Document ID: EPA-HQ-OAR-2010-0133-0087
Agency: epa
Document Type: Rule
Title: Supplemental Determination for Renewable Fuels Produced under Final RFS2 Program from Canola Oil
Posted Date: 2010-09-28T04:00Z

[Federal Register: September 28, 2010 (Volume 75, Number 187)]
[Rules and Regulations]               
[Page 59622-59634]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28se10-11]                         

=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2010-0133; FRL-9207-1]
RIN 2060-AQ35

 
Supplemental Determination for Renewable Fuels Produced Under the 
Final RFS2 Program From Canola Oil

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: On March 26, 2010, the Environmental Protection Agency 
published final changes to the Renewable Fuel Standard (RFS) program as 
required by the Energy Independence and Security Act (EISA) of 2007. In 
the preamble to the final rule, EPA indicated that it had not completed 
the lifecycle greenhouse gas (GHG) emissions impact analysis for 
several specific biofuel production pathways but that this work would 
be completed through a supplemental final rulemaking process. This 
supplemental final rule describes a final GHG analysis for canola oil 
biodiesel. It also finalizes our regulatory determination that canola 
oil biodiesel meets the biomass-based diesel and advanced biofuel GHG 
reduction thresholds of 50% as compared to the baseline petroleum fuel 
it will replace, petroleum diesel. This final rules will allow 
producers or importers of canola oil biodiesel fuel to generate 
biomass-based diesel Renewable Identification Numbers (RINs), providing 
that the fuel meets other definitional criteria for renewable fuel 
(e.g., produced from renewable biomass as defined in the RFS2 
regulations, and used to reduce or replace petroleum-based 
transportation fuel, heating oil or jet fuel). In addition, this rule 
includes a new regulatory provision establishing a temporary and 
limited means for producers or importers of canola oil biodiesel to 
generate RINs for qualifying biofuel produced or imported between July 
1, 2010, and the effective date of this rule.

DATES: This final rule is effective on September 28, 2010.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-OAR-2010-0133. All documents in the docket are listed on the 
http://www.regulations.gov web site. Although listed in the index, some 
information is not publicly available, e.g., confidential business 
information (CBI) or other information whose disclosure is restricted 
by statute. Certain other material, such as copyrighted material, is 
not placed on the Internet and will be publicly available only in hard 
copy form. Publicly available docket materials are available either 
electronically through http://www.regulations.gov or in hard copy at 
the Air and Radiation Docket and Information Center, EPA/DC, EPA West, 
Room 3334, 1301 Constitution Ave., NW., Washington, DC 20004. The 
Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through 
Friday, excluding legal holidays. The telephone 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: Doris Wu, Office of Transportation and 
Air Quality, Transportation and Climate Division, Environmental 
Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; 
telephone number: 734-214-4923; fax number: 734-214-4958; e-mail 
address: wu.doris@epa.gov.

SUPPLEMENTARY INFORMATION:

[[Page 59623]]

I. General Information

A. Does this action apply to me?

    Entities potentially affected by this action are those involved 
with the production, distribution, and sale of transportation fuels, 
including gasoline and diesel fuel or renewable fuels such as ethanol 
and biodiesel. Regulated categories include:

----------------------------------------------------------------------------------------------------------------
                                                                               Examples of potentially regulated
                 Category                   NAICS \1\ codes    SIC \2\ codes                entities
----------------------------------------------------------------------------------------------------------------
Industry.................................            324110              2911  Petroleum Refineries.
Industry.................................            325193              2869  Ethyl alcohol manufacturing.
Industry.................................            325199              2869  Other basic organic chemical
                                                                                manufacturing.
Industry.................................            424690              5169  Chemical and allied products
                                                                                merchant wholesalers.
Industry.................................            424710              5171  Petroleum bulk stations and
                                                                                terminals Chemical and allied
                                                                                products merchant wholesalers.
Industry.................................            424720              5172  Petroleum and petroleum products
                                                                                merchant wholesalers.
Industry.................................            454319              5989  Other fuel dealers.
----------------------------------------------------------------------------------------------------------------
\1\ North American Industry Classification System (NAICS).
\2\ Standard Industrial Classification (SIC) system code.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by the RFS2 
program. This table lists the types of entities that EPA is now aware 
of that could potentially be regulated under the program. To determine 
whether your activities would be regulated, you should carefully 
examine the applicability criteria in 40 CFR part 80, Subpart M. If you 
have any questions regarding the applicability of this action to a 
particular entity, consult the person listed in the preceding section.

Outline of This Preamble

I. Executive Summary
II. Lifecycle Analysis of Greenhouse Gas Emissions for Canola Oil 
Biodiesel
    A. Methodology and Key Assumptions
    1. Models
    2. Scenarios Modeled
    3. Year of Analysis
    4. Biodiesel Processing Assumptions
    5. Other Assumptions
    B. Threshold Determination and Assignment of Pathways
III. Delayed RIN Generation for New Pathways
IV. Public Participation
V. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
VI. Statutory Provisions and Legal Authority

I. Executive Summary

    On March 26, 2010, the Environmental Protection Agency published 
final changes to the Renewable Fuel Standard (RFS) program as required 
by the Energy Independence and Security Act (EISA) of 2007. EISA 
increased the volume of renewable fuel required to be blended into 
transportation fuel to 36 billion gallons by 2022. Furthermore, the Act 
established new eligibility requirements for four categories of 
renewable fuel, each with their own annual volume mandates. The 
eligibility requirements include minimum lifecycle greenhouse gas (GHG) 
reduction thresholds for each category of renewable fuel. EPA conducted 
lifecycle GHG analyses for a number of biofuel feedstocks and 
production pathways for the final rule. In the preamble to that final 
rule, EPA indicated that it had not completed the lifecycle greenhouse 
gas emissions impact analysis for certain biofuel production pathways 
but that this work would be completed through a supplemental final 
rulemaking process. This supplemental final rule describes a final GHG 
analysis for canola oil biodiesel. It also finalizes our regulatory 
determination that canola oil biodiesel qualifies as biomass-based 
biodiesel and advanced biofuel under RFS2 regulatory provisions, 
providing that the fuel meets other definitional criteria for renewable 
fuel (e.g., produced from renewable biomass as defined in the RFS2 
regulations, and used to reduce or replace petroleum-based 
transportation fuel, heating oil or jet fuel). EPA currently intends to 
issue additional supplemental final rules to address other biofuel 
production pathways, including those involving palm oil, woody biomass 
and sorghum.
    We issued a notice of data availability (NODA) on July 26, 2010 
which described the methodology and modeling assumptions, and proposed 
lifecycle GHG assessment, for canola oil biodiesel. EPA provided a 30-
day public comment period on the NODA. In addition, we sought input 
from several stakeholders during the development of this rule and have 
worked closely with other Federal agencies, in particular the U.S. 
Departments of Energy and Agriculture. In general, the public comments 
received supported our proposed lifecycle analysis, and we are 
finalizing the proposal without modification.
    The agency continues to recognize that lifecycle GHG assessment of 
biofuels is an evolving discipline. As we noted in the final RFS2 rule, 
EPA will revisit our lifecycle analyses in the future as new 
information becomes available. In addition, EPA is moving forward with 
plans to ask the National Academy of Sciences to make recommendations 
for these future lifecycle GHG assessments. This current canola 
analysis and subsequent supplemental analysis being conducted will 
continue to use the same lifecycle modeling approach as used for the 
RFS2 final rule and will be revisited along with other fuels as part of 
any future lifecycle updates as appropriate.
    In addition, on July 20, 2010, EPA issued a Notice of Proposed 
Rulemaking (NPRM) for the 2011 renewable fuel standards.\1\ This NPRM 
included a proposed provision to allow the temporary and limited 
generation of ``delayed RINs'' by renewable fuel producers using fuel 
production pathways approved for RIN generation on or after July 1, 
2010 and before January 1, 2011. Under the proposal, delayed RINs could 
be generated after the effective date of a rule adding a new

