***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **1** of **56 ENVIRONMENTAL PROTECTION AGENCY** 

**40 CFR Part 80 [EPA**  **- HQ**  **- OAR** **- 2012**  **- 0223**  **; FRL**

**– ]**  **Regulation of Fuels and Fuel Additives: Modifications**  **to Renewable Fuel Standard and Diesel Sulfur**  **Program s** 
**AGENCY** : Environmental Protection Agency (EPA). **ACTION** : Direct Final Rule. **SUMMARY:** EPA is issuing this direct final rule to amend the definition of heating oil in 40 CFR § 80.1401 in the Renewable Fuel S tandard ( “ RFS ” or “RFS2” ) program under section 211(o) of the Clean Air Act . This amendment will expand the scope of renewable fuels that can generate Renewable Identification Numbers ( RI Ns ) as heating oil to include fuel oil produced from qualifying renewable biomass that will be used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. Fuel oils used to generate proces s heat, power, or other functions will not be included in the amended definition. Producers or impo rters of fuel oil that meets the amended definition of heating oil will be allowed to generate RI Ns , provid ed that the fuel oil meets the other requirements specified in the RFS regulation s . This amendment will not modify

or limit fuel included in the current definition of heating oil at 40 CFR § 80.2(ccc)

. EPA is also amend ing the requirements under EPA’s diesel sul f ur program related to the sul f

ur content of locomotive and marine diesel fuel produced by transmix processors . These amendments will allow locomotive and marine diesel fuel produced***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **2** of **56** by transmix processors to meet a maximum 500 parts per million (ppm ) sulfur standard provided that; the fuel is us ed in older technology locomotive and marine engines that do not require 15 ppm sulfur diesel fuel, the fuel is used outside of the Northeast Mid

Atlantic Area, and the fuel is kept segregated from other fuel. These amendments will provide significant regulatory relief for transmix processors while having a neutral or net positive environmental impact. EPA is also amending the fuel marker requirements for 500 ppm sulfur locomotive and marine (LM) diesel fuel to address an oversight in the original rulemaking where the regulations failed to incorporate provisions described in the rulemaking preamble to allow for solvent y ellow 124 marker to transition out of the distribution sy stem
. **DATES:** This rule is effective on [ **insert date 60**  **days after the**  **date of publication in the Federal Register**  ] without further notice, unless EPA receives adverse comment or a public hearing request by [ **insert date 30**  **days after the**  **date of publication in the Federal Register**  ]
. If EPA receives a timely adverse comment or a hearing request on the rule or an y specific portion of this rule , we will publish a withdrawal of the rule or a specific portion of the rule in the Federal Register informing the public that the rule or portions of the rule with adverse comment will not take effect. If a public hearing is requested, we will publish a notice in the Federal Register announcing the date and location of the hearing at least 14 day s prior to the hearing. **ADDRESSES:** Submit your comments, identified by Docket ID No. EPA

- HQ

- OAR

2012

- 0223 , by of the following methods:

• www.regulations.gov : Follow the on

- line instructions for submitting comments.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **3** of **56** • Email: a - and

- r- docket@epa.gov, Attention Air and Radiation Docket ID EPA

H Q

- OAR

- 2012

- 0223
.

• Fax: 731

- 214

- 4051
.

• Mail: Air and Radiation Docket, Docket No. EPA

- HQ

- OAR

- 2012

- 0223 , Environmental Protection Agency , Mailcode: 6406J, 1200 Pennsylvania Ave nue , NW, Washington, DC 20460.

• Hand Delivery : EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW, Washington, DC, 20460, Attention Air and Radiation Docket, ID No. EPA

- HQ

- OAR

- 2012

- 0223
. Such deliveries are onl y accepted during the Docket’s normal hours of operation, and special arrangements should be made for de liveries of boxed information. Instructions: Direct your comments to Docket ID No. EPA

- HQ

- OAR

- 2012

- 0223
. EPA ’ s policy is that all comments received will be included in the public docket without change and may be made available online at www.regulations.gov , including an y personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted b y statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or e

- mail. The www.regulations.gov website is an “anon ym ous access” sy stem, which means EPA will not know your identity or contact information unless you provide it in the body of y our comment. If you send an e

- mail comment directl y to EPA without going through www.regulations.gov your e - mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Inter net. If you submit an electronic***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **4** of **56** comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD

- ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, an y form of encry ption, and be free of any

defects or viruses. For additional information about EPA’s public docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm

. Docket: All documents in the docket are listed in the www.regulations.gov index. Although listed in the index, some information is not publicly available, ( e.g. , CBI or other information whose disclosure is restricted b y statute )

. Certain other material, such as cop yri ghted material, will be publicly available only

in hard copy

. Publicly

available docket materials are available either electronically in www.regulations.gov or in hard copy at the Air and Radiation Docket and Information Center, EPA, EPA West, Room 3334, 1301 Constitution Ave., NW, Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday , excluding legal holiday s. The t elephone number for the Public Reading Room is (202) 566

- 1744, and the telephone number for the Air Docket is (202) 566

- 1742
. **FOR FURTHER INFORMATION CONTACT:** Kristien Knapp , Office of Transportation and Air Quality , Mail Code: 640 5 J, U.S. Environmental P rotection Agency , 1200 Penns yl vania Avenue, NW, 20460; telephone number: ( 202 ) 343

- 9 949 ; fax number: ( 202 ) 343

- 2800 ; email address: knapp.kristien @epa.gov

. **SUPPLEMENTARY INFORMATION** : **I. Executive Summary** ***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **5** of **56** A. Purpose EPA is issuing a direct final rule to amend provisions in the renewable fuel standard (RFS) and diesel sulfur fuel programs. The RFS amendment changes the definition of home heating oil , and the diesel sulfur amendments provide additional flexibility for transmix processors who produce locomotive and marine diesel fuel, and allow solvent y ellow 124 marker to transition out of the distribution sy stem. EPA is taking this action under section 211 of the Clean Air Act. B. Summary

of Today ’s Rule Amended Definition of Home Heating Oil This rule amends the definition of heating oil in 40 CFR § 80.1401 in the renewable fuel standard (“RFS” or “RFS2”) program promulgated under section 211(o) of the Clean Air Act (CAA). This amendment will expand the scope of renewable fuels that can generate Renewable Identification Numbers (“RINs”) as “home heating oil” to in clude fuel oil that will be used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. This rule will allow producers or importers of fuel oil that meets the amended definition of heating oi l to generate RINs, provided that other requirements specified in the regulations are met. Fuel oils used to generate process heat, power, or other functions will not be approved for RI N generation under the amended definition of heating oil. The amendme nt will not modify or limit fuel included in the current definition of heating oil at 40 CFR § 80.2(ccc). Diesel Transmix Amendments***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **6** of **56** T he diesel transmix amendments will reinstate an allowance for transmix processors to produce 500 ppm sulfur diesel fuel for use in older technology locomotive and marine diesel outside of the Northeast Mid

- Atlantic Area after 2014. EPA’s ocean

going vessels rule forbade this allowance beginning 2014 because a new stream of diesel, containing up to 1000 ppm sulfur, was intr oduced at that time. Transmix processors stated that they

were not aware of the changes to the 500

- ppm LM transmix provisions until after they

were finalized, and that the ocean

- going vessels market would not be a viable outlet for their distillate produc t. Based on additional input that we received from transmix processors and other stakeholders in the fuel distribution sy stem during our consideration of the petition, EPA believed that it would be appropriate to extend the 500

- ppm diesel transmix flexibi lity beyond 2014. EPA finalized a settlement agreement and this DFR and NPRM are in accord with the settlement agreement. Our anal ys is indicates that extending this flexibility beyond 2014 will have a neutral or net beneficial effect on overall emissions

. Yellow Marker Amendments The y ellow marker amendments address an oversight in the original nonroad diesel rulemaking. In that rulemaking, the regulations failed to incorporate provisions described in the rulemaking preamble. The preamble made clear that EPA intended to allow 500 ppm locomotive marine (LM) diesel fuel containing greater than 0.10 milligrams per liter of Solvent Yellow 124 (SY124) time to transition out of the fuel distribution sy stem. However, the regulations are not consistent with the preamble and did not provide this same allowance.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **7** of **56** Specificall y, the regulations as currently written do not provide an y transition time for unmarked LM fuel delivered from a truck loading rack beginning June 1, 2012 to work its way

through the fuel dis tribution sy stem downstream of the truck loading rack. The y ellow marker amendments will allow 500 ppm LM diesel fuel at an y point in the fuel distribution and end use sy stem to contain more than 0.10 milligrams per liter of SY 124 through November 30, 20 12. This regulatory change will allow marked LM diesel fuel to transition normally through the LM fuel distribution and use sy stem. Today ’s rule also amends the regulation to clarify the transition of the solvent y ellow 124 marker out of heating oil begi nning June 1, 2014. After December 1, 2014, EPA will no longer have any requirements with respect to the use of the SY 124 marker. C. Costs and Benefits T hese three sets of amendments attempt to provide new opportunities for RIN generation under the RFS program and necessary flexibilities and transition periods for those affected b y EPA’s transmix and marker requirements. Therefore, EPA believes that th e s e amendment s will impose no new direct costs or burdens on regulated entities beyond the minimal cos ts associated with reporting and recordkeeping requirements

. At the same time, EPA do es not believe that an y of these amendments will adversel y impact emissions. **II. Why is EPA**  **Issuing a Direct Final**  **Rule ?**  EPA is publishing this rule without a prior proposed rule because this may be viewed as a noncontroversial action that would no t receive adverse comment

. However, in the “ Proposed Rules ” section of today ’s Federal Register , we are publishing a separate document that will serve as the proposal to adopt the provisions in this direct final rule if***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **8** of **56** adverse comments or a hearing request are filed on the rule or an y portion of the rule

. 1 We will not institute a second comment period on this action. Any parties interested in commenting must do so at th is time. For further information about commenting on this rule, see the ADDRESSES section of this document

. **II I**  **. Does This Action Apply to Me?**  Entities potentially

affected by

this action include those involved with the production, distribution and sale of transportation fuels, including gasoline and diesel fuel, or renewable fuels such as ethanol and biodiesel , as well as those involved with the production, distribution and sale of other fuel oils that are not transportation fuel

. Regulated categories and entities affected b y this action include: **Category NAICS Codes**  **a SIC Codes**  **b Examples of Potentially**  **Regulated Parties** Industry Industry Industry Industry Industry Industry Industry Industry 324110

325193 325199
Various
424690
424710 424720
454319 2911

2869 2869
Various
5169
5171 5172
5989 Petroleum refiners, importers.

Ethyl alcohol manufacturers. Other basic organic chemical manufacturers. Transmix Processors Chemical and allied products merchant wholesalers. Petroleum bulk stations and terminals. Petroleum and petroleum products merchant wholesalers. Other fuel dealers.
a North American Industry Classification S ys tem (NAI CS).

