Document ID: EPA-HQ-OAR-2012-0223-0001
Agency: epa
Document Type: Rule
Title: Regulation of Fuels and Fuel Additives: Modifications to Renewable Fuel Standard and Diesel Sulfur Programs; Direct Final Rule
Posted Date: 2012-10-09T04:00Z

[Federal Register Volume 77, Number 195 (Tuesday, October 9, 2012)]
[Rules and Regulations]
[Pages 61281-61295]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23713]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2012-0223; FRL 9733-3]

Regulation of Fuels and Fuel Additives: Modifications to 
Renewable Fuel Standard and Diesel Sulfur Programs

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: EPA is issuing this direct final rule to amend the definition 
of heating oil in the Renewable Fuel Standard (``RFS'' or ``RFS2'') 
program under section 211(o) of the Clean Air Act. This amendment will 
expand the scope of renewable fuels that can generate Renewable 
Identification Numbers (RINs) as heating oil to include fuel oil 
produced from qualifying renewable biomass that will be used to 
generate heat to warm buildings or other facilities where people live, 
work, recreate, or conduct other activities. Fuel oils used to generate 
process heat, power, or other functions will not be included in the 
amended definition. Producers or importers of fuel oil that meets the 
amended definition of heating oil will be allowed to generate RINs, 
provided that the fuel oil meets the other requirements specified in 
the RFS regulations. This amendment will not modify or limit fuel 
included in the current definition of heating oil. EPA is also amending 
the requirements under EPA's diesel sulfur program related to the 
sulfur content of locomotive and marine diesel fuel produced by 
transmix processors. These amendments will allow locomotive and marine 
diesel fuel produced by transmix processors to meet a maximum 500 parts 
per million (ppm) sulfur standard provided that; the fuel is used in 
older technology locomotive and marine engines that do not require 15 
ppm sulfur diesel fuel, the fuel is used outside of the Northeast Mid-
Atlantic Area, and the fuel is kept segregated from other fuel. These 
amendments will provide significant regulatory relief for transmix 
processors while having a neutral or net positive environmental impact. 
EPA is also amending the fuel marker requirements for 500 ppm sulfur 
locomotive and marine (LM) diesel fuel to address an oversight in the 
original rulemaking where the regulations failed to incorporate 
provisions described in the rulemaking preamble to allow for solvent 
yellow 124 marker to transition out of the distribution system.

DATES: This rule is effective on December 10, 2012 without further 
notice, unless EPA receives adverse comment or a public hearing request 
by November 8, 2012. If EPA receives a timely adverse comment or a 
hearing request on the rule or any specific portion of this rule, we 
will publish a withdrawal of the rule or a specific portion of the rule 
in the Federal Register informing the public that the rule or portions 
of the rule with adverse comment will not take effect. If a public 
hearing is requested, we will publish a notice in the Federal Register 
announcing the date and location of the hearing at least 14 days prior 
to the hearing.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2012-0223, by one of the following methods:
     www.regulations.gov: Follow the on-line instructions for 
submitting comments.
     Email: a-and-r-docket@epa.gov, Attention Air and Radiation 
Docket ID EPA-HQ-OAR-2012-0223.
     Fax: 731-214-4051.
     Mail: Air and Radiation Docket, Docket No. EPA-HQ-OAR-
2012-0223,

[[Page 61282]]

Environmental Protection Agency, Mailcode: 6406J, 1200 Pennsylvania 
Avenue NW., Washington, DC 20460.
     Hand Delivery: EPA Docket Center, EPA/DC, EPA West, Room 
3334, 1301 Constitution Ave. NW., Washington, DC, 20460, Attention Air 
and Radiation Docket, ID No. EPA-HQ-OAR-2012-0223. Such deliveries are 
only accepted during the Docket's normal hours of operation, and 
special arrangements should be made for deliveries of boxed 
information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2012-0223. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
www.regulations.gov, including any personal information provided, 
unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through www.regulations.gov or email. The 
www.regulations.gov Web site is an ``anonymous access'' system, which 
means EPA will not know your identity or contact information unless you 
provide it in the body of your comment. If you send an email comment 
directly to EPA without going through www.regulations.gov your email 
address will be automatically captured and included as part of the 
comment that is placed in the public docket and made available on the 
Internet. If you submit an electronic comment, EPA recommends that you 
include your name and other contact information in the body of your 
comment and with any disk or CD-ROM you submit. If EPA cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, EPA may not be able to consider your comment. Electronic 
files should avoid the use of special characters, any form of 
encryption, and be free of any defects or viruses. For additional 
information about EPA's public docket visit the EPA Docket Center 
homepage at http://www.epa.gov/epahome/dockets.htm.
    Docket: All documents in the docket are listed in the 
www.regulations.gov index. Although listed in the index, some 
information is not publicly available, (e.g., CBI or other information 
whose disclosure is restricted by statute). Certain other material, 
such as copyrighted material, will be publicly available only in hard 
copy. Publicly available docket materials are available either 
electronically in www.regulations.gov or in hard copy at the Air and 
Radiation Docket and Information Center, EPA, EPA West, Room 3334, 1301 
Constitution Ave. NW., Washington, DC. The Public Reading Room is open 
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal 
holidays. The telephone number for the Public Reading Room is (202) 
566-1744, and the telephone number for the Air Docket is (202) 566-
1742.

FOR FURTHER INFORMATION CONTACT: Kristien Knapp, Office of 
Transportation and Air Quality, Mail Code: 6405J, U.S. Environmental 
Protection Agency, 1200 Pennsylvania Avenue NW., 20460; telephone 
number: (202) 343-9949; fax number: (202) 343-2800; email address: 
knapp.kristien@epa.gov.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

A. Purpose

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

B. Summary of Today's Rule

Amended Definition of Home Heating Oil
    This rule amends the definition of heating oil in 40 CFR 80.1401 in 
the renewable fuel standard (``RFS'' or ``RFS2'') program promulgated 
under section 211(o) of the Clean Air Act (CAA). This amendment will 
expand the scope of renewable fuels that can generate Renewable 
Identification Numbers (``RINs'') as ``home heating oil'' to include 
fuel oil that will be used to generate heat to warm buildings or other 
facilities where people live, work, recreate, or conduct other 
activities. This rule will allow producers or importers of fuel oil 
that meets the amended definition of heating oil to generate RINs, 
provided that other requirements specified in the regulations are met. 
Fuel oils used to generate process heat, power, or other functions will 
not be approved for RIN generation under the amended definition of 
heating oil. The amendment will not modify, limit, or change fuel 
included in the current definition of heating oil at 40 CFR 80.2(ccc).
Diesel Transmix Amendments
    The diesel transmix amendments will reinstate an allowance for 
transmix processors to produce 500 ppm sulfur diesel fuel for use in 
older technology locomotive and marine diesel outside of the Northeast 
Mid-Atlantic Area after 2014. EPA's ocean-going vessels rule forbade 
this allowance beginning 2014 because a new stream of diesel, 
containing up to 1000 ppm sulfur, was introduced at that time, which we 
believed would provide a suitable outlet for transmix distillate 
product. Transmix processors stated that they were not aware of the 
changes to the 500-ppm LM transmix provisions until after they were 
finalized, and that the ocean-going vessels market would not be a 
viable outlet for their distillate product. Based on additional input 
that we received from transmix processors and other stakeholders in the 
fuel distribution system during our consideration of the petition, EPA 
believed that it would be appropriate to extend the 500-ppm diesel 
transmix flexibility beyond 2014. EPA finalized a settlement agreement 
and this DFR and NPRM are in accord with the settlement agreement. Our 
analysis indicates that extending this flexibility beyond 2014 will 
have a neutral or net beneficial effect on overall emissions.
Yellow Marker Amendments
    The yellow marker amendments address an oversight in the original 
nonroad diesel rulemaking. In that rulemaking, the regulations failed 
to incorporate provisions described in the rulemaking preamble. The 
preamble made clear that EPA intended to allow 500 ppm locomotive 
marine (LM) diesel fuel containing greater than 0.10 milligrams per 
liter of Solvent Yellow 124 (SY124) time to transition out of the fuel 
distribution system. However, the regulations are not consistent with 
the preamble and did not provide this same allowance.
    Specifically, the regulations as currently written do not provide 
any transition time for unmarked LM fuel delivered from a truck loading 
rack beginning June 1, 2012 to work its way through the fuel 
distribution system downstream of the truck loading rack. The yellow 
marker amendments will allow 500 ppm LM diesel fuel at any point in the 
fuel distribution and end use system to contain more than 0.10 
milligrams per liter of SY 124 through November 30, 2012. This 
regulatory change will allow marked LM diesel fuel to transition 
normally through the LM fuel distribution and use system. Today's rule 
also amends the regulation

[[Page 61283]]

to clarify the transition of the solvent yellow 124 marker out of 
heating oil beginning June 1, 2014. After December 1, 2014, EPA will no 
longer have any requirements with respect to the use of the SY 124 
marker.

C. Costs and Benefits

    These three sets of amendments attempt to provide new opportunities 
for RIN generation under the RFS program and necessary flexibilities 
and transition periods for those affected by EPA's transmix and marker 
requirements. Therefore, EPA believes that these amendments will impose 
no new direct costs or burdens on regulated entities beyond the minimal 
costs associated with reporting and recordkeeping requirements. At the 
same time, EPA does not believe that any of these amendments will 
adversely impact emissions.

