Document ID: EPA-HQ-OAR-2018-0167-1297
Agency: epa
Document Type: Rule
Title: Renewable Fuel Standard Program: Standards for 2019 and Biomass-Based Diesel Volume for 2020
Posted Date: 2018-12-11T05:00Z

[Federal Register Volume 83, Number 237 (Tuesday, December 11, 2018)]
[Rules and Regulations]
[Pages 63704-63744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26566]

[[Page 63703]]

Vol. 83

Tuesday,

No. 237

December 11, 2018

Part II

Environmental Protection Agency

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40 CFR Part 80

Renewable Fuel Standard Program: Standards for 2019 and Biomass-Based 
Diesel Volume for 2020; Final Rule

  Federal Register / Vol. 83 , No. 237 / Tuesday, December 11, 2018 / 
Rules and Regulations  

[[Page 63704]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2018-0167; FRL-9987-66-OAR]
RIN 2060-AT93

Renewable Fuel Standard Program: Standards for 2019 and Biomass-
Based Diesel Volume for 2020

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Under section 211 of the Clean Air Act, the Environmental 
Protection Agency (EPA) is required to set renewable fuel percentage 
standards every year. This action establishes the annual percentage 
standards for cellulosic biofuel, biomass-based diesel, advanced 
biofuel, and total renewable fuel that apply to gasoline and diesel 
transportation fuel produced or imported in the year 2019. Relying on 
statutory waiver authority that is available when the projected 
cellulosic biofuel production volume is less than the applicable volume 
specified in the statute, EPA is establishing volume requirements for 
cellulosic biofuel, advanced biofuel, and total renewable fuel that are 
below the statutory volume targets. We are also establishing the 
applicable volume of biomass-based diesel for 2020.

DATES: This final rule is effective on February 11, 2019.

ADDRESSES: The EPA has established a docket for this action under 
Docket ID No. EPA-HQ-OAR-2018-0167. All documents in the docket are 
listed on the https://www.regulations.gov website. Although listed in 
the index, some information is not publicly available, e.g., CBI or 
other information whose disclosure is restricted by statute. Certain 
other material is not available on the internet and will be publicly 
available only in hard copy form. Publicly available docket materials 
are available electronically through http://www.regulations.gov.

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: Entities potentially affected by this final 
rule 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 affected categories include:

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                                        NAICS \1\
              Category                    codes       SIC \2\ codes                       Examples of potentially affected entities
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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.
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).

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be affected by this 
action. This table lists the types of entities that EPA is now aware 
could potentially 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 action, you should carefully 
examine the applicability criteria in 40 CFR part 80. If you have any 
questions regarding the applicability of this action to a particular 
entity, consult the person listed in the FOR FURTHER INFORMATION 
CONTACT section.

Outline of This Preamble

I. Executive Summary
    A. Summary of Major Provisions in This Action
    1. Approach To Setting Volume Requirements
    2. Cellulosic Biofuel
    3. Advanced Biofuel
    4. Total Renewable Fuel
    5. 2020 Biomass-Based Diesel
    6. Annual Percentage Standards
    B. RIN Market Operations
II. Authority and Need for Waiver of Statutory Applicable Volumes
    A. Statutory Authorities for Reducing Volume Targets
    1. Cellulosic Waiver Authority
    2. General Waiver Authority
    B. Treatment of Carryover RINs
    1. Carryover RIN Bank Size
    2. EPA's Decision Regarding the Treatment of Carryover RINs
III. Cellulosic Biofuel Volume for 2019
    A. Statutory Requirements
    B. Cellulosic Biofuel Industry Assessment
    1. Review of EPA's Projection of Cellulosic Biofuel in Previous 
Years
    2. Potential Domestic Producers
    3. Potential Foreign Sources of Cellulosic Biofuel
    4. Summary of Volume Projections for Individual Companies
    C. Projection From the Energy Information Administration
    D. Cellulosic Biofuel Volume for 2019
    1. Liquid Cellulosic Biofuel
    2. CNG/LNG Derived From Biogas
    3. Total Cellulosic Biofuel in 2019
IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2019
    A. Volumetric Limitation on Use of the Cellulosic Waiver 
Authority
    B. Attainable Volumes of Advanced Biofuel
    1. Imported Sugarcane Ethanol
    2. Other Advanced Biofuel
    3. Biodiesel and Renewable Diesel
    C. Volume Requirement for Advanced Biofuel
    D. Volume Requirement for Total Renewable Fuel
V. Impacts of 2019 Volumes on Costs
    A. Illustrative Costs Analysis of Exercising the Cellulosic 
Waiver Authority Compared to the 2019 Statutory Volumes Baseline
    B. Illustrative Costs of the 2019 Volumes Compared to the 2018 
RFS Volumes Baseline
VI. Biomass-Based Diesel Volume for 2020
    A. Statutory Requirements
    B. Review of Implementation of the Program and the 2020 
Applicable Volume of Biomass-Based Diesel
    C. Consideration of Statutory Factors Set Forth in CAA Section 
211(o)(2)(B)(ii)(I)-(VI) for 2020 and Determination of the 2020 
Biomass-Based Diesel Volume
VII. Percentage Standards for 2019
    A. Calculation of Percentage Standards
    B. Small Refineries and Small Refiners
    C. Final Standards
VIII. Administrative Actions
    A. Assessment of the Domestic Aggregate Compliance Approach
    B. Assessment of the Canadian Aggregate Compliance Approach
IX. Public Participation
X. Statutory and Executive Order Reviews

[[Page 63705]]

    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs
    C. Paperwork Reduction Act (PRA)
    D. Regulatory Flexibility Act (RFA)
    E. Unfunded Mandates Reform Act (UMRA)
    F. Executive Order 13132: Federalism
    G. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    H. Executive Order 13045: Protection of Children From 
Environmental Health Risks and Safety Risks
    I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    J. National Technology Transfer and Advancement Act (NTTAA)
    K. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    L. Congressional Review Act (CRA)
XI. Statutory Authority

I. Executive Summary

    The Renewable Fuel Standard (RFS) program began in 2006 pursuant to 
the requirements in Clean Air Act (CAA) section 211(o) that were added 
through the Energy Policy Act of 2005. The statutory requirements for 
the RFS program were subsequently modified through the Energy 
Independence and Security Act of 2007 (EISA), leading to the 
publication of major revisions to the regulatory requirements on March 
26, 2010.\1\ EISA's stated goals include moving the United States 
(U.S.) toward ``greater energy independence and security [and] 
increase[ing] the production of clean renewable fuels.'' \2\
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    \1\ 75 FR 14670, March 26, 2010.
    \2\ Public Law 110-140, 121 Stat. 1492 (2007). Hereinafter, 
``EISA.''
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    The statute includes annual volume targets, and requires EPA to 
translate those volume targets (or alternative volume requirements 
established by EPA in accordance with statutory waiver authorities) 
into compliance obligations that obligated parties must meet every 
year. In this action we are finalizing the applicable volumes for 
cellulosic biofuel, advanced biofuel, and total renewable fuel for 
2019, and biomass-based diesel (BBD) for 2020.\3\ We are also 
finalizing the annual percentage standards (also known as ``percent 
standards'') for cellulosic biofuel, BBD, advanced biofuel, and total 
renewable fuel that would apply to all gasoline and diesel produced or 
imported in 2019.\4\
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    \3\ The 2019 BBD volume requirement was established in the 2018 
final rule.
    \4\ For a list of the statutory provisions for the determination 
of applicable volumes, see the 2018 final rule (82 FR 58486, 
December 12, 2017; Table I.A-2).
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    Today, nearly all gasoline used for transportation purposes 
contains 10 percent ethanol (E10), and on average diesel fuel contains 
nearly 5 percent biodiesel and/or renewable diesel.\5\ However, the 
market has fallen well short of the statutory volumes for cellulosic 
biofuel, resulting in shortfalls in the advanced biofuel and total 
renewable fuel volumes. In this action, we are finalizing a volume 
requirement for cellulosic biofuel at the level we project to be 
available for 2019, along with an associated applicable percentage 
standard. For advanced biofuel and total renewable fuel, we are 
finalizing reductions under the ``cellulosic waiver authority'' that 
would result in advanced biofuel and total renewable fuel volume 
requirements that are lower than the statutory targets by the same 
magnitude as the reduction in the cellulosic biofuel reduction. This 
would effectively maintain the implied statutory volumes for non-
cellulosic advanced biofuel and conventional biofuel.\6\
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    \5\ Average biodiesel and/or renewable diesel blend percentages 
based on EIA's October 2018 Short Term Energy Outlook (STEO).
    \6\ The statutory total renewable fuel, advanced biofuel and 
cellulosic biofuel requirements for 2019 are 28.0, 13.0 and 8.5 
billion gallons respectively. This implies a conventional renewable 
fuel applicable volume (the difference between the total renewable 
fuel and advanced biofuel volumes, which can be satisfied by with 
conventional (D6) RINs) of 15.0 billion gallons, and a non-
cellulosic advanced biofuel applicable volume (the difference 
between the advanced biofuel and cellulosic biofuel volumes, which 
can be satisfied with advanced (D5) RINs) of 4.5 billion gallons.
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    The resulting final volume requirements for 2019 are shown in Table 
I-1 below. Relative to the levels finalized for 2018, the 2019 volume 
requirements for advanced biofuel and total renewable fuel would be 
higher by 630 million gallons. Approximately 130 million gallons of 
this increase would be due to the increase in the projected production 
of cellulosic biofuel in 2019 relative to 2018. The cellulosic biofuel 
volume is 37 million gallons greater than the proposed cellulosic 
biofuel volume for 2019. The advanced biofuel and total renewable fuel 
volumes are each 40 million gallons higher than the proposed volumes, 
as a result of an increased projection of cellulosic biofuel production 
in 2019 (see Section III for a further discussion of our cellulosic 
biofuel projection). We are also establishing the volume requirement 
for BBD for 2020 at 2.43 billion gallons. This volume is 330 million 
gallons higher than the volume for 2019.

                                     Table I-1--Final Volume Requirements a
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                                                       2019
                                     2018 \b\        Statutory    2019  Proposed    2019 Final      2020 Final
                                                      volumes         volumes         volumes         volumes
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Cellulosic biofuel (million                  288           8,500             381             418             n/a
 gallons).......................
Biomass-based diesel (billion                2.1           >=1.0             N/A         \c\ 2.1        \d\ 2.43
 gallons).......................
Advanced biofuel (billion                   4.29           13.00            4.88            4.92             n/a
 gallons).......................
Renewable fuel (billion gallons)           19.29           28.00           19.88           19.92             n/a
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\a\ All values are ethanol-equivalent on an energy content basis, except for BBD which is biodiesel-equivalent.
\b\ The 2018 volume requirements for cellulosic biofuel, advanced biofuel, and renewable fuel were established
  in the 2018 final rule (82 FR 58486, December 12, 2017). The 2018 BBD volume requirement was established in
  the 2017 final rule (81 FR 89746, December 12, 2016).
\c\ The 2019 BBD volume requirement was established in the 2018 final rule (82 FR 58486, December 12, 2017).
\d\ EPA proposed 2.43 billion gallons of BBD in 2020 in the 2019 NPRM.

A. Summary of Major Provisions in This Action

    This section briefly summarizes the major provisions of this final 
rule. We are finalizing applicable volume requirements and associated 
percentage standards for cellulosic biofuel, advanced biofuel, and 
total renewable fuel for 2019; for BBD we are finalizing the percentage 
standard for 2019 and the applicable volume requirement for 2020.

[[Page 63706]]

1. Approach to Setting Volume Requirements
    For advanced biofuel and total renewable fuel, we are finalizing 
reductions based on the ``cellulosic waiver authority'' that would 
result in advanced biofuel and total renewable fuel volume requirements 
that are lower than the statutory targets by the same magnitude as the 
reduction in the cellulosic biofuel applicable volume. This follows the 
same general approach as in the 2018 final rule. The volumes for 
cellulosic biofuel, advanced biofuel, and total renewable fuel exceed 
the required volumes for these fuel types in 2018.
    Section II provides a general description of our approach to 
setting volume requirements in today's rule, including a review of the 
statutory waiver authorities and our consideration of carryover 
Renewable Identification Numbers (RINs). Section III provides our 
assessment of the 2019 cellulosic biofuel volume, based on a projection 
of production that reflects a neutral aim at accuracy. Section IV 
describes our assessment of advanced biofuel and total renewable fuel. 
Finally, Section VI describes the 2020 BBD volume requirement, 
reflecting our analysis of a set of factors stipulated in CAA section 
211(o)(2)(B)(ii).
2. Cellulosic Biofuel
    EPA must annually determine the projected volume of cellulosic 
biofuel production for the following year. If the projected volume of 
cellulosic biofuel production is less than the applicable volume 
specified in section 211(o)(2)(B)(i)(III) of the statute, EPA must 
lower the applicable volume used to set the annual cellulosic biofuel 
percentage standard to the projected production volume. In this rule we 
are finalizing a cellulosic biofuel volume requirement of 418 million 
ethanol-equivalent gallons for 2019 based on our production projection. 
Our projection reflects consideration of the Energy Information 
Administration's (EIA) projection of cellulosic biofuel production in 
2019; RIN generation data for past years and 2018 to date that is 
available to EPA through the EPA Moderated Transaction System (EMTS); 
the information we have received regarding individual facilities' 
capacities, production start dates, and biofuel production plans; a 
review of cellulosic biofuel production relative to EPA's projections 
in previous annual rules; and EPA's own engineering judgment. To 
project cellulosic biofuel production for 2019 we used the same basic 
methodology as in our proposed rule, described further in the 2018 
final rule. However, we have used updated data to derive percentile 
values used in our production projection for liquid cellulosic biofuels 
and to derive the year-over-year change in the rate of production of 
compressed natural gas and liquified natural gas (CNG/LNG) derived from 
biogas that is used in the projection for CNG/LNG.
3. Advanced Biofuel
    If we reduce the applicable volume of cellulosic biofuel below the 
volume specified in CAA section 211(o)(2)(B)(i)(III), we also have the 
authority to reduce the applicable volumes of advanced biofuel and 
total renewable fuel by the same or a lesser amount. We refer to this 
as the ``cellulosic waiver authority.'' The conditions that caused us 
to reduce the 2018 volume requirement for advanced biofuel below the 
statutory target remain relevant in 2019. As for 2018, we investigated 
the projected availability of non-cellulosic advanced biofuels in 2019. 
We took into account the various constraints on the ability of the 
market to make advanced biofuels available, the ability of the 
standards we set to bring about market changes in the time available, 
the potential impacts associated with diverting biofuels and/or biofuel 
feedstocks from current uses to the production of advanced biofuel used 
in the U.S., the fact that the biodiesel tax credit is currently not 
available for 2019, the tariffs on imports of biodiesel from Argentina 
and Indonesia, as well as the cost of advanced biofuels. Based on these 
considerations we are reducing the statutory volume target for advanced 
biofuel by the same amount as we are reducing the statutory volume 
target for cellulosic biofuel. This results in an advanced biofuel 
volume requirement for 2019 of 4.92 billion gallons, which is 630 
million gallons higher than the advanced biofuel volume requirement for 
2018.
4. Total Renewable Fuel
    We believe that the cellulosic waiver authority is best interpreted 
to require equal reductions in advanced biofuel and total renewable 
fuel. Consistent with our proposal, we are reducing total renewable 
fuel by the same as the reduction in advanced biofuel, such that the 
resulting implied volume requirement for conventional renewable fuel 
will be 15 billion gallons, the same as the implied volume requirement 
in the statute.
5. 2020 Biomass-Based Diesel
    In EISA, Congress specified increasing applicable volumes of BBD 
through 2012. Beyond 2012 Congress stipulated that EPA, in coordination 
with DOE and USDA, was to establish the BBD volume taking into 
consideration implementation of the program during calendar years 
specified in the table in CAA 211(o)(B) and various specified factors, 
provided that the required volume for BBD could not be less than 1.0 
billion gallons. For 2013, EPA established an applicable volume of 1.28 
billion gallons. For 2014 and 2015 we established the BBD volume 
requirement to reflect the actual volume for each of these years of 
1.63 and 1.73 billion gallons.\7\ For 2016 and 2017, we set the BBD 
volume requirements at 1.9 and 2.0 billion gallons respectively. 
Finally, for 2018 and 2019 the BBD volume requirement was set at 2.1 
billion gallons. In this rule we are finalizing an increase to the BBD 
volume for 2020 to 2.43 billion gallons.
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    \7\ The 2015 BBD standard was based on actual data for the first 
9 months of 2015 and on projections for the latter part of the year 
for which data on actual use was not available at the time.
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    Given current and recent market conditions, the advanced biofuel 
volume requirement is driving the production and use of biodiesel and 
renewable diesel volumes over and above volumes required through the 
separate BBD standard, and we expect this to continue. While EPA 
continues to believe it is appropriate to maintain the opportunity for 
other advanced biofuels to compete for market share, the vast majority 
of the advanced biofuel obligations in recent years have been satisfied 
with BBD. Thus, after a review of the implementation of the program to 
date and considering the statutory factors, we are establishing, in 
coordination with USDA and DOE, an applicable volume of BBD for 2020 of 
2.43 billion gallons.\8\
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    \8\ The final 330 million gallon increase for BBD would generate 
approximately 500 million RINs, due to the higher equivalence value 
of biodiesel (1.5 RINs/gallon) and renewable diesel (generally 1.7 
RINs/gallon).
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6. Annual Percentage Standards
    The renewable fuel standards are expressed as a volume percentage 
and are used by each refiner and importer of fossil-based gasoline or 
diesel to determine their renewable fuel volume obligations.
    Four separate percentage standards are required under the RFS 
program, corresponding to the four separate renewable fuel categories 
shown in Table I.A-1. The specific formulas we use in calculating the 
renewable fuel

[[Page 63707]]

percentage standards are contained in the regulations at 40 CFR 
80.1405. The percentage standards represent the ratio of the national 
applicable volume of renewable fuel volume to the national projected 
non-renewable gasoline and diesel volume less any gasoline and diesel 
attributable to small refineries granted an exemption prior to the date 
that the standards are set. The volume of transportation gasoline and 
diesel used to calculate the percentage standards was based on 
projections provided by EIA as required under the statute. The final 
applicable percentage standards for 2019 are shown in Table I.B.6-1. 
Detailed calculations can be found in Section VII, including the 
projected gasoline and diesel volumes used.

             Table I.B.6-1--Final 2019 Percentage Standards
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                                                               Final
                                                            percentage
                                                             standards
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Cellulosic biofuel......................................           0.230
Biomass-based diesel....................................            1.73
Advanced biofuel........................................            2.71
Renewable fuel..........................................           10.97
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B. RIN Market Operations

    In the rulemaking notices proposing the 2018 and 2019 RFS volume 
requirements, we noted that various stakeholders had raised concerns 
regarding lack of transparency and potential manipulation in the RIN 
market. We asked for comment from the public on those issues, and 
received multiple suggestions from stakeholders in response. Since 
receiving those comments, we have continued to hold meetings with 
stakeholders on these topics, through which we have continued to hear 
various perspectives on RIN market operations and potential changes.
    A number of the comments received in response to the 2019 Notice of 
Proposed Rulemaking (NPRM) suggested increasing the amount of data 
related to the RIN market that EPA makes publicly available. In 
response to these comments, we have made additional information 
available through our public website.\9\ The website publishes data on 
a number of items of interest to stakeholders, including the number of 
small refinery exemption petitions received, granted, and denied by 
year; the fuel volume exempted by year; weekly volume-weighted average 
RIN prices by D-code; \10\ and weekly aggregated RIN transaction 
volumes by D-code. We intend to update these data regularly going 
forward. We believe this additional information will increase the 
transparency of the RIN market, and improve EPA's administration of the 
RFS program.
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    \9\ https://www.epa.gov/fuels-registration-reporting-and-compliance-help/public-data-renewable-fuel-standard.
    \10\ Each RIN has a ``D-code'' that identifies the category of 
fuel (D3 for cellulosic biofuel, D7 for cellulosic diesel, D4 for 
biomass-based diesel, D5 for advanced biofuel, or D6 for 
conventional biofuel) for which the RIN was generated.
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    We also received a number of comments on the potential impacts of 
changing the regulations related to who may purchase RINs, the duration 
for which RINs could be held, and other rules related to the buying, 
selling, or holding of RINs. On October 9, President Trump directed EPA 
to undertake a CAA rulemaking that would change certain elements of the 
RIN compliance system under the RFS program to improve both RIN market 
transparency and overall functioning of the RIN market. EPA is 
currently considering a number of regulatory reforms that could be 
included in the proposal, such as: Prohibiting entities other than 
obligated parties from purchasing separated RINs; requiring public 
disclosure when RIN holdings held by an individual actor exceed 
specified limits; limiting the length of time a non-obligated party can 
hold RINs; and changing the timelines that apply to obligated parties 
regarding when RINs must be retired for compliance purposes. We are not 
currently considering changing the point of obligation in the RFS 
program.\11\ While we have determined that RIN market issues will be 
addressed separately and are not being considered as part of the 
present rulemaking, EPA will consider comments received on this topic 
on the proposed 2019 annual rule as we develop this separate action.
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    \11\ EPA previously considered, and ultimately denied, petitions 
for reconsideration of the point of obligation in the RFS program. 
See ``Denial of Petitions for Rulemaking to Change the RFS Point of 
Obligation'' EPA-420-R-17-008, November 2017.
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II. Authority and Need for Waiver of Statutory Applicable Volumes

    The CAA provides EPA with the authority to enact volume 
requirements below the applicable volume targets specified in the 
statute under specific circumstances. This section discusses those 
authorities. As described in the executive summary, we are finalizing 
the volume requirement for cellulosic biofuel at the level we project 
to be available for 2019, and an associated applicable percentage 
standard. For advanced biofuel and total renewable fuel, we are 
establishing volume requirements and associated applicable percent 
standards, based on use of the ``cellulosic waiver authority'' that 
would result in advanced biofuel and total renewable fuel volume 
requirements that are lower than the statutory targets by the same 
magnitude as the reduction in the cellulosic biofuel reduction. This 
would effectively maintain the implied statutory volumes for non-
cellulosic advanced biofuel and conventional renewable fuel.\12\
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    \12\ See supra n. 6.
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A. Statutory Authorities for Reducing Volume Targets

    In CAA section 211(o)(2), Congress specified increasing annual 
volume targets for total renewable fuel, advanced biofuel, and 
cellulosic biofuel for each year through 2022, and for BBD through 
2012, and authorized EPA to set volume requirements for subsequent 
years in coordination with USDA and DOE, and after consideration of 
specified factors. However, Congress also recognized that under certain 
circumstances it would be appropriate for EPA to set volume 
requirements at a lower level than reflected in the statutory volume 
targets, and thus provided waiver provisions in CAA section 211(o)(7).
1. Cellulosic Waiver Authority
    Section 211(o)(7)(D)(i) of the CAA provides that if EPA determines 
that the projected volume of cellulosic biofuel production for a given 
year is less than the applicable volume specified in the statute, then 
EPA must reduce the applicable volume of cellulosic biofuel required to 
the projected production volume for that calendar year. In making this 
projection, EPA may not ``adopt a methodology in which the risk of 
overestimation is set deliberately to outweigh the risk of 
underestimation'' but must make a projection that ``takes neutral aim 
at accuracy.'' API v. EPA, 706 F.3d 474, 479, 476 (D.C. Cir. 2013). 
Pursuant to this provision, EPA has set the cellulosic biofuel 
requirement lower than the statutory volume for each year since 2010. 
As described in Section III.D, the projected volume of cellulosic 
biofuel production for 2019 is less than the 8.5 billion gallon volume 
target in the statute. Therefore, for 2019, we are requiring a 
cellulosic biofuel volume lower than the statutory applicable volume, 
in accordance with this provision.
    CAA section 211(o)(7)(D)(i) also provides EPA with the authority to 
reduce the applicable volume of total renewable fuel and advanced 
biofuel in

[[Page 63708]]

years when it reduces the applicable volume of cellulosic biofuel under 
that provision. The reduction must be less than or equal to the 
reduction in cellulosic biofuel. For 2019, we are reducing the 
applicable volumes of advanced biofuel and total renewable fuel under 
this authority.
    EPA has used the cellulosic waiver authority to lower the 
cellulosic biofuel, advanced biofuel and total renewable fuel volumes 
every year since 2014. Further discussion of the cellulosic waiver 
authority, and EPA's interpretation of it, can be found in the preamble 
to the 2017 final rule.\13\ See also API v. EPA, 706 F.3d 474 (D.C. 
Cir. 2013) (requiring that EPA's cellulosic biofuel projections reflect 
a neutral aim at accuracy); Monroe Energy v. EPA, 750 F.3d 909 (D.C. 
Cir. 2014) (affirming EPA's broad discretion under the cellulosic 
waiver authority to reduce volumes of advanced biofuel and total 
renewable fuel); Americans for Clean Energy v. EPA (``ACE''), 864 F.3d 
691 (D.C. Cir. 2017) (discussed below).
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    \13\ See 81 FR 89752-89753 (December 12, 2016).
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    In ACE, the court evaluated EPA's use of the cellulosic waiver 
authority in the 2014-2016 annual rulemaking to reduce the advanced 
biofuel and total renewable fuel volumes for 2014, 2015, and 2016. 
There, EPA used the cellulosic waiver authority to reduce the advanced 
biofuel volume to a level that was reasonably attainable, and then 
provided a comparable reduction under this authority for total 
renewable fuel.\14\ The Court of Appeals for the District of Columbia, 
relying on the analysis in Monroe Energy, reaffirmed that EPA enjoys 
``broad discretion'' under the cellulosic waiver authority ``to 
consider a variety of factors--including demand-side constraints in the 
advanced biofuels market.'' \15\ The Court noted that the only textual 
limitation on the use of the cellulosic waiver authority is that it 
cannot exceed the amount of the reduction in cellulosic biofuel.\16\ 
The Court contrasted the general waiver authority under CAA section 
211(o)(7)(A) and the biomass based diesel waiver authority under CAA 
section 211(o)(7)(E), which ``detail the considerations and procedural 
steps that EPA must take before waiving fuel requirements,'' with the 
cellulosic waiver authority, which identifies no factors regarding 
reductions in advanced and total renewable fuel other than the 
limitation that any such reductions may not exceed the reduction in 
cellulosic biofuel volumes.\17\ The Court also concluded that the scope 
of EPA's discretionary authority to reduce advanced and total volumes 
is the same under the cellulosic waiver provision whether EPA is 
declining to exercise its authority to waive volumes, or choosing to do 
so.\18\
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    \14\ See 80 FR 77433-34 (December 14, 2015).
    \15\ ACE, 864 F.3d at 730.
    \16\ Id. at 733.
    \17\ Id.
    \18\ Id. at 734.
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    In this action we are using the cellulosic waiver authority to 
reduce the statutory volume targets for advanced biofuels and total 
renewable fuel by equal amounts, consistent with our long-held 
interpretation of this provision and our approach in setting the 2014-
2018 standards. This approach considers the Congressional objectives 
reflected in the volume tables in the statute, and the environmental 
objectives that generally favor the use of advanced biofuels over non-
advanced biofuels. See 81 FR 89752-89753 (December 12, 2016). See also 
78 FR 49809-49810 (August 15, 2013); 80 FR 77434 (December 14, 2015). 
We are concluding, as described in Section IV, that it is appropriate 
for EPA to reduce the advanced biofuel volume under the cellulosic 
waiver authority by the same quantity as the reduction in cellulosic 
biofuel, and to provide an equal reduction under the cellulosic waiver 
authority in the applicable volume of total renewable fuel. We are 
taking this action both because we do not believe that the statutory 
volumes can be achieved, and because we do not believe that backfilling 
of the shortfall in cellulosic with advanced biofuel would be 
appropriate due to high costs, as well as other factors such as 
feedstock switching and/or diversion of foreign advanced biofuels. The 
volumes of advanced and total renewable fuel resulting from this 
exercise of the cellulosic waiver authority provide for an implied 
volume allowance for conventional renewable fuel of 15 billion gallons, 
and an implied volume allowance for non-cellulosic advanced biofuel of 
4.5 billion gallons, equal to the implied statutory volumes for 2019. 
We also believe that the volume of renewable fuel made available after 
reductions using the cellulosic waiver authority is attainable, as 
discussed in Section IV.
2. 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.
    EPA received comments suggesting that EPA should use the general 
waiver to further reduce volumes under findings of inadequate domestic 
supply, and/or severe harm to the economy or environment. Based on our 
review of the comments and updated data, and consistent with EPA's 
rationale and decisions in setting the 2018 standards, we decline to 
exercise our discretion to reduce volumes under the general waiver 
authority. Further discussion of these issues is found in the RTC 
document and a memorandum to the docket.\19\
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    \19\ See ``Endangered Species Act No Effect Finding and 
Determination of Severe Environmental Harm under the General Waiver 
Authority for the 2019 Final Rule'' Memorandum from EPA Staff to EPA 
Docket EPA-HQ-OAR-2018-0167.
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B. Treatment of Carryover RINs

    Consistent with our approach in the final rules establishing the 
RFS standards for 2013 through 2018, we have also considered the 
availability and role of carryover RINs in evaluating whether we should 
exercise our discretion to use our waiver authorities in setting the 
volume requirements for 2019. Neither the statute nor EPA regulations 
specify how or whether EPA should consider the availability of 
carryover RINs in exercising the cellulosic waiver authority.\20\ As 
noted in the context of the rules establishing the RFS standards for 
2014 through 2018, we believe that a bank of carryover RINs is 
extremely important

