Document ID: EPA-HQ-OAR-2017-0091-4115
Agency: epa
Document Type: Proposed Rule
Title: Renewable Fuel Standard Program: Standards for 2018 and Biomass-Based Diesel Volume for 2019
Posted Date: 2017-10-04T04:00Z

[Federal Register Volume 82, Number 191 (Wednesday, October 4, 2017)]
[Proposed Rules]
[Pages 46174-46180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21128]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2017-0091; FRL-9968-70-OAR]

Renewable Fuel Standard Program: Standards for 2018 and Biomass-
Based Diesel Volume for 2019; Availability of Supplemental Information 
and Request for Further Comment

AGENCY: Environmental Protection Agency (EPA).

ACTION: Availability of supplemental information; request for further 
comment.

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SUMMARY: This document provides additional data and an opportunity to 
comment on that data and potential options for reductions in the 2018 
biomass-based diesel, advanced biofuel, and total renewable fuel 
volumes, and/or the 2019 biomass-based diesel volume under the 
Renewable Fuel Standard (RFS) program. In a July 21, 2017 notice of 
proposed rulemaking, the EPA proposed certain reductions in the 
statutory volume targets for advanced biofuel and total renewable fuel 
for 2018, and requested comment on further reductions based on various 
considerations. This document presents additional data on production, 
imports and cost of renewable fuel and several options for how we may 
consider such

[[Page 46175]]

data in establishing the final volume requirements using the waiver 
authorities provided by the statute.

DATES: Comments must be received on or before October 19, 2017.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2017-0091, at https://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be edited or withdrawn.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 the full EPA public comment policy, information about CBI 
or multimedia submissions, and general guidance on making effective 
comments, please visit http://www.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:

Outline of This Preamble

I. General Information
    A. Does this action apply to me?
II. Overview
III. Costs and Supply of Advanced Biofuel
IV. Possible Further Reductions of 2018 Volume Requirements
    A. General Waiver Authority
    1. Inadequate Domestic Supply
    2. Severe Economic Harm
    B. Biomass-Based Diesel Waiver Authority
V. Consideration of Possible Reductions in the Biomass-Based Diesel 
Volume Requirement for 2019
VI. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review

I. General Information

A. Would this rule, if finalized, apply to me?

    Entities potentially affected by the July 21, 2017 proposed rule 
\1\ (the July proposal), should it become final, are those involved 
with the production, distribution, and sale of transportation fuels, 
including gasoline and diesel fuel or renewable fuels such as ethanol, 
biodiesel, renewable diesel, and biogas. Potentially regulated 
categories include:
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    \1\ 82 FR 34206.

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                                                                                     Examples of potentially
                Category                   NAICS \1\ codes     SIC \2\ codes           regulated entities
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Industry................................             324110               2911  Petroleum Refineries.
Industry................................             325193               3869  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.
Industry................................             424720               5172  Petroleum and petroleum products
                                                                                 merchant wholesalers.
Industry................................             221210               4925  Manufactured gas production and
                                                                                 distribution.
Industry................................             454319               5989  Other fuel dealers.
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\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 engage in activities 
that may be affected by this action. Other types of entities not listed 
in the table could also be affected. To determine whether your entity 
would be affected by this rule, if finalized, you should carefully 
examine the applicability criteria in 40 CFR part 80. If you have any 
questions regarding the applicability of the July proposal to a 
particular entity, consult the person listed in the FOR FURTHER 
INFORMATION CONTACT section.