1 The proposed rule contains all aspects of this direct final rule and seeks comments. Additionally, this document also requests comments on one issue that is not included in th e direct final rule: whether the am endments to the requirements for locomotive and marine diesel fuel produced by transmix processors should be extended to fuel used inside the Northeast Mid

- Atlantic Area.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **9** of **56** b Standard Industrial Classification (SI C) s ys tem code. This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely

to be regulated b y this action. This table lists the types of entities that EPA is now aware could be potentially regulated by

this action. Other ty

pes of entities not listed in the table could a lso be regulated. To determine whether your entity is regulated b y this action, you should carefully examine the applicability criteria of Part 80, subparts D, E and F of title 40 of the Code of Federal Regulations. If yo u have an y question regarding app licability of this action to a particular entity , consult the person in the preceding “FOR FURTHER I NFORMATION CONTACT” section above. **I V**  **. What Should I Consider as I Prepare My Comments for EPA?**  A. Submitting information claimed as CBI

. Do not submit this information to EPA through www.regulations.gov or e - mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that yo u mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically

within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a cop y of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR Part 2. B. Tips for Preparing Your Comments. When submitting comment s, remember to:

• Id entify

the rulemaking by

docket number and other identifying information (subject heading, Federal Register date and page number).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **10** of **56** • Follow directions

- The agency may ask you to respond to specific questions or organize comments by referen cing a Code of Federal Regulations (CFR) part or section number.

• Expl ain why

you agree or disagree. S uggest alternatives and substitute language for your requested changes.

• Describe an y assumptions and provide an y technical information and/or data that yo u used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clear ly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified. C. Docket Copying Costs. You may be charged a reasonable fee for photocopying docket materials, as provided in 40 CFR Part 2. **V. Am**  **end ed**  **Definition of Heating Oil under the Renewable Fuel Standard Program** EPA is issuing a direct final rule to amend the definition of heating oil in 40 CFR § 80.1401 in the renewable fuel standard ( “ RFS ” or “RFS2” ) program promulgated under section 211(o) of the Clean Air Act (CAA)

. 2 This amendment will expand the scope of renewable fuels that can generate Renewable Identification Numbers ( “ RINs ” ) as home

2 The Energy Independence and Security Act (EISA) of 2007 amended section 211(o) of the Clean Air Act (CAA), which was originally added by the Energy Policy Act (EPAct) of 2005.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **11** of **56** heating oil to include fuel oil that will be us ed to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. This rule will allow producers or importers of fuel oil that meets the amended definition of heating oil to generate RINs, provid ed that other requirements specified in the regulation s are met
. F uel oils used to generate process heat, power, or other functions will not be approved for RI N generation under the amended definition of heating oil , as these fuels are not within the sco pe of “home heating oil” as that term is used in the Energy Independence and Security Act of 2007 (“EISA”) , for the RFS program., The amendment will not modify or limit fuel included in the current definition of heating oil at 40 CFR § 80.2(ccc)

. The RFS program requires the production and use of renewable fuel to replace or reduce the quantity

of fossil fuel present in transportation fuel. Under EPA’s RFS program this is accomplished by providing for the generation of RINs by producers or importers of qualified renewable fuel. RINs are transferred to the producers or importers of gasoline and diesel transportation fuel who then use the RINs to demonstrate compliance with their renewable fuel volume obligations. RINs also serve the function of credits under the RFS program. Congress provided that EPA could also establish provisions for the generation of credits b y producers of certain renewable fuel that was not used in transportation fuel, called “additional renewable fuel.” 3 Additional renewable fuel is defi ned as fuel that is produced from renewable biomass and that is used to replace or reduce the quantity of

3 “EISA changed the definition of ‘renewable fuel’ to require that it be made f rom feedstocks that qualify as ‘renewable biomass.’ EISA’s definition of the term ‘renewable biomass’ limits the types of biomass as well as the types of land from which the biomass may be harvested.” Regulation of Fuels and Fuel Additives: Changes to Rene wable Fuel Standard Program, 75 FR 14670, 14681 (March 26, 2010).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **12** of **56** fossil fuel present in home heating oil or jet fuel. 4 In essence, additional renewable fuel has to meet all of the requirements applicable to qualify it as renewable fuel under the regulations, with the only difference being that it is blended into or is home heating o il or jet fuel

. This does not change the volume requirements of the statute itself, however this can provide an important additional avenue for parties to generate RINs for use by obligated parties, thus promoting the overall cost

- effective production and use of renewable fuels. EPA addressed the provision for additional renewable fuels in the RFS2 rulemaking, specifically

addressing the category

of “home heating oil.” EPA determined that this term was ambiguous, and defined it b y incorporating the existing definition of heating oil at 40 CFR § 80.2(ccc). EPA stated that: EI SA uses the term “ home heating oil ” in the definition of “ ad ditional renewable fuel. ” The statute does not clarify whether the term should be interpreted to refer only

to heating oil actually

used in homes, or to all fuel of a ty pe that can be used in homes. We note that the term ‘home heating oil’ is ty picall y use d in industry

in the latter manner, to refer to a t ype of fuel, rather than a particular use of it, and the term is ty picall y used interchangeabl y in industry with heating oil, heating fuel, home heating fuel, and other terms depending on the region and market. We believe this broad interpretation based on ty pical industry

usage best serves the goals and purposes of the statute. If EPA interpreted the term to apply onl y to heating oil actually

used in homes, we would necessarily require tracking of individu al gallons from production through ultimate [ use ] in homes in order to determine eligibility of the fuel for RINs. Given the fungible nature of the oil delivery

market, this would likely be sufficientl y difficult and potentially

expensive so as to discoura ge the generation of RINs for renewable fuels used as home heating oil. This problem would be similar to that which arose under RFS1 for certain renewable fuels (in particular biodiesel) that were produced for the highway diesel market but were also suitab le for other markets such as heating oil and non

- road applications where it was unclear at the time of fuel production (when RINs are ty picall y generated under the RFS program) whether the fuel would ultimately

be eligible to generate RINs. Congress elimin ated the

4 See CAA sections 211(o)(1)(A) and (o)(5)(E).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **13** of **56** complexity

with regards to non

- road applications in RFS2 by making all fuels used in both motor vehicle and nonroad applications subject to the renewable fuel standard program. We believe it best to interpret the Act so as to also avoid this ty

pe of complexity

in the heating oil context. Thus, under today ’s regulations, RI Ns may be generated for renewable fuel used as “ heating oil, ” as defined in existing EPA regulations at § 80.2(ccc). In addition to simplifying implementation and administration of the Act, this interpretation will best realize the intent of EI SA to reduce or replace the use of fossil fuels. 5 The existing definition of heating oil at 40 CFR § 80.2(ccc) means “ an y #1, #2, or
non - petroleum diesel blend that is sold for use in furna ces, boilers, stationary diesel engines, and similar applications and which is commonly or commercially known or sold as heating oil, fuel oil, or similar trade names, and that is not jet fuel, kerosene, or [ Motor Vehicle, Non

- Road, Locomotive and Marine ( MVNRLM ) ] diesel fuel. ” The existing definition of non

- petroleum diesel at 40 CFR § 80.2 (sss) means a diesel fuel that contains at least 80 percent mono

- alkyl esters of long chain fatty acids derived from vegetable oils or animal fats. Thus, in order to generate RINs for home heating oil that is a non

petroleum diesel blend, the fuel must contain at least 80 percent mono

- alkyl esters of long chain fatt y acids derived from vegetable oils or animal fats, as well as meeting all other requirements of the RFS2 regulations. Since the promulgation of the RFS2 final rule, we have received a number of requests from producers to consider expanding the scope of the home heating oil provision to include additional fuel oils that are produced from qualifying renewable biomass but do not meet the regulatory definition of heating oil because they

are not #1 or #2 diesel and do not contain at least 80 percent mono

- alkyl esters
. Parties raising this issue have suggested that limiting “home heating oil” to the fuel ty pes defined in 40 CFR § 80.2(ccc) disqualifies certain ty pes of renewable fuel oils

5 75 FR 14670, 14687 (March 26, 2010).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **14** of **56** that could be used for home heating and that this limitation does not align with our reasoning in the preamble to take a broa d interpretation of the term “home heating oil” in CAA section 211(o)

. EPA has considered this issue further and is revising the definition of heating oil in the RFS2 program to expand the scope of fuels that can generate RINs as heating oil. EPA is rev ising the definition such that RI Ns also may

be generated by

renewable fuel that is fuel oil and is used to heat interior spaces of homes or buildings to control ambient climate for human comfort. This will not include fuel oils used to generate process h eat, power, or other functions. The fuel oil must be used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. The fuel oil must only

be used in heating applications, where the sole purpose of the fuel’s use is for heating and not for any other combined use such as process energy use. We are amending the existing definition of heating oil in 40 CFR § 80.1401 to include fuel oils that are used in this way . This is in addi tion to the fuel oils currentl y included in the definition of heating oil at 40 CFR § 80.2(ccc), and will not modify or limit the fuel included in the current definition. EPA believes this expansion of the scope of the home heating oil provision is approp riate and authorized under CAA section 211(o). As EPA described in the RFS2 final rule, Congress did not define the term “home heating oil,” and it does not have a fixed or definite commercial meaning. In the RFS2 final rulemaking , EPA focused on whether the provision was limited to heating oil actually used in homes. EPA noted that the term home heating oil is usually used in the industry

to refer to one ty

pe of fuel, and not to a specific use for the fuel. Given this more general usage of the term, an d the***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **15** of **56** practical barriers that would have arisen if the term was defined as fuel actually used to heat homes, EPA defined the scope of home heating oil in a more specific fashion by identifying those t ypes of fuel oils that are t ypically used to heat homes. EPA determined this was a reasonable interpretation of an ambiguous statutory provision that simplified implementation and administration of the Act and promoted achie vement of the goals of the RFS program. In the RFS2 rulemaking , EPA focused on the kinds of fuel oils that can be used to heat homes. The expansion of the definition adopted in this rulemaking will address two ty pes of fuel oils not included in th e current definition of heating oil. First, the amended definition will include additional fuel oils that are actuall y used to heat homes, even if they do not meet the current definition of heating oil. This is clearly within the scope of the statutory

p rovision for home heating oil. Second, the amended definition will include fuel oils that are used to heat facilities other than homes to control ambient climate for human comfort . Under the current definition of heating oil, a fuel oil meets the definit ion based on its phy sical properties and its use in furnaces, boilers, stationary diesel engines, and similar applications, not whether it is actually used to heat a home. The basic decision made in the RFS2 final rulemaking was to allow RIN generation fo r the group of fuel oils that are ty picall y used for home heating purposes

