## Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

1 1. Waiver Credit Price Calculation. One commenter suggested that EPA incorporate a discussion of how the waiver credit price was calculated in the preamble.

2. Determination of Aggregate Compliance A pproach for Renewable Biomass from Foreign Countries. One commenter asked whether the aggregate compliance approach for renewable biomass from foreign countries b e construed as technical barrie rs to trade? Why or why not?

3. Impact of weather, water and climate as a risk factor to the mandatory setting of biofuel standards based on projected biofuel production estimates. There is a reference to such considerations on page 80, but t he commenter would recommend a small section addressing "environmental risks and uncertainties" be included and variabi lity in seasonal weather, water and climate be considered in the projection of the available feedst ock as well as the derived advanced biofuel standard and the total renewable fuel standard producti on estimates. This may also include the provision of environmental predictions internationally beca use the report includes fuel security and the standards take into consideration foreign biofuel suppl ies and trade.

Suggested language for this new section: Fuel volume production will be constrained or promoted due to c limate change and local variability. The risk to biofuel production and volume supply w ill also vary with availability and quality of fresh water as supplie d by snow pack, rain, runoff a nd inundations. Many of the same weather risks that are faced by agriculture will impact biofuel volume including extreme events, frost and icing, severe winds an d fires, hail and sleet, and ex tended periods of rain and drought. This applies to traditional biofuels such as corn and cellulose sources as well as emerging sources such as algae.

Climate predictions on the seasonal to interannual (El Nino/La Nina) are available to improve the volume and efficiency estimates. Weather and water predictions are also critical to shorter term supply management and volum e production analysis.

4. General Comment. The issue of production level goals affects industry confidence . Seemingly high and audacious production goals can potentially spur the in dustry to success. Lower goals depress the industry’s enthusias m because lower goals send a si gnal that the USG will not support investment in the burgeoning advanced biofuels industry, thereb y increasing the risk associated with these investments. The same can be said of the reluctanc e to sell RINs.

The supply-side analysis has been adequately addressed but more consideration could be given to the demand side of the equation. For instance, the analysis co uld be strengthened if infrastructure constraints that make the use of higher levels of ethanol hard to achieve were considered. It has been difficult to assess the validity of the rule’s analysis of the overall ethanol market in the United States without additional data o n ethanol exports. None of the supply/demand balance sheet

## Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

2 representations of the sector fr om EIA includes fuel ethanol ex ports. Without this information, any overall assessment of the domest ic ethanol sector is incomplete

. Comment: Throughout the report, EPA could more prominently ack nowledge the uncertainty associated with any projec ted production estimates.

5. U.S. Commercial Availability of Cellulosic Ethanol. On page 16, the rule text states, “EPA is aware of several companies exploring the possibility of cellulo sic biofuel production in Brazil. However none of these companies appear ready to make cellulosic biofuels commercially available in the United States.”

Comment: KL Energy and Petrobras project production of 4 million gallons per year will come online only in 2013.

6. Typo. The word “million” is missing in 2 spots on page 23, last parag raph.

7. Achieving Biodiesel Production Goals. Hitting the projected production goals for biodiesel will not be a capacity issue for the industry whose name plate capacity on the 170 biodiesel plants is 2,600 million gallons productio n capacity per year in the Un ited States. However, with no biodiesel tax incentive in place, and with higher prices of soy oil and of animal fats and yellow grease, producers are reluctant to produce biodiesel.

8. Historical Biodiesel Production. With respect to projected production capacity of biodiesel, page 27 and page 31 tables which examines the historical produc tion of biomass –based biodiesel and the volumetric requirements for 2011 (Page 27 and Page 31).

Table II.C-1 Historical Biodiesel Production, Net Exports, and Consumption (million gallons)(Source: EIA Monthly E nergy Review, August 2010)

Domestic Production Net Exports Domestic Consumption

2007 490 132 358

2008 678 362 316

2009 505 189 315

Table III.A-1 Volume Requirements for 2011

## Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

3 Actual Volume Ethanol Equivalent Volume

Cellulosic biofuel 6.6 mill gal 6.0 mill gal

Biomass-based diesel 0. 80 bill gal 1.20 bill gal

Advanced biofuel 1.35 bill gal 1.35 bill gal

Renewable fuel 13.95 bill gal 13.95 bill gal

Comment: Domestic consumption and product ion is falling, the price of so y oil, corn oil and animal fats does not give advantages for production from a feedstock p rice perspective. Outside of the RIN value, the commenter believes that the volume requirement for b iomass-based diesel is not supported by domestic use, expo rts, or by the current state of producers in the domestic biodiesel industry.

