Document ID: EPA-HQ-OAR-2016-0544-0069
Agency: epa
Document Type: Proposed Rule
Title: Petitions for Rulemaking to Change the RFS Point of Obligation; Proposed Denials
Posted Date: 2016-11-22T05:00Z

[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Proposed Rules]
[Pages 83776-83777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27854]

[[Page 83776]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2016-0544; FRL-9955-36-OAR]

Notice of Opportunity to Comment on Proposed Denial of Petitions 
for Rulemaking To Change the RFS Point of Obligation

AGENCY: Environmental Protection Agency (EPA).

ACTION: Petitions for rulemaking.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to deny 
several petitions requesting that EPA initiate a rulemaking process to 
reconsider or change its regulations that identify refiners and 
importers of gasoline and diesel fuel as the entities responsible for 
complying with the annual percentage standards adopted under the 
Renewable Fuel Standard (RFS) program. EPA is providing an opportunity 
for the public to comment on the petitions we have received and on our 
proposed denial of the requests to initiate rulemaking.

DATES: Written comments must be received on or before January 23, 2017.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2016-0544, to the Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting 
comments. Once submitted, comments cannot be edited or withdrawn. The 
EPA may publish any comment received to its public docket. Do not 
submit electronically any information you consider to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Multimedia submissions (audio, video, etc.) must 
be accompanied by a written comment. The written comment is considered 
the official comment and should include discussion of all points you 
wish to make. The EPA will generally not consider comments or comment 
contents located outside of the primary submission (i.e. on the web, 
cloud, or other file sharing system). For additional submission 
methods, the full EPA public comment policy, information about CBI or 
multimedia submissions, and general guidance on making effective 
comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Julia MacAllister, Office of 
Transportation and Air Quality, Assessment and Standards Division, 
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 
48105; telephone number: 734-214-4131; email address: 
macallister.julia@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

(A) What should I consider as I prepare my comments for EPA?

    Submitting CBI. Do not submit this information to EPA through 
www.regulations.gov or email. 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 you 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 copy 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.
    Tips for Preparing Your Comments. When submitting comments, 
remember to:
     Identify the rulemaking by docket number and other 
identifying information (subject heading, Federal Register date and 
page number).
     Follow directions--The agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree; suggest alternatives 
and substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you 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 clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the comment period 
deadline identified.

II. Background

    On March 26, 2010, the EPA issued a final rule (75 FR 14670) 
establishing regulatory amendments to the renewable fuel standards 
(``RFS'') program regulations to reflect statutory amendments to 
Section 211(o) of the Clean Air Act enacted as part of the Energy 
Independence and Security Act of 2007. These amended regulations 
included 40 CFR 80.1406, imposing the obligation for compliance with 
the RFS annual standards on refiners and importers of gasoline and 
diesel fuel. These entities are referred to in the RFS regulations as 
``obligated parties.'' Beginning in 2014, and continuing to the 
present, obligated parties and other stakeholders have questioned 
whether 40 CFR 80.1406 should be amended, and a number of them have 
filed formal petitions for reconsideration or revision of the 
definition of ``obligated party'' in 40 CFR 80.1406, or petitions for 
rulemaking to amend the provision. On January 27, 2014, Monroe Energy 
LCC (``Monroe'') filed a ``petition to revise'' 40 CFR 80.1406 to 
change the RFS point of obligation, and on January 28, 2016, Monroe 
filed a ``petition for reconsideration'' of the regulation. On February 
11, 2016, Alon Refining Krotz Springs, Inc.; American Refining Group, 
Inc.; Calumet Specialty Products Partners, L.P.; Lion Oil Company; 
Ergon-West Virginia, Inc.; Hunt Refining Company; Placid Refining 
Company LLC; U.S. Oil & Refining Company (the ``Small Refinery Owners 
Ad Hoc Coalition'') filed a petition for reconsideration of 40 CFR 
80.1406. On February 12, 2016, Valero Energy Corporation and its 
subsidiaries (``Valero'') filed a ``petition to reconsider and revise'' 
the rule. On June 13, 2016, Valero submitted a petition for rulemaking 
to change the definition of ``obligated party.'' On August 4, 2016, the 
American Fuel and Petrochemical Manufacturers (``AFPM'') filed a 
petition for rulemaking to change the definition of ``obligated 
party.'' On September 2, 2016, Holly Frontier also filed a petition for 
rulemaking to change the definition of ``obligated party.'' The 
petitions, comments received to date on the petitions, and EPA's draft 
analysis are available in a public docket that EPA has established for 
this Notice under Docket ID No. EPA-HQ-OAR-2016-0544.

