## Summary of Interagency Working Comments on Draft Language under EO

12866 and EO 13563 Interagency Review. Subject to Further Policy Review.

EO 12866 Interagency Comments on U.S. Environmental Protec tion Agency (EPA) draft final rule titled, “ Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and

Biomass

- Based Diesel Volume for 2017 ,” RIN 2060

- AS22

Regulatory Flexibility Analysis

Unfortunately, the RFA section of the RFS rule still relies heavily on the prior RFA work to justify the certification rather than standing on its own. The second para graph blurs the line between findings appropriate to this rulemaking and the “impacts already addressed” in the 2010 rulemaking. By repeating that the SBREFA panel for the 2010 rule was for the entire RFS program,

it further confuses the factual basis for the certification. The third paragraph doesn’t clarify the situation, since it talks about the conclusions of the 2010 FRFA, not the conclusions associated with the current rule in clearly different circumstances.

The third paragraph also misses the mar k, because it refers to requirements “beyond those already analyzed” when the actual concern should be “beyond those already imposed.” Since the RFS isn’t imposed without the annual rulemakings, prior analysis isn’t relevant. This should be particularly obvious when EPA is exercising a waiver authority as the agency didn’t project using it in the agency’s 2010 analysis. Similarly, EPA should not make the argument that it is reducing burden from the 2010 analysis by exercising the waiver authority. The correct comparison is against the world in the absence of the rule, not a world under a default rule that hasn’t been issued. To put that in a different way, were the 2016 rule delayed until 2017, it would likely reflect the real world usage in 2016, just as the current rule attempts to reflect the 2014 usage. For that reason, the default standards in the statute shouldn’t be used as baseline for evaluation of impacts.

The certification should start with the line in the third paragraph: “available inform ation shows that the impact on small entities from implementation of this rule will not be significant.”

In the discussion of alternatives, EPA should recognize that the alternatives it should be considering in this rulemaking are alternative volume stan dards, including broader and narrower exercise of

the waiver. A broader waiver would reduce the impacts on small entities, but may not be supported in law or policy.---------------------------------------

On pages 107

- 109 , EPA goes into detail about why they rejected UNICA numbers . The commenter suggests that this language in the last paragraph, in particular, be softened. First of all, the commenter does not agree

that the volumes of imports and exports are minor, especially when you look at them as a percentage of imports and exports. Is EPA only looking at them as perc entage of domestic consumption? Secondly, we

would request that the very last two sentences that are highlighted be deleted. We believe it is not necessary to speculate on matter s such as whether an increase in sugarcane ethanol imports would decrease opportunities for other biofuels (such as bio diesel) that have more lifecycle GHG reductions and therefore those imports are “less beneficial.”



### Given that advanced biofuels are a su bset 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. [1] 

### 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 chang e 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

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.

[1] In certain situations, advanced ethanol can also be produced from sorghum and food wastes.

### 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. [2] 

### If

this were co ntinue 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 af fect 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.

More importantly, while production of sugarcane has increased moderately in Brazil ov er the last several years, total gasoline consumption in Brazil also continues to climb. [3] 

### This leaves little room for substantial increases in exports of ethanol in 2016. In fact, total consumption of

[2] "Ethanol acts as lone bright spot amid China commodity gloom

- Reuters," docket EPA

- HQ

- OAR

- 2015

- 0111.

[3] "Gasoline Demand in Brazil: an empirical analysis," Thaís Machada de Matos Vilela, Pontifical Catholic University of Rio de Janeiro, Figure 2.

### petroleum in Brazil has increased at a rate of abou t 4.9% over the last several years, while the

rate of sugarcane production has only grown at a rate of about 2.2%. [4]



### 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. [5] 

### 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 t o 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 i s 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.

[4] "B razilian sugarcane production and petroleum consumption," docket EPA

- HQ

- OAR

- 2015

- 0111.

[5] 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.