II. Overview

    On July 21, 2017, EPA proposed reductions in the statutory volume 
targets for advanced biofuel and total renewable fuel using the 
cellulosic waiver authority in Clean Air Act (CAA) section 
211(o)(7)(D).\2\ We proposed using the maximum reduction permitted 
under that authority (considering the proposed cellulosic volume 
requirement) to reduce the 2018 volume targets for advanced biofuel and 
total renewable fuel to 4.24 and 19.24 billion gallons, respectively, 
in part by placing a greater emphasis on cost considerations than we 
have in the past. We requested comment on possible additional 
reductions in advanced biofuel (with corresponding reductions in total 
renewable fuel) using the general waiver authority in CAA section 
211(o)(7)(A) or other authorities. Similarly, we requested comment on 
whether EPA should, in the final rule, reduce the 2019 volume 
requirement for biomass-based diesel (BBD) \3\ to a level below the 
proposed level of 2.1 billion gallons.\4\
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    \2\ 82 FR 34206.
    \3\ Advanced biodiesel and renewable diesel with a D code of 4.
    \4\ We note the possibility that in light of our consideration 
of comments received on this document and the NPRM that the final 
rule could implement volume requirements that deviate further from 
the volume targets in the statute than the proposed levels. We 
believe the statutory provisions embody multiple Congressional 
objectives, including both increasing renewable fuels and limiting 
in certain circumstances the additional cost or economic impact 
associated with such increases. We invite comment on how to balance 
these objectives in exercising our waiver authorities.
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    We did not specifically request comment in the proposed rule on a 
possible reduction of the 2018 volume requirement for BBD, which was 
set at 2.1 billion gallons in 2016.\5\ We did, however, request comment 
on the use of the general waiver authority or other authorities to 
reduce the advanced biofuel requirement for 2018, and BBD is not only 
nested within advanced biofuel but is also the predominant source of 
advanced biofuel. Therefore, considerations leading to a reduction of 
the advanced biofuel volume may also be relevant in reducing the 2018 
BBD volume requirement. In this document we are providing additional 
information on renewable fuel costs and supply as well as possible 
options for the exercise of our waiver authorities based on these and 
other considerations.
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    \5\ 81 FR 89746, December 12, 2016.
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    We note that the statute also provides EPA the authority to waive a 
portion of the BBD standard if there is a significant renewable 
feedstock disruption or other

[[Page 46176]]

market circumstance that would make the price of biomass-based diesel 
fuel increase significantly, and to make related reductions in the 
advanced biofuel and total renewable fuel volume requirements.\6\ In 
light of recent developments, described below, we seek comment on 
whether it would be appropriate to use this waiver authority in the 
final rule.
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    \6\ Under CAA section 211(o)(7)(E)(ii).
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III. Cost and Supply of Advanced Biofuel

    As EPA indicated in the July proposal, the cost of advanced 
biofuels is high on a per gallon basis compared to the petroleum fuels 
they replace. The expiration of the biodiesel tax credit in the U.S. at 
the end of 2016 has already impacted the effective price of biodiesel 
to blenders, as well as the price of biodiesel blends to consumers. 
While it does not appear that the expiration of the tax credit has had 
a direct impact on the price of unblended biodiesel (B100) in 2017, we 
expect that the expiration of the tax credit has had a significant 
impact on the effective price of biodiesel sold to blenders. This is 
because the biodiesel tax credit that expired at the end of 2016 was 
received by biodiesel blenders, rather than biodiesel producers. The 
price of biodiesel and EPA's estimated effective price of biodiesel to 
blenders (net the $1/gallon tax credit when applicable) from January 
2016 through August 2017 are shown in Figure III-1 below.\7\ We also 
expect the price of biodiesel used in the U.S. could increase further 
following a recent preliminary determination by the Department of 
Commerce that it would be appropriate to place countervailing duties of 
41% to 68% on imports of biodiesel from Argentina and Indonesia.\8\ 
Cash deposits against preliminary duties are currently being collected, 
potentially impacting prices prior to a final determination. Such 
duties could also affect import volumes as pointed out in a recent 
letter from the American Fuel and Petrochemical Manufacturers 
(AFPM).\9\ A final decision from the Department of Commerce and the 
International Trade Commission, which could include final 
countervailing duty orders, is scheduled for December 29, 2017.
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    \7\ After January 1, 2017 the price of biodiesel and the 
estimated effective price of biodiesel to blenders are identical, as 
the tax credit expired at the end of 2016.
    \8\ ``Commerce Preliminary Finds Countervailable Subsidization 
of Imports of Biodiesel from Argentina and Indonesia,'' available in 
EPA docket number EPA-HQ-OAR-2017-0091.
    \9\ ``AFPM letter on biodiesel supply in 2017,'' available in 
docket EPA-HQ-OAR-2017-0091.
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BILLING CODE 6560-50-P
[GRAPHIC] [TIFF OMITTED] TP04OC17.010

BILLING CODE 6560-50-C
    The level of imports and exports can also affect the price of 
renewable fuel used in the U.S., and both imports and export volumes 
have varied considerably over the last several years. Based on data 
collected on RIN generation and retirement from the EPA-Moderated 
Transaction System (EMTS), we have determined gross domestic production 
and import and export volumes for advanced biofuels and