III. What information is EPA particularly interested in?

    The petitioners all seek to have the point of obligation shifted 
from refiners and importers, but differ somewhat in their suggestions 
for alternatives. Some request that EPA shift the point of obligation 
from refiners and importers to those parties that blend renewable fuel 
into transportation fuel. Others suggest that it be shifted to those 
parties that hold title to the gasoline or diesel fuel immediately 
prior to the sale of these fuels at the terminal (these parties

[[Page 83777]]

are commonly called the position holders), or to ``blenders and 
distributors.'' All petitioners argue, among other things, that 
shifting the point of obligation to parties downstream of refiners and 
importers in the fuel distribution system would align compliance 
responsibilities with the parties best positioned to make decisions on 
how much renewable fuel is blended into the transportation fuel supply 
in the United States. Some of the petitioners further claim that 
changing the point of obligation would result in an increase in the 
production, distribution, and use of renewable fuels in the United 
States and would reduce the cost of transportation fuel to consumers.
    In the draft analysis available in the docket referenced above 
(Docket ID No. EPA-HQ-OAR-2016-0544), we present our rationale for 
proposing to deny the requests to initiate a rulemaking on the issue. 
In evaluating this matter, EPA's primary consideration is whether or 
not a change in the point of obligation would improve the effectiveness 
of the program to achieve Congress's goals. At the same time, EPA 
believes that a change in the point of obligation would be a 
substantial disruption that has the potential to undermine the success 
of the RFS program, as a result of increasing instability and 
uncertainty in programmatic obligations. We believe that the proponents 
of such a change bear the burden of demonstrating that the benefits are 
sufficiently large and likely that the disruption associated with such 
a transition would be worthwhile.
    We believe that the current structure of the RFS program is working 
to incentivize the production, distribution, and use of renewable 
transportation fuels in the United States, while providing obligated 
parties a number of options for acquiring the RINs they need to comply 
with the RFS standards. We do not believe that petitioners have 
demonstrated that changing the point of obligation would likely result 
in increased use of renewable fuels. Changing the point of obligation 
would not address challenges associated with commercializing cellulosic 
biofuel technologies and the marketplace dynamics that inhibit the 
greater use of fuels containing higher levels of ethanol, two of the 
primary issues that inhibit the rate of growth in the supply of 
renewable fuels today. Changing the point of obligation could also 
disrupt investments reasonably made by participants in the fuels 
industry in reliance on the regulatory structure the agency established 
in 2007 and reaffirmed in 2010. While we do not anticipate a benefit 
from changing the point of obligation, we do believe that such a change 
would significantly increase the complexity of the RFS program, which 
could negatively impact its effectiveness. In the short term we believe 
that initiating a rulemaking to change the point of obligation could 
work to counter the program's goals by causing significant confusion 
and uncertainty in the fuels marketplace. Such a dynamic would likely 
cause delays to the investments necessary to expand the supply of 
renewable fuels in the United States, particularly investments in 
cellulosic biofuels, the category of renewable fuels that Congress 
envisioned would provide the majority of volume increases in future 
years.
    In addition, changing the point of obligation could cause 
restructuring of the fuels marketplace as newly obligated parties alter 
their business practices to purchase fuel under contract ``below the 
rack'' instead of ``above the rack'' to avoid the compliance costs 
associated with being an obligated party under the RFS program. We 
believe these changes would have no beneficial impact on the RFS 
program or renewable fuel volumes and would decrease competition among 
parties that buy and sell transportation fuels at the rack, potentially 
increasing fuel prices for consumers and profit margins for refiners, 
especially those not involved in fuel marketing. EPA is also not 
persuaded, based on our analysis of available data, including that 
supplied by petitioners, by their arguments that they are disadvantaged 
compared to integrated refiners in terms of their costs of compliance, 
nor that other stakeholders such as unobligated blenders are receiving 
windfall profits.
    EPA specifically requests comments that address whether or not 
changing the point of obligation in the RFS program would be likely to 
significantly increase the production, distribution, and use of 
renewable fuels as transportation fuel in the United States, as well as 
any data that can substantiate such claims. We also seek comment on any 
of the issues discussed here and in the more complete draft analysis of 
the petitions available in the docket referenced above, including EPA's 
authority to place the point of obligation on distributors and position 
holders; the significance of limiting the number and nature of 
obligated parties; the number of parties that are currently blenders or 
position holders; the extent to which blenders and position holders may 
be small businesses for whom designation as an obligated party would be 
particularly burdensome; whether it is likely that current renewable 
fuel blenders and/or position holders would reposition themselves in 
the market to avoid RFS obligations if designated as obligated parties 
and the likely impact of such repositioning; the significance of 
transitional issues and potential regulatory uncertainty that would 
result from changing the point of obligation; and the extent to which a 
change in the point of obligation could lead to unintended market 
changes or consequences.

    Dated: November 10, 2016.
Janet McCabe,
Acting Assistant Administrator, Office of Air and Radiation.
[FR Doc. 2016-27854 Filed 11-21-16; 8:45 am]
 BILLING CODE 6560-50-P