats, and greases that are suitable feedstocks for biodiesel and renewable diesel production 

has continued to grow over time. We believe that this supply can continue to grow as more 

oilseed crops are planted, productivity from existing crops increases, and recovery rates of waste, 

fats, oils, and greases adds to the total available supply. The recent development and 

commercialization of the non-food grade corn oil extracted from distillers dried grains at ethanol 

plants has also added to the total supply of biodiesel and renewable feedstocks. 

As the volume of feedstocks expands, the infrastructure for storing the feedstock and 

distributing it to biodiesel and renewable diesel production facilities will also need to expand. 

This will require changes to a number of industries depending on the feedstock, potentially 

including rail cars, barges, and trucks, soy and oil storage facilities. If supply of biodiesel and 

renewable diesel feedstocks are being sourced internationally, it would also involve expansion of 

import and export facilities.

It is also worth highlighting that over time the opportunity for continued growth in the 

feedstocks currently used to produce biodiesel and renewable diesel may begin to plateau, and 

the volumes of these fuels along with it unless there is a breakthrough in the development of new 

feedstocks. The bump up in supply brought about by large increases in palm oil production, corn 

oil extraction, and the increased recovery of waste fats, oils, and greases is limited, and may soon 

near its practical limit. There has been considerable research and development for many years in 

the potential for algal bio-oils and other new oilseed crops that could be grown on marginal lands 

that could serve as a feedstock for biodiesel and renewable diesel. However, the promise of 

large volumes of algal bio-oils and alternative oilseed crops remains in the future, well beyond 

the timeframe of the 2016 standards, and near term feedstock supply increases are likely to be 

incremental.

ii. Biodiesel and Renewable Diesel Production Capacity
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 92 of 189

As highlighted in the NPRM, the total capacity of all registered biodiesel and renewable 

diesel production facilities in the United States currently exceeds 2.7 billion gallons. In addition 

to the domestic production capacity, there is also significant registered capacity overseas. 

Historically domestic biodiesel production rates have been well short of the production capacity, 

with facility utilization rates often less than 50%. The reason for this is that the capital cost 

associated with biodiesel production is a relatively small portion of the cost of biodiesel, 

allowing facilities to build in excess capacity to allow for expansion later as the market develops 

and grows. The economies of scale associated with biodiesel facilities are also fairly low 

relative to other types of renewable fuel, allowing biodiesel production facilities operating at low 

utilization rates or very small biodiesel facilities to be economically viable by taking advantage 

of low priced local feedstock supplies. 

The situation is quite different however, for renewable diesel, where the hydrotreating 

necessary to convert the oil into diesel fuel requires considerably more capital, economies of 

scale require facilities to be relatively large, and the size and complexity of the facilities require 

much more time for financing, design, construction, and commissioning. This helps explain why 

renewable diesel production facilities are far fewer in number, have much larger production 

capacities on average, and why the volume of renewable diesel production has grown more 

slowly.

NBB in their comments pointed to the currently existing and registered production 

capacity as evidence to support its projection of how much biodiesel and renewable diesel could 

be supplied in 2016. However, while there is certainly potential to increase utilization of the 

existing production facilities it is uncertain what steps would have to be taken to increase 

production rates at these facilities. There is therefore uncertainty associated with the ability for 

an appreciable number of registered biodiesel and renewable diesel production facilities to 

simultaneously increase production rates given the constraints raised elsewhere in this section. 

Consequently, while we do not believe biodiesel and renewable diesel production capacity will 

likely be a constraining factor in biodiesel and renewable diesel production in 2016, reaching the 

3.4 billion gallons suggested by NBB may require the addition of new production capacity.

iii. Biodiesel and Renewable Diesel Import Capacity

Another important market component in assessing biodiesel and renewable diesel supply 

is the potential for imported volumes and the diversion of biodiesel and renewable diesel exports 

to domestic uses. In addition to the approximately 300 million gallons imported into the U.S. in 

2014, there were about 80 million gallons exported from the United States to overseas markets in 

2014. Given the right incentives, it might be possible to redirect a portion of the biodiesel 

consumed in foreign countries for use in the U.S. in 2016. However, the amount of biodiesel 

and renewable diesel that can be imported into the United States is difficult to predict, as the 

incentives to import biodiesel and renewable diesel to the U.S. are a function not only of the RFS 

and other U.S. policies and economic drivers, but also those in the other countries around the 

world. These policies and economic drivers are not fixed, and change on a continual basis. Over 

the years there has been significant variation in both the imports and exports of biodiesel and 

renewable diesel as a result of varying policies and relative economic policies (See Figure 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 93 of 189

II.E.3.iii-1 below). This includes a period from 2004 to 2008 when biodiesel and renewable 

diesel imports and exports were both simultaneously large due to the so-called “splash and dash” 

practices of importing biodiesel to the U.S., blending it with a small volume of petroleum based 

diesel to get the U.S. biodiesel blenders tax credit, and then exporting it to Europe where it 

received additional tax benefits. Because of biodiesel demand in other countries and potential 

biodiesel distribution constraints in the United States, maintaining or increasing import volumes 

of biodiesel and/or renewable diesel while at the same time decreasing export volumes may not 

be feasible in 2016. For example, a portion of the reported imports and exports is simply trade 

across the border with Canada. The exported biodiesel satisfies biodiesel mandates in Canada, 

while also helping to minimize biodiesel transportation costs in situations where the available 

supply for markets near the border happens to lie in the other country. Thus, on an annual basis 

we experience both exports to Canada and imports from Canada simply due to market constraints 

related to biodiesel distribution. 

Figure II.E.3.iii-1

Biodiesel and Renewable Diesel Imports and Exports (2011-2015)

Nevertheless, as evidenced in 2015 we have clearly been experiencing some upward 

growth in imports of biodiesel and renewable diesel. Much of the increase in biodiesel imports 

in 2015 has been from grandfathered facilities that are exempt from the 20% lifecycle GHG 

reduction requirement. Fuel from these facilities qualifies for D6 RINs that can be used to 

satisfy the total renewable fuel standard. 

In order for foreign biodiesel and renewable diesel producer to increase their imports into 

the U.S., they will need to either increase their total production (which may require building new 

production capacity), or divert exports from domestic use and/or other foreign markets currently 

relying on these volumes to meet their own requirements. If the former, it may require the 

expansion of foreign distribution and export capacity which will take some time to put in place. 

If the latter, it will require a number of changes, including:
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 94 of 189

 A clear economic advantage (e.g., higher prices) for exports to be directed to the 

U.S. relative to other destinations

 Time to renegotiate existing contracts and commitments

 Certainty that economic and political conditions won’t change that ultimately 

undermine such a decision, including such unpredictable things as relative 

currency valuations

 Time to expand available U.S. import terminal facilities, including not only 

tankage, loading, and offloading infrastructure, but also the rail and truck fleet 

necessary to transport the fuel from the import terminal to new markets. 

All of this can and is expected to occur over time, however the degree to which this can be 

accomplished in the coming year is uncertain. 

To demonstrate the uncertainty associated with increasing biodiesel and renewable 

imports it is instructive to consider the case of imports from Argentina in recent years. Several 

stakeholders expressed concern that Argentina would significantly increase exports of biodiesel 

to the U.S. in 2016, and that this potential for increased imports must be accounted for in the 

determination of the applicable 2016 volume requirements.103 This concern was based on the 

facts that pre-existing opportunities for export to European countries had recently been closed 

off, and the EPA had recently approved an alternative biomass tracking program for Argentina 

which commenters assumed would make it easier for Argentinean biodiesel producers to 

document that their product complies with the land use provisions associated with the RFS 

definition of renewable biomass. Some stakeholders suggested that imports of Argentinean 

biodiesel could be as high as several hundred million gallons in 2016. Our review of the 

available information, including that submitted by other stakeholders, does not support this view. 

For instance, the approval of the alternative biomass tracking program for Argentina was not 

followed by a sudden increase in imports to the U.S. as shown below. In fact, imports actually 

declined compared to months immediately preceding that approval.104

 

103 There have also been imports of biodiesel from other countries, but by and large such biodiesel did not qualify as 

advanced biofuel.

104 While it is possible that the full impact of EPA’s approval of the alternative biomass tracking program for 

Argentina is not yet reflected in the data (i.e., that it will take longer for the effects to be seen), we note that there are 

elements of the approved tracking program that are considerably more exacting than the pre-existing renewable 

biomass verification process, so we are not persuaded that EPA’s approval will in fact lead to an increase in 

Argentinean biodiesel imports. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 95 of 189

Figure II.E.3.iii-1

Imports of Biodiesel from Argentina

Source: Energy Information Administration

Additionally, the annualized volume of imported Argentinean biodiesel for 2015, based 

on data collected through July, is 94 million gallons. This level is far less that the potential 

volumes projected by the National Biodiesel Board and several others. Brazil has also just 

recently proposed increasing its biodiesel mandate from 7% to 8% in 2016, which may provide 

another attractive destination for exports of Argentinean biodiesel.105 Finally, Argentina has 

changed the applicable tax on exported biodiesel several times since the beginning of 2015, 

highlighting the uncertainty associated with projecting potential future imports into the U.S.106 

Based on these facts, we believe that the volume of biodiesel and renewable diesel imported 

from Argentina in 2016 is likely to be far less than the several hundred million gallons suggested 

by some commenters.

iv. Biodiesel and Renewable Diesel Distribution Capacity

While biodiesel and renewable diesel are similar in that they are both diesel fuel 

replacements produced from the same types of feedstocks, there are significant differences in 

their fuel properties that may result in differences in the way the two fuels are distributed and 

consumed. Biodiesel is an oxygenated fuel rather than a pure hydrocarbon. It cannot be 

distributed through most pipelines due to contamination concerns with jet fuel, and often requires 

specialized storage facilities to prevent the fuel from gelling in cold temperatures. Renewable 

 

105 "Brazil Proposes Raising Biodiesel Mandate To B10," docket EPA-HQ-OAR-2015-0111.

106 "Argentina changes biodiesel export tax - Biofuels Digest," docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 96 of 189

diesel is a pure hydrocarbon fuel that is nearly indistinguishable from petroleum based diesel. 

As a result, there are fewer constraints on its growth with respect to distribution capacity.

Comments we received from stakeholders on biodiesel supply challenges related to 

biodiesel distribution, storage, or use due to cold temperatures reveal differing opinions on the 

degree to which this may be a constraint on the growth of biodiesel and renewable diesel. The 

National Biodiesel Board stated that there are no constraints related to the distribution of 

biodiesel and renewable diesel because options such as heated storage tanks and the use of 

biodiesel produced from feedstocks with better cold temperature properties are available to 

address the issue. They pointed specifically to some states which require the use of biodiesel 

year-round. Others, such as CountryMark, indicated that they or their members stop blending 

biodiesel in the winter months. These comments suggest that the constraints on biodiesel supply 

due to cold temperatures may not be as pronounced as suggested in the NPRM, but that they 

continue to exist. The existence of methods for addressing potential challenges related to the 

cold temperature issues associated with biodiesel does not mean that these solutions can be 

employed nationwide in 2016. Since the market will determine the specific types and amounts 

of renewable fuels to use to meet the applicable volume requirements, cold weather issues will 

certainly be a consideration for some parties, and their hesitancy to blend biodiesel in winter 

months may constrain the total supply of biodiesel in 2016.

Another factor potentially constraining the supply of biodiesel is the number of terminals 

and bulk plants that currently distribute biodiesel. At present there are about 600 distribution 

facilities reported as selling biodiesel either in pure form or blended form.107 Our review of 

these locations indicates that the vast majority of them are what we refer to as bulk plants. These 

are not the major gasoline and diesel distribution terminals, but rather much smaller terminals 

that receive diesel fuel mostly by truck from the major terminals. These 600 facilities are a small 

subset of the 1400 terminals and approximately 9000 bulk plants nationwide.108 This small 

subset, however, appears to be concentrated in most of the population centers of the country, in 

addition to the Midwest. As a result, as the market continues to expand, it may require greater 

investment per volume of biodiesel supplied, as the new biodiesel distribution facilities will 

generally have access to smaller markets than the existing facilities, or face competition from 

existing distribution facilities. 

Transportation of biodiesel to and from the terminals and bulk plants is also an important 

consideration. There are two aspects to the distribution infrastructure of importance here; the 

distribution of biodiesel in pure/near pure form from biodiesel production or import facilities to 

terminals and bulk plants, and the distribution from the terminals/bulk plants in blended form to 

retail stations. As mentioned above, the unique properties of biodiesel have precluded blends 

from being transported in common carrier pipelines either in pure form (B100) or in blended 

 

107 List of biodiesel distributers from Biodiesel.org website (http://biodiesel.org/using-biodiesel/findingbiodiesel/locate-distributors-in-the-us/distributors-map). Accessed 10/8/15.

108 Number of terminals from the American Fuel and Petrochemical Manufacturer’s website 

(http://education.afpm.org/refining/fuels-facts/). Accessed 10/28/15. Number of bulk plants from the Regulatory 

Impact Analysis for the Heavy-Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control 

Requirements, EPA420-R-00-026, December 2000.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 97 of 189

form (such as B5 or B20). NBB has been working with the pipeline industry for many years in 

an effort to enable biodiesel blends to be transported by pipeline, as the ability to transport 

biodiesel by pipeline would quickly open new markets in farther ranging locations. In 2013 a 

major pipeline approved the transport of low level biodiesel blends (B5) in limited pipeline 

segments that do not carry jet fuel.109 While an important step, the pipeline segments that have 

been approved to ship biodiesel blends only serve a small portion of the U.S. market.

In lieu of pipeline transport, biodiesel currently relies primarily on rail car, barge, and 

especially tanker truck fleets for distribution from production and import facilities to blending 

terminals and bulk plants. Due to the unique properties of biodiesel, such transport typically has 

required the use of heated/insulated tanks, especially in winter to keep the product from gelling 

or freezing. This requirement for specialized equipment increases the cost of biodiesel 

distribution and further limits the speed at which biodiesel distribution can grow. Increasing 

biodiesel distribution capacity is not simply a matter of shifting barge/rail/truck infrastructure 

from other competing uses, as it may require specialized and/or purpose built equipment. The 

result of this has been that in order to respond as quickly as possible to market demand, biodiesel 

distribution has often instead been met using the existing non-specialized tanker truck fleets 

where the haul distance is limited – limiting the time the fuel is exposed to cold temperatures. 

While the use of the existing tanker trucks expands the volume of biodiesel that can be 

transported, it also limits the distribution of biodiesel to a relatively small geographic area near 

production and distribution facilities. This then translates into the need for more and disparately 

located production facilities and import terminals. Once blended with diesel fuel at the bulk 

plant, further distribution concerns are typically minimized by shorter transportation distances 

between the bulk plants and retail stations and lower biodiesel blend ratios that have fewer cold 

weather limitations. 

The net result is that the expansion of terminals and bulk plants selling biodiesel and 

biodiesel blends, and the distribution infrastructure necessary to transport biodiesel to and from 

these facilities, may be one of the biggest challenges facing the rapid expansion of biodiesel. 

This is an area in which the biodiesel industry has made steady progress over time, and we 

anticipate that this steady progress can and will continue into the future, particularly with the 

ongoing incentive for biodiesel growth provided by the RFS standards. As with many of these 

potential supply constraints, however, increasing the biodiesel distribution capacity will require 

time, and will likely be limited in scope in 2016.

v. Biodiesel and Renewable Diesel Retail Infrastructure Capacity

For renewable diesel, we do not expect that refueling infrastructure (e.g. refueling 

stations selling biodiesel blends) will be a significant limiting factor in 2016 due to its similarity 

to petroleum based diesel and the relatively small volumes expected to be supplied in the United 

States. The situation is different, however, for biodiesel. Biodiesel is typically distributed in 

blended form with diesel fuel as varying blends from B2 up to B20. Biodiesel blends up to and 

 

109 Sapp, Meghan. “Colonial Pipeline to Start B5 Transportation in Georgia.” Biofuels Digest. March 19, 2013. 

Available online: http://www.biofuelsdigest.com/bdigest/2013/03/19/colonial-pipeline-to-start-b5-transportation-ingeorgia/
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 98 of 189

including B20 can be sold using existing retail infrastructure, and generally does not require any 

upgrades or modifications at the retail level. Expanding the number of refueling stations offering 

biodiesel blends is therefore constrained less by the retail facilities themselves, and more by the 

lack of nearby wholesale distribution networks that can provide the biodiesel blends to retail. 

Based on currently available information, biodiesel blends greater than B5 are still only 

available in a very small fraction of possible refueling locations. Of the approximately 4,800 

truck stops nationwide, and the approximately 50,000 diesel retail stations, only 717 stations 

offer biodiesel in blends of B20 of greater.110 While the number of refueling stations offering 

higher level biodiesel blends is relatively small, the fact that diesel sales volumes in the United 

States are dominated by truck stops and the very large centrally fueled fleets, suggests that 

expanding the refueling infrastructure for these biodiesel blends will be relatively 

straightforward as production and distribution allow. The biggest challenge may be the 

reluctance of retailers and fleets to switch to biodiesel blends due to concerns over fuel quality, 

vehicle warranties, liability, or other factors.

There is some indication that the number of refueling stations willing or able to market 

biodiesel may become a factor that constrains the growth of biodiesel supply in the United 

States, either in 2016 or in future years. A number of retail locations that market diesel fuel are 

only offering biodiesel blends that exceed 5% (B5), which is the maximum amount of biodiesel 

for which many diesel vehicles are warranted. For example, the LOVES truck stop chain is a 

major retailers of biodiesel. A recent review of their website indicated that 221 of their 354 

stations were selling B15.111 This is despite the fact that many of the newer,112 and especially the 

older heavy-duty diesel truck engines were only designed and warranted for biodiesel blends up 

to B5. Similarly, in the state of Illinois nearly all sales of biodiesel blends are reported to be at 

B11 in order to benefit from the state tax subsidy, despite the fact that not all vehicles and 

engines have been designed and warranted for its use. This may suggest that increasing the 

number of refueling stations offering biodiesel blends could be a significant constraining factor 

to the supply of biodiesel in 2016. Were more retail outlets willing and able to dispense 

biodiesel, then, existing volumes of biodiesel could be distributed at concentrations B5 or less 

without raising any warranty concerns.

vi. Biodiesel and Renewable Diesel Consumption Capacity

Virtually all vehicles and engines now in the in-use fleet have now been warranted for the 

use of B5 blends. In fact the ASTM specification for diesel fuel (ASTM D975) allows for 

biodiesel concentrations of up to five volume percent (B5) to be sold as diesel fuel, with no 

separate labeling required at the pump. Biodiesel blends of up to 5% are therefore 

indistinguishable in this regard. In addition, NBB claims that nearly all manufacturers now 

warrant at least one of their current offerings for use with B20 blends. This is a significant factor 

 

110 B20+ Station counts are from the Department of Energy Alternative Fuels Data Center Station Locator. Includes 

public, private, government, and utility owned stations.

111 Information from Love’s Website: http://www.loves.com/locateus/fuelpricesearch.aspx# (Accessed 10/8/15)

112 The largest heavy-duty diesel vehicle manufacturer in the U.S., Daimler, comprising roughly 40% of the market 

still does not warrant its engines for the use of biodiesel in concentrations greater than 5%.

Commented [A40]: Isn't the more pertinent labeling 

requirement the FTC regulations and upstream EPA's PTD 

requirements?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 99 of 189

in assessing the potential supply of biodiesel to vehicles in future years and has been a main 

focus of NBB’s technical and outreach efforts for many years, and one of their true success 

stories. Using biodiesel blends above D5 in diesel engines may require changes in design, 

calibration, and/or maintenance.113

Even in instances where manufacturers warrant their engines to operate on B20 blends, 

they may have additional requirements to ensure the quality of the biodiesel fuel being used and 

that additional engine maintenance will be performed. These requirements may make the use of 

biodiesel blends containing greater than 5% biodiesel challenging, while technically possible. 

For instance, Detroit Diesel, a large diesel engine manufacturer, implemented a formal, 

multifaceted B20 approval process for fleets seeking to use B20. The process involved an 

evaluation of biodiesel producers and marketers that are to provide biodiesel to the fleet in 

question, an assessment of biodiesel Certificate of Analysis for B100 and B20 blends (or fuel 

samples as needed), as well as a review of preventative maintenance practices at dispensing 

locations, including bulk tank cleaning intervals, dispensing filtration, water handling, and 

volume of fuel consumed at each location. In the B20 fleet approval process, Detroit Diesel also 

considered the particular application to ensure that fleet vehicles were not parked for too long as 

well as an assessment of the preventative maintenance intervals for engines to ensure that they 

are in-line with Detroit Diesel’s published guidelines. Even in situations where approval to use 

B20 was granted, the approval did not provide blanket coverage for a geographically dispersed 

fleet; that is, a fleet that operated across several states was required to submit separate 

applications for each biodiesel producer, marketer, and dispenser supporting the fleet. Fleet 

operators that successfully completed the B20 approval process received a Statement of 

Warranty from Detroit Diesel’s Director of Quality and were permitted to operate the fleet using 

B20. Ultimately Detroit Diesel cancelled the B20 fleet approval process citing biodiesel quality 

concerns.

Given the long life of diesel engines and the number of new engines not warranted for 

biodiesel blends above B5, turning over a significant portion of the fleet to engines designed and 

warranted for B20 is still many years off into the future. This means that in the near term the 

opportunity to sell B20 exclusively to vehicles warranted to run on these blends will be limited to 

centrally fueled fleets.114 Increasing the supply of biodiesel, however, is not necessarily 

dependent on selling higher level biodiesel blends, as there is significant opportunity for 

expanding the use of biodiesel in lower level blends and for non-road applications. If the diesel 

pool contained 5% biodiesel nationwide consumption of biodiesel would reach approximately 

2.9 billion gallons in 2016. Furthermore, in addition to their successful efforts with diesel 

vehicles and engines, NBB has had a significant market outreach effort to expand the use of 

biodiesel into heating oil applications (referred to as bioheat). While still a relatively small outlet 

for biodiesel consumption compared to diesel fuel, it is a growing market that affords significant 

additional opportunity for growth.

 

113 The vast majority of diesel fuel in the U.S. is consumed by heavy-duty vehicles and nonroad diesel engines. 

Only a very minor portion is consumed by light-duty diesel passenger vehicles.

114 Although as stated above, some public retailers are choosing to sell only B11 or B20 blends and allowing the 

consumer the option of either going elsewhere or purchasing fuel for which their engines are not warranted.

Commented [A41]: typo
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 100 of 189

We received a number of comments on the NPRM related to the degree to which engine 

warranties may constrain biodiesel use in 2016, however no stakeholder provided any analyses 

demonstrating the fraction of in-use engines which are warranted for more than B5.115 Instead, 

most biodiesel proponents stated only that diesel engines being sold today are predominately 

warranted for B20. Since such warranties have not always existed, it is clear that some portion 

of the in-use fleet of diesel engine warranties do not approve the use of biodiesel blends greater 

than B5.116 These engines represent a potential constraint on use of biodiesel, though we cannot 

quantify the level of constraint. Comments submitted by Growth Energy support this fact:

"...the transportation fleet and heating oil equipment pools still contain significant 

percentages that are not warranted or deemed compatible with levels of biodiesel 

above 5%."117

The National Biodiesel Board argued that regardless of whether manufacturers place 

limits on the use of biodiesel blends as a condition of honoring their engine warranties, many of 

these diesel engines can still safely use higher biodiesel blends than those cited in those 

warranties. Thus, said NBB, "...the formally OEM recommended biodiesel level should not be 

construed or used as any sort of limitation for biodiesel volumes." We disagree, and believe that 

the OEM recommended biodiesel levels can have a significant impact on owners willingness to 

use biodiesel blends. Despite anecdotal evidence regarding behavior of some diesel vehicle 

operators, it would be inappropriate for EPA to assume that diesel truck owners in general will 

knowingly use biodiesel blends at concentrations that exceed the limits cited in their engine 

warranties. It would be more prudent for EPA to assume that engine manufacturers are in the 

best position to judge which biodiesel blends are appropriate for use in their engines, and that 

engine owners will view their engine warranties in the same way. Evidence that some truck 

owners ignore the recommended limits on biodiesel concentrations when refueling their truck is 

not, we believe, a reasonable basis for assuming that engine warranties place no constraints on 

the use of higher biodiesel blends for the in-use truck fleet as a whole. Similarly, we do not 

believe that older engines with expired warranties can be assumed to have no constraints on 

biodiesel concentrations. Not only were older engines more likely to have been designed to 

operate on B5 or lower, but engine warranties continue to provide indications to truck owners of 

acceptable biodiesel concentrations even after they expire. Owner's manuals for those engines 

may also cite limits on biodiesel concentrations, and owner's manuals do not expire.118

vii. Biodiesel and Renewable Diesel Consumer Response

 

115 Such warranties apply to the engines, not the fuels, as pointed out by the National Biodiesel Board. Nevertheless, 

the engine warranties are contingent upon the use of approved fuels.

116 As noted above, ASTM specifications allow for biodiesel concentrations of up to five volume percent (B5) to be 

sold as diesel fuel, with no separate labeling required at the pump.

117 "Non-Ethanol Potential for RFS Compliance," Stratus Advisors, July 16, 2015. Submitted by Growth Energy.

118 EPA is not aware of any comprehensive analysis of the diesel engine/vehicle warranties for the in use fleet with 

respect to biodiesel blends. EPA did not have the time or resources to conduct a detailed evaluation of warranty 

constraints over the range of engines and model years currently in service for purposes of this rulemaking. EPA 

encourages stakeholders to gather this type of information to inform future annual RFS rules. 

Commented [A42]: Isn't the more pertinent labeling 

requirement the FTC regulations and upstream EPA's PTD 

requirements?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 101 of 189

Consumer response to the availability of renewable diesel and low level biodiesel blends 

(B5 or less) has been generally positive, and this does not appear to be a significant impediment 

to growth in biodiesel and renewable diesel use. Because of its similarity to petroleum diesel, 

consumers who purchase renewable diesel are unlikely to notice any difference between 

renewable diesel and petroleum derived diesel fuel. Similarly, biodiesel blends up to B5 are 

unlikely to be noticed by consumers, especially since, as mentioned above they may be sold 

without specific labeling. Consumer response to biodiesel blends is also likely aided by the fact 

that despite biodiesel having roughly 10 percent less energy content than diesel fuel, when 

blended at 5 percent the fuel economy impact of B5 relative to petroleum derived diesel is a 

decrease of only 0.5%, an imperceptible difference. Consumer response has been further aided 

by the lower prices that many wholesalers and retailers have been willing to provide to the 

consumers for the use of biodiesel blends. The economic incentives provided by the tax credit 

and the RIN have made it possible for some retailers to realize additional profits while selling 

biodiesel blends, while in many cases offering these blends at lower price per gallon than diesel 

that has not been blended with biodiesel.

viii. Projected Supply of Biodiesel and Renewable Diesel in 2016

Due to the large number of market segments where actions and investments may be 

needed to support the continued growth of biodiesel blends, it is difficult to isolate the specific 

constraint or group of constraints that will be the limiting factor or factors to the supply of 

biodiesel and renewable diesel in the United States in 2016. Not only are many of the potential 

constraints inter-related, but they are likely to vary over time. The challenges in identifying a 

single factor limiting the growth in the supply of biodiesel and renewable diesel in 2016 does not 

mean, however, that there are no constraints to the growth in supply. 

A logical starting point in developing a projection of the available supply of biodiesel and 

renewable diesel in 2016 is a review the volumes of these fuels supplied in previous years. In 

examining the data, both the absolute volumes of the supply of biodiesel and renewable diesel in 

previous years, as well as the rates of growth between years are relevant considerations. The 

volumes of biodiesel and renewable diesel (including both D4 and D6 biodiesel and renewable 

diesel) supplied each year from 2011 through 2015 are shown below.

Commented [A43]: How many gallons of conventional 

ethanol might be displaced by conventional 

biodiesel/renewable diesel? 

What might be the change in these imports at different 

blendwall levels? 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 102 of 189

Figure II.E.3.viii-1

Biodiesel and Renewable Supply by Year (2011-2015)

One way to use the historical data to project the available supply of biodiesel and 

renewable diesel in 2016 would be to start with the volume expected to be supplied in 2015 (1.84 

billion gallons), the most recent year for which actual supply data are available and also the year 

with the largest supply of biodiesel and renewable diesel, and then assess how much the supply 

can be expected to increase in 2016 in light of the constraints discussed above. We could 

assume, for example, that past growth in the year or years leading up to 2015 reflects the rate at 

which biodiesel and renewable diesel constraints can reasonably be expected to be addressed and 

alleviated in the future. If this were the case, we could use either the largest observed annual 

supply increase (689 million gallons from 2012 to 2013) or the average supply increase (212 

million gallons from 2011 to 2015) to calculate how much biodiesel and renewable diesel 

volumes could increase over 2015 levels in 2016. This would result in a projected supply of 2.53 

billion gallons of biodiesel and renewable diesel if we used the highest observed annual growth 

rate, or 2.06 billion gallons of biodiesel and renewable diesel in 2016 if we used the average 

annual growth rate.

We recognize that the highest annual growth rate achieved in the past (or the average 

annual growth rate in the past) does not necessarily indicate the growth rate that can be achieved 

in the future. It is also the case that as the absolute biodiesel and renewable diesel supply 

increases it may become more difficult to achieve large increases in supply year over year. 

Much of the growth in biodiesel and renewable diesel supply in the past was enabled by 

addressing the existing constraints in ways that were relatively simple compared to the 

challenges currently facing the market. In 2013 additional feedstock was available to be 

recovered from waste streams and there was still significant opportunity to distribute additional 

biodiesel blends containing 5% biodiesel or less. Future supply increases will likely require 

diverting potential biodiesel and renewable diesel feedstocks from existing uses, potentially 

distributing the biodiesel to new terminal or bulk plants, and/or using biodiesel in blends greater 

than 5%. Thus, it may be challenging for growth rates of biodiesel and renewable diesel in 2016 

and 2017 to exceed those seen in previous years. However, any such conclusion would need to 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 103 of 189

be tempered by the consideration of the extent to which legal and market forces were in place to 

drive future growth. This is especially true since the year with the historic maximum rate of 

growth was 2013 – a year in which both tax incentives and RFS incentives were in place to 

incentivize growth. Longer term, developments such as significant gains in oilseed productivity 

or the development of new oilseed crops or the approval from engine manufacturers to use B20 

blends in all or nearly all diesel engines, may allow for significant increases in the use of 

biodiesel and renewable diesel.