[[Page 63709]]

in providing obligated parties compliance flexibility in the face of 
substantial uncertainties in the transportation fuel marketplace, and 
in providing a liquid and well-functioning RIN market upon which 
success of the entire program depends.\21\ Carryover RINs provide 
flexibility in the face of a variety of circumstances that could limit 
the availability of RINs, including weather-related damage to renewable 
fuel feedstocks and other circumstances potentially affecting the 
production and distribution of renewable fuel.\22\ On the other hand, 
carryover RINs can be used for compliance purposes, and in the context 
of the 2013 RFS rulemaking we noted that an abundance of carryover RINs 
available in that year (2.666 billion RINs or approximately 16 percent 
of the total renewable fuel volume requirement for 2013), together with 
possible increases in renewable fuel production and import, justified 
maintaining the advanced and total renewable fuel volume requirements 
for that year at the levels specified in the statute.\23\ EPA's 
approach to the consideration of carryover RINs in exercising our 
cellulosic waiver authority was affirmed in Monroe Energy and ACE.\24\
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    \20\ CAA section 211(o)(5) requires that EPA establish a credit 
program as part of its RFS regulations, and that the credits be 
valid to show compliance for 12 months as of the date of generation. 
EPA implemented this requirement though the use of RINs, which can 
be used to demonstrate compliance for the year in which they are 
generated or the subsequent compliance year. Obligated parties can 
obtain more RINs than they need in a given compliance year, allowing 
them to ``carry over'' these excess RINs for use in the subsequent 
compliance year, although use of these carryover RINs is limited to 
20 percent of the obligated party's renewable volume obligation 
(RVO). For the bank of carryover RINs to be preserved from one year 
to the next, individual carryover RINs are used for compliance 
before they expire and are essentially replaced with newer vintage 
RINs that are then held for use in the next year. For example, if 
the volume of the collective carryover RIN bank is to remain 
unchanged from 2017 to 2018, then all of the vintage 2017 carryover 
RINs must be used for compliance in 2018, or they will expire. 
However, the same volume of 2018 RINs can then be ``banked'' for use 
in 2019.
    \21\ See 80 FR 77482-87 (December 14, 2015), 81 FR 89754-55 
(December 12, 2016), and 82 FR 58493-95 (December 12, 2017).
    \22\ See 72 FR 23900 (May 1, 2007), 80 FR 77482-87 (December 14, 
2015), 81 FR 89754-55 (December 12, 2016), and 82 FR 58493-95 
(December 12, 2017).
    \23\ See 78 FR 49794-95 (August 15, 2013).
    \24\ Monroe Energy v. EPA, 750 F.3d 909 (D.C. Cir. 2014), ACE, 
864 F.3d at 713.
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    An adequate RIN bank serves to make the RIN market liquid. Just as 
the economy as a whole functions best when individuals and businesses 
prudently plan for unforeseen events by maintaining inventories and 
reserve money accounts, we believe that the RFS program functions best 
when sufficient carryover RINs are held in reserve for potential use by 
the RIN holders themselves, or for possible sale to others that may not 
have established their own carryover RIN reserves. Were there to be no 
RINs in reserve, then even minor disruptions or other shortfalls in 
renewable fuel production or distribution relative to petroleum fuel 
supply, or higher than expected transportation fuel demand (requiring 
greater volumes of renewable fuel to comply with the percentage 
standards that apply to all volumes of transportation fuel, including 
the unexpected volumes) could lead to the need for a new waiver of the 
standards, undermining the market certainty so critical to the RFS 
program. Moreover, a significant drawdown of the carryover RIN bank 
leading to a scarcity of RINs may stop the market from functioning in 
an efficient manner (i.e., one in which there are a sufficient number 
of reasonably available RINs for obligated parties seeking to purchase 
them), even where the market overall could satisfy the standards. For 
all of these reasons, the collective carryover RIN bank provides a 
needed programmatic buffer that both facilitates individual compliance 
and provides for smooth overall functioning of the program.\25\
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    \25\ Here we use the term ``buffer'' as shorthand reference to 
all of the benefits that are provided by a sufficient bank of 
carryover RINs.
---------------------------------------------------------------------------

1. Carryover RIN Bank Size
    At the time of the 2019 NPRM, we estimated that there were 
approximately 3.06 billion total carryover RINs available and proposed 
that carryover RINs should not be counted on to avoid or minimize the 
need to reduce the 2019 statutory volume targets. We also proposed that 
the 2019 volume should not be set at levels that would intentionally 
lead to a drawdown in the bank of carryover RINs (e.g., volumes that 
were significantly beyond the market's ability to supply renewable 
fuels).\26\
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    \26\ See 83 FR 32024 (July 10, 2018).
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    Since that time, obligated parties have performed their attest 
engagements and submitted revised compliance reports for the 2017 
compliance year and we now estimate that there are currently 
approximately 2.59 billion total carryover RINs available,\27\ a 
decrease of 470 million RINs from the 3.06 billion total carryover RINs 
that were estimated to be available in the 2019 NPRM.\28\ This decrease 
in the total carryover RIN bank compared to that projected in the 2019 
NPRM results from various factors, including market factors, regulatory 
and enforcement actions, and judicial proceedings. This estimate also 
includes the millions of RINs that were not required to be retired by 
small refineries that were granted hardship exemptions in recent 
years,\29\ along with the RINs that Philadelphia Energy Solutions 
Refining and Marketing, LLC (``PESRM'') was not required to retire as 
part of its bankruptcy settlement agreement.\30\ This total volume of 
carryover RINs is approximately 13 percent of the total renewable fuel 
volume requirement that EPA is finalizing for 2019, which is less than 
the 20 percent maximum limit permitted by the regulations to be carried 
over for use in complying with the 2019 standards.\31\
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    \27\ The calculations performed to estimate the number of 
carryover RINs currently available can be found in the memorandum, 
``Carryover RIN Bank Calculations for 2019 Final Rule,'' available 
in the docket.
    \28\ See ``Carryover RIN Bank Calculations for 2019 NPRM,'' 
Docket Item No. EPA-HQ-OAR-2018-0167-0043.
    \29\ Information about the number of small refinery exemptions 
granted and the volume of RINs not required to be retired as a 
result of those exemptions can be found at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
    \30\ Per PESRM's bankruptcy filings, PESRM had an RVO of 467 
million RINs for 2017 (including its deficit carryforward from 
2016). Pursuant to the settlement agreement, which was based on the 
unique facts and circumstances present in this case, including the 
insolvency and risk of liquidation, PESRM agreed to retire 138 
million RINs to meet its 2017 RVO and the portion of its 2018 RVO 
during the bankruptcy proceedings (approximately 97 million RINs). 
See docket for PES Holdings, LLC, 1:18bk10122, ECF Document Nos. 244 
(proposed settlement agreement), 347 (United States' motion to 
approve proposed settlement agreement), 376 (order approving 
proposed settlement agreement), and 510 (Stipulation between the 
Debtors and the United States on behalf of the Environmental 
Protection Agency relating to Renewable Identification Number 
Retirement Deadlines under Consent Decree and Environmental 
Settlement Agreement) (Bankr. D. Del.). PESRM has emerged from 
bankruptcy and EPA does not anticipate further relief being granted 
under the RFS program.
    \31\ See 40 CFR 80.1427(a)(5).
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    The above discussion applies to total carryover RINs; we have also 
considered the available volume of advanced biofuel carryover RINs. At 
the time of the 2019 NPRM, we estimated that there were approximately 
700 million advanced carryover RINs available. Since that time, 
obligated parties have performed their attest engagements and submitted 
revised compliance reports for the 2017 compliance year and we now 
estimate that there are currently approximately 600 million advanced 
carryover RINs available,\32\ a decrease of 100 million RINs from the 
700 million total carryover RINs that were estimated to be available in 
the 2019 NPRM.\33\ This volume of advanced carryover RINs is 
approximately 12 percent of the advanced renewable fuel volume 
requirement that EPA is finalizing for 2019, which is less than the 20 
percent maximum limit permitted by the regulations to be carried over 
for use in complying with the 2019 standards.\34\
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    \32\ The calculations performed to estimate the number of 
carryover RINs currently available can be found in the memorandum, 
``Carryover RIN Bank Calculations for 2019 Final Rule,'' available 
in the docket.
    \33\ See ``Carryover RIN Bank Calculations for 2019 NPRM,'' 
Docket Item No. EPA-HQ-OAR-2018-0167-0043.
    \34\ See 40 CFR 80.1427(a)(5).
---------------------------------------------------------------------------

    However, there remains considerable uncertainty surrounding the 
number of carryover RINs that will be available for use in 2019 for a 
number of reasons, including the potential impact of any future action 
to address the remand in ACE, the possibility of additional small

[[Page 63710]]

refinery exemptions, and the impact of 2018 RFS compliance on the bank 
of carryover RINs. In addition, we note that there have been 
enforcement actions in past years that have resulted in the retirement 
of carryover RINs to make up for the generation and use of invalid RINs 
and/or the failure to retire RINs for exported renewable fuel. Future 
enforcement actions could have similar results, and require that 
obligated parties and/or renewable fuel exporters settle past 
enforcement-related obligations in addition to the annual standards, 
thereby potentially creating demand for RINs greater than can be 
accommodated through actual renewable fuel blending in 2019. In light 
of these uncertainties, the net result could be a bank of total 
carryover RINs larger or smaller than 13 percent of the 2019 total 
renewable fuel volume requirement, and a bank of advanced carryover 
RINs larger or smaller than 12 percent of the 2019 advanced biofuel 
volume requirement.
2. EPA's Decision Regarding the Treatment of Carryover RINs
    We have evaluated the volume of carryover RINs currently available 
and considered whether they would justify a reduced use of our 
cellulosic waiver authority in setting the 2019 volume requirements in 
order to intentionally draw down the carryover RIN bank. We also 
carefully considered the comments received, including comments on the 
role of carryover RINs under our waiver authorities and the policy 
implications of our decision.\35\ For the reasons described throughout 
Section II.B, we do not believe we should intentionally draw down the 
bank of carryover RINs and limit the exercise of our cellulosic waiver 
authority. The current bank of carryover RINs provides an important and 
necessary programmatic buffer that will both facilitate individual 
compliance and provide for smooth overall functioning of the program. 
We believe that a balanced consideration of the possible role of 
carryover RINs in achieving the statutory volume objectives for 
advanced and total renewable fuels, versus maintaining an adequate bank 
of carryover RINs for important programmatic functions, is appropriate 
when EPA exercises its discretion under the cellulosic waiver 
authority, and that the statute does not specify the extent to which 
EPA should require a drawdown in the bank of carryover RINs when it 
exercises this authority. Therefore, for the reasons noted above and 
consistent with the approach we took in the final rules establishing 
the RFS standards for 2014 through 2018, we have decided to maintain 
our proposed approach and are making a determination to not set the 
2019 volume requirements at levels that would envision an intentional 
drawdown in the bank of carryover RINs. We note that we may or may not 
take a similar approach in future years; we will assess the situation 
on a case-by-case basis going forward and take into account the size of 
the carryover RIN bank in the future and any lessons learned from 
implementing past rules.
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    \35\ In their comments on the 2019 NPRM, parties generally 
expressed two opposing points of view. Commenters representing 
obligated parties supported EPA's proposed decision to not assume a 
drawdown in the bank of carryover RINs in determining the 
appropriate volume requirements, reiterating the importance of 
maintaining the carryover RIN bank in order to provide obligated 
parties with necessary compliance flexibilities, better market 
trading liquidity, and a cushion against future program uncertainty. 
Commenters representing renewable fuel producers, however, stated 
that not accounting for carryover RINs goes against Congressional 
intent of the RFS program and deters investment in cellulosic and 
advanced biofuels. A full description of comments received, and our 
detailed responses to them, is available in the RTC document in the 
docket.
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III. Cellulosic Biofuel Volume for 2019

    In the past several years, production of cellulosic biofuel has 
continued to increase. Cellulosic biofuel production reached record 
levels in 2017, driven largely by CNG and LNG derived from biogas. 
Production volumes through September 2018 suggest production in 2018 
will exceed production volumes in 2017.\36\ Production of liquid 
cellulosic biofuel has also increased in recent years, even as the 
total production of liquid cellulosic biofuels remains much smaller 
than the production volumes of CNG and LNG derived from biogas. This 
section describes our assessment of the volume of cellulosic biofuel 
that we project will be produced or imported into the U.S. in 2019, and 
some of the uncertainties associated with those volumes.
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    \36\ The majority of the cellulosic RINs generated for CNG/LNG 
are sourced from biogas from landfills; however, the biogas may come 
from a variety of sources including municipal wastewater treatment 
facility digesters, agricultural digesters, separated municipal 
solid waste (MSW) digesters, and the cellulosic components of 
biomass processed in other waste digesters.

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[[Page 63711]]

[GRAPHIC] [TIFF OMITTED] TR11DE18.000

    In order to project the volume of cellulosic biofuel production in 
2019, we considered EIA's projection of cellulosic biofuel production 
in 2019, the accuracy of the methodologies used to project cellulosic 
biofuel production in previous years, data reported to EPA through 
EMTS, and information we collected through meetings with 
representatives of facilities that have produced or have the potential 
to produce qualifying volumes of cellulosic biofuel in 2019 for 
consumption as transportation fuel, heating oil, or jet fuel in the 
U.S.
    There are two main elements to the cellulosic biofuel production 
projection: Liquid cellulosic biofuel and CNG/LNG derived from biogas. 
To project the range of potential production volumes of liquid 
cellulosic biofuel we used the same general methodology as the 
methodology used in the proposed rule, as well as the 2018 final rule. 
However, we have adjusted the percentile values used to select a point 
estimate within a projected production range for each group of 
companies based on updated information (through the end of September 
2018) with the objective of improving the accuracy of the projections. 
To project the production of cellulosic biofuel RINs for CNG/LNG 
derived from biogas, we used the same general year-over-year growth 
rate methodology as in the 2019 proposed rule and 2018 final rule, with 
updated RIN generation data through September 2018. This methodology 
reflects the mature status of this industry, the large number of 
facilities registered to generate cellulosic biofuel RINs from these 
fuels, and EPA's continued attempts to refine its methodology to yield 
estimates that are as accurate as possible. This methodology is an 
improvement on the methodology that EPA used to project cellulosic 
biofuel production for CNG/LNG derived from biogas in the 2017 and 
previous years (see Section III.B below for a further discussion of the 
accuracy of EPA's methodology in previous years). The methodologies 
used to project the production of liquid cellulosic biofuels and 
cellulosic CNG/LNG derived from biogas are described in more detail in 
Sections III.D-1 and III.D-2 below.
    The balance of this section is organized as follows. Section III.A 
provides a brief description of the statutory requirements. Section 
III.B reviews the accuracy of EPA's projections in prior years, and 
also discusses the companies the EPA assessed in the process of 
projecting qualifying cellulosic biofuel production in the U.S. in 2018 
in Section III.B. Section III.C discusses EIA's projection of 
cellulosic biofuel production for 2019 and how this projection compares 
to EPA's projection. Section III.D discusses the methodologies used by 
EPA to project cellulosic biofuel production in 2019 and the resulting 
projection of 381 million ethanol-equivalent gallons.

A. Statutory Requirements

    CAA section 211(o)(2)(B)(i)(III) states the statutory volume 
targets for cellulosic biofuel. The volume of cellulosic biofuel 
specified in the statute for 2019 is 8.5 billion gallons. The statute 
provides that if EPA determines, based on a letter provided to the EPA 
by EIA, that the projected volume of cellulosic biofuel production in a 
given year is less than the statutory volume, then EPA shall reduce the 
applicable volume of cellulosic biofuel to the projected volume 
available during that calendar year.\37\
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    \37\ CAA section 211(o)(7)(D)(i). The U.S. Court of Appeals for 
the District of Columbia Circuit evaluated this requirement in API 
v. EPA, 706 F.3d 474, 479-480 (D.C. Cir. 2013), in the context of a 
challenge to the 2012 cellulosic biofuel standard. The Court stated 
that in projecting potentially available volumes of cellulosic 
biofuel EPA must apply an ``outcome-neutral methodology'' aimed at 
providing a prediction of ``what will actually happen.'' Id. at 480, 
479. EPA has consistently interpreted the term ``projected volume of 
cellulosic biofuel production'' in CAA section 211(o)(7)(D)(i) to 
include volumes of cellulosic biofuel likely to be made available in 
the U.S., including from both domestic production and imports (see 
80 FR 77420 (December 14, 2015) and 81 FR 89746 (December 12, 
2016)). We do not believe it would be reasonable to include in the 
projection all cellulosic biofuel produced throughout the world, 
regardless of likelihood of import to the U.S., since volumes that 
are not imported would not be available to obligated parties for 
compliance and including them in the projection would render the 
resulting volume requirement and percentage standards unachievable.
---------------------------------------------------------------------------

    In addition, if EPA reduces the required volume of cellulosic 
biofuel below the level specified in the statute, we may reduce the 
applicable volumes of advanced biofuels and total renewable fuel by the 
same or a lesser volume,\38\ and we are also required to make 
cellulosic waiver credits

[[Page 63712]]

available.\39\ Our consideration of the 2019 volume requirements for 
advanced biofuel and total renewable fuel is presented in Section IV.
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    \38\ CAA section 211(o)(7)(D)(i).
    \39\ See CAA section 211(o)(7)(D)(ii); 40 CFR 80.1456.
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B. Cellulosic Biofuel Industry Assessment

    In this section, we first explain our general approach to assessing 
facilities or groups of facilities (which we collectively refer to as 
``facilities'') that have the potential to produce cellulosic biofuel 
in 2019. We then review the accuracy of EPA's projections in prior 
years. Next, we discuss the criteria used to determine whether to 
include potential domestic and foreign sources of cellulosic biofuel in 
our projection for 2019. Finally, we provide a summary table of all 
facilities that we expect to produce cellulosic biofuel in 2019.
    In order to project cellulosic biofuel production for 2019 we have 
tracked the progress of a number of potential cellulosic biofuel 
production facilities, located both in the U.S. and in foreign 
countries. As we have done in previous years, we have focused on 
facilities with the potential to produce commercial-scale volumes of 
cellulosic biofuel rather than small research and development (R&D) or 
pilot-scale facilities.\40\ We considered a number of factors, 
including EIA's projection of cellulosic biofuel production in 2019, 
information from EMTS, the registration status of potential biofuel 
production facilities as cellulosic biofuel producers in the RFS 
program, publicly available information (including press releases and 
news reports), and information provided by representatives of potential 
cellulosic biofuel producers, in making our projection of cellulosic 
biofuel production for 2019. As discussed in greater detail below, our 
projection of liquid cellulosic biofuel is based on a facility-by-
facility assessment of each of the likely sources of cellulosic biofuel 
in 2019, while our projection of CNG/LNG derived from biogas is based 
on an industry wide assessment. To make a determination of which 
facilities are most likely to produce liquid cellulosic biofuel and 
generate cellulosic biofuel RINs in 2019, each potential producer of 
liquid cellulosic biofuel was investigated further to determine the 
current status of its facilities and its likely cellulosic biofuel 
production and RIN generation volumes for 2019. Both in our discussions 
with representatives of individual companies and as part of our 
internal evaluation process we gathered and analyzed information 
including, but not limited to, the funding status of these facilities, 
current status of the production technologies, anticipated construction 
and production ramp-up periods, facility registration status, and 
annual fuel production and RIN generation targets.
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    \40\ For a further discussion of EPA's decision to focus on 
commercial scale facilities, rather than R&D and pilot scale 
facilities, see the 2019 proposed rule (83 FR 32031, July 10, 2018).
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1. Review of EPA's Projection of Cellulosic Biofuel in Previous Years
    As an initial matter, it is useful to review the accuracy of EPA's 
past cellulosic biofuel projections. The record of actual cellulosic 
biofuel production and EPA's projected production volumes from 2015-
2018 are shown in Table III.B-1 below. These data indicate that EPA's 
projection was lower than the actual number of cellulosic RINs made 
available in 2015,\41\ higher than the actual number of RINs made 
available in 2016 and 2017, and lower than the actual number of RINs 
projected to be made available in 2018. The fact that the projections 
made using this methodology have been somewhat inaccurate, under-
estimating the actual number of RINs made available in 2015 and 2018, 
and over-estimating in 2016 and 2017, reflects the inherent difficulty 
with projecting cellulosic biofuel production. It also emphasizes the 
importance of continuing to make refinements to our projection 
methodology in order to make our projections more accurate.
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    \41\ EPA only projected cellulosic biofuel production for the 
final three months of 2015, since data on the availability of 
cellulosic biofuel RINs (D3+D7) for the first nine months of the 
year were available at the time the analyses were completed for the 
final rule.

                          Table III.B.1-1--Projected and Actual Cellulosic Biofuel Production (2015-2018); Million Gallons \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Projected volume \b\                        Actual production volume \c\
                                                         -----------------------------------------------------------------------------------------------
                                                              Liquid          CNG/LNG          Total          Liquid          CNG/LNG          Total
                                                            cellulosic     derived  from    cellulosic      cellulosic     derived  from    cellulosic
                                                              biofuel         biogas        biofuel \d\       biofuel         biogas        biofuel \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015 \e\................................................               2              33              35             0.5            52.8            53.3
2016....................................................              23             207             230             4.1           186.2           190.3
2017....................................................              13             298             311            11.8           239.5           251.3
2018 \f\................................................              14             274             288            14.0           309.0           323.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ As noted in Section III.A. above, EPA has consistently interpreted the term ``projected volume of cellulosic biofuel production'' to include volumes
  of cellulosic biofuel likely to be made available in the U.S., including from both domestic production and imports. The volumes in this table
  therefore include both domestic production of cellulosic biofuel and imported cellulosic biofuel.
\b\ Projected volumes for 2015 and 2016 can be found in the 2014-2016 Final Rule (80 FR 77506, 77508, December 14, 2015); projected volumes for 2017 can
  be found in the 2017 Final Rule (81 FR 89760, December 12, 2016); projected volumes for 2018 can be found in the 2018 Final Rule (82 FR 58503,
  December 12, 2017).
\c\ Actual production volumes are the total number of RINs generated minus the number of RINs retired for reasons other than compliance with the annual
  standards, based on EMTS data.
\d\ Total cellulosic biofuel may not be precisely equal to the sum of liquid cellulosic biofuel and CNG/LNG derived from biogas due to rounding.
\e\ Projected and actual volumes for 2015 represent only the final 3 months of 2015 (October-December) as EPA used actual RIN generation data for the
  first 9 months of the year.
\f\ Actual production in 2018 is projected based on actual data from January-September 2018 and a projection of likely production for October-December
  2018.

    EPA's projections of liquid cellulosic biofuel were higher than the 
actual volume of liquid cellulosic biofuel produced each year from 2015 
to 2017.\42\ As a result of these over-projections, and in an effort to 
take into account the most recent data available and make the liquid 
cellulosic biofuel projections more accurate, EPA adjusted our 
methodology in the 2018 final

[[Page 63713]]

rule.\43\ The adjustments to our methodology adopted in the 2018 final 
rule appear to have resulted in a projection that is very close to the 
volume of liquid cellulosic biofuel expected to be produced in 2018 
based on data through September 2018. In this 2019 final rule we are 
again using percentile values based on actual production in previous 
years, relative to the projected volume of liquid cellulosic biofuel in 
these years (the approach first used in 2018). We have adjusted the 
percentile values to project liquid cellulosic biofuel production based 
on actual liquid cellulosic biofuel production in 2016 to 2018. Use of 
this updated data results in slightly different percentile values than 
we used to project production of liquid cellulosic biofuel in the 2019 
proposed rule and the 2018 final rule. We believe that the use of the 
methodology (described in more detail in Section III.D.1 below), with 
the adjusted percentile values, results in a projection that reflects a 
neutral aim at accuracy since it accounts for expected growth in the 
near future by using historical data that is free of any subjective 
bias.
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    \42\ We note, however, that because the projected volume of 
liquid cellulosic biofuel in each year was very small relative to 
the total volume of cellulosic biofuel, these over-projections had a 
minimal impact on the accuracy of our projections of cellulosic 
biofuel for each of these years.
    \43\ 82 FR 58486 (December 12, 2017).
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    We next turn to the projection of CNG/LNG derived from biogas. For 
2018, EPA for the first time used an industry-wide approach, rather 
than an approach that projects volumes for individual companies or 
facilities, to project the production of CNG/LNG derived from biogas. 
EPA used a facility-by-facility approach to project the production of 
CNG/LNG derived from biogas from 2015-2017. Notably this methodology 
resulted in significant over-estimates of CNG/LNG production in 2016 
and 2017, leading EPA to develop the alternative industry wide 
projection methodology first used in 2018. This updated approach 
reflects the fact that this industry is far more mature than the liquid 
cellulosic biofuel industry, with a far greater number of potential 
producers of CNG/LNG derived from biogas. In such cases, industry-wide 
projection methods can be more accurate than a facility-by-facility 
approach, especially as macro market and economic factors become more 
influential on total production than the success or challenges at any 
single facility. The industry wide projection methodology slightly 
under-projected the production of CNG/LNG derived from biogas in 2018. 
However, the difference between the projected and actual production 
volume of these fuels was smaller than in 2017.
    As described in Section III.D.2 below, EPA is again projecting 
production of CNG/LNG derived from biogas using the industry wide 
approach. We calculate a year-over-year rate of growth in the renewable 
CNG/LNG industry by comparing RIN generation for CNG/LNG derived from 
biogas from October 2016-September 2017 to the RIN generation for these 
same fuels from October 2017-September 2018 (the most recent month for 
which data are available). We then apply this year-over-year growth 
rate to the total number of cellulosic RINs generated and available to 
be used for compliance with the annual standards in 2017 to estimate 
the production of CNG/LNG derived from biogas in 2019.\44\ We have 
applied the growth rate to the number of available 2017 RINs generated 
for CNG/LNG derived from biogas as data from this year allows us to 
adequately account for not only RIN generation, but also for RINs 
retired for reasons other than compliance with the annual standards. 
While more recent RIN generation data is available, the retirement of 
RINs for reasons other than compliance with the annual standards 
generally lags RIN generation, sometimes by up to a year or more.\45\ 
Should this methodology continue to under predict in the future as it 
did in 2018, then we may need to revisit the methodology, but with only 
2018 to compare to it is premature to make any adjustments.
---------------------------------------------------------------------------

    \44\ To project the volume of CNG/LNG derived from biogas in 
2019 we multiply the number of 2017 RINs generated for these fuels 
and available to be used for compliance with the annual standards by 
the calculated growth rate to project production of these fuels in 
2018, and then multiply the resulting number by the growth rate 
again to project the production of these fuels in 2019.
    \45\ We note that we do not ignore this more recent data, but 
rather use it to calculate the year-over-year growth rate used to 
project the production of CNG/LNG derived from biogas in 2019.
---------------------------------------------------------------------------

2. Potential Domestic Producers
    There are several companies and facilities \46\ located in the U.S. 
that have either already begun producing cellulosic biofuel for use as 
transportation fuel, heating oil, or jet fuel at a commercial scale, or 
are anticipated to be in a position to do so at some time during 2019. 
The financial incentive provided by cellulosic biofuel RINs,\47\ 
combined with the fact that to date nearly all cellulosic biofuel 
produced in the U.S. has been used domestically \48\ and all the 
domestic facilities we have contacted in deriving our projections 
intend to produce fuel on a commercial scale for domestic consumption 
and plan to use approved pathways, gives us a high degree of confidence 
that cellulosic biofuel RINs will be generated for any fuel produced by 
domestic commercial scale facilities. To generate RINs, each of these 
facilities must be registered with EPA under the RFS program and comply 
with all the regulatory requirements. This includes using an approved 
RIN-generating pathway and verifying that their feedstocks meet the 
definition of renewable biomass. Most of the domestic companies and 
facilities considered in our assessment of potential cellulosic biofuel 
producers in 2019 have already successfully completed facility 
registration, and have successfully generated RINs.\49\ A brief 
description of each of the domestic companies (or group of companies 
for cellulosic CNG/LNG producers and the facilities using Edeniq's 
technology) that EPA believes may produce commercial-scale volumes of 
RIN generating cellulosic biofuel by the end of 2019 can be found in a 
memorandum to the docket for this final rule.\50\ General information 
on each of these companies or group of companies considered in our 
projection of the potentially available volume of cellulosic biofuel in 
2019 is summarized in Table III.B.3-1 below.
---------------------------------------------------------------------------

    \46\ The volume projection from CNG/LNG producers and facilities 
using Edeniq's production technology do not represent production 
from a single company or facility, but rather a group of facilities 
utilizing the same production technology.
    \47\ According to data from Argus Media, the price for 2018 
cellulosic biofuel RINs averaged $2.40 in 2018 (through September 
2018). Alternatively, obligated parties can satisfy their cellulosic 
biofuel obligations by purchasing an advanced (or biomass-based 
diesel) RIN and a cellulosic waiver credit. The price for 2017 
advanced biofuel RINs averaged $0.55 in through September 2018 while 
the price for a 2018 cellulosic waiver credit is $1.96 (EPA-420-B-
17-036).
    \48\ The only known exception was a small volume of fuel 
produced at a demonstration scale facility exported to be used for 
promotional purposes.
    \49\ Most of the facilities listed in Table III.B.3-1 are 
registered to produce cellulosic (D3 or D7) RINs with the exception 
of several of the producers of CNG/LNG derived from biogas and 
Ensyn's Port-Cartier, Quebec facility.
    \50\ ``Cellulosic Biofuel Producer Company Descriptions 
(November 2018),'' memorandum from Dallas Burkholder to EPA Docket 
EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

3. Potential Foreign Sources of Cellulosic Biofuel
    In addition to the potential sources of cellulosic biofuel located 
in the U.S., there are several foreign cellulosic biofuel companies 
that may produce cellulosic biofuel in 2019. These include facilities 
owned and operated by Beta Renewables, Enerkem, Ensyn, GranBio, and 
Raizen. All of these facilities use fuel production pathways that have 
been approved by EPA for cellulosic RIN generation provided eligible 
sources of renewable feedstock are used and other regulatory 
requirements are satisfied. These

[[Page 63714]]

companies would therefore be eligible to register their facilities 
under the RFS program and generate RINs for any qualifying fuel 
imported into the U.S. While these facilities may be able to generate 
RINs for any volumes of cellulosic biofuel they import into the U.S., 
demand for the cellulosic biofuels they produce is expected to be high 
in their own local markets.
    EPA's projection of cellulosic biofuel production in 2019 includes 
cellulosic biofuel that is projected to be imported into the U.S. in 
2019. For the purposes of this final rule we have considered all the 
registered foreign facilities under the RFS program to be potential 
sources of cellulosic biofuel in 2019. We believe that due to the 
strong demand for cellulosic biofuel in local markets, the significant 
technical challenges associated with the operation of cellulosic 
biofuel facilities, and the time necessary for potential foreign 
cellulosic biofuel producers to register under the RFS program and 
arrange for the importation of cellulosic biofuel to the U.S., 
cellulosic biofuel imports from foreign facilities not currently 
registered to generate cellulosic biofuel RINs are generally highly 
unlikely in 2019. For purposes of our 2019 cellulosic biofuel 
projection we have, with one exception (described below), excluded 
potential volumes from foreign cellulosic biofuel production facilities 
that are not currently registered under the RFS program.
    Cellulosic biofuel produced at three foreign facilities (Ensyn's 
Renfrew facility, GranBio's Brazilian facility, and Raizen's Brazilian 
facility) generated cellulosic biofuel RINs for fuel exported to the 
U.S. in 2017 and/or 2018; projected volumes from each of these 
facilities are included in our projection of available volumes for 
2019. EPA has also included projected volume from two additional 
foreign facilities. One of these facilities has completed the 
registration process as a cellulosic biofuel producer (Enerkem's 
Canadian facility). The other facility (Ensyn's Port-Cartier, Quebec 
facility), while not yet registered as a cellulosic biofuel producer, 
is owned by a Ensyn, a company that has previously generated cellulosic 
biofuel RINs using the same technology at a different facility. We 
believe that it is appropriate to include volume from these facilities 
in light of their proximity to the U.S., the proven technology used by 
these facilities, the volumes of cellulosic biofuel exported to the 
U.S. by the company in previous years (in the case of Ensyn), and the 
company's stated intentions to market fuel produced at these facilities 
to qualifying markets in the U.S. All of the facilities included in 
EPA's cellulosic biofuel projection for 2019 are listed in Table 
III.B.3-1 below.
4. Summary of Volume Projections for Individual Companies
    General information on each of the cellulosic biofuel producers (or 
group of producers, for producers of CNG/LNG derived from biogas and 
producers of liquid cellulosic biofuel using Edeniq's technology) that 
factored into our projection of cellulosic biofuel production for 2019 
is shown in Table III.B.3-1. This table includes both facilities that 
have already generated cellulosic RINs, as well as those that have not 
yet generated cellulosic RINs, but are projected to do so by the end of 
2019. As discussed above, we have focused on commercial-scale 
cellulosic biofuel production facilities. Each of these facilities (or 
group of facilities) is discussed further in a memorandum to the 
docket.\51\
---------------------------------------------------------------------------

    \51\ ``Cellulosic Biofuel Producer Company Descriptions 
(November 2018),'' memorandum from Dallas Burkholder to EPA Docket 
EPA-HQ-OAR-2018-0167.
    \52\ The Facility Capacity is generally equal to the nameplate 
capacity provided to EPA by company representatives or found in 
publicly available information. Capacities are listed in physical 
gallons (rather than ethanol-equivalent gallons). If the facility 
has completed registration and the total permitted capacity is lower 
than the nameplate capacity then this lower volume is used as the 
facility capacity. For companies generating RINs for CNG/LNG derived 
from biogas the Facility Capacity is equal to the lower of the 
annualized rate of production of CNG/LNG from the facility at the 
time of facility registration or the sum of the volume of contracts 
in place for the sale of CNG/LNG for use as transportation fuel 
(reported as the actual peak capacity for these producers).
    \53\ Where a quarter is listed for the first production date EPA 
has assumed production begins in the middle month of the quarter 
(i.e., August for the 3rd quarter) for the purposes of projecting 
volumes.
    \54\ For more information on these facilities see ``November 
2018 Assessment of Cellulosic Biofuel Production from Biogas 
(2019),'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-
OAR-2018-0167.
    \55\ The nameplate capacity of Enerkem's facility is 10 million 
gallons per year. However, we anticipate that a portion of their 
feedstock will be non-biogenic MSW. RINs cannot be generated for the 
portion of the fuel produced from non-biogenic feedstocks. We have 
taken this into account in our production projection for this 
facility (See ``November 2018 Liquid Cellulosic Biofuel Projections 
for 2018 CBI'').
    \56\ This date reflects the first production of ethanol from 
this facility. The facility began production of methanol in 2015.