[[Page 59624]]

pathway to Table 1 to Sec.  80.1426 for qualifying fuel produced 
between July 1, 2010 and the effective date of that rule, even if the 
fuel had been transferred to another party. In addition, the proposed 
rule included provisions allowing fuel producers who are grandfathered 
under the provisions of Sec.  80.1403 to exchange higher-value delayed 
RINs for RINs generated under the grandfathering provisions that have a 
D code of 6. We are finalizing this provision in today's rule. Since 
the only pathway we are approving in today's action is biodiesel and 
renewable diesel produced from canola oil, the delayed RINs provision 
will only be applicable to this pathway.
---------------------------------------------------------------------------

    \1\ 75 FR 42238.
---------------------------------------------------------------------------

    Today's rule does not add significant environmental or economic 
impacts beyond those already addressed in the final RFS2 rule published 
on March 26, 2010. The new delayed RINs provision provides additional 
flexibility to certain biofuel producers, and the new canola oil 
biodiesel pathway provides an additional basis for biofuel producers to 
generate RINs. Today's actions will not increase overall burdens on any 
regulatory party and will impose no additional costs.

II. Lifecycle Analysis of Greenhouse Gas Emissions for Canola Oil 
Biodiesel

A. Methodology and Key Assumptions

    EISA establishes specific lifecycle greenhouse gas (GHG) emissions 
reduction thresholds for each of four categories of renewable fuels 
(i.e., 60% for cellulosic biofuel, 50% for biomass-based diesel and 
advanced biofuel, and 20% for other renewable fuels). EPA employed the 
methodology described in the RFS2 final rule (published March 26, 2010) 
to analyze the lifecycle GHG emissions of the canola oil biodiesel 
pathway, as described in the NODA issued on May 26, 2010. This section 
briefly describes the methodological approach as well as the key 
assumptions that were used in the lifecycle modeling of canola oil 
biodiesel.
    The public comments received on the canola oil biodiesel NODA 
generally supported our proposed lifecycle GHG analysis. For instance, 
several commenters stated that they support the determination that 
canola oil biodiesel meets or exceeds the 50% biomass-based diesel 
lifecycle GHG reduction requirement and requested that EPA formally 
approve canola for RIN generation as expeditiously as possible.\2\ 
Responses to comments that were critical of certain elements of the 
proposal are included in the following sections. EPA has decided to 
finalize the proposed lifecycle GHG assessment for canola oil biodiesel 
without modification.
---------------------------------------------------------------------------

    \2\ See comments EPA-HQ-OAR-2010-0133-0079 (Embassy of Canada), 
EPA-HQ-OAR-2010-0133-0080 (Sustainable Biodiesel Alliance), EPA-HQ-
OAR-2010-0133-0082 (Washington State Department of Commerce), EPA-
HQ-OAR-2010-0133-0083 (U.S. Canola Association).
---------------------------------------------------------------------------

1. Models
    The analysis EPA has prepared for canola oil biodiesel uses the 
same set of models that was used for the final RFS2 rule, including the 
Forestry and Agricultural Sector Optimization Model (FASOM) developed 
by Texas A&M University and others and the Food and Agricultural Policy 
and Research Institute international models as maintained by the Center 
for Agricultural and Rural Development (FAPRI-CARD) at Iowa State 
University. The models require a number of inputs that are specific to 
the pathway being analyzed, for example, inputs include projected yield 
of feedstock per acre planted, projected fertilizer use, energy use in 
feedstock processing and energy use in fuel production. The docket 
includes detailed information on model inputs, assumptions, 
calculations, and the results of our modeling for canola oil biodiesel.
2. Volume Scenarios Modeled
    The RFS2 final rulemaking established reference and control cases 
to assess the impacts of an increase in renewable fuel volume from 
business-as-usual. That is, EPA compared what is likely to have 
occurred without EISA to the increased volume necessary to meet the 
EISA mandates. For the canola biodiesel assessment, we determined that 
an incremental impact of an increase of 200 million gallons of 
biodiesel from canola per year in 2022 was an appropriate volume to 
model. This assumed a 2022 reference case of zero canola oil biodiesel 
volume and a 2022 control case of 200 million gallons canola oil 
biodiesel volume. For more detail on our rationale for volumes modeled 
(which were based in part on consultation with USDA experts and 
industry representatives) please refer to the inputs and assumptions 
document that is available through the docket. We did not receive any 
comments on our proposed use of this volume scenario and are therefore 
using the same volume scenario for our final modeling.
3. Year of Analysis
    We received a comment disagreeing with our proposal to use the year 
2022 to model and evaluate GHG emissions associated with canola oil 
biodiesel, as we had done for other biofuels in the RFS2 final rule. 
The commenter stated that use of 2022 is inappropriate since that is 
``the year that the RFS ends'' and that GHGs are emitted in the present 
as the feedstock and fuel is produced and combusted. The commenter 
suggested that EPA instead use a year for its analyses that better 
reflects the ``average performance of the RFS,'' such as 2012, with a 
commitment to update the analysis regularly to reflect documented 
changes in technologies and practices, as well as better information on 
trends in land use and associated emissions.
    In response, EPA first notes that the commenter is incorrect in 
assuming that the RFS program ends in 2022. That is the year when the 
full 36 billion gallons specifically required by EISA is to be used, 
but EPA is directed to set renewable fuel volume requirements, and 
implement associated percentages standards, indefinitely into the 
future after 2022. Thus, no single year can reasonably be assumed to 
reflect an ``average performance'' of a fuel under the RFS program.
    As described in our final RFS2 rule, there were two main reasons 
for our focus on 2022.\3\ The first reason is that it is appropriate to 
select a single year to analyze. The lifecycle GHG analysis is based on 
the use of various economic models, both domestic and international. 
These models estimate economic impacts on relevant sectors over a 
multi-year time period, and rely on assumptions or projections as to 
the various biofuel volumes out into the future. The results are 
dependent in part on the biofuel volumes that are used, and the 
modeling requires a stable prediction of the specific volumes and types 
of fuels used from year to year. This reflects the current status of 
the models available to perform this analysis. If there were changes in 
volumes in interim years in the modeling, this would have impacts on 
the later years of the modeling. The lack of a stable projection or 
assumption in the year to year fuel volumes would make it impossible to 
accurately model the predicted lifecycle GHG reductions for the 
different fuels. Analytically it would not be possible to model in 
advance the GHG impacts and make lifecycle determinations on biofuels 
for different years over the life of the program.
---------------------------------------------------------------------------

    \3\ See Renewable Fuel Standard Program (RFS2) Summary and 
Analysis of Comments, EPA-420-R-10-003, February 2010, see page 7-
18, 7-19 & 7-31. Also, see preamble to final RFS2 rule in Chapter V. 
Lifecycle Analysis of Greenhouse Gas Emissions.
---------------------------------------------------------------------------