We received many comments on our NPRM that offered projections of the available 

biodiesel and renewable diesel supply in 2016. It was not always clear from reading the 

comments if the volume projections they offered represent their projection of the total supply of 

biodiesel and renewable diesel, as is relevant for determining the total renewable fuel supply in 

2016, or if they represent a sub-set of the total biodiesel and renewable diesel availability (such 

as only BBD and not conventional biodiesel, only biodiesel and not renewable diesel, or the level 

at which they requested the BBD standard be set). Nevertheless, we have reviewed these 

comments and considered the volume projections offered and the supporting data provided in 

determining the supply of biodiesel and renewable diesel in the United States in 2016.

The National Biodiesel Board suggested that the volume of advanced biodiesel supplied 

to help meet the advanced biofuel volume requirement should be at least 2.7 billion gallons in 

2016, based on the highest rate of D4 RIN generation achieved in a single month. They 

effectively assumed that the rate of RIN generation that occurred in December 2013 (220 million 

gallons) could be duplicated over a 12-month period, and that all of this product could be 

distributed and used in the United States in 2016. They stated that an additional 370-720 million 

gallons of biodiesel (550 – 1,080 million RINs) could be supplied from imported biodiesel. We 

disagree that these volumes can be supplied in 2016. We believe that using the highest 

production in a single month from the historical record is not a reasonable basis for projecting 

possible future supply over the course of an entire year for a number of reasons. Such an 

approach does not take into account the likelihood that feedstock and facilities can be marshalled 

for a given month’s production in a manner that cannot be sustained year-round, especially when 

there was a very strong incentive for the maximum single month’s production, such as the 

biodiesel blenders tax credit expiring at the end of 2013. In addition, production inventories can 

be grown over a one-month time period in a manner that masks constraints in the fuel delivery 

infrastructure. As evidence, we note that the highest D4 RIN generation level in a single month 

(220 million gallons in December 2013) occurred immediately before one of the lowest monthly 

D4 RIN generation level that has occurred in the last several years (88 million gallons in January 

2014). The average of those two months is the equivalent of about 1.85 billion gallons over the 

course of a year. 

Moreover, the highest monthly D4 RIN generation level cited by the National Biodiesel 

Board included imports which have been highly variable and cannot be projected with 

reasonable certainty based on historical supply. The fact that the month used by NBB to project 

that 2.7 billion gallons of BBD could be supplied already includes a significant amount of 

imported volumes makes their estimate of additional imports particularly uncertain. The portion 

of the 1.85 billion gallon annual average RIN generation rate derived from annualizing 

December 2013 and January 2014 volumes that can be attributed to domestic production is 1.43 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 104 of 189

billion gallons, and even this number should be considered high because it does not account for 

exports of biodiesel and RINs retired because they were invalid or were otherwise not available 

for compliance. As a result of these factors, the actual demonstrated domestic supply (domestic 

production plus imports, less exports and corrections) of biodiesel and renewable diesel does not 

support an available supply of 3.1-3.4 billion gallons per year, as suggested by NBB.

In addition to the comments from NBB, we also received a number of other comments 

suggesting a higher supply of biodiesel may be available in 2016 than in previous years. Many 

commenters, such as the American Council on Renewable Energy, the American Soybean 

Association, the National Renders Association, John Deere, several state soybean associations, 

and others suggested that the BBD standard should require the use of at least 2 billion gallons in 

2016. Other commenters, including Archer Daniels Midland, the California Biodiesel Alliance, 

Imperium Renewables, and others suggested that the BBD standard should require the use of 2.4 

billion gallons in 2016. Since they were focused on the BBD standard, these numbers do not 

necessarily represent the commenters’ views of the available supply of biodiesel and renewable 

diesel in 2016, but we believe they give a good indication of their views on the available supply. 

We also note that they are generally in line with the available supply volumes estimated above 

based on an extrapolation of growth rates from previous years.

Given the widely divergent comments and available data on the potential supply of 

biodiesel feedstocks, it is clear that there is a great deal of uncertainty in the degree to which 

those feedstock supplies can grow in 2016. A focus on potentially available feedstock supplies is 

insufficient as this is not the only factor to consider in assessing the potential volumes of 

biodiesel and renewable diesel in 2016. Neither biodiesel production capacity, nor the supply of 

oils, fats, and greases around the world, has ever been the sole constraint on biodiesel and 

renewable diesel supply to the U.S. Indeed, as discussed above, there are a number of 

constraints, ranging from competing demand for biodiesel and renewable diesel feedstocks to 

biodiesel and renewable diesel distribution infrastructure and engine compatibility, that we 

believe will constrain the supply of biodiesel and renewable diesel supply in 2016.

These constraints do not represent insurmountable barriers, but they do take time to 

overcome. The market has been making efforts to overcome these constraints in recent years as 

demonstrated by the fact that biodiesel and renewable diesel consumption in the U.S. has been 

steadily increasing. We agree with the biofuels industry that more opportunity still exists, but we 

do not believe that the constraints listed above can be completely overcome in 2016, nor do we 

believe that existing biodiesel and renewable diesel production capacity should be the basis for 

projecting achievable volumes in 2016. Instead, we believe that the ongoing constraints listed 

above mean that the opportunity for growth 2016 is of a similar magnitude as that which we have 

experienced in recent years. For 2016 we are projecting the supply of biodiesel and renewable 

diesel for use in the United States could reasonably be as much as 2.5 billion gallons. We 

believe this value represents the maximum achievable volume of biodiesel and renewable diesel 

that can be supplied to the United States in 2016. 

This volume of biodiesel and renewable diesel is higher than the projected volume using 

the average growth rate between 2011 and 2015 (2.06 billion gallons), and approximately equal 

to the projected volume using the highest observed annual growth rate (2.53 billion gallons). We 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 105 of 189

believe this is appropriate considering both demonstrated ability of the market to respond to 

incentives for increased production, import, and use of biodiesel and renewable diesel, as 

demonstrated in 2013, and also the potential constraints to the continued growth of biodiesel and 

renewable diesel discussed above. These constraints, particularly the availability of qualifying 

feedstocks in light of competing demand for these feedstocks and the distribution infrastructure 

needed to increase the use of biodiesel and renewable diesel, may be more challenging to 

overcome in 2016 than they were in 2013. In 2013 increasing available supplies of feedstock, 

through means such as greater corn oil production rates at ethanol plants and increased recovery 

of wasted fats and oils, and increasing biodiesel and renewable diesel distribution by adding 

biodiesel blending capacity at terminals and/or bulk plants in areas with large local demand for 

diesel fuel, were both relatively simple and it is likely that such gains cannot be easily replicated 

in 2016.

We recognize that the market may not necessarily respond to the final total renewable 

standard by supplying exactly 2.5 billion gallons of biodiesel and renewable diesel to the 

transportation fuels market in the United States, but may instead supply a slightly lower or higher 

volume of biodiesel and renewable diesel with corresponding changes in the supply of other 

types of renewable fuel. As a result, we believe there is less uncertainty with respect to 

achievability of the total volume requirement than there is concerning the projected 2.5 billion 

gallons of biodiesel and renewable diesel that we have used in deriving the final total renewable 

fuel volume requirement.

4. Projecting the Supply of Other Renewable Fuels

The RINs available for meeting the total renewable fuel standard include not only 

ethanol, biodiesel, and renewable diesel, but also RINs generated for a number of other 

renewable fuels. While the potential for each of these fuels is small relative to those covered 

above, the volumes must still be considered in assessing the total supply of renewable fuel in 

2016. One such fuel is CNG/LNG derived from biogas when used as a transportation fuel. The 

potential for this fuel in 2016 is approximately 210 million gallons. This projection is discussed 

in more detail in Section IV, as this fuel generally qualifies as a cellulosic biofuel. 

There also are some opportunities for moderate growth through the end of 2016 in such 

biofuels as heating oil and naphtha. The total ethanol-equivalent volume from these sources in 

2013 and 2014 was 3 and 18 mill gal, respectively. The projected annual volume from these 

sources in 2015 is 23 mill gal based on data through September, 2015. We expect the industries 

providing these fuels to continue to grow in 2016, such that supply is likely to be higher in 2016 

than it was in the recent past. We project that about a hundred million gallons will be available 

from these sources based on their supply in the recent past and our expectation that they could 

experience some moderate growth in 2016.

5. Total Renewable Fuel Supply in 2016

Commented [A44]: EPA projects that ~100mgal will be 

available from heating oil and naphtha. In comparison to 

larger biodiesel/renewable diesel discussion there is 

essentially no explanation of why they think this is realistic 

given volumes in 2015 of 23mgal and 3 and 18mil in 2013 

and 2014 respectively. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 106 of 189

The total volume of renewable fuel that can be supplied in 2016 is the combination of the 

estimated supply of each of the biofuel types described above: ethanol, biodiesel and renewable 

diesel, and other biofuels such as biogas, naphtha, and heating oil. Most of these biofuel types 

can be produced as either advanced biofuel or as conventional (D6) renewable fuel, depending 

on the feedstock and production process used. Our estimate of the supply of total renewable fuel 

shown in the table below includes contributions from both advanced biofuels and conventional 

renewable fuels.

Table II.E.5-1

Volumes Used To Determine Total Renewable Fuel Supply in 2016

Volume (million gallons) Million RINs

Ethanol 14,051 14,051

Biodiesel and renewable diesel 2,500 3,750

Biogas 210 210

Other non-ethanol renewable fuels 100 100

Total 16,861 18,100a

a We believe it is reasonable to round the sum of 18.11 to 18.10 bill gal.

Based on this analysis, we are establishing a total renewable fuel volume requirement of 18.10 

billion gallons for 2016. However, we note that the contributions from individual sources that 

are shown in Table II.E.5-1 were developed only for the purpose of determining a final volume 

requirement for 2016; they do not represent EPA's projection of precisely how the market will 

respond to the standards we set. We continue to believe, as we noted in the NPRM, that any 

estimate we make regarding particular fuel types is uncertain, but that overall the final volume 

requirement is attainable. The contributions from individual sources that we have used are 

illustrative of one way in which the volume requirement for total renewable fuel could be met. 

Actual market responses could vary widely, as described more fully in Section II.G.

The volumes of total renewable fuel that we are establishing for 2016 reflect our 

assessment of the maximum volumes that can reasonably be achieved, taking into account both 

the constraints on supply discussed previously and our judgment regarding the ability of the 

standards we set to result in marketplace changes in 2016. As shown in Figure II.E.5-1, the 

volume requirements for 2016 would follow an upward trend consistent with that from previous 

years. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 107 of 189

Figure II.E.5-1

Growth in Total Renewable Fuela

a Values for 2012 and 2013 represent actual supply of renewable fuel in 

each year, not the applicable volume requirements.

We believe the total renewable fuel volume requirements we are establishing for 2016 

reflect the available supply in the market as defined in the introduction to Section II.E above. 

While we acknowledge that there is considerable judgment involved in identifying the 

appropriate volumes, we note that each increment is increasingly difficult for the market to 

accommodate, as described in Section II.E.1. For instance, the use of ethanol in gasoline 

increased dramatically between 2000 and 2009, but by 2010 nearly all gasoline contained 

ethanol. Additional volumes of ethanol use in 2010 and thereafter increased much more slowly 

as the market approached the E10 blendwall.

This trend suggests that increases in renewable fuel use after 2014 will require greater 

effort than in the past, with additional renewable fuel production potentially requiring additional 

feedstock supplies, production technologies, and widespread changes to the fuel distribution 

infrastructure. Implementation of the RFS program to date has led to significant increases in the

production and use of renewable fuels in the United States, particularly ethanol and biodiesel. 

Any further growth in renewable fuel volumes will require overcoming a number of different 

potential constraints, which will differ by fuel type. The volume requirements we are 

establishing for 2016 represent significant increases from 2014, and we believe it would be 

unreasonable to expect, and thus require, the market to supply more than the final volumes.

F. Advanced Biofuel Volume Requirements for 2016

As described in Section II.B above, we are reducing volumes of total renewable fuel 

under both the cellulosic and the general waiver authority, and we are reducing volumes of 

advanced biofuel under the cellulosic waiver authority only. As noted in Section II.B, EPA has 

broad discretion in utilizing the cellulosic waiver authority, since Congress did not specify the 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 108 of 189

circumstances under which it may or should be utilized nor the factors to consider in determining 

appropriate volume reductions. We are cognizant of the fact that increases in the statutory 

volume targets after 2014 are only in advanced biofuel, and that advanced biofuel provides 

relatively large GHG reductions in comparison to conventional renewable fuel. In light of these 

facts, our intention in utilizing the cellulosic waiver authority for 2016 is to place an emphasis on 

setting the 2016 advanced biofuel volume requirement at a level that is reasonably attainable 

taking into account uncertainties related to such factors as production, import, distribution and 

likely consumption of these fuels.119 

As described earlier, we are establishing a total renewable fuel volume requirement of 

18.10 billion gallons for 2016. In addition to biogas and other non-ethanol renewable fuels, our 

assessment of total renewable fuel is based on an estimate of 14.05 billion gallons of ethanol and 

2.5 billion gallons of biodiesel.120 Given that advanced biofuels are a subset of total renewable 

fuel, the 2016 volume requirement for advanced biofuels will reflect our assessment of the 

portion of total ethanol and biodiesel, as well as other renewable fuels, that should be required as 

an advanced biofuel.

With regard to ethanol, the primary source of advanced biofuel is imported sugarcane 

ethanol.121 As described in the NPRM, the supply of imported sugarcane ethanol continues to be 

highly uncertain and there is little indication that this uncertainty will change in 2016. For 

instance, both total ethanol imports and imports of Brazilian sugarcane ethanol have varied 

significantly since 2004, as shown in Figure II.F-1. 

Figure II.F-1

Historical Imports of Ethanol

 

119 Our approach in identifying “reasonably attainable” volumes of advanced biofuels using the cellulosic waiver 

authority is different than our approach under the general waiver authority of identifying the “maximum reasonably 

achievable supply”. In exercising the cellulosic waiver authority in this rulemaking, we are not required, and do not 

intend, to necessarily identify the most likely “maximum” volumes of advanced biofuels that can be used in 2016. 

Although we generally seek in establishing the advanced biofuel volume requirement to require that available 

advanced biofuels backfill for shortfalls in cellulosic biofuels in 2016, our inquiry need not be as exacting. 

120 Our estimate of biodiesel can also include some renewable diesel.

121 In certain situations, advanced ethanol can also be produced from sorghum and food wastes.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 109 of 189

The Brazilian Sugarcane Industry Association (UNICA) provided comments suggesting 

that 2 billion gallons of sugarcane ethanol could be supplied to the U.S. in 2016. After further 

investigation, we do not believe that this level of import is reasonably achievable in 2016. To 

begin with, exports of 2 billion gallons from Brazil to the U.S. would be significantly higher than 

total exports to all countries in all previous years, as shown below.

Figure II.F-2

Total Exports of Ethanol From Brazil to All Countries

Source: www.unicadata.com.br

In recent years, ethanol exports from Brazil to countries other than the U.S. averaged more than 

300 million gallons each year, and Brazil has recently increased ethanol exports to China.122 If 

this were continue in 2016, total exports from Brazil would need to reach 2.4 billion gallons. We 

do not believe that the information that UNICA provided supports this extremely high level of 

exports.

Although UNICA cites a variety of factors that can affect ethanol exports and which are 

beyond the control of Brazilian mills and the EPA, it nevertheless based its estimate of potential 

exports to the U.S. solely on a combination of Brazilian ethanol production capacity and 

opportunities created by the RFS program itself. We believe that UNICA has underestimated the 

uncertainty associated with other market factors, including the E10 blendwall in the U.S., 

changes in domestic demand for ethanol in Brazil, and competing world demand for sugar. With 

regard to sugar, it is true that Brazilian production has been declining for the last several years. 

However, between 2005 and 2015, Brazilian production of sugar has increased just as often as it 

has decreased, demonstrating that there is uncertainty with regard to worldwide demand for 

sugar. We believe it would be imprudent to assume that the downward trend in sugar production 

in recent years will continue in 2016.

 

122 "Ethanol acts as lone bright spot amid China commodity gloom - Reuters," docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 110 of 189

More importantly, while production of sugarcane has increased moderately in Brazil over 

the last several years, total gasoline consumption in Brazil also continues to climb.123 This 

leaves little room for substantial increases in exports of ethanol in 2016. In fact, total 

consumption of petroleum in Brazil has increased at a rate of about 4.9% over the last several 

years, while the rate of sugarcane production has only grown at a rate of about 2.2%.124 

Several stakeholders also pointed to the potential for so-called "circle trade" between the 

U.S. and Brazil as a reason to either reduce the applicable volume requirement for advanced 

biofuel in such a way as to limit imports of sugarcane ethanol, and/or to increase the required 

volume of BBD. In this circle trade, corn-based ethanol is exported from the U.S. to Brazil at the 

same time that sugarcane ethanol is exported from Brazil to the U.S. This has undoubtedly 

occurred in the past, though the volumes have represented a minority of all ethanol imports and 

exports between the two countries.125 However, there has been a high degree of variability in 

sugarcane ethanol imports into the U.S., and also a high degree of variability in the export of 

corn ethanol to Brazil. In some years the U.S. exported more ethanol to Brazil than Brazil 

exported to the U.S., while in other years the opposite occurred. This indicates that there are a 

wide variety of factors driving imports and exports of ethanol, and “circle trade” does not appear 

to have been the major one in the past. Nevertheless, to the degree that circle trade increased in 

response to higher RFS volume requirements for advanced biofuel, the GHG benefits associated 

with the advanced biofuel volume requirement would be reduced. Thus while sugarcane ethanol 

qualifies as an advanced biofuel and is therefore eligible to participate in satisfying whatever 

advanced biofuel standard we establish, increased circle trade could reduce the GHG benefits of 

higher advanced biofuel volume requirements.

As stated in the NPRM, the highest volume of Brazilian sugarcane ethanol that has ever 

been imported was 680 million gallons in 2006; in 2013 imports reached 435 million gallons.126 

However, in 2014 imports were only 64 million gallons, and the projected annual level of 

imports for 2015 is about 55 million gallons.127,128 Some sugarcane ethanol will likely be 

imported in 2016 in order to meet the requirements of California's Low Carbon Fuel Standard 

(LCFS), and all such imported sugarcane ethanol will qualify to meet the RFS standards. 

However, sugarcane ethanol volumes have also fallen off in recent years under California’s 

program.129 Given our assessment of UNICA's estimate of volumes it can export to the U.S. in 

2016 as described previously, and our assessment of uncertainty in import volumes as evidenced 

by the highly variable historical supply, there is no indication (apart from UNICA’s comments, 

discussed above) that imports of sugarcane ethanol in 2016 will be markedly different from 

 

123 "Gasoline Demand in Brazil: an empirical analysis," Thaís Machada de Matos Vilela, Pontifical Catholic 

University of Rio de Janeiro, Figure 2.

124 "Brazilian sugarcane production and petroleum consumption," docket EPA-HQ-OAR-2015-0111.

125 Between 2010 and 2014, circle trade represented about 21% of all ethanol imports and exports between the U.S. 

and Brazil. See "Analysis of circle trade between the US and Brazil," docket EPA-HQ-OAR-2015-0111.

126 Ethanol import data from EIA, representing imports directly from Brazil and indirectly through the Caribbean 

Basin Initiative (CBI) and the Central America Free Trade Agreement (CAFTA). 

http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epooxe_im0_mbbl_m.htm

127 Based on import data from EMTS.

128 Notably, in response to the February 7, 2013 NPRM, UNICA projected that Brazil could supply 800 mill gal of 

sugarcane to the U.S. in 2014.

129 "Status Review of California's Low Carbon Fuel Standard," Institute of Transportation Studies, University of 

California Davis, April 2015.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 111 of 189

historic levels. While the historical average level of ethanol imports over the last ten years is 

about 300 million gallons, the low levels of imports seen in 2014 and 2015 suggest that such 

volumes may not be available in 2016. Accordingly, for the purposes of determining the 

reasonably attainable volume of advanced biofuels, we believe it is reasonable to assume that a 

somewhat lower level of imports will occur than the historic average over the last ten years. 

Thus we estimate that about 200 million gallons of sugarcane ethanol will be available in 2016 

for the purposes of determining the advanced biofuel volume requirement for 2016. However, 

actual imports of sugarcane ethanol could be higher or lower than this level as shown in the 

scenarios for how the market could respond in Section II.G.

With regard to advanced biodiesel and renewable diesel, past experience suggests that the 

primary source would be production in the United States. In previous years biodiesel and 

renewable diesel produced in the United States has been almost exclusively advanced biofuel. It 

is also likely that some advanced biodiesel will be imported in 2016, as discussed in Section 

II.E.3.iii, however we believe that the volume of biodiesel imported from Argentina in 2016 is 

likely to be less than the several hundred million gallons suggested by some commenters. 

Imports of conventional (D6) biodiesel and renewable diesel are likely to continue in 2016, but 

these volumes are limited relative to the volumes of advanced biofuel produced and imported 

into the United States. Thus, a very high percentage of the 2.5 billion gallons of total biodiesel 

and renewable diesel that we estimated in the context of determining the total renewable fuel 

volume requirement for 2016 is likely to be advanced biodiesel and renewable diesel. Including 

a large portion of the 2.5 billion gallons of biodiesel and renewable diesel in the advanced 

biofuel category also incentivizes the increase in the production and import of biodiesel and 

renewable diesel in 2016 to be produced from feedstocks that qualify for advanced, rather than 

conventional RINs, enhancing the GHG benefits of the RFS program.

The discussion of the many constraints on total biodiesel supply in Section II.E.3 above is 

also relevant in the determination of reasonably attainable volumes of advanced biodiesel. In 

this context, we believe that out of the total of 2.5 billion gallons of biodiesel and renewable 

diesel that we have determined can reasonably be assumed for purposes of establishing the total 

renewable fuel volume requirement, we would expect about 2.2 billion gallons to be advanced 

biofuel. This volume of advanced biodiesel and renewable diesel would represent an increase of 

about 470 million gallons from that supplied in 2015, which is greater than the annual increase 

that occurred in the previous two years (91 million gallons from 2013 to 2014 and 104 million 

gallons from 2014 to 2015) but less than the annual increase that occurred in 2013 (about 560 

million gallons from 2012 to 2013). We find this volume to be reasonably attainable for the 

reasons discussed in Section II.E.3.

Due to the nested nature of the standards, all cellulosic biofuel qualifies to help meet the 

advanced biofuel volume requirement. As described in Section II.E.4, we have also estimated 

that about 100 million gallons of advanced biofuel other than ethanol, biodiesel, and renewable 

diesel can be supplied in 2016. We estimate that the combination of all these sources results in a 

reasonably attainable volume of advanced biofuel for 2016 of 3.80 billion gallons. This is the 

volume requirement that we are establishing for advanced biofuel for 2016.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 112 of 189

Table II.F-1

Volumes Used To Determine Advanced Biofuel Supply in 2016

Volume (million gallons) Million RINs

Cellulosic biofuel 230 230

Biodiesel and renewable diesel 2,200 3,300

Imported sugarcane ethanol 200 200

Other non-ethanol 100 100

Total 2,630 3,800a

a We believe it is reasonable to round the sum of 3.83 to 3.80 bill gal.

The volume of advanced biofuel that we are establishing for 2016 will require increases 

from current levels that are substantial yet attainable, taking into account both the constraints on 

supply discussed previously, our judgment regarding the ability of the standards we set to result 

in marketplace changes, and the various uncertainties we have described. Figure II.F-3 shows 

the advanced biofuel volume requirement for 2016 as compared to the actual supply of advanced 

biofuel from previous years. 

Figure II.F-3

Growth in Advanced Biofuela

a Values for 2012 and 2013 represent actual supply of renewable fuel in 

each year, not the applicable volume requirements.

G. Market Responses to the 2016 Advanced Biofuel and Total Renewable Fuel 

Volume Requirements

The transportation fuel market is dynamic and complex, and the RFS program is only one 

of many factors that determine the relative types and amounts of renewable fuel that will be 

used. Thus, while we set the applicable volume requirements for advanced biofuel and total 

renewable fuel, we cannot precisely predict how the market will choose to meet those 

requirements, as the RFS standards we set generally allow use of multiple fuel types for 

compliance. We can, however, delineate a range of possibilities, and doing so provides a means 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 113 of 189

of demonstrating that the final volume requirements are attainable through multiple possible 

paths. 

For our final 2016 total renewable fuel volume requirement of 18.10 billion gallons, there 

would be 1.12 billion ethanol-equivalent gallons needed beyond that supplied by E10, the BBD 

volume requirement of 1.9 billion physical gallons (equivalent to 2.85 billion D4 RINs as 

described in Section III.D.4), and that portion of the cellulosic biofuel volume which we would 

expect to be derived from non-ethanol biofuel (see Section IV.F).

Table II.G-1

Breakdown of Renewable Fuel Use in 2016 Based on Final Volumes

(billion ethanol-equivalent gallons)

Total renewable fuel 18.10

Ethanol consumed as E10a-13.92

Non-ethanol cellulosic biofuel -0.21

Biomass-based dieselb-2.85

Additional renewable fuel that must be used 1.12

a

Includes all sources of ethanol (cellulosic, advanced, and 

conventional)

b Represents 1.90 billion physical gallons.

All of the constraints discussed in Section II.E.1 could play a role in determining how the market 

chooses to supply the additional 1.12 billion gallons needed. The options available to the market 

to fulfill the need for 1.12 billion gallons of renewable fuel include the following:130

• Increase the production and use of BBD above the final standard of 1.90 billion 

gallons131

• Increase import and use of sugarcane ethanol and/or domestic production and use 

of corn-ethanol, which would require a corresponding increase in E15 and/or E85

• Increase production and/or imports of conventional (D6) biodiesel and renewable 

diesel

• Increase the production of other non-ethanol biofuels, such as renewable heating 

oil, jet fuel, naphtha, butanol, and renewable fuels coprocessed with petroleum

In determining the amounts of each type of renewable fuel used to meet the total renewable fuel 

volume requirement, the market would also need to satisfy the final advanced biofuel standard of 

3.80 billion gallons. 

To illustrate the possible outcomes, we evaluated a number of scenarios with varying 

levels of E85, E0, imported sugarcane ethanol, advanced biodiesel and renewable diesel, and 

conventional biodiesel and renewable diesel (likely to be made from palm oil). In doing so we 

sought to capture the range of possibilities for each individual source, based both on levels 

 

130 Although obligated parties could draw down the bank of carryover RINs as an alternative means of compliance, 

as discussed elsewhere we believe that the incentives for them to retain their carryover RINs is sufficiently large that 

they will preferentially acquire and retire RINs for compliance, if they are made available.

131 We have determined in the context of deriving the advanced biofuel standard that 2.2 billion gallons are 

reasonably attainable. However, the market could operate such that larger volumes are made available.

Commented [A45]: 2.2bgal figure in the footnote is 

inconsistent with the earlier text
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 114 of 189

achieved in the past and how the market might respond to the final standards in 2016. Each of 

the rows in Table II.G-2 represent a scenario in which the final total renewable fuel and 

advanced biofuel volume requirements would be satisfied. While we cannot predict precisely 

how the market will respond to the standards we are setting, the fact that at least some of the 

scenarios fall within the reasonably expected capabilities of the market demonstrates that the 

volume requirements we are setting are achievable.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 115 of 189

Table II.G-2

Volume Scenarios Illustrating Possible Compliance with 3.80 Bill gal 

Advanced Biofuel and 18.10 Bill gal Total Renewable Fuel (million gallons)a,b

E85c E0 Total ethanold Sugarcane 

ethanol Total biodiesele Minimum volume of advanced biodiesele

200 100 14,042 100 2,499 2,247

200 100 14,042 300 2,499 2,113

200 300 14,021 0 2,512 2,313

200 300 14,021 100 2,512 2,247

200 300 14,021 300 2,512 2,113

200 300 14,021 520 2,512 1,967

400 100 14,174 0 2,411 2,313

400 100 14,174 100 2,411 2,247

400 100 14,174 300 2,411 2,113

400 100 14,174 520 2,411 1,967

400 300 14,154 100 2,424 2,247

400 300 14,154 300 2,424 2,113

a Assumes for the purposes of these scenarios that supply of other non-ethanol advanced biofuel (heating oil, naphtha, etc.) is 100 mill gal, and that the 

cellulosic biofuel final standard for 2016 is 230 mill gal, of which 20 mill gal is ethanol and the remainder is primarily biogas.

b Biomass-based diesel, conventional biodiesel, and total biodiesel are given as biodiesel-equivalent volumes, though some portion may be renewable 

diesel. Other categories are given as ethanol-equivalent volumes. Biodiesel-equivalent volumes can be converted to ethanol-equivalent volumes by 

multiplying by 1.5.

c Some higher ethanol blends here represented as E85 may alternatively be E15 (1 gal of E85 could be replaced with 12.8 gallons of E15)

d For the range of total ethanol shown in this table, the nationwide pool-wide average ethanol content would range from 10.07% to 10.18%. The 

majority of gasoline will contain 10% ethanol, and some gasoline will contain higher levels of ethanol such as E15 or E85.

e

Includes supply from both domestic producers as well as imports.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 116 of 189

The scenarios in the table above are not the only ways that the market could choose to 

meet the total renewable fuel and advanced biofuel volume requirements that we are finalizing 

today. Indeed, other combinations are possible, with volumes higher than the highest levels we 

have shown above or, in some cases, lower than the lowest levels we have shown. The scenarios 

above (and similar scenarios presented in the NPRM) cannot be treated as EPA's views on the 

only, or even most likely, ways that the market may respond to the final volume requirements for 

2016, contrary to the views of some stakeholders who commented on the NPRM. Instead, the 

scenarios are merely illustrative of the various ways that it could play out. Our purpose in 

generating the list of scenarios above is only to illustrate a range of possibilities which 

demonstrate that the standards we are finalizing today are achievable despite the considerable 

increases relative to 2015.