[[Page 46177]]

biomass-based diesel for the years 2013 through 2016.\10\ Further 
details can be found in a memorandum to the docket.\11\
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    \10\ The use of RIN data necessarily excludes renewable fuel 
import or export volumes for which no RINs were generated. RINs may 
not be generated, for instance, if ethanol has not been denatured or 
if a producer is exporting the renewable fuel. However, for advanced 
biofuels, RINless volumes (which would not be reflected in Tables 
III-1 or III-2) are expected to be an extremely small portion of all 
volumes.
    \11\ ``Imports and exports of renewable fuel in 2013 through 
2016,'' memorandum from David Korotney to docket EPA-HQ-OAR-2017-
0091.

                                     Table III-1--Supply of Advanced Biofuel
                                                 [million RINs]
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                                                       2013            2014            2015            2016
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Gross domestic production.......................           2,278           2,308           2,327           3,023
Imports.........................................             911             479             710           1,177
Exports.........................................             128             134             143             202
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                                   Table III-2--Supply of Biomass-Based Diesel
                                                 [million RINs]
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                                                       2013            2014            2015            2016
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Gross domestic production.......................           2,162           2,196           2,155           2,791
Imports.........................................             476             415             596           1,121
Exports.........................................             125             134             143             202
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    Commenters raised concerns that along with affecting prices of 
renewable fuels in the U.S., imports may also have an impact on the 
energy independence and security status of the U.S.\12\ Increasing the 
energy independence and security of the U.S. is one of the stated goals 
in the Energy Security and Independence Act of 2007, and the RFS 
program's standards affect the volumes of both domestic production and 
imports. EPA requests comment on whether it is appropriate to consider 
possible impacts of these volumes on U.S. energy independence and 
security in setting the applicable standards under the RFS program, 
insofar as they impact those factors that we are permitted to consider 
and evaluate under the available waiver authorities, and/or the 
standard-setting authority for BBD.
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    \12\ See e.g., comments from AFPM/API, EPA-HQ-OAR-2017-0091-
3645.
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    EPA remains concerned about the high cost of advanced biofuels. As 
a result, and in light of the pending action on countervailing duties 
on imported biodiesel from Argentina and Indonesia which we believe 
could, if finalized, further increase the cost and/or decrease the 
supply of advanced biofuel in the U.S., we believe it is appropriate to 
request further comment on appropriate ways to determine the applicable 
volume requirements for 2018, and the BBD volume requirement for 2019.

IV. Possible Further Reductions of 2018 Volume Requirements

A. General Waiver Authority

    Section 211(o)(7)(A) of the CAA provides that EPA, in consultation 
with the Secretary of Agriculture and the Secretary of Energy, may 
waive the applicable volumes specified in the Act in whole or in part 
based on a petition by one or more States, by any person subject to the 
requirements of the Act, or by the EPA Administrator on his own motion. 
Such a waiver must be based on a determination by the Administrator, 
after public notice and opportunity for comment that: (1) 
Implementation of the requirement would severely harm the economy or 
the environment of a State, a region or the United States, or (2) there 
is an inadequate domestic supply. We sought comment on the possible use 
of the general waiver authority in the proposal, and here are once 
again seeking comment in light of the data provided in Section III of 
this document and a possible revised interpretation of the inadequate 
domestic supply waiver authority, as discussed below. We also solicit 
further comment on our use of the general waiver authority under a 
determination of either inadequate domestic supply or severe economic 
harm to reduce volumes of renewable fuel.
1. Inadequate Domestic Supply
    In the annual rule establishing the 2014-2016 renewable fuel 
standards, we determined that there would be an ``inadequate domestic 
supply'' of renewable fuel to consumers in 2016, and so exercised the 
general waiver authority to reduce volumes to levels we believed could 
be supplied.\13\ The United States Court of Appeals for the District of 
Columbia Circuit recently ruled in a lawsuit challenging that rule that 
EPA improperly focused on supply of renewable fuel to consumers, and 
that the statue instead requires a ``supply-side'' assessment of the 
volumes of renewable fuel that can be supplied to refiners, importers 
and blenders. Americans for Clean Energy (``ACE'') v. EPA, 864 F.3d 691 
(2017). Other components of EPA's interpretation of ``inadequate 
domestic supply'' were either upheld by the court in ACE (e.g., EPA's 
interpretation that carryover RINs are not part of the ``supply'' for 
purposes of this waiver authority) or were not challenged (e.g., EPA's 
consideration of biofuel imports as part of the domestic supply). In 
response to the proposed 2018 standards, we received comments 
suggesting that EPA should interpret the undefined term ``domestic'' in 
``inadequate domestic supply'' to account for only volumes of renewable 
fuel that are produced domestically.\14\ As we understand this 
suggestion, in determining the adequacy of supply, EPA would consider 
only whether there was an adequate supply of domestically produced 
volumes to satisfy the statutory volume targets. If there were not, EPA 
would be authorized to reduce the statutory