                                           Table III.B.4-1--Projected Producers of Cellulosic Biofuel in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Facility
                                                                                                 capacity         Construction
          Company name                Location            Feedstock             Fuel        (million  gallons      start date      First production \53\
                                                                                              per year) \52\
--------------------------------------------------------------------------------------------------------------------------------------------------------
CNG/LNG Producers \54\.........  Various...........  Biogas............  CNG/LNG..........  Various..........  Various..........  August 2014.
Edeniq.........................  Various...........  Corn Kernel Fiber.  Ethanol..........  Various..........  Various..........  October 2016.
Enerkem........................  Edmonton, AL,       Separated MSW.....  Ethanol..........  10 \55\..........  2012.............  September 2017.\56\
                                  Canada.
Ensyn..........................  Renfrew, ON,        Wood Waste........  Heating Oil......  3................  2005.............  2014.
                                  Canada.
Ensyn..........................  Port-Cartier, QC,   Wood Waste........  Heating Oil......  10.5.............  June 2016........  January 2018.
                                  Canada.
GranBio........................  S[atilde]o Miguel   Sugarcane bagasse.  Ethanol..........  21...............  Mid 2012.........  September 2014.
                                  dos Campos,
                                  Brazil.
Poet-DSM.......................  Emmetsburg, IA....  Corn Stover.......  Ethanol..........  20...............  March 2012.......  4Q 2015.
QCCP/Syngenta..................  Galva, IA.........  Corn Kernel Fiber.  Ethanol..........  4................  Late 2013........  October 2014.
Raizen.........................  Piracicaba City,    Sugarcane bagasse.  Ethanol..........  11...............  January 2014.....  July 2015.
                                  Brazil.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63715]]

C. Projection From the Energy Information Administration

    Section 211(o)(3)(A) of the CAA requires EIA to ``provide to the 
Administrator of the Environmental Protection Agency an estimate, with 
respect to the following calendar year, of the volumes of 
transportation fuel, biomass-based diesel, and cellulosic biofuel 
projected to be sold or introduced into commerce in the United 
States.'' EIA provided these estimates to EPA on October 12, 2018.\57\ 
With regard to liquid cellulosic biofuel, the EIA estimated that the 
available volume in 2019 would be 10 million gallons.
---------------------------------------------------------------------------

    \57\ ``EIA letter to EPA with 2019 volume projections 10-12-
18,'' available in docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    In its letter, EIA did not identify the facilities on which their 
estimate of liquid cellulosic biofuel production was based. EIA did, 
however, indicate in the letter that it only included domestic 
production of cellulosic ethanol in their projections. These 
projections, therefore, do not include cellulosic biofuel produced by 
foreign entities and imported into the U.S., nor estimates of 
cellulosic heating oil or CNG/LNG produced from biogas, which together 
represent approximately 98 percent of our projected cellulosic biofuel 
volume for 2019. When limiting the scope of our projection to the 
companies assessed by EIA, we note that our volume projections are 
equal. EPA projects approximately 10 million gallons of liquid 
cellulosic biofuel will be produced domestically in 2019, all of which 
is expected to be cellulosic ethanol.

D. Cellulosic Biofuel Volume for 2019

1. Liquid Cellulosic Biofuel
    For our 2019 liquid cellulosic biofuel projection, we use the same 
general approach as we have in projecting these volumes in previous 
years. We begin by first categorizing potential liquid cellulosic 
biofuel producers in 2019 according to whether or not they have 
achieved consistent commercial scale production of cellulosic biofuel 
to date. We refer to these facilities as consistent producers and new 
producers, respectively. Next, we define a range of likely production 
volumes for 2019 for each group of companies. Finally, we use a 
percentile value to project from the established range a single 
projected production volume for each group of companies in 2019. As in 
2018, we calculated percentile values for each group of companies based 
on the past performance of each group relative to our projected 
production ranges. This methodology is briefly described here, and is 
described in detail in memoranda to the docket.\58\
---------------------------------------------------------------------------

    \58\ ``November 2018 Liquid Cellulosic Biofuel Projections for 
2018 CBI'' and ``Calculating the Percentile Values Used to Project 
Liquid Cellulosic Biofuel Production for the 2019 FRM,'' memorandums 
from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    We first separate the list of potential producers of cellulosic 
biofuel (listed in Table III.B.3-1) into two groups according to 
whether the facilities have achieved consistent commercial-scale 
production and cellulosic biofuel RIN generation. We next defined a 
range of likely production volumes for each group of potential 
cellulosic biofuel producers. For the final rule, we have updated the 
companies included in our projection, the categorization of these 
companies, and the low and high end of the potential production range 
for each company for 2019 based on updated information. The low end of 
the range for each group of producers reflects actual RIN generation 
data over the last 12 months for which data are available at the time 
our technical assessment was completed (October 2017-September 
2018).\59\ For potential producers that have not yet generated any 
cellulosic RINs, the low end of the range is zero. For the high end of 
the range, we considered a variety of factors, including the expected 
start-up date and ramp-up period, facility capacity, and the number of 
RINs the producer expects to generate in 2019.\60\ The projected range 
for each group of companies is shown in Tables III.D.1-1 and III.D.1-2 
below.\61\
---------------------------------------------------------------------------

    \59\ Consistent with previous years, we have considered whether 
there is reason to believe any of the facilities considered as 
potential cellulosic biofuel producers for 2019 is likely to produce 
a smaller volume of cellulosic biofuel in 2019 than in the previous 
12 months for which data are available. At this time, EPA is not 
aware of any information that would indicate lower production in 
2019 from any facility considered than in the previous 12 months for 
which data are available.
    \60\ As in our 2015-2018 projections, EPA calculated a high end 
of the range for each facility (or group of facilities) based on the 
expected start-up date and a six-month straight line ramp-up period. 
The high end of the range for each facility (or group of facilities) 
is equal to the value calculated by EPA using this methodology, or 
the number of RINs the producer expects to generate in 2019, 
whichever is lower.
    \61\ More information on the data and methods EPA used to 
calculate each of the ranges in these tables in contained in 
``November 2018 Liquid Cellulosic Biofuel Projections for 2018 CBI'' 
memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-
0167. We have not shown the projected ranges for each individual 
company. This is because the high end of the range for some of these 
companies are based on the company's production projections, which 
they consider confidential business information (CBI). Additionally, 
the low end of the range for facilities that have achieved 
consistent commercial scale production is based on actual RIN 
generation data in the most recent 12 months, with is also claimed 
as CBI.

  Table III.D.1-1--2019 Production Ranges for Liquid Cellulosic Biofuel
        Producers Without Consistent Commercial Scale Production
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
                                        Low end of  the  High end of the
          Companies included                 range          range \a\
------------------------------------------------------------------------
Enerkem, Ensyn (Port Cartier facility)               0               10
------------------------------------------------------------------------
\a\Rounded to the nearest million gallons.

[[Page 63716]]

  Table III.D.1-2--2019 Production Ranges for Liquid Cellulosic Biofuel
          Producers With Consistent Commercial Scale Production
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
                                         Low end of the  High end of the
          Companies included               range \a\        range \b\
------------------------------------------------------------------------
Facilities using Edeniq's technology                14               44
 (registered facilities), Ensyn
 (Renfrew facility), Poet-DSM,
 GranBio, QCCP/Syngenta, Raizen.......
------------------------------------------------------------------------
\a\ Rounded to the nearest million gallons.

    After defining likely production ranges for each group of 
companies, we next determined the percentile values to use in 
projecting a production volume for each group of companies. In this 
final rule we have calculated the percentile values using actual 
production data from January 2016 through September 2018 (the last 
month for which actual data is available) and projected production data 
for the remaining months of 2018 (October--December 2018). This 
approach is consistent with the approach taken in the 2018 final rule.
    For each group of companies and for each year from 2016--2018, 
Table III.D.1-3 below shows the projected ranges for liquid cellulosic 
biofuel production (from the 2014-16, 2017, and 2018 final rules), 
actual production, and the percentile values that would have resulted 
in a projection equal to the actual production volume.

             Table III.D.1-3--Projected and Actual Liquid Cellulosic Biofuel Production in 2016-2018
                                                [Million gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                      Actual
                                                  Low end of the    High end of     production        Actual
                                                       range         the range         \62\         percentile
----------------------------------------------------------------------------------------------------------------
New Producers: \63\
    2016........................................               0              76            1.06             1st
    2017........................................               0              33            8.79            27th
    2018........................................               0              47            4.16             9th
    Average \a\.................................             N/A             N/A             N/A            12th
Consistent Producers: \64\
    2016........................................               2               5            3.28            43rd
    2017........................................             3.5               7            3.02           -14th
    2018........................................               7              24            9.86            17th
    Average \a\.................................             N/A             N/A             N/A            15th
----------------------------------------------------------------------------------------------------------------
\a\ We have not averaged the low and high ends of the ranges, or actual production, as we believe it is more
  appropriate to average the actual percentiles from 2016-2018 rather than calculating a percentile value for
  2016-2018 in aggregate. This approach gives equal weight to the accuracy of our projections from 2016-2018,
  rather than allowing the average percentiles calculated to be dominated by years with greater projected
  volumes.

    Based upon the above analysis, EPA has projected cellulosic biofuel 
production from new producers at the 12th percentile of the calculated 
range and from consistent producers at the 15th percentile.\65\ These 
percentiles are calculated by averaging the percentiles that would have 
produced cellulosic biofuel projections equal to the volumes produced 
by each group of companies in 2016-2018. Prior to 2016, EPA used 
different methodologies to project available volumes of cellulosic 
biofuel, and thus believes it inappropriate to calculate percentile 
values based on projections from those years.\66\
---------------------------------------------------------------------------

    \62\ Actual production is calculated by subtracting RINs retired 
for any reason other than compliance with the RFS standards from the 
total number of cellulosic RINs generated.
    \63\ Companies characterized as new producers in the 2014-2016, 
2017, and 2018 final rules were as follows: Abengoa (2016), 
CoolPlanet (2016), DuPont (2016, 2017), Edeniq (2016, 2017), Enerkem 
(2018), Ensyn Port Cartier (2018), GranBio (2016, 2017), IneosBio 
(2016), and Poet (2016, 2017).
    \64\ Companies characterized as consistent producers in the 
2014-2016, 2017, and 2018 final rules were as follows: Edeniq Active 
Facilities (2018), Ensyn Renfrew (2016-2018), GranBio (2018), Poet 
(2018), and Quad County Corn Processors/Syngenta (2016-2018).
    \65\ For more detail on the calculation of the percentile values 
used in this final rule see ``Calculating the Percentile Values Used 
to Project Liquid Cellulosic Biofuel Production for 2018 and 2019,'' 
available in EPA docket EPA-HQ-OAR-2018-0167.
    \66\ EPA used a similar projection methodology for 2015 as in 
2016-2018, however we only projected cellulosic biofuel production 
volume for the final 3 months of the year, as actual production data 
were available for the first 9 months. We do not believe it is 
appropriate to consider data from a year for which 9 months of the 
data were known at the time the projection was made in determining 
the percentile values used to project volume over a full year.
---------------------------------------------------------------------------

    EPA also considered whether or not to include the percentile value 
from 2016 in our calculation of the percentile value to use in 
projecting liquid cellulosic biofuel production in 2019. Including a 
larger number of years in our calculation of the percentile value for 
2019 would result in a larger data set that is less susceptible to 
large fluctuations that result from unexpectedly high or low production 
volumes in any one year that may not be indicative of future 
production. However, including a larger number of years also 
necessarily requires including older data that may no longer reflect 
the likely production of liquid cellulosic biofuel in a future year, 
especially given the rapidly changing nature of this industry.
    We ultimately decided to include data from 2016 in calculating the 
percentile values to project liquid cellulosic biofuel production in 
2019, determining that there was significant value in including this 
additional data. Even though the liquid cellulosic biofuel industry has 
changed since 2016, these changes are not so significant as to render 
this data obsolete. In determining the percentile values to use for 
2019 we have also decided to weight the observed actual percentile 
values from 2016-2018 equally. While the percentile

[[Page 63717]]

value from 2018 represents the most recent data available, it is also 
dependent on the performance of a relatively small number of companies 
in a single year, as well as a projection of the performance of these 
facilities during the final three months of 2018. Using data from 
multiple years, especially years in which we have complete production 
data, is likely more representative of the future performance of these 
groups of companies than data from any single year.
    Commenters generally supported EPA's use of updated data (data not 
available at the time of the proposed rule, but expected to be 
available for the final rule) in calculating the percentage standards 
for 2019. Several commenters objected to EPA's use of a single 
percentile value based on historical production performance for each 
group of companies. These commenters often described this approach as 
``backwards looking'' and generally requested that EPA not discount 
facility's projected production at all, determine a unique percentile 
value for each facility based on facility specific factors, or return 
to the percentile values used in the 2016 and 2017 rules (25th 
percentile for new producers and 50th percentile for consistent 
producers).
    EPA disagrees with the commenters characterization of the 
projection methodology used in this final rule as ``backwards 
looking.'' As discussed above, and in more detail in a memorandum to 
the docket,\67\ EPA has used data specific to 2019 in determining the 
high end of the potential production range for these facilities. While 
we acknowledge that we have relied on data from previous years in 
calculating the percentile value we use to select a volume within the 
potential production range for each group of companies, we believe that 
this approach is appropriate and consistent with EPA's direction to 
project cellulosic biofuel volumes with a neutral aim at accuracy. We 
do not believe that we have significant data or expertise to 
individually consider all of the potential variables associated with 
each individual facility and produce a reasonably accurate projection. 
Indeed, in the early years of the RFS program (2010-2013) EPA attempted 
this approach with very poor results. Similarly, using the 25th and 
50th percentiles to project potential production produced overly 
optimistic projections in both 2016 (0.5 million gallons actual 
production versus 2 million gallons projected production) and 2017 (4.1 
million actual, 12 million projected). By contrast, the approach used 
in the 2018 rule, which is also the approach used in this action, 
produced a much more precise estimate (14 million actual, 14 million 
projected). We believe the approach used today is likely to produce a 
more accurate projection of liquid cellulosic biofuel production.\68\ 
This approach is therefore appropriate for projecting liquid cellulosic 
biofuel production in 2019. As this approach incorporates new data each 
year, we anticipate that we will be able to use it consistently in 
future years. However, as in previous years, EPA will continue to 
monitor the success of this approach going forward and will make 
adjustments to increase accuracy as necessary.
---------------------------------------------------------------------------

    \67\ ``November 2018 Liquid Cellulosic Biofuel Projections for 
2018 CBI,'' memorandum from Dallas Burkholder to EPA Docket EPA-HQ-
OAR-2018-0167.
    \68\ The comments discussed in this paragraph are discussed in 
additional detail in Section 3.2.1 of the RTC document.
    \69\ Historically RIN generation for CNG/LNG derived from biogas 
has increased each year. It is possible, however, that RIN 
generation for these fuels in the most recent 12 months for which 
data are available could be lower than the preceding 12 months. We 
believe our methodology accounts for this possibility. In such a 
case, the calculated rate of growth would be negative.
    \70\ Further detail on the data used to calculate each of these 
numbers in this table, as well as the projected volume of CNG/LNG 
derived from biogas used as transportation fuel in 2019 can be found 
in ``November 2018 Assessment of Cellulosic Biofuel Production from 
Biogas (2019)'' memorandum from Dallas Burkholder to EPA Docket EPA-
HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Finally, we used these percentile values, together with the ranges 
determined for each group of companies discussed above, to project a 
volume for each group of companies in 2019. These calculations are 
summarized in Table III.D.1-4 below.

                     Table III.D.1-4--Projected Volume of Liquid Cellulosic Biofuel in 2019
                                      [Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                  Low end of the    High end of                      Projected
                                                     range \a\     the range \a\    Percentile      volume \a\
----------------------------------------------------------------------------------------------------------------
Liquid Cellulosic Biofuel Producers; Producers                 0              10            12th               1
 without Consistent Commercial Scale Production.
Liquid Cellulosic Biofuel Producers; Producers                14              44            15th              19
 with Consistent Commercial Scale Production....
                                                 ---------------------------------------------------------------
    Total.......................................             N/A             N/A             N/A              20
----------------------------------------------------------------------------------------------------------------
\a\ Volumes rounded to the nearest million gallons.

2. CNG/LNG Derived From Biogas
    For 2019, EPA is using the same methodology as in the 2018 final 
rule, an industry wide projection based on a year-over-year growth 
rate, to project production of CNG/LNG derived from biogas used as 
transportation fuel.\69\ For this final rule, EPA has calculated the 
year-over-year growth rate in CNG/LNG derived from biogas by comparing 
RIN generation from October 2017 to September 2018 (the most recent 12 
months for which data are available) to RIN generation in the 12 months 
that immediately precede this time period (October 2016 to September 
2017). These RIN generation volumes are shown in Table III.D.2-1 below.

                                 Table III.D.2-1--Generation of Cellulosic Biofuel RINs for CNG/LNG Derived From Biogas
                                                                 [Million gallons] \70\
--------------------------------------------------------------------------------------------------------------------------------------------------------
            RIN generation (October 2016-September 2017)                    RIN generation (October 2017-September 2018)         Year-over-year increase
--------------------------------------------------------------------------------------------------------------------------------------------------------
216................................................................                                                       278                     29.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63718]]

    EPA then applied this 29 percent year-over-year growth rate to the 
total number of 2017 cellulosic RINs generated and available for 
compliance for CNG/LNG. This methodology results in a projection of 399 
million gallons of CNG/LNG derived from biogas in 2019.\71\ We believe 
that projecting the production of CNG/LNG derived from biogas in this 
manner appropriately takes into consideration the actual recent rate of 
growth of this industry, and that this growth rate accounts for both 
the potential for future growth and the challenges associated with 
increasing RIN generation from these fuels in future years. This 
methodology may not be appropriate to use as the projected volume of 
CNG/LNG derived from biogas approaches the total volume of CNG/LNG that 
is used as transportation fuel, as RINs can be generated only for CNG/
LNG used as transportation fuel. We do not believe that this is yet a 
constraint as our projection for 2019 is well below the total volume of 
CNG/LNG that is currently used as transportation fuel.\72\
---------------------------------------------------------------------------

    \71\ To calculate this value, EPA multiplied the number of 2017 
RINs generated and available for compliance for CNG/LNG derived from 
biogas (239.5 million), by 1.290 (representing a 29 percent year-
over-year increase) to project production of CNG/LNG in 2018, and 
multiplied this number (309 million RINs) by 1.290 again to project 
production of CNG/LNG in 2019.
    \72\ EPA projects that 538 million ethanol-equivalent gallons of 
CNG/LNG will be used as transportation fuel in 2019 based on EIA's 
October 2018 Short Term Energy Outlook (STEO). To calculate this 
estimate, EPA used the Natural Gas Vehicle Use from the STEO Custom 
Table Builder (0.12 billion cubic feet/day in 2019). This projection 
includes all CNG/LNG used as transportation fuel from both renewable 
and non-renewable sources. EIA does not project the amount of CNG/
LNG from biogas used as transportation fuel. To convert billion 
cubic feet/day to ethanol-equivalent gallons EPA used conversion 
factors of 946.5 British Thermal Units (BTU) per cubic foot of 
natural gas (lower heating value, per calculations using ASTM D1945 
and D3588) and 77,000 BTU of natural gas per ethanol-equivalent 
gallon per 40 CFR 80.1415(b)(5).
---------------------------------------------------------------------------

    EPA has also reviewed data on potential producers of CNG/LNG 
derived from biogas that is used as transportation fuel. Compared to 
EPA, these potential producers projected greater total production of 
CNG/LNG derived from biogas in 2019 based on the capacity of such 
projects. Since producers of CNG/LNG derived from biogas have 
historically over-estimated their production of these fuels, it would 
not be appropriate to simply adopt the capacity of these projects as 
our projection of CNG/LNG derived from biogas for 2019. The fact that 
the industry projections exceed EPA's projected volume, however, 
indicates that the volume of these fuels projected for 2019 can be 
satisfied by a combination of projects currently producing CNG/LNG 
derived from biogas for these purposes and projects expected to product 
biogas by the end of 2019.
    A number of commenters requested that, in addition to projecting 
volume of CNG/LNG derived from biogas using a year-over-year growth 
rate, EPA project additional volume to account for new projects and 
those currently in development. We believe that the industry-wide 
projection methodology used in this final rule already adequately 
accounts for new facilities and those currently in development. The 
growth rate used to project the production of CNG/LNG derived from 
biogas in 2019 includes both increased production from existing 
facilities, as well as new facilities that began producing fuel in the 
last 12 months for which data are available. Thus, adding additional 
volume to account for new facilities would effectively be double 
counting production from new facilities.
    Other commenters suggested that the industry wide projection was 
inappropriate, and that EPA should return to a facility-by-facility 
assessment, as was used to project CNG/LNG derived from biogas in 2016 
and 2017. We believe that the mature nature of the industry producing 
CNG/LNG derived from biogas lends itself well to an industry-wide 
projection methodology and that this methodology can be more accurate 
than a facility-by-facility approach, especially as macro market and 
economic factors have apparently become more influential on total 
production than the success or challenges at any single facility; 
especially as producers are vying for business relationships with the 
same pool of CNG/LNG fueled transportation fleets to enable them to 
generate RINs. We further note that the facility-by-facility approach 
used to project production of CNG/LNG produced from biogas in 2016 and 
2017 significantly over-estimated production of these fuels.
    While our projection methodology uses a growth rate based on 
historical data it adequately anticipates higher production volumes in 
future years, including both increased production from existing 
facilities as well as production from new facilities. In this way it 
satisfies our charge to project future cellulosic biofuel production in 
a reasonable manner, and with neutrality, even though it does not 
consider all potential producers of these fuels on a facility-by-
facility basis.
3. Total Cellulosic Biofuel in 2019
    After projecting production of cellulosic biofuel from liquid 
cellulosic biofuel production facilities and producers of CNG/LNG 
derived from biogas, EPA combined these projections to project total 
cellulosic biofuel production for 2019. These projections are shown in 
Table III.D.3-1. Using the methodologies described in this section, we 
project that 418 million ethanol-equivalent gallons of cellulosic 
biofuel will be produced in 2019. We believe that projecting overall 
production in 2019 in the manner described above results in a neutral 
estimate (neither biased to produce a projection that is too high nor 
too low) of likely cellulosic biofuel production in 2019.

     Table III.D.3-1--Projected Volume of Cellulosic Biofuel in 2019
                            [Million gallons]
------------------------------------------------------------------------
                                                             Projected
                                                            volume \a\
------------------------------------------------------------------------
Liquid Cellulosic Biofuel Producers; Producers without                 1
 Consistent Commercial Scale Production.................
Liquid Cellulosic Biofuel Producers; Producers with                   19
 Consistent Commercial Scale Production.................
CNG/LNG Derived from Biogas.............................             399
                                                         ---------------
    Total...............................................         \b\ 418
------------------------------------------------------------------------
\a\ Volumes rounded to the nearest million gallons.
\b\ Total projection of cellulosic biofuel appears less than the sum of
  the projected volume for each group of companies due to rounding.