Stakeholders who believed that the volume requirements we proposed in the NPRM were 

too high often described them as unprecedented or overly aggressive, implicitly treating the 

various legal and practical constraints to increased renewable fuel use as a barrier that cannot or 

should not be crossed. Some stakeholders said that any scenario in which a particular category 

of renewable fuel exceeded historical maximums or previously demonstrated production levels 

cannot be considered to be achievable. Based on this premise, such stakeholders dismissed all 

scenarios in the NPRM as being unachievable.

As described earlier, while we acknowledge that constraints on supply are real, we do not 

believe that they create absolute barriers to growth in renewable fuel supply. Instead, the current 

constraints on supply mean that each additional supply increment is likely to be more difficult to 

achieve than previous increments, and likely require more time to overcome than past 

constraints. The market most certainly can and will respond to the standards that we set by 

increasing supply, as has been demonstrated on other occasions. Growth in the biofuels market 

is also the primary objective of the statute, as we acknowledge throughout this action. However, 

the market is not unlimited in its ability to respond, and for this reason we have found it 

necessary to reduce the required volumes below the statutory targets. 

The scenarios that we provided in the NPRM, and somewhat different scenarios 

presented above that reflect the final volume requirements, demonstrate that the market has 

various ways in which it could respond. The market can be expected to choose the lowest cost 

path to compliance for 2016, but some parties may choose paths that are intended to result in 

lower costs in the long term despite generating higher costs in the near term. For instance, 

regulated parties may respond to the standards we set with investments in production, 

distribution, and consumption infrastructure that is focused on longer term growth. 

All of the volume levels in the scenarios shown above are within reach of a responsive 

market, though they may not all be equally likely. Below we discuss several of them to 

demonstrate that the final volume requirements for 2016 are achievable.

With regard to E85, according to EIA there will be about 16 million FFVs in the in-use 

fleet in 2016 with a total consumption capacity of about 14 billion gallons of E85.132 However, 

 

132 According to AEO2015, Table 42, total vehicle miles travelled by FFVs in 2016 will be about 7.95% of all lightduty gasoline-powered vehicles, equivalent to about 10.9 bill gal of E10 or 13.9 bill gal of E85.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 117 of 189

since only about 2% of retail stations nationwide currently offer E85, only a minority of FFVs 

have easy access to E85. Under more favorable E85 pricing that could result from higher RIN 

prices, E85 sales volumes higher than those achieved in 2014 (about 150 million gallons) are 

certainly achievable. As described in Section II.E.2.iii we believe that 200 million gallons is the 

most likely maximum achievable volume of E85 in 2016. Even with some growth in the number 

of retail stations offering E85, however, E85 sales are unlikely to grow dramatically in 2016 due 

to the weak observed consumer response to E85 combined with the limited ability of the RIN 

mechanism under current conditions to reduce the retail price of E85 relative to E10 as described 

in Section II.E.2.ii. Similarly, USDA's Biofuels Infrastructure Partnership grant program is 

unlikely to result in a significant number of additional retail stations offering E85 since it is 

focused primarily on E15 and moreover will take some time to implement.133 As described in 

Section II.E.2.iii, under highly favorable though much less likely conditions related to growth in 

the number of E85 retail stations, retail pricing, and consumer response to that pricing, it is 

possible that E85 volumes as high as 400 million gallons could be reached in 2016.134 Thus we 

have included scenarios in Table II.G-2 that include E85 volumes as high as 400 million gallons. 

Higher volumes of E85 sales in 2016 are very unlikely, but are possible if the market can 

overcome constraints associated with E85 pricing at retail and consumer responses to those 

prices.

As Table II.G-2 illustrates, the final standards could result in the consumption of as much 

as 2.5 billion gallons of biodiesel and renewable diesel, representing an increase of more than 

600 million gallons over the projected 2015 supply of all D4 and D6 biodiesel and renewable 

diesel. While this would be a substantial increase, we believe that it is possible for the market to 

reach this level as discussed as in Section II.E.3. 2.5 billion gallons of biodiesel would represent 

about 4% of the nationwide pool of diesel fuel in 2016. Most diesel fuel could contain 5% 

biodiesel while still allowing some diesel fuel to contain no biodiesel to accommodate areas of 

the country where the distribution infrastructure is not yet established, as well as that used in 

northern states during the coldest months of the year. Also, B20 could be used in a number of 

centrally-fueled fleets composed of newer engines without violating manufacturer warranties, 

and additional volumes of biodiesel could be used in heating oil. In light of these additional 

volumes, it is possible that 2.5 billion gallons could be supplied in 2016.

We note that it would be inappropriate to construct new scenarios based on the highest 

volumes in each category that are shown in Table II.G-2 in order to argue for higher volume 

requirements than we are establishing today. Doing so would result in summing of values that 

we have determined are higher than the most likely maximum achievable volumes of the 

different fuel categories, resulting in a total volume that we believe would be extremely unlikely 

to be achievable. We have more confidence in the ability of the market to achieve 18.10 billion 

gallons of renewable fuel through some combination of different types of renewable fuel than we 

have in the ability of the market to achieve a specific level of, say, biodiesel. Thus, for instance, 

 

133 We acknowledge that the USDA program will increase the number of retail stations offering E15, potentially 

significantly. However, as described in Section II.E.2.iv, the impact on total ethanol supply in 2016 is likely to be 

considerably smaller than the impact on total ethanol supply from the use of E85. Thus some portion of the volumes 

of E85 shown in Table II.G-2 may instead be ethanol-equivalent volumes of E15.

134 "Correlating E85 consumption volumes with E85 price," memorandum from David Korotney to EPA Docket 

EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 118 of 189

while the highest biodiesel volume shown in Table II.G-2 is 2.5 billion gallons, we are not able 

to say whether this specific level of biodiesel is one that the market could be expected to achieve 

in 2016, notwithstanding our belief that such volumes are theoretically possible as described 

earlier. The same is true for the highest level of E85 shown in Table II.G-2 of 400 million 

gallons, or the highest level of sugarcane ethanol of 520 million gallons. In addition, the 

consumption of each fuel in Table II.G-2 is not independent of the consumption of the other 

fuels in the table. For example, greater domestic biodiesel production reduces the likelihood of 

large imports of biodiesel because these two fuels compete against one another for access to 

feedstocks that can be used to make biodiesel in 2016 and for available distribution infrastructure 

and market share. The probability that the upper limits of all sources shown in Table II.G-2 

could be achieved simultaneously is extremely unlikely.

As noted in the NPRM, the volume requirements that we are establishing today will 

likely result in RIN prices that are higher than historical levels. RIN price increases are an 

expected market response to a renewable fuel volume requirement that is higher than that in 

previous years and which is expected to require effort on the part of producers, distributors, 

blenders, and retailers to overcome constraints. While the RIN market mechanism provides 

incentives for the market to increase supply both in the near and long term, as stated earlier the 

RIN market mechanism is not without limitation, and the renewable fuel supply cannot be 

expected to increase proportionally at any RIN price. Particularly in the near term (specifically 

2016), we do not believe that significantly higher RIN prices would likely compel the market to 

supply substantially higher volumes than we are finalizing today.

H. Treatment of Carryover RINs

We explained in the NPRM that we cannot precisely assess the volume of carryover RINs 

available for use in complying with the 2014, 2015, and 2016 standards, but that we estimate that 

there will be approximately 1.8 billion; roughly 10 percent of the final 2016 standard and just 

half of the maximum permitted by the regulations to be used for compliance in 2016. We 

proposed that this bank of carryover RINs should appropriately be preserved as a compliance 

“buffer” and not intentionally drawn down by setting volume requirements at a level that is 

higher than can be satisfied through the production and use of physical gallons of fuel.135

Many stakeholders provided comment on the topic of how EPA should consider 

carryover RINs as part of the standard-setting process. After considering these comments and our 

updated projections on the availability of carryover RINs and renewable fuel supplies, we have 

decided for this rulemaking to treat carryover RINs in the manner proposed and not assume use 

of carryover RINs in establishing the volume standards. We believe that it is important to 

preserve the available carryover RINs to allow the market to function properly, for compliance 

flexibility, and as a compliance mechanism available when unforeseen events arise. While we 

 

135 For the bank of carryover RINs to be preserved from one year to the next, individual carryover RINs are used for 

compliance before they expire and essentially replaced with a newer vintage RIN that is then held for use in the next 

year. For example, if the volume of the RIN bank is unchanged from 2013 to 2014, then all of the approximately 1.8 

billion vintage 2013 carryover RINs must be used for compliance in 2014, or they will expire. However, the same 

volume of 2014 RINs can then be “banked” for use in the next year.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 119 of 189

have not assumed the use of carryover RINs in establishing the volume standards for 2014, 2015, 

and 2016, some obligated parties may still choose to sell or use all or part of their bank of 

carryover RINs. To the extent that they do so, other obligated parties would be in a position to 

bank extra carryover RINs by using available renewable fuel or purchasing RINs representing 

such fuel, with the expected net result being no effective change in the size of the bank of 

carryover RINs. We believe that the existing RIN bank will be important for both obligated 

parties and the RFS program itself in addressing significant future uncertainties and challenges, 

particularly since compliance with the advanced and total renewable fuel standards are expected 

to require significant progress in growing and sustaining production of advanced biofuels and 

using ethanol in quantities that exceed the E10 blendwall.136 However, we note that we may or 

may not take the same approach in future years; we will assess the situation on a case-by-case 

basis going forward, and take into account any lessons learned from implementing the rules 

applicable to 2014, 2015, and 2016.

1. Summary of Proposal

In the proposed rule, we explained our approach to considering carryover RINs in 

assessing a potential partial waiver of the 2014, 2015, and 2016 advanced biofuel and total 

renewable fuel applicable volumes to address inadequate domestic supply. We began by 

reviewing how we had previously considered carryover RINs in deciding not to use the cellulosic 

waiver authority to reduce the 2013 statutory volume for total renewable fuels. For the 2013 rule, 

we estimated that 14.5 billion gallons of ethanol would be needed to meet the total statutory 

renewable fuel volume of 16.55 billion gallons, assuming that no biomass-based diesel was 

produced above the 1.28 billion gallons required by the biomass-based diesel standard. We also 

determined that the total amount of ethanol the market could absorb as E10 in 2013 was 13.1 

billion gallons, leaving a potential gap of 1.4 billion gallons. We then described how biomassbased diesel production in excess of the biomass-based diesel standard, increased production of 

other non-ethanol renewable fuels, and use of E85 could contribute to the needed gallons. We 

also pointed out that about 2.6 billion carryover RINs would be available in 2013, which was 

more than enough to cover the potential gap of 1.4 billion gallons if other approaches to 

compliance were not realized. We decided, therefore, that a waiver of the statutory applicable 

volume of total renewable fuel was not needed in 2013. Our approach was challenged in court, 

and upheld in Monroe Energy v. EPA.

137

In this rulemaking to establish standards for 2014, 2015, and 2016, we have similarly 

considered the availability of carryover RINs in determining the extent to which a waiver of 

statutory volumes is warranted. We estimated in the NPRM that 1.8 billion carryover RINs 

would be available for 2014, 2015, and 2016.138 We explained that in the 2007 rulemaking 

 

136 As previously explained in this notice, the “E10 blendwall” is the volume of ethanol that can be consumed 

domestically as E10. We expect that compliance with the total renewable fuel volume requirements will require 

more ethanol use than is possible through widespread use of E10.

137 Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014). 

138 We estimated that 800 million carryover RINs will need to be used for compliance with the 2013 RFS standards. 

This will reduce the bank of carryover RINs available for compliance in 2014, 2015, and 2016 to approximately 1.8 

billion RINs.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 120 of 189

establishing the RFS program139 we noted the importance of carryover RINs to provide 

compliance flexibility in the face of a variety of circumstances that can limit the availability of 

RINs, including weather-related damage to renewable fuel feedstocks and other circumstances 

affecting renewable fuel supply. Since for 2014, 2015, and 2016 we estimated that only 1.8 

billion carryover RINs will be available for addressing all compliance challenges (compared with 

2.6 billion carryover RINs for 2013), we proposed volume requirements designed to preserve 

those carryover RINs for compliance flexibility to address unknown and unforeseeable 

circumstances, noting that this appears to be particularly important in light of the compliance 

challenges posed by exceeding the E10 blendwall in the 2014-2016 time period. We therefore 

did not propose to assume a drawdown in the bank of carryover RINs in assessing the extent to 

which waivers from statutory volumes would be warranted for the 2014, 2015, and 2016 

advanced biofuel and total renewable fuel requirements. We requested comment on whether and 

how to account for carryover RINs in the final rule.

2. Summary of Public Comments

Comments on this issue generally expressed two opposing points of view. Many 

commenters including many obligated parties contended that EPA should not count carryover 

RINs in determining the appropriate level of volume requirements. On the other hand, other 

commenters including many renewable fuel providers urged EPA to rely on carryover RINs to 

push the standards higher than the levels of projected physical volumes and so minimize the 

extent to which statutory applicable volumes are reduced.

Representatives of obligated parties were nearly uniform in supporting EPA’s proposal to 

not count the current bank of carryover RINs in setting the 2014, 2015, and 2016 advanced 

biofuel and total renewable fuel standards. Virtually all of these commenters agreed that 

maintaining the bank of carryover RIN would provide them with needed compliance flexibility 

to address unforeseen events such as operational problems, market dislocations, supply 

limitations, or fraudulent RINs. Several commenters noted that if EPA were to rely on the use of 

carryover RINs, it would remove a flexibility that Congress had intended for obligated parties. 

Several commenters also noted that obligated parties vary in their ability to acquire RINs, with 

the result being that some obligated parties have a substantial number of carryover RINs, while 

others have few or none. They argued that setting the volume requirements with the expectation 

that all carryover RINs would be used would make compliance even more difficult than it would 

otherwise be for those who must rely largely or totally on RIN purchases rather than on acquiring 

RINs through blending activities. Several commenters also argued that maintaining the bank of 

carryover RINs allows for better market trading liquidity and a cushion against future program

uncertainty. They noted the importance of a relatively stable, liquid RIN market for achieving 

compliance with volume requirements, particularly where new and expanded avenues of supply 

are still being developed and built. In their view, carryover RINs have been important to 

maintaining a functioning market, and they cautioned EPA against reducing that pool at all or too 

much and thereby risking severe market disruption in the event of a drought or other unforeseen 

difficulties.

 

139 72 FR 23900, May 1, 2007.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 121 of 189

Commenters from the renewable fuel industry, on the other hand, urged EPA to count 

carryover RINs in determining whether and to what extent to waive statutory volumes. They 

noted that EPA considered the availability of carryover RINs in previous decisions not to waive 

statutory volumes, and argued that EPA’s proposed approach was inconsistent with this past 

practice. They pointed out that in order to comply with the statute’s purpose to encourage growth 

in the use of renewable fuel in the transportation fuel supply, carryover RINs should be 

considered available for minimizing the extent to which statutory volume requirements are 

reduced. Some of these commenters further argued that the carryover RINs clearly are part of the 

“supply” available for compliance purposes, and therefore EPA must count them in determining 

whether there is an “inadequate domestic supply” for purposes of justifying use of the general 

waiver authority. Representatives of the cellulosic biofuel industry also requested that EPA 

change its current regulations to increase the 20 percent limit on the use of carryover RINs for 

cellulosic biofuel, in case production so outstripped the volume requirement that a large number 

of “excess” RINs put significant downward pressure on RIN prices for an industry that is still 

scaling up.

3. EPA Decision and Responses

We carefully reviewed the comments addressing our proposed treatment of carryover 

RINs in the 2014-2016 time period, and have determined to maintain the proposed approach.

Some commenters suggested that carryover RINs are part of the “supply” that must be 

considered in determining if there is an “inadequate domestic supply” justifying a waiver 

pursuant to CAA section 211(o)(7)(A). We disagree with this comment. As noted in Section 

II.B., the term “inadequate domestic supply” is not defined in the statute. Similarly, CAA section 

211(o)(5) requires that EPA establish a credit program as part of its RFS regulations, and that the 

credits be valid to show compliance for 12 months as of the date of generation, but the statute is 

silent on the relationship of these credits to the “inadequate domestic supply” reference in 

211(o)(7(A). EPA established the RIN system to satisfy this statutory credit requirement, and 

EPA finds no guidance in the statute on whether or not carryover RINs should be deemed part of 

the “supply” referenced in CAA section 211(o)(7)(A). In light of the statute’s silence on this 

matter, it is appropriate for EPA to interpret the statute so as to best fulfill its objectives. We 

believe that the term supply is best read to refer only to actual renewable fuel (and not carryover 

RINs), since the focus of the entire RFS program is on increasing the amount of renewable fuel 

used as transportation fuel. In addition, treating carryover RINs as part of the “supply” for 

purposes of exercising the general waiver authority could result in exhausting the availability of 

carryover RINs. We firmly believe, for the reasons discussed below, that maintaining a bank of 

carryover RINs provides a substantial benefit to the RFS program, so we believe it best serves 

the interests of the program to interpret the term “supply” to include only renewable fuel, and not 

carryover RINs.140

 

140 We expect that individual obligated parties may elect to use or sell the carryover RINs they own, but to the extent 

that they do, this would allow others the opportunity, through the purchase of renewable fuel or associated RINs, to 

create or increase their carryover RIN banks. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 122 of 189

However, although EPA does not believe that carryover RINs should be considered as 

part of the “supply” of renewable fuel in the context of a finding of “inadequate domestic 

supply” under the general waiver authority, EPA does believe that the availability of carryover 

RINs is an important factor for EPA to consider in determining whether or not to use its waiver 

authority. We believe that the availability of carryover RINs is a compliance flexibility that EPA 

appropriately should take into account in determining the adequacy of the supply of renewable 

fuel.141 With an overabundance of carryover RINs, EPA could decide not to waive the statutory 

volume targets, even where the supply of renewable fuel may be inadequate to allow compliance, 

since the carryover RINs will allow compliance and a draw-down in the bank will not result in a 

loss of the “buffer” function that is provided by a sufficient bank of carryover RINs. However, 

when the size of the bank of carryover RINs is limited, EPA could reasonably decide to exercise 

its waiver authority in a manner that is designed to preserve them for the benefit of the overall 

program. That is the present situation; in light of the limited size of the current bank of carryover 

RINs, we have determined that the volume requirements for advanced biofuel and total 

renewable fuel should be set at the level of projected supply of renewable fuels, and not at higher 

levels that would be expected to require a draw-down in the bank of carryover RINs.

A primary reason for finalizing the proposed approach is the importance of carryover 

RINs in providing a fluid and well-functioning RIN market, and compliance flexibility in the 

face of substantial uncertainties in the transportation fuel marketplace. As described in the 2007 

rulemaking establishing the RFS regulatory program,142 carryover RINs are intended to provide 

flexibility in the face of a variety of circumstances that could limit the availability of RINs, 

including weather-related damage to renewable fuel feedstocks and other circumstances affecting 

the supply of renewable fuel that is needed to meet the standards. We appreciate that obligated 

parties make individual decisions about whether and how many RINs to acquire for their 

compliance management purposes, and that a decision by EPA to effectively “draw down” their 

bank of RINs in calculating future volume requirements would decrease their compliance 

flexibility, increase their risk of noncompliance, and reduce the incentives for them to overcomply in the future to obtain carryover RINs. We also appreciate that the number of carryover 

RINs available in 2014, 2015, and 2016 will also affect the number of carryover RINs that will 

be available in future years, when compliance becomes more challenging and the ability to 

generate new carryover RINs more limited.

We believe the carryover RIN bank can best be analogized to a typical bank account. It is 

commonly understood that in managing both personal and business finances, that a reserve fund 

should be maintained to cover unforeseen circumstances. Thus, it is generally considered unwise 

to budget spending every dollar that is earned in a paycheck, since unforeseen events such as 

illness, injury, or a downturn in business could impact future earnings, and it is prudent to 

assume that such an event will occur in the future and to plan for it. This type of planning is 

particularly important in situations where credit is either unavailable or restricted, since in such 

circumstances there may be very limited alternatives to a reserve account. The RFS compliance 

system is structured to provide very little availability for “credit” when the unforeseen occurs. 

 

141 The size of the bank of carryover RINs can also be seen as informing EPA’s decision whether or not to exercise 

its discretion to provide a waiver of statutory volume targets when it finds that there is an inadequate domestic 

supply of renewable fuel. 

142 72 FR 23900, May 1, 2007.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 123 of 189

Parties may defer compliance for one calendar year, but are required to pay back the deficit in 

the next compliance year while also meeting the next year’s requirements.143 Parties may also 

petition EPA pursuant to CAA section 211(o)(7)(A) for a waiver to account for “inadequate 

domestic supply” or severe economic or environmental harm, but there is no guarantee that such 

waivers will be provided, they may not be granted in time to provide the relief needed, and since 

such waivers are only available to address widespread concerns, they may not be available to 

address individual circumstances. Thus, we believe that there are very good reasons for 

individual parties to seek to establish and retain a reserve bank of carryover RINs that can be 

used to address unforeseen circumstances that may hinder or prevent compliance.

Given the current size of the carryover RIN bank, we do not believe it would be 

reasonable to set volume requirements that would effectively require obligated parties that 

possess carryover RINs to draw their carryover RIN bank accounts down to a low or zero 

balance. Just as the economy as a whole functions best when individuals and businesses 

prudently plan for unforeseen events through creation of reserve money accounts, we believe that 

the RFS program works best when RINs are held in reserve for potential use by the RIN holders 

themselves, or for possible sale to others that may not have established their own reserve 

accounts, to account for unforeseen circumstances. In this way, the carryover RIN bank provides 

a buffer that is available for use by obligated parties when either individual or more widespread 

issues make compliance through the purchase of current-year RINs difficult or impossible. 

Furthermore, many obligated parties lack the ability to generate certain types of RINs. With a 

functioning liquid RIN market this is not a problem because we expect that these obligated 

parties will be able to comply by securing these RINs on the open market. However, a significant 

drawdown of the carryover RIN bank leading to a severe scarcity of RINs may stop the market 

from functioning in an efficient manner, which in turn could lead to noncompliance for certain 

parties, even where the market overall could satisfy the standards.

We understand that the availability of a very large number of carryover RINs may result 

in obligated parties complying through retirement of carryover RINs rather than investing in 

infrastructure or other long-term efforts to increase biofuel supply. However, considering the 

importance of maintaining some measure of compliance flexibility for the future, obligated 

parties as a whole are unlikely to voluntarily deplete their bank of carryover RINs simply to 

delay making investments in new infrastructure to increase the distribution and consumption of 

renewable fuel. The standards established today leave very little opportunity for obligated parties 

to acquire carryover RINs beyond those they already hold, and we do not believe the existing 

supply is so large that obligated parties as a whole will voluntarily deplete their reserves rather 

than preserve them for unforeseen difficulties. Thus, to the extent that obligated parties have 

already obtained a bank of carryover RINs, we believe that they will take steps to avoid dipping 

into that reserve. As such, to the extent possible, we believe obligated parties will make the 

necessary infrastructure improvements that need to be made to expand biofuel distribution and 

consumption, which in turn will enable them to hold on to their bank of carryover RINs. 

While it is relatively straightforward to conclude that it is appropriate to preserve a RIN 

bank for the reasons noted above, it is also necessary to consider the volume that is needed to 

provide an appropriate program buffer. In establishing the RFS regulatory program, we 

 

143 See CAA section 211(o)(5)(D).
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 124 of 189

considered both the beneficial program impacts of carryover RINs (e.g., compliance flexibility, 

liquidity in the RIN trading market, etc.) and the potential that a substantial volume of carryover 

RINs could undermine the legitimate need of biofuel producers for assurance that the products 

they produce will actually be sold and used during a given compliance year, which could be 

undermined if obligated parties satisfy their obligations with carryover RINs. Balancing these 

considerations, and taking into account the statutory provision that credits should only be valid to 

show compliance for 12 months after the date of generation, EPA specified by regulation that 

obligated parties may only satisfy 20 percent of their RVO in a given year with carryover RINs. 

This 20 percent value therefore sets a cap on the possible use of carryover RINs that increases in 

absolute terms over time as the volume of renewable fuel required through the RFS program 

grows. In practice, however, the absolute size of the carryover RIN bank has been decreasing 

with time, as compliance requirements become more exacting, and the ability to over-comply 

and create carryover RINs becomes increasingly difficult.

For example, we estimated that 3.5 billion excess RINs were generated in 2011 – almost 

500 million more than the 3.02 billion carryover RINs that could be used in 2012 as a result of 

the 20 percent cap.144 For 2013, EPA estimated that 2.67 billion 2012 carryover RINs were 

available for compliance. This represented 16 percent of that year’s 16.55 billion gallon total 

renewable fuel applicable volume. After compliance with the 2013 standards, we estimate that 

the carryover RIN bank will be drawn down to 1.8 billion RINs. Since we are setting the 2014 

and 2015 volumes to reflect actual production and use of renewable fuel in those years, this same 

volume of carryover RINs should be available for use in 2016. At that time, 1.8 billion carryover 

RINs would represent just 8 percent of the statutory volume of 22.25 billion gallons, and 10 

percent of the 18.1 billion gallon total renewable volume requirement finalized today.145 We 

believe that we should not intentionally set the RFS standards for 2014-2016 so as to 

intentionally draw down this bank of carryover RINs. This is not inconsistent with prior 

decisions, since the bank of carryover RINs is substantially less, both in absolute numbers and as 

a percentage of the applicable standards, than was the case in prior actions when we noted the 

availability of carryover RINs as a factor in deciding not to waive statutory volume targets. We 

recognize that the volume of carryover RINs that should be preserved as a program buffer is not 

given to a precise determination, and is largely a matter of judgment. At this time, given the 

information presently available to us, we believe it best not to set the RFS standards for 2014-

2016 so as to intentionally draw down the current carryover RIN bank. We expect to evaluate 

this issue each year in our annual standards rulemakings, and to learn from experience in 

implementing the program. 

 

144 See 77 FR 70752, 70759 (November 27, 2012).

145 By comparison, EPA notes that since 2010, stocks of ethanol have averaged approximately 5-6 percent of annual 

production. EIA. “Weekly U.S. Ending Stocks of Fuel Ethanol.” October 21, 2015 (available at 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPOOXE_SAE_NUS_MBBL&f=W); EIA. 

“Weekly U.S. Oxygenate Plant Production of Fuel Ethanol.” October 21, 2015 (available at 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPOOXE_YOP_NUS_MBBLD&f=W). Corn 

stocks, which vary by season, have rarely fallen below 9 percent of the annual harvest. USDA. “Grain Stocks.” 

September 30, 2015 (available at http://usda.mannlib.cornell.edu/usda/current/GraiStoc/GraiStoc-09-30-2015.pdf); 

USDA. “Crop Production Annual Summary.” January 12, 2015 (available at 

http://usda.mannlib.cornell.edu/usda/current/CropProdSu/CropProdSu-01-12-2015_revision.pdf).

Deleted: judgement
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 125 of 189

We do not agree with those commenters who asserted that carryover RINs should never 

be counted in determining whether and by how much to reduce statutory volume requirements. 

The D.C. Circuit in Monroe Energy ruled in evaluating EPA’s decision not to use the cellulosic 

waiver authority in 2013 that “EPA reasonably concluded that ‘the availability of carryover RINs 

[wa]s certainly relevant’ to its decision whether to reduce the [2013] volume requirement for 

total renewable fuel.” 146 In 2013, EPA carefully considered the specific circumstances presented 

-- the availability of several avenues for increasing physical volumes, some of them challenging, 

and a large enough number of carryover RINs that even in the unlikely event that all of the 

available ways of increasing volumes failed, carryover RINs could fill the void with a significant 

number still available for compliance flexibility. Under those circumstances, after considering 

the availability of carryover RINs, EPA concluded that a reduction in the statutory volume for 

total renewable fuel was not warranted. 

Similarly, were EPA to receive a request to waive already-established standards during 

the compliance year, we believe that it is appropriate for EPA to take into consideration the 

substantially different context involved. Although the situation is not presently before us, we 

believe that there could be a strong case for avoiding granting a waiver during the course of a 

compliance year if a waiver can be avoided through the use of carryover RINs. We would need 

to consider in that context whether it would be appropriate to revise an established standard in 

the midst of the compliance year if there is a compliance mechanism available to avert that 

result. Indeed, EPA believes that one benefit of preserving carryover RINs when setting 

standards in the first instance, is precisely so that they may be available to address unforeseen 

circumstances such as a downturn in wet gallon production during the compliance year. EPA 

will evaluate all such actions on a case-by-case basis.

For all of these reasons, we have determined that under current circumstances, carryover 

RINs should not be counted on to avoid or minimize the need to reduce the 2014, 2015, and 2016 

statutory volume requirements.

I. Impacts of Final Standards on Costs

In this section we provide illustrative cost estimates for the final standards. By 

“illustrative costs,” EPA means that the cost estimates provided are not meant to be precise 

measures, nor do they attempt to capture the full impacts of the rule. These estimates are 

provided solely for the purpose of showing how the cost to produce a gallon of a “representative” 

renewable fuel compares to the cost of petroleum fuel. There are a significant number of caveats 

that must be considered when interpreting these cost estimates. First, as discussed by 

commenters, there are a number of different feedstocks that could be used to produce advanced 

fuels, and there is a significant amount of heterogeneity in the costs associated with these 

different feedstocks and fuels. Some fuels may be cost competitive with the petroleum fuel they 

replace; however, we do not have cost data on every type of feedstock and every type of fuel. 

Therefore, we do not attempt to capture this range of potential costs in our illustrative estimates. 

 

146 Monroe Energy at 12. The court also quoted with approval EPA’s explanation that “carryover RINs are a valid 

compliance mechanism” and a means for obligated parties to “protect [] against any potential supply shortfalls that 

could limit the availability of RINs.” Id. (emphasis added by the court).

Commented [A46]: Would help to include more of an 

explanation on the position EPA took in Monroe. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 126 of 189

Second, EPA did not quantitatively assess other direct and indirect costs or benefits of 

increased biofuel volumes such as infrastructure costs, investment, GHG reduction benefits, air 

quality impacts, or energy security benefits, which all are to some degree affected by the rule. 

While some of these impacts were analyzed in the 2010 final rulemaking which established the 

current RFS program, we have not fully analyzed these impacts for the 2014, 2015, and 2016 

volume requirements being established today. We have framed the analyses we have performed 

for this final rule as “illustrative” so as not to give the impression of comprehensive estimates.