. Under the current definition the relationship of the fuel oil to heating homes is that the fuel oil is of the ty pe that is ty

pically used for and can be used for that purpose. 6

6 This is different from other renewable fuels in the RFS program, which are defined in terms of their use as transportation fuel or jet fuel. See 40 CFR § 80.1401, definitions of “renewable fuel” and “transportation fuel.”***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **16** of **56** Inthe amended definition, qualifying fuel oils will be used for heating places where people live, work, or recreate, and not just their homes. It focuses more on what is getting heated

– p eople

– and not where the people are located. EPA believes this is a reasonable interpretation of the phrase “home heat ing oil,” while recognizing that it is not an obvious interpretation. This interpretation recognizes the ambiguity of the phrase used by Congress, which is not defined and does not have a clear and definite commercial meaning. Itgives reasonable meaning to the term home heating oil , by limiting th e additional fuel oils to fuel oils when used for heating of facilities that people will occup y, and excluding fuel oil s when used for other purposes such as generation of energy used in the manufacture of products. It also focus es on the aspect of home that is important here

– th e heating of people

– r ecognizing that EPA has already determined that fuel oil can be included in the scope of home heating oil even if it is not actually used to heat a home. This interpretation will also promote the purposes of the EI SA and the RFS program . It will promote the purposes of the EI SA in that it will increase the production and use of

r enewable fuels by

introducing new sources of fuel producers to the RFS program. It will specificall y promote the RFS programmatic goals by facilitating the generation of RI Ns for renewable fuels that reduce emissions of greenhouse gases compared to fossil fuels. For example, EPA has received information from Envergent Technologies ( a lliance of Ensy n and UOP /Honey

well ) that such an expanded definition of heating oil would result in nearl y immediate production of 3.5 million gallons from their existing facilities, with an additional projected production of up to 45 million gallons per ye ar within 24 months following regulatory

action. Based on this information from Envergent Technologies,***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **17** of **56** application of the expanded definition of heating oil to the entire industry would result in the production of man y more million additional gallons of renewable fuel. **V I**  **. Lifecycle Greenhouse Gas Assessment of the Amended Definition of Heating Oil** EPA has also evaluated whether an y revisions will need to be ma de to Table 1 to 40 CFR § 80. 1426 that list s the applicable D c odes for each fuel pathway for use in g enerating RINs in the RFS2 regulations in light of the additional fuel oils included in the expanded definition of heating oil. As discussed below, EPA has determined that the applicable D code entries for heating oil in Table 1 to 40 CFR § 80. 1426 will co ntinue to be appropriate and will not need to be revised in light of the expanded definition of heating oil. Under the RFS program, EPA must assess lifecy cle greenhouse gas (GHG) emissions to determine which fuel pathway s meet the GHG reduction thr esholds for the four required renewable fuel categories. The RFS program requires a 20% reduction in lifecycle GHG emissions for conventional renewable fuel (except for grandfathered facilities and volumes), a 50% reduction for biomass

- based diesel or advanced b iofuel, and a 60% reduction for cellulosic biofuel. For the final RFS2 rule, EPA assessed the lifecycle greenhouse gas emissions of multiple renewable fuel pathway s and classified pathway s based on these GHG thresholds , as compared to the EISA statutory baseline

. 7 In addition, EPA has added several pathway s since the final rule was published. Expanding the definition of heating oil does not affect these prior analy ses. The fuel pathway s consist of fuel ty pe, feedstock, and production process requirements

. GHG emissions are assessed at all points throughout the lifecycle

7 See Table 1 to 40 CFR § 80.1426.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **18** of **56** pathway . For instance, emissions associated with sowing and harvesting of feedstocks and in the production, distribution and use of the renewable fuel are examples of what ar e accounted for in the GHG assessment. A full accounting of emissions is then compared with the petroleum baseline emissions for the transportation fuel being replaced. The lifecycle GHG emissions determination is one factor used to determine compliance with the regulations. There are currently

several fuel pathway s that list heating oil as a fuel t ype with various ty pes of feedstock and production process es used, qualifying the heating oil pathway s as either biomass

- based diesel, advanced, or cellulosic. The determinations for these different pathway s were based on the current definition of heating oil. The pathway s also include several t ypes of distillate product including diesel fuel, jet fuel and heating oil. The lifecycle calculations and thre shold determinations are based on the GHG emissions associated with production of the fuel and processing of the feedstock. Converting biomass feedstocks such as triglycerides (if oils are used as feedstock) or hemi

- cellulose, cellulose, lignin, starches, etc
. (if solid biomass feedstock is used) into heating oil products and can be accomplished thro ugh either a biochemical or thermochemical process converting those molecules into a fuel product. The existing heating oil pathway s were based on the current definition of the fuel, and were based on a certain level of processing to produce #1, #2, or a non - petroleum diesel blend and the related energy

use and GHG emissions that were part of the lifecycle determination for those fuel pathway s.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **19** of **56** The main difference between the current definition of heating oil, which refers to #1, #2, or a non - petroleum diesel blend , and the expanded definition adopted in this rulemaking is that the expanded definition will include heavier t ypes of fuel oil with larger molecules. Based on the ty pe of conversion process, producing these heavier fuel oil products ver sus the #1, #2, or a non - petroleum diesel blend will affect the amount of energy used and therefore the GHG emissions from the process. There are two main paths for producing a fuel oil product from biomass. In one the biomass is converted into a biocrud e which is further refined into lighter products. In this case producing a heavier fuel oil product will require less processing energy and have lower GHG emissions than converting the same feedstock into a #1, #2, or non

- petroleum diesel blend

. In the other t ype of process the compounds in the biomass are changed into a set of intermediary products , such as hydrogen ( H ) and carbon monoxide ( CO )

. 8 These compounds are then either cataly tically or biochemically

converted into the fuel product. In this case , the vast majority of the energy

is associated with breaking down the feedstock into the set of intermediary compounds. The process used and the energy needed for it does not vary based on the t ype of fuel that is then produced from these interm ediary

compounds. The ty

pe of fuel could affect the t yp e of catal ys t or biological process used to change the intermediary compounds into the fuel product, but based on EPA calculations and assessments developed as part of the RFS 2 rulemaking , 9 this will

8 This describes the Fischer

- Tropsch process. Other processes rely on forming different sets o f compounds from the biomass, and then producing the fuel product from the set of compounds. 9 “Regulation of Fuel and Fuel Additives; Changes to Renewable Fuel Standard Program,” 75 FR 14670, available at http://www.gpo.gov/fdsys/pkg/FR

- 2010

- 03

- 26/pdf/2010

- 3851.pdf

. See also , EPA’s summary factsheet, “EPA Lifecycle Analysis of Greenhouse Gas Emissions from Renewable Fuels,” available at http://www.epa.gov/otaq/renewablefuels/420f10006.pdf

.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **20** of **56** have no real impact on the energy used or the GHG emissions associated with converting the biomass into a different fuel product. Based on these considerations , EPA believes the GHG emissions associated with producing the fuel oil include d in the expanded definition will be the same or lower than the GHG emissions associated with producing #1, #2, or non

- petroleum diesel blend

. Therefore, EPA believes the prior life cycle analy sis for heating oil support applying the existing pathway s for fuel oil in the RFS2 regulations to the expanded definition of heating oil

. Once the r e gulatory change to the definition of “heating oil” is final, all of the pathway s currentl y applicable to heating oil under Table 1 to 40 CFR § 80.1426 would apply

to the expanded definition of heating oil. **VI I**  **. Additional Registration, Reporting**  **, Product Transfer Document**  **, and**  **Recordkeeping Requirements A.**  **Additional Requirements for the Amended Definition of Heating Oil**  An important issue to address is how to implement such an expanded definition. As EPA recognized in the RFS2 rulemaking, fuel oils end up being used in a variety of different uses, where the fuel producer may have little knowledge at the time of production as to eventual use of the fuel. This is especially the case where the fuel oil is distributed in a fungible distribution sy stem. EPA addressed this in the RSF2 rulemaking by defining home heating oil as a t ype of fuel with certain characte ristics, irrespective of where it was used. This approach avoided the need to track the fuel to its actual use, and including the characteristics of the fuel in its definition in 40 CFR § 80.1401 , was
a dequate to retain a close tie to the concept underlyi ng home heating oil.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **21** of **56** The expansion of the definition raises this same issue but in a more significant way . While the expansion of the definition includes some limited phy sical characteristics that fuels oils will need to meet in order to qualify for generating RINs, it does not provide sufficient specificity to differentiate between those fuels oils used to heat buildings for climate control for human comfort and those used to generate process heat or other purpos es. Therefore , for eligible fuel oils other than those qualifying under the existing definition in 40 CFR § 80.2(ccc), EPA is requiring that the renewable fuel producer or importer have adequate documentation to demonstrate that the fuel oil volume for wh ich RINs were generated was used to heat buildings for climate control for human comfort and meets the expanded definition of heating oil prior to generating RINs

. EPA recognizes that under the current definition of heating oil no tracking or other docum entation of end use is required, and some heating oils that meet the current definition could end up being used for other purposes. However , in all cases the heating oil under the current definition has to have the physical or other characteristics that t ie it to the ty pe of fuel oil used to heat homes. In addition, because these fuel oils will qualify to generate RINs under the RFS program, it will likely lead to their use for heating of buildings , and not for generation of process heat. For the fuel oils included in the expanded definition , the tie to home heating oil will not be the phy sical characteristics of the fuel oil but instead its actual usage for heating for the purposes of cli mate control for human comfort

. In order to verify that the fuel oils are actuall y used to generate heat for climate control purposes, EPA is adopting the following registration, recordkeeping , product transfer document (PTD) and reporting requirements

. T hese requirements will not apply***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **22** of **56** to fuels qualifying under the existing 40 CFR § 80.2(ccc) of the regulations

. If RINs are generated for fuel oils under the expansion of the scope of home heating oil in today ’s rule, and those fuel oils are designated for but not actuall y used to generate heat for climate control purposes, but for some other purpose, all parties involved in either the generation, assignment, transfer or use of that RIN, including the end user of that fuel oil, are subject to and liable for violations of the RFS2 regulations and the CAA. **1 .**  **Registration** For the purpose of registration, EPA is allowing the producer of the expanded fuel oil ty pes to establish their facilit y’s baseline volume in the same manner as all other producers under the RFS program, e.g. , based on the facilit y’s permitted capacity or actual peak capacit y . Additionally though, we are requiring producers of the expanded fuel oil ty pes to submit affidavits in support of their registration, including a statement that the fuel will be used for the purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose , as well as lists of end users and information about those uses. We will also require a secondary affidavit from the end user to verify that the fuel is actuall y being used for a qualifying purpose. We are also adopting new recordkeeping , product transfer documents (PTD) and reporting requirements discussed below that will be used as a means for verification that the qualifying fuel is being used in an approved application

. These requirements are necessary to assure confidence that the fuel used to generate RINs is actually used for a qualifying purpose because these t yp es of fuel have not previously been used as heating oil, and are not readil y identifiable b y their ph ys ical characteristics. Without such safeguards, EPA could not be confident that the fuel is used as heating oil, and end users***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **23** of **56** might not have adequate no tice that the fuel must be used as heating oil. EPA believes these requirements will place a small burden on producers and end users, and greatl y benefit the integrit y of the program.