[[Page 63719]]

    Further discussion of the companies expected to produce cellulosic 
biofuel and make it commercially available in 2019 can be found in a 
memorandum to the docket.\73\
---------------------------------------------------------------------------

    \73\ ``Cellulosic Biofuel Producer Company Descriptions 
(November 2018),'' memorandum from Dallas Burkholder to EPA Docket 
EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2019

    The national volume targets for advanced biofuel and total 
renewable fuel to be used under the RFS program each year through 2022 
are specified in CAA section 211(o)(2)(B)(i)(I) and (II). Congress set 
annual renewable fuel volume targets that envisioned growth at a pace 
that far exceeded historical growth and, for years after 2011, 
prioritized that growth as occurring principally in advanced biofuels 
(contrary to previous growth patterns where most growth was in 
conventional renewable fuel). Congressional intent is evident in the 
fact that the implied statutory volume requirement for conventional 
renewable fuel is 15 billion gallons for all years after 2014, while 
the advanced biofuel volume requirements, driven largely by growth in 
cellulosic biofuel, continue to grow each year through 2022 to a total 
of 21 billion gallons.
    Due to a shortfall in the availability of cellulosic and advanced 
biofuel, and consistent with our long-held interpretation of the 
cellulosic waiver authority as best interpreted and applied by 
providing equal reductions in advanced biofuel and total renewable 
fuel, we are reducing the statutory volume targets for both advanced 
biofuel and total renewable fuel for 2019 using the full extent of the 
cellulosic waiver authority.
    In this Section we discuss our use of the discretion afforded by 
the cellulosic waiver authority at CAA 211(o)(7)(D)(i) to reduce 
volumes of advanced biofuel and total renewable fuel. We first discuss 
our assessment of advanced biofuel and the considerations that have led 
us to conclude that the advanced biofuel volume target in the statute 
should be reduced by the full amount permitted under the cellulosic 
waiver authority. We then address total renewable fuel in the context 
of our interpretation, articulated in previous annual rulemakings, that 
advanced biofuel and total renewable fuel should be reduced by the same 
amount under the cellulosic waiver authority. We also address several 
comments we received in response to the July 10, 2018 proposal; the 
remaining comments are addressed in a separate RTC document.
    To begin, we have evaluated the capabilities of the market and are 
making a finding that the 13.0 billion gallons specified in the statute 
for advanced biofuel cannot be reached in 2019. This is primarily due 
to the expected continued shortfall in cellulosic biofuel; production 
of this fuel type has consistently fallen short of the statutory 
targets by 95 percent or more, and as described in Section III, we 
project that it will fall far short of the statutory target of 8.5 
billion gallons in 2019. For this and other reasons described in this 
section we are reducing the advanced biofuel statutory target by the 
full amount of the shortfall in cellulosic biofuel for 2019.
    In previous years when we have used the cellulosic waiver 
authority, we have determined the extent to which we should reduce 
advanced biofuel volumes by taking into account the availability of 
advanced biofuels, their energy security and greenhouse gas (GHG) 
impacts, the availability of carryover RINs, the apparent intent of 
Congress as reflected in the statutory volumes tables to substantially 
increase the use of advanced biofuels over time, as well as factors 
such as increased costs associated with the use of advanced biofuels 
and the increasing likelihood of adverse unintended impacts associated 
with use of advanced biofuel volumes achieved through diversion of 
foreign fuels or substitution of advanced feedstocks from other uses to 
biofuel production. Until the 2018 standards rule, the consideration of 
these factors led us to conclude that it was appropriate to set the 
advanced biofuel standard in a manner that would allow the partial 
backfilling of missing cellulosic volumes with non-cellulosic advanced 
biofuels.\74\ For the 2018 standards, we placed a greater emphasis on 
cost considerations in the context of balancing the various 
considerations, ultimately concluding that partial backfilling with 
non-cellulosic advanced biofuels was not warranted and the applicable 
volume requirement for advanced biofuel should be based on the maximum 
reduction permitted under the cellulosic waiver authority.
---------------------------------------------------------------------------

    \74\ For instance, see 81 FR 89750 (December 12, 2016).
---------------------------------------------------------------------------

    Although we continue to believe that the factors earlier considered 
in exercising the cellulosic waiver authority are relevant and 
appropriate, we project that there will be insufficient reasonably 
attainable volumes of non-cellulosic advanced biofuels in 2019 to allow 
any backfilling for missing volumes of cellulosic biofuel.\75\ As a 
result of this projection, the high cost of advanced biofuels, and our 
consideration of carryover RINs, we are reducing the statutory volume 
target for advanced biofuel by the same amount as the reduction in 
cellulosic biofuel. This will result in the non-cellulosic component of 
the advanced biofuel volume requirement being equal to the implied 
statutory volume target of 4.5 billion gallons in 2019.
---------------------------------------------------------------------------

    \75\ As described further below, ``reasonably attainable'' 
volumes are not merely those that can be attained given available 
biofuel production capacity and feedstocks, but also take into 
consideration factors such as costs and feedstock and/or fuel 
diversions that could create disruptions in other markets.
---------------------------------------------------------------------------

    Several stakeholders commented that it was inappropriate for EPA to 
change its policy with regard to backfilling of missing cellulosic 
biofuel with other advanced biofuel as it had done prior to 2018. 
However, in making such comments, stakeholders misinterpreted our 
approach in those years. While we permitted some backfilling, we did so 
only after considering such factors as described above. The approach we 
have taken for the 2019 volume requirements is no different than it was 
in previous years, though the outcome of that approach is different due 
to the different circumstances.
    We note that the predominant non-cellulosic advanced biofuels 
available in the near term are advanced biodiesel and renewable 
diesel.\76\ We expect limited growth in the availability of feedstocks 
used to produce these fuel types, absent the diversion of these 
feedstocks from other uses. In addition, we expect diminishing 
incremental GHG benefits and higher per gallon costs as the required 
volumes of advanced biodiesel and renewable diesel increase. These 
outcomes are a result of the fact that the lowest cost and most easily 
available feedstocks are typically used first, and each additional 
increment of advanced biodiesel and renewable diesel requires the use 
of feedstocks that are generally incrementally more costly and/or more 
difficult to obtain. Moreover, to the extent that higher advanced 
biofuel requirements cannot be satisfied through growth in the 
production of advanced biofuel feedstocks, they would instead be 
satisfied through a re-direction of such feedstocks from competing 
uses. Products (other than qualifying advanced biofuels) that were

[[Page 63720]]

formerly produced using these feedstocks are likely to be replaced by 
products produced using the lowest cost alternatives, likely derived 
from palm oil (for food and animal feed) or petroleum sources (non-
edible consumer products). This in turn could increase the lifecycle 
GHG emissions associated with these incremental volumes of non-
cellulosic advanced biofuel, since fuels produced from both palm oil 
and petroleum have higher estimated lifecycle GHG emissions than 
qualifying advanced biodiesel and renewable diesel.\77\ There would 
also likely be market disruptions and increased burden associated with 
shifting feedstocks among the wide range of companies that are relying 
on them today and which have optimized their processes to use them. 
Higher advanced biofuel standards could also be satisfied by diversion 
of foreign advanced biofuel from foreign markets, and there would also 
be an increased likelihood of adverse unintended impacts associated 
with such diversions. Taking these considerations into account, we 
believe, as discussed in more detail below, that it is appropriate to 
exercise our discretion under the cellulosic waiver authority to set 
the advanced biofuel volume requirement at a level that would minimize 
such diversions.
---------------------------------------------------------------------------

    \76\ While sugarcane ethanol, as well as a number of other fuel 
types, can also contribute to the supply of advanced biofuel, in 
recent years supply of these other advanced biofuels has been 
considerably lower than supply of advanced biodiesel or renewable 
diesel. See Table IV.B.3-1.
    \77\ For instance, see the draft GHG assessment of palm oil 
biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012).
---------------------------------------------------------------------------

    Furthermore, several other factors have added uncertainty regarding 
the volume of advanced biofuels that we project are attainable in 2019. 
The first is the fact that the tax credit for biodiesel has not been 
renewed for 2019. The second is the final determination by the 
Department of Commerce that tariffs should be imposed on biodiesel 
imports from Argentina and Indonesia, and the potential for those 
tariffs to increase.\78\ \79\ Finally, China has recently imposed new 
tariffs on soybean imports. Each of these factors is discussed in more 
detail in Section IV.B.3 below.
---------------------------------------------------------------------------

    \78\ ``Affirmative Final Antidumping Duty Determinations on 
Biodiesel From Argentina and Indonesia,'' available in docket EPA-
HQ-OAR-2018-0167.
    \79\ ``US adds more duties on biodiesel from Argentina & 
Indonesia,'' Reuters article available in docket EPA-HQ-OAR-2018-
0167.
---------------------------------------------------------------------------

    We believe that the factors and considerations noted above are all 
appropriate to consider under the broad discretion provided under the 
cellulosic waiver authority, and that consideration of these factors 
supports our use of this authority. Many of the considerations 
discussed in this final rule are related to the availability of non-
cellulosic advanced biofuels (e.g., historic data on domestic supply, 
expiration of the biodiesel blenders' tax credit, potential imports of 
biodiesel in light of the Commerce Department's determination on 
tariffs on biodiesel imports from Argentina and Indonesia, potential 
imports of sugarcane ethanol, and anticipated decreasing growth in 
production of feedstocks for advanced biodiesel and renewable diesel), 
while others focus on the potential benefits and costs of requiring use 
of available volumes (e.g., relative cost of advanced biofuels in 
comparison to the petroleum fuels they displace, GHG reduction 
benefits, and energy security benefits).
    As discussed in further detail in the following sections, our 
assessment of advanced biofuel suggests that achieving the implied 
statutory volume target for non-cellulosic advanced biofuel in 2019 
(4.5 billion gallons) is attainable. While it may also be possible that 
a volume of non-cellulosic advanced biofuel greater than 4.5 billion 
gallons may be attainable, a volume equal to or higher than 4.5 billion 
gallons would likely result in the diversion of advanced feedstocks 
from other uses or diversion of advanced biofuels from foreign sources, 
and thus is not reasonably attainable. In that case, our assessment of 
other factors, such as cost and GHG impacts, indicate that while such 
higher volumes may be attainable, it would not be appropriate to set 
the advanced biofuel volume requirement so as to require use of such 
volumes to partially backfill for missing cellulosic volumes.
    The impact of our exercise of the cellulosic waiver authority is 
that after waiving the cellulosic biofuel volume down to the projected 
available level, and applying the same volume reduction to the 
statutory volume target for advanced biofuel, the resulting volume 
requirement for advanced biofuel for 2019 would be 630 million gallons 
more than the applicable volume used to derive the 2018 percentage 
standard. Furthermore, after applying the same reduction to the 
statutory volume target for total renewable fuel, the volume 
requirement for total renewable fuel would also be 630 million gallons 
more than the applicable volume used to derive the 2018 percentage 
standard.

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

    As described in Section II.A, when making reductions in advanced 
biofuel and total renewable fuel under the cellulosic waiver authority, 
the statute limits those reductions to no more than the reduction in 
cellulosic biofuel. As described in Section III.D, we are establishing 
a 2019 applicable volume for cellulosic biofuel of 418 million gallons, 
representing a reduction of 8,082 million gallons from the statutory 
target of 8,500 million gallons. As a result, 8,082 million gallons is 
the maximum volume reduction for advanced biofuel and total renewable 
fuel that is permissible using the cellulosic waiver authority. Use of 
the cellulosic waiver authority to this maximum extent would result in 
volumes of 4.92 and 19.92 billion gallons for advanced biofuel and 
total renewable fuel, respectively.

   Table IV.A-1--Lowest Permissible Volumes Using Only the Cellulosic
                            Waiver Authority
                            [Million gallons]
------------------------------------------------------------------------
                                             Advanced          Total
                                              biofuel     renewable fuel
------------------------------------------------------------------------
Statutory target........................          13,000          28,000
Maximum reduction permitted under the              8,082           8,082
 cellulosic waiver authority............
Lowest 2019 volume requirement permitted           4,918          19,918
 using only the cellulosic waiver
 authority..............................
------------------------------------------------------------------------

    We are authorized under the cellulosic waiver authority to reduce 
the advanced biofuel and total renewable fuel volumes ``by the same or 
a lesser'' amount as the reduction in the cellulosic biofuel 
volume.\80\ As discussed in Section II.A, EPA has broad discretion in 
using the cellulosic

[[Page 63721]]

waiver authority in instances where its use is authorized under the 
statute, since Congress did not specify factors that EPA must consider 
in determining whether to use the authority to reduce advanced biofuel 
or total renewable fuel, nor what the appropriate volume reductions 
(within the range permitted by statute) should be. This broad 
discretion was affirmed in both Monroe and ACE.\81\ Thus, we have the 
authority set the 2019 advanced biofuel volume requirement at a level 
that is designed to partially backfill for the shortfall in cellulosic 
biofuel. However, based on our consideration of a number of relevant 
factors, we are using the full extent of the cellulosic waiver 
authority in deriving volume requirements for 2019.
---------------------------------------------------------------------------

    \80\ CAA section 211(o)(7)(D)(i).
    \81\ See ACE, 864 F.3d at 730-35 (citing Monroe, 750 F.3d 909, 
915-16).
---------------------------------------------------------------------------

B. Attainable Volumes of Advanced Biofuel

    We have considered both attainable and reasonably attainable 
volumes of advanced biofuel to inform our exercise of the cellulosic 
waiver authority. As used in this rulemaking, both ``reasonably 
attainable'' and ``attainable'' are terms of art defined by EPA.\82\ 
Volumes described as ``reasonably attainable'' are those that can be 
reached with minimal market disruptions, increased costs, and/or 
reduced GHG benefits, and with minimal diversion of advanced biofuels 
or advanced biofuel feedstocks from existing uses. We use this phrase 
in today's action in the same way that we used it in previous actions. 
Volumes described as ``attainable,'' in contrast, are those we believe 
can be reached, but would likely result in market disruption, higher 
costs, and/or reduced GHG benefits. Neither ``reasonably attainable'' 
nor ``attainable'' are meant to convey the ``maximum achievable'' 
level, which as we explained in the 2017 final rule, we do not consider 
to be an appropriate target under the cellulosic waiver authority.\83\ 
Finally, we note that our assessments of the ``reasonably attainable'' 
and ``attainable'' volumes of non-cellulosic advanced biofuels are not 
intended to be as exacting as our projection of cellulosic biofuel 
production, described in Section III of this rule.
---------------------------------------------------------------------------

    \82\ Our consideration of ``reasonably attainable'' volumes is 
not intended to imply that ``attainable'' volumes are unreasonable 
or otherwise inappropriate. As we explain in this section, we 
believe that an advanced biofuel volume of 4.92 billion gallons, 
although not reasonably attainable, is attainable, and that 
establishing such volume is an appropriate exercise of our 
cellulosic waiver authority.
    \83\ 81 FR 89762 (December 12, 2016). The maximum achievable 
volume may be relevant to our consideration of whether to exercise 
the general waiver authority on the basis of inadequate domestic 
supply. In 2019, we have determined that the after exercising our 
cellulosic waiver authority the advanced biofuel volume is 
achievable, and therefore further reductions using the general 
waiver authority on the basis of inadequate domestic supply are not 
necessary.
---------------------------------------------------------------------------

    As in prior rulemakings, we begin by considering what volumes of 
advanced biofuels are reasonably attainable. In ACE, the Court noted 
that in assessing what volumes are ``reasonably attainable,'' EPA had 
considered the availability of feedstocks, domestic production 
capacity, imports, and market capacity to produce, distribute, and 
consume renewable fuel.\84\ These considerations include both demand-
side and supply-side factors.\85\ We are taking a similar approach for 
2019, with the added consideration of the possibility that higher 
volume requirements would lead to ``feedstock switching'' or diversion 
of advanced biofuels from use in other countries. We also took these 
factors into account in setting the 2017 and 2018 volume requirements, 
and we continue to believe that they are appropriate considerations 
under the broad discretion provided by the cellulosic waiver authority. 
We are establishing the advanced biofuel volume requirement at a level 
that would seek to minimize such feedstock/fuel diversions within the 
discretion available under the cellulosic waiver authority.
---------------------------------------------------------------------------

    \84\ See ACE, 864 F.3d at 735-36.
    \85\ See id. at 730-35.
---------------------------------------------------------------------------

    Our individual assessments of reasonably attainable volumes of each 
type of advanced biofuel reflect this approach. As discussed in further 
detail in this section, we find that 100 million gallons of advanced 
ethanol, 60 million gallons of other advanced biofuels, and 2.61 
billion gallons of advanced biodiesel and renewable diesel are 
reasonably attainable. Together with our projected volume of 418 
million gallons of cellulosic biofuel, the sum of these volumes falls 
short of 4.92 billion gallons, which is the lowest advanced biofuel 
requirement that EPA can require under the cellulosic waiver authority.
    Therefore, we also have considered whether the market can 
nonetheless make available 4.92 billion gallons of advanced biofuel, 
notwithstanding likely feedstock/fuel diversions. That is, we assess 
whether 4.92 billion gallons is merely ``attainable,'' as opposed to 
reasonably attainable. In particular, we assess whether additional 
volumes of advanced biodiesel and renewable diesel are attainable. We 
conclude that 2.8 billion gallons of advanced biodiesel and renewable 
diesel are attainable, notwithstanding potential feedstock/fuel 
diversions. This quantity of advanced biodiesel and renewable diesel, 
together with the cellulosic biofuel, sugarcane ethanol, and other 
advanced biofuels described above, would enable the market to make 
available 4.92 billion gallons of advanced biofuels.
1. Imported Sugarcane Ethanol
    The predominant available source of advanced biofuel other than 
cellulosic biofuel and BBD is imported sugarcane ethanol. Imported 
sugarcane ethanol from Brazil is the predominant form of imported 
ethanol and the only significant source of imported advanced ethanol. 
In setting the 2018 standards, we estimated that 100 million gallons of 
imported sugarcane ethanol would be reasonably attainable.\86\ This was 
a reduction from the 200 million gallons we had assumed for 2016 and 
2017, and was based on a combination of data from 2016 and part of 2017 
as well as an attempt to balance the lower-than-expected imports from 
recent data with indications that higher volumes were possible based on 
older data. We also noted the high variability in ethanol import 
volumes in the past (including of Brazilian sugarcane ethanol), 
increasing gasoline consumption in Brazil, and variability in Brazilian 
production of sugar as reasons that it would be inappropriate to assume 
that sugarcane ethanol imports would reach the much higher levels 
suggested by some stakeholders.
---------------------------------------------------------------------------

    \86\ 82 FR 58507 (December 12, 2017).
---------------------------------------------------------------------------

    Since the 2018 final rule, new data reveals a continued trend of 
low imports. At the time of the 2018 standards final rule, we had used 
available data from a portion of 2017 to estimate that import volumes 
of sugarcane ethanol were likely to fall significantly below the 200 
million gallons we had assumed when we set the 2017 standards. Import 
data for all of 2017 is now available, and indicates that imports of 
sugarcane ethanol reached just 77 million gallons. Moreover, EIA data 
on monthly ethanol imports in 2018 through July indicate that no 
ethanol was imported.\87\
---------------------------------------------------------------------------

    \87\ However, EIA data on weekly imports of ethanol does 
indicate that some ethanol was imported in August and October of 
2018, totaling 37 million gallons. This volume was not reflected in 
the monthly EIA data as of September 28, 2018.

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

[[Page 63722]]

[GRAPHIC] [TIFF OMITTED] TR11DE18.001

    While it is difficult to predict imports for 2019, we believe it 
would be reasonable not to increase the assumed volume above 100 
million gallons for purposes of determining whether an advanced biofuel 
volume requirement of 4.92 billion gallons is reasonably attainable for 
2019. Although the advanced biofuel volume requirement for 2019 is 
about 630 million gallons higher than that for 2018, creating some 
incentive for increases in imports, we note that an even larger 
increase in the required volume of advanced biofuel between 2016 and 
2017 was accompanied by only a very small increase in imports of 
sugarcane ethanol, from 34 million gallons in 2016 to 77 million 
gallons in 2017. Moreover, the E10 blendwall and the fact that imported 
sugarcane ethanol typically costs more than corn ethanol create 
disincentives for increasing imports above the levels in recent years, 
though the difference in RIN values between conventional and advanced 
ethanol may offset the cost difference to some degree.\88\ Even so, we 
do not believe it would be appropriate to reduce the volume of imported 
sugarcane ethanol below 100 million gallons for the purposes of 
determining the 2019 volume requirement for advanced biofuel because 
imports have typically been higher in the second half of the year 
compared to the first half of the year, and have reached considerably 
more than 100 million gallons in the past.\89\ Taking all of these 
considerations into account, we are using 100 million gallons of 
imported sugarcane ethanol for the purposes of projecting reasonably 
attainable volumes of advanced biofuel for 2019.\90\ This level 
reflects a balancing of the information available to EPA at this time; 
both the lower import volumes that have occurred more recently with the 
higher volumes that are possible based on earlier years and under the 
influence of the higher standards in 2019. Additional discussion on 
this topic can be found in the RTC document.
---------------------------------------------------------------------------

    \88\ For example, see the relative costs of imported sugarcane 
ethanol and corn ethanol in Tables V.D-2 and V.D-3 in the final 
rulemaking that established the 2017 standards (81 FR 89746, 
December 12, 2016).
    \89\ ``US Imports of Fuel Ethanol from EIA,'' available in 
docket EPA-HQ-OAR-2018-0167.
    \90\ We note that even if sugarcane ethanol imports fall below 
our projection of 100 million gallons in 2019, the advanced biofuel 
volume would still be achievable. For example, if sugarcane ethanol 
imports were only 50 million gallons in 2019, the market could still 
supply 4.5 billion gallons of non-cellulosic advanced biofuel by 
supplying an additional 33 million gallons of advanced biodiesel.
---------------------------------------------------------------------------

    We note that the future projection of imports of sugarcane ethanol 
is inherently imprecise, and that actual imports in 2019 could be lower 
or higher than 100 million gallons. Factors that could affect import 
volumes include uncertainty in the Brazilian political climate, weather 
and harvests in Brazil, world ethanol demand and prices, constraints 
associated with the E10 blendwall in the U.S., world demand for and 
prices of sugar, and the cost of sugarcane ethanol relative to that of 
corn ethanol. After considering these factors, and in light of the high 
degree of variability in historical imports of sugarcane ethanol, we 
believe that 100 million gallons is reasonably attainable for 2019.
2. Other Advanced Biofuel
    In addition to cellulosic biofuel, imported sugarcane ethanol, and 
advanced biodiesel and renewable diesel, there are other advanced 
biofuels that can be counted in the determination of reasonably 
attainable volumes of advanced biofuel for 2019. These other advanced 
biofuels include non-cellulosic CNG, naphtha, heating oil, and 
domestically-produced advanced ethanol. However, the supply of these 
fuels has been relatively low in the last several years.

[[Page 63723]]

                                              Table IV.B.2-1--Historical Supply of Other Advanced Biofuels
                                                          [Million ethanol-equivalent gallons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     CNG/LNG       Heating oil       Naphtha         Domestic ethanol        Total \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013...........................................................              26               0               3                       23              52
2014...........................................................              20               0              18                       26              64
2015...........................................................               0               1              24                       25              50
2016...........................................................               0               2              26                       27              55
2017...........................................................               2               2              32                       26              62
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Excludes consideration of D5 renewable diesel, as this category of renewable fuel is considered as part of BBD in Section IV.B.3 below.

    The downward trend over time in CNG/LNG from biogas as advanced 
biofuel with a D code of 5 is due to the re-categorization in 2014 of 
landfill biogas from advanced (D code 5) to cellulosic (D code 3).\91\ 
Total supply of these other advanced biofuels has exhibited no 
consistent trend during 2013 to 2017. Based on data from EMTS for these 
same categories of biofuel in 2018 through August, we estimate that 
total RIN generation in 2018 will be approximately the same as in 
2017.\92\ Based on this historical record, we believe that 60 million 
gallons is reasonably attainable in 2019.
---------------------------------------------------------------------------

    \91\ 79 FR 42128 (July 18, 2014).
    \92\ See ``Projecting Advanced Biofuel Production and Imports 
for 2018 (November 2018)'' Memorandum from Dallas Burkholder to EPA 
Docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    We recognize that the potential exists for additional volumes of 
advanced biofuel from sources such as jet fuel, liquefied petroleum gas 
(LPG), butanol, and liquefied natural gas (as distinct from CNG), as 
well as non-cellulosic CNG from biogas produced in digesters. However, 
since they have been produced, if at all, in only de minimis and 
sporadic amounts in the past, we do not have a reasonable basis for 
projecting substantial volumes from these sources in 2019.\93\
---------------------------------------------------------------------------

    \93\ No RIN-generating volumes of these other advanced biofuels 
were produced in 2017, and less than 1 million gallons total in 
prior years.
---------------------------------------------------------------------------

3. Biodiesel and Renewable Diesel
    Having projected the production volume of cellulosic biofuel, and 
the reasonably attainable volumes of imported sugarcane ethanol and 
``other'' advanced biofuels, we next assess the potential supply of 
advanced biodiesel and renewable diesel. First, we calculate the amount 
of advanced biodiesel and renewable diesel that would need to be 
supplied to meet the advanced requirement were we to exercise our 
maximum discretion under the cellulosic authority: 2.8 billion gallons. 
This calculation, shown in Table IV.B.3-1 below, helps inform the 
exercise of our waiver authorities. Second, we consider the historical 
supply of these fuels and the impact of the biodiesel tax policy on 
advanced biodiesel and renewable diesel use in the U.S. Next, we 
consider factors that could potentially limit the supply of advanced 
biodiesel including the production capacity of advanced biodiesel and 
renewable diesel production facilities, the ability for the market to 
distribute and use these fuels, the availability of feedstocks to 
produce these fuels, and fuel imports and exports. Based on our 
projection of the domestic growth in advanced biodiesel and renewable 
diesel feedstocks we project a reasonably attainable volume of 2.61 
billion gallons of advanced biodiesel and renewable diesel in 2019. 
Since this volume is lower than the 2.8 billion gallons we calculated 
would need to be supplied to meet the advanced requirement were we to 
exercise our maximum discretion under the cellulosic authority, we 
finally consider if additional supplies of advanced biodiesel and 
renewable diesel are attainable. Ultimately, we conclude that a volume 
of at least 2.8 billion gallons of advanced biodiesel and renewable 
diesel is attainable in 2019. We note that we have not attempted to 
determine the maximum attainable volume of these fuels. While the 
maximum attainable volume of advanced biodiesel and renewable diesel in 
2019 is greater than 2.8 billion gallons we do not believe it would be 
appropriate to require a greater volume of these fuels (by establishing 
a higher advanced biofuel volume for 2019) due to the high cost and the 
increased likelihood of adverse unintended impacts associated with 
these fuels.
    Calculating the volume of advanced biodiesel and renewable diesel 
that would be needed to meet the volume of advanced biofuel for 2019 is 
an important benchmark to help inform EPA's consideration of our waiver 
authorities. In situations where the reasonably attainable volume of 
biodiesel and renewable diesel exceeds the volume of these fuels that 
would be needed to meet the volume of advanced biofuel after reducing 
the advanced biofuel volume by the same amount as the cellulosic 
biofuel volume, as was the case in 2017 and 2018, EPA may consider 
whether or not to allow additional volumes of these fuels to backfill 
for missing cellulosic biofuel volumes. In situations where the 
reasonably attainable volume of advanced biodiesel and renewable diesel 
is less than the volume of these fuels that would be needed to meet the 
volume of advanced biofuel after reducing the advanced biofuel volume 
by the same amount as the cellulosic biofuel volume, EPA may consider 
whether or not to use additional waiver authorities, to the extent 
available, to make further reductions to the advanced biofuel volume.

[[Page 63724]]

   Table IV.B.3-1--Determination of Volume of Biodiesel and Renewable
    Diesel Needed in 2019 To Achieve 4.92 Billion Gallons of Advanced
                                 Biofuel
          [Million ethanol-equivalent gallons except as noted]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Lowest 2019 advanced biofuel volume requirement                    4,918
 permitted using under the cellulosic waiver authority..
Cellulosic biofuel......................................             418
Imported sugarcane ethanol..............................             100
Other advanced..........................................              60
Calculated advanced biodiesel and renewable diesel           4,340/2,800
 needed (ethanol-equivalent gallons/physical gallons)
 \94\...................................................
------------------------------------------------------------------------

    Having calculated the volume of advanced biodiesel and renewable 
diesel that would need to be supplied to meet the volume of advanced 
biofuel for 2019 after reducing the advanced biofuel volume by the same 
amount as the cellulosic biofuel volume, EPA next projected the 
reasonably attainable volume of these fuels for 2019. With regard to 
advanced biodiesel and renewable diesel, there are many different 
factors that could potentially influence the reasonably attainable 
volume of these fuels used as transportation fuel or heating oil in the 
U.S. These factors include the availability of qualifying biodiesel and 
renewable diesel feedstocks, the production capacity of biodiesel and 
renewable diesel facilities (both in the U.S. and internationally), and 
the availability of imported volumes of these fuels.\95\ A review of 
the volumes of advanced biodiesel and renewable diesel used in previous 
years is especially useful in projecting the potential for growth in 
the production and use of such fuels, since for these fuels there are a 
number of complex and inter-related factors beyond simply the total 
production capacity for biodiesel and renewable diesel (including the 
availability of advanced feedstocks, the expiration of the biodiesel 
tax credit, recent tariffs on biodiesel from Argentina and Indonesia, 
and other market-based factors) that are likely to affect the supply of 
advanced biodiesel and renewable diesel.
---------------------------------------------------------------------------

    \94\ To calculate the volume of advanced biodiesel and renewable 
diesel that would generate the 4.34 billion RINs needed to meet the 
advanced biofuel volume EPA divided the 4.34 billion RINs by 1.55. 
1.55 is the approximate average (weighted by the volume of these 
fuels expected to be produced in 2019) of the equivalence values for 
biodiesel (generally 1.5) and renewable diesel (generally 1.7).
    \95\ Throughout this section we refer to advanced biodiesel and 
renewable diesel as well as advanced biodiesel and renewable diesel 
feedstocks. In this context, advanced biodiesel and renewable diesel 
refer to any biodiesel or renewable diesel for which RINs can be 
generated that satisfy an obligated party's advanced biofuel 
obligation (i.e., D4 or D5 RINs). While cellulosic diesel (D7) also 
contributed towards an obligated party's advanced biofuel 
obligation, these fuels are discussed in Section III rather than in 
this section. An advanced biodiesel or renewable feedstock refers to 
any of the biodiesel, renewable diesel, jet fuel, and heating oil 
feedstocks listed in Table 1 to 40 CFR 80.1426 or in petition 
approvals issued pursuant to section 80.1416, that can be used to 
produce fuel that qualifies for D4 or D5 RINs. These feedstocks 
include, for example, soy bean oil; oil from annual cover crops; oil 
from algae grown photosynthetically; biogenic waste oils/fats/
greases; non-food grade corn oil; camelina sativa oil; and canola/
rapeseed oil (See pathways F, G, and H of Table 1 to section 
80.1426).
---------------------------------------------------------------------------

    In addition to a review of the volumes of advanced biodiesel and 
renewable diesel used in previous years, we believe the likely growth 
in production of feedstocks used to produce these fuels, as well as the 
total projected available volumes of these feedstocks, are important 
factors to consider. This is because while there are many factors that 
could potentially limit the production and availability of these fuels, 
the impacts of increasing production of advanced biodiesel and 
renewable diesel on factors such as costs, energy security, and GHG 
emissions are expected to vary depending on whether the feedstocks used 
to produce these fuels are sourced from waste sources or by-products of 
other industries (such as the production of livestock feed or ethanol 
production), are sourced from increased oilseed production, or are 
sourced from the diversion of feedstocks from existing uses. The energy 
security and GHG reduction value associated with the growth in the use 
of advanced biofuels is greater when these fuels are produced from 
waste fats and oils or feedstocks that are byproducts of other 
industries (such as soybean oil from soybeans primarily grown as animal 
feed), rather than a switching of existing advanced feedstocks from 
other uses to renewable fuel production or the diversion of advanced 
biodiesel and renewable diesel from foreign markets. This is especially 
true if the parties that previously used the advanced biofuel or 
feedstocks replace these oils with low cost palm oil \96\ or petroleum 
derived products, as we believe would likely be the case in 2019.\97\ 
In this case the global production of advanced biodiesel and renewable 
diesel would not increase, and the potential benefits associated with 
increasing the diversity of the supply of transportation fuel (energy 
security) and the production of additional volumes of advanced 
biodiesel and renewable diesel (low GHG sources of transportation fuel) 
would be reduced.
---------------------------------------------------------------------------

    \96\ For instance, see the draft GHG assessment of palm oil 
biodiesel and renewable diesel at 77 FR 4300 (January 27, 2012).
    \97\ We believe palm or petroleum derived products would likely 
be used replace advanced biodiesel and renewable diesel diverted to 
the U.S. as these products are currently the lowest cost sources.
---------------------------------------------------------------------------

    Before considering the projected growth in the production of 
qualifying feedstocks that could be used to produce advanced biodiesel 
and renewable diesel, as well as the total volume of feedstocks that 
could be used to produce these fuels, it is helpful to review the 
volumes of biodiesel and renewable diesel that have been used in the 
U.S. in recent years. While historic data and trends alone are 
insufficient to project the volumes of biodiesel and renewable diesel 
that could be provided in future years, historic data can serve as a 
useful reference in considering future volumes. Past experience 
suggests that a high percentage of the biodiesel and renewable diesel 
used in the U.S. (from both domestic production and imports) qualifies 
as advanced biofuel.\98\ In previous years, biodiesel and renewable 
diesel produced in the U.S. have been almost exclusively advanced 
biofuel.\99\ Imports of advanced biodiesel increased through 2016, but 
were lower in 2017 and 2018, as seen in Table IV.B.2-1. Volumes of 
imported advanced biodiesel and renewable diesel have varied 
significantly from year to year, as they are impacted both by domestic 
and foreign policies, as well as many economic factors.
---------------------------------------------------------------------------

    \98\ From 2011 through 2017 approximately 95 percent of all 
biodiesel and renewable diesel supplied to the U.S. (including 
domestically-produced and imported biodiesel and renewable diesel) 
qualified as advanced biodiesel and renewable diesel (11,701 million 
gallons of the 12,323 million gallons) according to EMTS data.
    \99\ From 2011 through 2017 over 99.9 percent of all the 
domestically produced biodiesel and renewable diesel supplied to the 
U.S. qualified as advanced biodiesel and renewable diesel (10,089 
million gallons of the 10,096 million gallons) according to EMTS 
data.