Third, a number of different scenarios could be considered the “baseline” for the 

assessment of the costs of this rule. One scenario would be the statutory volumes in which case 

this final rule would be reducing volumes, and reducing costs. For the purposes of showing 

illustrative overall costs of this rulemaking, we use the preceding year’s standard as the baseline 

(e.g., the baseline for the 2016 advanced standard is the final 2015 advanced standard, etc.), an 

approach consistent with past practices. 

Fourth, the 2014 standards were not finalized prior to 2014 so it is difficult to estimate 

what their costs may have been. Market participants may have anticipated a higher final 2014 

standard than the market would provide in the absence of the standard, which would contribute 

to the positive RIN prices witnessed in 2014. In contrast, the final 2014 standards represent 

reductions in both the advanced and conventional volumes compared to the 2013 standards, 

suggesting a reduction in costs for this final 2014 rule compared to the 2013 standards. Finally, 

the final 2014 standards are based on actual production levels in 2014, possibly suggesting that 

the 2014 standards we are finalizing are what would have happened in the marketplace absent a 

rulemaking. Viewed in this way, the standards would impose no cost. Given the complexity of 

this issue, we have not attempted to estimate the costs of the 2014 standards. Therefore, we only 

provide illustrative costs for the 2015 and 2016 advanced biofuel standards and total renewable 

fuel standards.

EPA is providing cost estimates for three illustrative scenarios – one, if the entire change 

in the advanced standards is met with soybean oil BBD; two, if the entire change in the advanced 

standards is met with sugarcane ethanol from Brazil; and three, if the entire change in the total 

renewable fuel volumes that can be satisfied with conventional biofuels (i.e., non-advanced) is 

met with corn ethanol. While a variety of biofuels could help fulfill the advanced standard 

beyond soybean oil BBD and sugarcane ethanol from Brazil, these two biofuels have been most 

widely used in the past. The same is true for corn ethanol vis-a-vis the non-advanced component 

of the total renewable fuel standard. We believe these scenarios provide illustrative costs of 

meeting the final standards. For this analysis, we estimate the per gallon costs of producing 

biodiesel, sugarcane ethanol, and corn ethanol relative to the petroleum fuel they replace at the 

wholesale level, then multiply these per gallon costs by the applicable volumes established in 

this rule for the advanced (for biodiesel and sugarcane ethanol) and non-advanced component of 

the total renewable fuel (for corn ethanol) categories. More background information on this 

section, including details of the data sources used and assumptions made for each of the

scenarios, can be found in a memorandum submitted to the docket.147

 

147 "Illustrative Costs Impact of the Final Annual RFS2 Standards, 2014-2017," Memorandum from Michael Shell 

and Michael Shelby to EPA Air Docket EPA-HQ-OAR-XXXX.

Deleted: given time constraints associated with providing 

estimates for the annual standard setting process, 

Commented [A48]: Please provide the cost estimates for 

the 2017 BBD standard as well.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 127 of 189

Because we are focusing on the wholesale level in each of the three scenarios, these 

comparisons do not consider taxes, retail margins, and any other costs or transfers that occur at 

or after the point of blending (i.e., transfers are payments within society and are not additional 

costs). Further, as mentioned above we do not attempt to estimate potential costs related to 

infrastructure expansion with increased biofuel volumes. In addition, because more ethanol 

gallons must be consumed to go the same distance as gasoline and more biomass-based diesel 

must be consumed to go the same distance as petroleum diesel due to each of the biofuels’ lesser 

energy content, we consider the costs of ethanol and biomass-based diesel on an energy 

equivalent basis to their petroleum replacements (i.e., per energy equivalent gallon (EEG)).

For our first illustrative cost scenario, we consider the costs of soybean-based biodiesel to 

meet the entire change in the advanced standards. The final 2014 standard is being set at the 

actual level of advanced biofuels produced in 2014, 2.67 billion gallons. The advanced biofuel 

volumes are being finalized for 2015 at 2.88 billion gallons and for 2016 at 3.8 billion gallons. 

Comparing the difference in costs between biomass-based diesel and petroleum-based diesel, we 

estimate a cost difference that ranges from $1.45 to $1.71/EEG in 2015 and from $1.00 to 

$2.55/EEG in 2016. Multiplying the per gallon cost estimates by the volume of fuel displaced by 

the advanced standard, on an energy equivalent basis, results in an overall annual cost of $203 to 

$240 million in 2015 and $547 to $1,394 million in 2016. 

For our second illustrative cost scenario, we provide estimates of what the potential costs 

might be if all additional volumes used to meet the 2015 and 2016 advanced biofuel standards 

above the previous year’s advanced biofuel standard are met with imported Brazilian sugarcane 

ethanol. Comparing the difference in costs between sugarcane ethanol and the wholesale 

gasoline price on a per gallon basis, we estimate cost differences that range from $0.89 to 

$2.05/EEG in 2015 and from $0.91 to $2.07/EEG in 2016. Taking the difference in per gallon 

costs for sugarcane ethanol and the wholesale gasoline price and multiplying that by the volume 

of petroleum displaced on an energy equivalent basis from the advanced standard results in an 

overall estimated annual cost of $186 to $431 million for 2015 and $747 to $1,701 million for 

2016.

For the third illustrative cost scenario, we assess the difference in cost associated with a 

change in the implied volumes available for conventional (i.e., non-advanced) biofuels for 2015 

and 2016. We provide estimates of what the potential costs might be if corn ethanol is used to 

meet the entire conventional renewable fuel volumes. The implied 2014 volume allowance for 

conventional renewable fuel is 13.61 billion gallons, 14.05 billion gallons in 2015, and 14.30 

billion gallons in 2016. If corn ethanol is used to meet the difference between the implied 2014 

to 2015 and 2015 to 2016 conventional renewable fuel volume increases, an increase of 440 

million gallons of corn ethanol would be required in 2015 and 250 million gallons in 2016. 

Comparing the difference in costs between corn ethanol and the wholesale gasoline price, we 

estimate a cost difference of $0.96 in 2015 and cost differences that range from $0.97 to 

$1.29/EEG in 2016. Taking the difference in per gallon costs between the corn ethanol and the 

wholesale gasoline price estimates and multiplying that by the volume of petroleum displaced on 

an energy equivalent basis by the conventional standard results in an overall estimated annual 

cost of $424 million for 2015 and $146 to $194 million for 2016. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 128 of 189

An alternative way of looking at the illustrative costs in 2016, given the fact that this is a 

three year rule and the 2015 standards may change, is to consider a volume change relative to the 

2014 proposed standard. The cost estimate for meeting the 2016 standard would range from 

$695 to $1,003 million if the entire advanced standard were to be met with soybean-based diesel. 

The cost estimates would range from $610 to $1,877 million if the entire advanced standard were 

met with sugarcane ethanol. The cost estimate for meeting the entire conventional standard in 

2016 with corn ethanol would range from $435 to $676 million. 

EPA received numerous comments related to the costs of the proposed 2014, 2015, and 

2016 renewable fuel volumes. One commenter believes that EPA overestimated the cost of 

additional biodiesel volumes. They claimed that “the program has resulted in providing the 

public with an alternative fuel source at a lower cost,” and provided documentation of a 

testimony in which a diesel fuel provider claims to use biodiesel because it’s cheaper than diesel. 

The commenter further states that the price of the RIN offers discounts to the biofuel producer.

Per gallon, wholesale biodiesel prices have been and continue to be more expensive than 

petroleum diesel. For example, on October 22, 2015, the front month futures price for B100 Soy 

Methyl Ester (SME) Chicago is $2.32/gallon, while the front month futures price for New York 

Harbor (NYH) Ultra-Low Sulfur Diesel (ULSD) is $1.47/gallon.149

Regarding the RIN discount, EPA acknowledges that biofuel producers may receive 

discounts due to RIN values. However, the discount a producer may receive due to RIN payment 

is not a cost, or a benefit; it is a transfer. In our cost methodology, we attempt to calculate the 

real resource costs associated with using biofuels in comparison to the fossil fuels that they 

replace. We did not attempt to capture transfers as a result of RIN prices, which we acknowledge 

have distributional impacts. We simply evaluated the cost to consumers by considering per 

energy equivalent gallon difference in wholesale costs of biofuels against their petroleum 

alternative given projected market prices. 

Multiple commenters expressed concern over the fact that EPA did not perform a full 

incremental cost-benefit analysis for the annual renewable fuel volumes. API commented that 

EPA should provide a “complete assessment of the rule’s costs on obligated parties, consumers, 

and other affected parties, along with a comparison of those costs with the rule’s benefits.” For 

the 2010 RFS2 final rule, EPA performed a full benefit-cost analysis for 2022, when the program 

fully matures. For this rulemaking, EPA performed the illustrative cost analysis described above 

in an attempt to capture some of the impacts of the rule and addresses benefits qualitatively. 

Another commenter acknowledged EPA’s 2010 benefit-cost analysis and the time constraint 

facing the agency in propagating annual standards, but called on EPA to complete an incremental 

analysis of the full impacts of this rule. 

 

149 PFL Market Daily, Progressive Fuels Limited

http://www.progressivefuelslimited.com/Web_Data/pfldaily.pdf

Deleted: As mentioned above, the short timeframe provided 

for the annual renewable fuel rule process does not allow 

sufficient time for EPA to conduct a comprehensive analysis 

of the benefits of the 2015 and 2016 standards and the statute 

does not require it. Moreover, as discussed in the final rule 

establishing the 1.28 billion gallon requirement for BBD in 

2013, the costs and benefits of the RFS program as a whole 

are best assessed when the program is fully mature in 2022 

and beyond.148 We continue to believe that this is the case, 

as the annual standard-setting process encourages 

consideration of the program on a piecemeal (i.e., year-toyear) basis, which may not reflect the long-term economic 

effects of the program. Therefore, for the purpose of this 

annual rulemaking, we have not quantified benefits for the 

2015 and 2016 final standards. We do not have a quantified 

estimate of the GHG impacts for the single year (e.g., 2015, 

2016). When the RFS program is fully phased in, the 

program will result in considerable volumes of renewable 

fuels that will reduce GHG emissions in comparison to the 

fossil fuels which they replace. EPA estimated GHG, energy 

security, and air quality impacts and benefits for the 2010 

RFS2 final rule for 2022. 

Formatted: Indent: First line: 0.5", Keep with next,

Keep lines together

Commented [A50]: Please update the numbers/text in this 

paragraph (taken from NPRM), which gives the cumulative 

range of estimates for the rule considering all of the 

standards. Please also include the 2017 BBD cost as well.

Deleted: As EPA has previously stated, the annual 

rulemaking schedule for setting renewable fuel volumes does 

not allow sufficient time to conduct a comprehensive 

benefit-cost analysis. 

Deleted: We agree that performing an incremental costbenefit analysis would be helpful to an extent, but we 

continue to believe that assessing the program as a whole, 

over its maturity, is most appropriate. Further, attempting to 

assess the full impacts of the program annually introduces 

issues of what to compare impacts against, or what baseline 

to use, an issue EPA described in the NPRM. Impacts from 

annual standards could be analyzed against a number of 

impacts including the EISA statutory volumes or a “no RFS 

world.” Either option has merits as well as shortcomings, 

and would result in directionally different impacts due to the 

divergent states of the world being considered. We do not 

think including either would necessarily make the analysis 

more robust. 

Deleted: ¶
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 129 of 189
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 130 of 189

III. Final Biomass-Based Diesel Volumes for 2014 -2017

In this section we discuss the final biomass-based diesel (BBD) applicable volumes for 

2014 through 2017. It is important to note that the BBD volume requirement is nested within 

both the advanced biofuel and the total renewable fuel volume requirements; so that any 

“excess” BBD produced beyond the mandated BBD volume can be used to satisfy both these 

other applicable volume requirements. Therefore, in finalizing the applicable BBD volume for 

2014-2017, we considered not only the volume for BBD, which effectively guarantees a 

minimum amount, but also the advanced biofuel and total renewable fuel volume requirements, 

which historically have played a significant role in determining demand for BBD as well. 

In finalizing an applicable BBD volume requirement for 2017, we are establishing the 

volume requirement but not the percent standard. 

A. Statutory Requirements

The statute establishes applicable volume targets for years through 2022 for cellulosic 

biofuel, advanced biofuel, and total renewable fuel. For BBD, applicable volume targets are 

specified in the statute only through 2012. For years after those for which volumes are specified 

in the statute, EPA is required under CAA section 211(o)(2)(B)(ii) to determine the applicable 

volume of BBD, in coordination with the Secretary of Energy and the Secretary of Agriculture, 

based on a review of the implementation of the program during calendar years for which the 

statute specifies the volumes and an analysis of the following factors:

1. The impact of the production and use of renewable fuels on the environment, 

including on air quality, climate change, conversion of wetlands, ecosystems, 

wildlife habitat, water quality, and water supply;

2. The impact of renewable fuels on the energy security of the United States;

3. The expected annual rate of future commercial production of renewable fuels, 

including advanced biofuels in each category (cellulosic biofuel and BBD);

4. The impact of renewable fuels on the infrastructure of the United States, including 

deliverability of materials, goods, and products other than renewable fuel, and the 

sufficiency of infrastructure to deliver and use renewable fuel;

5. The impact of the use of renewable fuels on the cost to consumers of 

transportation fuel and on the cost to transport goods; and

6. The impact of the use of renewable fuels on other factors, including job creation, 

the price and supply of agricultural commodities, rural economic development, 

and food prices.

The statute also specifies that the volume requirement for BBD cannot be less than the applicable 

volume for calendar year 2012, which is 1.0 billion gallons. The statute does not, however, 

establish any other numeric criteria, or provide any guidance on how the EPA should weigh the 

importance of the often competing factors, and the overarching goals of the statute when the 

EPA sets the applicable volumes of BBD in years after those for which the statute specifies such 

volumes. In the period 2013-2022, the statute specifies increasing applicable volumes of 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 131 of 189

cellulosic biofuel, advanced biofuel, and total renewable fuel, but provides no guidance, beyond 

the 1.0 billion gallon minimum, on the level at which BBD volumes should be set.

B. BBD Production and Compliance Through 2013

Due to the delayed issuance of the major regulatory revisions necessary to implement 

changes to the RFS program enacted through the Energy Independence and Security Act of 

2007, EPA established a 2010 BBD standard that reflected volume requirements for both 2009 

and 2010, and allowed RINs generated as early as 2008 to be used for compliance with that 

standard. Given the complexity associated with the 2010 BBD standard, we begin our review of 

implementation of the program with the 2011 compliance year. This review is required by the 

CAA, and also provides insight into the capabilities of the industry to produce, import, export, 

and distribute BBD. It also helps us to understand what factors, beyond the BBD standard, may 

incentivize the production and import of BBD. The number of BBD RINs generated, along with 

the number of RINs retired for reasons other than compliance with the annual BBD standards, 

are shown in Table III.B-1 below.

Table III.B-1

Biomass-Based RIN Generation and Standards in 2011-2013 (million gallons)150

BBD 

RINs 

Generated

Exported 

BBD 

(RINs)

BBD RINs Retired, 

Non-Compliance 

Reasons

Available 

BBD RINs

BBD 

Standard 

(Gallons)

BBD 

Standard 

(RINs)151

2011 1,692 110 97 1,484 800 1,200

2012 1,737 193 80 1,465 1,000 1,500

2013 2,739 295 94 2,350 1,280 1,920

In reviewing historical BBD RIN generation and use, we see that the number of RINs 

available for compliance purposes exceeded the volume required to meet the BBD standard in 

2011 and 2013. Additional production and use of biodiesel may have been driven by a number 

of factors, including demand to satisfy the advanced biofuel and total renewable fuels standards, 

the biodiesel tax credit, and favorable blending economics. In 2012 the available BBD RINs 

were slightly less than the BBD standard. There are many reasons this may have been the case, 

including the lapse of the biodiesel tax credit at the end of 2011.152

While the total number of BBD RINs generated in 2013 was 2.74 billion (representing 

1.79 billion gallons of BBD), it is also instructive to review the data on volumes that were 

produced domestically, imported, exported, and retired for reasons other than compliance. Total 

domestic production of BBD was 1.45 billion gallons (2.19 billion RINs), while imports resulted 

 

150 Net BBD RINs Generated and BBD RINs Retired for Non-Compliance Reasons information from EMTS. 

Biodiesel Export information from EIA 

(http://www.eia.gov/dnav/pet/pet_move_expc_a_EPOORDB_EEX_mbbl_a.htm)

151 Each gallon of biodiesel generates 1.5 RINs due to its higher energy content per gallon than ethanol. Renewable 

diesel generates between 1.5 and 1.7 RINs per gallon.

152 The biodiesel tax credit was reauthorized in January 2013. It applied retroactively for 2012 and for the remainder 

of 2013. It was once again extended in December 2014 and applied retroactively to all of 2014 as well as to the 

remaining weeks of 2014.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 132 of 189

in an additional 0.34 billion gallons (0.55 billion RINs).153 However, this volume was not 

entirely available for compliance purposes, since some of the BBD produced domestically was 

exported and some RINs had to be retired for purposes other than compliance. Based on EIA 

export data, we estimate that 0.196 billion gallons (0.295 billion RINs) of BBD were exported in 

2013.154 A corresponding number of BBD RINs will eventually be retired by exporters, as 

required by the RFS regulations, and therefore are not available for use by refiners and importers 

in satisfying their 2013 obligations.155 Additionally, 0.094 billion BBD RINs were retired for 

reasons other than compliance, such as volume error corrections, contaminated or spoiled fuel, or 

fuel used for purposes other than transportation fuel, heating oil, or jet fuel. Based on this 

information, the actual amount of BBD available for compliance in 2013 totaled 2.36 billion 

RINs, representing approximately 1.55 billion gallons of BBD. This is 430 million more BBD 

RINs than were required for compliance with the BBD standard in 2013.

C. BBD Volumes for 2014 

As we did for advanced and total renewable fuel in 2014 and 2015, we believe that it is 

appropriate to establish the 2014 and 2015 volume requirements of BBD to reflect actual supply 

(including a projection for the latter part of 2015 that is primarily based on supply in the earlier 

part of the year for which data is available). Therefore, we are finalizing a BBD applicable 

volume requirement of 1.63 billion gallons for 2014, which represents our estimate of actual 

BBD supply in 2014. We define supply for 2014 as the number of BBD RINs generated in 2014 

that were available for compliance.156 Supply would thus include RINs that were generated for 

renewable fuel produced or imported in 2014 as recorded in the EMTS, minus any RINs that 

have already been retired or would be expected to be retired to cover exports of renewable fuels 

or for any purpose other than compliance with the RFS percentage standards. RINs that have 

already been retired for such circumstances as RINs being invalid, spills, corrected and replaced 

RINs, etc. are recorded in EMTS on an ongoing basis. However, complete information on RINs 

that are retired to cover exports of renewable fuel is not available through EMTS until after the 

2014 compliance demonstration deadline. Since compliance cannot occur until the standards are 

set, we are using biodiesel export information from EIA for 2014 to estimate the number of 2014 

BBD RINs that will be retired to satisfy obligations associated with exported BBD.

 

153 “2013 RIN Supply”, EPA Docket EPA-HQ-OAR-2015-0111.

According to the U.S. Energy Information Administration (EIA), Annual import data for BBD (Biodiesel and 

Renewable diesel countries contributing to BBD imports (million gallons) were Argentina=132, Aruba = 6, 

Australia= 1, Belgium=5, Canada= 45, Finland = 36, Germany = 61, Indonesia=52, Netherlands = 8, Norway = 9, 

South Korea = 20, Panama=3, Singapore = 164, Spain = 4, Taiwan=1. (See 

http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_a.htm (last accessed October 22, 

2015).

Note that not all of the imported volumes generated BBD (D4) RINs. Some of this volume may have generated 

Renewable Fuel (D6) RINs or no RINs at all. 

154 U.S. Energy Information Administration (EIA). Annual export data for Biodiesel (2013). See 

http://www.eia.gov/dnav/pet/pet_move_expc_a_EPOORDB_EEX_mbbl_a.htm (last accessed October 27, 2015).

155 EMTS includes data on RINs retired for export, but the values are incomplete as of this writing since the 2013 

compliance deadline has not yet passed.

156 Our focus on RINs generated in 2014 is consistent with our general approach to carryover RINs for this 

rulemaking, as described in Section II.H.

Commented [A52]: The number of RINs is calculated 

incorrectly even though all of the volumes in footnote 153 

are correct. Biodiesel only imports were 8,152,000 bbl in 

2013 or 0.34 billion gallons of biodiesel * 1.5 = 0.51 billion 

RINs (not 0.55). Renewable diesel only imports were 

4,921,000 bbl in 2013 or 0.21 billion gallons. Biomassbased diesel (biodiesel and renewable diesel) imports in 

2014 were half as large as in 2013.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 133 of 189

Actual supply of BBD in 2014 and the projected actual supply for 2015 is shown in Table 

III.C-1 below. Further details are provided in a memorandum to the docket.157 Since EIA does 

not distinguish exports by D code, we assumed that all biodiesel exports represent D4 BBD. We 

expect that any errors introduced by this assumption will be very small.158

Table III.C-1

Supply of Biomass-Based Diesel in 2014 and 2015

2014

Domestic 

production and 

imports

Exports

BBD RINs Retired, 

Non-Compliance 

Reasons

Net supply

Million RINs 2,709 124 82 2,490

Million gallons 1,763 83 48 1,630159

Projected Actual 2015 

Million RINs 2,888 145 92 2,650

Million gallons 1,880 97 54 1,730

Some commenters suggested the EPA was prohibited from increasing the biomass-based 

diesel standard above 1.28 billion for 2014 because obligated parties did not have notice of 

EPA’s intention to increase the biomass-based diesel standard above this amount during the 2014 

production year. We do not agree with these commenters and believe that obligated parties were 

on notice that the BBD volume requirement could be higher than 1.28 billion gallons. First, in 

proposing 2014 volumes, in the November 2013 NPRM160 we said that we believed 1.60 billion 

gallons of biomass-based diesel was the upper-end of BBD volume range for use in deriving the 

proposed total renewable fuel volume for 2014. While we proposed a 2014 BBD volume 

requirement of 1.28 million, we also requested comment on alternative approaches and higher 

volumes.161 We also noted in the NPRM that total biodiesel production by the end of 2013 could 

be as high as 1.7 billion gallons and that the facilities contributing to this production collectively 

had a capacity of well over 2 billion gallons.162 Thus, stakeholders were certainly on notice by 

November 2013 that a final BBD volume requirement greater than 1.28 billion gallons was 

possible and could be used in deriving the final 2014 BBD standard. Furthermore, they were 

provided with notice of the precise volume requirement being finalized today through the June 

 

157 "2014 RIN Supply," EPA docket EPA-HQ-OAR-2015-0111.

158 From 2011 through 2015 only 12 million gallons of conventional (D6) biodiesel and renewable diesel was 

produced in the United States. We believe it is unlikely that foreign-produced conventional (D6) biodiesel and 

renewable diesel was imported into the United States and consequently exported, especially as the biodiesel blenders 

tax credit has not applied to fuel produced outside the US for use as a fuel outside the US since 2008.

159 While the actual physical volume of D4 BBD supplied in 2014 was 1.63 billion gallons, we have used a physical 

volume of 1.67 billion gallons in calculating the percentage standard for 2014 because the formula for calculating 

the BBD percentage standard in 40 CFR 80.1405(c) includes a factor of 1.5, presuming that all BBD is biodiesel. In 

reality, a significant portion of BBD in 2014 was renewable diesel (328 million gallons), which generally has an 

equivalence value of 1.7 rather than 1.5. The use of a physical volume of 1.67 billion gallons ensures that the 

applicable percentage standard for BBD accounts for the higher equivalence value of the volume of renewable diesel 

produced and imported in 2014 and results in a requirement for 2.50 billion RINs, consistent with supply.

160 78 Fed. Reg. 71732, 71767 (November 29, 2013). 

161 78 Fed Reg 71732, 71734.

162 78 Fed Reg 71732, 71752.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 134 of 189

10, 2015 NPRM, and parties will have almost a full year from that NPRM, to June 1, 2016, to 

submit their compliance demonstrations for 2014. 

These same industry commenters suggested that because of the retroactive nature of the 

2014 rulemaking and purported lack of notice, some obligated parties might have difficulty 

meeting their 2014 BBD volume obligations if we were to finalize a BBD volume requirement 

greater than 1.28 billion gallons. After review of comments submitted by obligated parties we 

were not able to find any commenter specifically indicating that this would occur. Only one 

obligated party commented that for 2014, “production challenges may occur with increased 

numbers.”163 

Even if an obligated party faced compliance challenges for 2014, CAA 211(o)(2)(5)(A)-

(D) provides two compliance flexibility options that an obligated party may utilize if they are 

unable to meet their 2014 BBD volume obligation with RINs generated in 2014. First, to the 

extent that any shortfall of BBD RINs might exist, an obligated party, could utilize carryover 

BBD RINs (D4) to meet their compliance obligation. As we discussed in Section II.H, carryover 

RINs were intended to provide flexibility for obligated parties in complying with the RFS 

standards in a variety of circumstances. Certainly, if an obligated party experiences a shortfall in 

complying with the BBD 2014 volume standard it would be an appropriate use of carryover 

RINs to meet compliance obligations. Based on available data in the EMTS system164, we 

estimate that there are about 400 million carryover BBD RINs available for use in 2014. This 

number of BBD carryover RINs should be available for purchase on the RIN market (since if 

they are not used in 2014 they will expire), and together with available RINs generated in 2014 

make up a substantial RIN pool from which obligated parties may acquire needed RINs. 

However, if an obligated party was either unable to generate or purchase the necessary carryover 

RINs to meet its compliance obligation, they could alternatively use the carry-forward deficit 

provision of CAA 211(o)(2)(5)(D) to carry forward the deficit for one year on the condition that 

it be met the following year. 

We recognize that the same number of BBD RINs will likely be retired for compliance 

with the 2014 RFS standards whether we set the BBD volume requirement at 1.28 versus 1.63 

billion RINs, because complying with the 2014 advanced and total renewable fuel standards will 

require retirement of 1.63 billion BBD RINs. However, in light of this fact, the ease with which 

RINs may be traded, as well as the availability of carryover RINs and the deficit carry-forward 

option, we are not persuaded that any obligated party will have more difficulty complying with a 

1.63 billion gallons BBD volume requirement as compared to a 1.28 billion gallon BBD volume 

requirement. Therefore, we do not believe that sufficient justification has been presented by 

commenters for EPA to deviate from the proposed approach of setting the 2014 BBD volume 

requirement as equal to the 2014 BBD volume. In addition, we believe that lowering the 

proposed 2014 BBD volume requirement for what we believe to be a highly theoretical, and 

undocumented concern would send a potentially chilling message to investors in the BBD 

industry that would be contrary to the objectives of the CAA to incentivize the growth of 

renewable fuel volumes. 

 

163 Phillips 66

164 Reference specific EMTS data.

Commented [A53]: Are obligated parties under an 

obligation to raise this concern?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 135 of 189

For all of these reasons, we believe that it is reasonable and appropriate to establish the 

2014 BBD applicable volume requirement as equal to 1.63 billion gallons, the volume actually 

produced and imported in 2014 and which is available for compliance. This is consistent with 

the approach we are taking to establishing the total renewable fuel, advanced biofuel, and 

cellulosic biofuel standards in 2014. Since we are establishing the requirement for a time period 

that has already passed, and setting the requirement equal to the available supply of 2014 BBD 

RINs, we continue to believe that our action will result in no real-world impacts, including no 

impacts with respect to the factors listed under CAA section 211 (o)(2)(B)(ii)(I)-(VI). 

D. Determination of Applicable Volume of Biomass-Based Diesel for 2015 – 2017

The statute requires that, in determining the applicable volume of BBD, we review the 

implementation of the program in previous years. Based on the fact that the industry made more 

BBD available in 2011 and 2013 than volume requirements for those years, we conclude that the 

BBD standard is not the sole driver for the amount of BBD produced or imported into the United 

States.165 We believe that the advanced biofuel and total renewable fuel standards are significant 

factors in the amount of biodiesel produced and imported into the United States. We also believe 

that the advanced and/or total renewable fuel standards can continue to drive BBD volume in 

2015 – 2017. As described in more detail in Sections II.E and II.F, we are finalizing volumes of 

advanced biofuel and total renewable fuel for 2016 that require growth beyond the volumes 

supplied in 2014 and 2015 and this will continue to provide incentives for BBD volumes that 

exceeds the BBD volume requirement.

However, we recognize that in addition to being a component of advanced biofuel and 

total renewable fuel, Congress also intended that BBD have its own specific standard. Given 

that the statute requires annual increases in advanced biofuel through 2022, it may be appropriate 

for BBD to play a specific and increasing role in the advanced biofuels to the market. While we 

generally believe that the advanced and total volume requirements are sufficient to incentivize 

continued growth in the production and consumption of BBD in most years, circumstances may 

arise that result in unfavorable market conditions for the production and consumption of BBD, as 

was the case in 2012. We believe there is value in providing some degree of certainty to BBD 

producers that there will be a market for the fuel they produce for circumstances such as this. 

Therefore, this final rule seeks to balance the goals of supporting the BBD industry and 

incentivizing the production of non-BBD advanced biofuels by providing a guaranteed, 

increasing market for BBD, while at the same time providing room under the advanced standard 

for other types of advanced biofuels, and thus incentivizing their growth as well. We have 

considered the ability of the advanced biofuel and total renewable fuel standards to incentivize 

an increasing volume of BBD, the implementation of the RFS program to date, and the statutory 

factors listed in CAA 211(o)(2)(B) (discussed in further detail in Section III.E below).

1. Implication of Nested Standards

 

165 The blenders tax credit for biodiesel likely also incentivized additional biodiesel blending in these years.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 136 of 189

The BBD standard is nested within the advanced biofuel and total renewable fuel 

standards. This means that when an obligated party retires a BBD RIN (D4) to satisfy their BBD 

obligation, this RIN also counts towards meeting their advanced biofuel and total renewable fuel 

obligations. It also means that obligated parties may use BBD RINs in excess of their BBD 

obligations to satisfy their advanced biofuel and total renewable fuel obligations. Higher 

advanced biofuel and total renewable fuel standards, therefore, create demand for BBD, 

especially if there is an insufficient supply of other advanced or conventional renewable fuels to 

satisfy the standards, or if BBD RINs can be acquired at or below the price of other advanced or 

conventional biofuel RINs.