[[Page 46178]]

applicable volumes. Having made the threshold finding that there was an 
inadequate domestic supply, EPA could consider the availability of 
imports as one factor among others in determining whether to exercise 
its discretion to use the waiver authority.
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    \13\ See 80 FR 77420 (December 14, 2015).
    \14\ See, e.g., comments from American Fuels and Petrochemical 
Manufacturers/American Petroleum Institute (AFPM/API) (Docket Item 
No. EPA-HQ-OAR-2017-0091-3645) and Valero (Docket Item No. EPA-HQ-
OAR-2017-0091-3677).
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    Some commenters suggested that this interpretation would rely on 
common dictionary definitions of ``domestic,'' as meaning ``of, or 
relating to, or originating within a country and especially one's own 
country,'' \15\ or ``[o]f or pertaining to one's own country or nation; 
not foreign, internal, inland, `home.''' \16\ Commenters suggested that 
this interpretation could lead to volume requirements providing greater 
stability and certainty for obligated parties; they noted the 
increasing uncertainty in international trade markets for biofuels, 
including the potential for disruptions in supply and duties being 
placed on these biofuels. These commenters suggested that by basing the 
volume requirements on the projected domestic supply of biofuels, EPA 
could set volume requirements that would better ensure the availability 
of renewable fuel for compliance.\17\
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    \15\ AFPM/API comments (citing Merriam-Webster Dictionary).
    \16\ Id. (citing Oxford English Dictionary).
    \17\ See, e.g., Comments from Valero (Docket Item No. EPA-HQ-
OAR-2017-0091-3677). EPA notes that we also received comments from 
the biodiesel industry that reducing volumes based on imports could 
actually harm domestic producers, see, e.g., comments from the 
National Renderers Association (Docket Item No. EPA-HQ-OAR-2017-
0091-3959), National Biodiesel Board (Docket Item No. EPA-HQ-OAR-
2017-0091-3880).
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    We note that this interpretation of the statutory phrase 
``inadequate domestic supply,'' would not in any way limit the use of 
qualifying imported biofuel by obligated parties to ultimately comply 
with the annual percentage standards. Imported and domestically 
produced biofuels would still have the same opportunities to compete in 
the U.S. market as they do now. The interpretation would only affect 
the way in which EPA calculates the volumes used to set the percentage 
standards with which obligated parties must comply, by allowing EPA to 
consider the supply of domestically produced biofuels in deciding 
whether to use the general waiver authority. Once the standards were 
established, however, qualifying imported renewable fuel could still be 
used to comply with the established standards, exactly as it is 
currently.
    We request comment on whether this interpretation would comply with 
the Court's direction in ACE that we only consider ``supply-side 
factors'' in determining whether there is an inadequate domestic 
supply. Although the Court in ACE explained that EPA ``may'' or is 
``authorized'' to consider renewable fuel imports as part of a supply-
side assessment under this waiver authority,\18\ we note that these 
statements were made in the context of comparing supply-side 
considerations to demand-side considerations, and finding EPA's demand-
side consideration to be impermissible. Thus, the court's statements 
may indicate the scope of permissible, but not required, 
interpretations, and not foreclose further consideration by EPA of the 
scope of appropriate supply-side considerations in light of the statute 
and the court's decision.\19\
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    \18\ See e.g., ACE, 864 F.3d at 709.
    \19\ Moreover, EPA's interpretation of the term ``domestic'' in 
the phrase ``inadequate domestic supply'' and the relevance of 
imports to EPA's assessment was not challenged in the litigation or 
necessary for the court's decision, so we believe that the court's 
statements in this regard are dicta.