**2 .**  **Recordkeeping , Product Transfer Document**  **s and Reporting** 
For the purpose of continued verification after registration, EPA is adopting additional requirements for recordkeeping in 40 CFR § § 80.1454(b) PTDs in § 80.1453(d), and reporting requirements in § 80.1451(b)(1)(ii)(T) for the expanded fuel oil ty pes . The recordkeeping, PTD and reporting requirements will ensure that the expanded fuel oil ty pes that are used to generate RINs ar e actually used in a qualifying application. The regulations require that a product transfer documents be prepared and maintained between the fuel oil producer and the final end user for the legal transfer of title of a specific volume of fuel oil that is designated for use, and is actuall y used, only for the purpose of heating interior spaces of homes or buildings to control ambient climate for human comfort. For instance, the additional recordkeeping requirements will stipulate that the producer of fuel oils maintain documents associated with each gallon of fuel oil that is sold, and affidavits from its clients stating that it is using the fuel oil for purposes of heating interior spaces of buildings where people live, work, recreate, or conduct other
ac tivities to control ambient climate for human comfort. Affidavits will be a required element of the transaction between renewable fuel producer and end user of the qualifying fuel oil, each time the qualifying fuel oil is transferred from the renewable fu el***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **24** of **56** producer to an end user of the qualifying fuel. 10 Another recordkeeping requirement is that the producers keep the contracts which describe the fuel oil under contract with each end user and an y certificates of analysis related to the fuel under contra ct with each end
user. Additionally , producers are required to maintain all documents and records submitted for registration and registration updates as part of the producer’s recordkeeping requirements for the expanded fuel oil t ypes they register for RI N generation. EPA believes the producer’s maintenance of these records will help to substantiate continued tracking and verification that the end use of the fuel oil is in compliance with the expanded definition of heating oil. The additional PTD requi rement stipulates that the PTD used to transfer ownership of the renewable fuel must contain the statement: “This volume of renewable fuel is designated and intended to be used to heat interior spaces of homes or buildings to control ambient climate for human comfort . Do NOT use for process heat or an y other purpose.” EPA believes that this PTD requirement would help to ensure that each gallon of fuel oil that is transferred from the producer to the end user is used for qualifying purposes under the expand ed definition of heating oil. If the fuel oil is sent to the end user, but the fuel oil is not actually used to generate heat for climate control purposes, but for some other non

- qualifying purpose, then the RINs that were generated for that fuel oil must be immediately

retired and report ed under 40 CFR § 80.1451

. The additional reporting requirements also stipulate that the producer of fuel oils who generates RINs submit affidavits to EPA reporting the total quantit y of the fuel oils

10 EPA does not expect that the expanded definition of home heating oil will result in an obligation on hom e owners or small businesses. Based on our analysis of the market, qualifying fuel oil is expected to be used in large industrial settings or apartment buildings, not in individual homes. Therefore, EPA anticipates that the information it is requiring would be readily available and producible by these entities.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **25** of **56** produced , the total quantity of the fuel oils sold to end users, and the total quantity of fuel oils sold to end users for which RINs were generated. Additionally , affidavits from each end user must be reporte d to EPA, describing the total quantity of fuel oils purchased from the producer and the total amount of fuel oil used for qualifying purposes. **B. Additional Requirement for RIN Generation**  We are also amending the regulatory text that describes the general requirements for how RINs are generated and assigned to batches of renewable fuel b y renewable fuel producers and importers. This will explicitly clarify a requirement that alway s existed: that producers and importer of renewable fuel who generate RINs must comply with the registration requirements of 40 CFR § 80.1450, the reporting requirements of 40 CFR § 80.1451, the recordkeeping requirements of 40 CFR § 80.1454, and all other applicable regulations of this subpart M . This is a generall y applicable requirement

– not specific to fuel meeting the definition of home heating oil. See amended section 80.1426(a)(1)(iii). **VI I**  **I .**  **Am endments**  **Related to Transmix**  The final regulations for the nonroad diesel program were published in the Federal Register on June 24, 2004
. 12 The provisions in the nonroad diesel rule related to transmix processors were modified by the Category 3 Marine diesel final rule that was published on April 30, 2010

. 13 This action amends the requirements for diesel fuel produced b y transmix processors. Below is a table listing the provisions that we are amend ing . The following sections provide a discussion of these amendments

. **P roposed Amendments**  **Description**

12 69 FR 38958 (June 24, 2004). 13 75 FR 22896 (April 30, 2010).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **26** of **56 to the Diesel Program**  Section 80.511(b)(4) Amended to allow for the production and sale of 500 ppm locomotive and marine (LM) diesel fuel produced from transmix past 2014. 80.513 (entire section) Amended to allow for the production and sale of 500 ppm LM diesel fuel produced from transmix past 2014. 80.572(d) Amended to extend 500ppm LM diesel fuel label past 2012. 80.597(d)(3)(ii) Amended to include 500 ppm LM diesel fuel in the list of fuels th at an entit y ma y deliver or receive custody of past June 1, 2014.

**A. Exten**  **sion of**  **the Diesel Transmix Provisions Outside of the Northeast Mid**  **- Atlantic Area and Alaska Beyond 2014**  Batches of different fuel products commonly abut each other as they

are shipped in sequence b y pipeline. When the mixture between two adjacent products is not compatible with either product, it is removed from the pipeline and segregated as transmix. Transmix ty

pically is gathered for reprocessing at the end of the fuel distribution sy stem far from a refinery . In addition to the long transportation distances to return transmix to a refinery for reprocessing, incorporating transmix into a refinery ’s feed also presents technical and logistical refining process challenges that ty pically make refinery reprocessing an unattractive option. Thus, transmix processers provide a valuable service in maintaining an efficient fuel distribution sy stem. Transmix***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **27** of **56** proce ssing facilities handle very low volumes of fuel compared to a refinery and hence are limited to the use of a simple distillation tower and additional blendstocks to manufacture finished fuels. There is currentl y no desulfurization equipment which has bee n demonstrated to be suitable for application at a transmix processor facility

. The cost of installing and operating a currently available desulfurization unit is too high in relation to the small volume of distillate fuel produced at transmix proce ssing facilities

. Some products shipped b y pipeline such as jet fuel and heating oil are subject to relatively high sulfur specifications ( e.g. , maximum 3,000 ppm for jet fuel). The presence of such high sulfur product s in multi

- product pipelines and consequently in transmix constrains the ability of transmix processors to produce a low sulfur distillate product. The engine emission standards finalized in the nonroad diesel rulemaking for new nonroad, locomotive, and Category 1 & 2 (C1 & C2) marine engines necessitates the use of sulfur

- sensitive emissions control equipment which requires 15 ppm sulfur diesel fuel to function properly

. 14 Accordingl y, the nonroad rule required that nonroad, locomotive and marine (NRLM) diesel fuel must meet a 15 ppm sulfur standard in parallel with the introduction of new sulfur

- sensitive emission control technolo gy to NRLM equipment. Beginning June 1, 2014, the nonroad diesel rule required that all NRLM diesel fuel produced by refiners and importers must meet a 15 ppm sulfur standard. The nonroad diesel rule included special provisions to allow the continued use of 500 ppm sulfur locomotive and marine (LM) diesel fuel produced from transmix beyond 2014 in older technology engines as long as such engines remained in the in

- use fleet. These provisions along with other now expired flexibiliti es in the diesel program

14 Control of Emissions of Air Pollution from Nonroad Diesel Engines and Fuel, Final Rule, 69 FR 38958 ( June 24, 2004 )

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Page **28** of **56** were designed to minimize and postpone the impacts on transmix processors of transitioning to a condition where all highway , nonroad, locomotive, and marine diesel engines can onl y operate on 15 ppm diesel fuel. 15 The 500 pp m LM diesel transmix provisions were limited to areas outside of the Northeast Mid

- Atlantic Area (NEMA) and Alaska because it was judged that the heating oil market in these areas would provide a sufficient outlet for transmix distillate in these areas. 16 Excluding the NEMA area and Alaska also allowed us to exempt the NEMA area and Alaska from the fuel marker provisions that are a part of the compliance assurance regime. The continuation of the 500 ppm LMdiesel transmix provisions beyond 2014 (finalized in the nonroad rule) was supported by

ongoing recordkeeping, reporting, and fuel marker provisions that were established to facilitate enforcement during the phase in of the diesel sulfur program. 17 In the development of the proposed requirements for Category 3 (C3) marine engines, EPA worked with industry to evaluate how the enforcement provisions for the new 1,000

- ppm C3 marine diesel fuel to be introduced in June of 2014 could be

15 As discussed in the original nonroad diesel rulemaking, a s LM equipment is retired from service, the market for 500 ppm LM will gradually diminish and eventually disappear. Given the long lifetime of LM equipment (in many cases 40 years or more), we anticipate that a market for 500 ppm LM will remain for a significant amount of time. This phase

- out time will also allow transmix processors to transition to their >15ppm sulfur distillate product to other markets (C3 marine, heating o il, process heat). It may also allow sufficient time for the introduction of desulfurization equipment that is suitable for use at transmix processing facilities

. 16 The NEMA area is defined in 40 CF R § 80.510(g)(1) as follow s: (1) Northeast/Mid

- Atlantic Area, which includes the following States and counties, through May 31, 2014: North Carolina, Virginia, Maryland, Delaware, New Jersey, Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire , Maine, Washington DC, New York (except for the counties of Chautauqua, Cattaraugus, and Allegany), Pennsylvania (except for the counties of Erie, Warren, McKean, Potter, Cameron, Elk, Jefferson, Clarion, Forest, Venango, Mercer, Crawford, Lawrence, Beave r, Washington, and Greene), and the eight eastern

mo st counties of West Virginia (Jefferson, Berkeley, Morgan, Hampshire, Mineral, Hardy, Grant, and Pendleton). 17 This included the now

- com pleted phase

- in of 15 ppm highway diesel fuel and 15 ppm nonroad die sel fuel as well as the phase

- out of the small refiner and credits provisions for LM diesel fuel that will be completed in 2014.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **29** of **56** incorporated into existing diesel program provisions. 18 Our assessment based on input from industry

at the time indicated that incorporating the new C3 marine fuel into the diesel program enforcement mechanisms while preserving the 500 ppm diesel transmix flexibility could not be accomplished without retaining significant existing burdens and introducing new burdens on a broad number of regulated parties. We also concluded that the new C3 marine diesel market would provide a sufficient outlet for transmix processors distil late product in place of the 500 ppm LMdiesel market. Thus, we believed the 500 ppm LM diesel transmix flexibility would no longer be needed after 2014. Hence, we requested comment on whether we should eliminate the 500 ppm LM transmix provisions in par allel with the implementation of the C3 marine diesel sulfur requirement. This approach allowed for a significant reduction in the regulatory burden on a large number of industry stakeholders through the retirement of the diesel program’s designate

- and

- tr ack and fuel marker requirements. All of the comments that we received on the proposed rule were supportive of the approach. Consequentl y, we finalized the approach in the C3 marine final rule that was published on April 30, 2010. 19 EPA received a petiti on from a group of transmix processors on June 29, 2010 , requesting that the Agency reconsider and reverse the 2014 sunset date for the 500 ppm LM transmix flexibility

. 20 A parallel petition for judicial review was filed with the U.S.