II. Why is EPA issuing a direct final rule?

    EPA is publishing this rule without a prior proposed rule because 
this may be viewed as a noncontroversial action that would not receive 
adverse comment. However, in the ``Proposed Rules'' section of today's 
Federal Register, we are publishing a separate document that will serve 
as the proposal to adopt the provisions in this direct final rule if 
adverse comments or a hearing request are filed on the rule or any 
portion of the rule.\1\ We will not institute a second comment period 
on this action. Any parties interested in commenting must do so at this 
time. For further information about commenting on this rule, see the 
ADDRESSES section of this document.
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    \1\ The proposed rule contains all aspects of this direct final 
rule and seeks comments. Additionally, this document also requests 
comments on one issue that is not included in the direct final rule: 
whether the amendments to the requirements for locomotive and marine 
diesel fuel produced by transmix processors should be extended to 
fuel used inside the Northeast Mid-Atlantic Area.
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 III. Does this action apply to me?

    Entities potentially affected by this action include those involved 
with the production, distribution and sale of transportation fuels, 
including gasoline and diesel fuel, or renewable fuels such as ethanol 
and biodiesel, as well as those involved with the production, 
distribution and sale of other fuel oils that are not transportation 
fuel. Regulated categories and entities affected by this action 
include:

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                                         NAICS codes
               Category                      \a\        SIC codes \b\                      Examples of potentially  regulated parties
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Industry.............................          324110            2911  Petroleum refiners, importers.
Industry.............................          325193            2869   Ethyl alcohol manufacturers.
Industry.............................          325199            2869   Other basic organic chemical manufacturers.
Industry.............................         Various         Various   Transmix Processors.
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.............................          454319            5989   Other fuel dealers.
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\a\ North American Industry Classification System (NAICS).
\b\ Standard Industrial Classification (SIC) system code.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could be potentially regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your entity is regulated by this action, you should carefully examine 
the applicability criteria of Part 80, subparts D, E and F of title 40 
of the Code of Federal Regulations. If you have any question regarding 
applicability of this action to a particular entity, consult the person 
in the preceding FOR FURTHER INFORMATION CONTACT section above.

IV. What should I consider as I prepare my comments for EPA?

    A. Submitting information claimed as CBI. Do not submit this 
information to EPA through www.regulations.gov or email. Clearly mark 
the part or all of the information that you claim to be CBI. For CBI 
information in a disk or CD ROM that you mail to EPA, mark the outside 
of the disk or CD ROM as CBI and then identify electronically within 
the disk or CD ROM the specific information that is claimed as CBI. In 
addition to one complete version of the comment that includes 
information claimed as CBI, a copy of the comment that does not contain 
the information claimed as CBI must be submitted for inclusion in the 
public docket. Information so marked will not be disclosed except in 
accordance with procedures set forth in 40 CFR part 2.
    B. Tips for Preparing Your Comments. When submitting comments, 
remember to:
     Identify the rulemaking by docket number and other 
identifying information (subject heading, Federal Register date and 
page number).
     Follow directions--The agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree. Suggest alternatives 
and substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you used.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns, and 
suggest alternatives.
     Explain your views as clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the comment period 
deadline identified.
    C. Docket Copying Costs. You may be charged a reasonable fee for 
photocopying docket materials, as provided in 40 CFR part 2.

V. Amendments Under the Renewable Fuel Standard Program

A. Amended Definition of Heating Oil

    EPA is issuing a direct final rule to amend the definition of 
heating oil in 40 CFR 80.1401 in the renewable fuel standard (``RFS'' 
or ``RFS2'') program promulgated under section 211(o) of the Clean Air 
Act (CAA).\2\ This amendment will expand the scope of renewable fuels 
that can generate Renewable Identification Numbers (``RINs'') as

[[Page 61284]]

home heating oil to include fuel oil that will be used to generate heat 
to warm buildings or other facilities where people live, work, 
recreate, or conduct other activities. This rule will allow producers 
or importers of fuel oil that meets the amended definition of heating 
oil to generate RINs, provided that other requirements specified in the 
regulations are met. Fuel oils used to generate process heat, power, or 
other functions will not be approved for RIN generation under the 
amended definition of heating oil, as these fuels are not within the 
scope of ``home heating oil'' as that term is used in the Energy 
Independence and Security Act of 2007 (``EISA''), for the RFS program. 
The amendment will not modify or limit fuel included in the current 
definition of heating oil at 40 CFR 80.2(ccc).
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    \2\ The Energy Independence and Security Act (EISA) of 2007 
amended section 211(o) of the Clean Air Act (CAA), which was 
originally added by the Energy Policy Act (EPAct) of 2005.
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    The RFS program requires the production and use of renewable fuel 
to replace or reduce the quantity of fossil fuel present in 
transportation fuel. Under EPA's RFS program this is accomplished by 
providing for the generation of RINs by producers or importers of 
qualified renewable fuel. RINs are transferred to the producers or 
importers of gasoline and diesel transportation fuel who then use the 
RINs to demonstrate compliance with their renewable fuel volume 
obligations. RINs also serve the function of credits under the RFS 
program.
    Congress provided that EPA could also establish provisions for the 
generation of credits by producers of certain renewable fuel that was 
not used in transportation fuel, called ``additional renewable fuel.'' 
\3\ Additional renewable fuel is defined as fuel that is produced from 
renewable biomass and that is used to replace or reduce the quantity of 
fossil fuel present in home heating oil or jet fuel.\4\ In essence, 
additional renewable fuel has to meet all of the requirements 
applicable to qualify it as renewable fuel under the regulations, with 
the only difference being that it is blended into or is home heating 
oil or jet fuel. This does not change the volume requirements of the 
statute itself, however this can provide an important additional avenue 
for parties to generate RINs for use by obligated parties, thus 
promoting the overall cost-effective production and use of renewable 
fuels.
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    \3\ ``EISA changed the definition of `renewable fuel' to require 
that it be made from feedstocks that qualify as `renewable biomass.' 
EISA's definition of the term `renewable biomass' limits the types 
of biomass as well as the types of land from which the biomass may 
be harvested.'' Regulation of Fuels and Fuel Additives: Changes to 
Renewable Fuel Standard Program, 75 FR 14670, 14681 (March 26, 
2010).
    \4\ See CAA sections 211(o)(1)(A) and (o)(5)(E).
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    EPA addressed the provision for additional renewable fuels in the 
RFS2 rulemaking, specifically addressing the category of ``home heating 
oil.'' EPA determined that this term was ambiguous, and defined it by 
incorporating the existing definition of heating oil at 40 CFR 
80.2(ccc). EPA stated that:

    EISA uses the term ``home heating oil'' in the definition of 
``additional renewable fuel.'' The statute does not clarify whether 
the term should be interpreted to refer only to heating oil actually 
used in homes, or to all fuel of a type that can be used in homes. 
We note that the term `home heating oil' is typically used in 
industry in the latter manner, to refer to a type of fuel, rather 
than a particular use of it, and the term is typically used 
interchangeably in industry with heating oil, heating fuel, home 
heating fuel, and other terms depending on the region and market. We 
believe this broad interpretation based on typical industry usage 
best serves the goals and purposes of the statute. If EPA 
interpreted the term to apply only to heating oil actually used in 
homes, we would necessarily require tracking of individual gallons 
from production through ultimate [use] in homes in order to 
determine eligibility of the fuel for RINs. Given the fungible 
nature of the oil delivery market, this would likely be sufficiently 
difficult and potentially expensive so as to discourage the 
generation of RINs for renewable fuels used as home heating oil. 
This problem would be similar to that which arose under RFS1 for 
certain renewable fuels (in particular biodiesel) that were produced 
for the highway diesel market but were also suitable for other 
markets such as heating oil and non-road applications where it was 
unclear at the time of fuel production (when RINs are typically 
generated under the RFS program) whether the fuel would ultimately 
be eligible to generate RINs. Congress eliminated the complexity 
with regards to non-road applications in RFS2 by making all fuels 
used in both motor vehicle and nonroad applications subject to the 
renewable fuel standard program. We believe it best to interpret the 
Act so as to also avoid this type of complexity in the heating oil 
context. Thus, under today's regulations, RINs may be generated for 
renewable fuel used as ``heating oil,'' as defined in existing EPA 
regulations at Sec.  80.2(ccc). In addition to simplifying 
implementation and administration of the Act, this interpretation 
will best realize the intent of EISA to reduce or replace the use of 
fossil fuels.\5\
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    \5\ 75 FR 14670, 14687 (March 26, 2010).