    Thus it would not be possible using our current methodology to use 
more

[[Page 59625]]

than one year to determine the life-cycle assessment, as recommended by 
the commenter. They recommend that we assess biofuel GHG performance 
early in the RFS2 implementation schedule, using a year such as 2012 as 
the year, and then make periodic GHG impact reassessments prior to 2022 
with threshold determinations on the basis of these reassessments. 
However, if a biofuel met a certain GHG performance threshold in some 
years while not in others, this would affect the volumes of different 
types of fuels produced to meet RFS2 requirements. A change in a 
threshold determination would lead to changes in investments and in the 
market, producing a new mix of biofuels that we are not able to predict 
and use in the lifecycle modeling. This use of more than one year can 
lead to changes in the interim years' biofuel volumes that we are not 
in a position to model or project. Based on the inability to determine 
the impact of these iterative changes in the market resulting from 
changes in the GHG threshold decision over time, we would be unable to 
develop a valid year by year projection of biofuel volumes for the 
subsequent lifecycle modeling. EPA is also concerned that this approach 
would produce significantly increased uncertainty in the biofuels 
industry and could affect investment decisions and thus the ability of 
the industry to produce sufficient complying biofuels to meet the goals 
of EISA. This increased uncertainty about future decisions is not 
warranted in a situation where the modeling tools available to the 
agency could not be used to produce consistent results over multiple 
years when biofuel volume predictions are not stable due to changing 
threshold determinations from year to year. As such, EPA's position is 
that it is more appropriate to rely on modeling centered on a single 
year.
    The second reason to focus on 2022, the final year of ramp up in 
the required volumes of renewable fuel, is that modeling that uses the 
year 2022 allows the total fuel volumes specified in EISA to be 
incorporated into the analysis. Modeling an early year such as 2012 
would result in almost all of the volume being made up of traditional 
biofuels such as ethanol from corn or biodiesel from soy. We note also 
that much of the 2012 production capacity is already in place and thus 
allowed to meet the overall renewable fuel standard under its 
grandfathering provisions (for which no GHG assessment if required). We 
are more interested in modeling the GHG performance of future 
production capacity likely to come on board after 2012. Additionally, 
assessment of the impact of biofuels on land use in an early year such 
as 2012 would underestimate the full land use impact of the greater 
biofuel volumes required in later years. Additionally, such an early 
assessment would not reflect the anticipated technology changes and 
expanded use of valuable co-products such as DGS. In this way, an early 
analysis would give a false picture of the anticipated emission 
reductions from individual biofuels. In contrast, EPA feels that the 
2022 analysis represents an appropriate estimate of GHG impacts as it 
represents the full adoption of statutorily-prescribed biofuel volumes 
and thus their feedstock demand on land use and otherwise appropriately 
assesses the GHG impacts of the program when fully implemented. An 
earlier assessment year would underestimate the full volumes required 
by EISA and therefore not appropriately account for the full impact of 
the program. Furthermore, we note that the RFS2 requirements do not end 
in 2022, rather it would continue in years to follow. Since trends 
which might impact a 2022 assessment compared to earlier years such as 
improvements in crop yield or production technology would be expected 
to continue after 2022, selecting 2022 as a preferred year of 
assessment represents a more reasonable single year for assessment of 
the expected GHG performance of a biofuel during the RFS2 program than 
an assessment early in the program such as 2012. Finally, a 2022 
assessment for canola oil biodiesel is consistent with the 2022 
assessments for all other biofuel pathways adopted in RFS2. EPA 
believes that it is best to use similar assessment techniques across 
all biofuel pathways.
4. Biodiesel Processing Assumptions
    We analyzed the lifecycle GHG emission impacts of producing 
biodiesel using canola oil as a feedstock assuming the same biodiesel 
production facility designs and conversion efficiencies as modeled for 
biodiesel produced from soybean oil. Canola oil biodiesel is produced 
using the same methods as soybean oil biodiesel, therefore plant 
designs are assumed to not significantly differ between these two 
feedstocks. As was the case for soybean oil biodiesel, production 
technology for canola oil biodiesel is mature and we have not projected 
in our assessment of canola oil biodiesel any significant improvements 
in plant technology. Unanticipated energy saving improvements would 
further improve GHG performance of the fuel pathway. Refer to the 
docket for more details on these model inputs and assumptions. The 
inputs and assumptions are based on our understanding of the industry, 
analysis of relevant literature, public comments, and recommendations 
of experts within the canola and biodiesel industries and those from 
USDA as well as the experts at Texas A&M and Iowa State Universities 
who have designed the FASOM and FAPRI models.
    The glycerin produced from canola oil biodiesel production is 
equivalent to the glycerin produced from the existing biodiesel 
pathways (based on soy oil, etc.) that were analyzed as part of the 
RFS2 final rule. Therefore the same assumptions and co-product credit 
was applied to canola oil biodiesel as was used for the biodiesel 
pathways modeled for the RFS2 final rule. The assumption is that the 
GHG reductions associated with the replacement of residual oil on an 
energy equivalent basis represents an appropriate mid-range co-product 
credit of biodiesel produced glycerin. The U.S. Canola Association 
supported this approach in its comments, stating that ``EPA properly 
considered glycerin as a co-product, and conservatively assumed that 
the glycerin would be used as a fuel source in place of residual oil.'' 
However, we also received comments that this approach overestimates the 
GHG reduction benefits of glycerin co-product because the glycerin 
would actually replace less than an energy equivalent amount of 
residual oil. The commenter, Clean Air Task Force (CATF), makes the 
argument that while the glycerin use would lower the demand for 
residual oil, it would also reduce the price of residual oil fuel, and 
this lowered price would increase somewhat the demand and use of 
residual oil above the levels we assumed in our analysis. According to 
the commenter, this assumed rebound effect should decrease the credit 
we provide in our analysis for biodiesel-produced glycerin.
    EPA feels that the proposed approach, which it is finalizing today, 
provides an appropriate estimate of credit for the glycerin co-product 
produced from the canola biodiesel pathway. As part of our RFS2 
proposal we assumed the glycerin would have no value and would 
effectively receive no co-product credits in the soy biodiesel pathway. 
We received numerous comments, however, as part of the RFS2 final rule 
stating that the glycerin would have a beneficial use and should 
generate co-product benefits. Therefore, the biodiesel glycerin co-
product determination made as part of the RFS2 final rule took into 
consideration the possible range of co-product credit results. The 
actual co-