9. Future Biodiesel Production Prospects. The first paragraph on page 28 of the rule text states,

“ Although biodiesel production a ppears to have been significantl y affected by both the EU tariff on biodiesel from the U.S. and the expiration of the biodiesel tax credit, the fact that the U.S. biodiesel industry has produced higher volumes when it was economic for i t to do so suggests that the industry has the capability to p roduce greater volumes in the f uture under the appropriate circumstances.”

Comment: The following change is suggested to more conservatively re-cas t the future biodiesel market characterization.

Although biodiesel production ap pears to have been significantl y affected by both the EU tariff on biodiesel from the U.S. and the expiration of the biodiesel tax credit, the fact that the U.S. biodiesel industry has produced higher volumes when it was economic for i t to do so suggests that the industry may have the capability to produce greater volumes in the future under the appropriate circumstances. Production assets have been shuttered and liqui dations have taken place where creditors have sold plant assets at salvage value; therefore, r amping up production will require time and reinvestment.

10. Assessment of the Domestic Aggregate Compliance Approach. Page 10 of the rule text states,

“ Based on data provided by the USDA, we have estimated that U.S. agricultural land reached 396.5 million acres in 2010, and thus did not exceed the 20 07 baseline acreage.......Whil e the 2010 estimate for U.S. agricultural land does not exceed the 397 million acre trigger point for further investigation, EPA, with the help of USDA, will nonetheless conduct further investigation into this matter.”

## Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

4 However, page 81 of the rule text goes on to state, “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 398 million acres in 2010, and thus did not exceed the 2007 baseline acreage. However, this total acreage estima te is greater than the 397 million acre trigger point for further investigation, therefore EPA, with the help of USDA, will look further into the relevant data and review the factors related to U.S. agricultural land use over the coming months.”

While both paragraphs include stat ements regarding how EPA will conduct further investigation to verify these numbers (whether exceeding or not exceeding the threshold) the inconsistency of the two paragraphs is confusing to the reader. Please clar ify and include additional language in the preamble text acknowledging the uncertainty of the estimate and the factors contributing to this uncertainty.

## Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

5 

### 1) This final rule, for only 2011, a ddresses the gap in projected cellulosic biofuel production (for 2011), which is estimated to be well below the statutory requirement of 0.25 billion gallons of ethanol equivalent.

2) EPA’s estimate for achievable do mestic cellulosic production is 6.0 million gallons of ethanol equivalent, in 2011. The lower limit in the proposed ru le was 6.5 million gallons. Currently there are only 5 facilities in the U.S. prod ucing cellulosic biofuels at commercial scale. The proposed ru le used production estimates f rom 7 facilities; two of those facilities have since decided not to produce cellulosic b iofuels in 2011. Therefore EPA’s downward revision is a reasonable and informed decision.

3) It is encouraging that productio n of cellulosic biofuels is pro jected to greatly increase in 2012. EPA is currently aware of more than 20 facilities repres enting over 300 million gallons of production that are targeting commercial production of cellulosic biofuels in 2012. If the majority of these facilities begin production in 2012, cellulosic biofuel production may possibl y achieve EISA’s requirement of 0.25 bill ion gallons of ethanol equivalent.

4) EPA’s approach to allowing for eign countries to adopt an aggreg ate approach for confirming land use for biofuel production is also reasonable. For a foreign government to meet the requirement and adopt this approach, they would hav e to have a very similar process in place to EPA’ s aggregate approach for the U. S., involving high-quality, publicly-available data (from sa tellites, censuses, etc.). a) It is encouraging that EPA is using lessons learned from use of the aggregate approach in the U.S., to inform the process of allowing foreign countries to petition to also use the aggregate approach. b) It is encouraging that EPA has p roposed to allow public comment on each petition.