    The existing definition of heating oil at 40 CFR 80.2(ccc) means 
``any 1, 2, or non-petroleum diesel blend that is 
sold for use in furnaces, boilers, stationary diesel engines, and 
similar applications and which is commonly or commercially known or 
sold as heating oil, fuel oil, or similar trade names, and that is not 
jet fuel, kerosene, or [Motor Vehicle, Non-Road, Locomotive and Marine 
(MVNRLM)] diesel fuel.'' The existing definition of non-petroleum 
diesel at 40 CFR 80.2(sss) means a diesel fuel that contains at least 
80 percent mono-alkyl esters of long chain fatty acids derived from 
vegetable oils or animal fats. Thus, in order to generate RINs for home 
heating oil that is a non-petroleum diesel blend, the fuel must contain 
at least 80 percent mono-alkyl esters of long chain fatty acids derived 
from vegetable oils or animal fats, as well as meeting all other 
requirements of the RFS2 regulations. Since the promulgation of the 
RFS2 final rule, we have received a number of requests from producers 
to consider expanding the scope of the home heating oil provision to 
include additional fuel oils that are produced from qualifying 
renewable biomass but do not meet the regulatory definition of heating 
oil because they are not 1 or 2 diesel and do not 
contain at least 80 percent mono-alkyl esters. Parties raising this 
issue have suggested that limiting ``home heating oil'' to the fuel 
types defined in 40 CFR 80.2(ccc) disqualifies certain types of 
renewable fuel oils that could be used for home heating and that this 
limitation does not align with our reasoning in the preamble to take a 
broad interpretation of the term ``home heating oil'' in CAA section 
211(o).
    EPA has considered this issue further and is revising the 
definition of heating oil in the RFS2 program to expand the scope of 
fuels that can generate RINs as heating oil. EPA is revising the 
definition such that RINs also may be generated by renewable fuel that 
is fuel oil and is used to heat interior spaces of homes or buildings 
to control ambient climate for human comfort. This will not include 
fuel oils used to generate process heat, power, or other functions. The 
fuel oil must be used to generate heat to warm buildings or other 
facilities where people live, work, recreate, or conduct other 
activities. The fuel oil must only be used in heating applications, 
where the sole purpose of the fuel's use is for heating and not for any 
other combined use such as process energy use. We are amending the 
existing definition of heating oil in 40 CFR 80.1401 to include fuel 
oils that are used in this way. This is in addition to the fuel oils 
currently included in the definition of heating oil at 40 CFR 
80.2(ccc), and will not modify or limit the fuel included in the 
current definition.
    EPA believes this expansion of the scope of the home heating oil 
provision is appropriate and authorized under CAA section 211(o). As 
EPA described

[[Page 61285]]

in the RFS2 final rule, Congress did not define the term ``home heating 
oil,'' and it does not have a fixed or definite commercial meaning. In 
the RFS2 final rulemaking, EPA focused on whether the provision was 
limited to heating oil actually used in homes. EPA noted that the term 
home heating oil is usually used in the industry to refer to one type 
of fuel, and not to a specific use for the fuel. Given this more 
general usage of the term, and the practical barriers that would have 
arisen if the term was defined as fuel actually used to heat homes, EPA 
defined the scope of home heating oil in a more specific fashion by 
identifying those types of fuel oils that are typically used to heat 
homes. EPA determined this was a reasonable interpretation of an 
ambiguous statutory provision that simplified implementation and 
administration of the Act and promoted achievement of the goals of the 
RFS program.
    In the RFS2 rulemaking, EPA focused on the kinds of fuel oils that 
can be used to heat homes. The expansion of the definition adopted in 
this rulemaking will address two types of fuel oils not included in the 
current definition of heating oil. First, the amended definition will 
include additional fuel oils that are actually used to heat homes, even 
if they do not meet the current definition of heating oil. This is 
clearly within the scope of the statutory provision for home heating 
oil.
    Second, the amended definition will include fuel oils that are used 
to heat facilities other than homes to control ambient climate for 
human comfort. Under the current definition of heating oil, a fuel oil 
meets the definition based on its physical properties and its use in 
furnaces, boilers, stationary diesel engines, and similar applications, 
not whether it is actually used to heat a home. The basic decision made 
in the RFS2 final rulemaking was to allow RIN generation for the group 
of fuel oils that are typically used for home heating purposes. Under 
the current definition the relationship of the fuel oil to heating 
homes is that the fuel oil is of the type that is typically used for 
and can be used for that purpose.\6\
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    \6\ This is different from other renewable fuels in the RFS 
program, which are defined in terms of their use as transportation 
fuel or jet fuel. See 40 CFR 80.1401, definitions of ``renewable 
fuel'' and ``transportation fuel.''
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    In the amended definition, qualifying fuel oils will be used for 
heating places where people live, work, or recreate, and not just their 
homes. It focuses more on what is getting heated--people--and not where 
the people are located. EPA believes this is a reasonable 
interpretation of the phrase ``home heating oil,'' while recognizing 
that it is not an obvious interpretation. This interpretation 
recognizes the ambiguity of the phrase used by Congress, which is not 
defined and does not have a clear and definite commercial meaning. It 
gives reasonable meaning to the term home heating oil, by limiting the 
additional fuel oils to fuel oils when used for heating of facilities 
that people will occupy, and excluding fuel oils when used for other 
purposes such as generation of energy used in the manufacture of 
products. It also focuses on the aspect of home that is important 
here--the heating of people--recognizing that EPA has already 
determined that fuel oil can be included in the scope of home heating 
oil even if it is not actually used to heat a home. This interpretation 
will also promote the purposes of the EISA and the RFS program. It will 
promote the purposes of the EISA in that it will increase the 
production and use of renewable fuels by introducing new sources of 
fuel producers to the RFS program. It will specifically promote the RFS 
programmatic goals by facilitating the generation of RINs for renewable 
fuels that reduce emissions of greenhouse gases compared to fossil 
fuels. For example, EPA has received information from Envergent 
Technologies (alliance of Ensyn and UOP/Honeywell) that such an 
expanded definition of heating oil would result in nearly immediate 
production of 3.5 million gallons from their existing facilities, with 
an additional projected production of up to 45 million gallons per year 
within 24 months following regulatory action. Based on this information 
from Envergent Technologies, application of the expanded definition of 
heating oil to the entire industry would result in the production of 
many more million additional gallons of renewable fuel.

B. Lifecycle Greenhouse Gas Assessment of the Amended Definition of 
Heating Oil

    EPA has also evaluated whether any revisions will need to be made 
to Table 1 to 40 CFR 80.1426 that lists the applicable D codes for each 
fuel pathway for use in generating RINs in the RFS2 regulations in 
light of the additional fuel oils included in the expanded definition 
of heating oil. As discussed below, EPA has determined that the 
applicable D code entries for heating oil in Table 1 to 40 CFR 80.1426 
will continue to be appropriate and will not need to be revised in 
light of the expanded definition of heating oil.
    Under the RFS program, EPA must assess lifecycle greenhouse gas 
(GHG) emissions to determine which fuel pathways meet the GHG reduction 
thresholds for the four required renewable fuel categories. The RFS 
program requires a 20% reduction in lifecycle GHG emissions for 
conventional renewable fuel (except for grandfathered facilities and 
volumes), a 50% reduction for biomass-based diesel or advanced biofuel, 
and a 60% reduction for cellulosic biofuel. For the final RFS2 rule, 
EPA assessed the lifecycle greenhouse gas emissions of multiple 
renewable fuel pathways and classified pathways based on these GHG 
thresholds, as compared to the EISA statutory baseline.\7\ In addition, 
EPA has added several pathways since the final rule was published. 
Expanding the definition of heating oil does not affect these prior 
analyses.
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    \7\ See Table 1 to 40 CFR 80.1426.
---------------------------------------------------------------------------

    The fuel pathways consist of fuel type, feedstock, and production 
process requirements. GHG emissions are assessed at all points 
throughout the lifecycle pathway. For instance, emissions associated 
with sowing and harvesting of feedstocks and in the production, 
distribution and use of the renewable fuel are examples of what are 
accounted for in the GHG assessment. A full accounting of emissions is 
then compared with the petroleum baseline emissions for the 
transportation fuel being replaced. The lifecycle GHG emissions 
determination is one factor used to determine compliance with the 
regulations.
    There are currently several fuel pathways that list heating oil as 
a fuel type with various types of feedstock and production processes 
used, qualifying the heating oil pathways as either biomass-based 
diesel, advanced, or cellulosic. The determinations for these different 
pathways were based on the current definition of heating oil. The 
pathways also include several types of distillate product including 
diesel fuel, jet fuel and heating oil.
    The lifecycle calculations and threshold determinations are based 
on the GHG emissions associated with production of the fuel and 
processing of the feedstock. Converting biomass feedstocks such as 
triglycerides (if oils are used as feedstock) or hemi-cellulose, 
cellulose, lignin, starches, etc. (if solid biomass feedstock is used) 
into heating oil products and can be accomplished through either a 
biochemical or thermochemical process converting those molecules into a 
fuel product. The existing heating oil pathways were based on the 
current definition of the fuel, and were based on a certain level of 
processing to produce 1, 2, or a non-petroleum diesel 
blend and the