[[Page 63725]]

                                  Table IV.B.3-2--Advanced (D4 and D5) Biodiesel and Renewable Diesel From 2011 to 2017
                                                                   [Million gallons] a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  2011         2012         2013        2014 \b\     2015 \b\       2016          2017        2018 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)..........    967 (N/A)  1,014 (+47)  1,376 (+362)  1,303 (-73)  1,253 (-50)  1,633 (+380)   1,573 (-60)  1,896 (+323)
Domestic Renewable Diesel (Annual Change)...     58 (N/A)     11 (-47)      92 (+81)    155 (+63)    175 (+20)     221 (+46)     258 (+37)      255 (-3)
Imported Biodiesel (Annual Change)..........     44 (N/A)      40 (-4)    156 (+116)    130 (-26)   261 (+131)    561 (+300)     462 (-99)    212 (-250)
Imported Renewable Diesel (Annual Change)...      0 (N/A)     28 (+28)    145 (+117)    129 (-16)     121 (-8)     170 (+49)     193 (+23)      197 (+4)
Exported Biodiesel and Renewable Diesel          48 (N/A)    102 (+54)     125 (+23)     134 (+9)     133 (-1)      129 (-4)     157 (+28)     103 (-54)
 (Annual Change)............................
                                             -----------------------------------------------------------------------------------------------------------
    Total (Annual Change)...................  1,021 (N/A)    991 (-30)  1,644 (+653)  1,583 (-61)  1,677 (+94)  2,456 (+779)  2,329 (-127)  2,457 (+128)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the
  RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ Data for 2018 is based on actual production and import data through September 2018, and a projection for October-December 2018. For more information
  on how the volumes for 2018 were determined see ``Projecting Advanced Biofuel Production and Imports for 2018 (November 2018)'' Memorandum from Dallas
  Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.

                                   Table IV.B.3-3--Conventional (D6) Biodiesel and Renewable Diesel From 2011 to 2017
                                                                   [Million gallons] a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      2011         2012         2013       2014 \b\     2015 \b\       2016         2017       2018 \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)..............      0 (N/A)       0 (+0)       6 (+6)       1 (-5)       0 (+0)       0 (+0)       0 (+0)       0 (+0)
Domestic Renewable Diesel (Annual Change).......      0 (N/A)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       0 (+0)
Imported Biodiesel (Annual Change)..............      0 (N/A)       0 (+0)     31 (+31)     52 (+21)     74 (+22)    113 (+39)     0 (-113)       0 (+0)
Imported Renewable Diesel (Annual Change).......      0 (N/A)       0 (+0)     53 (+53)      0 (-53)   106 (+106)     43 (-63)   144 (+101)    123 (-21)
Exported Biodiesel and Renewable Diesel (Annual       0 (N/A)       0 (+0)       0 (+0)       0 (+0)       0 (+0)       1 (+1)       0 (-1)       0 (+0)
 Change)........................................
                                                 -------------------------------------------------------------------------------------------------------
    Total (Annual Change).......................      0 (N/A)       0 (+0)     90 (+90)     53 (-37)   180 (+127)    155 (-25)    144 (-11)    123 (-21)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with
  the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.
\b\ RFS required volumes for these years were not established until December 2015.
\c\ Data for 2018 is based on actual production and import data through September 2018, and a projection for October-December 2018. For more information
  on how the volumes for 2018 were determined see ``Projecting Biodiesel and Renewable Diesel Production and Imports for 2018 (November 2018)''
  Memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.

    Since 2011, the year-over-year changes in the volume of advanced 
biodiesel and renewable diesel used in the U.S. have varied greatly, 
from a low of 127 million fewer gallons from 2016 to 2017 to a high of 
779 million additional gallons from 2015 to 2016. These changes were 
likely influenced by multiple factors such as the cost of biodiesel 
feedstocks and petroleum diesel, the status of the biodiesel blenders 
tax credit, growth in marketing of biodiesel at high volume truck stops 
and centrally fueled fleet locations, demand for biodiesel and 
renewable diesel in other countries, biofuel policies in both the U.S. 
and foreign countries, and the volumes of renewable fuels (particularly 
advanced biofuels) required by the RFS. This historical information 
does not indicate that the maximum previously observed increase of 779 
million gallons of advanced biodiesel and renewable diesel would be 
reasonable to expect from 2018 to 2019, nor does it indicate that the 
low (or negative) growth rates observed in other years would recur in 
2019. Rather, these data illustrate both the magnitude of the changes 
in advanced biodiesel and renewable diesel in previous years and the 
significant variability in these changes.
    The historic data indicates that the biodiesel tax policy in the 
U.S. can have a significant impact on the volume of biodiesel and 
renewable diesel used in the U.S. in any given year.\100\ While the 
biodiesel blenders tax credit has applied in each year from 2010 to 
2017, it has only been prospectively in effect during the calendar year 
in 2011, 2013 and 2016, while other years it has been applied 
retroactively. The biodiesel blenders tax credit expired at the end of 
2009 and was re-instated in December 2010 to apply retroactively in 
2010 and extend through the end of 2011. Similarly, after expiring at 
the end of 2011, 2013, and 2014 the tax credit was re-instated in 
January 2013 (for 2012 and 2013), December 2014 (for 2014), December 
2015 (for 2015 and 2016), and February 2018 (for 2017). Each of the 
years in which the biodiesel blenders tax credit was in effect during 
the calendar year (2013 and 2016) resulted in significant increases in 
the volume of advanced biodiesel and renewable diesel used in the U.S. 
over the previous year (653 million gallons and 779 million gallons 
respectively). However, following these large increases in 2013 and 
2016, there was little to no growth in the use of advanced biodiesel 
and renewable diesel in the following years, only 33 million gallons 
from 2013 to 2015 and negative 127 million gallons from 2016 to 2017. 
This decrease from 2016 to 2017 occurred even though the required 
volume of advanced biofuel increased from 3.61 in 2016 to 4.28 billion 
gallons in 2017. This pattern is likely the result of both accelerated 
production and/or importation of biodiesel and renewable diesel in the 
final few months of years during which the tax credit was available to 
take advantage of the expiring tax credit, as well as relatively lower 
volumes of biodiesel and renewable diesel production and import in 
2014, 2015,

[[Page 63726]]

and 2017 than would have occurred if the tax credit had been in 
place.\101\
---------------------------------------------------------------------------

    \100\ The status of the tax credit does not impact our 
assessment of the reasonably attainable volume of advanced biodiesel 
and renewable diesel in 2019 as our assessment is primarily based on 
feedstock availability. The status of the tax credit may affect the 
maximum attainable volume of these fuels, but our assessment 
demonstrates that 2.8 billion gallons of advanced biodiesel and 
renewable diesel is attainable whether or not the tax credit is 
renewed prospectively (or retrospectively) for 2019.
    \101\ We also acknowledge that EPA not finalizing the required 
volumes of renewable fuel under the RFS program for 2014 and 2015 
until December 2015 likely affected the volume of advanced biodiesel 
and renewable diesel supplied in these years. Further, the 
preliminary tariffs on biodiesel imported from Argentina and 
Indonesia announced in August 2017 likely negatively affected the 
volume of biodiesel supplied in 2017.
---------------------------------------------------------------------------

    Some commenters stated that the tax credit has no impact on the 
potential supply of advanced biodiesel and renewable diesel. They 
generally argued that while the tax credit impacted the cost of 
biodiesel, as well as the RIN price needed to make advanced biodiesel 
and renewable diesel cost competitive with petroleum diesel, the RIN 
price was ultimately capable of incentivizing the production and use of 
advanced biodiesel and renewable diesel with or without the tax credit. 
We recognize that this is theoretically true; because the RIN prices 
vary with the supply and demand for RINs, the RIN price can rise to 
provide the same value as the tax credit in its absence. However, we 
note that it is this very aspect of the price of RINs, the potential 
that RIN prices may rise or fall depending on market conditions, that 
can hinder their ability to incentivize increased production and use of 
advanced biodiesel and renewable diesel. Further, higher advanced 
biofuel RIN prices can incentivize the production of other advanced 
fuels if these fuels can be produced at a price that is cost 
competitive with advanced biodiesel and renewable diesel. Conversely, 
the tax credit provides a fixed price incentive for all biodiesel and 
renewable diesel blended into the diesel fuel pool in the U.S., and is 
not available to other advanced biofuels. Ultimately, as discussed 
above the supply of biodiesel and renewable diesel is likely to be 
influenced by a number of factors, including the 2019 RFS volume 
requirements, the advanced and BBD RIN prices, expectations about the 
availability of the biodiesel blenders tax credit, and a number of 
other market-based factors.
    The historical data suggests that the supply of advanced biodiesel 
and renewable diesel could potentially increase from the projected 2.54 
billion gallons in 2018 to 2.8 billion gallons in 2019 (the projected 
volume needed to meet the advanced biofuel volume for 2019 after 
reducing the statutory advanced biofuel volume by the same amount as 
the cellulosic biofuel reduction). This would represent an increase of 
approximately 250 million gallons from 2018 to 2019, slightly higher 
than the average increase in the volume of advanced biodiesel and 
renewable diesel used in the U.S. from 2011 through 2017 (218 million 
gallons per year) and significantly less than the highest annual 
increase during this time (779 million gallons from 2015 to 2016).
    After reviewing the historical volume of advanced biodiesel and 
renewable diesel used in the U.S. and considering the possible impact 
of the expiration of the biodiesel tax credit (discussed above), EPA 
next considers other factors that may impact the production, import, 
and use of advanced biodiesel and renewable diesel in 2019. The 
production capacity of registered advanced biodiesel and renewable 
diesel production facilities is highly unlikely to limit the production 
of these fuels, as the total production capacity for biodiesel and 
renewable diesel at registered facilities in the U.S. (4.1 billion 
gallons) exceeds the volume of these fuels that are projected to be 
needed to meet the advanced biofuel volume for 2019 after exercising 
the cellulosic waiver authority (2.8 billion gallons).\102\ Significant 
registered production also exists internationally. Similarly, the 
ability for the market to distribute and use advanced biodiesel and 
renewable diesel appears unlikely constrain the growth of these fuels 
to a volume lower than 2.8 billion gallons. The investments required to 
distribute and use this volume of biodiesel and renewable diesel are 
expected to be modest, as this volume is less than 200 million gallons 
greater than the volume of biodiesel and renewable diesel produced, 
imported, and used in the U.S. in 2016.
---------------------------------------------------------------------------

    \102\ The production capacity of the sub-set of biodiesel and 
renewable diesel producers that generated RINs in 2017 is 
approximately 3.1 billion gallons. See ``Biodiesel and Renewable 
Diesel Registered Capacity (May 2018)'' Memorandum from Dallas 
Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Conversely, the availability of advanced feedstocks that can be 
used to produce advanced biodiesel and renewable diesel, as well as the 
availability of imported advanced biodiesel and renewable diesel, may 
be limited in 2019. We acknowledge that an increase in the required use 
of advanced biodiesel and renewable diesel could be realized through a 
diversion of advanced feedstocks from other uses, or a diversion of 
advanced biodiesel and renewable diesel from existing markets in other 
countries. Furthermore, the volume of advanced biodiesel and renewable 
diesel and their corresponding feedstocks projected to be produced 
globally exceeds the volume projected to be required in 2019 (2.8 
billion gallons of advanced biodiesel and renewable diesel and the 
corresponding volume of advanced feedstocks) by a significant 
margin.\103\ It is also the case that actions unrelated to the RFS 
program, such as recent tariffs on soybeans exported to China, could 
result in increased supplies of domestic biodiesel feedstocks.\104\ 
However, we expect that further increases in advanced biofuel and 
renewable fuel volumes would be increasingly likely to incur adverse 
unintended impacts.
---------------------------------------------------------------------------

    \103\ The October 2018 WASDE projects production of vegetable 
oils in 2017/2018 in the World to be 203.33 million metric tons. 
This quantity of vegetable oil would be sufficient to produce 
approximately 58.1 billion gallons of biodiesel and renewable 
diesel. Global production of biodiesel is projected to be 38.0 
billion liters (10.0 billion gallons) according to the 2018 OECD-FAO 
Agricultural Outlook.
    \104\ The potential impacts of this tariff on the availability 
of biodiesel feedstocks is discussed in our discussion of available 
vegetable oils below.
---------------------------------------------------------------------------

    We perceive the net benefits to be lower both because of the 
potential disruption and associated cost impacts to other industries 
resulting from feedstock switching, and the potential adverse effect on 
lifecycle GHG emissions associated with feedstocks for biofuel 
production that would have been used for other purposes and which must 
then be backfilled with other feedstocks. Similarly, increasing the 
supply of biodiesel and renewable diesel to the U.S. by diverting fuel 
that would otherwise have been used in other countries results in 
higher lifecycle GHG emissions than if the supply of these fuels was 
increased by an increased collection of waste fats and oils or 
increased production of feedstocks that are byproducts of other 
industries, especially if this diversion results in increased 
consumption of petroleum fuels in the countries that would have 
otherwise consumed the biodiesel or renewable diesel. By focusing our 
assessment of the potential growth in the attainable volume of 
biodiesel and renewable diesel on the expected growth in the production 
of advanced feedstocks (rather than the total supply of these 
feedstocks in 2018, which would include feedstocks currently being used 
for non-biofuel purposes), we are attempting to minimize the incentives 
for the RFS program to increase the supply of advanced biodiesel and 
renewable diesel through feedstock switching or diverting biodiesel and 
renewable diesel from foreign markets to the U.S.
    Advanced biodiesel and renewable diesel feedstocks include both 
waste oils, fats, and greases; and oils from planted crops. We received 
many comments from parties projecting that

[[Page 63727]]

available feedstocks from both of these sources are expected to 
increase in 2019. We agree that increases in the availability of 
advanced feedstocks would in 2019 and we have projected the magnitude 
of these increases using the best available data, including data 
received in comments on this rule. The projected growth in advanced 
feedstocks, however, is expected to be modest relative to the volume of 
these feedstocks that are currently being used to produce biodiesel and 
renewable diesel. Most of the waste oils, fats, and greases that can be 
recovered economically are already being recovered and used in 
biodiesel and renewable diesel production or for other purposes. The 
availability of animal fats will likely increase with beef, pork, and 
poultry production. Most of the vegetable oil used to produce advanced 
biodiesel and renewable diesel that is sourced from planted crops comes 
from crops primarily grown for purposes other than providing feedstocks 
for biodiesel and renewable diesel, such as for livestock feed, with 
the oil that is used as feedstock for renewable fuel production a co-
product or by-product.\105\ This is true for soybeans and corn, which 
are the two largest sources of feedstock from planted crops used for 
biodiesel production in the U.S.\106\ We do not believe that the 
increased demand for soybean oil or corn oil caused by a higher 2019 
advanced biofuel standard would result in an increase in soybean or 
corn prices large enough to induce significant changes in agricultural 
activity.\107\ However, we acknowledge that production of these 
feedstocks is likely to increase as crop yields, oil extraction rates, 
and demand for the primary products increase in 2019.
---------------------------------------------------------------------------

    \105\ For example, corn oil is a co-product of corn grown 
primarily for feed or ethanol production, while soy and canola are 
primarily grown as livestock feed.
    \106\ According to EIA data 6,230 million pounds of soy bean oil 
and 1,579 million pounds of corn oil were used to produce biodiesel 
in the U.S. in 2017. Other significant sources of feedstock were 
yellow grease (1,471 million pounds), canola oil (1,452 million 
pounds), and white grease (591 million pounds). Numbers from EIA's 
September 2018 Monthly Biodiesel Production Report.
    \107\ This position is supported by several commenters, 
including the South Dakota Soybean Association (EPA-HQ-OAR-2018-
0167-0389), the International Council on Clean Transportation (EPA-
HQ-OAR-2018-0167-0531), and the Union of Concerned Scientists (EPA-
HQ-OAR-2018-0167-0535).
---------------------------------------------------------------------------

    We believe the most reliable source for projecting the expected 
increase in vegetable oils in the U.S. is USDA's World Agricultural 
Supply and Demand Estimates (WASDE). At the time of our assessment for 
this final rule, the most current version of the WASDE is from October 
2018. The projected increase in vegetable oil production in the U.S. 
from 2017/2018 to 2018/2019 is 0.14 million metric tons per year. This 
additional quantity of vegetable oils could be used to produce 
approximately 40 million additional gallons of advanced biodiesel or 
renewable diesel in 2019 relative to 2018.\108\ We recognize that 
oilseed production is projected in increase by a much greater amount 
(6.89 million metric tons).\109\ However, it is the vegetable oil, 
rather than oilseed production, that is of relevance as an advanced 
biodiesel and renewable diesel feedstock.
---------------------------------------------------------------------------

    \108\ To calculate this volume, we have used a conversion of 7.7 
pounds of feedstock per gallon of biodiesel. This is based on the 
expected conversion of soybean oil (http://extension.missouri.edu/p/G1990), which is the largest source of feedstock used to produce 
advanced biodiesel and renewable diesel. Conversion rates for other 
types of vegetable oils used to produce biodiesel and renewable 
diesel are similar to those for soybean oil.
    \109\ World Agricultural Supply and Demand Estimates. United 
States Department of Agriculture. October 11, 2018.
---------------------------------------------------------------------------

    A number of commenters mentioned the tariffs recently enacted by 
China on soybean exports from the U.S. as a potential source of 
additional feedstock for advanced biodiesel and renewable diesel. The 
potential impacts of these tariffs are significant, as approximately 25 
percent of the U.S. soybean crop is currently exported to China.\110\ 
However, the duration and ultimate impacts of these tariffs on total 
exports of U.S. soybeans are highly uncertain. In recent months, the 
price premium for soybeans from Brazil (the largest global exporter of 
soybeans), which are not impacted by the tariffs, have increased to 
approximately $2 per bushel.\111\ A likely result of this price premium 
is that countries other than China will turn to U.S. sources of 
soybeans, rather than sourcing soybeans from Brazil. Ultimately, the 
tariffs could have little impact on the overall exports of soybeans 
from the U.S.
---------------------------------------------------------------------------

    \110\ Hart, Chad and Schulz, Lee. China's Importance in U.S. Ag 
Markets. CARD Agricultural Policy Review. Available online: https://www.card.iastate.edu/ag_policy_review/article/?a=41.
    \111\ Durisin, Megan and Dodge, Sam. Why Soybeans Are at the 
Heart of the U.S.-China Trade War. Bloomberg. Published July 5, 
2018. Updated July 9, 2018.
---------------------------------------------------------------------------

    The most recent WASDE report projects that exports of oilseeds will 
decrease by approximately 2 million metric tons (approximately 3 
percent) from 2017/2018 to 2018/2019. In addition, the WASDE projects 
that exports of vegetable oils will decrease by 0.10 million metric 
tons during this same time period. The October WASDE appears to take 
the recent tariffs into account, as there is a notable decrease in the 
expected trade of oilseeds in the recent WASDE projections relative to 
WASDE projections made prior to the announcement of Chinese tariffs on 
U.S. soybeans.\112\ If the 2 million metric tons of soybeans were 
crushed to produce vegetable oil, this oil, along with the 0.10 million 
metric ton decrease in vegetable oil exports, could be used to produce 
approximately 130 million gallons of biodiesel and renewable diesel, 
less than 6 percent of the current market.\113\ We believe this is a 
reasonable estimate of the volume of biodiesel and renewable diesel 
that could be produced from a decrease in exports of oilseeds and 
vegetable oil from the U.S. in 2019. However, any biodiesel and 
renewable diesel produced from soybeans previously exported to China 
are necessarily diverted from other uses (even if the reason for this 
diversion is the tariffs, rather than the RFS program), and are 
therefore more likely to have the adverse unintended impacts associated 
with diverted feedstocks. We therefore have not included this potential 
volume increase in our assessment of the reasonably attainable volume 
of these fuels in 2019. These feedstocks are a likely source of 
additional supply of advanced biodiesel and renewable diesel that could 
contribute towards satisfying the difference between the reasonably 
attainable volume of these fuels and the 2.8 billion gallons of these 
fuels projected to be used to satisfy the advanced biofuel volume for 
2019. We further note that even if the 130 million gallons of biodiesel 
and renewable diesel that could be produced from a

[[Page 63728]]

decrease in exports of oilseeds and vegetable oil from the U.S. in 2019 
were included in our projection of the reasonably attainable volume of 
advanced biodiesel and renewable diesel, this projection would still be 
less than 2.8 billion gallons.
---------------------------------------------------------------------------

    \112\ Projected trade of oilseeds decreased from 63.46 million 
metric tons for 2018/2019 in the June 2018 WASDE report to 57.20 
million metric tons for 2018/2019 in the October 2018 WASDE.
    \113\ To calculate the quantity of oil that can be produced from 
2 million metric tons of oilseeds we converted this total to 
approximately 73 million bushels of soybeans, assuming 60 pounds per 
bushel. We then calculated that this quantity of soybeans could 
produce approximately 800 million pounds of oil assuming each bushel 
of soybeans produced 11 pounds of oil. To this, we added the 
approximately 220 million pounds (0.10 million metric tons) of 
decreased exports of vegetable oils for a total of 1.02 billion 
pounds of vegetable oils. Finally, we divided this total by 7.7 
pounds of vegetable oil per gallon of biodiesel (or renewable 
diesel) to estimate that 130 million gallons of biodiesel and 
renewable diesel could be produced from these feedstocks. Support 
for the 7.7 pounds of vegetable oil per gallon of biodiesel 
conversion factor can be found here: http://extension.missouri.edu/p/G1990. All other conversion factors are from Irwin, S. ``The Value 
of Soybean Oil in the Soybean Crush: Further Evidence on the Impact 
of the U.S. Biodiesel Boom.'' farmdoc daily (7):169, Department of 
Agricultural and Consumer Economics, University of Illinois at 
Urbana-Champaign, September 14, 2017.
---------------------------------------------------------------------------

    In addition to virgin vegetable oils, we also expect increasing 
volumes of distillers corn oil \114\ to be available for use in 2019. 
The WASDE report does not project distillers corn oil production, so 
EPA must use an alternative source to project the growth in the 
production of this feedstock. For this final rule EPA is using results 
from the World Agricultural Economic and Environmental Services (WAEES) 
model to project the growth in the production of distillers corn 
oil.\115\ In assessing the likely increase in the availability of 
distillers corn oil from 2018 to 2019, the authors of the WAEES model 
considered the impacts of an increasing adoption rate of distillers 
corn oil extraction technologies at domestic ethanol production 
facilities, as well as increased corn oil extraction rates enabled by 
advances in this technology. The WAEES model projects that production 
of distillers corn oil in 2018 will increase by approximately 120 
million pounds from the 2017/2018 to the 2018/2019 agricultural 
marketing year. This quantity of feedstock could be used to produce 
approximately 15 million gallons of biodiesel or renewable diesel. We 
believe it is reasonable to use these estimates from the WAEES model 
for these purposes.
---------------------------------------------------------------------------

    \114\ Distillers corn oil is non-food grade corn oil produced by 
ethanol production facilities.
    \115\ For the purposes of this rule, EPA relied on WAEES 
modeling results submitted as comments by the National Biodiesel 
Board on the 2019 proposed rule (Kruse, J., ``Implications of an 
Alternative Advanced and Biomass Based Diesel Volume Obligation for 
Global Agriculture and Biofuels'', August 13, 2018, World 
Agricultural Economic and Environmental Services (WAEES)).
---------------------------------------------------------------------------

    While much of the increase in advanced biodiesel and renewable 
diesel feedstocks produced in the U.S. from 2018 to 2019 is expected to 
come from virgin vegetable oils and distillers corn oil, increases in 
the supply of other sources of advanced biodiesel and renewable diesel 
feedstocks, such as biogenic waste oils, fats, and greases, may also 
occur. These increases, however, are expected to be modest, as many of 
these feedstocks that can be recovered economically are already being 
used to produce biodiesel or renewable diesel, or in other markets. In 
fact, the WAEES model projects an increase of only 5 million gallons in 
the volume of biodiesel produced from feedstocks other than soybean 
oil, canola oil, and distillers corn oil from 2018 to 2019.\116\ 
Conversely, an assessment conducted by LMC in 2017 and submitted in 
comments on our proposed rule projected that the waste oil supply in 
the U.S. could increase by approximately 2.4 million metric tons from 
2016 to 2022.\117\ This estimate represents a growth rate of 
approximately 0.4 billion tons per year, or enough feedstock to produce 
approximately 115 million gallons of biodiesel and renewable diesel per 
year. This estimate, however, only accounts for potential sources of 
feedstock, and not for the economic viability of recovering waste oils. 
While we acknowledge that additional waste oils could be collected in 
2019, these waste oils will only be collected if it is economically 
viable to do so. Neither the results of the WAEES model, nor the future 
prices of soybean oil,\118\ suggest the prices for waste oils will 
increase to a level that will incentivize significantly more wasted oil 
collection in 2019 relative to previous years. We have therefore 
included an additional 5 million gallons of advanced biodiesel and 
renewable diesel from wasted oils in our assessment of the reasonably 
attainable volume for 2019, consistent with the results of the WAEES 
model.
---------------------------------------------------------------------------

    \116\ Id.
    \117\ LMC International. Global Waste Grease Supply. August 
2017.
    \118\ CME Group Soybean Oil Futures Quotes. Accessed online 
October 23, 2018.
---------------------------------------------------------------------------

    In total, we expect that increases in feedstocks produced in the 
U.S. are sufficient to produce approximately 60 million more gallons of 
advanced biodiesel and renewable diesel in 2019 relative to 2018. This 
number includes 40 million gallons from increased vegetable oil 
production, 15 million gallons from increased corn oil production, and 
5 million gallons from increased waste oil collection. This number does 
not include additional volumes related to decreases in exported volumes 
of soybeans to China as a result of tariffs and/or increased collection 
of waste oils. Decreased exports of soybeans and soybean oil, represent 
feedstocks diverted from use in other countries, while any increase in 
the collection of waste oils is highly uncertain. Our projection also 
does not consider factors which could potentially decrease the 
availability of advanced biofuel feedstocks that could be used to 
produce biodiesel or renewable diesel, such as an increase in the 
volume of vegetable oils used in food markets or other non-biofuel 
industries. In our 2018 final rule, we determined that 2.55 billion 
gallons of advanced biodiesel and renewable diesel were reasonably 
attainable in 2018,\119\ therefore our projection of the reasonably 
attainable volume of advanced biodiesel and renewable diesel in 2019 is 
2.61 billion gallons.
---------------------------------------------------------------------------

    \119\ 82 FR 58512 (December 12, 2017).
---------------------------------------------------------------------------

    EPA's projections of the growth of advanced feedstocks does not, 
however, suggest that the total supply of advanced biodiesel and 
renewable diesel to the U.S. in 2018 will be limited to 2.61 billion 
gallons. Rather, this is the volume of these fuels that we project 
could be supplied while seeking to minimize quantities of advanced 
feedstocks or biofuels from existing uses. The October 2018 WASDE 
reports that production of vegetable oil in the U.S. in the 2018/2019 
market year will be sufficient to produce approximately 3.5 billion 
gallons of biodiesel and renewable diesel (including both advanced and 
conventional biofuels) if the entire volume of vegetable oil was used 
to produce these fuels. Additional advanced biodiesel and renewable 
diesel could be produced from waste fats, oils, and greases. The global 
production of vegetable oil projected in the 2018/2019 marketing year 
would be sufficient to produce approximately 58.1 billion gallons of 
biodiesel and renewable diesel (including both advanced and 
conventional biofuels).\120\ While it would not be reasonable to assume 
that all, or even a significant portion, of global vegetable oil 
production could be available to produce biodiesel or renewable diesel 
supplied to the U.S. for a number of reasons,\121\ the large global 
supply of vegetable oil strongly suggests that under the right market 
conditions 2.8 billion gallons of advanced biodiesel and renewable 
diesel is attainable in 2019. Reaching these levels, however, may 
result in the diversion of advanced feedstocks currently used in other 
markets and/or the import of biodiesel and renewable diesel from these 
feedstocks.
---------------------------------------------------------------------------

    \120\ The October 2018 WASDE projects production of vegetable 
oils in 2018/19 in the U.S. and the World to be 12.27 and 203.33 
million metric tons respectively. To convert projected vegetable oil 
production to potential biodiesel and renewable diesel production we 
have used a conversion of 7.7 pounds of feedstock per gallon of 
biodiesel.
    \121\ These reasons include the demand for vegetable oil in the 
food, feed, and industrial markets both domestically and globally; 
constraints related to the production, import, distribution, and use 
of significantly higher volumes of biodiesel and renewable diesel; 
and the fact that biodiesel and renewable diesel produced from much 
of the vegetable oil available globally would not qualify as an 
advanced biofuel under the RFS program.
---------------------------------------------------------------------------

    Further, the supply of advanced biodiesel and renewable diesel to 
the U.S. in 2019 could be increased by