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    We believe there are a number of reasons why this interpretation of 
the phrase ``inadequate domestic supply'' may be appropriate. First, as 
noted by commenters, this interpretation may be consistent with a 
straightforward reading of the term ``domestic supply'' as referring to 
volumes of domestically-produced renewable fuels. Second, as also noted 
by commenters, basing EPA's use of the general waiver authority on 
domestic supply only may better meet the energy independence and 
security purposes of EISA. Third, as EPA has noted in past 
rulemakings,\20\ it is extremely difficult to project volumes that can 
be made available in the U.S. through imports, and we believe that in 
light of this substantial uncertainty, that EPA could reasonably 
interpret the statute as allowing it the discretion to waive statutory 
applicable volumes on the basis of a more certain assessment of the 
likely supply of domestically-produced fuels.
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    \20\ See, e.g., Renewable Fuel Standard Program: Standards for 
2017 and Biomass-Based Diesel Volume for 2018, 81 FR 89746, 89764-65 
(December 12, 2016).
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    We invite comment on this possible interpretation of the term 
``inadequate domestic supply,'' and the possibility of applying this 
interpretation to reduce the final 2018 advanced biofuel volume 
requirement beyond the level proposed. In Section III of this document 
we provide data on the domestic production of advanced biofuels for 
2013 through 2016. We solicit comment on data and methodologies we 
should use for estimating the 2018 supply of domestically-produced BBD 
and other advanced biofuels if we adopt this interpretation. We also 
invite comment on the potential impact on imports and the domestic 
production of advanced biofuel if EPA were to further reduce the 
proposed applicable volume of advanced biofuel on the basis of an 
interpretation of the term ``inadequate domestic supply'' as discussed 
in this section. We also request comment on whether and how EPA should 
consider the potential level of imports in determining whether to use 
its discretionary general waiver authority to reduce the required 
volume requirements should this interpretation be adopted.
    Considering the nested nature of the standards, we also seek 
comment on the appropriateness of (and possible basis for) providing a 
reduction in the total renewable fuel applicable volume requirement 
commensurate with any reduction in the advanced biofuel volume 
requirement that may be finalized based on a reinterpretation of the 
inadequate domestic supply waiver authority as discussed in this 
section. We note that absent a commensurate reduction, the implied 
volume for conventional biofuels (i.e., the difference between advanced 
and total volumes), would exceed the 15 billion gallon implied cap that 
can be discerned from the statutory tables. We note that both the 
cellulosic waiver authority in CAA section 211(o)(7)(D) and the BBD 
waiver authority in section 211(o)(7)(E) stipulate that when nested 
cellulosic or BBD volumes, respectively, are waived under these 
authorities, that reductions in the advanced and total renewable fuel 
volume requirements are authorized. Similarly, due to the nested nature 
of the standards, advanced biofuel can be used to meet the total 
renewable fuel requirement. This program structure, established in 
EISA, suggests that, in general, a reduction in a nested renewable fuel 
type can justify a corresponding reduction in the other renewable fuel 
standard or standards that the fuel can also be used to meet. We seek 
comment on the extent to which EPA should interpret the inadequate 
domestic supply waiver authority in CAA section 211(o)(7)(A) as also 
authorizing EPA to make a commensurate reduction in total renewable 
fuel volumes when waiving advanced biofuel volumes on the basis of 
inadequate domestic supply.
2. Severe Economic Harm
    Section 211(o)(7)(A)(1) of the CAA provides that EPA may waive the 
applicable volume based on a determination that implementation of the 
requirement would severely harm the economy or environment of a State, 
a region, or the United States. We received comments from several

[[Page 46179]]