[[Page 61286]]

related energy use and GHG emissions that were part of the lifecycle 
determination for those fuel pathways.
    The main difference between the current definition of heating oil, 
which refers to 1, 2, or a non-petroleum diesel 
blend, and the expanded definition adopted in this rulemaking is that 
the expanded definition will include heavier types of fuel oil with 
larger molecules. Based on the type of conversion process, producing 
these heavier fuel oil products versus the 1, 2, or a 
non-petroleum diesel blend will affect the amount of energy used and 
therefore the GHG emissions from the process. There are two main paths 
for producing a fuel oil product from biomass. In one the biomass is 
converted into a biocrude which is further refined into lighter 
products. In this case producing a heavier fuel oil product will 
require less processing energy and have lower GHG emissions than 
converting the same feedstock into a 1, 2, or non-
petroleum diesel blend.
    In the other type of process the compounds in the biomass are 
changed into a set of intermediary products, such as hydrogen (H) and 
carbon monoxide (CO).\8\ These compounds are then either catalytically 
or biochemically converted into the fuel product. In this case, the 
vast majority of the energy is associated with breaking down the 
feedstock into the set of intermediary compounds. The process used and 
the energy needed for it does not vary based on the type of fuel that 
is then produced from these intermediary compounds. The type of fuel 
could affect the type of catalyst or biological process used to change 
the intermediary compounds into the fuel product, but based on EPA 
calculations and assessments developed as part of the RFS2 
rulemaking,\9\ this will have no real impact on the energy used or the 
GHG emissions associated with converting the biomass into a different 
fuel product.
---------------------------------------------------------------------------

    \8\ This describes the Fischer-Tropsch process. Other processes 
rely on forming different sets of compounds from the biomass, and 
then producing the fuel product from the set of compounds.
    \9\ ``Regulation of Fuel and Fuel Additives; Changes to 
Renewable Fuel Standard Program,'' 75 FR 14670, available at http://www.gpo.gov/fdsys/pkg/FR-2010-03-26/pdf/2010-3851.pdf. See also, 
EPA's summary factsheet, ``EPA Lifecycle Analysis of Greenhouse Gas 
Emissions from Renewable Fuels,'' available at http://www.epa.gov/otaq/renewablefuels/420f10006.pdf.
---------------------------------------------------------------------------

    Based on these considerations, EPA believes the GHG emissions 
associated with producing the fuel oil included in the expanded 
definition will be the same or lower than the GHG emissions associated 
with producing 1, 2, or non-petroleum diesel blend. 
Therefore, EPA believes the prior life cycle analysis for heating oil 
support applying the existing pathways for fuel oil in the RFS2 
regulations to the expanded definition of heating oil. Once the 
regulatory change to the definition of ``heating oil'' is final, all of 
the pathways currently applicable to heating oil under Table 1 to 40 
CFR Sec.  80.1426 would apply to the expanded definition of heating 
oil.

C. Additional Registration, Reporting, Product Transfer Document, and 
Recordkeeping Requirements

1. Additional Requirements for the Amended Definition of Heating Oil
    An important issue to address is how to implement such an expanded 
definition. As EPA recognized in the RFS2 rulemaking, fuel oils end up 
being used in a variety of different uses, where the fuel producer may 
have little knowledge at the time of production as to eventual use of 
the fuel. This is especially the case where the fuel oil is distributed 
in a fungible distribution system. EPA addressed this in the RSF2 
rulemaking by defining home heating oil as a type of fuel with certain 
characteristics, irrespective of where it was used. This approach 
avoided the need to track the fuel to its actual use, and including the 
characteristics of the fuel in its definition in 40 CFR 80.1401, was 
adequate to retain a close tie to the concept underlying home heating 
oil.
    The expansion of the definition raises this same issue but in a 
more significant way. While the expansion of the definition includes 
some limited physical characteristics that fuels oils will need to meet 
in order to qualify for generating RINs, it does not provide sufficient 
specificity to differentiate between those fuels oils used to heat 
buildings for climate control for human comfort and those used to 
generate process heat or other purposes. Therefore, for eligible fuel 
oils other than those qualifying under the existing definition in 40 
CFR 80.2(ccc), EPA is requiring that the renewable fuel producer or 
importer have adequate documentation to demonstrate that the fuel oil 
volume for which RINs were generated was used to heat buildings for 
climate control for human comfort and meets the expanded definition of 
heating oil prior to generating RINs.
    EPA recognizes that under the current definition of heating oil no 
tracking or other documentation of end use is required, and some 
heating oils that meet the current definition could end up being used 
for other purposes. However, in all cases the heating oil under the 
current definition has to have the physical or other characteristics 
that tie it to the type of fuel oil used to heat homes. In addition, 
because these fuel oils will qualify to generate RINs under the RFS 
program, it will likely lead to their use for heating of buildings, and 
not for generation of process heat. For the fuel oils included in the 
expanded definition, the tie to home heating oil will not be the 
physical characteristics of the fuel oil but instead its actual usage 
for heating for the purposes of climate control for human comfort.
    In order to verify that the fuel oils are actually used to generate 
heat for climate control purposes, EPA is adopting the following 
registration, recordkeeping, product transfer document (PTD) and 
reporting requirements. These requirements will not apply to fuels 
qualifying under the existing 40 CFR 80.2(ccc) of the regulations. If 
RINs are generated for fuel oils under the expansion of the scope of 
home heating oil in today's rule, and those fuel oils are designated 
for but not actually used to generate heat for climate control 
purposes, but for some other purpose, all parties involved in either 
the generation, assignment, transfer or use of that RIN, including the 
end user of that fuel oil, are subject to and liable for violations of 
the RFS2 regulations and the CAA.
a. Registration
    For the purpose of registration, EPA is allowing the producer of 
the expanded fuel oil types to establish their facility's baseline 
volume in the same manner as all other producers under the RFS program, 
e.g., based on the facility's permitted capacity or actual peak 
capacity. Additionally though, we are requiring producers of the 
expanded fuel oil types to submit affidavits in support of their 
registration, including a statement that the fuel will be used for the 
purposes of heating interior spaces of homes or buildings to control 
ambient climate for human comfort, and no other purpose. We also 
require that producers submit secondary affidavits from the existing 
end users to verify that the fuel is actually being used for a 
qualifying purpose. We are also adopting new reporting, product 
transfer documents (PTD), and recordkeeping requirements discussed 
below that will be used as a means for verification that the qualifying 
fuel is being used in an approved application. These requirements are 
necessary to assure confidence that the fuel used to generate RINs is 
actually used for a qualifying purpose because these types of fuel have 
not previously been used as heating oil, and are not readily 
identifiable by their physical characteristics. Without such

[[Page 61287]]

safeguards, EPA could not be confident that the fuel is used as heating 
oil, and end users might not have adequate notice that the fuel must be 
used as heating oil. EPA believes these requirements will place a small 
burden on producers and end users, and greatly benefit the integrity of 
the program.
b. Reporting, Product Transfer Documents and Recordkeeping Requirements
    For the purpose of continued verification after registration, EPA 
is adopting additional requirements for reporting in Sec.  
80.1451(b)(1)(ii)(T), PTDs in Sec.  80.1453(d), and recordkeeping in 40 
CFR 80.1454(b), for the expanded fuel oil types.
    The reporting, PTD, and recordkeeping requirements will help ensure 
that the expanded fuel oil types that are used to generate RINs are 
actually used in a qualifying application. For reporting, producers are 
required to file quarterly reports with EPA that identify certain 
information about the volume of fuel oil produced and used as heating 
oil. The additional reporting requirements stipulate that the producer 
of fuel oils submit affidavits to EPA reporting the total quantity of 
the fuel oils produced, the total quantity of the fuel oils sold to end 
users, and the total quantity of fuel oils sold to end users for which 
RINs were generated. Additionally, affidavits from each end user must 
be obtained by the producer and reported to EPA, describing the total 
quantity of fuel oils received from the producer, the total amount of 
fuel oil used for qualifying purposes, the date the fuel oil was 
received from the producer, the blend level of the fuel oil, quantity 
of assigned RINs received with the renewable fuel, and quantity of 
assigned RINs that the end user separated from the renewable fuel, if 
applicable.\10\ The additional product transfer document requirement 
associated with the expanded definition of heating oil is that a PTD 
must be prepared and maintained between the fuel oil producer and the 
final end user for the legal transfer of title or custody of a specific 
volume of fuel oil that is designated for use, and is actually used, 
only for the purpose of heating interior spaces of buildings to control 
ambient climate for human comfort. This additional PTD requirement 
requires that the PTD used to transfer ownership or custody of the 
renewable fuel must contain the statement: ``This volume of renewable 
fuel is designated and intended to be used to heat interior spaces of 
homes or buildings to control ambient climate for human comfort. Do NOT 
use for process heat or any other purpose, pursuant to 40 CFR Sec.  
80.1460(g).'' EPA believes that this PTD requirement will help to 
ensure that each gallon of fuel oil that is transferred from the 
producer to the end user is used for qualifying purposes under the 
expanded definition of heating oil. If the fuel oil is sent to the end 
user, but the fuel oil is not actually used to generate heat for 
climate control purposes, but for some other non-qualifying purpose, 
then the RINs that were generated for that fuel oil must be immediately 
retired and reported under 40 CFR 80.1451. The additional recordkeeping 
requirement is that producers are required to keep copies of the 
contracts which describe the fuel oil under contract with each end 
user. Consistent with existing regulations, producers are required to 
maintain all documents and records submitted for registration, 
reporting, and PTDs as part of the producer's recordkeeping 
requirements. EPA believes the producer's maintenance of these records 
will allow for continued tracking and verification that the end use of 
the fuel oil is in compliance with the expanded definition of heating 
oil.
---------------------------------------------------------------------------

    \10\ EPA does not expect that the expanded definition of home 
heating oil will result in an obligation on home owners or small 
businesses. Based on our analysis of the market, qualifying fuel oil 
is expected to be used in large industrial settings or apartment 
buildings, not in individual homes. Therefore, EPA anticipates that 
the information it is requiring would be readily available and 
producible by these entities.
---------------------------------------------------------------------------

D. Additional Requirement for RIN Generation

    We are also amending the regulatory text that describes the general 
requirements for how RINs are generated and assigned to batches of 
renewable fuel by renewable fuel producers and importers. This will 
explicitly clarify a requirement that always existed: that producers 
and importer of renewable fuel who generate RINs must comply with the 
registration requirements of 40 CFR 80.1450, the reporting requirements 
of 40 CFR 80.1451, the recordkeeping requirements of 40 CFR 80.1454, 
and all other applicable regulations of this subpart M. This is a 
generally applicable requirement--not specific to fuel meeting the 
definition of home heating oil. See amended section 80.1426(a)(1)(iii).