18 Control of Emissions From New Marine Compression

- Ignition Engines at or Above 30 Liters per Cylinder; Proposed Rule, 74 FR 44 442 ( August 28, 2009 )

. 19 Control of Emissions From New Marine Compression

- Ignition Engines at or Above 30 Liters per Cylinder; Final Rule, 75 FR 22896 ( April 30, 2010 )

. 20 “Petition to Reconsider Final Rule: Control of Emissions from New Marine Compression Ignition Engines at or Above 30 Liters per Cylinder; Final Rule, ” 75 FR 22,896 (April 30, 2010), Letter to EPA Ad ministrator Lisa Jackson dated June 29, 2010, from Chet T hompson of Crowell and Moring LLP, on behalf of Allied Energy Company, Gladieux Trading and Marketing, Insight Equity Acquisition Partners, LP, Liquid Titan, LLC, and Seaport Refining and Environmental, LLC.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **30** of **56** Court of Appeals, D.C . Circuit. 21 The transmix processors stated that they were not aware of the changes to the 500 ppm LMtransmix provisions until after they were finalized. The petitioners also stated that they believe that the C3 marine market would not be a viable outlet for their distillate product given the increased distribution costs compared to the 500 ppm LMmarket. Based on the additional input that we received from transmix processors and other stakeholders in the fuel distribution sy stem during our conside ration of the petition, EPA believes that while the increased costs for transportation of transmix distillate product could be accommodated , there is no compelling reason not to extend the 500 ppm diesel transmix flexibility beyond 2014 if such costs can be avoided or deferred without affecting the benefits from the diesel sulfur program . A settlement agreement has been finalized between EPA and the petitioners under which EPA would prop ose regulatory changes to reintroduce the 500 ppm LM transmix diesel flexibility for legacy

L M equipment. 22 The amendments to the diesel transmix provisions contained in today ’s action are in accord with the settlement agreement. Our anal ys is indicates that extending the 500 ppm LM flexibility beyond 2014 would have a neutral or net beneficial effect on overall vehicle emissions. The use of 500 ppm LMfrom transmix would be limited to older technology engines that do not possess sulfur

- sensitive emissions control technology . We believe that the 500 ppm LM

21 Petition for Review, United States Court of Appeals for the District of Columbia Circuit, Petitioners , Allied Energy Company, Gladieux Trading and Marketing, Insight Equity Acquisition Partners, LP, LiquidTitan, LLC, and Seaport Refining and Environmental LLC, v. Respondent , U.S. Environmental Prote ction Agency, Case 10

- 1146, Document 1252640, Filed 06/29/2010. 22 Notice of Proposed Settlement Agreement; Request for Public Comment, 76 FR 56194 (September 12, 2011)

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Page **31** of **56** segregation and other associated requirements would prevent misfueling of sulfur

sensitive engines. To evaluate the environmental consequences of extending the diesel transmix provisions, we compared the potential increase in sulfate particulate matter ( PM ) from the use of 500 ppm LM from transmix in older engines to the additional transportation emissions associated with shipment to the C ategory 3 (C3) marine market which might be deferred b y allowing co ntinued access to the 500 ppm LM market. Markets for locomotive and marine diesel tend to be nearer to transmix processing facilities than markets for C3 marine diesel. Therefore, extending the diesel transmix provisions would result in a reduction in ni trogen oxides (NO X ), volatile organic compounds ( VOC s) , carbon monoxide ( CO ) , as well as PM emissions that would otherwise be associated with transporting transmix distillate product to the more distant C3 market. Although some batches of transmix distillate product may approach the 500 ppm sulfur limit, we estimate that the average sulfur content of transmix distillate product would be no more than 300 ppm. 23 We estimate that approximately 500 million gallons of distillate fuel per ye ar is produce d from transmix. 24 Assuming that all of the transmix distillate product would be used as 500 ppm LM in older engines, we estimate that an additional 70 tons of sulfate PM would be produced annuall y compared to the use of 15 ppm diesel fuel. 25 We beli eve that a substantial fraction of transmix distillate product would be used as heating oil and C3 diesel fuel regardless of whether the diesel transmix

23 This is based on our review of data on the sulfur levels of transmix distillate produ ct from various transmix processors. 24 Based on information provided by transmix processors, we estimate that approximately 750 million gallons per year of transmix is produced annually and that 2/3 of the transmix

- derived product is distillate fuel and 1 /3 is gasoline. 25 Sulfate PM w as converted to PM 2.5 to allow a com parison with PM 2.5 from increased fuel transport emissions.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **32** of **56** provisions are extended. Also, as the older LM engines are retired from service, the size of the potential 500 ppm LM market will diminish until all LM engines must use 15 ppm diesel fuel. Therefore, assuming that all transmix distillate product would be used as 500 ppm LM provides an upper bound estimate of the potential impact on PM emissions. We estimate on average that transmix processors would need to ship their transmix distillate product an additional 150 miles by tank truck to reach the C3 Emission Control Area ( ECA ) marine market as compared to the 500 ppm LM market. 26 This would result in an addi tional 80 tons of PM emissions annually . Thus, the PM emissions associated with transport to the C3 marine market are roughly equal to the increased sulfate PM emissions associated with the continued use of 500 ppm LM . We estimate that the increased tran sport distances could also result in an additional 2,200 tons of NO X , 220 tons of VOC, and 650 tons of CO annuall y. Based on the above discussion, we believe that the extension of the 500 ppm LM provisions beyond 2014 outside the NEMA area and Alaska would have a neutral or net positive environmental impact. The extension of the 500 ppm LM transmix flexibility would defer additional transportation costs and provide a lower

- cost fuel for use in older LM engines for man y ye ars to com e given that the useful life of LM engines can exceed 40 y ears . 27 Therefore, extending this flexibility

would reduce the overall burden on industry of compliance with EPA’s diesel sulfur program. Providing additional time for transmix processors to evaluate how the C3 ECA marine market will develop after 2014 would also facilitate a

26 There is no ability to ship transmix distillate product to the C3 marine diesel market by pipeline. 27 In the 2011 edition of “ Railroad Facts,” the Association of American Railroads reported that in 2010 approximately 35% of the locomotive fleet was at least 21 years old.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **33** of **56** smoother transition for transmix processors from the 500 ppm LMmarket as it gradually disappears due to fleet turnover. **B. Revised**  **Diesel Transmix Provisions** Industry stakeholders suggested alternative enforcement mechanisms to support the extended flexibility

which would not necessitate reinstating and expanding the designate

- and

- track and fuel marker provisions that were retired b y the C3 marine final rule. Reinstatement and expansion of these provisions would likely place an unacceptable burden on a large number of stakeholders, most of whom would not handle 500 ppm LM . The suggested alternative enforcement mechanism would impose minimal additional reportin g and recordkeeping burdens only on the parties that produce, handle, and use 500 ppm LM. We believe that this alternative enforcement approach would meet the Agency ’s goals of ensuring that the pool of 500 ppm LMis limited to transmix distillate and that 500 ppm LMis not used in sulfur

- sensitive emissions control equipment. The compliance assurance provisions that we are u sing to support the extension of the diesel transmix flexibility are similar to those that were used to support the small refiner f lexibilities in Alaska during the phase

- in of EPA’s diesel sulfur program. 28 In addition to registering as a refiner and certifying that each batch of fuel complies with the fuel quality

requirements for 500 ppm LM diesel fuel, producers of 500 ppm transmi x distillate product would be required to submit a compliance plan for approval by EPA. This compliance plan would provide details on how the 500 ppm LM would be segregated through to the ultimate consumer and its use limited to the legacy LM fleet.

28 See 40 CFR § 80.554(a)(4).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **34** of **56** The plan would be required to identify the entities that would handle the fuel and the means of segregation. We believe that it is appropriate to limit the number of entities that would be allowed to handle the fuel between the producer and the ultimate consu mer in order to facilitate EPA’s compliance assurance activities. 29 Based on conv ers ations with transmix processors, we believe that specifying that no more than 4 separate entities handle the fuel between the producer and the ultimate consumer would not h inder the ability to distribute the fuel. 30 The plan would need to identify the ultimate consumers and include information on how the product would be prevented from being used in sulfur

- sensitive equipment. We understand that some transmix processors c urrently rely on shipment by pipeline to reach the 500 ppm locomotive diesel market. 31 As a result, the regulations allow 500 ppm LM to be shipped by pipeline provided that it does not come into contact with distillate products that have a sulfur content greater than 15 ppm. The compliance plan would need to include information from the pipeline operator regarding how this segregation would be maintained. Discussions with transmix processors indicate that this requirement would not limit their a bility to ship 500 ppm LM by

pipeline. If 500 ppm LM was shipped b y pipeline abutting 15 ppm diesel, the volume of 500 ppm LM delivered would likel y be slightly greater than that which was introduced into the pipeline

29 An entity is defined as any company that takes custody of 500 ppm LM diesel fuel. 30 In most cases, fewer entities would take custody of the product

. In many cases, only a single entity (a tank truck operator) would be in the distribution chain between the transmix processor and the ultimate consumer. However, we unde rstand that as many as 4 separate entities may handle the product between the producer and ultimate consumer if it is shipped by pipeline: the tank truck operator to ship the product f r o m the producer to the pipeline, the pipeline operator, the product termi nal that receives th e fuel from the pipeline, and another tank truck operator to ship the product to the ultimate consumer from the terminal. 31 500 ppm LM diesel fuel is shipped by a short dedicated pipeline from a product terminal to a locomotive refue ling facility.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **35** of **56** as a consequence of cutting the pipel ine interface between the two fuel batches into the 500 ppm LMbatch. This small increase in 500 ppm LM volume would be acceptable. To provide an additional safeguard to ensure that volume of 500 ppm LM diesel fuel does not swell inappropriatel y, the vo lume increase during any single pipeline shipment must be limited to 2 volume percent or less. This limitation on volume swell to 2 volume percent or less is consistent with the limitation in 40 CFR § 80.599 (b)(5) regard ing the allowed swell in volume during the shipment of highway diesel fuel for the purposes of the determination of compliance with the now expired volume balance requirements under 40 CFR § 80.598(b)(9)(vii)(B). Industry did not object to this requirement, and therefore, we believe that limiting the volume swell of 500 ppm LM diesel fuel during shipment by pipeline to 2 volume percent or less should provide sufficient flexibility