[[Page 59626]]

product benefit will be based on what products are replaced by the 
glycerin, or what new uses the co-product glycerin is applied to. The 
total amount of glycerin produced from the biodiesel industry will 
actually be used across a number of different markets with different 
GHG impacts. This could include for example, replacing petroleum 
glycerin, replacing fuel products (residual oil, diesel fuel, natural 
gas, etc.), or being used in new products that don't have a direct 
replacement, but may nevertheless have indirect effects on the extent 
to which existing competing products are used. The more immediate GHG 
reductions from glycerin co-product use will likely range from fairly 
high reductions when petroleum glycerin is replaced to lower reduction 
credits if it is used in new markets that have no direct replacement 
product, and therefore no replaced emissions. EPA does not have 
sufficient information (and the commenter supplied none) on which to 
allocate glycerin use across the range of likely uses. Also, if 
additional residual oil is used as predicted by the commenter, its use 
would presumably replace some other product (e.g., perhaps replacing 
coal in some cases) which would also have a secondary GHG impact which 
could be in a positive direction (i.e., a lowering of GHG emissions). 
Again, EPA does not have sufficient information on which to base such 
market movements and their GHG impact. Therefore, EPA believes that its 
proposed approach of picking a surrogate use for modeling purposes in 
the mid-range of likely glycerin uses, and focusing on the more 
immediate GHG emissions results tied to such use, is reasonable. The 
replacement of an energy equivalent amount of residual oil is a 
simplifying assumption determined by EPA to reflect the mid-range of 
possible glycerin uses in terms of GHG credits, and EPA believes that 
it is appropriately representative of GHG reduction credit across the 
possible range without necessarily biasing the results toward high or 
low GHG impact.
    EPA feels that the comments from the CATF do not change the 
appropriateness of using at this time an assumption of residual oil 
replaced on an energy equivalent basis (without any adjustment for 
possible global rebound effect) as a representative biodiesel glycerin 
co-product credit. Since we are not actually assuming all of the 
biodiesel glycerin produced replaces residual oil (it will likely 
replace a mix of products with a range of GHG impacts but residual oil 
is used as the representative GHG reduction credit), any potential 
rebound impact in the residual oil market would not occur to the extent 
described in the CATF comment as they assumed the total amount of 
glycerin would be used as a residual oil replacement. Furthermore, 
while including rebound effects and other indirect impacts for residual 
oil that is replaced by biodiesel co-product glycerin could possibly 
lower reduction credits, that would not be true for all replacement 
products. For example, including indirect impacts for glycerin that is 
used in new markets could tend to increase estimated emission 
reductions. Without indirect impacts the co-product assessment for 
glycerin used in new markets would assume that it did not have a 
replacement value and would therefore generate no credits. If indirect 
impacts were taken into account it could be that the new products would 
actually have impacts in other markets that were not direct 
replacements but generate GHG benefits. Given the varying impacts of 
including the type of factors CATF mentions in their comments would 
have across the full range of possible glycerin replacements, and the 
fundamental difficulty of predicting possible glycerin uses and impacts 
of those uses many years into the future under different market 
conditions, EPA believes it is reasonable to finalize its more 
simplified approach to calculating co-product GHG benefit associated 
with glycerin production.
5. Other Assumptions
    We received comments from the U.S. Canola Association supported by 
the State of Washington Department of Commerce that the GHG impacts of 
canola oil biodiesel as proposed in our Notice of Data Availability 
overestimated the GHG emissions of canola production and therefore 
canola oil biodiesel has a greater than 50% lifecycle GHG reduction 
compared to the baseline petroleum diesel fuel baseline. The U.S. 
Canola Association plans to submit more detailed technical analysis to 
EPA for consideration in any updated analysis of canola oil biodiesel. 
Because comments suggesting that EPA overestimated lifecycle GHG 
emissions from canola oil biodiesel do not impact today's regulatory 
determination that canola oil biodiesel achieves at least a 50% 
lifecycle GHG reduction, and because those who submitted such comments 
have asked that EPA expedite its qualification action for canola oil 
biodiesel under RFS2, we believe it is most appropriate that EPA 
consider these comments in detail at such time as we prepare an updated 
analysis of canola oil biodiesel. We worked closely with the canola 
industry on the lifecycle analysis performed for this rulemaking and 
will continue to work with them on any future analysis. The state of 
Washington specifically referenced a concern with the diesel fuel 
consumption rate in our analysis. The concern is that the total change 
in diesel use divided by the total acreage change across the entire 
U.S. agricultural sector as a result of an increase in canola oil 
biodiesel production results in a diesel use figure that is higher than 
the rate of diesel fuel used to produce canola. The commenter indicates 
that this appears to represent an error in the EPA lifecycle analysis. 
EPA disagrees that this represents an error in the modeling. As 
mandated by EISA, and as was done for the other biofuels analyzed as 
part of the RFS2 final rule, EPA's lifecycle analysis takes into 
account the full direct as well as significant indirect impacts of 
canola oil biodiesel production. As described in the RFS2 final 
rulemaking, this means that for the agricultural sector we consider the 
full impacts across the entire sector due to canola oil biodiesel 
production including not only the impacts on canola acres and diesel 
fuel input, but also the impacts of crop shifting and changes in 
livestock production with associated impacts on feed crops and other 
crop production with associated diesel fuel use. Therefore the diesel 
fuel use figure that the state of Washington cites does not represent 
just the change from canola acres but shifts in all crop acres across 
all regions as described in the agricultural sector model results 
included in the docket to this rulemaking. The shifts of all these 
different crop acres with associated diesel fuel use results in the 
correct diesel use figure used by EPA.
    The state of Washington also has comments specifically referencing 
regional data on canola production that is not reflective of the 
national and international analysis that EPA performed for canola oil 
biodiesel, as mandated by EISA and as was done for all feedstocks 
considered as part of the final RFS2 rulemaking. While regional 
specific data was included in the analysis the full lifecycle impacts 
of canola oil biodiesel as mentioned above were determined based on 
comprehensive national and international changes in agriculture and 
associated GHG impacts and therefore the data described in the State of 
Washington comments would not impact our determination that canola oil 
biodiesel qualifies under the 50% GHG threshold for biomass-based 
diesel and advanced biofuel. Furthermore, the

[[Page 59627]]

State of Washington comments encourage EPA to extend this rulemaking to 
other oilseeds in the family Brassicaceae such as camelina. Today's 
action is limited to canola, so this comment raises issues beyond the 
scope of this rulemaking. Parties seeking EPA analysis of additional 
fuel pathways are urged to follow the petition process specified in 40 
CFR 80.1416.
    We received comment from the Clean Air Task Force objecting to 
EPA's assumptions regarding likely improvements in canola yields in the 
future. According to the commenter, there is ``recent evidence [which] 
significantly undermines any expectation that crop yields will increase 
in the future.'' The commenter bases this statement on a study 
suggesting that ``the effects of climate change could decrease 
agricultural yields'' and ``further research is needed to identify how 
crop yields will respond to increased levels of carbon dioxide''. 
However, we note that the authors of the study cited by commenters do 
not draw definitive conclusions, but phrase their statements 
cautiously, including, for examples, statements such as yields ``may 
have reached their ceiling.'' In the study, the authors look 
principally at two crops, wheat and rice, as these crops have had 
declined gains in yield. However, the study also notes that maize has 
``maintained the rate of increase of the 1970s and 1980s into the most 
recent decade.'' This seems to go against the commenter's point that 
``recent evidence significantly undermines any expectation that crop 
yields will increase in the future.'' For crops that are not part of 
these three most important grains, no comparison has been made in the 
study. Thus, the study does not directly address canola. Finally, we 
note that the thrust of the paper is that past approaches to increasing 
yields may be reaching the ceiling of potential effectiveness, but the 
author notes many other avenues that the author believes can and should 
be pursued to increase yield. Thus, even for the crops that have 
experienced a drop in yield increases, the study does not necessarily 
suggest that this will remain the case if appropriate research as 
suggested by the paper is conducted. Given the uncertain nature of 
scientific advancement and possible future effects related to climate 
change, EPA believes that its approach of looking at yield trends on a 
crop by crop basis based on past historical and verifiable data 
provides the most reasonable approach available at this time to 
predicting future yields.
    EPA bases its crop yields on projecting long-term trends based on 
historical data for each crop using the same methodology. EPA's 
approach is consistent with USDA's future projections of crop yield 
changes over time. On the other end of the spectrum, we note that 
during the proposal to the final RFS2 rule we received comments that 
EPA's crop yields were actually too low and that yields will continue 
to increase due to improvements in seed technology.\4\ Those commenters 
would argue that higher yields than used by EPA should be adopted. We 
believe that our assumptions are reasonably justifiable and do not 
differ from past long-term trend yield performance.
---------------------------------------------------------------------------