[[Page 63729]]

approximately 150 million gallons if all of the exported volumes of 
these fuels were used domestically. Diverting this fuel to markets in 
the U.S. may be complicated, however, as doing so would likely require 
higher prices for these fuels in the U.S. (to divert the fuels from 
foreign markets that are presumably more profitable currently). It may 
also be more difficult and costly to distribute this additional volume 
of biodiesel and renewable diesel to domestic markets than the current 
foreign markets. Finally, reducing advanced biodiesel and renewable 
diesel exports may indirectly result in the decreased availability of 
imported volumes of these fuels, as other countries seek to replace 
volumes previously imported from the U.S.
    EPA next considered potential changes in the imports of advanced 
biodiesel and renewable diesel produced in other countries. In previous 
years, significant volumes of foreign produced advanced biodiesel and 
renewable diesel have been supplied to markets in the U.S. (see Table 
IV.B.2-1 above). These significant imports were likely the result of a 
strong U.S. demand for advanced biodiesel and renewable diesel, 
supported by the RFS standards, the low carbon fuel standard (LCFS) in 
California, the biodiesel blenders tax credit, and the opportunity for 
imported biodiesel and renewable diesel to realize these incentives. As 
in 2018, we have not included the potential for increased volumes of 
imported advanced biodiesel and renewable diesel in our projection of 
the reasonably attainable volume for 2019. There is a far higher degree 
of uncertainty related to the availability and production of advanced 
biodiesel and renewable diesel in foreign countries, as this supply can 
be impacted by a number of unpredictable factors such as the imposition 
of tariffs and increased incentives for the use of these fuels in other 
countries (such as tax incentives or blend mandates). EPA also lacks 
the data necessary to determine the quantity of these fuels that would 
otherwise be produced and used in other countries, and thus the degree 
to which the RFS standards are simply diverting this fuel from use in 
other countries as opposed to incentivizing additional production.
    The RFS requirements and California's LCFS are expected to continue 
to provide an incentive for imports of advanced biodiesel and renewable 
diesel in 2019. Several other factors, however, may negatively impact 
the volume of these fuels imported in 2019. In February 2018 the 
biodiesel blenders tax credit, which had expired at the end of 2016, 
was retroactively reinstated for biodiesel blended in 2017 but was not 
extended to apply to biodiesel blended in 2018 or 2019.\122\ Perhaps 
more significantly, in December 2017 the U.S. International Trade 
Commission adopted tariffs on biodiesel imported from Argentina and 
Indonesia.\123\ According to data from EIA,\124\ no biodiesel was 
imported from Argentina or Indonesia since September 2017, after a 
preliminary decision to impose tariffs on biodiesel imported from these 
countries was announced in August 2017. Biodiesel imports from these 
countries were significant prior to the imposition of tariffs, 
accounting for over 550 million gallons in 2016 and approximately 290 
million gallons in 2017.
---------------------------------------------------------------------------

    \122\ Bipartisan Budget Act of 2018, Public Law 115-123, 132 
Stat. 64 sections 40406, 40407, and 40415 (2018).
    \123\ ``Biodiesel from Argentina and Indonesia Injures U.S. 
Industry, says USITC,'' Available online at: https://www.usitc.gov/press_room/news_release/2017/er1205ll876.htm.
    \124\ See ``U.S. Imports of Biodiesel'' available in docket EPA-
HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Despite these tariffs, imports of biodiesel and renewable diesel 
have not ceased. From January to June 2018, biodiesel and renewable 
diesel imports (according to EIA data) are approximately 172 million 
gallons, suggesting an annual volume of approximately 390 million 
gallons if the current import rates and seasonal trends hold through 
the end of the year.\125\ This suggests that imported volumes of 
advanced biodiesel and renewable diesel from countries other than 
Argentina and Indonesia may increase by approximately 100 million 
gallons in 2018 (from approximately 290 million gallons in 2017). 
However overall imports have not returned to the levels observed prior 
to the tariffs. At this time, the ultimate impact these tariffs will 
have on overall imports of advanced biodiesel and renewable diesel to 
the U.S. remains uncertain. It appears likely that imports of advanced 
biodiesel and renewable diesel from other countries not impacted by 
these tariffs will continue to increase, however these increases may 
not be sufficient to replace all of the biodiesel imported from 
Argentina and Indonesia in previous years by 2019.
---------------------------------------------------------------------------

    \125\ See ``U.S. Imports of Biodiesel'' available in docket EPA-
HQ-OAR-2018-0167 and ``Projecting Biodiesel and Renewable Diesel 
Production and Imports for 2018 (November 2018)'' Memorandum from 
Dallas Burkholder to EPA Docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    In addition to EPA's assessment of the market's ability to produce, 
import, distribute, and use the 2.8 billion gallons of advanced 
biodiesel and renewable diesel projected to be used in 2019 to meet the 
advanced biofuel volume requirement, EPA compared the projected 
increase in these fuels to the increases observed in recent years. 
While each year's circumstances are unique, a projected increase 
comparable to pas increases further confirms that the volume is 
attainable. Domestic production of advanced biodiesel and renewable 
diesel in 2016 and 2017 was approximately 1.85 billion gallons, and is 
expected to increase to approximately 2.15 billion gallons in 2018 
based on production data through September 2018. Of this total, 
approximately 150 million gallons of domestically produced biodiesel 
was exported in 2016 and 2017. If imported biodiesel and renewable 
diesel volumes continue to increase through 2019 by approximately 100 
million gallons per year (to approximately 500 million gallons in 2019) 
domestic production would need to increase by approximately 300 million 
gallons in 2019 to reach a total advanced biodiesel and renewable 
diesel supply of 2.8 billion gallons by 2019.\126\ This growth is 
attainable, as it is approximately equal to the increase in the 
domestic production of advanced biodiesel and renewable diesel from 
2017 to 2018 (approximately 300 million gallons), and significantly 
lower than the rate of growth observed in previous years (for example 
the increase of 653 million gallons from 2012 to 2013 or the increase 
of 779 million gallons from 2015 to 2016). We note, however, that using 
this volume of advanced biodiesel and renewable diesel in the U.S. may 
result in the diversion of advanced biodiesel and renewable diesel and/
or feedstocks used to produce these fuels, as advanced biodiesel and 
renewable diesel that is currently exported may instead be used in the 
U.S. and alternative sources for significant volumes of these fuels 
would need to be found.
---------------------------------------------------------------------------

    \126\ This estimate assumes that the U.S. continues to export 
approximately 150 million gallons of biodiesel per year in 2019. 
Alternatively, if the U.S. consumes all domestically produced 
biodiesel and renewable diesel, rather than exporting any of this 
fuel, domestic production of advanced biodiesel and renewable diesel 
would have to increase by approximately 150 million gallons in 2019. 
This volume is approximately equal to the increase in the domestic 
production of advanced biodiesel and renewable diesel from 2018 to 
2019, which we also believe is attainable.
---------------------------------------------------------------------------

    After a careful consideration of the factors discussed above, EPA 
has determined that the 2.8 billion gallons of advanced biodiesel and 
renewable diesel projected needed to satisfy the implied statutory 
volume for non-cellulosic advanced biofuel in 2019 (4.5 billion 
gallons) are attainable. The total

[[Page 63730]]

production capacity of registered biodiesel and renewable diesel 
producers is significantly higher than 2.8 billion gallons, even if 
only those facilities that generated RINs for advanced biodiesel and 
renewable diesel in 2017 are considered (3.1 billion gallons). This 
volume (2.8 billion gallons) is only 200 million gallons higher than 
the total volume of biodiesel and renewable diesel supplied in 2016 
(approximately 2.6 billion gallons), strongly suggesting that 
production capacity and the ability to distribute and use biodiesel and 
renewable diesel will not limit the supply of advanced biodiesel and 
renewable diesel to a volume below 2.8 billion gallons in 2018. 
Sufficient feedstocks are expected to be available to produce this 
volume of advanced biodiesel and renewable diesel in 2019, however 
doing so may result in some level of diversion of advanced feedstocks 
and/or advanced biodiesel and renewable diesel from existing uses. 
Finally, the increase in the production and import of advanced 
biodiesel and renewable diesel projected from 2018 to 2019 is 
comparable to (or has been exceeded) by the increases observed in 
recent years. While we do not believe it will be necessary, in the 
event that the supply of advanced biodiesel and renewable diesel falls 
short of the projected 2.8 billion gallons in 2019, obligated parties 
could rely on the significant volume of carryover advanced RINs 
projected to be available in 2019 (See Section II.B for a further 
discussion of carryover RINs).

C. Volume Requirement for Advanced Biofuel

    In exercising the cellulosic waiver authority for 2017 and earlier, 
we determined it was appropriate to require a partial backfilling of 
missing cellulosic volumes with volumes of non-cellulosic advanced 
biofuel we determined to be reasonably attainable, notwithstanding the 
increase in costs associated with those decisions.\127\ For the 2018 
standards, in contrast, we placed a greater emphasis on cost 
considerations in the context of balancing the various considerations, 
ultimately concluding that the applicable volume requirement should be 
based on the maximum reduction permitted under the cellulosic waiver 
authority. For 2019 we concluded that while it may be possible that 
more than 4.92 billion gallons of advanced biofuel is attainable in 
2019, requiring additional volumes would lead to higher costs, and 
would likely result in feedstock switching and/or diversion of foreign 
advanced biofuels.\128\ We do not believe that it would be appropriate 
to set the advanced biofuel volume requirement higher than 4.92 billion 
gallons given that it could lead to these results.
---------------------------------------------------------------------------

    \127\ See, e.g., Renewable Fuel Standards for 2014, 2015 and 
2016, and the Biomass-Based Volume for 2017: Response to Comments 
(EPA-420-R-15-024, November 2015), pages 628-631, available in 
docket EPA-HQ-OAR-2015-0111-3671.
    \128\ There will likely be some feedstock switching and/or 
diversion of foreign advanced biofuels to achieve an advanced 
biofuel volume of 4.92 billion gallons. However, further reductions 
in the advanced biofuel volume requirement would require the use of 
the general waiver authority, which we do not believe is warranted.
---------------------------------------------------------------------------

    We further note that while there is some uncertainty in the volume 
of advanced biofuel that may be attainable or reasonably attainable, 
even if greater volumes of advanced biofuel are attainable or 
reasonably attainable, the high cost of these fuels provides sufficient 
justification for our decision to reduce the advanced biofuel volume 
for 2019 by the maximum amount under the cellulosic waiver authority. 
In Section V we present illustrative cost projections for sugarcane 
ethanol and soybean biodiesel in 2019, the two advanced biofuels that 
would be most likely to provide the marginal increase in volumes of 
advanced biofuel in 2019 in comparison to 2018. Sugarcane ethanol 
results in a cost increase compared to gasoline that ranges from $0.39-
$1.04 per ethanol-equivalent gallon. Soybean biodiesel results in a 
cost increase compared to diesel fuel that ranges from $0.74-$1.23 per 
ethanol-equivalent gallon. The cost of these renewable fuels is high as 
compared to the petroleum fuels they displace.
    Based on the information presented above, we believe that 4.92 
billion gallons of advanced biofuel is attainable in 2019. After a 
consideration of the projected volume of cellulosic biofuel and 
reasonably attainable volumes of imported sugarcane ethanol and other 
advanced biofuels, we determined that 2.8 billion gallons of advanced 
biodiesel and renewable diesel would be needed to reach 4.92 billion 
gallons of advanced biofuel. Based on a review of the factors relevant 
to the supply of advanced biodiesel and renewable diesel as discussed 
in Section IV.B.2 above, including historic production and import data, 
the production capacity of registered biodiesel and renewable diesel 
producers, and the availability of advanced feedstocks, we have 
determined that 2.8 billion gallons of advanced biodiesel and renewable 
diesel is attainable in 2019.
    However, we also acknowledge that 2.8 billion gallons of advanced 
biodiesel and renewable diesel is higher than the approximately 2.5 
billion gallons projected to be supplied in 2018 based on available 
data through September 2018. While 2.8 billion gallons would require an 
increase in supply of approximately 300 million gallons between 2018 
and 2019, this is approximately equal to the increase in domestic 
production of these fuels from 2017 to 2018, and approximately 100 
million gallons less than the increase in the supply of advanced 
biodiesel and renewable diesel between 2017 and 2018 after adjusting 
for imported volumes of these fuels from Argentina and Indonesia in 
2017.\129\ Nevertheless, there is some uncertainty regarding whether 
the market will actually supply 2.8 billion gallons in 2019.
---------------------------------------------------------------------------

    \129\ To calculate the increase in the supply of advanced 
biodiesel and renewable diesel between 2017 and 2018 after adjusting 
for imported volumes of these fuels from Argentina and Indonesia in 
2017, we subtracted the volume of biodiesel imported from Argentina 
and Indonesia in 2017 from the total volume of these fuels supplied 
in 2017 and compared this volume of advanced biodiesel and renewable 
diesel supplied in 2018. There have been no imports of biodiesel 
from Argentina and Indonesia since August 2017, when tariffs on 
biodiesel imported from these countries were announced.
---------------------------------------------------------------------------

    In the event that the market does not supply this volume, the 
carryover RIN bank represents a source of RINs that could help 
obligated parties meet an advanced biofuel volume requirement of 4.92 
billion gallons in 2019 if the market fails to supply sufficient 
advanced biofuels in 2019. As discussed in greater detail in Section 
II.B.1 of the preamble, carryover RINs provide obligated parties 
compliance flexibility in the face of substantial uncertainties in the 
transportation fuel marketplace, and provide a liquid and well-
functioning RIN market upon which success of the entire program 
depends. We currently estimate that there are approximately 620 million 
advanced carryover RINs available.
    In response to the proposal, we received comments supporting our 
proposed volume requirement of 4.92 billion gallons, as well as 
comments requesting higher or lower volumes. EPA's assessment of these 
comments is provided in the RTC document.
    It should be noted that by exercising the full cellulosic waiver 
authority for advanced biofuel, the implied statutory volume target for 
non-cellulosic advanced biofuel of 4.5 billion gallons in 2019 would be 
maintained. This represents an increase of 0.5 billion gallons from the 
2018 volume requirements.

[[Page 63731]]

D. Volume Requirement for Total Renewable Fuel

    As discussed in Section II.A.1, we believe that the cellulosic 
waiver provision is best interpreted to reduce the advanced biofuel and 
total renewable fuel volumes by equal amounts. For the reasons we have 
previously articulated, we believe this interpretation is consistent 
with the statutory language and best effectuates the objectives of the 
statute. If we were to reduce the total renewable fuel volume 
requirement by a lesser amount than the advanced biofuel volume 
requirement, we would effectively increase the opportunity for 
conventional biofuels to participate in the RFS program beyond the 
implied statutory volume of 15 billion gallons. Applying an equal 
reduction of 8.12 billion gallons to both the statutory target for 
advanced biofuel and the statutory target for total renewable fuel 
results in a total renewable fuel volume of 19.92 billion gallons as 
shown in Table IV.A-1.\130\ This volume of total renewable fuel results 
in an implied volume of 15 billion gallons of conventional fuel, which 
is the same as in the 2018 final rule.
---------------------------------------------------------------------------

    \130\ EPA also considered the availability of carryover RINs in 
determining whether reduced use of the cellulosic waiver authority 
would be warranted. For the reasons described in Section II.B, we do 
not believe this to be the case.
---------------------------------------------------------------------------

    In response to the July 10, 2018 proposal, some stakeholders said 
that EPA had not evaluated whether 19.92 billion gallons of total 
renewable fuel was attainable as it did for advanced biofuel. As a 
result, they indicated that EPA had not fulfilled its responsibilities 
under the statute and had not given stakeholders meaningful opportunity 
to evaluate the proposed volume requirement. In response, we note first 
of all that we proposed, and are finalizing, the maximum reduction 
possible under the cellulosic waiver authority, and thus no additional 
reductions are possible under that authority. Secondly, while the 
general waiver authority does provide a means for further reductions in 
the applicable volume requirement for total renewable fuel, the record 
before us does not indicate that a waiver is warranted as described in 
Section II of the RTC.
    Notwithstanding the fact that we did not propose to use, and in 
this final rule are not using the general waiver authority, we did in 
fact provide a description of the ways in which the market could make 
19.92 billion gallons volume of total renewable fuel available in 2019 
in a memorandum to the docket.\131\ Some stakeholders pointed 
specifically to a lack of any analysis of the volumes of E0, E15, and 
E85 as a reason that the assessment in that memorandum was 
insufficient. However, the supply and use of these gasoline-ethanol 
blends is strongly influenced by consumer demand. We noted in the 
proposal that, regardless of the outcome of such an assessment, we were 
precluded from waiving volumes due to inadequate domestic supply 
insofar as our assessment depended on a consideration of demand-side 
factors.
---------------------------------------------------------------------------

    \131\ ``Updated market impacts of biofuels in 2019,'' memorandum 
from David Korotney to docket EPA-HQ-OAR-2018-0167. In prior actions 
including the 2019 proposed rule and the 2018 annual rule proposal, 
similar analyses indicated that the market was capable of both 
producing and consuming the required volume of renewable fuels, and 
that as a result there was no basis for finding an inadequate 
domestic supply of total renewable fuel. See 82 FR 34229 & n.82 
(July 21, 2017). Given the D.C. Circuit's decision in ACE, however, 
assessment of demand-side constraints is no longer relevant for 
determining inadequate domestic supply. However, we believe 
consideration of the ways that the market could make this volume 
available may still be generally relevant to whether and how EPA 
exercises its waiver authorities, such as our consideration of 
whether the volumes will cause severe economic harm.
---------------------------------------------------------------------------

    More importantly, an analysis of the volumes of E0, E15, and E85 
that could be supplied in 2019 was not necessary to determine whether 
the volume requirement of 19.92 billion gallons could be reached.\132\ 
This is because it is the total volume of ethanol that can be consumed 
that is the relevant consideration in evaluating the reasonableness of 
19.92 billion gallons, not the specific volumes of E0, E15, and 
E85.\133\ To this end, we began with the assumption that the nationwide 
average ethanol concentration could reach 10.11 percent in 2019 because 
it had reached this same level in 2017. In the context of a market 
wherein nearly all gasoline contains 10 percent ethanol, the average 
ethanol concentration provides a better indication of the net effect of 
all E0, E15, and E85 without the need to estimate the volumes of each. 
In essence, our assumption that the average ethanol concentration would 
be at least 10.11 percent provided a surrogate for attempting to 
separately estimate volumes of E0, E15, and E85, which would contain a 
high degree of uncertainty. Thus, as a result our use of the average 
ethanol content is both more straightforward and more robust. In 
addition to a consideration of the volumes of non-ethanol renewable 
fuel that could be available in 2019, our consideration of 10.13 
percent nationwide average ethanol concentration led us to a proposed 
determination that the market could make available 19.88 billion 
gallons of total renewable fuel in 2019. Following this same approach, 
the updated market impacts for this final rule similarly demonstrates 
that the market can make available 19.92 billion gallons of total 
renewable fuel in 2019.
---------------------------------------------------------------------------

    \132\ Cf. API, 706 F.3d at 481 (``Nothing in the text of Sec.  
7545(o)(7)(D)(i), or any other applicable provision of the Act, 
plainly requires EPA to support its decision not to reduce the 
applicable volume of advanced biofuels with specific numerical 
projections.'').
    \133\ Importantly, EPA is not requiring the use of any specific 
ethanol blend; rather, the market chooses which biofuels and blends 
to use to satisfy the biofuel standards. See 42 U.S.C. 
7545(o)(2)(A)(iii)(II)(bb) (the RFS program ``shall not'' ``impose 
any per-gallon obligation for the use of renewable fuel'').
---------------------------------------------------------------------------

V. Impacts of 2019 Volumes on Costs

    In this section, EPA presents its assessment of the illustrative 
costs of the final 2019 RFS rule. It is important to note that these 
illustrative costs do not attempt to capture the full impacts of this 
final rule. We frame the analyses we have performed for this rule as 
``illustrative'' so as not to give the impression of comprehensive 
estimates. These estimates are provided for the purpose of showing how 
the cost to produce a gallon of a ``representative'' renewable fuel 
compares to the cost of petroleum fuel. There are a significant number 
of caveats that must be considered when interpreting these illustrative 
cost estimates. For example, there are many different feedstocks that 
could be used to produce biofuels, and there is a significant amount of 
heterogeneity in the costs associated with these different feedstocks 
and fuels. Some renewable fuels may be cost competitive with the 
petroleum fuel they replace; however, we do not have cost data on every 
type of feedstock and every type of fuel. Therefore, we do not attempt 
to capture this range of potential costs in our illustrative estimates.
    Illustrative cost estimates are provided below for this final rule. 
The volumes for which we have provided cost estimates and are described 
in Sections III and IV, and result from reducing the cellulosic, 
advanced, and total renewable fuel volume requirements using the 
cellulosic waiver authority under CAA section 211(o)(7)(D)(i). For this 
rule we examine two different cases. In the first case, we provide 
illustrative cost estimates by comparing the final 2019 renewable fuel 
volumes to 2019 statutory volumes. In the second case, we examine the 
final 2019 renewable fuel volumes to the final 2018 renewable fuel 
volumes to estimate changes in the annual costs of the final 2019 RFS 
volumes in comparison to the 2018 volumes.

[[Page 63732]]

A. Illustrative Costs Analysis of Exercising the Cellulosic Waiver 
Authority Compared to the 2019 Statutory Volumes Baseline

    In this section, EPA provides illustrative cost estimates that 
compare the final 2019 cellulosic biofuel volume requirements to the 
2019 cellulosic statutory volume that would be required absent the 
exercise of our cellulosic waiver authority under CAA section 
211(o)(7)(D)(i).\134\ As described in Section III, we are finalizing a 
cellulosic volume of 418 million gallons for 2019, using our cellulosic 
waiver authority to waive the statutory cellulosic volume of 8.5 
billion gallons by 8.082 billion gallons. Estimating the cost savings 
from volumes that are not projected to be produced is inherently 
challenging. EPA has taken the relatively straightforward methodology 
of multiplying this waived cellulosic volume by the wholesale per-
gallon costs of cellulosic biofuel production relative to the petroleum 
fuels they displace.
---------------------------------------------------------------------------

    \134\ Since the implied non-cellulosic advanced biofuel and 
implied conventional renewable fuel volumes are unchanged from the 
statutory implied volumes, see supra note, there is no need to 
estimate cost impacts for these volumes.
---------------------------------------------------------------------------

    While there may be growth in other cellulosic renewable fuel 
sources, we believe it is appropriate to use cellulosic ethanol 
produced from corn kernel fiber as the representative cellulosic 
renewable fuel. The majority of liquid cellulosic biofuel in 2019 is 
expected to be produced using this technology, and application of this 
technology in the future could result in significant incremental 
volumes of cellulosic biofuel. In addition, as explained in Section 
III, we believe that production of the major alternative cellulosic 
biofuel--CNG/LNG derived from biogas--is limited to approximately 538 
million gallons due to a limitation in the number of vehicles capable 
of using this form of fuel.\135\
---------------------------------------------------------------------------

    \135\ EPA projects that 538 million ethanol-equivalent gallons 
of CNG/LNG will be used as transportation fuel in 2019 based on 
EIA's October 2018 Short Term Energy Outlook (STEO). To calculate 
this estimate, EPA used the Natural Gas Vehicle Use from the STEO 
Custom Table Builder (0.12 billion cubic feet/day in 2019). This 
projection includes all CNG/LNG used as transportation fuel from 
both renewable and non-renewable sources. EIA does not project the 
amount of CNG/LNG from biogas used as transportation fuel. To 
convert billion cubic feet/day to ethanol-equivalent gallons EPA 
used conversion factors of 946.5 BTU per cubic foot of natural gas 
(lower heating value, per calculations using ASTM D1945 and D3588) 
and 77,000 BTU of natural gas per ethanol-equivalent gallon per 40 
CFR 80.1415(b)(5).
---------------------------------------------------------------------------

    EPA uses a ``bottom-up'' engineering cost analysis to quantify the 
costs of producing a gallon of cellulosic ethanol derived from corn 
kernel fiber. There are multiple processes that could yield cellulosic 
ethanol from corn kernel fiber. EPA assumes a cellulosic ethanol 
production process that generates biofuel using distiller's grains, a 
co-product of generating corn starch ethanol that is commonly dried and 
sold into the feed market as distillers dried grains with solubles 
(DDGS), as the renewable biomass feedstock. We assume an enzymatic 
hydrolysis process with cellulosic enzymes to break down the cellulosic 
components of the distiller's grains. This process for generating 
cellulosic ethanol is similar to approaches currently used by industry 
to generate cellulosic ethanol at a commercial scale, and we believe 
these cost estimates are likely representative of the range of 
different technology options being developed to produce ethanol from 
corn kernel fiber. We then compare the per-gallon costs of the 
cellulosic ethanol to the petroleum fuels that would be replaced at the 
wholesale stage, since that is when the two are blended together.
    These cost estimates do not consider taxes, retail margins, or 
other costs or transfers that occur at or after the point of blending 
(transfers are payments within society and are not additional costs). 
We do not attempt to estimate potential cost savings related to avoided 
infrastructure costs (e.g., the cost savings of not having to provide 
pumps and storage tanks associated with higher-level ethanol blends). 
When estimating per-gallon costs, we consider the costs of gasoline on 
an energy-equivalent basis as compared to ethanol, since more ethanol 
gallons must be consumed to travel the same distance as on gasoline due 
to the ethanol's lower energy content.
    Table V.A-1 below presents the cellulosic fuel cost savings with 
this final rule that are estimated using this approach.\136\ The per-
gallon cost difference estimates for cellulosic ethanol ranges from 
$0.27-$2.80 per ethanol-equivalent gallon.\137\ Given that cellulosic 
ethanol production is just starting to become commercially available, 
the cost estimates have a significant range. Multiplying those per-
gallon cost differences by the amount of cellulosic biofuel waived in 
this final rule results in approximately $2.2-$23 billion in cost 
savings.
---------------------------------------------------------------------------

    \136\ Details of the data and assumptions used can be found in a 
Memorandum available in the docket entitled ``Cost Impacts of the 
Final 2019 Annual Renewable Fuel Standards'', Memorandum from 
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in 
docket EPA-HQ-OAR-2018-0167.
    \137\ For the purposes of the cost estimates in this section, 
EPA has not attempted to adjust the price of the petroleum fuels to 
account for the impact of the RFS program, since the changes in the 
renewable fuel volume are relatively modest. Rather, we have simply 
used the wholesale price projections for gasoline and diesel as 
reported in EIA's October 2018 STEO.
    \138\ For this table and all subsequent tables in this section, 
approximate costs in per gallon cost difference estimates are 
rounded to the cents place.
    \139\ For this table and all subsequent tables in this section, 
approximate resulting costs (other than in per-gallon cost 
difference estimates) are rounded to two significant figures.

   Table V.A-1--Illustrative Costs of Exercising the Cellulosic Waiver
        Authority Compared to the 2019 Statutory Volumes Baseline
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic Volume Required (Million Ethanol-                         418
 Equivalent Gallons)................................
Change in Required Cellulosic Biofuel from 2019                  (8,082)
 Statutory Volume (Million Ethanol-Equivalent
 Gallons)...........................................
Cost Difference Between Cellulosic Corn Kernel Fiber         $0.27-$2.80
 Ethanol and Gasoline Per Gallon ($/Ethanol-
 Equivalent Gallons) \138\..........................
Annual Change in Overall Costs (Million $) \139\....  $(2,200)-$(23,000)
------------------------------------------------------------------------

B. Illustrative Costs of the 2019 Volumes Compared to the 2018 RFS 
Volumes Baseline

    In this section, we provide illustrative cost estimates for EPA 
exercising its cellulosic waiver authority to reduce statutory 
cellulosic volumes for 2019 (with corresponding reductions to the 
advanced and total renewable fuel volumes) compared to the final 2018 
RFS volumes. This results in an increase in cellulosic volumes for the 
2019 RFS of 130 gallons (ethanol-equivalent) and an increase in the 
non-cellulosic advanced biofuel volumes for 2019 of 500 million gallons 
(ethanol-equivalent).
1. Cellulosic Biofuel
    We anticipate that the increase in the final 2019 cellulosic 
biofuel volumes would be composed of 5 million gallons of liquid 
cellulosic biofuel and 125

[[Page 63733]]

million gallons of CNG/LNG derived from landfill biogas. Based upon the 
methodology outlined in Section V.A, we use corn kernel fiber as the 
representative liquid cellulosic biofuel to develop cost estimates of 
cellulosic ethanol. We estimate a cost difference between cellulosic 
corn fiber-derived ethanol and gasoline of $0.27-$2.80 on an ethanol-
equivalent gallon basis. Next, the per-gallon costs of cellulosic 
renewable fuel are multiplied by the 5 million gallon increase between 
the final 2019 cellulosic volume and the final 2018 cellulosic RFS 
volume requirements to estimate the total costs from the increase in 
cellulosic ethanol.
    For CNG/LNG-derived cellulosic biogas, we provide estimates of the 
cost of displacing natural gas with CNG/LNG derived from landfill 
biogas to produce 125 million ethanol-equivalent gallons of cellulosic 
fuel. To estimate the cost of production of CNG/LNG derived from 
landfill gas (LFG), EPA uses Version 3.2 of the Landfill Gas Energy 
Cost Model, or LFG cost-Web. EPA ran the financial cost calculator for 
projects with a design flow rate of 1,000 and 10,000 cubic feet per 
minute with the suggested default data. The costs estimated for this 
analysis exclude any pipeline costs to transport the pipeline quality 
gas, as well as any costs associated with compressing the gas to CNG/
LNG. These costs are not expected to differ significantly between LFG 
or natural gas. In addition, the cost estimates excluded the gas 
collection and control system infrastructure at the landfill, as EPA 
expects that landfills that begin producing high BTU gas in 2019 are 
very likely to already have this infrastructure in place.\140\
---------------------------------------------------------------------------

    \140\ Details of the data and assumptions used can be found in a 
Memorandum available in the docket entitled ``Cost Impacts of the 
Final 2019 Annual Renewable Fuel Standards'', Memorandum from 
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in 
docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    To estimate the illustrative cost impacts of the change in CNG/LNG 
derived from LFG, we compared the cost of production of CNG/LNG derived 
from LFG in each case to the projected price for natural gas in 2019 in 
EIA's October 2018 STEO.\141\ Finally, we converted these costs to an 
ethanol-equivalent gallon basis. The resulting cost estimates are shown 
in Table V.B.2-1. Adding the cost of cellulosic ethanol to the costs of 
CNG/LNG landfill gas, the total costs of the final 2019 cellulosic 
volume compared to 2018 RFS cellulosic volume range from $(2.9)-$23 
million.
---------------------------------------------------------------------------

    \141\ Henry Hub Spot price estimate for 2019. EIA, Short Term 
Energy Outlook (STEO) available in docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

2. Advanced Biofuel
    EPA provides a range of illustrative cost estimates for the 
increases in the advanced standard of 500 million ethanol-equivalent 
gallons using two different advanced biofuels. In the first scenario, 
we assume that all the increase in advanced biofuel volumes is 
comprised of soybean oil BBD. In the second scenario, we assume that 
all the increase in the advanced volume is comprised of sugarcane 
ethanol from Brazil.
    Consistent with the analysis in previous annual RFS volume rules, a 
``bottom-up'' engineering cost analysis is used that quantifies the 
costs of producing a gallon of soybean-based biodiesel and then 
compares that cost to the energy-equivalent gallon of petroleum-based 
diesel. We compare the cost of biodiesel and diesel fuel at the 
wholesale stage, since that is when the two are blended together and 
represents the approximate costs to society absent transfer payments 
and any additional infrastructure costs. On this basis, EPA estimates 
the costs of producing and transporting a gallon of biodiesel to the 
blender in the U.S.
    To estimate the illustrative costs of sugarcane ethanol, we compare 
the cost of sugarcane ethanol and gasoline at the wholesale stage, 
since that is when the two are blended together and represents the 
approximate costs to society absent transfer payments and any 
additional infrastructure costs (e.g., blender pumps). On this basis, 
EPA estimates the costs of producing and transporting a gallon of 
sugarcane ethanol to the blender in the U.S. More background 
information on the cost assessment described in this Section, including 
details of the data sources used and assumptions made for each of the 
scenarios, can be found in a Memorandum available in the docket.\142\
---------------------------------------------------------------------------

    \142\ Details of the data and assumptions used can be found in a 
Memorandum available in the docket entitled ``Cost Impacts of the 
Final 2019 Annual Renewable Fuel Standards'', Memorandum from 
Michael Shelby, Dallas Burkholder, and Aaron Sobel available in 
docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Table V.B.2-1 below also presents estimates of per energy-
equivalent gallon costs for producing: (1) Soybean biodiesel (in 
ethanol-equivalent gallons) and (2) Brazilian sugarcane ethanol, 
relative to the petroleum fuels they replace at the wholesale level. 
For each of the fuels, these per-gallon costs are then multiplied by 
the increase in the 2019 non-cellulosic advanced volume relative to the 
2018 final advanced standard volume to obtain an overall cost increase 
of $190-$610 million.
    In addition, in Table V.B.2-1, we also present estimates of the 
total cost of this final rule relative to 2018 RFS fuel volumes. We add 
the increase in cost of the final 2019 cellulosic standard volume, 
$(2.9)-$23 million, with the additional costs of the increase in non-
cellulosic advanced biofuel volumes resulting from the final 2019 
advanced standard volume, $190-$610 million. The overall total costs of 
this final rule range from $190-$630 million (after rounding to two 
significant figures).