In reviewing the implementation of the RFS program to date, it is apparent that the 

advanced and/or total renewable fuel requirements were in fact helping grow the market for 

volumes of biodiesel above the BBD standard. Table III.D.1-1 below shows the number of BBD 

RINs generated and available for use towards demonstrating compliance166 in each year from 

2011 – 2013. Similar data for 2014 is shown in Table III.C-1. As can be seen from these tables, 

in 2011 and 2013 the number of BBD RINs available for use exceeded the volumes required to 

satisfy the BBD standard. Similarly the quantity of BBD RINs in 2014 far exceeded the 1.28 

billion gallons volume requirement (1.92 billion BBD RINs) for BBD that EPA proposed in 

November 2013. In 2013 the number of advanced RINs generated from fuels other than BBD 

was not large enough to satisfy the implied standard for “other advanced” biofuel (advanced 

biofuel that is not BBD or cellulosic biofuel), and BBD filled the gap. In fact, the amount by 

which the available BBD RINs exceeded the 1.28 billion gallon BBD volume requirement (421 

million RINs) was slightly larger than the amount by which the non-BBD RINs fell short of 

satisfying the “other advanced” biofuel implied standard (285 million RINs). This supports the 

theory that the advanced biofuel standard provided an incentive to support a BBD volume in the 

United States in excess of that required to satisfy the BBD standard.

In 2012 the available BBD RINs was slightly less than the BBD standard, despite the 

continued opportunity for BBD to contribute towards satisfying the advanced and total 

renewable fuel volume requirements. There are a number of reasons this may have been the 

case. The drought in 2012 resulted in reduced production of soy beans and other oilseed crops 

that provide feedstocks for the BBD industry. Compounding this effect was the significantly 

lower corn harvest in 2012, which increased the demand for soy beans and other fats and oils in 

the animal feed market. The biodiesel tax credit, which had been in place since the end of 2010, 

expired at the end of 2011. Finally, and perhaps most significantly, the E10 blendwall had not 

yet been reached in 2012. This meant that meeting the advanced biofuel requirements through 

the use of advanced ethanol, primarily sugar cane ethanol, in E10 blends, rather than additional 

volumes of BBD was still a viable option. Indeed, in 2012 over 600 million RINs were 

generated for advanced ethanol. While we believe these circumstances are unlikely to be 

repeated in future years, this does demonstrate the value of an increasing BBD standard despite 

the ability for the advanced and total renewable fuel volume requirements to incentivize 

additional biodiesel and renewable diesel volumes beyond the BBD standard.

 

166 RINs available for use is number of RINs generated minus the number of RINs retired (or that we anticipate will 

be retired) for any reason other than a demonstration of annual compliance, such as RINs retired for exported 

biofuel, volume error corrections, enforcement actions, fuel used in applications other than transportation fuel, 

heating oil, or jet fuel, etc.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 137 of 189

 

Table III.D.1-1

Biomass-Based Diesel and Advanced Biofuel RIN Generation and Standards (million gallons)

Available BBD 

(RINs)

BBD Standard 

(RINs)

Available NonBiodiesel 

Advanced Biofuel

“Other” Advanced 

Biofuel Allowed

2011 1,484 1,200 225 150

2012 1,465 1,500 597 500

2013 2,360 1,920 552 830

The prices paid for advanced biofuel and BBD RINs beginning in early 2013 through 

2015 also support the theory that advanced biofuel and/or total renewable fuel standards provide 

sufficient incentive for additional biodiesel volume. Because the BBD standard is nested within 

the advanced biofuel and total renewable fuel standards, we would expect the price of BBD RINs 

to exceed that of advanced and conventional renewable RINs. If, however, BBD RINs are being 

used by obligated parties to satisfy their advanced biofuel and/or total renewable fuel obligations, 

above and beyond the BBD standard, we would expect the prices of conventional renewable fuel, 

advanced biofuel, and BBD RINs to converge. When examining RIN prices data from 2011 

through 2014, shown in Figure III.D.1-1 below, we see that until January 2013 there is a 

consistent price differential between the price of BBD and the relatively cheaper other advanced 

biofuel and conventional renewable fuel RINs. Beginning in 2013 the price of BBD RINs and 

other advanced biofuel RINs converge, and remain at a similar price throughout 2015. This is 

more evidence that suggests that the advanced biofuel standard and/or total renewable fuel 

standard is capable of incentivizing increased BBD volumes beyond the BBD standard, and that 

it in fact operated in this manner in 2013.167

 

167 Although we did not issue a rule establishing the final 2013 standards until August of 2013, we believe that the 

market anticipated the final standards, based on EPA’s July 2011 proposal and the volume targets for advanced and 

total renewable fuel established in the statute. (76 Fed Reg 38844, 38843).
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 138 of 189

Figure III.D.1-1

RIN Prices: July 2011 – July 2014

Image from ICCT. Available online: http://www.theicct.org/blogs/staff/does-biodiesel-really-need-tax-credit

2. Biomass-Based Diesel as a Fraction of Advanced Biofuel

In establishing the BBD and cellulosic standards as nested within the advanced biofuel 

standard, Congress clearly intended to support development of BBD and cellulosic biofuels, 

while also providing an incentive for the growth of other non-specified types of advanced 

biofuels. That is, the advanced biofuel standard provides an opportunity for other advanced 

biofuels (advanced biofuels that do not qualify as cellulosic biofuel or BBD) to be used to satisfy 

the advanced biofuel standard after the cellulosic biofuel and BBD standards have been met. 

Indeed, since Congress specifically directed growth in BBD only through 2012, leaving 

development of volume targets for BBD to EPA for later years while also specifying substantial 

growth in the cellulosic and general advanced categories, we believe that Congress clearly 

intended for EPA to evaluate in setting BBD volume requirements after 2012 the appropriate rate 

of participation of BBD within the advanced biofuel standard. 

The unspecified advanced biofuel volume in the statutory tables in CAA 211(o)(2)B)(i) 

starts at 0.25 billion gallons in 2013 and grows to 3.5 billion gallons in 2022. The actual size of 

the unspecified volume of advanced biofuel in any given year is, however, heavily dependent on 

EPA actions. Increasing the BBD standard above 1 billion gallons, as we did in 2013, reduced 

the potential market for other advanced biofuels to contribute towards meeting the advanced 

biofuel standard in that year. Conversely, reducing the cellulosic biofuel standard while 

simultaneously maintaining the advanced biofuel standard (or reducing it by a lesser amount), as 

we have done each year since 2010, increases the potential market for all advanced biofuels, 

including BBD. While each year’s volume requirements are established in consideration of the 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 139 of 189

volumes of various types of biofuels expected to be reasonably attainable in that year, we are 

also cognizant that the annual standards send messages to the market that can influence the 

direction of research and investment. 

When viewed in a long-term perspective, BBD can be seen as competing for research and 

development dollars with other types of advanced biofuels for participation as advanced biofuels 

in the RFS program. In addition to the long-term impact of our action in establishing the BBD 

volume requirements, there is also the potential for short-term impacts during the compliance 

years in question. Although we are setting the advanced standard at a level that reflects growth 

in volumes that is reasonable attainable , we are not setting the standard at the maximum 

theoretical level that reflects the highest potential for domestic production plus import. As 

described in Section II.F, there is substantial uncertainty, especially regarding import volumes, 

that cautions against such an approach. Therefore, by setting the BBD volume requirement at a 

level lower than the advanced biofuel volume requirement (and lower than the expected 

production of BBD to satisfy the advanced biofuel requirement), we are allowing the potential 

for some competition between BBD and other advanced biofuels (including imported advanced 

biofuels) to satisfy the advanced biofuel volume standard. We believe that this competition will 

also help to encourage, over the long term, the development and production of a variety of 

advanced biofuels. However, in the short term it could also result in lower cost advanced 

biofuels. 

BBD, like all non-cellulosic advanced biofuels, must, by definition, achieve lifecycle 

greenhouse gas reductions of at least 50% relative to the petroleum fuels it displaces. Thus, the 

environmental benefits of BBD are comparable to those of other non-cellulosic advanced 

biofuels. Increasing the portion of the advanced standard that comprises a guaranteed market for 

BBD would over time likely reduce competition among advanced biofuels and could disincentivize research and development of advanced biofuels that are potentially more economical 

or environmentally preferable (including for non-GHG related reasons) than BBD. Having a 

more limited assortment of biofuels participate in the RFS program would also reduce the 

potential energy security benefits of the program, since energy security is enhanced through fuel 

diversity. Thus, we believe that the long term success of the RFS program, as envisioned by 

Congress, is best served by growth in a variety of advanced biofuels. We intend, therefore that 

the standards we set today provide a signal to the market to move forward with research, 

development, and commercialization of a variety of types of advanced biofuels beyond just 

BBD. 

We received comments that the consideration of competition within the advanced biofuel 

pool between BBD and other advanced biofuels, and the potential for lower compliance costs 

cited in our proposed rule, are not included in the list of factors in 42 U.S.C. § 

7545(o)(2)(B)(ii)(V) that EPA is to consider in establishing the volume requirement for BBD. 

EPA respectfully disagrees. Three of the factors specified in the statute are indeed related to the 

considerations discussed above. The “impact of the use of renewable fuels on the cost to 

consumers of transportation fuel and on the cost to transport goods” referenced in CAA 

211(o)(2)(B)(ii)(V) is relevant, since we believe a diverse advanced biofuel pool will potentially 

result in decreased costs associated with the use of advanced biofuels and, consequently, 

decreased costs to consumers. Similarly, the “impact of the production and use of renewable 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 140 of 189

fuels on the environment” referenced in CAA 211(o)(2)(B)(ii)((I) is relevant, since we believe 

that incentivizing research and development in a variety of advanced biofuels could lead to the 

development of biofuels that have more benign effects on the environment than those that are 

currently available. As noted above, “the impact of renewable fuels on the energy security of 

the United States” referenced in CAA 211(o)(2)(B)(ii)(II) is relevant, since we believe that 

incentivizing the development of a diverse array of biofuels will increase energy security Finally, 

we note that the list of factors specified in the statute is not exclusive; that is EPA is not 

precluded from considering additional factors that advance the statutory objectives when it sets 

applicable volumes for years not specified in the statute. 

3. Ensuring Growth in Biomass-Based Diesel and Other Advanced Biofuel

While a single-minded focus on the ability of the advanced and total renewable fuel 

standards to incentivize increasing production of advanced biofuels other than BBD would 

suggest that a flat or even decreasing BBD volume requirement may be the optimal solution, this 

is not the only consideration. Despite many of these same issues being present in 2013, EPA 

decided to increase the BBD standard in 2013 to 1.28 billion gallons. EPA’s decision to 

establish this higher BBD volume for 2013 was made against the backdrop of the BBD industry 

having increased production from about 400 million gallons in 2010 to over 1 billion gallons in 

2011.168 EPA was not completely confident in the ability of the BBD industry to further increase 

production without an increased BBD standard. While BBD production had performed well in 

2011 and the early part of 2012, the biodiesel industry had gone through a period of instability in 

2009 and 2010.169

During the development of the 2013 standards rulemaking, we were also concerned that 

production of cellulosic biofuel, also nested within the advanced biofuel requirement, was 

lagging significantly behind the statutory volume target. The shortfall in cellulosic biofuel 

volume meant that either other sources of advanced biofuel would be necessary to fulfill the 

specified volumes in the statute for advanced biofuel, or that EPA would need to waive a portion 

of the advanced biofuel volume target. It is in this context that we determined that raising the 

BBD requirement to 1.28 billion gallons was appropriate. Most importantly, an applicable 

volume requirement of 1.28 billion gallons was expected to encourage continued investment and 

innovation in the BBD industry, providing necessary assurances to the industry to increase 

production for 2013 while also serving the long term goal of the RFS statute to increase volumes 

of advanced biofuels over time.170 

Although the BBD industry has performed well in 2013 and in subsequent years, we 

believe that continued appropriate increases in the BBD volume requirement will help provide 

stability to the BBD industry and encourage continued growth. This industry is currently the 

single largest contributor to the advanced biofuel pool, one that to date has been largely 

 

168 77 FR 59461 col. 1, September 27, 2012. 

169 Regulations of Fuels and Fuel Additives: 2013 BBD Renewable Fuel Volume; Final Rule. 77 Fed. Reg. 59458, 

59460-59461. http://www2.epa.gov/renewable-fuel-standard-program/regulations-and-volume-standards-underrenewable-fuel-standard (last accessed October 22, 2015).

170 77 FR 59458, 59462 and 59483.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 141 of 189

responsible for providing the growth in advanced biofuels envisioned by Congress. 

Nevertheless, there has been variability in the number of biodiesel facilities in production over 

the last few years, as well as the percent utilization of individual facilities, both of which 

contribute uncertainty in the rate of production in the near future, and which can be mitigated to 

some degree with an increase in the BBD applicable volume.171 Increasing the BBD volume 

requirement should help to provide market conditions that allow these BBD production facilities 

to operate with greater certainty. This result is consistent with the goals of the Act to increase 

the production and use of advanced biofuels.

4. Final BBD Volume for 2015

In the June 10, 2015 NPRM we proposed a 1.7 billion gallon BBD volume requirement 

for 2015, anticipating that the growth over actual levels observed in the first part of the year was 

possible despite late issuance of the proposal. The market responded as we anticipated and, 

indeed, slightly exceeded our expectations. During the first nine months of 2015 for which data 

are now available, 2.05 billion BBD RINs, representing 1.34 billion gallons of biodiesel and 

renewable diesel, were generated. When this rate of production is extrapolated to the end of the 

year, and taking into account the heightened end-of-year production we expect, based on past 

experience, as well as expected RIN corrections and retirements due to exports, we now estimate 

an actual BBD volume of 1.73 billion gallons for 2015.172 We do not anticipate that this final 

rule can influence the market in any way for the remaining month of 2015. Therefore, we are 

finalizing a 1.73 billion gallon volume requirement for 2015. 173

5. Final Volumes for 2016 – 2017

With the considerations discussed in sections III.D.1-3 in mind, as well as our analysis of 

the factors specified in the statute and described below, and in coordination with the 

Departments of Agriculture and Energy, we are finalizing the applicable volume of BBD at 1.9 

billion gallons for 2016 and 2.0 billion gallons for 2017. These volumes are higher than 

proposed and take into account new studies and analysis of increased availability of feedstocks 

that were developed subsequent to the proposal and which are discussed in section II.E.3-4. 

While these studies provide differing assessments of feedstock availability, on the whole, the 

EPA acknowledges that the supply of oils, fats, and greases that are suitable feedstocks for 

 

171 EIA’s Monthly Biodiesel Production Reports since 2009 indicate that there were significant biodiesel facility 

closures during the 2009 and 2010 calendar years. Throughout 2013 the number of biodiesel plants operating 

fluctuated between110-116 and at the end of 2013, EIA’s monthly production report, noted there were 115 plants 

operational. During 2014 the number of operating biodiesel plants in the U.S. was lower than in 2013, fluctuating 

between 89 – 100 facilities, finishing up the year at 99 operating biodiesel plants. Overall industry-wide utilization 

rates increased during the 2009 – 2013 period from 25% in 2009 to approximate 46% in 2011 and 2012 and to more 

than 60% in 2013 and 2014. These data suggest a stabilizing trend in the industry, but with some continued 

fluctuations. See http://www.eia.gov/biofuels/biodiesel/production/ for copies of monthly reports (last accessed 

October 22, 2015).

172 The details for these calculations are described in a docket memorandum. [CITE]

173 Some commenters suggested that EPA should set the 2015 final BBD volume requirement at 1.28 billion gallons, 

for the same reasons they asserted that the 2014 volume requirement should be set at that level. We disagree, for the 

same reasons noted earlier with respect to the 2014 BBD requirement. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 142 of 189

biodiesel and renewable diesel production has continued to grow over time and warrants the 

increases in BBD standard for 2016-2017 in this final rule. 

We believe this final rule strikes the appropriate balance as envisioned by the RFS statute, 

between providing a market environment where the development of other advanced biofuels is 

incentivized, while also realizing the benefits associated with increasing the required volume of 

BBD. Given our final volumes for advanced biofuel in these years, setting the BBD standard in 

this manner continues to allow a considerable portion of the advanced biofuel volume to be 

satisfied by either additional gallons of BBD or by other unspecified types of qualifying 

advanced biofuels (see Table III.D.4-1 below). While we have not yet determined the applicable 

volume of total advanced biofuel for 2017, we anticipate the continued growth in the advanced 

biofuel standard such that the advanced standard will provide an incentive for both increasing 

volumes of BBD and other advanced biofuels. We believe maintaining this unspecified or other 

advanced biofuel volume will provide the incentive for development and growth in other types of 

advanced biofuels. At the same time, allowing the portion of the advanced biofuel volume 

requirement that is dedicated to BBD to increase concurrently with the increase in the overall 

advanced biofuel volume requirement will contribute to market certainty for both the BBD 

industry and the renewable fuels program in general.

Table III.E.4-1

Final Biomass-Based Diesel, Cellulosic Biofuel, and Advanced Biofuel Standards: 2015-2017 

BBD (billion 

Gallons)

BBD (billion 

RINs)

Cellulosic 

Biofuel 

(billion RINs)

Advanced 

Biofuel 

(billion RINs)

Unspecified 

Advanced 

(billion RINs)

2015 1.73 2.65 0.125 2.88 0.105

2016 1.90 2.85 0.230 3.80 0.720

2017 2.00 3.00. TBD TBD TBD

EPA received comments on our proposed rule providing data suggesting that sufficient 

BBD feedstocks, production facilities, and fuel distribution infrastructure existed to produce, 

import, and consume volumes of BBD in 2016 – 2017 that exceed the volume requirements 

established in this rule.174 Some commenters specifically cited the potential for large volumes of 

imported BBD to displace domestically produced BBD if the BBD volume requirements were 

not increased. These commenters argued that EPA should increase the BBD standard in 2016 –

2017 in light of the fact that the potential volume of BBD exceeds the proposed BBD volume 

requirements for each of these years. EPA agrees with the commenters that the potential 

available volume of BBD in 2016 and 2017 exceeds the BBD volume requirements we are 

finalizing in this rule, and have considered multiple scenarios where additional volumes of BBD 

are used to comply with the advanced and total renewable fuel standards.175 As discussed above, 

however, we do not believe it is in the best interest of the RFS program to set the BBD volume 

requirement at the maximum available volume of BBD. Doing so would reduce the opportunity 

for other advanced biofuels to compete for market share within the context of the advanced 

 

174 For a further discussion of EPA’s assessment of BBD feedstock availability, production capacity, and fuel 

distribution limitations see "Memorandum to docket: Statutory Factors Assessment for 2015-2017 BBD Applicable 

Volumes" EPA-HQ-OAR-2015-0111.

175 See Section II.G for a list of potential compliance scenarios.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 143 of 189

biofuel standard, and would send market signals that would hinder the long term development of 

these fuels. Our review of the history of the RFS program strongly suggests that the advanced 

and total renewable fuel standards can provide sufficient incentives for the production and use of 

increased volumes of BBD beyond levels required to satisfy the BBD standard.

EPA also received comments stating that increasing the BBD volume requirement to 

reflect actual BBD available volumes would have the advantage of helping to ensure that BBD, 

rather than imported sugar cane ethanol, would be used to satisfy the advanced standard. The 

commenters claimed that this was preferable because BBD does not contribute to the renewable 

fuel consumption challenges associated with the E10 blendwall, and because BBD is generally 

produced in the United States, while sugar cane ethanol is almost exclusively an imported 

product. They claimed that requiring additional volumes of a domestic product rather than an 

imported one would have positive impacts on the economy of the United States and aid rural 

economic development, and that these benefits justified a higher BBD standard.

EPA acknowledges that if we were to increase the BBD volume standard we would 

increase the guaranteed market for BBD, and reduce the likelihood that significant volumes of 

sugar cane ethanol would be imported to satisfy the advanced and total renewable fuels 

standards. We do not agree, however, that this is a necessary step to promote the viability and 

growth of the BBD industry. In reviewing the history of the program, as shown above, EPA 

notes that BBD production, import, and consumption has been strong and increasing each year 

since 2011. In particular, we note that in 2013 BBD volumes rose sharply, and ethanol imports 

simultaneously fell and have stayed low.176 

The data EPA has presented in the preceding sections strongly suggests that despite the 

ongoing potential for competition form sugar cane ethanol and biodiesel imports, the BBD 

industry, supported by the advanced and total renewable fuel standards, has achieved and can 

continue to achieve production volumes beyond levels needed to satisfy the BBD volume 

requirement. Given the constraints on ethanol use associated with the E10 blendwall even if 

sugar cane ethanol imports were to increase, it is still likely that there would be a strong market 

for BBD to help satisfy the total renewable fuel requirements. Finally, in light of the broad 

programmatic objective of the RFS program to increase the content of biofuels in U.S. 

transportation fuel, we believe that it would be counterproductive to design the standards in such 

a way as to intentionally discourage or disincentivize the import of foreign biofuels.

In finalizing these standards for BBD for 2014 – 2017 EPA has taken into account the 

statutory requirements found in CAA section 211(o)(2)(B)(ii), including coordination with the 

Departments of Energy and Agriculture, review of the implementation of the renewable fuels 

program to date, and analysis of the statutory factors specified in CAA section 

211(o)(2)(B)(ii)(I)-(VI). Of particular relevance in our review of the implementation of the 

renewable fuels program to date were the circumstances and context that led us to increase the 

 

176 The reduction in ethanol imports was likely due to a combination of factors including poor sugar cane harvests, 

increased demand for sugar cane ethanol in the countries where it was produced, increased competition for sugar 

cane ethanol imports from other countries, and challenges relating to increasing the consumption of ethanol beyond 

E10 in the US. See ethanol import volumes, as reported by EIA, at: 

http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epooxe_im0_mbbl_a.htm
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 144 of 189

BBD standard from 1.0 billion gallons in 2012 to 1.28 billion gallons for 2013, and the biofuel 

industry’s successful performance in 2013. We have also reviewed the statutory factors in the 

context that the BBD volume requirement is nested within the advanced biofuels and total 

renewable fuels volume requirements. This discussion of the statutory factors is found in Section 

III.E., below.

In deciding to finalize the applicable volume of 1.9 billion gallons of BBD for 2016, with 

an additional 100 million gallon increase for 2017 to 2.0 billion gallons, we considered not only 

the short-term impacts, but also the potential long-term impacts of our action on the RFS 

program. We took into account the competitive impacts such an increase in the BBD volume 

requirement would likely have on other advanced biofuel producers already in the marketplace 

as well as on potential new market entrants. This increase in the BBD volumes through 2017 

should result in ongoing investment and growth for BBD, while also providing for continued 

investment and growth in other advanced biofuels.

 

Raising the guaranteed BBD volume beyond the volumes in this rule so that it approaches 

the maximum possible volume of BBD could result in a less competitive advanced biofuels 

market, increasing RIN prices, and a less efficient market-driven renewable fuels program. Our 

decision today to finalize the BBD volumes for 2016 – 2017 at 1.90 and 2.0 billion gallons per 

year respectively, would not be expected to lead to such an adverse result. We believe that the 

final BBD volume increases for 2016 – 2017 will both contribute to market stability for the 

renewable fuels program and continue to promote a growing and competitive advanced biofuels 

marketplace, one which encourages the growth and development of diverse biofuels along with 

additional volumes of BBD beyond the volumes required by the BBD standard. 

E. Consideration of Statutory Factors for 2014-2017

In this section we discuss our considerations of the statutory factors set forth in CAA 

section 211(o)(2)(B)(ii)(I)-(VI). As discussed earlier in Section III.D.1, the BBD volume 

requirement is nested within both the advanced biofuel and the total renewable fuel volume 

requirements; so that any BBD produced beyond the mandated BBD volume can be used to 

satisfy both these other applicable volume requirements. The result is that in considering the 

statutory factors we must consider the potential impacts of increasing BBD in comparison to 

other advanced biofuels177. Greater or lesser applicable volumes of BBD do not change the 

amount of advanced biofuel used to displace petroleum fuels; rather, increasing the BBD 

applicable volume may result in the displacement of other types of advanced biofuels that could 

have been used to meet the advanced biofuels volume requirement.

1. Assessment for 2014 and 2015 Biomass-Based Diesel Applicable Volume 

 

177 While BBD can be used to satisfy the total renewable fuel requirement we anticipate that it will be used to satisfy 

the advanced biofuel volume requirement in 2015-2017. See Table II.G-2, “Volume Scenarios Illustrating Possible 

Compliance with 3.80 Bill Gal Advanced Biofuelaand 18.10 Bill Gal Bill Gal Total Renewable Fuel”.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 145 of 189

Given the fact that the 2014 compliance year has passed, we believe that our action in 

setting the 2014 BBD volume requirement will result in no real-world impacts, including no 

impacts with respect to the factors listed under CAA section 211(o)(2)(B)(ii)(I)-(VI). For 

example, there is no longer any ability for other advanced biofuels to compete with BBD for a 

greater share of the advanced biofuel pool in 2014, so there would be no marginal benefit in 

terms of incentivizing production of such fuels in setting a lower volume requirement than the 

volume of BBD that was actually produced and imported and available for compliance in 2014. 

Setting the applicable volume at a higher level than was actually produced and available for 

compliance would require a draw-down in the bank of carryover RINs, which EPA does not 

consider prudent for the reasons discussed in Section II.H of this preamble. In light of these 

considerations, we are finalizing the 2014 applicable volume for BBD as equal to the volume 

actually produced and imported, which is available for compliance. We believe this approach is 

also appropriate for the 2015 BBD standard. While there is still one month remaining in 2015, 

we believe it is similarly appropriate to set the biomass-based diesel standard for 2015 at the 

level of BBD that we project will actually be produced and imported and available for 

compliance in 2015 given that the primary benefits of allowing for opportunity for non-BBD 

fuels in the context of the advanced biofuel standard is not applicable for the 11 months of 2015 

that have passed.

2. Primary and Supplementary Statutory Factors Assessment for 2016 and 2017 

Biomass-Based Diesel Applicable Volumes

EPA’s primary assessment of the statutory factors for 2016 is that because the final 

advanced biofuel volume requirement for 2016 reflects the advanced biofuel volumes (including 

BBD) that can be reasonably attained , and because the BBD requirement is nested within the 

advanced biofuel volume requirement, we expect that the 2016 advanced volume requirement 

will largely determine the level of BBD production and imports; the same volume of BBD will 

likely be produced and imported regardless of the BBD volume that we require for2016. 

This assessment is based, in part, on our review of the RFS program implementation to 

date, as discussed in Sections III.B and III.D. Since our decision on the BBD volume 

requirement for 2016 is not expected to impact the volume of BBD which is produced and 

imported during this time period, we do not expect our decision to result in a difference in the 

factors we are required to consider pursuant to CAA section 211(o)(2)(B)(ii)(I)-(VI). However, 

we note that our principal approach of setting BBD volume requirements at a higher level in 

2016, while still at a volume level lower than anticipated overall production and consumption of 

BBD, is consistent with our evaluation of statutory factors 211(o)(2)(B)(ii) (I), (II) and (III), 

since we believe that our decision on the BBD volume requirement can have a positive impact on 

the future development and marketing of other advanced biofuels and can also result in potential 

environmental and energy security benefits, while still sending a supportive signal to potential 

BBD investors, consistent with the objectives of the Act to support the continued growth in 

production and use of renewable fuels. 

Similarly for 2017, even though we are finalizing only the 2017 BBD volume 

requirement at this time and not the 2017 advanced biofuel requirement, we believe this same 

Commented [A54]: Would there not be impacts on the 

use/price of RINs?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 146 of 189

primary assessment is appropriate since we anticipate that the 2017 advanced biofuel 

requirement will be set to reflect ambitious but reasonably attainable volumes in the use of all 

advanced biofuels and that the advanced biofuel volume standard will be expected to drive BBD 

production and use. 

As an additional supplementary assessment, we have considered the potential impacts of 

modifying the applicable volume of BBD from the final levels of 1.90 billion gallons in 2016, 

and 2.0 billion gallons in 2017, based on the assumption that in guaranteeing BBD volumes at 

any given level there could be greater use of BBD and a corresponding decrease in the use of 

other types of advanced biofuels. However, setting a higher or lower BBD volume requirement 

than the final levels would only be expected to impact BBD volumes on the margin, protecting to 

varying degrees this advanced biofuel from being outcompeted by other advanced biofuels. In 

this supplementary assessment we have considered the statutory factors found in CAA 

211(2)(B)(ii), and as described in a memorandum to the docket,178our final assessment does not 

appear, based on available information, to provide a good reason for setting a higher or lower 

volume standard for BBD than 1.90 billion gallons in 2016, and 2.0 billion gallons in 2017. 

The EPA received numerous comments pertaining to the consideration of the statutory 

factors for the 2016-2017 BBD volume requirement. Following are responses to a number of 

key issues raised by NBB. Additional comments and EPA responses can be found in the 

Response to Comment document that accompanies this final rule. 

NBB stated that we improperly based our consideration of the statutory factors on a 

comparison of BBD to other advanced biofuels, rather than to diesel fuel. They asserted that 

BBD would not compete with other advanced biofuels because EPA proposed to set the 

advanced biofuel volume at maximally achievable levels, and that no competition would be 

present if all available advanced biofuels had to be used. They suggested that setting the BBD 

standard at a higher level than proposed would actually result in BBD competing against diesel 

fuel, and therefore, EPA should analyze the impacts of displacing diesel fuel with BBD. We 

disagree. In setting the advanced biofuel volume requirement, we have assumed reasonably 

attainable volumes in BBD and other advanced biofuels. After determining that it is in the 

interest of the program, as described in Sections III.D.1–D.3, to set the BBD volume requirement 

at a level below anticipated BBD production and imports, so as to provide continued incentives 

for research and development of alternative advanced biofuels, it is apparent that excess BBD

above the BBD volume requirement will compete with other advanced biofuels, rather than 

diesel. The only way for EPA’s action on the BBD volume requirement to result in a direct 

displacement of petroleum-based fuels, rather than other advanced biofuels, would be if the BBD 

volume requirement were set equal to or larger than the advanced biofuel requirement. Since 

BBD is a type of advanced biofuel, the BBD volume requirement could never be larger than the 

advanced requirement, and we do not believe it should be equal to the advanced requirement, 

since that would eliminate other advanced biofuels from participating in the program Thus, EPA 

continues to believe that it is appropriate to evaluate the impact of its action in setting the BBD 

volume requirements by evaluating the impact of using BBD as compared to other advanced 

biofuels to determine what increment of the advanced biofuel standard that is not guaranteed to 

BBD. 