VI. Amendments Related to Transmix

    The final regulations for the nonroad diesel program were published 
in the Federal Register on June 24, 2004.\11\ The provisions in the 
nonroad diesel rule related to transmix processors were modified by the 
Category 3 Marine diesel final rule that was published on April 30, 
2010.\12\ This action amends the requirements for diesel fuel produced 
by transmix processors. Below is a table listing the provisions that we 
are amending. The following sections provide a discussion of these 
amendments.
---------------------------------------------------------------------------

    \11\ 69 FR 38958 (June 24, 2004).
    \12\ 75 FR 22896 (April 30, 2010).

------------------------------------------------------------------------
Proposed amendments to the  diesel
          program section                        Description
------------------------------------------------------------------------
80.511(b)(4)......................  Amended to allow for the production
                                     and sale of 500 ppm locomotive and
                                     marine (LM) diesel fuel produced
                                     from transmix past 2014.
80.513 (entire section)...........  Amended to allow for the production
                                     and sale of 500 ppm LM diesel fuel
                                     produced from transmix past 2014.
80.572(d).........................  Amended to extend 500 ppm LM diesel
                                     fuel label past 2012.
80.597(d)(3)(ii)..................  Amended to include 500 ppm LM diesel
                                     fuel in the list of fuels that an
                                     entity may deliver or receive
                                     custody of past June 1, 2014.
------------------------------------------------------------------------

[[Page 61288]]

A. Extension of the Diesel Transmix Provisions Outside of the Northeast 
Mid-Atlantic Area and Alaska Beyond 2014

    Batches of different fuel products commonly abut each other as they 
are shipped in sequence by pipeline. When the mixture between two 
adjacent products is not compatible with either product, it is removed 
from the pipeline and segregated as transmix. Transmix typically is 
gathered for reprocessing at the end of the fuel distribution system 
far from a refinery. In addition to the long transportation distances 
to return transmix to a refinery for reprocessing, incorporating 
transmix into a refinery's feed also presents technical and logistical 
refining process challenges that typically make refinery reprocessing 
an unattractive option. Thus, transmix processers provide a valuable 
service in maintaining an efficient fuel distribution system. Transmix 
processing facilities handle very low volumes of fuel compared to a 
refinery and hence are limited to the use of a simple distillation 
tower and additional blendstocks to manufacture finished fuels. There 
is currently no desulfurization equipment which has been demonstrated 
to be suitable for application at a transmix processor facility. The 
cost of installing and operating a currently available desulfurization 
unit is too high in relation to the small volume of distillate fuel 
produced at transmix processing facilities. Some products shipped by 
pipeline such as jet fuel and heating oil are subject to relatively 
high sulfur specifications (e.g., maximum 3,000 ppm for jet fuel). The 
presence of such high sulfur products in multi-product pipelines and 
consequently in transmix constrains the ability of transmix processors 
to produce a low sulfur distillate product.
    The engine emission standards finalized in the nonroad diesel 
rulemaking for new nonroad, locomotive, and Category 1 & 2 (C1 & C2) 
marine engines necessitates the use of sulfur-sensitive emissions 
control equipment which requires 15 ppm sulfur diesel fuel to function 
properly.\13\ Accordingly, the nonroad rule required that nonroad, 
locomotive and marine (NRLM) diesel fuel must meet a 15 ppm sulfur 
standard in parallel with the introduction of new sulfur-sensitive 
emission control technology to NRLM equipment. Beginning June 1, 2014, 
the nonroad diesel rule required that all NRLM diesel fuel produced by 
refiners and importers must meet a 15 ppm sulfur standard. The nonroad 
diesel rule included special provisions to allow the continued use of 
500 ppm sulfur locomotive and marine (LM) diesel fuel produced from 
transmix beyond 2014 in older technology engines as long as such 
engines remained in the in-use fleet. These provisions along with other 
now expired flexibilities in the diesel program were designed to 
minimize and postpone the impacts on transmix processors of 
transitioning to a condition where all highway, nonroad, locomotive, 
and marine diesel engines can only operate on 15 ppm diesel fuel.\14\ 
The 500 ppm LM diesel transmix provisions were limited to areas outside 
of the Northeast Mid-Atlantic Area (NEMA) and Alaska because it was 
judged that the heating oil market in these areas would provide a 
sufficient outlet for transmix distillate in these areas.\15\ Excluding 
the NEMA area and Alaska also allowed us to exempt the NEMA area and 
Alaska from the fuel marker provisions that are a part of the 
compliance assurance regime. The continuation of the 500 ppm LM diesel 
transmix provisions beyond 2014 (finalized in the nonroad rule) was 
supported by ongoing recordkeeping, reporting, and fuel marker 
provisions that were established to facilitate enforcement during the 
phase in of the diesel sulfur program.\16\
---------------------------------------------------------------------------

    \13\ Control of Emissions of Air Pollution from Nonroad Diesel 
Engines and Fuel, Final Rule, 69 FR 38958 (June 24, 2004).
    \14\ As discussed in the original nonroad diesel rulemaking, as 
LM equipment is retired from service, the market for 500 ppm LM will 
gradually diminish and eventually disappear. Given the long lifetime 
of LM equipment (in many cases 40 years or more), we anticipate that 
a market for 500 ppm LM will remain for a significant amount of 
time. This phase-out time will also allow transmix processors to 
transition to their >15ppm sulfur distillate product to other 
markets (C3 marine, heating oil, process heat). It may also allow 
sufficient time for the introduction of desulfurization equipment 
that is suitable for use at transmix processing facilities.
    \15\ The NEMA area is defined in 40 CFR 80.510(g)(1) as follows: 
(1) Northeast/Mid-Atlantic Area, which includes the following States 
and counties, through May 31, 2014: North Carolina, Virginia, 
Maryland, Delaware, New Jersey, Connecticut, Rhode Island, 
Massachusetts, Vermont, New Hampshire, Maine, Washington DC, New 
York (except for the counties of Chautauqua, Cattaraugus, and 
Allegany), Pennsylvania (except for the counties of Erie, Warren, 
McKean, Potter, Cameron, Elk, Jefferson, Clarion, Forest, Venango, 
Mercer, Crawford, Lawrence, Beaver, Washington, and Greene), and the 
eight eastern-most counties of West Virginia (Jefferson, Berkeley, 
Morgan, Hampshire, Mineral, Hardy, Grant, and Pendleton).
    \16\ This included the now-completed phase-in of 15 ppm highway 
diesel fuel and 15 ppm nonroad diesel fuel as well as the phase-out 
of the small refiner and credits provisions for LM diesel fuel that 
will be completed in 2014.
---------------------------------------------------------------------------

    In the development of the proposed requirements for Category 3 (C3) 
marine engines, EPA worked with industry to evaluate how the 
enforcement provisions for the new 1,000-ppm C3 marine diesel fuel to 
be introduced in June of 2014 could be incorporated into existing 
diesel program provisions.\17\ Our assessment based on input from 
industry at the time indicated that incorporating the new C3 marine 
fuel into the diesel program enforcement mechanisms while preserving 
the 500 ppm diesel transmix flexibility could not be accomplished 
without retaining significant existing burdens and introducing new 
burdens on a broad number of regulated parties. We also concluded that 
the new C3 marine diesel market would provide a sufficient outlet for 
transmix processors distillate product in place of the 500 ppm LM 
diesel market. Thus, we believed the 500 ppm LM diesel transmix 
flexibility would no longer be needed after 2014. Hence, we requested 
comment on whether we should eliminate the 500 ppm LM transmix 
provisions in parallel with the implementation of the C3 marine diesel 
sulfur requirement. This approach allowed for a significant reduction 
in the regulatory burden on a large number of industry stakeholders 
through the retirement of the diesel program's designate-and-track and 
fuel marker requirements. All of the comments that we received on the 
proposed rule were supportive of the approach. Consequently, we 
finalized the approach in the C3 marine final rule that was published 
on April 30, 2010.\18\
---------------------------------------------------------------------------