  Table V.B.2-1--Illustrative Costs of the 2019 Volumes Compared to the
                        2018 RFS Volumes Baseline
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                            Cellulosic Volume
------------------------------------------------------------------------
Corn Kernel Fiber Cellulosic Ethanol Costs:
    Cost Difference Between Cellulosic Corn Kernel Fiber     $0.27-$2.80
     Ethanol and Gasoline Per Gallon ($/Ethanol-
     Equivalent Gallons)................................
    Change in Volume (Million Ethanol-Equivalent                       5
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........        $1.4-$14
CNG/LNG Derived from Biogas Costs:
    Cost Difference Between CNG/LNG Derived from           $(0.03)-$0.07
     Landfill Biogas and Natural Gas Per Gallon ($/
     Ethanol-Equivalent Gallons)........................
    Change in Volume (Million Ethanol-Equivalent                     125
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........     $(4.3)-$9.0
Range of Annual Increase in Costs with Cellulosic Volume      $(2.9)-$23
 (Million $)............................................
------------------------------------------------------------------------

[[Page 63734]]

 
                             Advanced Volume
------------------------------------------------------------------------
Soybean Biodiesel Scenario:
    Cost Difference Between Soybean Biodiesel and            $0.74-$1.23
     Petroleum Diesel Per Gallon ($/Ethanol-Equivalent
     Gallons)...........................................
    Change in Volume (Million Ethanol-Equivalent                     500
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........       $370-$610
Brazilian Sugarcane Ethanol Scenario:
    Cost Difference Between Sugarcane Ethanol and            $0.39-$1.04
     Gasoline Per Gallon ($/Ethanol-Equivalent Gallons).
    Change in Volume (Million Ethanol-Equivalent                     500
     Gallons)...........................................
    Annual Increase in Overall Costs (Million $)........       $190-$520
Range of Annual Increase in Overall Costs with Non-            $190-$610
 Cellulosic Advanced Volume (Million $).................
------------------------------------------------------------------------
                     Cellulosic and Advanced Volumes
------------------------------------------------------------------------
Range of Annual Increase in Overall Costs with                 $190-$630
 Cellulosic and Advanced Volume (Million $) \143\.......
------------------------------------------------------------------------

    The annual volume-setting process encourages consideration of the 
RFS program on a piecemeal (i.e., year-to-year) basis, which may not 
reflect the full, long-term costs and benefits of the program. For the 
purposes of this final rule, other than the estimates of costs of 
producing a ``representative'' renewable fuel compared to cost of 
petroleum fuel, EPA did not quantitatively assess other direct and 
indirect costs or benefits of changes in renewable fuel volumes. These 
direct and indirect costs and benefits may include infrastructure 
costs, investment, climate change impacts, air quality impacts, and 
energy security benefits, which all are to some degree affected by the 
annual volumes. For example, we do not have a quantified estimate of 
the lifecycle GHG or energy security benefits for a single year (e.g., 
2019). Also, there are impacts that are difficult to quantify, such as 
rural economic development and employment changes from more diversified 
fuel sources, that are not quantified in this rulemaking. While some of 
these impacts were analyzed in the 2010 final rulemaking that 
established the current RFS program,\144\ we have not analyzed these 
impacts for the 2019 volume requirements.
---------------------------------------------------------------------------

    \143\ Summed costs are presented using two significant figures.
    \144\ RFS2 Regulatory Impact Analysis (RIA). U.S. EPA 2010, 
Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis. 
EPA-420-R-10-006. February 2010. Docket EPA-HQ-OAR-2009-0472-11332.
---------------------------------------------------------------------------

VI. Biomass-Based Diesel Volume for 2020

    In this section we discuss the BBD applicable volume for 2020. We 
are setting this volume in advance of those for other renewable fuel 
categories in light of the statutory requirement in CAA section 
211(o)(2)(B)(ii) to establish the applicable volume of BBD for years 
after 2012 no later than 14 months before the applicable volume will 
apply. We are not at this time setting the BBD percentage standards 
that would apply to obligated parties in 2020 but intend to do so in 
late 2019, after receiving EIA's estimate of gasoline and diesel 
consumption for 2020. At that time, we will also set the percentage 
standards for the other renewable fuel types for 2020. Although the BBD 
applicable volume sets a floor for required BBD use, because the BBD 
volume requirement is nested within both the advanced biofuel and the 
total renewable fuel volume requirements, any BBD produced beyond the 
mandated 2020 BBD volume can be used to satisfy both of these other 
applicable volume requirements.

A. Statutory Requirements

    The statute establishes applicable volume targets for years through 
2022 for cellulosic biofuel, advanced biofuel, and total renewable 
fuel. For BBD, applicable volume targets are specified in the statute 
only through 2012. For years after those for which 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 the 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.\145\ The statute does 
not, however, establish any other numeric criteria, or provide any 
guidance on how the EPA should weigh the importance of the often 
competing factors and the overarching goals of the statute when the 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 provides no guidance, beyond the 
1.0 billion gallon minimum, on the level at which BBD volumes should be 
set.
---------------------------------------------------------------------------

    \145\ See CAA section 211(o)(2)(B)(v).
---------------------------------------------------------------------------

    In establishing the BBD and cellulosic standards as nested within 
the advanced biofuel standard, Congress clearly intended to support 
development of BBD and especially cellulosic biofuels, while also 
providing an incentive for the growth of other non-specified types of 
advanced biofuels. In general, the advanced biofuel standard provides 
an

[[Page 63735]]

opportunity for other advanced biofuels (advanced biofuels that do not 
qualify as cellulosic biofuel or BBD) to compete with cellulosic 
biofuel and BBD to satisfy the advanced biofuel standard after the 
cellulosic biofuel and BBD standards have been met.

B. Review of Implementation of the Program and the 2020 Applicable 
Volume of Biomass-Based Diesel

    One of the primary considerations in determining the BBD volume for 
2020 is a review of the implementation of the program to date, as it 
affects BBD. This review is required by the CAA, and also provides 
insight into the capabilities of the industry to produce, import, 
export, and distribute BBD. It also helps us to understand what 
factors, beyond the BBD standard, may incentivize the production and 
import of BBD. Table VI.B.1-1 below shows, for 2011-2017, the number of 
BBD RINs generated, the number of RINs retired due to export, the 
number of RINs retired for reasons other than compliance with the 
annual BBD standards, and the consequent number of available BBD RINs; 
and for 2011-2019, the BBD and advanced biofuel standards.

              Table VI.B.1-1--Biomass-Based Diesel (D4) RIN Generation and Advanced Biofuel and Biomass-Based Diesel Standards in 2011-2019
                                                             [Million RINs or gallons] \146\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             BBD RINs                                                        Advanced
                                             BBD RINs      Exported BBD    retired, non-   Available BBD   BBD standard    BBD standard       biofuel
                                             generated        (RINs)        compliance       RINs \a\        (gallons)        (RINs)         standard
                                                                              reasons                                                         (RINs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................           1,692             110              98           1,483             800           1,200           1,350
2012....................................           1,737             183              90           1,465           1,000           1,500           2,000
2013....................................           2,739             298             101           2,341           1,280           1,920           2,750
2014....................................           2,710             126              92           2,492           1,630       \b\ 2,490           2,670
2015....................................           2,796             133              32           2,631           1,730       \b\ 2,655           2,880
2016....................................           4,008             203              52           3,753           1,900           2,850           3,610
2017....................................           3,849             244              35           3,570           2,000           3,000           4,280
2018 \c\................................           3,898             154              40           3,740           2,100           3,150           4,290
2019....................................             N/A             N/A             N/A             N/A           2,100           3,150           4,920
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Available BBD RINs may not be exactly equal to BBD RINs Generated minus Exported RINs and BBD RINs Retired, Non-Compliance Reasons, due to rounding.
\b\ Each gallon of biodiesel qualifies for 1.5 RINs due to its higher energy content per gallon than ethanol. Renewable diesel qualifies for between 1.5
  and 1.7 RINs per gallon, but generally has an equivalence value of 1.7. While some fuels that qualify as BBD generate more than 1.5 RINs per gallon,
  EPA multiplies the required volume of BBD by 1.5 in calculating the percent standard per 80.1405(c). In 2014 and 2015 however, the number of RINs in
  the BBD Standard column is not exactly equal to 1.5 times the BBD volume standard as these standards were established based on actual RIN generation
  data for 2014 and a combination of actual data and a projection of RIN generation for the last three months of the year for 2015, rather than by
  multiplying the required volume of BBD by 1.5. Some of the volume used to meet the BBD standard in these years was renewable diesel, with an
  equivalence value higher than 1.5.
\c\ ``2018 BBD RINs generated,'' ``Exported BBD,'' and ``BBD RINs retired, Non-Compliance Reasons'' are projected based on data through September 2018.

    In reviewing historical BBD RIN generation and use, we see that the 
number of RINs available for compliance purposes exceeded the volume 
required to meet the BBD standard in 2011, 2012, 2013, 2016 and 2017. 
Additional production and use of biodiesel was likely driven by a 
number of factors, including demand to satisfy the advanced biofuel and 
total renewable fuels standards, the biodiesel tax credit,\147\ and 
favorable blending economics. The number of RINs available in 2014 and 
2015 was approximately equal to the number required for compliance in 
those years, as the standards for these years were finalized at the end 
of November 2015 and EPA's intent at that time was to set the standards 
for 2014 and 2015 to reflect actual BBD use.\148\ In 2016, with RFS 
standards established prior to the beginning of the year and the 
blenders tax credit in place, available BBD RINs exceeded the volume 
required by the BBD standard by 859 million RINs (30 percent). In 2017, 
the RFS standards were established prior to the beginning of the year, 
and the blenders tax credit was only applied retroactively; even 
without the certainty of a tax credit, the available BBD RINs exceeded 
the volume required by the BBD standard by 570 million RINs (19 
percent). Extrapolated data for 2018 also indicates that available BBD 
RINs will exceed the BBD standard. This indicates that in certain 
circumstances there is demand for BBD beyond the required volume of 
BBD. We also note that while EPA has consistently established the 
required volume in such a way as to allow non-BBD fuels to compete for 
market share in the advanced biofuel category, since 2016 the vast 
majority of non-cellulosic advanced biofuel used to satisfy the 
advanced biofuel obligations has been BBD.
---------------------------------------------------------------------------

    \146\ Available BBD RINs Generated, Exported BBD RINs, and BBD 
RINs Retired for Non-Compliance Reasons information from EMTS.
    \147\ The biodiesel tax credit was reauthorized in January 2013. 
It applied retroactively for 2012 and for the remainder of 2013. It 
was once again extended in December 2014 and applied retroactively 
to all of 2014 as well as to the remaining weeks of 2014. In 
December 2015 the biodiesel tax credit was authorized and applied 
retroactively for all of 2015 as well as through the end of 2016. In 
February 2018 the biodiesel tax credit was authorized and applied 
retroactively for all of 2017.
    \148\ See 80 FR 77490-92, 77495 (December 14, 2015).
---------------------------------------------------------------------------

    The prices paid for advanced biofuel and BBD RINs beginning in 
early 2013 through September 2018 (the last month for which data are 
available) also support the conclusion that advanced biofuel and/or 
total renewable fuel standards provide a sufficient incentive for 
additional biodiesel volume beyond what is required by the BBD 
standard. Because the BBD standard is nested within the advanced 
biofuel and total renewable fuel standards, and therefore can help to 
satisfy three RVOs, we would expect the price of BBD RINs to exceed 
that of advanced and conventional renewable RINs.\149\ If,

[[Page 63736]]

however, BBD RINs are being used (or are expected to be used) by 
obligated parties to satisfy their advanced biofuel obligations, above 
and beyond the BBD standard, we would expect the prices of advanced 
biofuel and BBD RINs to converge.\150\ Further, if BBD RINs are being 
used (or are expected to be used) to satisfy obligated parties' total 
renewable fuel obligation, above and beyond their BBD and advanced 
biofuel requirements, we would expect the price for all three RIN types 
to converge.
---------------------------------------------------------------------------

    \149\ This is because when an obligated party retires a BBD RIN 
(D4) to help satisfy their BBD obligation, the nested nature of the 
BBD standard means that this RIN also counts towards satisfying 
their advanced and total renewable fuel obligations. Advanced RINs 
(D5) count towards both the advanced and total renewable fuel 
obligations, while conventional RINs (D6) count towards only the 
total renewable fuel obligation.
    \150\ We would still expect D4 RINs to be valued at a slight 
premium to D5 and D6 RINs in this case (and D5 RINs at a slight 
premium to D6 RINs) to reflect the greater flexibility of the D4 
RINs to be used towards the BBD, advanced biofuel, and total 
renewable fuel standard. This pricing has been observed over the 
past several years.
---------------------------------------------------------------------------

    When examining RIN price data from 2012 through September 2018, 
shown in Figure VI.B.2-1 below, we see that beginning in early 2013 and 
through September 2018 the advanced RIN price and BBD RIN prices were 
approximately equal. Similarly, from early 2013 through late 2016 the 
conventional renewable fuel and BBD RIN prices were approximately 
equal. This suggests that the advanced biofuel standard and/or total 
renewable fuel standard are capable of incentivizing increased BBD 
volumes beyond the BBD standard. The advanced biofuel standard has 
incentivized additional volumes of BBD since 2013, while the total 
standard had incentivized additional volumes of BBD from 2013 through 
2016.\151\ While final standards were not in place throughout 2014 and 
most of 2015, EPA had issued proposed rules for both of these 
years.\152\ In each year, the market response was to supply volumes of 
BBD that exceeded the proposed BBD standard in order to help satisfy 
the proposed advanced and total biofuel standards.\153\ Additionally, 
the RIN prices in these years strongly suggests that obligated parties 
and other market participants anticipated the need for BBD RINs to meet 
their advanced and total biofuel obligations, and responded by 
purchasing advanced biofuel and BBD RINs at approximately equal prices. 
We do note, however, that in 2012 the BBD RIN price was significantly 
higher than both the advanced biofuel and conventional renewable fuel 
RIN prices. In 2012 the E10 blendwall had not yet been reached, and it 
was likely more cost effective for most obligated parties to satisfy 
the portion of the advanced biofuel requirement that exceeded the BBD 
and cellulosic biofuel requirements with advanced ethanol.
---------------------------------------------------------------------------

    \151\ Although we did not issue a rule establishing the final 
2013 standards until August of 2013, we believe that the market 
anticipated the final standards, based on EPA's July 2011 proposal 
and the volume targets for advanced and total renewable fuel 
established in the statute. (76 FR 38844, 38843 July 1, 2011).
    \152\ See 80 FR 33100 (2014-16 standards proposed June 10, 
2015); 78 FR 71732 (2014 standards proposed Nov. 29, 2013).
    \153\ EPA proposed a BBD standard of 1.28 billion gallons (1.92 
billion RINs) for 2014 in our November 2013 proposed rule. The 
number of BBD RINs available in 2014 was 2.67 billion. EPA proposed 
a BBD standard of 1.70 billion gallons (2.55 billion RINs) for 2015 
in our June 2015 proposed rule. The number of BBD RINs available in 
2015 was 2.92 billion.
[GRAPHIC] [TIFF OMITTED] TR11DE18.002

    In raising the 2013 BBD volume above the 1 billion gallon minimum 
mandated by Congress, the EPA sought to ``create greater certainty for 
both producers of BBD and obligated parties'' while also acknowledging 
that, ``the potential for somewhat increased costs is appropriate in 
light of the additional certainty of GHG reductions and enhanced energy 
security provided by the advanced biofuel volume requirement of 2.75 
billion gallons.'' \154\ Unknown at that

[[Page 63737]]

time was the degree to which the required volumes of advanced biofuel 
and total renewable fuel could incentivize volumes of BBD that exceeded 
the BBD standard. In 2012 the available supply of BBD RINs exceeded the 
required volume of BBD by a very small margin (1,545 million BBD RINs 
were made available for compliance towards meeting the BBD requirement 
of 1,500 million BBD RINs). The remainder of the 2.0 billion-gallon 
advanced biofuel requirement was satisfied with advanced ethanol, which 
was largely imported from Brazil.\155\ From 2012 to 2013 the statutory 
advanced biofuel requirement increased by 750 million gallons. If EPA 
had not increased the required volume of BBD for 2013, and the advanced 
biofuel standard had proved insufficient to increase the supply of BBD 
beyond the statutory minimum of 1.0 billion gallons, an additional 750 
million gallons of non-BBD advanced biofuels beyond the BBD standard 
would have been needed to meet the advanced biofuel volume requirement.
---------------------------------------------------------------------------

    \154\ 77 FR 59458, 59462 (September 27, 2012).
    \155\ 594 million advanced ethanol RINs were generated in 2012.
---------------------------------------------------------------------------

    The only advanced biofuel other than BBD available in appreciable 
quantities in 2012 and 2013 was advanced ethanol, the vast majority of 
which was imported sugarcane ethanol. EPA had significant concerns as 
to whether or not the supply of advanced ethanol could increase this 
significantly (750 million gallons) in a single year. These concerns 
were heightened by the approaching E10 blendwall, which had the 
potential to increase the challenges associated with supplying 
increasing volumes of ethanol to the U.S. If neither BBD volumes nor 
advanced ethanol volumes increased sufficiently, EPA was concerned that 
some obligated parties might be unable to acquire the advanced biofuel 
RINs necessary to demonstrate compliance with their RVOs in 2013. 
Therefore, as discussed above, EPA increased the volume requirement for 
BBD in 2013 to help create greater certainty for BBD producers (by 
ensuring demand for their product above the 1.0 billion gallon 
statutory minimum) and obligated parties (by ensuring that sufficient 
RINs would be available to satisfy their advanced biofuel RVOs). Since 
2013, however, EPA has gained significant experience implementing the 
RFS program. As discussed above, RIN generation data has consistently 
demonstrated that the advanced biofuel volume requirement, and to a 
lesser degree the total renewable fuel volume requirement, are capable 
of incentivizing the supply of BBD above and beyond the BBD volume 
requirement. The RIN generation data also show that while EPA has 
consistently preserved the opportunity for fuels other that BBD to 
contribute towards satisfying the required volume of advanced biofuel, 
these other advanced biofuels have not been supplied in significant 
quantities since 2013.

                Table VI.B.1-2--Opportunity for and RIN Generation of ``Other'' Advanced Biofuels
                                                 [Million RINs]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Available BBD
                                                                    Opportunity                    (D4) RINs in
                                                                   for ``other''     Available    excess of  the
                                                                     advanced     advanced  (D5)        BBD
                                                                   biofuels \a\        RINs         requirement
                                                                                                        \b\
----------------------------------------------------------------------------------------------------------------
2011............................................................             150             225             283
2012............................................................             500             597             -35
2013............................................................             829             552             421
2014 \c\........................................................             192             143               2
2015 \c\........................................................             162             147             -24
2016............................................................             530              97             903
2017............................................................             969             144             570
2018 \d\........................................................             852             121             590
----------------------------------------------------------------------------------------------------------------
\a\ The required volume of ``other'' advanced biofuel is calculated by subtracting the number of cellulosic
  biofuel and BBD RINs required each year from the number of advanced biofuel RINs required. This portion of the
  advanced standard can be satisfied by advanced (D5) RINs, BBD RINs in excess of those required by the BBD
  standard, or cellulosic RINs in excess of those required by the cellulosic standard.
\b\ The available BBD (D4) RINs in excess of the BBD requirement is calculated by subtracting the required BBD
  volume (multiplied by 1.5 to account for the equivalence value of biodiesel) required each year from the
  number of BBD RINs available for compliance in that year. This number does not include carryover RINs, nor do
  we account for factors that may impact the number of BBD RINs that must be retired for compliance, such as
  differences between the projected and actual volume of obligated gasoline and diesel.
\c\ The 2014 and 2015 volume requirements were established in November 2015 and were set equal to the number of
  RINs projected to be available for each year.
\d\ Available Advanced RINs and available D4 RINs in excess of the BBD requirement are projected based on data
  through September 2018.

    In 2014 and 2015, EPA set the BBD and advanced standards at actual 
RIN generation, and thus the space between the advanced biofuel 
standard and the biodiesel standard was unlikely to provide an 
incentive for ``other'' advanced biofuels. EPA now has data on the 
amount of ``other'' advanced biofuels produced in 2016 and 2017 as 
shown in the table above. For 2016 and 2017, the gap between the BBD 
standard and the advanced biofuel provided an opportunity for ``other'' 
advanced biofuels to be generated to satisfy the advanced biofuel 
standard. While the RFS volumes created the opportunity for up to 530 
million and 969 million gallons of ``other'' advanced for 2016 and 2017 
respectively to be used to satisfy the advanced biofuel obligation, 
only 97 million and 144 million gallons of ``other'' advanced biofuels 
were generated. This is significantly less than the volumes of 
``other'' advanced available in 2012-2013. Despite creating space 
within the advanced biofuel standard for ``other'' advanced, in recent 
years, only a small fraction of that space has been filled with 
``other'' advanced, and BBD continues to fill most of the gap between 
the BBD standard and the advanced standard.
    Thus, while the advanced biofuel standard is sufficient to drive 
biodiesel volume separate and apart from the BBD standard, there would 
not appear to be a compelling reason to increase the ``space'' 
maintained for ``other'' advanced biofuel volumes. The overall

[[Page 63738]]

volume of non-cellulosic advanced biofuel in this final rule increases 
by 500 million gallons for 2019. Increasing the BBD volume by the same 
amount would preserve the space already available for other advanced 
biofuels to compete.
    At the same time, the rationale for preserving the ``space'' for 
``other'' advanced biofuels remains. We note that the BBD industry in 
the U.S. and abroad has matured since EPA first increased the required 
volume of BBD beyond the statutory minimum in 2013. To assess the 
maturity of the biodiesel industry, EPA compared information on BBD RIN 
generation by company in 2012 and 2017 (the most recent year for which 
complete RIN generation by company is available). In 2012, the annual 
average RIN generation per company producing BBD was about 11 million 
RINs (about 7.3 million gallons) with approximately 50 percent of 
companies producing less than 1 million gallons of BBD a year.\156\ The 
agency heard from multiple commenters during the 2012 and 2013 
rulemakings that higher volume requirements for BBD would provide 
greater certainty for the emerging BBD industry and encourage further 
investment. Since that time, the BBD industry has matured in a number 
of critical areas, including growth in the size of companies, the 
consolidation of the industry, and more stable funding and access to 
capital. In 2012, the BBD industry was characterized by smaller 
companies with dispersed market share. By 2017, the average BBD RIN 
generation per company had climbed to almost 33 million RINs (22 
million gallons) annually, a 3-fold increase. Only 33 percent of the 
companies produced less than 1 million gallons of BBD in 2017.\157\
---------------------------------------------------------------------------

    \156\ ``BBD RIN Generation by Company 2012, 2016, and 2017 
CBI,'' available in EPA docket EPA-HQ-OAR-2018-0167.
    \157\ Id.
---------------------------------------------------------------------------

    We are conscious of public comments claiming that BBD volume 
requirements that are a significant portion of the advanced volume 
requirements effectively disincentivize the future development of other 
promising advanced biofuel pathways.\158\ A variety of different types 
of advanced biofuels, rather than a single type such as BBD, would 
increase energy security (e.g., by increasing the diversity of 
feedstock sources used to make biofuels, thereby reducing the impacts 
associated with a shortfall in a particular type of feedstock) and 
increase the likelihood of the development of lower cost advanced 
biofuels that meet the same GHG reduction threshold as BBD.\159\
---------------------------------------------------------------------------

    \158\ See, e.g., Comments from Advanced Biofuel Association, 
available in EPA docket EPA-HQ-2018-0167-1277.
    \159\ All types of advanced biofuel, including BBD, must achieve 
lifecycle GHG reductions of at least 50 percent. See CAA section 
211(o)(1)(B)(i), (D).
---------------------------------------------------------------------------

    We received comments from stakeholders suggesting that the BBD 
volume standard is unique, as it is required to be set 14 months prior 
to beginning of the compliance year, in contrast to the advanced 
standard which is often modified only a month prior to the compliance 
year. These commenters suggested that EPA should therefore increase the 
BBD standard to allow for industry to utilize the 14-month notice to 
make investments. EPA acknowledges this unique aspect of the BBD 
volume, but still believes a volume of 2.43 billion appropriately 
provides a floor for guaranteed BBD volume, while also providing space 
for other advanced biofuels to compete in the market. Based on our 
review of the data, and the nested nature of the BBD standard within 
the advanced standard, we conclude that the advanced standard continues 
to drive the ultimate volume of BBD supplied. However, given that BBD 
has been the predominant source of advanced biofuel in recent years and 
the 500 million gallon increase in non-cellulosic advanced biofuel we 
are finalizing in this rule, we are setting a volume of 2.43 billion 
gallons of BBD for 2020.
    We recognize that the space for other advanced biofuels in 2020 
will ultimately depend on the 2020 advanced biofuel volume. While EPA 
is not establishing the advanced biofuel volume for 2020 in this 
action, we anticipate that the non-cellulosic advanced biofuel volume 
for 2020, when established, will be greater than 3.65 billion gallons 
(equivalent to 2.43 billion gallons of BBD, after applying the 1.5 
equivalence ratio). This expectation is consistent with our actions in 
previous years. Accordingly, we expect that the 2020 advanced biofuel 
volume, together with the 2020 BBD volume established today, will 
continue to preserve a considerable portion of the advanced biofuel 
volume that could be satisfied by either additional gallons of BBD or 
by other unspecified and potentially less costly types of qualifying 
advanced biofuels.