stakeholders suggesting that EPA should reduce volumes on the basis of 
severe economic harm.\21\ We note that EPA has previously expressed an 
interpretation of the severe economic harm waiver in denying petitions 
to exercise the waiver.\22\ We solicit comment on the appropriateness 
of this interpretation, as well as rationales and data to support 
approaches for identifying volumes that would be associated with severe 
economic harm, or other means of implementing this waiver authority 
consistent with the statutory provision. In particular, we seek input 
on whether there is information indicating that severe economic harm is 
occurring under current standards or would occur for any volume 
requirement that could be established in the current rulemaking \23\ 
and, if so, whether and how volumes should be adjusted to address such 
harm.
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    \21\ See, e.g., comments from American Fuels and Petrochemical 
Manufacturers/American Petroleum Institute (AFPM/API) (Docket Item 
No. EPA-HQ-OAR-2017-0091-3645) and Valero (Docket Item No. EPA-HQ-
OAR-2017-0091-3677).
    \22\ See e.g., 73 FR 47168 (August 13, 2008) (Notice of Decision 
Regarding the State of Texas Request for a Waiver of a Portion of 
the Renewable Fuel Standard); 77 FR 70752 (November 27, 2012) 
(Notice of Decision Regarding Requests for a Waiver of the Renewable 
Fuel Standard).
    \23\ 82 FR 34206 (July 21, 2017).
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B. Biomass-Based Diesel Waiver Authority

    CAA section 211(o)(7)(E)(ii) provides that if EPA determines that 
there is a significant renewable feedstock disruption or other market 
circumstance that would make the price of BBD increase significantly, 
EPA shall, in consultation with the Secretary of Energy, and the 
Secretary of Agriculture, issue an order to reduce, for up to a 60-day 
period, the annual volume requirement for BBD by an appropriate 
quantity that does not exceed 15 percent. The statute also stipulates 
that EPA is authorized to reduce applicable volumes of advanced biofuel 
and total renewable fuel by the same or a lesser volume than the 
reduction in BBD. Also, the statute provides that EPA may provide 
additional 60-day waivers, with an appropriate additional reduction in 
the annual requirement of up to 15%, if EPA determines that the 
feedstock disruptions or circumstances warranting the initial waiver 
are continuing.
    We note that the renewable fuels standards apply on an annual basis 
and compliance is determined three months after the end of the year. 
Waiving the standard for 60 days without adjusting the annual standard 
would provide no relief. We thus solicit comment on whether it would be 
appropriate to implement the provision by waiving the annual standard 
(in circumstances where use of the provision is authorized) by a volume 
that does not exceed 15%. Alternatively, it may be possible to 
implement the provision by allowing each refiner or importer to 
subtract from its compliance obligation calculations an amount of 
gasoline and diesel produced or imported during a specific 60-day 
period, subject to a 15% limitation on the reduction in their annual 
RVO. We note that the statute also allows for an extension of any 
initial waiver for additional 60-day periods if the feedstock 
disruption or other market circumstance persists. We invite comment on 
how to interpret and implement the BBD waiver provision consistent with 
the text and goals of the Act.
    As described in Section III of this action, the price of biodiesel, 
particularly advanced biodiesel, has been impacted by the expiration of 
the federal tax credit at the end of 2016 and may be expected to be 
impacted further by the imposition of new duties on imports of 
biodiesel from Argentina and Indonesia.\24\ We seek comment on the 
likely result of these and any other factors on biodiesel prices, and 
the extent to which any expected price increases should be considered 
``significant'' for purposes of the waiver authority in CAA section 
211(o)(7)(E)(ii). We also seek comment on whether the relevant 
biodiesel prices are those paid by refiners, importers and 
blenders,\25\ and if so whether it is appropriate to consider the 
increase in the ``effective price'' of biomass-based diesel (net of any 
tax credit) to blenders for these purposes. We note that the 2018 BBD 
volume requirement was established by rule in 2016 at 2.1 billion 
gallons.\26\ Therefore, if EPA were to make the appropriate findings 
under the statute, CAA section 211(o)(7)(E)(ii) would authorize an 
initial waiver of up to 315 million gallons (15% as specified in the 
statute) of the 2018 applicable volume requirement of 2.1 billion 
gallon (resulting in an applicable volume as low as 1.79 billion 
gallons), with additional incremental reductions possible in 60 day 
intervals if the circumstances warranted.\27\
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    \24\ Both advanced and conventional biodiesel are imported from 
these two countries.
    \25\ This approach would arguably be consistent with the focus 
of the ACE Court on the ability of these parties to blend the 
statutorily required volumes of renewable fuel.
    \26\ 81 FR 89746, December 12, 2016.
    \27\ 2.10 billion gallon BBD volume requirement x 15% = 315 mill 
gal.
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    This statutory provision also indicates that EPA may reduce the 
applicable volume of renewable fuel and advanced biofuels requirement 
by the same or a lesser volume as the reduction in the BBD volume 
requirement. Were we to exercise this BBD waiver authority, we believe 
it would be appropriate to lower the advanced biofuel and total 
renewable fuel volumes by the same amount, since the predominant form 
of advanced biofuel is BBD and a reduction in the BBD volume 
requirement may have little or no impact on BBD prices if there is no 
commensurate reduction in advanced biofuel and total renewable fuel 
volumes. If the BBD volume requirement were to be reduced by 315 
million gallons, an equivalent reduction in advanced biofuel and total 
renewable fuel would be 473 million ethanol equivalent RINs.\28\ This 
would bring the 2018 advanced biofuel volume requirement down from the 
proposed level of 4.24 billion gallons to 3.77 billion gallons and the 
2018 total renewable fuel volume requirement from the proposed level of 
19.24 billion gallons to 18.77 billion gallons.\29\
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    \28\ In the context of calculating the applicable percentage 
standards from the volume requirements, one gallon of BBD is 
equivalent to 1.5 gallons of ethanol. The advanced biofuel and total 
renewable fuel applicable volumes are expressed as ethanol-
equivalent volumes, whereas the BBD applicable volume requirement is 
expressed in terms of biodiesel equivalence.
    \29\ The statute does not specifically require notice and 
opportunity for comment prior to EPA issuance of a waiver under CAA 
section 211(o)(7)(E)(ii); that EPA is providing an opportunity for 
comment regarding EPA's possible first use of this authority at this 
time should not be viewed as suggesting that EPA would always do so 
in the future.
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    We request comment on the possible use of the waiver authority 
provided in CAA section 211(o)(7)(E)(ii) to reduce the 2018 volume 
requirement for BBD by as much as 315 million gallons, and to 
concurrently reduce the advanced biofuel and total renewable fuel 
volume requirements by as much as 473 million gallons. In particular, 
we seek data on recent BBD price increases and expectations for 
additional price increases, and we seek comment on the extent to which 
these price increases should be considered `significant'' for purposes 
of the CAA section 211(o)(7)(E)(ii) waiver authority and the extent of 
a waiver (up to 15%) that would be necessary to address or avoid a 
significant price increase.