 

178 "Memorandum to docket: Final Statutory Factors Assessment for 2015-2017 BBD Applicable Volumes".
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 147 of 189

NBB also asserted that our analysis of the desirability of setting the BBD volume 

requirement in a manner that would promote the development and use of a diverse array of 

advanced biofuels is prohibited by statute. We disagree with these comments and continue to 

believe that the statutory volumes of renewable fuel established by Congress in CAA section 

211(o)(2)(B) provide an opportunity for other advanced biofuels (advanced biofuels that do not 

qualify as cellulosic biofuel or BBD) to be used to satisfy the advanced biofuel standard after the 

cellulosic biofuel and BBD standards have been met. Ensuring that a diversity of renewable 

biofuels are produced is consistent with CAA 211 (o)(2)(A)(i),which requires that the EPA 

“ensure that transportation fuel sold, or introduced into commerce in the United States...contains 

at least the applicable volume of renewable fuel, advanced biofuels, cellulosic biofuel, and 

biomass-based diesel...”. Because the BBD standard is nested within the advanced biofuel and 

total renewable fuel standards, when an obligated party retires a BBD RIN (D4) to satisfy their 

obligation, this RIN also counts towards meeting their advanced biofuel and total renewable fuel 

obligations. It also means that obligated parties may use BBD RINs in excess of their BBD 

obligations to satisfy their advanced biofuel and total renewable fuel obligations. To the extent 

that obligated parties are required to achieve compliance with the overall advanced biofuel 

standard using higher volumes of BBD D4 RINs, they forgo the use of other biofuels considered 

advanced biofuels. Therefore, the higher the BBD volume standard is, the lower the opportunity 

for other non-BBD advanced biofuels to compete for market share within the context of the 

advanced biofuel standard. When viewed in a long-term perspective, BBD can be seen as 

competing for research and development dollars with other types of advanced biofuels for 

participation as advanced biofuels in the RFS program. 

Finally, NBB stated that the EPA previously found statutory factors supported greater 

annual increases in BBD volume requirement for 2013 and the statutory factors analysis 

developed to justify the 2016 and 2017 BBD volume requirements contradicts the analysis 

EPA put forward in 2013. We disagree. As in 2013, we have determined that incremental 

increases in the 2016 and2017 BBD volume requirement are appropriate to provide continued 

support to the BBD industry. We did this in 2013, acknowledging the important role the 

industry thus far had played in providing advanced biofuels to the marketplace, and in 

furthering the GHG reduction objectives of the statute. We did not in 2013, and are not today, 

setting the BBD volume requirement at the maximum potential production volume of BBD. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 148 of 189

IV. Final Cellulosic Biofuel Volume for 2014-2016

In the past several years the cellulosic biofuel industry has made significant progress 

towards commercial scale production. Quad County Corn Processors produced the first 

cellulosic biofuel RINs from corn kernel fiber at a corn ethanol plant in 2014. In addition, in 

2014 two large scale cellulosic ethanol facilities owned and operated by Abengoa and Poet 

completed construction. EPA also determined that compressed natural gas (CNG) and liquefied 

natural gas (LNG) produced from biogas from landfills, municipal waste-water treatment facility 

digesters, agricultural digesters, and separated municipal solid waste (MSW) digesters are 

eligible to generate cellulosic RINs. This determination led to a significant increase in cellulosic 

RIN generation beginning in late 2014, as fuel that previously had been qualified to generate 

advanced biofuel RINs could now generate cellulosic RINs. Efforts continue to be made at 

facilities across the country to reduce both capital costs and production costs associated with 

cellulosic biofuel production through technology advances and the development of best practices 

gained through operating experience. EPA also continues to support the ongoing development of 

cellulosic biofuels through actions such as the evaluation of new pathways with the potential to 

generate cellulosic biofuel RINs. This section describes the available supply of cellulosic biofuel 

RINs in 2014, the volumes that we project will be produced or imported in 2015 and 2016, and 

some of the uncertainties associated with these volumes projections.

In this rule we are finalizing the proposed approach of using a slightly different 

methodology to determine the projected available volume of cellulosic biofuel for each of the 

three years. Our approach to each of these years can broadly be described as one that seeks to 

use actual production volumes where they are available (such as for all of 2014 and the first nine 

months of 2015) and to project production volumes from likely production facilities for future 

months in which actual production volumes are not available. In order to project the volume of 

cellulosic biofuel production in 2015 and 2016 we considered the Energy Information 

Administration’s projections of cellulosic biofuel production,179 data reported to EPA through 

the EPA Moderated Transaction System (EMTS) and information we collected regarding 

individual facilities that have produced or have the potential to produce qualifying volumes for 

consumption as transportation fuel, heating oil, or jet fuel in the U.S. in 2015 or 2016. New 

cellulosic biofuel production facilities projected to be brought online in the United States over 

the next few years are expected to continue to increase the production capacity of the cellulosic 

industry. Operational experience gained at the first few commercial scale cellulosic biofuel 

production facilities should also lead to increasing production of cellulosic biofuel from existing 

production facilities as they ramp up to production rates at or near their nameplate capacity. The 

following section discusses the companies EPA reviewed in the process of projecting qualifying 

cellulosic biofuel production in the United States in 2015 and 2016. Information on these 

companies forms the basis for our production projections of cellulosic biofuel that will be 

produced for use as transportation fuel, heating oil, or jet fuel in the United States in these years 

(see Table IV-1 below).

 

179 "EIA projections of transportation fuel for 2015 and 2016", letter from Adam Sieminski, EIA Administrator to 

Gina McCarthy, EPA Administrator September 16, 2015.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 149 of 189

Table IV-1

Final Cellulosic Biofuel Standards

Year Volume (million gallons)

2014 33a

2015 123

2016 230

a Based on the number of cellulosic biofuel RINs generated in 2014 minus RINs retired for reasons other than 

compliance with the RFS standard. We assumed no exports of cellulosic biofuel (data from EMTS)

A. Statutory Requirements

The volumes of renewable fuel to be used under the RFS program each year (absent an 

adjustment or waiver by EPA) are specified in CAA section 211(o)(2). The volumes of 

cellulosic biofuel specified in the statute for 2014, 2015, and 2016 are shown in Table IV.A-1 

below. The statute provides that if EPA determines, based on EIA’s estimate, that the projected 

volume of cellulosic biofuel production in a given year is less than the statutory volume, then 

EPA is to reduce the applicable volume of cellulosic biofuel to the projected volume available 

during that calendar year.180

Table IV.A-1

Statutory Volumes of Cellulosic Biofuel

Year Volume (million gallons)

2014 1,750

2015 3,000

2016 4,250

In addition, if EPA reduces the required volume of cellulosic biofuel below the level 

specified in the statute, the Act also indicates that we may reduce the applicable volumes of 

advanced biofuels and total renewable fuel by the same or a lesser volume, and we are required 

to make cellulosic waiver credits available. Our consideration of the 2014, 2015, and 2016 

volume requirements for advanced biofuels and total renewable fuel is presented in Section II. 

B. Cellulosic Biofuel Industry Assessment

In order to project cellulosic biofuel production for 2015 and 2016 we have tracked the 

progress of several dozen potential cellulosic biofuel production facilities. As we did in 

establishing the 2013 annual volumes, we have focused on facilities with the potential to produce 

commercial scale volumes of cellulosic biofuel rather than small R&D or pilot-scale facilities. 

We did so because the larger commercial-scale facilities are much more likely to generate RINs 

for the fuel they produce and the volumes they produce will have a far greater impact on the 

 

180 On January 25, 2013, the United States Court of Appeals for the District of Columbia Circuit issued its decision 

concerning a challenge to the 2012 cellulosic biofuel standard. In this decision the Court stated that in projecting 

potentially available volumes of cellulosic biofuel EPA must apply a “neutral methodology” aimed at providing a 

prediction of “what will actually happen.” API v. EPA, 706 F 3d 474 (D.C. Cir. January 25, 2013).
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 150 of 189

cellulosic biofuel standards for 2015 – 2016. From this list of facilities we used information 

from EMTS and publically available information, and information provided by representatives of 

potential cellulosic biofuel producers, to make a determination of which facilities are most likely 

to produce cellulosic biofuel and generate cellulosic biofuel RINs in 2015 and 2016. Each of 

these companies was investigated further in order to determine the current status of its facilities 

and its likely cellulosic biofuel production and RIN generation volumes for 2015 and 2016. Both 

in our discussions with representatives of each company181 and as part of our internal evaluation 

process we gathered and analyzed information including, but not limited to, the funding status of 

these facilities, current status of the production technologies, anticipated construction and 

production ramp-up periods, facility registration status, and annual fuel production and RIN 

generation targets.

Our approach for each of the three years is discussed in more detail in Sections IV.D –

IV.F below. The remainder of this Section discusses the current status of the companies and 

facilities EPA expects may be in a position to produce commercial scale volumes of cellulosic 

biofuel by the end of 2016. This information forms the basis for our final standards for cellulosic 

biofuel for the final three months of 2015, and all of 2016.

1. Potential Domestic Producers

There are a number of companies and facilities182 located in the United States that have 

either already begun producing cellulosic biofuel for use as transportation fuel, heating oil, or jet 

fuel at a commercial scale, or are anticipated to be in a position to do so by the end of 2016. The 

financial incentive provided by cellulosic biofuel RINs, combined with the fact that all these 

facilities intend to produce fuel on a commercial scale for domestic consumption using approved 

pathways, gives us a high degree of confidence that cellulosic biofuel RINs will be generated for 

any fuel produced. In order to generate RINs, each of these facilities must be registered under 

the RFS program and comply with all the regulatory requirements. This includes using an 

approved RIN-generating pathway and verifying that their feedstocks meet the definition of 

renewable biomass. Many of the companies and facilities have already successfully completed 

facility registration, and some have successfully generated RINs. A brief description of each of 

the companies that EPA believes may produce commercial scale volumes of RIN generating 

cellulosic biofuel by the end of 2016 can be found in a memorandum to the docket for this final 

rule.183 These descriptions are based on a review of the publicly available information and 

information provided to EPA in conversations with company representatives. The key data for 

each of these companies used in our projection of the potentially available volume of cellulosic 

biofuel in 2015 and 2016 is summarized in Table IV.B.3-1 below.

 

181 In determining appropriate volumes for CNG/LNG producers we did not contact individual producers but rather 

relied primarily on discussions with industry associations, and information on likely production facilities that are 

already registered under the RFS program. In some cases where further information was needed we did speak with 

individual companies.

182 The volume projection from CNG/LNG producers does not represent production from a single company or 

facility, but rather a group of facilities utilizing the same production technology.

183 “Cellulosic Biofuel Producer Company Descriptions”, memorandum from Dallas Burkholder to EPA Air Docket 

EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 151 of 189

2. Potential Foreign Sources of Cellulosic Biofuel 

In addition to the potential sources of cellulosic biofuel located in the United States, there 

are several foreign cellulosic biofuel companies that may produce cellulosic biofuel in 2015 or 

2016. These include facilities owned and operated by Beta Renewables, Enerkem, Ensyn, 

GranBio, and Raizen. All of these facilities use fuel production pathways that have been 

approved by EPA for cellulosic RIN generation provided eligible sources of renewable feedstock 

are used. These companies would therefore be eligible to register these facilities under the RFS 

program and generate RINs for any qualifying fuel imported into the United States. While these 

facilities may be able to generate RINs for any volumes of cellulosic biofuel they import into the 

United States, demand for the cellulosic biofuels they produce is expected to be high in local 

markets. 

EPA is charged with projecting the volume of cellulosic biofuel that will be produced or 

imported into the United States. For the purposes of this final rule we have considered all of the 

companies who have registered foreign facilities under the RFS program to be potential sources 

of cellulosic biofuel in 2015 and 2016. We believe that due to the strong demand for cellulosic 

biofuel in local markets, the significant technical challenges associated with the operation of 

cellulosic biofuel facilities, and the time necessary for potential foreign cellulosic biofuel 

producers to register under the RFS program and arrange for the importation of cellulosic biofuel 

to the United States, cellulosic biofuel imports from facilities not currently registered to generate 

cellulosic biofuel RINs are highly unlikely in 2015 and 2016. We have therefore only 

considered foreign cellulosic biofuel production from facilities that are currently registered in our 

projection of available volume of cellulosic biofuel in 2015 and 2016. Two foreign facilities that 

have registered as cellulosic biofuel producers have already generated cellulosic biofuel RINs for 

fuel exported to the United States; projected volumes from each of these facilities are included in 

our projection of available volumes for 2015 and 2016. One facility has registered as a cellulosic 

biofuel producer, but has not yet generated any cellulosic RINs. EPA contacted representatives 

of this facility and received confirmation that they intended to export cellulosic biofuel to the 

United States in 2016. EPA has therefore included potential volumes from this facility in our 

2016 volume production projections.

3. Summary of Volume Projections for Individual Companies

The information we have gathered on cellulosic biofuel producers, described above, 

along with the production estimates from EIA and data collected through EMTS, forms the basis 

for our projected volumes of cellulosic biofuel production for each facility in 2015 and 2016. As 

in 2013, we have focused on commercial scale cellulosic biofuel production facilities. This 

focus is appropriate, as the volume of cellulosic biofuel produced from R&D and pilot scale 

facilities is quite small in relation to that expected from the commercial scale facilities. R&D 

and demonstration scale facilities have also generally not generated RINs for any fuel they have 

produced.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 152 of 189

By 2016 there are a number of cellulosic biofuel production facilities that have the 

potential to produce fuel at commercial scale. Each of these facilities is discussed in a 

memorandum to the docket184, and the relevant information used to project a likely production 

range for each company is summarized in Table IV.B.3-1 below.185

 

184 “Cellulosic Biofuel Producer Company Descriptions”, memorandum from Dallas Burkholder to EPA Air Docket 

EPA-HQ-OAR-2015-0111.

185 For the purpose of the preamble discussion we have grouped together all facilities expected to produce cellulosic 

CNG/LNG. The individual facilities included in our assessment are listed in “Assessment of Cellulosic Biofuel 

Production from Biogas (2015-2016)”, memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 153 of 189

Table IV.B.3-1

Projected Producers of Cellulosic Biofuel by 2016

Company 

Name Location Feedstock Fuel

Facility

Capacity 

(MGY)

186

Construction 

Start Date First 

Production187

Abengoa Hugoton, KS Corn Stover Ethanol 25 September 2011 4Q 2015

Cool Planet Alexandria, LA Wood Waste Gasoline 1 2Q 2015 Late 2016

CNG/LNG 

Producers188

Various Biogas CNG/ 

LNG

Various N/A August 2014

DuPont Nevada, IA Corn Stover Ethanol 30 November 2012 4Q 2015

Edeniq Various Corn Kernel Fiber Ethanol Various Various 4Q 2015

Ensyn Renfrew, ON Wood Waste Heating 

Oil

3 N/A 2014

INEOS Bio Vero Beach, FL Vegetative Waste Ethanol 8 February 2011 1Q 2016

Poet Emmetsburg, IA Corn Stover Ethanol 24 March 2012 4Q 2015

QCCP Galva, IA Corn Kernel Fiber Ethanol 2 Late 2013 October 2014

 

186 The Facility Capacity is generally equal to the nameplate capacity provided to EPA by company representatives or found in publicly available information. If 

the facility has completed registration and the total permitted capacity is lower than the nameplate capacity then this lower volume is used as the facility capacity. 

For companies generating RINs for CNG/LNG derived from biogas the Facility Capacity is equal to the lower of the annualized rate of production of CNG/LNG 

from the facility or the sum of the volume of contracts in place for the sale of CNG/LNG for use as transportation fuel (reported as the actual peak capacity for 

these producers).

187 Where a quarter is listed for the first production date EPA has assumed production begins in the middle month of the quarter (i.e. August for the 3rd quarter) 

for the purposes of projecting volumes.

188 For more information on these facilities see “Assessment of Cellulosic Biofuel Production from Biogas (2015-2016)”, memorandum from Dallas Burkholder 

to EPA Air Docket EPA-HQ-OAR-2015-0111. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 154 of 189

C. Projection from the Energy Information Administration

Section 211(o)(3)(A) of the Clean Air Act requires EIA to "...provide to the Administrator of the Environmental Protection Agency an estimate, with respect to the following 

calendar year, of the volumes of transportation fuel, biomass-based diesel, and cellulosic biofuel 

projected to be sold or introduced into commerce in the United States." EIA provided these 

estimates to us on September 16, 2015.189 With regard to cellulosic biofuel, the EIA estimated 

that the available volume in 2015 would be 3 million gallons and in 2016 would be 10 million 

gallons. A summary of the commercial scale plants they considered is shown below in Table 

IV.C-1. 

Table IV.C-1

List of Cellulosic Biofuel Plants Considered in EIA’s Projections

Year Online Company Location Product

2013 INEOS Bio Vero Beach, FL Ethanol

2014 Quad County Galva, IA Ethanol

2015 Abengoa Hugoton, KS Ethanol

2015 POET Emmetsburg, IA Ethanol

2016 DuPont Nevada, IA Ethanol

EIA indicated in their letter that they did not include estimates for cellulosic biofuel 

produced from biogas from landfills, municipal wastewater treatment facilities, separated MSW 

digesters, or agricultural digesters or those producing renewable heating oil. When limiting the 

scope of our projection to the companies assessed by EIA, we note that while our volume 

projections are not identical, they are very similar. EPA projects approximately 4 million gallons 

of liquid cellulosic biofuel will be produced in 2015 (approximately 2 million gallons has been 

produced through September 2015, and we project an additional 2 million gallons will be 

produced through the end of 2015). This projection includes renewable heating oil (up to 1 

million gallons) which was not considered in EIA’s projection. For 2016 EPA projects 23 

million gallons of liquid cellulosic biofuel will be produced. Of this 23 million gallons, up to 3 

million gallons is expected to come from renewable heating oil, and up to 2 million gallons is 

expected to come from imported cellulosic biofuel. Neither of these sources are included in 

EIA’s projection. EIA did not provide detail on the basis of their projections other than the list 

of expected producers shown above, so we cannot say precisely why EPA and EIA’s projections 

differ. We note, however, that the impact of this difference on the cellulosic biofuel standard for 

2016 is less than 5%.

D. Cellulosic Biofuel Volume for 2014

EPA is charged with projecting the available volume of cellulosic biofuel for each year, 

and to reduce the applicable volume of cellulosic biofuel to the level projected to be available for 

years in which the projected available volume falls below the cellulosic biofuel applicable 

 

189 Letter from Adam Sieminski, EIA Administrator to Gina McCarthy, EPA Administrator September 16, 2015. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 155 of 189

volume target specified in the CAA 211(o)(2). EPA believes that for any historical time period, 

the required projection is best calculated as the sum of the cellulosic biofuel RINs (D3) and the 

cellulosic diesel RINs (D7) generated, adjusted for RINs that are retired for purposes other than 

compliance with the annual standards. EPA publishes the number of cellulosic biofuel and 

cellulosic diesel RINs generated on a month-by-month basis on our website.190 The number of 

cellulosic biofuel and cellulosic diesel RINs generated for each month of 2014 can be found in 

Table IV.D-1 below. From this total, we subtract the number of cellulosic biofuel and cellulosic 

diesel RINs retired for reasons other than compliance with the annual standards, as these RINs 

are not available to obligated parties.191 In calculating the number of cellulosic biofuel RINs 

available for compliance with the annual standards for 2014 we have assumed that there were no 

exports of cellulosic biofuel.192 In this final rule, we are establishing the cellulosic biofuel 

requirement for 2014 at 33 million gallons. We believe this number, calculated by subtracting 

the total number of cellulosic biofuel RINs (D3 and D7) retired for reasons other than 

compliance with the annual standards from the total number of cellulosic biofuel RINs generated 

in 2014 (D3 and D7), represents the total available supply of cellulosic biofuel RINs for 2014.

Table IV.D-1

Cellulosic Biofuel RIN Generation in 2014193

Cellulosic Biofuel (D3) Cellulosic Diesel (D7)

January 2014 58,415 0

February 2014 7,072 0

March 2014 6,624 472

April 2014 643 10,950

May 2014 0 0

June 2014 0 0

July 2014 4,156 1,248

August 2014 3,492,106 5,532

September 2014 7,555,432 17,073

October 2014 7,047,762 24,030

November 2014 6,325,080 0

December 2014 8,863,270 0

Total 33,360,560 59,305

RINs retired for reasons 

other than compliance 

with the annual standards

348,973 4,997

RINs Available 33,011,587 54,308

Available Cellulosic RINs 

(D3 and D7)

33,065,895

 

190 http://www2.epa.gov/fuels-registration-reporting-and-compliance-help/2014-renewable-fuel-standard-data

191 In 2014 Cellulosic Biofuel and Cellulosic Diesel RINs were retired for Remedial Actions and Invalid RINs.

192 The vast majority of cellulosic biofuel RINs generated in 2014 (approximately 32 or the 33 million RINs) were 

for CNG or LNG. These fuels require verification that the CNG/LNG was used as transportation fuel in the United 

States in order for RINs to be generated.

193 All numbers from EPA website: http://www.epa.gov/otaq/fuels/rfsdata/index.htm. Accessed February 9, 2015.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 156 of 189

E. Cellulosic Biofuel Volume for 2015

To project the volume of cellulosic biofuel in 2015, EPA has relied on a combination of 

production information reported to EPA through EMTS for months in which we have data 

available and facility or company specific estimates of likely production for months for which 

EMTS data is not available. For months in which information on the production of cellulosic 

biofuel is available we have used the methodology discussed in Section IV.D, subtracting the 

number of RINs retired for reasons other than compliance in 2015 from the total number of RINs 

produced in 2015 that are eligible to be used towards satisfying the cellulosic biofuel standard 

(D3 and D7 RINs). Since the time of the NPRM, data have become available for cellulosic RIN 

generations in April – September of 2015. This data has been used in our projection of available 

cellulosic biofuel volume for this final rule. We have again assumed that no cellulosic biofuel 

was exported in the first nine months of 2015. Data on the number of cellulosic biofuel RINs 

generated and retired for purposes other than compliance with the 2015 RVO from January 2015 

through September 2015 are shown in Table IV.E-1 below. 

Table IV.E-1

Cellulosic Biofuel RIN Generation and Retirements

January 2015 – September 2015

Cellulosic Biofuel (D3) Cellulosic Diesel (D7)

January 2015 4,108,477 0

February 2015 7,950,318 0

March 2015 7,803,420 0

April 2015 7,831,248 0

May 2015 9,341,048 173,731

June 2015 12,506,549 0

July 2015 12,999,815 0

August 2015 13,805,608 53,303

September 2015 12,316,744 0

Total 88,663,227 227,034

RINs retired for reasons 

other than compliance

716,177 22,702

RINs Available 87,947,050 204,332

Total Available Cellulosic 

RINs (D3 and D7)

88,151,382

For months in which information is unavailable EPA has generally used the projection 

methodology described in the proposed rule, with one change based on comments received on 

the NPRM. Consistent with our proposed rule, our projection methodology starts with 

estimating a range of potential production volumes for each company for the portion of 2015 

where production data is not available.194 EPA has established a range of potential production 

 

194 For the purposes of projecting RIN generation from CNG/LNG projections were made for parent companies, 

generally representing multiple facilities. For more detail see “Assessment of Cellulosic Biofuel Production from 

Biogas (2015-2016)”, memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 157 of 189

volumes for each company such that it is possible, but unlikely, that the actual production will be 

above or below the range. We believe that it is more appropriate to project a range of potential 

production volumes rather than a single point estimate due to the highly uncertain and variable 

nature of biofuel production at cellulosic biofuel facilities, especially those in the early stages of 

production. The projected production ranges for each facility are used to generate a single point 

estimate for the total production of cellulosic biofuel from all companies in 2015 for the months 

in which actual production volumes through EMTS are not available (October – December 

2015).

In establishing a range for each company, we began by determining an appropriate low 

end of the range. The low end of the range for each company is designed to represent the 

volume of fuel EPA believes each company would produce if they are unable to begin fuel 

production on their expected start-up date and/or if they experience challenges that result in 

reduced production volumes or a longer than expected ramp-up period. In this final rule EPA 

has set the low end of the production range for each company based on the volume of RINgenerating cellulosic biofuel the company has produced in the most recent 12 months for which 

data is available. Because we are not attempting to determine a low end of a likely production 

range for a full year, but rather only the months in 2015 for which data are not available, this 

number is then multiplied by a scaling factor195 to appropriately scale this annual production 

volume for use as the low end of the range over the last three of months of 2015 for which actual 

production data is unavailable. 

This approach provides us with an objective methodology for calculating the low end of 

the potential production range for each company that we believe is appropriate in light of the 

history of start-up delays and missed production targets in the cellulosic biofuel industry. If a 

company has not yet begun producing RIN-generating volumes of cellulosic biofuel, our 

experience suggests that they may experience challenges in progressing toward commercial-scale 

production that would result in the delay of the production of cellulosic biofuel. We 

acknowledge that in the majority of cases cellulosic companies that have begun producing fuel 

and are currently in the start-up and ramp-up phases of production will increase their production 

of cellulosic biofuel from one year to the next as they work towards production rates at or near 

the facility capacity. Fuel production by these companies may, however, be interrupted, either 

intentionally or unexpectedly, and these interruptions may hinder the ability of these companies 

to increase biofuel production year over year. Several commenters also noted low market prices 

for cellulosic biofuel as an additional reason that fuel production may be reduced or suspended 

until such a time as the market for the fuel produced improves. We will account for the 

likelihood of increasing production in developing the high end of each company’s production 

range. Finally, there may be cases in which information is available that suggests a company is 

unlikely to meet the production volumes achieved in the previous 12 months for which data is 

available, due to technical, financial, or legal difficulties. We do not believe this is the case with 

any of the companies projected to produce cellulosic biofuel in 2015.

It is important to note that the low end of the range does not necessarily represent a 

worst-case scenario. The worst-case scenario for any of these facilities for the months in which 

we are projecting production is no production, as it is always possible that extreme 

 

195 The scaling factor is 0.25; equal to the 3 months for which production data is being projected divided by 12.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 158 of 189

circumstances or natural disasters may result in extended delays, facility damages, or facility 

closures. While not denying such a possibility, we nevertheless believe it is generally 

appropriate to use the production over the previous 12 months as the low end of the range, with 

exceptions made where available information indicates that such production may be unlikely. In 

situations where a company has not produced any cellulosic biofuel in the previous 12 months, 

we believe it is appropriate to use zero as the low end of the projected production range given the 

many uncertainties and challenges associated with the commissioning and start-up of a new 

cellulosic biofuel production facility we have observed to date.

To determine the high end of the range of expected production volumes for each 

company we considered a variety of factors, including the expected start-up date and ramp-up 

period, facility capacity, and fuel off-take agreements. As a starting point, EPA calculated a 

production volume using the expected start-up date, facility capacity, and a benchmark of a sixmonth straight-line ramp-up period representing an optimistic ramp-up scenario.196

 We then 

compared the volume calculated using this methodology to the company’s own expectations for 

the period in which we are projecting production where they were available. In cases where the 

company projection for any given year exceeds our benchmark volume we used the benchmark 

volume, rather than the company estimate, as the high end of the range for that company. If the 

production estimate EPA received from a company was lower than the volume calculated using 

the projected start-up date, facility capacity, and six month straight-line ramp-up period, EPA 

used the company production targets instead.

EPA received comments from biofuels producers stating that production projections we 

receive from companies should be used as the basis for the mean value of any projected 

production range. They argue that EPA should defer to the technical expertise of the cellulosic 

biofuel manufacturers who provide these projections, and that it is inappropriate to base the low 

end of the range on previous production data. EPA understands that the volume projections 

provided by companies included in our projection are intended to represent the companies’ 

expectations for production, rather than the high end of a potential production range. We also 

acknowledge the technical expertise of these companies and the significant amount of investment 

that has gone into the development of these biofuel production processes as they have progressed 

from R&D through demonstration and pilot scale in preparation for the first commercial scale 

facilities. While acknowledging these facts, we do not believe it would be appropriate to ignore 

the history of the cellulosic biofuel industry. Each year since 2010, EPA has gathered 

information, including volume production projections, from companies with the potential to 

produce cellulosic biofuel. Each of these companies supported these projections with successful 

pilot and demonstration scale facilities as well as other supporting documentation. In each of 

these cases the companies were unable to meet their own volume projections, and in many cases 

were unable to produce any RIN-generating cellulosic biofuel. 

 

196 We did not assume a six-month straight-line ramp-up period in determining the high end of the projected 

production range for CNG/LNG producers. This is because these facilities generally have a history of CNG/LNG 

production prior to producing RINs, and therefore do not face many of the start-up and scale-up challenges that 

impact new facilities. For further information on the methodology used to project cellulosic RIN generation from 

CNG/LNG producers see “Assessment of Cellulosic Biofuel Production from Biogas (2015-2016)”, memorandum 

from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 159 of 189

The inability of cellulosic biofuel producers in previous years to achieve their projection 

production targets does not provide a sufficient basis for completely discounting production of 

cellulosic biofuel in future years, either for these same facilities that were previously unable to 

achieve their target projections or from new facilities expected to start-up in 2015 or 2016. Each 

of these companies is an individual case, with their own production technologies, construction 

and operations staffs, and financial situations, and we do not believe it is appropriate to dismiss 

all future potential cellulosic biofuel production because of the failure of several facilities to 

successfully operate at commercial scale. We do believe it strongly suggests that we should 

view the individual company projections as something other than the most likely outcomes. In 

order to take a “neutral aim at accuracy” in projecting cellulosic biofuel production volumes, as 

directed by the United States Court of Appeals for the DC Circuit, we have decided to treat these 

company projections as the high end of a potential production range unless this volume exceeds

the volume calculated using our six-month straight-line ramp-up period methodology, suggesting 

that these company projections are unreasonably high. We will continue to monitor the progress 

and experience of the cellulosic biofuel industry and may adjust our approach as appropriate in 

light of additional experience.