    \4\ See RFS2 Summary and Analysis of Comments, e.g., pg. 7-17, 
7-37, 7-149.
---------------------------------------------------------------------------

    The docket includes a useful memorandum which summarizes relevant 
materials used for the canola biodiesel pathways analysis including 
detailed information on the assumptions used in our lifecycle modeling. 
Described in the memorandum, for example, are the input and assumptions 
document (e.g., crop yield projections, fertilizer use, agricultural 
energy use, etc.) and detailed results spreadsheets (e.g., foreign 
agricultural impacts, foreign agricultural energy use, FASOM and FAPRI 
model results) used to generate the results presented above.

B. Threshold Determination and Assignment of Pathways

    As part of this final rule, EPA is making a lifecycle GHG threshold 
determination based on its final lifecycle GHG analysis for canola oil 
biodiesel. Figure II-1 shows the results of the modeling. It shows the 
percent difference between lifecycle GHG emissions for 2022 canola oil 
biodiesel as compared to the 2005 petroleum diesel fuel baseline. In 
the figure, the zero on the x-axis represents the lifecycle GHG 
emissions equivalent to the 2005 petroleum diesel fuel baseline. The y-
axis on the chart represents the likelihood that possible results would 
have a specific GHG reduction value shown. The area under the curve 
represents all the possible results. The results for canola biodiesel 
are that the midpoint of the range of results is a 50% reduction in GHG 
emissions compared to the diesel fuel baseline. The 95% confidence 
interval around that midpoint results in range of a 20% reduction to a 
75% reduction compared to the 2005 petroleum diesel fuel baseline. 
These results justify authorizing the generation of biomass-based 
diesel RINs for fuel produced by the canola oil biodiesel pathway 
modeled, assuming that the fuel meets the other definitional criteria 
for renewable fuel (e.g., produced from renewable biomass, and used to 
reduce or replace petroleum-based transportation fuel, heating oil or 
jet fuel) specified in EISA.
BILLING CODE 6560-50-P

[[Page 59628]]

[GRAPHIC] [TIFF OMITTED] TR28SE10.002

BILLING CODE 6560-50-C
    Table II-1 breaks down by stage the lifecycle GHG emissions for 
canola oil biodiesel and the 2005 diesel baseline. The biodiesel 
production process reflected in this table assumes that natural gas is 
used for process energy and accounts for co-product glycerin displacing 
residual oil. This table demonstrates the contribution of each stage 
and its relative significance.
    As a sensitivity case, we also looked at the use of biomass as an 
energy source and determined that this would further improve the GHG 
lifecycle emissions profile compared to natural gas use. Thus, the GHG 
emissions threshold determination would apply to facilities using 
biomass or natural gas as an energy source. We have clarified in the 
Table 1 to 80.1426 that canola oil biodiesel facilities seeking to 
generate biomass-based diesel or advanced biofuel RINs must use either 
natural gas or biomass. Other process energy sources (such as coal) 
have not been modeled, but are likely to result in additional GHG 
emissions that would result in the pathway failing to provide 50% 
lifecycle GHG emissions as compared to baseline fuel. This is also true 
for biodiesel pathways using soybean oil and other feedstocks. However, 
at this time we are not amending Table 1 to Sec.  80.1426 to specify 
the required process energy source(s) for soybean oil and other 
biodiesel feedstocks because this rule is focused on canola. We commit 
to updating Table 1 to Sec.  80.1426 at a future time to include this 
energy use stipulation for other biodiesel feedstocks.

   Table II-1--Lifecycle GHG Emissions for Canola Oil Biodiesel, 2022
                             [kgCO2e/mmBTU]
------------------------------------------------------------------------
                                            Canola oil      2005 Diesel
                Fuel type                    biodiesel       baseline
------------------------------------------------------------------------
Net Domestic Agriculture (w/o land use                 8  ..............
 change)................................
Net International Agriculture (w/o land                0  ..............
 use change)............................
Domestic Land Use Change................               3  ..............
International Land Use Change, Mean (Low/      31 (7/61)  ..............
 High)..................................

[[Page 59629]]

Fuel Production.........................               3              18
Fuel and Feedstock Transport............               2               *
Tailpipe Emissions......................               1              79
                                         -------------------------------
Total Emissions, Mean (Low/High)........      48 (25/78)              97
------------------------------------------------------------------------
* Emissions included in fuel production stage.

    Based on the above analyses, canola oil biodiesel has been found to 
comply with the lifecycle GHG reduction thresholds (50%) applicable to 
the biomass-based diesel and advanced biofuel categories and are 
therefore eligible for the D-Codes specified in Table II-2.

                                         Table II-2--D-Code Designations
----------------------------------------------------------------------------------------------------------------
                                                                   Production process
              Fuel type                       Feedstock               requirements                D-Code
----------------------------------------------------------------------------------------------------------------
Biodiesel............................  Canola oil.............  Trans-Esterification     4 (biomass-based
                                                                 using natural gas or     diesel).
                                                                 biomass for process
                                                                 energy.
----------------------------------------------------------------------------------------------------------------

III. Delayed RIN Generation for New Pathways

    In a Notice of Proposed Rulemaking (NPRM) published on July 20, 
2010 (75 FR 42238), we proposed a new regulatory provision that would 
allow RINs to be generated for fuel produced on or after July 1, 2010 
representing certain fuel pathways that were not in Table 1 to Sec.  
80.1426 as of July 1, 2010, but were added to Table 1 by January 1, 
2011. Under the proposal, RINs could be generated only if the pathways 
were indeed approved as valid RIN-generating pathways, and only for 
volumes of fuel produced between July 1, 2010 and the effective date of 
a new pathway added to Table 1 to Sec.  80.1426. In today's rule, we 
are finalizing regulatory provisions for ``delayed RINs'' with certain 
modifications as described below only for biodiesel produced from 
canola oil since today's action adds only this new RIN-generating 
pathway to Table 1 to Sec.  80.1426.
    For the RFS2 final rule (75 FR 14670), we attempted to evaluate and 
model as many pathways as possible so that producers and importers 
could generate RFS2 RINs beginning on July 1, 2010. However, we were 
not able to complete the evaluation of all pathways that we had 
planned. In the final RFS2 rulemaking we announced our intention to 
complete the evaluation of three specific pathways after release of the 
RFS2 final rule: Grain sorghum ethanol, pulpwood biofuel, and palm oil 
biodiesel (see Section V.C of the RFS2 final rule, 75 FR 14796). To 
this list we added biodiesel produced from canola oil as this biofuel 
was produced under RFS1 and was also expected to participate in the 
RFS2 program at the program's inception.
    Following release of the final RFS2 rule, we determined that the 
lifecycle assessments for these additional pathways would not be 
completed by July 1, 2010, the start of the RFS2 program. While some 
producers of these biofuels could continue to generate RINs under the 
RFS2 ``grandfathering'' provisions, they would have no approved means 
for generating higher-value RINs (i.e. cellulosic biofuel, biomass-
based diesel, or advanced biofuel) \5\. Knowing that this circumstance 
had the potential to adversely impact these producers as well as to 
reduce the number of RINs available in the market relative to biofuel 
volume, in the July 20, 2010 NPRM, we proposed a new regulatory 
provision for delayed RINs that would allow certain renewable fuel 
producers to generate higher-value RINs for all fuel they produce and 
sell between July 1, 2010, and the effective date of the new pathway, 
if applicable pathways are ultimately approved for RIN generation after 
July 1, 2010 and by December 31,2010. This proposed provision was 
designed to allow biofuel producers to participate in the RFS2 program 
as fully as possible as it gets underway even though we were not able 
to complete the evaluation of a number of pathways prior to July 1. 
However, we also indicated in the preamble to the proposal that we 
intended to apply the delayed RINs provision to only the four pathways 
under consideration prior to July 1, 2010 (grain sorghum ethanol, 
pulpwood biofuel, palm oil biodiesel, and canola oil biodiesel) if any 
of these pathways are determined to meet the applicable GHG thresholds 
prior to January 1, 2011, and the provision would apply only for 
renewable fuel produced in 2010.
---------------------------------------------------------------------------