. Product transfer documents (PTDs) for 500 ppm LM diesel are require d to indicate that the fuel must be distributed in compliance with the approved compliance assurance plan. Entities in the distribution chain for 500 ppm LM diesel fuel are required to keep records on the volumes of the 500 ppm that they receive from and deliver to each other entity

. Based on input from fuel distributors, keeping these records will be a minimal additional burden , as discussed in section X .B. Such entities are also required to keep records on how the fuel was transported and segregated. We would typically expect that the volumes of 500 ppm LMdelivered would be equal to or less than those received unless shipment by

pipeline occurred. Some minimal increase in 500 ppm LM volume would be acceptable due to differences in temperature between when the shipped and received volumes were measured and interface cuts during shipment by pipeline. Entities***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **36** of **56** that handle 500 ppm LM are required to calculate a balance of 500 ppm LM received versus delivered/used on an annual basis. If the volume of fuel delivered/dispensed is greater than that received, EPA would expect that the records would indicate the cause. If an entit y’s evaluation of their receipts and deliveries of 500 ppm LM fuel indicated noncompliance with the product segregation requirements, the custodian would be required to notify

EPA. All entities in the 500 ppm LM distribution chain are required to maintain the specified records for 5 y ears and provide them to EPA upon request. **IX .**  **Am endments Related to the Marker Requirements for Locomotive and**  **Marine Fuel** Today ’s rule amends the regulatory provisions regarding the transition in the fuel marker requirements for 500 ppm LM diesel fuel in 20 12 to address an oversight in the original rulemaking where the regulations failed to incorporate provisions described in the rulemaking preamble. Today ’s rule also amends the regulatory provisions regarding the transition in the fuel marke r requirements for heating oil in 2014 to provide improved clarity

. The preamble in the nonroad diesel final rule stated that EPA intended to allow 500 ppm LM diesel fuel containing greater than 0.10 milligrams per liter of solvent ye llow 124 ( SY124 ) to be present at an y location in the fuel distribution system (up to and including retail and wholesale

- purchaser

- consumer storage tanks) until September 30, 2012
. 32 Although it was not explicitly stated in the preamble, it was implied that additional tim e would be allowed for marked 500 ppm LM to transition from the fuel tanks connected to locomotive and marine engines, consistent with the approach taken

32 “Co ntrol of Emissions for Air Pollution From Nonroad Diesel Engines and Fuel; Final Rule,” Section V.C.1.c., “The Period From June 1, 2012 Through May 31, 2014, 69 FR 39083, 39084 (June 29, 2004).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **37** of **56** regarding the implementation of more stringent diesel fuel sulfur standards. However, the nonroad die sel regulations are not consistent with the preamble and do not provide th e allowance for marked 500 ppm LM diesel fuel to transition from fuel distribution and end

- user tanks . 40 CFR § 80.510(e) requires that all 500 ppm LM diesel fuel delivered from a truck loading rack located outside of the Northeast Mid

- Atlantic (NEMA) area and Alaska must contain at least 6 mg/liter of SY124 through May 31, 2012. However, the regulatory

text at 40 CFR 80.510(f) requires that beginning June 1, 2012, any diesel fuel that contains 0.10 mg/liter of SY124 must be designated as heating oil. Thus, the regulations as currentl y written do not provide any transition time for marked LM fuel that is present the distribution sy stem as of May 31, 2012 to work its way through the fuel distribution sy stem downstream of the truck loading rack and through the tanks connected to locomotive and marine engines

. A number of locomotive and marine wholesale purchaser

- consumers have taken custody of marked 500 ppm LM diesel fuel that they will not be able to consume prior to June 1, 2012. A number of fuel suppliers also have inventories of 500 ppm LM diesel fuel on hand that they

may not be able to sell to LM diesel fuel users because such users are concerned about clearing their tanks of marked LM diesel fuel by June 1, 2012. This new rule allows marked 500 ppm LM diesel fuel to transition normally through the fuel distribution and use sy stem, consistent with the original intent of the nonroad diesel rule preamble. Today ’s rule allows 50 0 ppm LM diesel fuel at an y point in the fuel distribution and end use system to contain more than 0.10 milligrams per liter of SY 124 through November 30, 2012

.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **38** of **56** We are implementing a single transition date applicable at all points in the fuel distrib ution and use sy stem rather than a separate date applicable through retail and wholesale

- purchaser

- consumer ( WPC ) facilities and another date applicable at all locations including the tanks attached to locomotive and marine equipment because we believe that a stepped compliance schedule is not necessary and a single transition date provides the most flexibility for regulated parties. We expect that the marker will ty picall y transition out of retailer and WPC LM diesel storage tanks well in advance of November 30, 2012. We further expect that users of LM diesel fuel can coordinate with retail and WPC facilities regarding deliveries of marked 500 ppm LM diesel fuel to ensure that the fuel in storage tanks attached to LM equipment is in compliance b y November 30, 2012.

` Today ’s rule also amends the regulation to clarify the transition of the solvent ye llow 124 marker out of heating oil beginning June 1, 2014. Specificall y, today’s rule amends the regulations to clarify that a fter December 1, 2014 , EPA will no longer have any require ments with respect to the use of the solvent y ellow 124 marker

. This is consistent with the intent expressed in our original nonroad diesel fuel rulemaking. We do not b elieve these change s will adversel y impact emissions.
**X . Statutory and Executive Order Reviews**  A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review Under Executive Order 12866 (58 CFR § 51735 (October 4, 1993), this action is a “significant regulatory

action.” Accordingl y, EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13563***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **39** of **56** (76 FR 3821 (January

21, 2011) and an y changes made in response to OMB recommendations h ave been documented in the docket for this action. B. Paperwork Reduction Act The information collection requirements in this notice of proposed rulemaking and direct final rule have been submitted for approval to the Office of Management and Budget (OMB) under the Paperwork Reduction Act , 44 U.S.C. § 3501 et
. seq . The In formation Collection Request (ICR) document prepared b y EPA related to the amended heating oil definition has been assigned EPA ICR number 2462.01 and the ICR document prepared b y EPA for diesel fuel produced by transmix producers has been assigned EPA ICR number 2463.01
. Supporting statements for these proposed ICRs have been placed in the docket. The proposed information collections are described in the following paragraphs. This act ion contains recordkeeping and reporting (registration and product transfer documentation) that may affect parties who produce or import renewable fuels subject to the revised definition of heating oil. EPA expects that very few parties will be subject to additional recordkeeping and reporting. We estimate that up to 11 parties ( i.e. , RI N generators, consisting of up to 10 producers and one importer) may be subject to the proposed information collection over the next several y ears . 33 We estimate an annual reporting burden of 21 hours per respondent and an annual recordkeeping burden of 24 hours, yielding a total per respondent burden of 45 hours. 34 Burden means the total time, effort, or financial resources expended b y persons to generate, maintain, retain, or

33 We project that the number of effected p arties will remain essentially constant over time. 34 This includes the time to train staff, formulate and transmit responses, and other miscellaneous compliance related activities.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **40** of **56** disclose or provide information to or for a Federal agency . This includes the time needed to review the instructions; develop, acquire, install, and utilize technology and sy stems for the purpose of collecting, validatin g, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing way s to comply

with any previously

applicable instructions and requirements; train personnel to be able to respond to a coll ection of information; search data sources; complete and review the collection of information; and transit or otherwise disclose the information. Burden is as defined at 5 CFR § 1320.3(b). This action also contains provisions related to diesel fuel that is produced by transmix processors. We have proposed reporting requirements that would apply to transmix processors (all of whom are refiners) and other parties (such as carriers or distributors) in the distribution chain who handle diesel fuel produced by transmix producers. The collected data will permit EPA to: ( 1) Process compliance plans from transmix producers; and ( 2) Ensure that diesel fuel made from transmix meets the standards required under the regulations at 40 CFR Part 80, and that the as sociated benefits to human health and the environment are realized. We estimate that 25 transmix processors and 150 other parties may be subject to the proposed information collection. 35 We estimate an annual reporting burden of 28 hours per transmix proc essor ( respondent ) and 8 hours per other party (respondent); considering all respondents (transmix producers and other parties) who would be subject to the proposed information collection, the annual reporting burden, per respondent, would be 11 hours . Burden means the total

35 This is based on current transmix production. Although the total volume of transmix produced in the fuel distribution system may decline in parallel with the projected decrease in overall petroleum

- based fuel use, we anticipate that the number of transmix processors will remain essentially constant since their number is d ependent on the configuration of the petroleum

- based fuel distribution system.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **41** of **56** time, effort, or financial resources expended b y persons to generate, maintai n, retain, or disclose or provide information to or for a Federal agency . This includes the time needed to review the instructions; develop, acquire, install, and utilize technology and sy stems for the purpose of collecting, validating, and verifying info rmation, processing and maintaining information, and disclosing and providing information; adjust the existing way s to comply

with any previously

applicable instructions and requirements; train personnel to be able to respond to a collection of information ; search data sources; complete and review the collection of information; and transit or otherwise disclose the information. Burden is as defined at 5 CFR § 1320.3(b). The amendments to the fuel marker requirements for locomotive and marine diesel fuel in today ’s rule do not contain an y new recordkeeping and reporting requirements. An agency

may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it display s a currently valid OMB control number. The OMB control numbers for EPA ’ s regulations are listed in 40 CFR part 9. To comment on the Agency ’ s need for this information, the accuracy of the provided burden estimates, and an y suggested methods for minimizing respondent burden, EPA has e stablished a public docket for this rule, which includes the I CRs described above, under Docket ID number EPA

- HQ

- OAR

- 2012

- 0223 . Submit any comments related to the ICR to EPA and OMB. See the **ADDRESSES** section at the beginning of this notice for where to submit comments to EPA. Send comments to OMB at the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW, Washington, DC 20503, Attention: Desk Office for EPA. Since***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **42** of **56** OMB is required to make a decision concern ing the I CR between 30 and 60 day s after **[Insert date of publication in the Federal Register.]** , a comment to OMB is best assured of having its full effect if OMB receives it by **[Insert date 30 days after publication in the Federal Register.]** 

. C. Regulatory Flexibility Act The Regulatory

Flexibility

Act (RFA) generall y requires an agency to prepare a regulatory

flexibility

analy sis of any

rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or an y other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of as sessing the impacts of today ’s rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration’s (SBA) regulations at 13 CFR § 121.201; (2) a small governmental jurisdiction that is a government of a cit y, count y, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not