    \17\ Control of Emissions From New Marine Compression-Ignition 
Engines at or Above 30 Liters per Cylinder; Proposed Rule, 74 FR 
44442 (August 28, 2009).
    \18\ Control of Emissions From New Marine Compression-Ignition 
Engines at or Above 30 Liters per Cylinder; Final Rule, 75 FR 22896 
(April 30, 2010).
---------------------------------------------------------------------------

    EPA received a petition from a group of transmix processors on June 
29, 2010, requesting that the Agency reconsider and reverse the 2014 
sunset date for the 500 ppm LM transmix flexibility.\19\ A parallel 
petition for judicial review was filed with the U.S. Court of Appeals, 
DC Circuit.\20\ The transmix processors stated that they were not aware 
of the

[[Page 61289]]

changes to the 500 ppm LM transmix provisions until after they were 
finalized. The petitioners also stated that they believe that the C3 
marine market would not be a viable outlet for their distillate product 
given the increased distribution costs compared to the 500 ppm LM 
market. Based on the additional input that we received from transmix 
processors and other stakeholders in the fuel distribution system 
during our consideration of the petition, EPA believes that while the 
increased costs for transportation of transmix distillate product could 
be accommodated, there is no compelling reason not to extend the 500 
ppm diesel transmix flexibility beyond 2014 if such costs can be 
avoided or deferred without affecting the benefits from the diesel 
sulfur program. A settlement agreement has been finalized between EPA 
and the petitioners under which EPA would propose regulatory changes to 
reintroduce the 500 ppm LM transmix diesel flexibility for legacy LM 
equipment.\21\ The amendments to the diesel transmix provisions 
contained in today's action are in accord with the settlement 
agreement.
---------------------------------------------------------------------------

    \19\ ``Petition to Reconsider Final Rule: Control of Emissions 
from New Marine Compression Ignition Engines at or Above 30 Liters 
per Cylinder; Final Rule,'' 75 FR 22,896 (April 30, 2010), Letter to 
EPA Administrator Lisa Jackson dated June 29, 2010, from Chet 
Thompson of Crowell and Moring LLP, on behalf of Allied Energy 
Company, Gladieux Trading and Marketing, Insight Equity Acquisition 
Partners, LP, Liquid Titan, LLC, and Seaport Refining and 
Environmental, LLC.
    \20\ Petition for Review, United States Court of Appeals for the 
District of Columbia Circuit, Petitioners, Allied Energy Company, 
Gladieux Trading and Marketing, Insight Equity Acquisition Partners, 
LP, LiquidTitan, LLC, and Seaport Refining and Environmental LLC, v. 
Respondent, U.S. Environmental Protection Agency, Case 10-1146, 
Document 1252640, Filed 06/29/2010.
    \21\ Notice of Proposed Settlement Agreement; Request for Public 
Comment, 76 FR 56194 (September 12, 2011).
---------------------------------------------------------------------------

    Our analysis indicates that extending the 500 ppm LM flexibility 
beyond 2014 would have a neutral or net beneficial effect on overall 
vehicle emissions. The use of 500 ppm LM from transmix would be limited 
to older technology engines that do not possess sulfur-sensitive 
emissions control technology. We believe that the 500 ppm LM 
segregation and other associated requirements would prevent misfueling 
of sulfur-sensitive engines.
    To evaluate the environmental consequences of extending the diesel 
transmix provisions, we compared the potential increase in sulfate 
particulate matter (PM) from the use of 500 ppm LM from transmix in 
older engines to the additional transportation emissions associated 
with shipment to the Category 3 (C3) marine market which might be 
deferred by allowing continued access to the 500 ppm LM market. Markets 
for locomotive and marine diesel tend to be nearer to transmix 
processing facilities than markets for C3 marine diesel. Therefore, 
extending the diesel transmix provisions would result in a reduction in 
nitrogen oxides (NOX), volatile organic compounds (VOCs), 
carbon monoxide (CO), as well as PM emissions that would otherwise be 
associated with transporting transmix distillate product to the more 
distant C3 market.
    Although some batches of transmix distillate product may approach 
the 500 ppm sulfur limit, we estimate that the average sulfur content 
of transmix distillate product would be no more than 300 ppm.\22\ We 
estimate that approximately 500 million gallons of distillate fuel per 
year is produced from transmix.\23\ Assuming that all of the transmix 
distillate product would be used as 500 ppm LM in older engines, we 
estimate that an additional 70 tons of sulfate PM would be produced 
annually compared to the use of 15 ppm diesel fuel.\24\ We believe that 
a substantial fraction of transmix distillate product would be used as 
heating oil and C3 diesel fuel regardless of whether the diesel 
transmix provisions are extended. Also, as the older LM engines are 
retired from service, the size of the potential 500 ppm LM market will 
diminish until all LM engines must use 15 ppm diesel fuel. Therefore, 
assuming that all transmix distillate product would be used as 500 ppm 
LM provides an upper bound estimate of the potential impact on PM 
emissions. We estimate on average that transmix processors would need 
to ship their transmix distillate product an additional 150 miles by 
tank truck to reach the C3 Emission Control Area (ECA) marine market as 
compared to the 500 ppm LM market.\25\ This would result in an 
additional 80 tons of PM emissions annually. Thus, the PM emissions 
associated with transport to the C3 marine market are roughly equal to 
the increased sulfate PM emissions associated with the continued use of 
500 ppm LM. We estimate that the increased transport distances could 
also result in an additional 2,200 tons of NOX, 220 tons of 
VOC, and 650 tons of CO annually. Based on the above discussion, we 
believe that the extension of the 500 ppm LM provisions beyond 2014 
outside the NEMA area and Alaska would have a neutral or net positive 
environmental impact.
---------------------------------------------------------------------------

    \22\ This is based on our review of data on the sulfur levels of 
transmix distillate product from various transmix processors.
    \23\ Based on information provided by transmix processors, we 
estimate that approximately 750 million gallons per year of transmix 
is produced annually and that \2/3\ of the transmix-derived product 
is distillate fuel and \1/3\ is gasoline.
    \24\ Sulfate PM was converted to PM2.5 to allow a 
comparison with PM2.5 from increased fuel transport 
emissions.
    \25\ There is no ability to ship transmix distillate product to 
the C3 marine diesel market by pipeline.
---------------------------------------------------------------------------

    The extension of the 500 ppm LM transmix flexibility would defer 
additional transportation costs and provide a lower-cost fuel for use 
in older LM engines for many years to come given that the useful life 
of LM engines can exceed 40 years.\26\ Therefore, extending this 
flexibility would reduce the overall burden on industry of compliance 
with EPA's diesel sulfur program. Providing additional time for 
transmix processors to evaluate how the C3 ECA marine market will 
develop after 2014 would also facilitate a smoother transition for 
transmix processors from the 500 ppm LM market as it gradually 
disappears due to fleet turnover.
---------------------------------------------------------------------------

    \26\ In the 2011 edition of ``Railroad Facts,'' the Association 
of American Railroads reported that in 2010 approximately 35% of the 
locomotive fleet was at least 21 years old.
---------------------------------------------------------------------------

B. Revised Diesel Transmix Provisions

    Industry stakeholders suggested alternative enforcement mechanisms 
to support the extended flexibility which would not necessitate 
reinstating and expanding the designate-and-track and fuel marker 
provisions that were retired by the C3 marine final rule. Reinstatement 
and expansion of these provisions would likely place an unacceptable 
burden on a large number of stakeholders, most of whom would not handle 
500 ppm LM. The suggested alternative enforcement mechanism would 
impose minimal additional reporting and recordkeeping burdens only on 
the parties that produce, handle, and use 500 ppm LM. We believe that 
this alternative enforcement approach would meet the Agency's goals of 
ensuring that the pool of 500 ppm LM is limited to transmix distillate 
and that 500 ppm LM is not used in sulfur-sensitive emissions control 
equipment.
    The compliance assurance provisions that we are using to support 
the extension of the diesel transmix flexibility are similar to those 
that were used to support the small refiner flexibilities in Alaska 
during the phase-in of EPA's diesel sulfur program.\27\ In addition to 
registering as a refiner and certifying that each batch of fuel 
complies with the fuel quality requirements for 500 ppm LM diesel fuel, 
producers of 500 ppm transmix distillate product would be required to 
submit a compliance plan for approval by EPA. This compliance plan 
would provide details on how the 500 ppm LM would be segregated through 
to the ultimate consumer and its use limited to the legacy LM fleet. 
The plan would be required to identify the entities that would handle 
the fuel and the means of segregation. We believe that it is 
appropriate to limit the number of entities that would be allowed to 
handle the fuel between the producer and the ultimate consumer in order 
to facilitate

[[Page 61290]]

EPA's compliance assurance activities.\28\ Based on conversations with 
transmix processors, we believe that specifying that no more than 4 
separate entities handle the fuel between the producer and the ultimate 
consumer would not hinder the ability to distribute the fuel.\29\ The 
plan would need to identify the ultimate consumers and include 
information on how the product would be prevented from being used in 
sulfur-sensitive equipment.
---------------------------------------------------------------------------