    \5\ Grandfathered facilities could generate renewable fuel RINs 
with a D code of 6 beginning on July 1, 2010, but many of these 
producers believed that their biofuel should be qualified for 
generating RINs with D codes other than 6.
---------------------------------------------------------------------------

    In response to the NPRM, most commenters supported such a 
provision. However, the American Petroleum Institute and the National 
Petrochemical Refiners Association opposed the proposal, stating that 
retroactively applicable actions are inappropriate and that delayed 
RINs would create more uncertainty for obligated parties. However, we 
continue to believe that the delayed RINs provision is both appropriate 
and will actually help obligated parties to comply with the applicable 
standards. Since the delayed RINs provision will increase the 
likelihood that higher-value RINs will be generated in 2010, more such 
RINs may be available to obligated parties for compliance purposes. 
Delayed RINs can be bought and sold independently of renewable fuel 
volumes, making them more easily marketable and more directly available 
to obligated parties than RINs assigned to renewable fuel. In addition, 
while this provision will allow RINs to be generated after the 
associated renewable fuel has been produced and sold, it does not 
constitute an impermissibly retroactive provision. Producers who

[[Page 59630]]

generate delayed RINs will do so voluntarily, and after the effective 
date of the new pathway. No additional burdens will be placed upon 
obligated parties and the rule will have no impact on any settled 
transactions of an obligated party. Moreover, RINs already generated 
and accepted in EMTS will not be affected. The D code assigned to any 
given RIN will not change, and RINs owned by any party can be retained 
by them for compliance purposes or sold as they wish.
    Finally, to the extent that the provision could be seen as having 
retroactive impacts, EPA believes its action is authorized by CAA 
section 211(o)(2)(A)(iii), providing that ``regardless of the date of 
promulgation, the regulations * * * shall contain compliance provisions 
applicable to refineries, blenders, distributors, and importers, as 
appropriate, to ensure that the requirements'' of the Act relating to 
use of specified volumes of renewable fuel are satisfied. The delayed 
RINs provision is a ``compliance provision'' because it relates to 
RINs, and RINs are the currency by which obligated parties demonstrate 
compliance. The delayed RINs provision relates to ensuring that the 
volumes of renewable fuel specified in the statute are met, by allowing 
producers to generate appropriate RINs for canola oil biodiesel that 
reflects its proper identification as biomass based diesel under the 
statute.
    Two commenters requested that the provision for delayed RINs be 
made applicable to other pathways as well, such as pathways utilizing 
camelina and winter barley. Since the only new pathway that we 
approving for RIN generation in today's action is biodiesel produced 
from canola oil, we are finalizing the delayed RINs provision only for 
this pathway in today's action. The application of delayed RINs to 
other pathways does not need to be addressed in this action, as it does 
not affect the decision on delayed RINs for biodiesel produced from 
canola oil.
    Several commenters responded to our proposed 30-day deadline for 
generation of delayed RINs by saying that additional time is necessary 
to allow grandfathered producers to acquire and retire an appropriate 
number of general renewable fuel (D code of 6) RINs. We proposed the 
30-day limit because we believe that the deadline for the generation of 
delayed RINs should be set such that they are entering the market as 
close as possible to the date of production of the renewable fuel that 
they represent. However, we agree with the commenters that 60-days is a 
reasonable timeframe consistent with this consideration, and that it is 
appropriate to allow producers additional time to complete necessary 
transactions. Therefore, today's final rule provides that all delayed 
RINs for a given pathway must be generated within 60-days of the 
effective date of either a qualifying rule adding that pathway to Table 
1 to Sec.  80.1426, or of a qualifying action on a petition pursuant to 
Sec.  80.1416.
    As described in the RFS2 final rule, grandfathered producers can 
generate RINs for their renewable fuel starting on July 1, 2010, but 
must designate the D code as 6 for such fuel, and they must transfer 
those RINs with renewable fuel they sell. Under today's rule, such 
grandfathered producers who qualify for the generation of delayed RINs, 
and who wish to avail themselves of the opportunity, will be required 
to acquire and retire RINs from the open market with a D code of 6 
prior to the generation of delayed RINs. The number of RINs retired in 
this fashion must be no greater than the number they generated in 2010 
in the time period between July 1, 2010 and the effective date of the 
new approved pathway for biodiesel made from canola oil. Once those 
RINs are retired, an equivalent number of delayed RINs with a different 
D code can be generated and sold. One commenter requested that the 
regulations allow delayed RINs to be generated and sold before, rather 
than after, the producer retires an equivalent number of RINs with a D 
code of 6. The commenter argued that this approach would allow 
producers to generate and sell delayed RINs as quickly as possible, and 
would also allow the producer to use the proceeds from the sale of 
delayed RINs to purchase and retire RINs with a D code of 6. However, 
despite these advantages to producers, we continue to believe that 
delayed RINs should only be generated after RINs with a D code of 6 are 
retired. In order to ensure that the number of RINs in the market 
accurately reflects biofuel produced or imported to represent those 
RINs, the number of delayed RINs generated must be equivalent to the 
number of RINs with a D code of 6 that are retired. If a producer were 
to generate and sell delayed RINs prior to retiring RINs with a D code 
of 6, the producer would be forced to estimate the appropriate number 
of delayed RINs to generate, and there would be no recourse for 
correcting an overestimation. By requiring RINs with a D code of 6 to 
be retired first, the producer will know exactly how many delayed RINs 
he is permitted to generate.