C. Consideration of Statutory Factors Set Forth in CAA Section 
211(o)(2)(B)(ii)(I)-(VI) for 2020 and Determination of the 2020 
Biomass-Based Diesel Volume

    The BBD volume requirement is nested within the advanced biofuel 
requirement, and the advanced biofuel requirement is, in turn, nested 
within the total renewable fuel volume requirement.\160\ This means 
that any BBD produced beyond the mandated BBD volume can be used to 
satisfy both these other applicable volume requirements. The result is 
that in considering the statutory factors we must consider the 
potential impacts of increasing or decreasing BBD in comparison to 
other advanced biofuels.\161\ For a given advanced biofuel standard, 
greater or lesser BBD volume requirements do not change the amount of 
advanced biofuel used to displace petroleum fuels; rather, increasing 
the BBD requirement may result in the displacement of other types of 
advanced biofuels that could have been used to meet the advanced 
biofuels volume requirement. EPA is increasing the BBD volume for 2020 
to 2.43 billion gallons from 2.1 billion gallons in 2019 based on our 
review of the statutory factors and the other considerations noted 
above and in the 2020 BBD Docket Memorandum. This increase, in 
conjunction with the statutory increase of 500 million gallons of non-
cellulosic advanced biofuel in 2019, would preserve a gap for ``other'' 
advanced biofuels, that is the difference between the advanced biofuel 
volume and the sum of the cellulosic biofuel and BBD volumes. This 
would allow other advanced biofuels to continue to compete with excess 
volumes of BBD for market share under the advanced biofuel standard, 
while also supporting further growth in the BBD industry.
---------------------------------------------------------------------------

    \160\ See CAA section 211(o)(2)(B)(i)(IV), (II).
    \161\ While excess BBD production could also displace 
conventional renewable fuel under the total renewable standard, as 
long as the BBD applicable volume is lower than the advanced biofuel 
applicable volume our action in setting the BBD applicable volume is 
not expected to displace conventional renewable fuel under the total 
renewable standard, but rather other advanced biofuels. We 
acknowledge, however, that under certain market conditions excess 
volumes of BBD may also be used to displace conventional biofuels.
---------------------------------------------------------------------------

    Consistent with our approach in setting the final BBD volume 
requirement for 2019, EPA's primary assessment of the statutory factors 
for the 2020 BBD applicable volume is that because the BBD requirement 
is nested within the advanced biofuel volume requirement, we expect 
that the 2020 advanced volume requirement, when set next year, will 
determine the level of BBD use, production and imports that occur in 
2020.\162\ Therefore, EPA

[[Page 63739]]

continues to believe that approximately the same overall volume of BBD 
would likely be supplied in 2020 even if we were to mandate a somewhat 
lower or higher BBD volume for 2020 in this final rule. Thus, we do not 
expect our 2020 BBD volume requirement to result in a significant 
difference in the factors we consider pursuant to CAA section 
211(o)(2)(B)(ii)(I)-(VI) in 2020.
---------------------------------------------------------------------------

    \162\ Even though we are not establishing the 2020 advanced 
biofuel volume requirement as part of this rulemaking, we expect 
that, as in the past, the 2020 advanced volume requirement will be 
higher than the 2020 BBD requirement, and, therefore, that the BBD 
volume requirement for 2020 would not be expected to impact the 
volume of BBD that is actually used, produced and imported during 
the 2020-time period.
---------------------------------------------------------------------------

    As an additional assessment, we considered in the 2020 BBD docket 
memorandum \163\ the potential impacts on the statutory factors of 
selecting an applicable volume of BBD other than 2.43 billion gallons 
in 2020 and also in the longer term. While BBD volumes and resulting 
impact on the statutory factors found in 211(o)(2)(B)(ii), will not 
likely be significantly impacted by the 2020 BBD standard in the short 
term, leaving room for growth of other advanced could have a beneficial 
impact on certain statutory factors in the long term. Even if BBD 
volumes were to be impacted by the 2020 BBD standard, setting a 
requirement higher or lower than 2.43 billion gallons in 2020 would 
only be expected to affect BBD volumes and the statutory factors found 
in CAA section 211(o)(2)(B)(ii)(I)-(VI) minimally in 2020. However, we 
find that over a longer timeframe, providing support for other advanced 
biofuels could have beneficial effects for a number of the statutory 
factors.
---------------------------------------------------------------------------

    \163\ ``Memorandum to docket: Statutory Factors Assessment for 
the 2020 Biomass-Based Diesel (BBD) Applicable Volumes.'' See Docket 
EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    With the considerations discussed above in mind, as well as our 
analysis of the factors specified in the statute, we are setting the 
applicable volume of BBD at 2.43 billion gallons for 2020. This 
increase, in conjunction with the statutory increase of 500 million 
gallons of non-cellulosic advanced biofuel in 2019, would continue to 
preserve a significant gap between the advanced biofuel volume and the 
sum of the cellulosic biofuel and BBD volumes. This would allow other 
advanced biofuels to continue to compete with excess volumes of BBD for 
market share under the advanced biofuel standard. We believe this 
volume sets the appropriate floor for BBD, and that the volume of 
advanced biodiesel and renewable diesel actually used in 2020 will be 
driven by the level of the advanced biofuel and total renewable fuel 
standards that the Agency will establish for 2020. It also recognizes 
that while maintaining an opportunity for other advanced biofuels is 
important, the vast majority of the advanced biofuel used to comply 
with the advanced biofuel standard in recent years has been BBD. Based 
on information now available from 2016 and 2017, despite providing a 
significant degree of space for ``other'' advanced biofuels, smaller 
volumes of ``other'' advanced have been utilized to meet the advanced 
standard. EPA believes that the BBD standard we are finalizing today 
still provides sufficient incentive to producers of ``other'' advanced 
biofuels, while also acknowledging that the advanced standard has been 
met predominantly with biomass-based diesel. Our assessment of the 
required statutory factors, as well as the implementation of the 
program, supports a volume of 2.43 billion gallons.

VII. Percentage Standards for 2019

    The renewable fuel standards are expressed as volume percentages 
and are used by each obligated party to determine their Renewable 
Volume Obligations (RVOs). Since there are four separate standards 
under the RFS program, there are likewise four separate RVOs applicable 
to each obligated party. Each standard applies to the sum of all non-
renewable gasoline and diesel produced or imported.
    Sections II through V provide our rationale and basis for the final 
volume requirements for 2019.\164\ The volumes used to determine the 
percentage standards are shown in Table VII-1.
---------------------------------------------------------------------------

    \164\ The 2019 volume requirement for BBD was established in the 
2018 final rule.

  Table VII-1--Volumes for Use in Determining the Final 2019 Applicable
                          Percentage Standards
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel.............  Million ethanol-                    418
                                  equivalent gallons.
Biomass-based diesel...........  Billion gallons........             2.1
Advanced biofuel...............  Billion ethanol-                   4.92
                                  equivalent gallons.
Renewable fuel.................  Billion ethanol-                  19.92
                                  equivalent gallons.
------------------------------------------------------------------------

    For the purposes of converting these volumes into percentage 
standards, we generally use two decimal places to be consistent with 
the volume targets as given in the statute, and similarly two decimal 
places in the percentage standards. However, for cellulosic biofuel we 
use three decimal places in both the volume requirement and percentage 
standards to more precisely capture the smaller volume projections and 
the unique methodology that in some cases results in estimates of only 
a few million gallons for a single producer.

A. Calculation of Percentage Standards

    To calculate the percentage standards, we are following the same 
methodology for 2019 as we have in all prior years. The formulas used 
to calculate the percentage standards applicable to producers and 
importers of gasoline and diesel are provided in 40 CFR 80.1405. The 
formulas rely on estimates of the volumes of gasoline and diesel fuel, 
for both highway and nonroad uses, which are projected to be used in 
the year in which the standards will apply. The projected gasoline and 
diesel volumes are provided by EIA, and include projections of ethanol 
and biodiesel used in transportation fuel. Since the percentage 
standards apply only to the non-renewable gasoline and diesel produced 
or imported, the volumes of renewable fuel are subtracted out of the 
EIA projections of gasoline and diesel.
    Transportation fuels other than gasoline or diesel, such as natural 
gas, propane, and electricity from fossil fuels, are not currently 
subject to the standards, and volumes of such fuels are not used in 
calculating the annual percentage standards. Since under the 
regulations the standards apply only to producers and importers of 
gasoline and diesel, these are the transportation fuels used to set the 
percentage standards, as well as to determine the annual volume 
obligations of an individual gasoline or diesel producer or importer 
under 40 CFR 80.1407.
    As specified in the RFS2 final rule,\165\ the percentage standards 
are based on energy-equivalent gallons of renewable fuel, with the 
cellulosic biofuel, advanced biofuel, and total renewable fuel 
standards based on ethanol equivalence and the BBD standard based on 
biodiesel equivalence. However, all RIN generation is based on ethanol-
equivalence. For example, the

[[Page 63740]]

RFS regulations provide that production or import of a gallon of 
qualifying biodiesel will lead to the generation of 1.5 RINs. The 
formula specified in the regulations for calculation of the BBD 
percentage standard is based on biodiesel-equivalence, and thus assumes 
that all BBD used to satisfy the BBD standard is biodiesel and requires 
that the applicable volume requirement be multiplied by 1.5 in order to 
calculate a percentage standard that is on the same basis (i.e., 
ethanol-equivalent) as the other three standards. However, BBD often 
contains some renewable diesel, and a gallon of renewable diesel 
typically generates 1.7 RINs.\166\ In addition, there is often some 
renewable diesel in the conventional renewable fuel pool. As a result, 
the actual number of RINs generated by biodiesel and renewable diesel 
is used in the context of our assessment of the applicable volume 
requirements and associated percentage standards for advanced biofuel 
and total renewable fuel, and likewise in obligated parties' 
determination of compliance with any of the applicable standards. While 
there is a difference in the treatment of biodiesel and renewable 
diesel in the context of determining the percentage standard for BBD 
versus determining the percentage standard for advanced biofuel and 
total renewable fuel, it is not a significant one given our approach to 
determining the BBD volume requirement. Our intent in setting the BBD 
applicable volume is to provide a level of guaranteed volume for BBD, 
but as described in Section VI.B, we do not expect the BBD standard to 
be binding in 2019. That is, we expect that actual supply of BBD, as 
well as supply of conventional biodiesel and renewable diesel, will be 
driven by the advanced biofuel and total renewable fuel standards.
---------------------------------------------------------------------------

    \165\ See 75 FR 14670 (March 26, 2010).
    \166\ Under 40 CFR 80.1415(b)(4), renewable diesel with a lower 
heating value of at least 123,500 Btu/gallon is assigned an 
equivalence value of 1.7. A minority of renewable diesel has a lower 
heating value below 123,500 BTU/gallon and is therefore assigned an 
equivalence value of 1.5 or 1.6 based on applications submitted 
under 40 CFR 80.1415(c)(2).
---------------------------------------------------------------------------

B. Small Refineries and Small Refiners

    In CAA section 211(o)(9), enacted as part of the Energy Policy Act 
of 2005, and amended by the Energy Independence and Security Act of 
2007, Congress provided a temporary exemption to small refineries \167\ 
through December 31, 2010. Congress provided that small refineries 
could receive a temporary extension of the exemption beyond 2010 based 
either on the results of a required DOE study, or based on an EPA 
determination of ``disproportionate economic hardship'' on a case-by-
case basis in response to small refinery petitions. In reviewing 
petitions, EPA, in consultation with the Department of Energy, 
determines whether the small refinery has demonstrated disproportionate 
economic hardship, and may grant refineries exemptions upon such 
demonstration.
---------------------------------------------------------------------------

    \167\ A small refiner that meets the requirements of 40 CFR 
80.1442 may also be eligible for an exemption.
---------------------------------------------------------------------------

    EPA has granted exemptions pursuant to this process in the past. 
However, at this time no exemptions have been approved for 2019, and 
therefore we have calculated the percentage standards for 2019 without 
any adjustment for exempted volumes. We are maintaining our approach 
that any exemptions for 2019 that are granted after the final rule is 
released will not be reflected in the percentage standards that apply 
to all gasoline and diesel produced or imported in 2019.

C. Final Standards

    The formulas in 40 CFR 80.1405 for the calculation of the 
percentage standards require the specification of a total of 14 
variables covering factors such as the renewable fuel volume 
requirements, projected gasoline and diesel demand for all states and 
territories where the RFS program applies, renewable fuels projected by 
EIA to be included in the gasoline and diesel demand, and exemptions 
for small refineries. The values of all the variables used for this 
final rule are shown in Table VII.C-1.\168\
---------------------------------------------------------------------------

    \168\ To determine the 49-state values for gasoline and diesel, 
the amount of these fuels used in Alaska is subtracted from the 
totals provided by EIA because petroleum-based fuels used in Alaska 
do not incur RFS obligations. The Alaska fractions are determined 
from the June 29, 2018 EIA State Energy Data System (SEDS), Energy 
Consumption Estimates.

    Table VII.C-1--Values for Terms in Calculation of the Final 2019
                             Standards \169\
                            [Billion gallons]
------------------------------------------------------------------------
              Term                     Description             Value
------------------------------------------------------------------------
RFVCB..........................  Required volume of                0.418
                                  cellulosic biofuel.
RFVBBD.........................  Required volume of                 2.10
                                  biomass-based diesel.
RFVAB..........................  Required volume of                 4.92
                                  advanced biofuel.
RFVRF..........................  Required volume of                19.92
                                  renewable fuel.
G..............................  Projected volume of              142.62
                                  gasoline.
D..............................  Projected volume of               56.31
                                  diesel.
RG.............................  Projected volume of               14.53
                                  renewables in gasoline.
RD.............................  Projected volume of                2.75
                                  renewables in diesel.
GS.............................  Projected volume of                   0
                                  gasoline for opt-in
                                  areas.
RGS............................  Projected volume of                   0
                                  renewables in gasoline
                                  for opt-in areas.
DS.............................  Projected volume of                   0
                                  diesel for opt-in
                                  areas.
RDS............................  Projected volume of                   0
                                  renewables in diesel
                                  for opt-in areas.
GE.............................  Projected volume of                0.00
                                  gasoline for exempt
                                  small refineries.
DE.............................  Projected volume of                0.00
                                  diesel for exempt
                                  small refineries.
------------------------------------------------------------------------

    Projected volumes of gasoline and diesel, and the renewable fuels 
contained within them, were provided by EIA in a letter to EPA that is 
required under the statute, and represent consumption values from the 
October 2018 version of EIA's Short-Term Energy Outlook.\170\
---------------------------------------------------------------------------

    \169\ See ``Calculation of final % standards for 2019'' in 
docket EPA-HQ-OAR-2018-0167.
    \170\ ``EIA letter to EPA with 2019 volume projections 10-12-
18,'' available in docket EPA-HQ-OAR-2018-0167.
---------------------------------------------------------------------------

    Using the volumes shown in Table VII.C-1, we have calculated the 
final percentage standards for 2019 as shown in Table VII.C-2.

           Table VII.C-2--Final Percentage Standards for 2019
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Cellulosic biofuel......................................           0.230
Biomass-based diesel....................................            1.73
Advanced biofuel........................................            2.71

[[Page 63741]]

 
Renewable fuel..........................................           10.97
------------------------------------------------------------------------

VIII. Administrative Actions

A. Assessment of the Domestic Aggregate Compliance Approach

    The RFS regulations specify an ``aggregate compliance'' approach 
for demonstrating that planted crops and crop residue from the U.S. 
complies with the ``renewable biomass'' requirements that address lands 
from which qualifying feedstocks may be harvested.\171\ In the 2010 
RFS2 rulemaking, EPA established a baseline number of acres for U.S. 
agricultural land in 2007 (the year of EISA enactment) and determined 
that as long as this baseline number of acres was not exceeded, it was 
unlikely that new land outside of the 2007 baseline would be devoted to 
crop production based on historical trends and economic considerations. 
The regulations specify, therefore, that renewable fuel producers using 
planted crops or crop residue from the U.S. as feedstock in renewable 
fuel production need not undertake individual recordkeeping and 
reporting related to documenting that their feedstocks come from 
qualifying lands, unless EPA determines through one of its annual 
evaluations that the 2007 baseline acreage of 402 million acres 
agricultural land has been exceeded.
---------------------------------------------------------------------------

    \171\ 40 CFR 80.1454(g).
---------------------------------------------------------------------------

    In the 2010 RFS2 rulemaking, EPA committed to make an annual 
finding concerning whether the 2007 baseline amount of U.S. 
agricultural land has been exceeded in a given year. If the baseline is 
found to have been exceeded, then producers using U.S. planted crops 
and crop residue as feedstocks for renewable fuel production would be 
required to comply with individual recordkeeping and reporting 
requirements to verify that their feedstocks are renewable biomass.
    The Aggregate Compliance methodology provided for the exclusion of 
acreage enrolled in the Grassland Reserve Program (GRP) and the 
Wetlands Reserve Program (WRP) from the estimated total U.S. 
agricultural land. However, the 2014 Farm Bill terminated the GRP and 
WRP as of 2013 and USDA established the Agriculture Conservation 
Easement Program (ACEP) with wetlands and land easement components. The 
ACEP is a voluntary program that provides financial and technical 
assistance to help conserve agricultural lands and wetlands and their 
related benefits. Under the Agricultural Land Easements (ACEP-ALE) 
component, USDA helps Indian tribes, state and local governments, and 
non-governmental organizations protect working agricultural lands and 
limit non-agricultural uses of the land. Under the Wetlands Reserve 
Easements (ACEP-WRE) component, USDA helps to restore, protect and 
enhance enrolled wetlands. The WRP was a voluntary program that offered 
landowners the opportunity to protect, restore, and enhance wetlands on 
their property. The GRP was a voluntary conservation program that 
emphasized support for working grazing operations, enhancement of plant 
and animal biodiversity, and protection of grassland under threat of 
conversion to other uses.
    USDA and EPA concur that the ACEP-WRE and ACEP-ALE represent a 
continuation in basic objectives and goals of the original WRP and GRP. 
Therefore, in preparing this year's assessment of the total U.S. acres 
of agricultural land, the acreage enrolled in the ACEP-WRE and ACEP-ALE 
was excluded.
    Based on data provided by the USDA Farm Service Agency (FSA) and 
Natural Resources Conservation Service (NRCS), we have estimated that 
U.S. agricultural land reached approximately 381 million acres in 2018, 
and thus did not exceed the 2007 baseline acreage. This acreage 
estimate is based on the same methodology used to set the 2007 baseline 
acreage for U.S. agricultural land in the RFS2 final rulemaking, with 
the GRP and WRP substitution as noted above. Specifically, we started 
with FSA crop history data for 2018, from which we derived a total 
estimated acreage of 381,694,332 acres. We then subtracted the ACEP-ALE 
and ACEP-WRE enrolled areas by the end of Fiscal Year 2018, 798,023 
acres, to yield an estimate of 380,896,309 acres or approximately 381 
million acres of U.S. agricultural land in 2018. The USDA data used to 
make this derivation can be found in the docket to this 
rule.172 173
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    \172\ USDA also provided EPA with 2018 data from the 
discontinued GRP and WRP programs. Given this data, EPA estimated 
the total U.S. agricultural land both including and omitting the GRP 
and WRP acreage. In 2018, combined land under GRP and WRP totaled 
2,975,165 acres. Subtracting the GRP, WRP, ACEP-WRE, and ACEP-ALE 
acreage yields an estimate of 377,921,144 acres or approximately 378 
million total acres of U.S. agricultural land in 2018. Omitting the 
GRP and WRP data yields approximately 381 million acres of U.S. 
agricultural land in 2018.
    \173\ In providing the 2018 agricultural land data to EPA, USDA 
provided updated data from 2017. An explanation of this data and a 
revised estimate of 2017 total U.S. agricultural land can be found 
in the docket to this rule.
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B. Assessment of the Canadian Aggregate Compliance Approach

    The RFS regulations specify a petition process through which EPA 
may approve the use of an aggregate compliance approach for planted 
crops and crop residue from foreign countries.\174\ On September 29, 
2011, EPA approved such a petition from the Government of Canada.
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    \174\ 40 CFR 80.1457.
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    The total agricultural land in Canada in 2018 is estimated at 118.5 
million acres; below the 2007 baseline of 123 million acres. This total 
agricultural land area includes 96.3 million acres of cropland and 
summer fallow, 12.4 million acres of pastureland and 9.8 million acres 
of agricultural land under conservation practices. This acreage 
estimate is based on the same methodology used to set the 2007 baseline 
acreage for Canadian agricultural land in EPA's response to Canada's 
petition. The data used to make this calculation can be found in the 
docket to this rule.

IX. Public Participation

    Many interested parties participated in the rulemaking process that 
culminates with this final rule. This process provided opportunity for 
submitting written public comments following the proposal that we 
published on July 3, 2018 (83 FR 31098), and we also held a public 
hearing on July 18, 2018, at which many parties provided both verbal 
and written testimony. All comments received, both verbal and written, 
are available in Docket ID No. EPA-HQ-OAR-2018-0167 and we considered 
these comments in developing the final rule. Public comments and EPA 
responses are discussed throughout this preamble and in the 
accompanying RTC document, which is available in the docket for this 
action.

X. Statutory and Executive Order Reviews

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

    This action is an economically significant regulatory action that 
was submitted to the Office of Management and Budget (OMB) for review. 
Any changes made in response to OMB recommendations have been 
documented in the docket. EPA prepared an analysis of illustrative 
costs associated with this action. This analysis is presented in 
Section V of this preamble.

[[Page 63742]]

B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs

    This action is considered an Executive Order 13771 regulatory 
action. Details on the estimated costs of this final rule can be found 
in EPA's analysis of the illustrative costs associated with this 
action. This analysis is presented in Section V of this preamble.

C. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden 
under the PRA. OMB has previously approved the information collection 
activities contained in the existing regulations and has assigned OMB 
control numbers 2060-0637 and 2060-0640. The final standards will not 
impose new or different reporting requirements on regulated parties 
than already exist for the RFS program.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. In 
making this determination, the impact of concern is any significant 
adverse economic impact on small entities. 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, has no 
net burden, or otherwise has a positive economic effect on the small 
entities subject to the rule.
    The small entities directly regulated by the RFS program are small 
refiners, which are defined at 13 CFR 121.201. We have evaluated the 
impacts of this final rule on small entities from two perspectives: As 
if the 2019 standards were a standalone action or if they are a part of 
the overall impacts of the RFS program as a whole.
    When evaluating the standards as if they were a standalone action 
separate and apart from the original rulemaking which established the 
RFS2 program, then the standards could be viewed as increasing the 
cellulosic biofuel volume by 130 million gallons and the advanced 
biofuel and total renewable fuel volume requirements by 630 million 
gallons between 2018 and 2019. To evaluate the impacts of the volume 
requirements on small entities relative to 2018, we have conducted a 
screening analysis \175\ to assess whether we should make a finding 
that this action will not have a significant economic impact on a 
substantial number of small entities. Currently available information 
shows that the impact on small entities from implementation of this 
rule will not be significant. We have reviewed and assessed the 
available information, which shows that obligated parties, including 
small entities, are generally able to recover the cost of acquiring the 
RINs necessary for compliance with the RFS standards through higher 
sales prices of the petroleum products they sell than would be expected 
in the absence of the RFS program.\176\ This is true whether they 
acquire RINs by purchasing renewable fuels with attached RINs or 
purchase separated RINs. The costs of the RFS program are thus 
generally being passed on to consumers in the highly competitive 
marketplace. Even if we were to assume that the cost of acquiring RINs 
were not recovered by obligated parties, and we used the maximum values 
of the illustrative costs discussed in Section V of this preamble and 
the gasoline and diesel fuel volume projections and wholesale prices 
from the October 2018 version of EIA's Short-Term Energy Outlook, and 
current wholesale fuel prices, a cost-to-sales ratio test shows that 
the costs to small entities of the RFS standards are far less than 1 
percent of the value of their sales.
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    \175\ ``Screening Analysis for the Final Renewable Fuel 
Standards for 2019,'' memorandum from Dallas Burkholder, Nick 
Parsons, and Tia Sutton to EPA Air Docket EPA-HQ-OAR-2018-0167.
    \176\ For a further discussion of the ability of obligated 
parties to recover the cost of RINs see ``Denial of Petitions for 
Rulemaking to Change the RFS Point of Obligation,'' EPA-420-R-17-
008, November 2017.
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    While the screening analysis described above supports a 
certification that this rule will not have a significant economic 
impact on small refiners, we continue to believe that it is more 
appropriate to consider the standards as a part of ongoing 
implementation of the overall RFS program. When considered this way, 
the impacts of the RFS program as a whole on small entities were 
addressed in the RFS2 final rule, which was the rule that implemented 
the entire program as required by EISA 2007.\177\ As such, the Small 
Business Regulatory Enforcement Fairness Act (SBREFA) panel process 
that took place prior to the 2010 rule was also for the entire RFS 
program and looked at impacts on small refiners through 2022.
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    \177\ 75 FR 14670 (March 26, 2010).
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    For the SBREFA process for the RFS2 final rule, we conducted 
outreach, fact-finding, and analysis of the potential impacts of the 
program on small refiners, which are all described in the Final 
Regulatory Flexibility Analysis, located in the rulemaking docket (EPA-
HQ-OAR-2005-0161). This analysis looked at impacts to all refiners, 
including small refiners, through the year 2022 and found that the 
program would not have a significant economic impact on a substantial 
number of small entities, and that this impact was expected to decrease 
over time, even as the standards increased. For gasoline and/or diesel 
small refiners subject to the standards, the analysis included a cost-
to-sales ratio test, a ratio of the estimated annualized compliance 
costs to the value of sales per company. From this test, we estimated 
that all directly regulated small entities would have compliance costs 
that are less than one percent of their sales over the life of the 
program (75 FR 14862, March 26, 2010).
    We have determined that this final rule will not impose any 
additional requirements on small entities beyond those already 
analyzed, since the impacts of this rule are not greater or 
fundamentally different than those already considered in the analysis 
for the RFS2 final rule assuming full implementation of the RFS 
program. This final rule increases the 2019 cellulosic biofuel volume 
requirement by 130 million gallons and the advanced biofuel and total 
renewable fuel volume requirements by 630 million gallons relative to 
the 2018 volume requirements, but those volumes remain significantly 
below the statutory volume targets analyzed in the RFS2 final rule. 
Compared to the burden that would be imposed under the volumes that we 
assessed in the screening analysis for the RFS2 final rule (i.e., the 
volumes specified in the Clean Air Act), the volume requirements 
proposed in this rule reduce burden on small entities. Regarding the 
BBD standard, we are increasing the volume requirement for 2020 by 330 
million gallons relative to the 2019 volume requirement we finalized in 
the 2018 final rule. While this volume is an increase over the 
statutory minimum value of 1 billion gallons, the BBD standard is a 
nested standard within the advanced biofuel category, which we are 
significantly reducing from the statutory volume targets. As discussed 
in Section VI, we are setting the 2020 BBD volume requirement at a 
level below what is anticipated will be produced and used to satisfy 
the reduced advanced biofuel requirement. The net result of the 
standards being finalized in this action is a reduction in burden as 
compared to implementation of the statutory volume targets as was 
assumed in the RFS2 final rule analysis.
    While the rule will not have a significant economic impact on a 
substantial number of small entities, there are compliance 
flexibilities in the program that can help to reduce impacts

[[Page 63743]]

on small entities. These flexibilities include being able to comply 
through RIN trading rather than renewable fuel blending, 20 percent RIN 
rollover allowance (up to 20 percent of an obligated party's RVO can be 
met using previous-year RINs), and deficit carry-forward (the ability 
to carry over a deficit from a given year into the following year, 
providing that the deficit is satisfied together with the next year's 
RVO). In the RFS2 final rule, we discussed other potential small entity 
flexibilities that had been suggested by the SBREFA panel or through 
comments, but we did not adopt them, in part because we had serious 
concerns regarding our authority to do so.
    Additionally, we realize that there may be cases in which a small 
entity may be in a difficult financial situation and the level of 
assistance afforded by the program flexibilities is insufficient. For 
such circumstances, the program provides hardship relief provisions for 
small entities (small refiners), as well as for small refineries.\178\ 
As required by the statute, the RFS regulations include a hardship 
relief provision (at 40 CFR 80.1441(e)(2)) that allows for a small 
refinery to petition for an extension of its small refinery exemption 
at any time based on a showing that the refinery is experiencing a 
``disproportionate economic hardship.'' EPA regulations provide similar 
relief to small refiners that are not eligible for small refinery 
relief (see 40 CFR 80.1442(h)). EPA has currently identified a total of 
9 small refiners that own 11 refineries subject to the RFS program, all 
of which are also small refineries.
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    \178\ See CAA section 211(o)(9)(B).
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    We evaluate these petitions on a case-by-case basis and may approve 
such petitions if it finds that a disproportionate economic hardship 
exists. In evaluating such petitions, we consult with the U.S. 
Department of Energy and consider the findings of DOE's 2011 Small 
Refinery Study and other economic factors. To date, EPA has adjudicated 
petitions for exemption from 29 small refineries for the 2017 RFS 
standards (8 of which were owned by a small refiner).\179\
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    \179\ EPA is currently evaluating 7 additional 2017 petitions (1 
of which is owned by a small refiner) and 15 additional 2018 
petitions (7 of which are owned by a small refiner), bringing the 
total number of petitions for 2017 to 36 and for 2018 to 15. More 
information on Small Refinery Exemptions is available on EPA's 
public website at: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.
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    In sum, this final rule will not change the compliance 
flexibilities currently offered to small entities under the RFS program 
(including the small refinery hardship provisions we continue to 
implement) and available information shows that the impact on small 
entities from implementation of this rule will not be significant 
viewed either from the perspective of it being a standalone action or a 
part of the overall RFS program. We have therefore concluded that this 
action will have no net regulatory burden for directly regulated small 
entities.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or 
more as described in UMRA, 2 U.S.C. 1531-1538, and does not 
significantly or uniquely affect small governments. This action 
implements mandates specifically and explicitly set forth in CAA 
section 211(o) and we believe that this action represents the least 
costly, most cost-effective approach to achieve the statutory 
requirements.

F. Executive Order 13132: Federalism

    This action 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.

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

    This action does not have tribal implications as specified in 
Executive Order 13175. This action will be implemented at the Federal 
level and affects transportation fuel refiners, blenders, marketers, 
distributors, importers, exporters, and renewable fuel producers and 
importers. Tribal governments will be affected only to the extent they 
produce, purchase, or use regulated fuels. Thus, Executive Order 13175 
does not apply to this action.

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

    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that EPA has reason to believe may disproportionately affect children, 
per the definition of ``covered regulatory action'' in section 2-202 of 
the Executive Order. This action is not subject to Executive Order 
13045 because it implements specific standards established by Congress 
in statutes (CAA section 211(o)) and does not concern an environmental 
health risk or safety risk.

I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution, or use of energy. This action establishes the required 
renewable fuel content of the transportation fuel supply for 2019, 
consistent with the CAA and waiver authorities provided therein. The 
RFS program and this rule are designed to achieve positive effects on 
the nation's transportation fuel supply, by increasing energy 
independence and security and lowering lifecycle GHG emissions of 
transportation fuel.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    EPA believes that this action does not have disproportionately high 
and adverse human health or environmental effects on minority 
populations, low income populations, and/or indigenous peoples, as 
specified in Executive Order 12898 (59 FR 7629, February 16, 1994). 
This regulatory action does not affect the level of protection provided 
to human health or the environment by applicable air quality standards. 
This action does not relax the control measures on sources regulated by 
the RFS regulations and therefore will not cause emissions increases 
from these sources.

L. Congressional Review Act (CRA)

    This action is subject to the CRA, and EPA will submit a rule 
report to each House of the Congress and to the Comptroller General of 
the United States. This action is a ``major rule'' as defined by 5 
U.S.C. 804(2).

XI. Statutory Authority

    Statutory authority for this action comes from section 211 of the 
Clean Air Act, 42 U.S.C. 7545. Additional support for the procedural 
and compliance related aspects of this final rule comes from sections 
114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 
7601(a).

[[Page 63744]]

List of Subjects in 40 CFR Part 80

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports, 
Oil imports, Petroleum, Renewable fuel.

    Dated: November 30, 2018.
Andrew R. Wheeler,
Acting Administrator.

    For the reasons set forth in the preamble, EPA is amending 40 CFR 
part 80 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, 7521, 7542, 7545, and 7601(a).

Subpart M--Renewable Fuel Standard

0
2. Section 80.1405 is amended by adding paragraph (a)(10) to read as 
follows:

Sec.  80.1405  What are the Renewable Fuel Standards?

    (a) * * *
    (10) Renewable Fuel Standards for 2019.
    (i) The value of the cellulosic biofuel standard for 2019 shall be 
0.230 percent.
    (ii) The value of the biomass-based diesel standard for 2019 shall 
be 1.73 percent.
    (iii) The value of the advanced biofuel standard for 2019 shall be 
2.71 percent.
    (iv) The value of the renewable fuel standard for 2019 shall be 
10.97 percent.
* * * * *
[FR Doc. 2018-26566 Filed 12-10-18; 8:45 am]
BILLING CODE 6560-50-P