- for

profit enterprise which is independentl y owned and operated and is not dominant in its field. After considering the economic impacts of this action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any new requirements on small entiti es. The amendments to the diesel transmix provisions would lessen the regulatory burden on all affected tran s mix processors and provide a source of lower cost locomotive and***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **43** of **56** marine diesel fuel to consumers. The relatively minor corrections and modificatio ns this rule do not impact small entities. D. Unfunded Mandates Reform Act This rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any

one y ear. We have determined that this action will not result in expenditures of $100 million or more for the above parties and thus, this rule is not subject to the requirements of sections 202 or 205 of UMRA. This rule is also not subject t o the requirements of section 203 of UMRA because it contains no regulatory

requirements that might significantl y or uniquely affect small governments. It only

applies to gasoline, diesel, and renewable fuel producers, importers, distributors and marketers and makes relatively minor corrections and modifications to the RFS2 and diesel sulfur regulations. E. Executive Order 13132 (Federalism) This action does not have federalism implications. Itwill not have substantial direct effects on the States, on th e relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This action only applies to gasoline, diesel, and renewable fuel producers, importers, distributors and marketers and makes relativel y minor corrections and modifications to the RFS2 and diesel sulfur regulations. Thus, Executive Order 13132 does not apply to this action. F. Executive Order 13175 (Consultation and Coordination W ith Indian Tribal Governments)***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **44** of **56** This rule does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249 (November 9, 2000 ) ). It applies to gasoline, diesel, and renewable fuel producers, importers, distributors and mar keters. This action makes relatively minor corrections and modifications to the RFS 2 and diesel sulfur regulations, and does not impose any

enforceable duties on communities of Indian tribal governments. Thus, Executive Order 13175 does not apply to this action. G. Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks EPA interprets EO 13045 (62 FR 19885 ( April 23, 1997 ) ) as appl yi ng only to those regulatory

actions that concern health or safety risks, such that the analy sis required under section 5

– 501 of the EO has the potential to influence the regulation. This action is not subject to EO 13045 because it does not est ablish an environmental standard intended to mitigate health or safety risks. H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use This action is not a “significant energy action” as define d in Executive Order 13211 (66 FR 28355 (May 22, 2001)) , because it is not likely to have a significant adverse effect on the supply , distribution, or use of energy . We have concluded that this rule is not likely

to have adverse energy

effects because we do not anticipate adverse energy effects related to the additional generation of RINs for home heating oil or the reduced regulatory

burden for transmix processors. This rule will facilitate the use of 500 ppm sulfur locomotive and marine (LM) diesel fuel , which contains the SY 124 marker that is alread y in the fuel distribution and use system consistent with EPA’s original***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **45** of **56** intent. Today ’s action will avoid the potential need to remove marked 500 ppm LM diesel fuel from the s ys tem for reprocessing, and the associated increased costs and potential disruption to the supply of LMdiesel fuel

. I. National Technology Transfer and Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (‘‘NTTAA’’), Public Law 104

– 113, 12(d) (15 U.S.C. § 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so will be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary

consensus standards bodies. NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to u se available and applicable voluntary consensus standards. This action does not involve technical standards. Therefore, EPA did not consider the use of an y voluntary consensus standards. J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low

-Income Populations Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes Federal executive policy

on environmental justice. It s main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by

identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and
a ctivities on minority

populations and low

- income populations in the United States.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **46** of **56** EPA has determined that this rule will not have disproportionatel y high and adverse human health or environmental effects on minority or low

- income populations because it do es not affect the level of protection provided to human health or the environment. These amendments will not relax the control measures on sources regulated by the RFS regulations and therefore will not cause emissions increases from these
sources. We hav e determined that proposed amendments to the diesel transmix provisions and marker provisions for locomotive and marine diesel fuel under the diesel sulfur program would have a neutral or positive impact on diesel vehicle emissions. 36 K. Congressional Re view Act The Congressional Review Act, 5 U.S.C. § 801 et
. seq ., as added b y the Small Business Regulatory

Enforcement Fairness Act of 1996, generall y provides that before a rule may take effect, the agency

promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptrolle r General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, an d the Comptroller General of the United States prior to publication of the rule in the Federal Register

. A major rule cannot take effect until 60 day s after it is published in the Federal Register

. This action is not a ‘‘major rule’’ as defined by 5 U.S.C. § 804(2). **X . Statutory Provisions and Legal Authority**  Statutory authorit y for the rule finalized today can be found in section 211 of the Clean Air Act, 42 U.S.C. § 7545. Additional support for the procedural and compliance related a spects of today ’ s rule, including the recordkeeping requirements, come from

36 See section VII .A. and VIII of today’s notice for details of this analysis.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **47** of **56** s ections 114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. §§ 7414, 7542, and 7601(a). List of Subjects in 40 CFR Part 80 Environmental protection, Administrative practice and procedure, Agriculture, Air pollution control, Confidential business information, Diesel Fuel, Transmix, Energy, Forest and Forest Products, Fuel additives, Gasoline, Imports, Labeling, Motor vehicle po llution, Penalties, Petroleum, Reporting and recordkeeping requirements.

Dated: ____________________________

_____________________________________ Lisa P. Jackson, Administrator***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **48** of **56** For the reasons set forth in the preamble, 40 CFR part 80 is amended as follows: **PART 80**

**— REGULATION OF FUELS AND FUEL ADDITIVES**  1. The authorit y citation for part 80 continues to read as follows: Authority : 42 U.S.C. 7414, 7542, 7545, and 7601(a). **Subpart I**

**— [Amended]**  2. Section 80.510 (f) is amended to read as follows: **§ 80.510 What are the standards and marker requirements for NRLM diesel** 

**fuel and ECA marine fuel?**

* * * * * (f) Marking provisions. From June 1, 2012 through November 30, 2014: (1) Except as provided for in paragraph (i) of this section, prior to distribution from a truck loading terminal, all heating oil shall contain six milligrams per liter of marker solvent yellow 124 from June 1, 2012 through May 31, 2014. (2) All motor vehicle and NR diesel fuel shall be free of marker solv ent ye llow 124 , and a ll LM diesel fuel shall be free of marker solvent y ellow 124 beginning December 1, 2012. ( 3 ) From June 1, 2012 through November 30, 2012, any diesel fuel that contains greater than or equal to 0.10 milligrams per liter of marker solv ent y ellow 124 shall be deemed to be either heating oil or 500 ppm sulfur LM diesel fuel and shall be prohibited from use in any motor vehicle or nonroad diesel engine (excluding locomotive, or marine diesel engines). ( 4 ) From December 1, 2012 through Nov ember 30, 2014, any diesel fuel that contains greater than or equal to 0.10 milligrams per liter of marker solvent y ellow 124 shall be deemed to be heating oil and shall be prohibited from use in any motor vehicle or nonroad diesel engine (including locomo tive, or marine diesel engines). ( 5 ) Except as provided for in paragraph (i) of this section, from June 1, 2012 through November 30, 2014, any diesel fuel, other than jet fuel or kerosene that is downstream of a truck loading terminal, that contains less than 0.10 milligrams per liter of marker solvent yellow 124 shall be considered motor vehicle diesel fuel or NRLM diesel fuel, as appropriate. ( 6 ) Any

heating oil that is required to contain marker solvent y ellow 124 pursuant to the requirements of this paragraph (f) must also contain visible evidence of d ye solvent red 164. ( 8 ) Beginning December 1, 2014 there are no requirements or restrictions on the use of marker solvent y ellow 124 under this subpart. * * * * ****EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **49** of **56** 3
. Section 80.511 is amended by revising paragraphs (b)(4) and (b)(10) to read as follows: **§ 80.511 What are the per**  **- gallon and marker requirements that apply to** 

**NRLM diesel fuel, ECA marine fuel, and heating oil downstream of the refiner or importer?** 

* * * * * (b) * * * (4) Except as provided in paragraphs (b)(5) through (8) of this section, the per - gallon sulfur standard of §80.510(c) shall apply to all NRLM diesel fuel beginning August 1, 2014 for all downstream locations other than retail outlets or wholesale purchaser

- consumer faci lities, shall apply to all NRLM diesel fuel beginning October 1, 2014 for retail outlets and wholesale purchaser

- consumer facilities, and shall apply to all NRLM diesel fuel beginning December 1, 2014 for all locations. This paragraph (b)(4) does not appl y to LM diesel fuel produced from transmix or interface fuel that is sold or intended for sale in areas other than those listed in §80.510(g)(1) or (g)(2), as provided b y §80.513(f). * * * * * (10) For the purposes of this subpart, on an y occasion where a distributor directly dispenses fuel into vehicles or equipment from a mobile facility such as a tanker truck, the distributor shall be treated as a retailer, and the mobile facility

shall be treated as a retail outlet.
4
. Section 80.513 is amended as fo llows: a. By

revising the section heading. b. By

revising the introductory text. c. By

revising paragraph (e). d. By

adding a new paragraph (f). **§ 80.513 What provisions apply to facilities that process transmix?**  For purposes of this section, transmix means a mixture of finished fuels, such as pipeline interface, that no longer meets the specifications for a fuel that can be used or sold without further processing. This section applies to refineries (or other facilities) that produce diesel fu el from transmix by distillation or other refining processes but do not produce diesel fuel b y processing crude oil. This section only applies to the volume of diesel fuel produced b y s uch a processor using these processes, and does not apply to an y diese l fuel produced b y the blending of blendstocks. For the purposes of this section, pipeline interface means the mixture between different fuels that abut each other during shipment by

pipeline.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **50** of **56** * * * * * (e) From June 1, 2012 through June 1, 2014, NRLM die sel fuel produced b y a facility that processes transmix is subject to the standards of §80.510(c), except that LM diesel fuel produced from transmix is subject to the sulfur standard of §80.510(a). This paragraph (e) does not apply to NRLM or LM diesel fu el that is sold or intended for sale in the areas listed in §80.510(g)(1) or (g)(2). (f) Beginning June 1, 2014, LM diesel fuel produced from transmix is subject to the sulfur standard of §80.510(a), provided that the conditions in this paragraph are sati sfied. Diesel fuel produced from transmix that does not meet the conditions in this paragraph is subject to the sulfur standard in §80.510(c). (1) The fuel must be produced from transmix. (2) The fuel must not be sold or intended for sale in the areas li sted in §80.510(g)(1) or (g)(2). (3) A facility

producing 500 ppm LM diesel fuel must obtain approval from the Administrator for a compliance plan. The compliance plan must detail how the facilit y will segregate an y 500 ppm LM diesel fuel produced subject to the standards under §80.510(a) from the producer through to the ultimate consumer from fuel having other designations. The compliance plan must identify

the entities that handle the 500 ppm LM thr ough to the ultimate consumer. No more than 4 separate entities shall handle the 500 ppm LM between the producer and the ultimate consumer. The compliance plan must also identify all ultimate consumers to whom the refiner supplies the 500 ppm LM diesel fuel. The compliance plan must detail how misfueling of 500 ppm LM into vehicles or equipment that require the use of 15 ppm diesel fuel will be prevented. (i) Producers of 500 ppm LM diesel fuel must be registered with EPA under §80.597 prior to the distribution of any 500 ppm LM diesel fuel after June 1, 201 4. (ii) Producers of 500 ppm LM must initiate a PTD that meets the requirements in paragraph (f)( 3 )(iii) of this section. (iii) All transfers of 500 ppm LM diesel fuel must be accompanied b y a PTD that clearl y and accuratel y states the fuel designation; the PTD must also meet all other requirements of §80.590. (iv) Batches of 500 ppm LM may be shipped by

pipeline provided that such batches do not come into phy sical contact in the pipeline with batches of other distillate fuel products that have a sulfur content greater than 15 ppm. (v) The volume of 500 ppm LM shipped via pipeline under paragraph (f)(3)(iv) of this section may swell by no more than 2 % upon delivery to the next party. Such a volume increase may onl y be due to volume swell due to temperature differences when the volume was measured or due to normal pipeline interface cutting practices notwithstanding the requirement under paragraph (f)(3)(iv) of this section.***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **51** of **56** (vi) Entities that handle 500 ppm LM must calculate the balance of 500 ppm LM received versus the volume delivered and used on an annual basis. (vii) The records required in this section must be maintained for five ye ars, by each entity

that handles 500 ppm LM and be made available to EPA upon request. (4) All parties that take custody of 500 ppm LM must segregate the product from other fuels and observe the other requirements in the compliance plan approved b y EPA pursuant to paragraph (f)(3) of this section.
5
. Section 80.572 is amended by revising the secti on heading and paragraphs (a) and (d) to read as follows: **§ 80.572 What labeling requirements apply to retailers and wholesale** 