V. Consideration of Possible Reductions in the Biomass-Based Diesel 
Volume Requirement for 2019

    The statute establishes applicable volume targets for BBD only 
through 2012. For years after those for which

[[Page 46180]]

volumes are specified in the statute, EPA is required under CAA section 
211(o)(2)(B)(ii) to determine the applicable volume of BBD, in 
coordination with the Secretary of Energy and the Secretary of 
Agriculture, based on a review of implementation of the program during 
calendar years for which the statute specifies the volumes and an 
analysis of the following factors:
    1. The impact of the production and use of renewable fuels on the 
environment, including on air quality, climate change, conversion of 
wetlands, ecosystems, wildlife habitat, water quality, and water 
supply;
    2. The impact of renewable fuels on the energy security of the 
United States;
    3. The expected annual rate of future commercial production of 
renewable fuels, including advanced biofuels in each category 
(cellulosic biofuel and BBD);
    4. The impact of renewable fuels on the infrastructure of the 
United States, including deliverability of materials, goods, and 
products other than renewable fuel, and the sufficiency of 
infrastructure to deliver and use renewable fuel;
    5. The impact of the use of renewable fuels on the cost to 
consumers of transportation fuel and on the cost to transport goods; 
and
    6. The impact of the use of renewable fuels on other factors, 
including job creation, the price and supply of agricultural 
commodities, rural economic development, and food prices.
    The statute also specifies that the volume requirement for BBD 
cannot be less than the applicable volume specified in the statute for 
calendar year 2012, which is 1.0 billion gallons. The statute does not, 
however, establish any other numeric criteria, or specify how EPA 
should weigh the importance of the often competing factors, and the 
overarching goals of the statute when EPA sets the applicable volumes 
of BBD in years after those for which the statute specifies such 
volumes. In the period 2013-2022, the statute specifies increasing 
applicable volumes of cellulosic biofuel, advanced biofuel, and total 
renewable fuel, but does not do so for BBD, instead specifying only a 
1.0 billion gallon minimum and factors that EPA must evaluate in 
determining the volume requirement that EPA is to set.
    We received comments on our July proposal requesting that EPA 
reduce the proposed applicable volume of BBD for 2019 due to the large 
volume of imported biodiesel and renewable diesel in recent years (See 
Table 2 for import volumes of BBD),\30\ which could affect our analysis 
of several of the factors listed above. Additionally, on August 28, 
2017, the Department of Commerce published a preliminary determination 
that countervailing subsidies are being provided to producers and/or 
exporters of biodiesel from Argentina and Indonesia, and began 
requiring cash deposits equal to the subsidy rates.\31\ These subsidies 
ranged from 50%-64% for biodiesel from Argentina and 41%-68% for 
biodiesel from Indonesia.\32\ If finalized, the determination would 
have a direct impact on the cost of biodiesel imported from these 
countries, and could ultimately lead to increased cost to consumers of 
transportation fuel and the cost to transport goods, and/or could lead 
to reduced imports from these countries and potentially more limited 
supplies in the United States.
---------------------------------------------------------------------------