EPA also received comments claiming that the proposed cellulosic biofuel volumes were 

unreasonably high. These commenters generally claimed that in light of the inability of cellulosic 

biofuel companies to achieve their projected production volumes, start-up dates, and ramp-up 

schedules in previous years the only reasonable basis for projecting future production volumes 

was historical production data. They suggested that EPA should project future production 

volumes based solely on available cellulosic RIN generation data from previous months. EPA 

believes this would be inconsistent with our charge to project available cellulosic biofuel volume 

by taking a neutral aim at accuracy. Adopting such an approach would effectively mean 

ignoring the potential for facilities that have not generated RINs during the historical time period 

used for the basis of our future projection to contribute significant volumes in the future. This 

would not only be inconsistent with our expectations for an industry that has shown substantial 

growth over the last several years, but also with congressional intent to provide incentives for the 

rapid expansion of the cellulosic biofuel industry. Most importantly, a comparison of the results 

of the method suggested by these commenters for the cellulosic biofuel standard in 2015 (90 

million ethanol-equivalent gallons) and those proposed by EPA (106 million ethanol-equivalent 

gallons) to the volume that would be expected to be produced in 2015 using a conservative 

extrapolation of the monthly average cellulosic biofuel RIN generation observed in the first nine 

months of 2015 over the remaining three months (118 million gallons) shows this suggested 

method to be inappropriately conservative. 

We believe our range of projected production volumes for each company represents the 

range of what is likely to actually happen for each company. A brief overview of each of the 

companies we believe will produce cellulosic biofuel and make it commercially available in 

2015 or 2016 can be found in a memorandum to the docket197. In the case of cellulosic biofuel 

produced from CNG/LNG we have discussed the production potential from these facilities as a 

group rather than individually. EPA believes it is appropriate to discuss these facilities as a 

group since they are utilizing a proven production technology and face many of the same 

 

197 “Cellulosic Biofuel Producer Company Descriptions”, memorandum from Dallas Burkholder to EPA Air Docket 

EPA-HQ-OAR-2015-0111.

Commented [A55]: Doe this overstate their claim?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 160 of 189

challenges related to demonstrating that the fuel they produce is used as transportation fuel and 

therefore eligible to generate RINs under the RFS program.198

After establishing a projected production range for each facility (or group of facilities for 

CNG/LNG producers), we must then determine a method for using these projected production 

ranges to project the volume of cellulosic biofuel most likely to be produced by the cellulosic 

biofuel industry as a whole in 2015. As discussed above, the high and the low end of the range 

for each company represents values such that it is possible but unlikely that actual volumes 

would fall outside of those ranges. At present, data do not exist to allow EPA to develop a 

unique production probability distribution for each company based on the available information, 

as some commenters suggested. Even if EPA were able to undertake such a task there is no 

evidence that the distributions we developed would necessarily be more accurate than a 

standardized distribution curve as the cellulosic biofuel industry is still in its infancy and there is 

a high degree of uncertainty associated with many of the factors that will impact production at 

each individual facility. This is supported by the poor accuracy of the individual company 

estimates in previous years, which were made by individuals with significant technical expertise 

and knowledge of each individual company and technology.

Rather than attempting to develop a unique probability distribution curve that represents 

likely cellulosic biofuel production for each company, EPA has instead separated the list of 

potential cellulosic biofuel producers into several groups with similar characteristics and 

projected the likely production from each of these groups. In our proposed rule we separated all 

of the potential cellulosic biofuel producers into two groups; those who have already achieved 

consistent commercial-scale production and those who have not. EPA received comments on 

our proposed rule that biogas producers should be treated differently than liquid biofuel 

producers since there was very little technology risk associated with the production and 

collection of biogas. We believe these comments are valid, and that the available data support 

using a percentile value to projected production from biogas facilities that differs from the value 

used for liquid biofuel producers. For this final rule we have used the 50th and 75th percentile 

values within the projected ranges to project likely cellulosic biofuel production from new and 

consistently producing facilities producing CNG/LNG from biogas.199

We continue to believe that grouping the potential cellulosic biofuel producers using the 

criteria of whether or not they have achieved consistent commercial-scale production is 

appropriate for the purposes of projecting a likely production volume. While each of these 

groupings contains a diverse set of companies with their own production technologies and 

challenges, we believe there is sufficient commonality in the challenges related to the funding, 

construction, commissioning, and start-up of commercial-scale cellulosic biofuel facilities to 

justify aggregating these company projections into a single group for the purposes of projecting 

the most likely production volume of cellulosic biofuel. The challenges new production facilities 

face are also significantly different than those of facilities ramping up production volumes to the 

facility capacity and maintaining consistent production. 

 

198 For individual company information see “Cellulosic Biofuel Individual Company Projections for 2014 – 2016 

(CBI)”, memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-0111.

199 For more information see XXUpdated Biogas Memo. Using these percentile values and the ranges from the 

NPRM results in a production projection much closer to the actual production of cellulosic biofuel in 2015. 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 161 of 189

After separating the companies into these four groups (liquid cellulosic biofuel producers 

with and without consistent production and biogas producers with and without consistent 

production) we then summed the low and high ends of each of the ranges for each individual 

company (or group of companies for CNG/LNG producers) within the group to calculate an 

aggregate projected production range for each group of companies. The ranges for each group of 

companies are shown in Tables IV.E-2 through IV.E-4 below. 

Table IV.E-2

2015 Production Ranges for Liquid Cellulosic Biofuel Producers without Consistent Commercial 

Scale Production (million gallons)

Low End of the Rangea High End of the Rangea

Abengoa 0 1

CoolPlanet 0 0

DuPont 0 1

Poet 0 1

Total 0 3

a Rounded to the nearest million gallons

Table IV.E-3

2015 Production Ranges for Liquid Cellulosic Biofuel Producers with Consistent Commercial 

Scale Production (million gallons)

Low End of the Rangea High End of the Rangea

Ensyn X

b

0.5

Quad County Corn 

Processors

X

b

0.5

Total 0 1

a Rounded to the nearest million gallons

b The low end of the range for each individual company is based on actual 

production volumes and is therefore withheld to protect information claimed to 

be confidential business information

Table IV.E-4

2015 Production Ranges for CNG/LNG Produced From Biogas

(million gallons)

Low End of the Rangea High End of the Rangea

CNG/LNG Producers 

(New Facilities)

0 0

CNG/LNG Producers 

(Currently generating RINs)

28 35

a Rounded to the nearest million gallons

Because the cellulosic biofuel industry is still in its infancy and it is therefore not possible 

to predict with any degree of certainty the precise production volume each individual company 

will achieve, we believe that it would not be appropriate to choose a specific value within the 

projected range for each individual company/source. We believe it is more appropriate to 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 162 of 189

identify a specific value within the aggregated ranges from Tables IV.E-2 and IV.E-4 that best 

reflects the likely production volume for each group of companies. For liquid cellulosic biofuel 

producers that have not yet achieved consistent commercial-scale production (Table IV.D-2) we 

are finalizing the use of the 25th percentile of the projected production range. This does not 

mean, as some commenters suggested, that we expect these facilities to operate at 25% of their 

nameplate, but rather that we expect that this group of facilities will produce a volume of 

cellulosic biofuel at the 25th percentile of the projected range. We note again that the high end of 

the range for each company, which were used to calculate the high end of the range for the group 

of companies, is significantly lower than the nameplate capacity of each facility, in some cases 

dramatically so, based on the expected start-up date of the facility. We believe this volume is 

appropriate as, in addition to the uncertainties listed above, there is also significant technology 

risk as these facilities attempt to operate their technologies at commercial scale. In the early 

years of the cellulosic biofuel industry several companies, including Cello Energy, Range Fuels, 

and KiOR experienced significant technical difficulties in scaling up their technologies and were 

able to produce little, if any, volumes of cellulosic biofuels. More recently, facilities owned and 

operated by Abengoa and Poet-DSM have also experienced unexpected challenges that resulted 

in commercial scale production being delayed. It is necessary to consider this history when 

projecting production volumes from companies who have not yet achieved consistent production 

at commercial scale.200 

For the group of liquid cellulosic biofuel producers that have achieved consistent 

commercial-scale production (Table IV.E-3) we are projecting the available volume produced by 

these facilities at the mid-point (50th percentile) of the projected range. We believe that this 

point accounts for the uncertainty related to the scale-up of production from the volume 

produced in the previous 12 months (through September 2015) as well as other uncertainties 

related to the generation of RINs such as documenting that the fuel is used as transportation fuel, 

heating oil, or jet fuel. As stated above, this does not mean that we anticipate that each of these 

facilities within each group will produce at the 50th percentile of the projected range over the 

final 3 months of 2015, but rather that as a group the 50th percentile is a realistic projections for 

this group of companies. We believe this methodology accounts for the fact that some individual 

company may be able to deliver the volume of cellulosic biofuel they expect and produce at or 

near the high end of the range, while others may experience challenges and produce closer to the 

low end of the range.

Finally, EPA has projected production for companies generating cellulosic biofuel RINs 

from biogas at the 50th percentile for those facilities that have not yet generated cellulosic biofuel 

RINs and at the 75th percentile for those facilities that have achieved consistent commercial scale 

production. In our proposed rule we projected volumes from these facilities at the 25th and 50th

percentile of the projected production ranges respectively, consistent with the way we projected 

likely production from liquid cellulosic biofuel producers. We received comments that our 

 

200 While “new” CNG/LNG facilities may not face the same challenges related to start-up and scale-up there is 

uncertainty related to RIN generation from facilities that have not yet begun generating RINs. RIN generation from 

these facilities may be delayed or reduced if they are unable to verify that all or a portion of the CNG/LNG they 

produce is used as transportation fuel, or if they decide to sell the CNG/LNG they produce into non-transportation 

markets. These uncertainties can significantly impact the number of RINs generated by a CNG/LNG producer, and 

we therefore believe that projecting production from these “new” facilities at the 50th percentile of the range is 

appropriate.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 163 of 189

methodology under-estimated the potential for the generation of cellulosic RINs from biogas, 

with some commenters claiming that the mature state of the technology required to produce 

and/or collect biogas and clean it to pipeline quality justified a using a higher percentile to 

projected production from these facilities. In our proposed rule EPA noted the differences in the 

status of the technologies used to produce liquid cellulosic biofuels and cellulosic biofuel from 

biogas. We nevertheless proposed to use the same percentiles for both liquid cellulosic biofuels 

and cellulosic biofuel from biogas due to uncertainties related to the ability of the biogas 

production facilities to demonstrate the use of the biogas as transportation fuel and a lack of RIN 

generation data to compare to previous projections on the part of many of the biogas facilities. 

After reviewing the fuel production and RIN generation history of these facilities, and with these 

comments in mind, EPA has decided to use higher percentile values to project likely production 

from cellulosic biogas producers as compared to liquid cellulosic biofuel producers.201 The 

projected volume of cellulosic RINS generated for CNG/LNG from biogas are shown in Table 

IV.E-5 below.

Table IV.E-5

Projected Volume of Cellulosic Biofuel in 2015 for Months Without Production Data

(million gallons)a

Low End of 

the Rangeb

High End of 

the Rangeb

Percentile Projected 

Volumeb

Liquid Cellulosic Biofuel 

Producers Without Consistent 

Commercial Scale Production

0 3 25th 1

Liquid Cellulosic Biofuel 

Producers With Consistent 

Commercial Scale Production

0.5 1 50th 1

CNG/LNG Produced From 

Biogas Without Consistent 

Commercial Scale Production

0 0 50th 0

CNG/LNG Produced From 

Biogas With Consistent 

Commercial Scale Production

28 35 75th 33

Total N/A N/A N/A 35

a The projections in this table are for October 2015 – December 2015. The low end of the range is equal to the 

number of RINs produced by the companies over the most recent 12 months for which data is available multiplied 

by a factor of 0.25 (since it is only a projection for 3 months of the year). The high end of the range is based on 

projected production for the final 3 months of 2015.

b Rounded to the nearest million gallons.

As noted in our proposed rule, EPA anticipates that if the same methodology is used in 

future years that as cellulosic biofuel companies successfully achieve commercial scale 

production, application of this methodology will appropriately generate increasing volume 

projections, both for the individual companies and for the industry as a whole. This will happen 

in two ways. First, as companies successfully produce cellulosic biofuel the low end of the range 

(which is based on the most recent 12 months of production for which data are available) will 

 

201 XXReference Updated Biogas projection memo.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 164 of 189

increase. Second, we would use the higher percentile values for all companies who have 

achieved consistent commercial-scale production. If merited by the available data, we will also 

consider using a higher (or lower) percentile for both new facilities and facilities that have 

already achieved consistent commercial-scale production. As new pathways for the production 

of cellulosic biofuel are approved, we will also consider volumes produced using these pathways 

in our projections.202

The final step in projecting the potentially available volume of cellulosic biofuel in 2015 

is to combine the volumes of cellulosic biofuel actually produced in months for which data is 

available with the projected production volumes for the remaining months of 2015. This is 

shown in Table IV.E-6 below. For 2015 we are finalizing a cellulosic biofuel standard of 123 

million gallons.

Table IV.E-6

Projected Available Cellulosic Biofuel in 2015

Cellulosic Biofuel Production 

(January 2015 – September 2015)

88 Million Gallons

Projected Cellulosic Biofuel Production 

(October 2015 – December 2015)

35 Million Gallons

Projected Available Volume of 

Cellulosic Biofuel in 2015

123 Million Gallons

F. Cellulosic Biofuel Volume for 2016

To project the volume of potentially available cellulosic biofuel in 2016 we are using a 

methodology very similar to the methodology used for projecting cellulosic biofuel production in 

2015 for months in which actual production data are not available. The only difference is that in 

2016 a scaling factor is not used in calculating the low end of the projected ranges, as we are 

projecting production over the entire year rather than for only 3 months. For 2016 we separated 

the list of potential producers of cellulosic biofuel into four groups according to whether they are 

producing liquid cellulosic biofuel or CNG/LNG from biogas and the production history of the 

facilities (See Table IV.F-1 through Table IV.F-3). We next defined a range of likely production 

volumes for each group of potential cellulosic biofuel producers. The low end of the range for 

each group of producers reflects actual production data over the last 12 months for which data is 

available. This is the same approach used to establish the low end of the range for each of the 

potential cellulosic biofuel producers in 2015.

To calculate the high end of the projected production range for each group of companies 

we considered each company individually (with the exception of the CNG/LNG producers) and 

used the same methodology in 2016 as for the months in 2015 for which actual past production 

data was not available (this methodology is covered in further detail in Section IV.E above). The 

 

202 We disagree with commenters who stated that EPA should anticipate the approval of new pathways and include 

production from these pathways in our projections. Assuming the approval of new pathways, and the subsequent 

registration and production from new facilities using these pathways, is highly uncertain and inconsistent with our 

attempt at neutral projections, particularly for pathways that have not yet been proposed.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 165 of 189

high end of the range for each company within each group was added together to calculate the 

high end of the projected production range for that group.

After defining likely production ranges for each group of companies we projected a likely 

production volume from each group of companies for 2016. We used the same percentile values 

to project a production volume within the established ranges 2016 as we did in 2015; the 50th and 

25th percentiles respectively for liquid cellulosic biofuel producers with and without a history of 

consistent cellulosic biofuel production, and the 75th and 50th percentiles respectively for 

producers of CNG/LNG from biogas with and without a history of consistent commercial scale 

production. These percentile values are discussed in more detail in Section IV.E above.

Table IV.F-1

2016 Production Ranges for Liquid Cellulosic Biofuel Producers without Consistent Commercial 

Scale Production (million gallons)

Low End of the Rangea High End of the Rangea

Abengoa 0 22

CoolPlanet 0 0

DuPont 0 26

Edeniq 0 5

GranBio 0 2

Ineos Bio 0 6

Poet 0 15

Aggregate Range 0 76

Projected Production 

(25th Percentile of Range)

19

a Rounded to the nearest million gallons

Table IV.F-2

2016 Production Ranges for Liquid Cellulosic Biofuel Producers with Consistent Commercial 

Scale Production (million gallons)

Low End of the Rangea High End of the Rangea

Ensyn N/A 3

Quad County Corn Processors N/A 2

Aggregate Range 2 5

Projected Production 

(50th Percentile of Range)

4

a Rounded to the nearest million gallons

Deleted: ed
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 166 of 189

Table IV.F-3

2016 Production Ranges for CNG/LNG Produced From Biogas

(million gallons)

Low End of the Rangea High End of the Rangea

CNG/LNG Producers 

(New Facilities)

0 63

CNG/LNG Producers 

(Currently generating RINs)

109 197

a Rounded to the nearest million gallons

The final step in projecting the potentially available volume of cellulosic biofuel in 2016 

is to combine the volumes of cellulosic biofuel projected to be produced from each of the four 

groups discussed above (shown in Table IV.F-4 below). For 2016 we are finalizing a cellulosic 

biofuel volume requirement of 230 million gallons.

Table IV.F-4

Projected Volume of Cellulosic Biofuel in 2016

(million gallons)

Low End of 

the Rangea

High End of 

the Rangea

Percentile Projected 

Volumea

Liquid Cellulosic Biofuel 

Producers; New Facilities

0 76 25th 19

Liquid Cellulosic Biofuel 

Producer; Consistent Production

2 5 50th 4

CNG/LNG Producers; New 

Facilities

0 63 50th 32

CNG/LNG Producers; Consistent 

Production

109 197 75th 175

Total N/A N/A N/A 230

a Volumes rounded to the nearest million gallons

G. Rescission of the 2011 Cellulosic Biofuel Standards

On January 25, 2013, the United States Court of Appeals for the District of Columbia 

Circuit issued its decision concerning a challenge to the 2012 cellulosic biofuel standard.203 The 

Court found that in establishing the applicable volume of cellulosic biofuel for 2012, EPA had 

used a methodology in which “the risk of overestimation [was] set deliberately to outweigh the 

risk of underestimation.” The Court held EPA’s action to be inconsistent with the statute because 

EPA had failed to apply a “neutral methodology” aimed at providing a prediction of “what will 

actually happen,” as required by the statute. As a result of this ruling, the Court vacated the 2012 

cellulosic biofuel standard, and we removed the 2012 requirement from the regulations in a 

previous action. Industry had also challenged the 2011 cellulosic biofuel standard by, first, filing 

a petition for reconsideration of that standard, and then seeking judicial review of our denial of 

 

203 API v. EPA, 706 F 3d 474 (D.C. Cir. January 25, 2013).
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 167 of 189

the petition for reconsideration. This matter was still pending at the time of the D.C. Circuit’s 

ruling on the 2012 cellulosic biofuel standard. Since we used essentially the same methodology 

to develop the 2011 cellulosic biofuel standard as we did to develop the 2012 standard, we 

requested, and the Court granted, a partial voluntary remand to enable us to reconsider our denial 

of the petition for reconsideration of the 2011 cellulosic biofuel standard. Given the Court's 

ruling that the methodology EPA used in developing the 2012 cellulosic biofuel standard was 

flawed, we are rescinding the 2011 cellulosic biofuel applicable standard and will refund the 

money paid by obligated parties to purchase cellulosic waiver credits to comply with the 

standard. The only comments received on this issue were supportive of this action. Commented [A56]: For 2011, was there any production of 

cellulosic? Assuming there was no production, this would 

mean that obligated parties purchased CWC for 100% 

compliance and did not purchase any wet gallons of 

cellulosic?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 168 of 189

V. Percentage Standards

A. Background

The renewable fuel standards are expressed as volume percentages and are used by each 

obligated party to determine their Renewable Volume Obligations (RVO). Since there are four 

separate standards under the RFS program, there are likewise four separate RVOs applicable to 

each obligated party. Each standard applies to the sum of all gasoline and diesel produced or 

imported. The percentage standards are set so that if every obligated party meets the 

percentages, then the amount of renewable fuel, cellulosic biofuel, biomass-based diesel (BBD), 

and advanced biofuel used will meet the applicable volumes established in this rule on a 

nationwide basis.

Sections II, III, and IV provide our rationale and basis for the final volumes for advanced 

biofuel and total renewable fuel, BBD, and cellulosic biofuel, respectively. The volumes to be 

used to determine the four final percentage standards are shown in Table V.A-1.

Table V.A-1

Final Volumes for Use in Setting the Applicable Percentage Standards

2014 2015 2016

Cellulosic biofuel (million gallons) 33 123 230

Biomass-based diesel (billion gallons)a1.63 1.73 1.90

Advanced biofuel (billion gallons) 2.67 2.88 3.80

Renewable fuel (billion gallons) 16.28 16.93 18.10

a Represents physical volume.

B. Calculation of Standards

1. How Are the Standards Calculated?

The following formulas are used to calculate the four percentage standards applicable to 

producers and importers of gasoline and diesel (see 40 CFR 80.1405): 

Gi  RGi  GSi  RGSi  GEi  Di  RDi  DSi  RDSi  DEi

 

( ) ( ) ( ) ( )

RFV Std 100%CB,i

CB,i

Gi  RGi  GSi  RGSi  GEi  Di  RDi  DSi  RDSi  DEi



 

( ) ( ) ( ) ( )

RFV 1.5

Std 100%

BBD,i 

BBD,i

Gi  RGi  GSi  RGSi  GEi  Di  RDi  DSi  RDSi  DEi

 

( ) ( ) ( ) ( )

RFV Std 100%AB, i

AB, i

Gi  RGi  GSi  RGSi  GEi  Di  RDi  DSi  RDSi  DEi

 

( ) ( ) ( ) ( )

RFV Std 100%RF, i

RF, i
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 169 of 189

Where

StdCB,i = The cellulosic biofuel standard for year i, in percent.

StdBBD,i = The biomass-based diesel standard (ethanol-equivalent basis) for year i, in 

percent.

StdAB,i = The advanced biofuel standard for year i, in percent.

StdRF,i = The renewable fuel standard for year i, in percent.

RFVCB,i = Annual volume of cellulosic biofuel required by section 211(o) of the Clean Air 

Act for year i, in gallons.

RFVBBD,i = Annual volume of biomass-based diesel required by section 211(o) of the Clean

Air Act for year i, in gallons.

RFVAB,i = Annual volume of advanced biofuel required by section 211(o) of the Clean Air 

Act for year i, in gallons.

RFVRF,i = Annual volume of renewable fuel required by section 211(o) of the Clean Air Act 

for year i, in gallons.

Gi = Amount of gasoline projected to be used in the 48 contiguous states and Hawaii, 

in year i, in gallons. 

Di = Amount of diesel projected to be used in the 48 contiguous states and Hawaii, in 

year i, in gallons. This value excludes diesel used in ocean-going vessels.

RGi = Amount of renewable fuel blended into gasoline that is projected to be consumed 

in the 48 contiguous states and Hawaii, in year i, in gallons.

RDi = Amount of renewable fuel blended into diesel that is projected to be consumed in 

the 48 contiguous states and Hawaii, in year i, in gallons.

GSi = Amount of gasoline projected to be used in Alaska or a U.S. territory in year i if 

the state or territory opts-in, in gallons.

RGSi = Amount of renewable fuel blended into gasoline that is projected to be consumed 

in Alaska or a U.S. territory in year i if the state or territory opts-in, in gallons.

DSi = Amount of diesel projected to be used in Alaska or a U.S. territory in year i if the 

state or territory opts-in, in gallons.

RDSi = Amount of renewable fuel blended into diesel that is projected to be consumed in 

Alaska or a U.S. territory in year i if the state or territory opts-in, in gallons.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 170 of 189

GEi = Amount of gasoline projected to be produced by exempt small refineries and 

small refiners in year i, in gallons, in any year they are exempt per §§80.1441 and 

80.1442, respectively.

DEi = Amount of diesel projected to be produced by exempt small refineries and small 

refiners in year i, in gallons, in any year they are exempt per §§80.1441 and 

80.1442, respectively.

The formulas used in deriving the annual percentage standards rely on estimates of the 

volumes of gasoline and diesel fuel, for both highway and nonroad uses, which are projected to 

be used in the year in which the standards will apply. The projected gasoline and diesel volumes 

provided by EIA include ethanol and biodiesel used in transportation fuel, which are subtracted 

out as indicated in the equations above. Production of other transportation fuels, such as natural 

gas, propane, and electricity from fossil fuels, is not currently subject to the standards, and 

volumes of such fuels are not used in calculating the annual standards. Since under the 

regulations the standards apply only to producers and importers of gasoline and diesel, these are 

the transportation fuels used to set the standards, as well as to determine the annual volume 

obligations of an individual gasoline or diesel producer or importer.

2. Small Refineries and Small Refiners

In CAA section 211(o)(9), enacted as part of the Energy Policy Act of 2005, and 

amended by the Energy Independence and Security Act of 2007, Congress provided a temporary 

exemption to small refineries204 through December 31, 2010. Congress provided that small 

refineries could receive a temporary extension of the exemption based on an EPA determination 

of “disproportionate economic hardship” on a case-by-case basis in response to small refinery 

petitions.205

EPA, in consultation with the Department of Energy, evaluates the structural impacts 

petitioning refineries would likely face in achieving compliance with the RFS requirements and 

how compliance would affect their ability to remain competitive and profitable. A 

disproportionate economic hardship exists where a refinery faces a high cost of compliance 

relative to the industry average and where compliance would significantly impair its operations. 

The U.S. Courts of Appeal for the Eighth and D.C. Circuits206 have found that the relative costs 

 

204 A small refinery, as defined by the statute, is a refinery with an average daily crude throughput of 75,000 barrels 

or less (see 40 CFR 80.1441). As this is a facility-based definition, not company-based as SBA’s small refiner

definition is, it follows that not all small refiners’ facilities meet the definition of a small refinery. A small refiner 

that meets the parameters of 40 CFR 80.1442 may also be eligible for an exemption. 

205 For 2011 and 2012 13 small refineries were granted an extension to the statutory exemption based on the findings 

of a Department of Energy investigation into the disproportionate economic hardship experienced by small 

refineries. 

206 Lion Oil Company v. EPA, 792 F.3d 978; 2015 U.S. App. LEXIS 11725 (8th Cir. 2015); Monroe Energy, LLC 

v. EPA, 750 F.3d 909; 409 U.S. App. D.C. 413 (D.C. Cir. 2014).
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 171 of 189

of compliance alone cannot demonstrate disproportionate economic hardship because all 

refineries face a direct cost associated with participation in the RFS program.207 

EPA has granted some exemptions pursuant to this process in the past, and has granted 

exemptions for three small refineries for 2014. The final applicable percentage standards for 

2014 reflect the fact that the gasoline and diesel volumes associated with these three small 

refineries have been exempted, as provided in the formulas described in the preceding section. 

However, at this time, no exemptions have been approved for 2015 or 2016, and therefore we 

have calculated the percentage standards for these years without an adjustment for exempted 

volumes. As stated in the final rule establishing the 2011 standards, “EPA believes the Act is 

best interpreted to require issuance of a single annual standard in November that is applicable in 

the following calendar year, thereby providing advance notice and certainty to obligated parties 

regarding their regulatory requirements. Periodic revisions to the standards to reflect waivers 

issued to small refineries or refiners would be inconsistent with the statutory text, and would 

introduce an undesirable level of uncertainty for obligated parties.”208 Thus, any additional 

exemptions for small refineries that are issued after today will not affect the 2014, 2015, or 2016 

standards.

3. Final Standards

As specified in the RFS2 final rule,209 the percentage standards are based on energyequivalent gallons of renewable fuel, with the cellulosic biofuel, advanced biofuel, and total 

renewable fuel standards based on ethanol equivalence and the BBD standard based on biodiesel 

equivalence. However, all RIN generation is based on ethanol-equivalence. For example, the 

RFS regulations provide that production or import of a gallon of qualifying biodiesel will lead to 

the generation of 1.5 RINs. In order to ensure that demand for the required physical volume of 

BBD will be created in each year, the calculation of the BBD standard provides that the 

applicable physical volume be multiplied by 1.5. The net result is a BBD gallon being worth 1.0 

gallon toward the BBD standard, but worth 1.5 gallons toward the other standards.

The levels of the percentage standards would be reduced if Alaska or a U.S. territory 

chooses to participate in the RFS program, as gasoline and diesel produced in or imported into 

that state or territory would then be subject to the standard. Neither Alaska nor any U.S. territory 

has chosen to participate in the RFS program at this time, and thus the value of the related terms 

in the calculation of the standards is zero.

 

207 EPA has also found in its recent analyses of the RIN market that in a competitive market typical of the gasoline 

and diesel marketplace, the cost of RFS compliance (RINs) is passed along to consumers and recovered by refiners 

through the prices of the gasoline blendstocks they sell. Consequentially, not only are the costs of the RFS program 

automatically normalized across the industry based on production volume, but these costs are passed on to 

consumers.

208 See 75 FR 76804 (December 9, 2010).

209 75 FR 14716, March 26, 2010.

Commented [A57]: If a small refinery produces more than 

75,000 BPD for any given year, are they able to petition EPA 

in future years if their production drops below 75,000 BPD 

again? Please explain.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 172 of 189

The values of the variables described above are shown in Table V.B.3-1.210

Table V.B.3-1

Values for Terms in Calculation of the Final Standards211 (billion gallons)

Term 2014 2015 2016

RFVCB 0.033 0.123 0.230

RFVBBD 1.66a1.77b1.90

RFVAB 2.67 2.88 3.80

RFVRF 16.28 16.93 18.10

G 136.48 139.38 139.96

D 55.67 54.05 55.26

RG 13.42 13.81 13.85

RD 1.55 1.76 2.05

GS 0.00 0.00 0.00

RGS 0.00 0.00 0.00

DS 0.00 0.00 0.00

RDS 0.00 0.00 0.00

GE 0.01 0.00 0.00

DE 0.03 0.00 0.00

a Represents the biodiesel-equivalent volume of actual 2014 supply, which was 

2.49 bill D4 RINs. Actual physical volume was 1.63 billion physical gallons, 

composed of 1.35 bill gal of biodiesel and 0.28 bill gal renewable diesel.

b Represents the biodiesel-equivalent volume of actual 2015 supply, which was 

2.65 bill D4 RINs. Actual physical volume was 1.73 billion physical gallons, 

composed of 1.45 bill gal of biodiesel and 0.28 bill gal renewable diesel.

Using the volumes shown in Table V.B.3-1, we have calculated the final percentage 

standards for 2014, 2015, and 2016 as shown in Table V.B.3-2.