**purchaser -**  **consumers of Motor Vehicle, NR, LM and NRLM diesel fuel and heating oil beginning June 1, 2010?**  * * * * * (d) From June 1, 2010 and beyond, for pumps dispensing LM diesel fuel subject to the 500 ppm sulfur standard of §80.510(a): LOW SULFUR LOCOMOTIVE AND MARINE DIESELFUEL (500 ppm Sulfur Maximum) WARNI NG Federal law prohibits use in nonroad engines or in highway vehic les or engines. * * * * * 6
. Section 80.597 is amended by revising paragraph (d)(3)(ii) to read as follows: **§ 80.597 What are the registration requirements?**  * * * * * (d) * * * (3) * * * (ii) Fuel designated as 500 ppm LM diesel fuel.

7. Section 80.598 is amended by revising paragraph (b)(9)(ii) to read as follows: **§ 80.598**  **What are the designation requirements for refiners, importers, and distributors?** 

***** ***** ***** ***** ********EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **52** of **56** (ii) Until June 1, 2014, any distillate fuel containing greater than or equal to 0.10 milligrams per liter of marker solvent yellow 124 required under §80.510(d), (e), or (f) must be designated as heating oil except that from June 1, 2010, through November 30, 2012, it may

also be designated as LM diesel fuel as specified under §80.510 (e).

***** ***** ***** ***** *****
8. Section 80.601 is amended by revising paragraph (a)(2) to read as follows: **§ 80.610**  **What acts are prohibited under the diesel fuel sulfur program?**

***** ***** ***** ***** ***** (2) Beginning June 1, 2007, produce, import, sell, offer for sale, dispense, supply , offer for supply , store or transport any diesel fuel for use in motor vehicle or nonroad engines that contains greater than 0.10 milligrams per liter of solvent y ellow 124, except for 500 ppm sulfur diesel fuel sold, offered for sale, dispensed, s upplied, offered for supply , stored, or transported for use in LM. from June 1, 2010 through November 30, 2012 for use only in locomotive or marine diesel engines that is marked under the provisions of §80.510(e).

***** ***** ***** ***** ***** 9
. Section 80.1401 is amended by revising the definition of “Heating Oil” to read as follows: **§ 80.1401**  **Definitions.** * * * * * Heating oil means either of the following: (1) A #1, #2, or non

- petroleum diesel meeting the definition set forth in §80.2(ccc) ; or (2) A fuel oil that , pursuant to §§ 80.1450(b)(1)(ix) and (d)(4), 80.1451(b)(1)(ii)(T) , 80.1453(d) and 80.1454(b)(7), is demonstrated to be used to heat interior spaces of homes or buildings to control ambient climate for human comfort , is capable of flowing at 60 degrees Fahrenheit and 1 atmosphere of pressure , and is not used for an y other purpose

. * * * * * 10
. Section 80.14 26 is amended by revising paragraph (a)(1) to read as follows: **§ 80.14**  **26 How**  **are RINs generated and assigned to batches of renewable fuel by renewable fuel producers or importers?**  (a) * * * (1) * * ****EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **53** of **56** (i) * * * (ii) Is demonstrated to be produced from renewable biomass pursuant to the reporting requirements of §80.1451 and the recordkeeping requirements of §80.1454 ; and (A) * * * (B) [Reserved] (iii) Was produced in compliance with the registration requirements of §80.1450, the reporting requirements of §80.1451, the recordkeeping requirements of §80.1454, and all other applicable regulations of this subpart M. * * * * * 11
. Section 80.1431 is amended by adding new paragraph (a)(1)(x) to read as follows: **§ 80.14**  **31 Treatment of invalid RINs.**  * * * * * (a)(1)(x) A RIN generated for renewable fuel that was not used as a transportation fuel, heating oil, or jet fuel. 12
. Section 80.1450 is amended by adding new paragraph s (b)(1)(ix) and (d)(4) to read as follows: **§ 80.1450**  **What are the registration requirements under the RFS program?** * * * * * (b) * * * (1) * * * (ix) For a producer of fuel oil meeting paragraph (2) of the definition of heating oil in §80.1401: (A) (A ) An affidavit from the producer of the fuel oil stating that the fuel oil for which RI Ns are generated is being sold for the purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose. (B) A list of end users. ( C ) For each end user, the total quantity of fuel oil under contract, in units of U.S. gallons, and the respective heating content of the fuel oil, in units of BTU per U.S. gallon. ( D ) For each end user, the total number buildings, the phy sical address of each building, and the entit y that owns the building, if different than the entity that entered into the contract to receive title to the fuel oil and use it to heat interior spaces of homes or buildings to control ambient climate for human comfort. ( E ) A ffidavit s from the final end users of the fuel oil stating that the fuel oil for which RINs are generated is being used for purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose . ( * * * * * * * * * ****EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **54** of **56** 13
. Section 80.1451 is amended by adding a new paragraph (b)(1)(ii)(T) to read as follows: **§ 80.1451 What**  **are the reporting requirements under the RFS program?** * * * * * (b) * * * (1) * * * (ii) * * * (T) Producers of fuel oil that meets the paragraph (2) of the definition of heating oil in §80.1401, shall report , on a quarterly basis, all the following for each volume of fuel oil: ( 1 ) Total volume of fuel oil produced and sold to end users , in units of U.S. gallon, and the respective heating content of the fuel oil, in units of BTU per U.S. gallon

. ( 2 ) Total volume of fuel oil for which RINs we re generated , in units of U.S. gallon, and the respective quantities of fuel oil sold to end users, name s and location s of the building s in which the fuel oil was used to heat interior spaces of those buildings to control ambient climate for human comfort , and the RIN numbers assigned to each batch of fuel oil. (3) Affidavits from the final end users of the fuel oil, describing the total quantity of fuel oils purchased from the producer, the total amount of fuel oils purchased for which RINs were generated by the producer, and the total amount of fuel oil used by the end user for purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort

. (4) An annual report of an y updates to the information required b y § 80.1450, including updated information about end use. * * * * * 14
. Section 80.1453 is amended by adding a new paragraph (d) to read as follows: **§ 80.1453**  **What are the product transfer document (PTD) requirements for the RFS program?**  * * * * * (d) For fuel oil meeting paragraph (2) of the definition of heating oil in §80.1401, the PTD which is used to transfer ownership of the renewable fuel shall state : “This volume of renewable fuel is designated and intended to be used to heat interior spaces of homes or buildings to control ambient climate for human comfort . Do NOT use for process heat or an y other purpose , pursuant to 40 CFR § 80.1460(g) .” 15
. Section 80.1454 is amended by revising paragraph (b)(6) and adding new paragraph s (b)(7) and (b)(8) to read as follows: **§ 80.1454**  **What are the recordkeeping requirements under the RFS program?** * * * * * (b) * * ****EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **55** of **56** (6) Copies of registration documents required under §80.1450, including information on transportation fuel, jet fuel, or heating oil and products, feedstocks, facility production processes, process changes, and capacity , energy sources, contracts and a cop y of the independent third part y engineering review submitted to EPA per §80.1450(b)(2). (7) A ll information required und er §80.1450(b)(1)(ix) for qualifying fuel oil that meets paragraph (2) of the definition of heating oil in §80.1401. (8) A ll the information required under §80.145 1 for qualifying fuel oil that meets paragraph (2) of the definition of heating oil in §80.1401. (9) Copies of all contracts which describe the fuel oil under contract with each end user. (10) Copies of all c ertificate s of anal ys is or specification sheet for the fuel oil under contract with each end user that contains all of the following i nformation and the various test methods used to determine all of the following: (1) Gross heat of combustion. (2) Water content. (3) Solids content. (4) Kinematic viscosity

. (5) Density

. (6) Sulfur content. (7) Ash content. (8) Flash point. (9) Pour point. (10) Copies of all product transfer documents that contain all of the information required under §80.1453 for qualifying fuel oil that meets paragraph (2) of the definition of heating oil in §80.1401. ( 11 ) For each batch of transferred fuel oil for which RINs are generated that the renewable fuel producer claims to meet paragraph (2) of the definition of heating oil in §80.1401 and is sold for those purposes , affidavits from the end user of the fuel that includes, but not limited to, the followin g information: (i) Quantity

of fuel oil used for heating oil. (ii) Date the fuel oil was received from producer. (iii) Date s the fuel oil was used. (iv) Blend level of the fuel oil in petroleum based fuel oil when received

. (v) Blend level of the fuel oil in petroleum based fuel oil when used. (vi) Quantity

of assigned RINs received with the renewable fuel , if applicable. (vii) Quantity

of assigned RINs that the end user separated f rom the renewable fuel, if applicable. (viii) Description of the fuel oi l use , and stating that it was used for purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose

. * * * * * 16
. Section 80.1460 is amended by adding a new paragraph (g).***EPA Response to O MB Comments (06/18/2012)*** ***E.O. 12866 Review

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Page **56** of **56 §**  **80.1460 What acts are prohibited under the RFS program?**  * * * * * (g) Failing to use a renewable fuel for its intended use. No person shall use qualifying fuel oil that meets paragraph (2) of the definition of heating oil in §80.1401 in an application other than to heat interior spaces of homes or buildings to control ambient climate for human comfort without retiring the RINs

. * * * * *