    \27\ See 40 CFR 80.554(a)(4).
    \28\ An entity is defined as any company that takes custody of 
500 ppm LM diesel fuel.
    \29\ In most cases, fewer entities would take custody of the 
product. In many cases, only a single entity (a tank truck operator) 
would be in the distribution chain between the transmix processor 
and the ultimate consumer. However, we understand that as many as 4 
separate entities may handle the product between the producer and 
ultimate consumer if it is shipped by pipeline: the tank truck 
operator to ship the product from the producer to the pipeline, the 
pipeline operator, the product terminal that receives the fuel from 
the pipeline, and another tank truck operator to ship the product to 
the ultimate consumer from the terminal.
---------------------------------------------------------------------------

    We understand that some transmix processors currently rely on 
shipment by pipeline to reach the 500 ppm locomotive diesel market.\30\ 
As a result, the regulations allow 500 ppm LM to be shipped by pipeline 
provided that it does not come into contact with distillate products 
that have a sulfur content greater than 15 ppm. The compliance plan 
would need to include information from the pipeline operator regarding 
how this segregation would be maintained. Discussions with transmix 
processors indicate that this requirement would not limit their ability 
to ship 500 ppm LM by pipeline. If 500 ppm LM was shipped by pipeline 
abutting 15 ppm diesel, the volume of 500 ppm LM delivered would likely 
be slightly greater than that which was introduced into the pipeline as 
a consequence of cutting the pipeline interface between the two fuel 
batches into the 500 ppm LM batch. This small increase in 500 ppm LM 
volume would be acceptable.
---------------------------------------------------------------------------

    \30\ 500 ppm LM diesel fuel is shipped by a short dedicated 
pipeline from a product terminal to a locomotive refueling facility.
---------------------------------------------------------------------------

    To provide an additional safeguard to ensure that volume of 500 ppm 
LM diesel fuel does not swell inappropriately, the volume increase 
during any single pipeline shipment must be limited to 2 volume percent 
or less. This limitation on volume swell to 2 volume percent or less is 
consistent with the limitation in 40 CFR 80.599 (b)(5) regarding the 
allowed swell in volume during the shipment of highway diesel fuel for 
the purposes of the determination of compliance with the now expired 
volume balance requirements under 40 CFR 80.598(b)(9)(vii)(B). Industry 
did not object to this requirement, and therefore, we believe that 
limiting the volume swell of 500 ppm LM diesel fuel during shipment by 
pipeline to 2 volume percent or less should provide sufficient 
flexibility.
    Product transfer documents (PTDs) for 500 ppm LM diesel are 
required to indicate that the fuel must be distributed in compliance 
with the approved compliance assurance plan. Entities in the 
distribution chain for 500 ppm LM diesel fuel are required to keep 
records on the volumes of the 500 ppm that they receive from and 
deliver to each other entity. Based on input from fuel distributors, 
keeping these records will be a minimal additional burden, as discussed 
in section VIII.B. Such entities are also required to keep records on 
how the fuel was transported and segregated. We would typically expect 
that the volumes of 500 ppm LM delivered would be equal to or less than 
those received unless shipment by pipeline occurred. Some minimal 
increase in 500 ppm LM volume would be acceptable due to differences in 
temperature between when the shipped and received volumes were measured 
and interface cuts during shipment by pipeline. Entities that handle 
500 ppm LM are required to calculate a balance of 500 ppm LM received 
versus delivered/used on an annual basis. If the volume of fuel 
delivered/dispensed is greater than that received, EPA would expect 
that the records would indicate the cause. If an entity's evaluation of 
their receipts and deliveries of 500 ppm LM fuel indicated 
noncompliance with the product segregation requirements, the custodian 
would be required to notify EPA. All entities in the 500 ppm LM 
distribution chain are required to maintain the specified records for 5 
years and provide them to EPA upon request.

VII. Amendments Related to the Marker Requirements for Locomotive and 
Marine Fuel

    Today's rule amends the regulatory provisions regarding the 
transition in the fuel marker requirements for 500 ppm LM diesel fuel 
in 2012 to address an oversight in the original rulemaking where the 
regulations failed to incorporate provisions described in the 
rulemaking preamble. Today's rule also amends the regulatory provisions 
regarding the transition in the fuel marker requirements for heating 
oil in 2014 to provide improved clarity.
    The preamble in the nonroad diesel final rule stated that EPA 
intended to allow 500 ppm LM diesel fuel containing greater than 0.10 
milligrams per liter of solvent yellow 124 (SY124) to be present at any 
location in the fuel distribution system (up to and including retail 
and wholesale-purchaser-consumer storage tanks) until September 30, 
2012.\31\ Although it was not explicitly stated in the preamble, it was 
implied that additional time would be allowed for marked 500 ppm LM to 
transition from the fuel tanks connected to locomotive and marine 
engines, consistent with the approach taken regarding the 
implementation of more stringent diesel fuel sulfur standards. However, 
the nonroad diesel regulations are not consistent with the preamble and 
do not provide the allowance for marked 500 ppm LM diesel fuel to 
transition from fuel distribution and end-user tanks. 40 CFR 80.510(e) 
requires that all 500 ppm LM diesel fuel delivered from a truck loading 
rack located outside of the Northeast Mid-Atlantic (NEMA) area and 
Alaska must contain at least 6 mg/liter of SY124 through May 31, 2012. 
However, the regulatory text at 40 CFR 80.510(f) requires that 
beginning June 1, 2012, any diesel fuel that contains 0.10 mg/liter of 
SY124 must be designated as heating oil. Thus, the regulations as 
currently written do not provide any transition time for marked LM fuel 
that is present the distribution system as of May 31, 2012 to work its 
way through the fuel distribution system downstream of the truck 
loading rack and through the tanks connected to locomotive and marine 
engines.
---------------------------------------------------------------------------

    \31\ ``Control of Emissions for Air Pollution From Nonroad 
Diesel Engines and Fuel; Final Rule,'' Section V.C.1.c., ``The 
Period From June 1, 2012 Through May 31, 2014, 69 FR 39083, 39084 
(June 29, 2004).
---------------------------------------------------------------------------

    A number of locomotive and marine wholesale purchaser-consumers 
have taken custody of marked 500 ppm LM diesel fuel that they will not 
be able to consume prior to June 1, 2012. A number of fuel suppliers 
also have inventories of 500 ppm LM diesel fuel on hand that they may 
not be able to sell to LM diesel fuel users because such users are 
concerned about clearing their tanks of marked LM diesel fuel by June 
1, 2012. This new rule allows marked 500 ppm LM diesel fuel to 
transition normally through the fuel distribution and use system, 
consistent with the original intent of the nonroad diesel rule 
preamble. Today's rule allows 500 ppm LM diesel fuel at any point in 
the fuel distribution and end use system to contain more than 0.10 
milligrams per liter of SY 124 through November 30, 2012.
    We are implementing a single transition date applicable at all 
points in

[[Page 61291]]

the fuel distribution and use system rather than a separate date 
applicable through retail and wholesale-purchaser-consumer (WPC) 
facilities and another date applicable at all locations including the 
tanks attached to locomotive and marine equipment because we believe 
that a stepped compliance schedule is not necessary and a single 
transition date provides the most flexibility for regulated parties. We 
expect that the marker will typically transition out of retailer and 
WPC LM diesel storage tanks well in advance of November 30, 2012. We 
further expect that users of LM diesel fuel can coordinate with retail 
and WPC facilities regarding deliveries of marked 500 ppm LM diesel 
fuel to ensure that the fuel in storage tanks attached to LM equipment 
is in compliance by November 30, 2012.
    Today's rule also amends the regulation to clarify the transition 
of the solvent yellow 124 marker out of heating oil beginning June 1, 
2014. Specifically, today's rule amends the regulations to clarify that 
after December 1, 2014, EPA will no longer have any requirements with 
respect to the use of the solvent yellow 124 marker. This is consistent 
with the intent expressed in our original nonroad diesel fuel 
rulemaking. We do not believe these changes will adversely impact 
emissions.

VIII. Statutory and Executive Order Reviews

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

    Under Executive Order 12866 (58 CFR 51735 (October 4, 1993), this 
action is a ``significant regulatory action.'' Accordingly, EPA 
submitted this action to the Office of Management and Budget (OMB) for 
review under Executive Orders 12866 and 13563 (76 FR 3821 (January 21, 
2011) and any changes made in response to OMB recommendations have been 
documented in the docket for this action.