Table V.B.3-2

Final Percentage Standards

2014 2015 2016

Cellulosic biofuel 0.019% 0.069% 0.128%

Biomass-based diesel 1.41% 1.49% 1.59%

Advanced biofuel 1.51% 1.62% 2.12%

Renewable fuel 9.19% 9.52% 10.09%

 

210 To determine the 49-state values for gasoline and diesel, the amounts of these fuels used in Alaska is subtracted 

from the totals provided by DOE. The Alaska fractions are determined from the June 24, 2015 EIA State Energy 

Data System (SEDS), Energy Consumption Estimates.

211 Details of volumes and calculations are available in the docket.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 173 of 189

VI. Amendments to Regulations

We are finalizing several revisions to the RFS regulations, which are described below. 

The first revision relates to the definition of terms in Table 1 to 40 CFR 80.1426, which 

describes approved biofuel production pathways. The second set of revisions addresses annual 

compliance reporting and associated attest reporting deadlines.

A. Changes to the Algal Biofuel Pathways

In the March 2010 RFS rule (75 FR 14670), EPA established two pathways for biofuels 

derived from algal oil to generate D-Code 4 (Biomass-Based Diesel) or 5 (Advanced) RINs. The 

analyses supporting the pathways approved in the March 2010 RFS rule assumed that algae 

would be grown photosynthetically (i.e., using predominantly sunlight and CO2 as inputs) and 

harvested for their oil.212 Biofuel produced with algae grown through other means is likely to 

have different lifecycle GHG emissions impacts. EPA proposed and is now finalizing changes to 

our regulations that clarify that the existing algal oil pathways adopted as part of the March 2010 

RFS rule apply only to oil from algae grown photosynthetically. Specifically, we are finalizing 

the proposed replacement of “algal oil” as a feedstock in Table 1 to 40 CFR 80.1426 with “oil 

from algae grown photosynthetically.” We are also finalizing the proposed definition for “algae 

grown photosynthetically” to 40 CFR 80.1401. EPA did not propose or seek comment on adding 

a regulatory definition of “algae.”

EPA received several comments in support of these clarifications. EPA also received 

several comments that suggested these clarifications were not necessary and urged the agency to 

clarify a number of issues related to the production of algal biofuel using different pathway 

configurations. Comments also requested the agency expand the interpretation of algae to 

include all autotrophic microorganisms. These issues are beyond the scope of this rulemaking, 

which is limited to the proposed regulatory amendments discussed above that clarify the existing 

algal oil pathways. Companies wishing to produce biofuels from algae grown with a nonphotosynthetic stage of growth must apply to EPA for approval of their pathway pursuant to 40 

CFR 80.1416.

B. Annual Compliance Reporting and Attest Engagement Deadlines under the RFS 

Program

Based on the comments received and the discussion below, the EPA is finalizing the 

annual compliance reporting and attest engagement deadlines as proposed, but is changing the 

2015 attest engagement reporting deadline for obligated parties. 

Commenters on the proposed due dates for the 2013, 2014, and 2015 RFS annual 

compliance and attest engagement reports generally supported the EPA’s approach to staggering 

the deadlines between compliance years. However, as one commenter noted, the time between 

the deadline for 2015 RFS attest engagement reports for obligated parties conflicts with 2016 

 

212 See 75 FR 14696 (March 26, 2010).

Commented [A58]: Do either of these allow for the use of 

cynobacteria? 

Deleted: except for
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 174 of 189

RFS annual compliance and attest reporting deadlines for obligated parties. The commenter 

argued that obligated parties rely upon the results of the prior compliance year’s attest 

engagement reports to correct vital information that is needed to accurately determine an 

obligated party’s RVO and RIN balance. Since the proposed deadlines for 2015 attest 

engagement reporting occurred after the 2016 annual compliance reporting deadline, obligated 

parties would have been unable to utilize the 2015 attest engagement report to ensure timely, 

accurate 2016 annual compliance reports. The result of this conflict would have been the 

unnecessary resubmission of 2016 annual compliance reports by obligated parties to address 

issues identified in the 2015 attest engagement reports. Additionally, certified public accountants 

(CPAs) and certified internal auditors (CIAs) would not have been able to rely upon the 2015 

attest engagement report for the 2016 attest engagement procedures since the proposed deadlines 

for 2015 and 2016 attest engagements reports were the same. The commenter noted that six 

months was too much time between the 2014 and 2015 annual compliance reporting deadlines 

for obligated parties. (It should be noted that the proposed 2014 and 2015 RFS annual 

compliance deadlines for obligated parties was only five months apart, not six months.)

While we recognize the concerns raised, due to constraints on the EPA’s reporting 

systems and staff, we are unable to accommodate a faster annual compliance reporting schedule. 

Additionally, we have concerns that obligated parties may have difficulty complying with a 

more compressed RFS reporting schedule. Obligated parties have several other EPA fuel 

program registration and reporting requirements that become effective in 2016 and 2017. These 

requirements were primarily finalized in the Tier 3 rulemaking and include the registration of all 

oxygenate blenders (e.g., terminals), the submission of applications for test methods under the 

Performance Based Analytical Test Method Approach program, and compliance with the new 

Tier 3 gasoline sulfur standards. 

Concerning obligated parties’ attest engagement reporting deadlines, we believe we can 

move forward the 2015 RFS attest engagement reporting deadline for obligated parties to more 

appropriately sequence 2015 and 2016 annual compliance and attest engagement reporting 

deadlines. However, we recognize that there is a limited number of CPAs and CIAs that conduct 

most of the attest engagement reporting across all of EPA’s fuels programs for obligated parties. 

We are concerned that these CPAs and CIAs would become overburdened if we compressed the 

attest engagement reporting deadlines too much. Although we value the timely submission of 

information, we believe compressing the 2013 and 2014 attest engagement reporting deadlines 

would unnecessarily increase compliance costs for many obligated parties.

Therefore, for obligated parties, we are finalizing RFS annual compliance reporting 

deadlines for 2013, 2014, and 2015 as proposed. We are also finalizing the 2013 and 2014 attest 

engagement reporting deadlines as proposed. We are changing the 2015 attest engagement 

reporting deadline for obligated parties from June 1, 2017 to March 1, 2017. We believe this 

helps address comments concerned with having the 2015 and 2016 RFS attest engagement 

reporting deadlines fall on the same day and should allow obligated parties some time to adjust 

2016 annual compliance reports based on issues identified in the 2015 attest engagement report. 

We are finalizing all other annual compliance and attest engagement reporting deadlines 

for 2013, 2014, and 2015 for other responsible parties as proposed. The revised annual 
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 175 of 189

compliance and attest reporting deadlines for all regulated party categories for the 2013, 2014, 

and 2015 compliance years are shown below in Table VI.B-1. For the 2016 and subsequent 

compliance years, the deadlines will be back on track with annual compliance demonstration 

reports due March 31 and attest engagement reports due June 1 of the year following the 

compliance year.

Table VI.B-1

Annual Compliance and Attest Engagement Reporting Deadlines by Regulated Party 

Category for the 2013, 2014, and 2015 compliance years

Regulated Party Category

Revised Annual 

Compliance Deadline

Revised Attest Engagement 

Reporting Deadline

2013 Compliance Year

RIN-generating renewable fuel 

producers and importers; other 

parties owning RINs

N/A January 31, 2016

Independent third-party auditors N/A N/A

Renewable fuel exporters January 31, 2016 June 1, 2016

Obligated parties January 31, 2016 June 1, 2016

2014 Compliance Year

RIN-generating renewable fuel 

producers and importers; other 

parties owning RINs

N/A January 31, 2016

Independent third-party auditors N/A January 31, 2016

Renewable fuel exporters

January 1 –

September 16, 2014

Partial report: 

March 31, 2015

Full report: 

January 31, 2016

Partial report: 

June 1, 2015

Full report: 

June 1, 2016

September 17 –

December 31, 2014 March 31, 2015 June 1, 2015

Obligated parties June 1, 2016 December 1, 2016

2015 Compliance Year

RIN-generating renewable fuel 

producers and importers; other 

parties owning RINs

N/A June 1, 2016

Independent third-party auditors N/A June 1, 2016

Renewable fuel exporters March 31, 2016 June 1, 2016

Obligated parties December 1, 2016 March 1, 2017
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 176 of 189
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 177 of 189

VII. Assessment of Aggregate Compliance

A. Assessment of the Domestic Aggregate Compliance Approach

The RFS2 regulations contain a provision for renewable fuel producers who use planted 

crops and crop residue from U.S. agricultural land that relieves them of the individual 

recordkeeping and reporting requirements concerning the specific land from which their 

feedstocks were harvested. To enable this approach, EPA established a baseline number of acres 

for U.S. agricultural land in 2007 (the year of EISA enactment) and determined that as long as 

this baseline number of acres was not exceeded, it was unlikely that new land outside of the 2007 

baseline would be devoted to crop production based on historical trends and economic 

considerations. We therefore provided that renewable fuel producers using planted crops or crop 

residue from the U.S. as feedstock in renewable fuel production need not comply with the 

individual recordkeeping and reporting requirements related to documenting that their feedstocks 

are renewable biomass, unless EPA determines through one of its annual evaluations that the 

2007 baseline acreage of agricultural land has been exceeded. 

In the final RFS2 regulations, EPA committed to make an annual finding concerning 

whether the 2007 baseline amount of U.S. agricultural land has been exceeded in a given year. If 

the baseline is found to have been exceeded, then producers using U.S. planted crops and crop 

residue as feedstocks for renewable fuel production would be required to comply with individual 

recordkeeping and reporting requirements to verify that their feedstocks are renewable biomass. 

Based on data provided by the USDA Farm Service Agency (FSA) and Natural 

Resources Conservation Service (NRCS), we have estimated that U.S. agricultural land reached 

approximately XXX million acres in 2013, and thus did not exceed the 2007 baseline acreage. 

This acreage estimate is based on the same methodology used to set the 2007 baseline acreage 

for U.S. agricultural land in the RFS2 final rulemaking. Specifically, we started with FSA crop 

history data for 2013, from which we derived a total estimated acreage of XXX million acres. 

We then subtracted the amount of land estimated to be participating in the Grasslands Reserve 

Program (GRP) and Wetlands Reserve Program (WRP) by the end of Fiscal Year 2013, xxx 

acres, to yield an estimate of approximately XXX million acres of U.S. agricultural land in 2013. 

The USDA data used to make this calculation can be found in the docket to this rule.

Similarly, we have estimated that U.S. agricultural land reached approximately XXX 

million acres in 2014, and thus did not exceed the 2007 baseline acreage. This acreage estimate 

is based on the same methodology used to set the 2007 baseline acreage for U.S. agricultural 

land in the RFS2 final rulemaking. Specifically, we started with FSA crop history data for 2014, 

from which we derived a total estimated acreage of XXX million acres. We then subtracted the 

amount of land estimated to be participating in the Grasslands Reserve Program (GRP) and 

Wetlands Reserve Program (WRP) by the end of Fiscal Year 2014, xxx acres, to yield an 

estimate of approximately XXX million acres of U.S. agricultural land in 2014. The USDA data 

used to make this calculation can be found in the docket to this rule.

Calculations for 2016 will be made once the data becomes available.

Commented [A59]: EPA needs to include the values in 

this section as well as the others related to the aggregate 

compliance.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 178 of 189

B. Assessment of the Canadian Aggregate Compliance Approach

On March 15, 2011, EPA issued a notice of receipt of and solicited public comment on a 

petition for EPA to authorize the use of an aggregate approach for compliance with the 

Renewable Fuel Standard renewable biomass requirements, submitted by the Government of 

Canada. The petition requested that EPA determine that an aggregate compliance approach will 

provide reasonable assurance that planted crops and crop residue from Canada meet the 

definition of renewable biomass. After thorough consideration of the petition, all supporting 

documentation provided and the public comments received, EPA determined that the criteria for 

approval of the petition were satisfied and approved the use of an aggregate compliance 

approach to renewable biomass verification for planted crops and crop residue grown in Canada. 

The Government of Canada utilized several types of land use data to demonstrate that the 

land included in their 124 million acre baseline is cropland, pastureland or land equivalent to 

U.S. Conservation Reserve Program land that was cleared or cultivated prior to December 19, 

2007, and was actively managed or fallow and non-forested on that date (and is therefore RFS2 

qualifying land). The total agricultural land in Canada in 2013 is estimated at 119.8 million 

acres. This total agricultural land area includes 96.3 million acres of cropland and summer 

fallow, 13.7 million acres of pastureland and 9.8 million acres of agricultural land under 

conservation practices. This acreage estimate is based on the same methodology used to set the 

2007 baseline acreage for Canadian agricultural land in the RFS2 response to petition. The data 

used to make this calculation can be found in the docket to this rule.

The total agricultural land in Canada in 2014 is estimated at 119.5 million acres. This 

total agricultural land area includes 96 million acres of cropland and summer fallow, 13.7 million 

acres of pastureland and 9.8 million acres of agricultural land under conservation practices. This 

acreage estimate is based on the same methodology used to set the 2007 baseline acreage for 

Canadian agricultural land in the RFS2 response to petition. The data used to make this 

calculation can be found in the docket to this rule.

The total agricultural land in Canada in 2015 is estimated at 118.6 million acres. This 

total agricultural land area includes 94.9 million acres of cropland and summer fallow, 13.9 

million acres of pastureland and 9.8 million acres of agricultural land under conservation 

practices. This acreage estimate is based on the same methodology used to set the 2007 baseline 

acreage for Canadian agricultural land in the RFS2 response to petition. The data used to make 

this calculation can be found in the docket to this rule.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 179 of 189

VIII. Public Participation

Many interested parties participated in the rulemaking process that culminates with this 

final rule. This process provided opportunity for submitting written public comments following 

the proposal that we published on June 10, 2015 (80 FR 33100), and we also held a public 

hearing on June 15, 2015, at which many parties provided both verbal and written testimony. All 

comments received, both verbal and written, are available in EPA docket EPA-HQ-OAR-2015-

0111 and we considered these comments in developing the final rule. Public comments and EPA 

responses are discussed throughout this preamble and in the accompanying RTC document, 

which is available in the docket for this action.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 180 of 189

IX. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 

13563: Improving Regulation and Regulatory Review

This action is an economically significant regulatory action that was submitted to the 

Office of Management and Budget (OMB) for review. This action is a “significant regulatory 

action” because it raises novel legal or policy issues arising out of legal mandates, the President’s 

priorities, or the principles set forth in the Executive Order. Any changes made in response to 

OMB recommendations have been documented in the docket. The EPA prepared an analysis of 

the potential costs associated with this action. This analysis is presented in Section II.I of this 

preamble.

B. Paperwork Reduction Act (PRA)

This action does not impose any new information collection burden under the PRA. OMB 

has previously approved the information collection activities contained in the existing 

regulations and has assigned OMB control numbers 2060-0637 and 2060-0640. The final 

standards would not impose new or different reporting requirements on regulated parties than 

already exist for the RFS program.

C. Regulatory Flexibility Act (RFA)

I certify that this action will not have a significant economic impact on a substantial 

number of small entities under the RFA. In making this determination, the impact of concern is 

any significant adverse economic impact on small entities. An agency may certify that a rule will 

not have a significant economic impact on a substantial number of small entities if the rule 

relieves regulatory burden, has no net burden, or otherwise has a positive economic effect on the 

small entities subject to the rule. The small entities directly regulated by the RFS program are 

small refiners, which are defined at 13 CFR 121.201 as refiners with 1,500 employees or less 

company-wide.

EPA has conducted a screening analysis to assess whether it should make a finding that 

there would be no significant economic impact on a substantial number of small entities. We 

discuss this analysis below. The impacts of the RFS program on small entities were already 

addressed in the March 26, 2010, RFS2 rulemaking (75 FR 14670), which was a rule that 

implemented the entire program required by the Energy Independence and Security Act of 2007 

(EISA 2007). As such, the Small Business Regulatory Enforcement Fairness Act (SBREFA) 

panel process that took place prior to the 2010 rule was also for the entire RFS program and 

looked at impacts on small refiners through 2022.

For the SBREFA process for the March 26, 2010, RFS2 rulemaking, EPA conducted 

outreach, fact-finding, and analysis of the potential impacts of the program on small refiners 

which are all described in the Final Regulatory Flexibility Analysis, located in the rulemaking 

Commented [A60]: Based on EPA’s estimates for the 

BBD changes, the rule imposes annual costs of more than 

$100 million/year so it is economically significant under EO 

12866. Please update the highlighted sentence to be 

consistent with the language that EPA typically uses here.

Commented [A61]: Are there other OMB control numbers 

associated with RFS?
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 181 of 189

docket (EPA–HQ–OAR–2005–0161). This analysis looked at impacts to all refiners, including 

small refiners, through the year 2022 and found that the program would not have a significant 

economic impact on a substantial number of small entities, and that this impact was expected to 

decrease over time, even as the standards increased. The analysis included a cost-to-sales ratio 

test, a ratio of the estimated annualized compliance costs to the value of sales per company, for 

gasoline and/or diesel small refiners subject to the standards. From this test, it was estimated that 

all small entities would have compliance costs that are less than one percent of their sales over 

the life of the program (75 FR 14862).

This final rule will not impose any additional requirements on small entities beyond those 

already analyzed, since the impacts of this final rule are not greater or fundamentally different 

than those already considered in the analysis for the March 26, 2010, rule assuming full 

implementation of the RFS program. As shown above in Tables I-1 and I.A-1 (and discussed 

further in Sections II and IV), this rule finalizes the 2014, 2015, and 2016 volume requirements 

for cellulosic biofuel, advanced biofuel, and total renewable fuel at levels significantly below the 

statutory volume targets. This exercise of EPA’s waiver authorities reduces burdens on small 

entities, as compared to the burdens that would be imposed under the volumes specified in the 

Clean Air Act in the absence of waivers. Regarding the biomass-based diesel standard, we are 

finalizing to increase the volume requirements for 2014-2016 over the statutory minimum value 

of 1 billion gallons. However, this is a nested standard within the advanced biofuel category, for 

which we are finalizing significant reductions from the statutory volume targets. As discussed in 

Section III, we are setting the biomass-based diesel volume requirement at a level below what is 

anticipated will be produced and used to satisfy the reduced advanced biofuel requirement. The 

net result of our final actions are a reduction in burden as compared to implementation of the 

statutory volume targets, as was assumed in the March 26, 2010, analysis. Furthermore, available 

information shows that the impact on small entities from implementation of this rule will not be 

significant. EPA has reviewed the available information, which suggests that obligated parties, 

including small entities, are generally able to recover the purchase cost of the RINs necessary for 

compliance through higher sales prices of the petroleum products they sell than would be 

expected in the absence of the RFS program.213 Even if we were to assume that the cost of RINs 

were not recovered by obligated parties, and we used the maximum values of the illustrative 

costs discussed in Section II.I, the gasoline and diesel fuel volume projections from the October 

2015 version of EIA's Short-Term Energy Outlook, and current wholesale fuel prices, a simple 

cost-to-sales ratio test shows that the costs to small entities of the RFS standards remain less than 

1% of the value of their sales.

The program also includes compliance flexibilities that can reduce impacts on small 

entities. These flexibilities include RIN trading, 20% RIN rollover allowance (up to 20% of an 

obligated party’s RVO can be met using previous-year RINs), and deficit carry forward (the 

ability to carry over a deficit from a given year into the following year, providing that the deficit 

is satisfied together with the next year’s RVO). In the March 26, 2010, final rule, we discussed 

other potential small entity flexibilities that had been suggested by the SBREFA panel or through 

comments, but we did not adopt them since they are inconsistent with EPA’s authority under the 

 

213 For a further discussion of the ability of obligated parties to recover the cost of RINs see "A Preliminary 

Assessment of RIN Market Dynamics, RIN Prices, and Their Effects," Dallas Burkholder, Office of Transportation 

and Air Quality, US EPA. May 14, 2015, EPA Air Docket EPA-HQ-OAR-2015-0111.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 182 of 189

CAA (see 75 FR 14737). Our statutory authority to issue relief to small entities has not changed 

since that time. Additionally, as specified by the statute,214 the RFS regulations (at 40 CFR 

80.1441(e)(2)) allow for a small refinery215 to petition for an extension of its small refinery 

exemption at any time based on a showing that compliance with the requirements of the RFS 

program would result in the refinery experiencing a “disproportionate economic hardship.” A 

small refiner may also petition for an extension of its small refiner exemption based on a similar 

showing that compliance with the requirements of the RFS program would result in the refiner 

experiencing a “disproportionate economic hardship” (see 40 CFR 80.1442(h)). EPA evaluates 

these petitions on a case-by-case basis and may approve such petitions if it finds that a 

disproportionate economic hardship exists. For the 2013 RFS standards, the EPA successfully 

implemented these provisions by evaluating 16 petitions for exemptions from small refineries 

(one was later withdrawn).

Given that this final rule would not impose additional requirements on small entities, 

would decrease burden via a reduction in required volumes as compared to statutory volume 

targets, and would not change the compliance flexibilities currently offered to small entities 

under the RFS program, including the small refinery hardship provisions we continue to 

successfully implement, we have therefore concluded that this action would not have a 

significant impact on a substantial number of directly regulated small entities. 

D. Unfunded Mandates Reform Act (UMRA)

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 

1531–1538, and does not significantly or uniquely affect small governments. The action 

implements mandates specifically and explicitly set forth in CAA section 211(o) without the 

exercise of any policy discretion by the EPA.

E. Executive Order 13132: Federalism

This action does not have federalism implications. It will not have substantial direct 

effects on the states, on the relationship between the national government and the states, or on 

the distribution of power and responsibilities among the various levels of government.

F. Executive Order 13175: Consultation and Coordination with Indian Tribal 

Governments

This action does not have tribal implications as specified in Executive Order 13175. This 

final rule will be implemented at the Federal level and affects transportation fuel refiners, 

blenders, marketers, distributors, importers, exporters, and renewable fuel producers and 

 

214 See CAA section 211(o)(9)(B).

215 A small refinery, as defined by the statute, is a refinery with an average daily crude throughput of 75,000 barrels 

or less. As this is a facility-based definition, not company-based as SBA’s small refiner definition is, it follows that 

not all small refiners’ facilities meet the definition of a small refinery.

Commented [A62]: This rule should have an UMRA 

component as the imposed costs are estimated to be more 

than $100 million/year on the private sector.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 183 of 189

importers. Tribal governments would be affected only to the extent they produce, purchase, and 

use regulated fuels. Thus, Executive Order 13175 does not apply to this action. 

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 concern environmental health or safety risks that the EPA has reason to believe may 

disproportionately affect children, per the definition of “covered regulatory action” in section 2-

202 of the Executive Order. This action is not subject to Executive Order 13045 because it 

implements specific standards established by Congress in statutes (CAA section 211(o)) and 

does not concern an environmental health risk or safety risk.

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect 

Energy Supply, Distribution, or Use

This action is not a “significant energy action” because it is not likely to have a 

significant adverse effect on the supply, distribution, or use of energy. This action establishes the 

required renewable fuel content of the transportation fuel supply for 2014, 2015, and 2016, 

consistent with the CAA and waiver authorities provided therein. The RFS program and this rule 

are designed to achieve positive effects on the nation’s transportation fuel supply, by increasing 

energy independence and lowering lifecycle greenhouse gas emissions of transportation fuel.

I. National Technology Transfer and Advancement Act (NTTAA)

This rulemaking does not involve technical standards.

J. Executive Order 12898: Federal Actions to Address Environmental Justice in 

Minority Populations, and Low-Income Populations

The EPA believes that this action will not have potential disproportionately high and 

adverse human health or environmental effects on minority, low-income, or indigenous 

populations. This final rule does not affect the level of protection provided to human health or 

the environment by applicable air quality standards. This action does not relax the control 

measures on sources regulated by the RFS regulations and therefore will not cause emissions 

increases from these sources.

K. Congressional Review Act (CRA)
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 184 of 189

This action is subject to the CRA, and the EPA will submit a rule report to each House of 

the Congress and to the Comptroller General of the United States. This action is not a “major 

rule” as defined by 5 U.S.C. 804(2). Commented [A63]: This action is “major” as it would 

impose a burden of $100 million or more on the public in 

any given year. Please update.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 185 of 189

X. Statutory Authority

Statutory authority for this action comes from section 211 of the Clean Air Act, 42 

U.S.C. 7545. Additional support for the procedural and compliance related aspects of this final 

rule come from sections 114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. sections 7414, 

7542, and 7601(a).

List of Subjects in 40 CFR Part 80

Environmental protection, Administrative practice and procedure, Air pollution control, Diesel 

fuel, Fuel additives, Gasoline, Imports, Oil imports, Petroleum, Renewable fuel.

Dated: _____________________.

___________________________

Gina McCarthy,

Administrator.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 186 of 189

For the reasons set forth in the preamble, EPA amends 40 CFR part 80 as follows:

PART 80—REGULATION OF FUELS AND FUEL ADDITIVES

Authority: The authority citation for part 80 continues to read as follows:

Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart M – [Amended]

1. Section 80.1401 is amended by adding in alphabetical order the definition for “Algae 

grown photosynthetically” to read as follows:

§ 80.1401 Definitions.

* * * * *

Algae grown photosynthetically are algae that are grown such that their energy and carbon are 

predominantly derived from photosynthesis.

* * * * *

2. Section 80.1405 is amended by:

a. Removing and reserving paragraph (a)(2)(i).

b. Adding new paragraphs (a)(5), (a)(6), and (a)(7).

The additions read as follows:

§ 80.1405 What are the Renewable Fuel Standards?

(a) * * *

(5) Renewable Fuel Standards for 2014.

(i) The value of the cellulosic biofuel standard for 2014 shall be 0.019 percent.

(ii) The value of the biomass-based diesel standard for 2014 shall be 1.41 percent.

(iii) The value of the advanced biofuel standard for 2014 shall be 1.51 percent.

(iv) The value of the renewable fuel standard for 2014 shall be 9.19 percent.

(6) Renewable Fuel Standards for 2015.

(i) The value of the cellulosic biofuel standard for 2015 shall be 0.069 percent.
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 187 of 189

(ii) The value of the biomass-based diesel standard for 2015 shall be 1.49 percent.

(iii) The value of the advanced biofuel standard for 2015 shall be 1.62 percent.

(iv) The value of the renewable fuel standard for 2015 shall be 9.52 percent.

(7) Renewable Fuel Standards for 2016.

(i) The value of the cellulosic biofuel standard for 2016 shall be 0.128 percent.

(ii) The value of the biomass-based diesel standard for 2016 shall be 1.59 percent.

(iii) The value of the advanced biofuel standard for 2016 shall be 2.12 percent.

(iv) The value of the renewable fuel standard for 2016 shall be 10.09 percent.

* * * * *

3. Section 80.1426 is amended in paragraph (f)(1), in Table 1 to §80.1426, revising entries F 

and H to read as follows:

§ 80.1426 How are RINs generated and assigned to batches of renewable fuel by 

renewable fuel producers or importers?

* * * * *

(f) * * *

(1) * * *

TABLE 1 TO §80.1426—APPLICABLE D CODES FOR EACH FUEL PATHWAY FOR USE IN 

GENERATING RINS

Fuel type Feedstock Production process 

requirements

D-Code

* * * * * * *

F Biodiesel, 

renewable 

diesel, jet fuel 

and heating oil

Soy bean oil;

Oil from annual covercrops;

Oil from algae grown 

photosynthetically;

Biogenic waste oils/fats/greases;

Non-food grade corn oil;

Camelina sativa oil; 

One of the following:

Trans-Esterification 

Hydrotreating

Excluding processes that 

co-process renewable 

biomass and petroleum

4

* * * * * * *
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 188 of 189

H Biodiesel, 

renewable 

diesel, jet fuel 

and heating oil

Soy bean oil;

Oil from annual covercrops;

Oil from algae grown 

photosynthetically;

Biogenic waste oils/fats/greases;

Non-food grade corn oil;

Camelina sativa oil; 

One of the following:

Trans-Esterification

Hydrotreating

Includes only processes 

that co-process renewable 

biomass and petroleum

5

* * * * * * *

* * * * *

4. Section 80.1451 is amended by revising paragraph (a)(1)(xiv) to read as follows:

§ 80.1451 What are the reporting requirements under the RFS program? 

(a) * * * 

(1) * * * 

(xiv)(A) For the 2013 compliance year, annual compliance reports shall be submitted no later 

than January 31, 2016.

(B) For obligated parties, for the 2014 compliance year, annual compliance reports shall be 

submitted no later June 1, 2016.

(C) For exporters of renewable fuel, for the 2014 compliance period from January 1, 2014, 

through September 16, 2014, full annual compliance reports (containing the information 

specified in paragraphs (a)(1)(i), (ii), (vi), (viii), and (x) of this section) for that period shall be 

submitted no later than January 31, 2016.

(D) For obligated parties, for the 2015 compliance year, annual compliance reports shall be 

submitted no later than December 1, 2016.

* * * * *

5. Section 80.1464 is amended by:

a. Revising paragraph (g).

b. Adding new paragraph (i)(3).

The addition and revision read as follows:

§80.1464 What are the attest engagement requirements under the RFS program?

* * * * *
*** EO 12866 Review - Draft - Do Not Cite, Quote, or Release During Review ***

Page 189 of 189

(g)(1) For obligated parties and exporters of renewable fuel, for the 2013 compliance year, 

reports required under this section shall be submitted to the EPA no later than June 1, 2016. 

(2) For RIN-generating renewable fuel producers, RIN-generating importers of renewable fuel, 

and other parties owning RINs, for the 2013 compliance year, reports required under this section 

shall be submitted to the EPA no later than January 31, 2016.

(3) For obligated parties, for the 2014 compliance year, reports required under this section shall 

be submitted to the EPA no later than December 1, 2016. 

(4) For exporters of renewable fuel, for the 2014 compliance period from January 1, 2014, 

through September 16, 2014, full reports for that period required under this section shall be 

submitted no later than June 1, 2016.

(5) For RIN-generating renewable fuel producers, RIN-generating importers of renewable fuel, 

and other parties owning RINs, for the 2014 compliance year, reports required under this section 

shall be submitted to the EPA no later than January 31, 2016.

(6) For obligated parties, for the 2015 compliance year, reports required under this section shall 

be submitted to the EPA no later than March 1, 2017.

* * * * *

(i) * * *

(3) Reporting requirements. For the 2014 compliance year, reports required under this paragraph 

(i) shall be submitted to the EPA no later than January 31, 2016. For the 2015 compliance year 

and each subsequent year, reports required under this paragraph (i) shall be submitted pursuant to 

paragraph (d) of this section.