IV. Public Participation

    Many interested parties participated in the rulemaking process that 
culminates with this final rule. The public had an opportunity to 
submit both written and oral comments on the proposed RFS2 final rule 
published on May 26, 2009 (74 FR 24904), and has had an opportunity to 
submit additional comments following publication of the Notice of Data 
Availability (NODA) for canola oil biodiesel that was published on July 
26, 2010 (75 FR 43522). We have considered these comments in developing 
today's final rule.
    One commenter on the canola oil biodiesel NODA objected to ``EPA's 
finalization of a petition process to generate RINs for additional 
fuels or additional fuel pathways without providing an adequate 
opportunity for notice and comment.'' The comment apparently relates to 
the process established in the RFS2 final rule, in Sec.  80.1416, for 
parties to petition EPA to evaluate the lifecycle GHG reductions 
associated with additional biofuel production pathways beyond those 
already covered in Table 1 to Sec.  80.1426. EPA notes that today's 
action on canola oil biodiesel was not made pursuant to this petition 
process, so this comment is not relevant to this proceeding. The 
commenter also states, more generally, that EPA is required ``to 
conduct a notice and comment rulemaking before approving any biofuel 
under EISA,'' and that although the commenter appreciates that EPA has 
provided through issuance of the NODA an opportunity for public comment 
with respect to the canola oil biodiesel analysis, that ``EPA was 
required to comply with the full procedural requirements of section 
307(d) of the Clean Air Act.'' EPA responds here only to these comments 
as they relate to today's final action with respect to canola oil 
biodiesel. EPA's proposed RFS2 rule would have qualified all 
``biodiesel made from ``soybean oil and other virgin plant oils'' 
through a transesterification process as renewable fuel with a D code 
of 4. See proposed Table 1 to Sec.  80.1426 (74 FR 25119, May 26, 
2009). Canola oil is a virgin plant oil within the scope of this 
proposal. The public was afforded an opportunity to submit written 
comments on this proposal, and also an opportunity to present oral 
comments during a public hearing held on June 9, 2009. In the final 
RFS2 rule published on March 26, 2010, EPA did not take final action on 
the component of its proposal that related to ``other virgin plant 
oils'' such as canola biodiesel. See final Table 1 to Sec.  80.1426 (75 
FR 14872). Instead it has

[[Page 59631]]

conducted additional analytical work and provided an additional 
opportunity for comment on that work as described in the NODA EPA views 
this final action as a continuation of the rulemaking process initiated 
in the May 26, 2009 proposal, and believes it has fully complied with 
all procedural requirements of Section 307(d) of the Clean Air Act.

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    This action is not a ``significant regulatory action'' under the 
terms of Executive Order (EO)12866 (58 FR 51735, October 4, 1993) 
because it is not likely to have an annual effect on the economy of 
$100 million or more, not likely to create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency, 
not likely to materially alter the budgetary impacts of entitlements, 
grants, user fees, or loan programs, and not likely to raise novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the EO. Therefore, this rule 
is not subject to review under the EO.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
Parties who are affected by today's regulation are already covered by 
the registration, recordkeeping and reporting provisions of the RFS2 
regulations. The new canola oil biodiesel pathway provides an 
additional means for generating RINs, but does not add any new 
information collection burden. The Office of Management and Budget 
(OMB) has previously approved the information collection requirements 
contained in the RFS2 regulations at 40 CFR Part 80, subpart M, under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. 
and has assigned the following OMB control numbers 2060-0637 
(``Renewable Fuels Standard Program, Petition and Registration'') and 
2060-0640 (``Renewable Fuels Standard''). The OMB control numbers for 
EPA's regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedure Act or any 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 assessing 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 city, county, 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 independently owned and operated 
and is not dominant in its field.
    After considering the economic impacts of today's rule on small 
entities, we certify that this proposed action will not have a 
significant economic impact on a substantial number of small entities. 
This rule does not impose a new burden but creates a new opportunity to 
generate RINs. Therefore, there should be no adverse impacts on small 
businesses. In determining whether a rule has a significant economic 
impact on a substantial number of small entities, the impact of concern 
is any significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analyses is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the rule on small entities.'' 5 U.S.C. 603 and 604. 
Thus, an agency may certify that a rule will not have a significant 
economic impact on a substantial number of small entities if the rule 
relieves regulatory burden, or otherwise has a positive economic effect 
on all of the small entities subject to the rule.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 
U.S.C. 1531-1538, requires Federal agencies, unless otherwise 
prohibited by law, to assess the effects of their regulatory actions on 
State, local, and tribal governments and the private sector. Under 
section 202 of the UMRA, EPA generally must prepare a written 
statement, including a cost-benefit analysis, for proposed and final 
rules with ``Federal mandates'' that may result in expenditures to 
State, local, and tribal governments, in the aggregate, or to the 
private sector, of $100 million or more in any one year.
    This rule is not subject to the requirements of section 203 of UMRA 
because it contains no regulatory requirements that might significantly 
or uniquely affect small governments. EPA has determined that this rule 
imposes no enforceable duty on any State, local or tribal governments. 
In addition this rule will not result in expenditures to State, local, 
and tribal governments, in the aggregate, or to the private sector, of 
$100 million or more in any one year.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This final rule does not have federalism implications. It will not 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. Thus, Executive Order 13132 does 
not apply to this rule.

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

    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). This rule will 
be implemented at the Federal level and impose compliance costs only on 
transportation fuel refiners, blenders, marketers, distributors, 
importers, and exporters. Tribal governments would be affected only to 
the extent they purchase and use regulated fuels. Thus, Executive Order 
13175 does not apply to this action.

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

    EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying 
only to those regulatory actions that concern health or safety risks, 
such that the analysis 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 establish an environmental standard intended 
to mitigate health or safety risks and because it implements specific 
provisions established by Congress in statutes.

[[Page 59632]]

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This rule is not subject to Executive Order 13211 (66 FR 28355 (May 
22, 2001)), because it only provides new opportunities for RIN 
generation, and thus is not likely to have a significant adverse effect 
on the supply, distribution, or use of energy. Therefore, we have 
concluded that this rule is not subject to the EO.

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 would 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 use 
available and applicable voluntary consensus standards. This rulemaking 
does not adopt or change any technical standards, so the EO is not 
applicable to this rule.

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. Its 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 activities on minority populations and low-income 
populations in the United States.
    EPA lacks the discretionary authority to address environmental 
justice in this rulemaking since the Agency is implementing specific 
standards established by Congress in statutes. Although EPA lacks 
authority to modify today's regulatory action on the basis of 
environmental justice considerations, EPA nevertheless determined that 
this rule does not have a disproportionately high and adverse human 
health or environmental impact on minority or low-income populations.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
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 Comptroller General of the 
United States. A major rule cannot take effect until 60 days after it 
is published in the Federal Register. EPA will submit a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Comptroller General of the 
United States prior to publication of the rule the Federal Register. 
This action is not a ``major rule'' as defined by 5 U.S.C. 804(2).

VI. Statutory Provisions and Legal Authority

    Statutory authority 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 aspects of today's rule, 
including the recordkeeping requirements, come from Sections 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, Energy, Forest and forest products, Fuel additives, 
Gasoline, Imports, Labeling, Motor vehicle pollution, Penalties, 
Petroleum, Reporting and recordkeeping requirements.

    Dated: September 22, 2010.
Lisa P. Jackson,
Administrator.

0
For the reasons set forth in the preamble, 40 CFR part 80 is amended as 
follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 continues to read as follows:

    Authority:  42 U.S.C. 7414, 7542, 7545, and 7601(a).

0
2. Section 80.1426 is amended by revising paragraph (e)(1) and Table 1 
to Sec.  80.1426 following paragraph (f)(1), and adding paragraph (g) 
to read as follows:

Sec.  80.1426  How are RINs generated and assigned to batches of 
renewable fuel by renewable fuel producers or importers?