    \30\ See e.g., comments from AFPM/API, EPA-HQ-OAR-2017-0091-
3645.
    \31\ See 82 FR 40746 and 82 FR 40748 (July 21, 2017).
    \32\ Ibid.
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    In our proposed assessment of the statutory factors listed above, 
we noted that the proposed BBD standard for 2019, if finalized, would 
not likely impact the advanced biodiesel and renewable diesel supply to 
the U.S. market. Instead, the higher advanced biofuel volume 
requirement would be the determinant, and the market would supply more 
advanced biodiesel and renewable diesel than the BBD standard would 
require. We further noted in the July proposal our expectation that the 
historic trend in establishing the advanced volume requirements (i.e., 
annual increases) would continue into 2019, and the current production 
levels and costs for different types of advanced biofuel led us to 
believe that the same volume of BBD would likely be produced and 
imported to satisfy the anticipated 2019 advanced biofuel standard 
regardless of the applicable volume of BBD we ultimately required for 
purposes of the 2019 BBD standard. Any differences in the production 
and import of BBD were expected to be marginal and uncertain as BBD 
competes with other advanced biofuels in meeting the 2019 advanced 
biofuel volume. We proposed a level that we reasoned would provide a 
level of guaranteed support to the BBD industry, while also ensuring an 
opportunity under the advanced standard for the further development and 
marketing of non-BBD advanced biofuels that might have superior 
environmental characteristics or cost implications. As noted above, we 
are now also soliciting comment on options for reducing the 2018 
advanced biofuel volume requirement. If we determine that it is 
appropriate to use one of the waiver authorities discussed above to 
reduce the required volume of advanced biofuel in 2018, it is possible 
that similar considerations would lead us to provide reductions of the 
2019 advanced biofuel volume requirement for similar reasons. A lower 
required volume of advanced biofuel in 2019 could result in the 
proposed required volume of BBD for 2019 (2.1 billion gallons or 3.15 
billion ethanol-equivalent RINs) driving demand for advanced biodiesel 
and renewable diesel, and could provide insufficient room under the 
advanced standard for non-BBD advanced biofuels to compete for market 
share within the advanced biofuel category and an inappropriate level 
of guaranteed support to the BBD industry.
    In addition to these considerations, we seek comment on the extent 
to which the successful BBD industry requires the proposed level of 
guaranteed support, or if the advanced standard together with a 
significantly lower BBD standard would be sufficient for that purpose 
while advancing the goals of energy independence and security by 
providing additional encouragement for the growth of other types of 
advanced biofuels.
    We request comment on how EPA should take into consideration the 
costs of biodiesel and the factors that influence those costs, together 
with other relevant factors discussed above or which commenters may 
wish to bring to our attention, in setting the appropriate required 
volume of BBD for 2019. We also request comment on what the volume 
requirement should be, noting that it could be equal to or greater than 
the statutory minimum of 1.0 billion gallons.

VI. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This rulemaking is a significant regulatory action that was 
submitted to the Office of Management and Budget (OMB) for review, as 
it raises novel legal or policy issues arising out of legal mandates, 
the President's priorities, or the principles set forth in the 
Executive Order. Any changes made in response to OMB recommendations 
have been documented in the docket.

    Dated: September 26, 2017.
E. Scott Pruitt,
Administrator.
[FR Doc. 2017-21128 Filed 10-3-17; 8:45 am]
 BILLING CODE 6560-50-P