* * * * *
    (e) * * *
    (1) Except as provided in paragraph (g) of this section for delayed 
RINs, the producer or importer of renewable fuel must assign all RINs 
generated to volumes of renewable fuel.
* * * * *
    (f) * * *
    (1) * * *

         Table 1 to Sec.   80.1426--Applicable D Codes for Each Fuel Pathway for Use in Generating RINs
----------------------------------------------------------------------------------------------------------------
                                                                              Production process
               Fuel type                           Feedstock                     requirements            D-Code
----------------------------------------------------------------------------------------------------------------
Ethanol...............................  Corn starch...................  All of the following:                  6
                                                                        Dry mill process, using
                                                                         natural gas, biomass, or
                                                                         biogas for process energy
                                                                         and at least two advanced
                                                                         technologies from Table 2 to
                                                                         this section.
Ethanol...............................  Corn starch...................  All of the following:                  6
                                                                        Dry mill process, using
                                                                         natural gas, biomass, or
                                                                         biogas for process energy
                                                                         and at least one of the
                                                                         advanced technologies from
                                                                         Table 2 to this section plus
                                                                         drying no more than 65% of
                                                                         the distillers grains with
                                                                         solubles it markets annually.
Ethanol...............................  Corn starch...................  All of the following:                  6
                                                                        Dry mill process, using
                                                                         natural gas, biomass, or
                                                                         biogas for process energy
                                                                         and drying no more than 50%
                                                                         of the distillers grains
                                                                         with solubles it markets
                                                                         annually.

[[Page 59633]]

Ethanol...............................  Corn starch...................  Wet mill process using                 6
                                                                         biomass or biogas for
                                                                         process energy.
Ethanol...............................  Starches from crop residue and  Fermentation using natural             6
                                         annual covercrops.              gas, biomass, or biogas for
                                                                         process energy.
Biodiesel, and renewable diesel.......  Soy bean oil;                   One of the following:                  4
                                        Oil from annual covercrops;...  Trans-Esterification.........
                                        Algal oil;....................  Hydrotreating................
                                        Biogenic waste oils/fats/       Excluding processes that co-
                                         greases;.                       process renewable biomass
                                        Non-food grade corn oil.......   and petroleum.
Biodiesel.............................  Canola oil....................  Trans-Esterification using             4
                                                                         natural gas or biomass for
                                                                         process energy.
Biodiesel, and renewable diesel.......  Soy bean oil;                   One of the following:                  5
                                        Oil from annual covercrops;...  Trans-Esterification.........
                                        Algal oil;....................  Hydrotreating................
                                        Biogenic waste oils/fats/       Includes only processes that
                                         greases;.                       co-process renewable biomass
                                        Non-food grade corn oil.......   and petroleum.
Ethanol...............................  Sugarcane.....................  Fermentation.................          5
Ethanol...............................  Cellulosic Biomass from crop    Any..........................          3
                                         residue, slash, pre-
                                         commercial thinnings and tree
                                         residue, annual covercrops,
                                         switchgrass, and miscanthus;
                                         cellulosic components of
                                         separated yard waste;
                                         cellulosic components of
                                         separated food waste; and
                                         cellulosic components of
                                         separated MSW.
Cellulosic Diesel, Jet Fuel and         Cellulosic Biomass from crop    Any..........................          7
 Heating Oil.                            residue, slash, pre-
                                         commercial thinnings and tree
                                         residue, annual covercrops,
                                         switchgrass, and miscanthus;
                                         cellulosic components of
                                         separated yard waste;
                                         cellulosic components of
                                         separated food waste; and
                                         cellulosic components of
                                         separated MSW.
 Butanol..............................  Corn starch...................  Fermentation; dry mill using           6
                                                                         natural gas, biomass, or
                                                                         biogas for process energy.
Cellulosic Naphtha....................  Cellulosic Biomass from crop    Fischer-Tropsch process......          3
                                         residue, slash, pre-
                                         commercial thinnings and tree
                                         residue, annual covercrops,
                                         switchgrass, and miscanthus;
                                         cellulosic components of
                                         separated yard waste;
                                         cellulosic components of
                                         separated food waste; and
                                         cellulosic components of
                                         separated MSW.
Ethanol, renewable diesel, jet fuel,    The non-cellulosic portions of  Any..........................          5
 heating oil, and naphtha.               separated food waste.
Biogas................................  Landfills, sewage waste         Any..........................          5
                                         treatment plants, manure
                                         digesters.
----------------------------------------------------------------------------------------------------------------

* * * * *
    (g) Delayed RIN generation. (1) Parties who produce or import 
renewable fuel may elect to generate delayed RINs to represent 
renewable fuel volumes that have already been transferred to another 
party if those renewable fuel volumes meet all of the following 
criteria.
    (i) The renewable fuel is biodiesel that is made from canola oil 
and described by a pathway in Table 1 to Sec.  80.1426; and
    (ii) The fuel was produced or imported between July 1, 2010, and 
September 28, 2010 inclusive.
    (2) Delayed RINs must be generated no later than the following 
deadline:
    (i) For renewable fuel that is biodiesel that is made from canola 
oil and described by a pathway in Table 1 to Sec.  80.1426, no later 
than 60 days after September 28, 2010.
    (ii) [Reserved]
    (3) A party authorized pursuant to paragraph (g)(1) of this section 
to generate delayed RINs, and electing to do so, who generated RINs 
pursuant to 80.1426(f)(6) and transferred those RINs with renewable 
fuel volumes between July 1, 2010 and September 28, 2010 inclusive, 
must retire a number of gallon-RINs prior to generating delayed RINs.
    (i) The number of gallon-RINs retired by a party pursuant to this 
paragraph must not exceed the number of gallon-RINs originally 
generated by the party to represent fuel described in paragraph 
(g)(1)(i) of this section that was produced or imported, and 
transferred to another party, between July 1, 2010 and September 28, 
2010 inclusive.
    (ii) Retired RINs must have a D code of 6.
    (iii) Retired RINs must have a K code of 2.
    (iv) Retired RINs must have been generated in 2010.
    (4) For parties that retire RINs pursuant to paragraph (g)(3) of 
this section, the number of delayed gallon-RINs generated shall be 
equal to the number of gallon-RINs retired.
    (5) A party authorized pursuant to paragraph (g)(1) of this section 
to generate delayed RINs, and electing to do so, who did not generate 
RINs pursuant to 80.1426(f)(6) for renewable fuel produced or imported 
between July 1, 2010 and September 28, 2010 inclusive, may generate a 
number of delayed gallon-RINs for that renewable fuel in accordance 
with paragraph (f) of this section.
    (i) The standardized volume of fuel (Vs) used by a party 
to determine the RIN volume (VRIN) under paragraph (f) of 
this section shall be the standardized volume of the fuel described in 
paragraph (g)(1)(i) of this section that was produced or imported by 
the party, and transferred to another party,

[[Page 59634]]

between July 1, 2010 and September 28, 2010 inclusive
    (ii) [Reserved]
    (6) The renewable fuel for which delayed RINs are generated must be 
described by the new pathway described in paragraph (g)(1) of this 
section.
    (7) All delayed RINs generated by a renewable fuel producer or 
importer must be generated on the same date.
    (8) Delayed RINs shall be generated as assigned RINs in EMTS, and 
then immediately separated by the RIN generator.
    (9) The D code that shall be used in delayed RINs shall be the D 
code which corresponds to the new pathway.

[FR Doc. 2010-24310 Filed 9-27-10; 8:45 am]
BILLING CODE 6560-50-P