B. Paperwork Reduction Act

    The information collection requirements in this notice of proposed 
rulemaking and direct final rule have been submitted for approval to 
the Office of Management and Budget (OMB) under the Paperwork Reduction 
Act, 44 U.S.C. 3501 et. seq. The Information Collection Request (ICR) 
document prepared by EPA related to the amended heating oil definition 
has been assigned EPA ICR number 2462.01 and the ICR document prepared 
by EPA for diesel fuel produced by transmix producers has been assigned 
EPA ICR number 2463.01. Supporting statements for these proposed ICRs 
have been placed in the docket. The proposed information collections 
are described in the following paragraphs.
    This action contains recordkeeping and reporting (registration and 
product transfer documentation) that may affect parties who produce or 
import renewable fuels subject to the revised definition of heating 
oil. EPA expects that very few parties will be subject to additional 
recordkeeping and reporting. We estimate that up to 11 parties (i.e., 
RIN generators, consisting of up to 10 producers and one importer) may 
be subject to the proposed information collection over the next several 
years.\32\ We estimate an annual reporting burden of 21 hours per 
respondent and an annual recordkeeping burden of 24 hours, yielding a 
total per respondent burden of 45 hours.\33\ Burden means the total 
time, effort, or financial resources expended by persons to generate, 
maintain, retain, or disclose or provide information to or for a 
Federal agency. This includes the time needed to review the 
instructions; develop, acquire, install, and utilize technology and 
systems for the purpose of collecting, validating, and verifying 
information, processing and maintaining information, and disclosing and 
providing information; adjust the existing ways to comply with any 
previously applicable instructions and requirements; train personnel to 
be able to respond to a collection of information; search data sources; 
complete and review the collection of information; and transit or 
otherwise disclose the information. Burden is as defined at 5 CFR 
1320.3(b).
---------------------------------------------------------------------------

    \32\ We project that the number of effected parties will remain 
essentially constant over time.
    \33\ This includes the time to train staff, formulate and 
transmit responses, and other miscellaneous compliance related 
activities.
---------------------------------------------------------------------------

    This action also contains provisions related to diesel fuel that is 
produced by transmix processors. We have proposed reporting 
requirements that would apply to transmix processors (all of whom are 
refiners) and other parties (such as carriers or distributors) in the 
distribution chain who handle diesel fuel produced by transmix 
producers. The collected data will permit EPA to: (1) Process 
compliance plans from transmix producers; and (2) Ensure that diesel 
fuel made from transmix meets the standards required under the 
regulations at 40 CFR Part 80, and that the associated benefits to 
human health and the environment are realized. We estimate that 25 
transmix processors and 150 other parties may be subject to the 
proposed information collection.\34\ We estimate an annual reporting 
burden of 28 hours per transmix processor (respondent) and 8 hours per 
other party (respondent); considering all respondents (transmix 
producers and other parties) who would be subject to the proposed 
information collection, the annual reporting burden, per respondent, 
would be 11 hours. Burden means the total time, effort, or financial 
resources expended by persons to generate, maintain, retain, or 
disclose or provide information to or for a Federal agency. This 
includes the time needed to review the instructions; develop, acquire, 
install, and utilize technology and systems for the purpose of 
collecting, validating, and verifying information, processing and 
maintaining information, and disclosing and providing information; 
adjust the existing ways to comply with any previously applicable 
instructions and requirements; train personnel to be able to respond to 
a collection of information; search data sources; complete and review 
the collection of information; and transit or otherwise disclose the 
information. Burden is as defined at 5 CFR 1320.3(b).
---------------------------------------------------------------------------

    \34\ This is based on current transmix production. Although the 
total volume of transmix produced in the fuel distribution system 
may decline in parallel with the projected decrease in overall 
petroleum-based fuel use, we anticipate that the number of transmix 
processors will remain essentially constant since their number is 
dependent on the configuration of the petroleum-based fuel 
distribution system.
---------------------------------------------------------------------------

    The amendments to the fuel marker requirements for locomotive and 
marine diesel fuel in today's rule do not contain any new recordkeeping 
and reporting requirements.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9.
    To comment on the Agency's need for this information, the accuracy 
of the provided burden estimates, and any suggested methods for 
minimizing respondent burden, EPA has established a public docket for 
this rule, which includes the ICRs described above, under Docket ID 
number EPA-HQ-OAR-2012-0223. Submit any comments related to the ICR to 
EPA and OMB. See the ADDRESSES section at the beginning of this notice 
for where to submit comments to EPA. Send comments to OMB at the Office 
of Information and

[[Page 61292]]

Regulatory Affairs, Office of Management and Budget, 725 17th Street 
NW., Washington, DC 20503, Attention: Desk Office for EPA. Since OMB is 
required to make a decision concerning the ICR between 30 and 60 days 
after October 9, 2012, a comment to OMB is best assured of having its 
full effect if OMB receives it by November 8, 2012.

 C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedure Act or any other statute unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small 
entities, small entity is defined as: (1) A small business as defined 
by the Small Business Administration's (SBA) regulations at 13 CFR 
121.201; (2) a small governmental jurisdiction that is a government of 
a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    After considering the economic impacts of this action on small 
entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. This final 
rule will not impose any new requirements on small entities. The 
amendments to the diesel transmix provisions would lessen the 
regulatory burden on all affected transmix processors and provide a 
source of lower cost locomotive and marine diesel fuel to consumers. 
The relatively minor corrections and modifications this rule do not 
impact small entities.

D. Unfunded Mandates Reform Act

    This rule does not contain a Federal mandate that may result in 
expenditures of $100 million or more for State, local, and tribal 
governments, in the aggregate, or the private sector in any one year. 
We have determined that this action will not result in expenditures of 
$100 million or more for the above parties and thus, this rule is not 
subject to the requirements of sections 202 or 205 of UMRA.
    This rule is also not subject to the requirements of section 203 of 
UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. It only applies to 
gasoline, diesel, and renewable fuel producers, importers, distributors 
and marketers and makes relatively minor corrections and modifications 
to the RFS2 and diesel sulfur regulations.

E. Executive Order 13132 (Federalism)

    This action does not have federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. This action only applies to 
gasoline, diesel, and renewable fuel producers, importers, distributors 
and marketers and makes relatively minor corrections and modifications 
to the RFS2 and diesel sulfur regulations. Thus, Executive Order 13132 
does not apply to this action.

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

    This rule does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249 (November 9, 2000)). It applies to 
gasoline, diesel, and renewable fuel producers, importers, distributors 
and marketers. This action makes relatively minor corrections and 
modifications to the RFS2 and diesel sulfur regulations, and does not 
impose any enforceable duties on communities of Indian tribal 
governments. Thus, Executive Order 13175 does not apply to this action.

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

    EPA interprets EO 13045 (62 FR 19885 (April 23, 1997)) as applying 
only to those regulatory actions that concern health or safety risks, 
such that the analysis required under section 5-501 of the EO has the 
potential to influence the regulation. This action is not subject to EO 
13045 because it does not establish an environmental standard intended 
to mitigate health or safety risks.

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

    This action is not a ``significant energy action'' as defined in 
Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy. We have concluded that this rule is not 
likely to have adverse energy effects because we do not anticipate 
adverse energy effects related to the additional generation of RINs for 
home heating oil or the reduced regulatory burden for transmix 
processors. This rule will facilitate the use of 500 ppm sulfur 
locomotive and marine (LM) diesel fuel, which contains the SY 124 
marker that is already in the fuel distribution and use system 
consistent with EPA's original intent. Today's action will avoid the 
potential need to remove marked 500 ppm LM diesel fuel from the system 
for reprocessing, and the associated increased costs and potential 
disruption to the supply of LM diesel fuel.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so will be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards.
    This action does not involve technical standards. Therefore, EPA 
did not consider the use of any voluntary consensus standards.

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

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
Federal executive policy on environmental justice. Its main provision 
directs Federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA has determined that this rule will not have disproportionately 
high and adverse human health or environmental effects on minority or 
low-income

[[Page 61293]]

populations because it does not affect the level of protection provided 
to human health or the environment. These amendments will not relax the 
control measures on sources regulated by the RFS regulations and 
therefore will not cause emissions increases from these sources. We 
have determined that proposed amendments to the diesel transmix 
provisions and marker provisions for locomotive and marine diesel fuel 
under the diesel sulfur program would have a neutral or positive impact 
on diesel vehicle emissions.\35\
---------------------------------------------------------------------------

    \35\ See section VI and VII of today's notice for details of 
this analysis.
---------------------------------------------------------------------------

K. Congressional Review Act

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

IX. Statutory Provisions and Legal Authority

    Statutory authority for the rule finalized today can be found in 
section 211 of the Clean Air Act, 42 U.S.C. 7545. Additional support 
for the procedural and compliance related aspects of today's rule, 
including the recordkeeping requirements, come from sections 114, 208, 
and 301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 7601(a).

List of Subjects in 40 CFR Part 80

    Environmental protection, Administrative practice and procedure, 
Agriculture, Air pollution control, Confidential business information, 
Diesel fuel, Transmix, Energy, Forest and forest products, Fuel 
additives, Gasoline, Imports, Labeling, Motor vehicle pollution, 
Penalties, Petroleum, Reporting and recordkeeping requirements.

    Dated: September 17,2012.
Lisa P. Jackson,
Administrator.
    For the reasons set forth in the preamble, 40 CFR part 80 is 
amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

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

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

Subpart I--[Amended]

0
2. Section 80.510 is amended by revising paragraph (f) to read as 
follows:

Sec.  80.510  What are the standards and marker requirements for NRLM 
diesel fuel and ECA marine fuel?

* * * * *
    (f) Marking provisions. From June 1, 2012 through November 30, 
2014:
    (1) Except as provided for in paragraph (i) of this section, prior 
to distribution from a truck loading terminal, all heating oil shall 
contain six milligrams per liter of marker solvent yellow 124 from June 
1, 2012 through May 31, 2014.
    (2) All motor vehicle and NR diesel fuel shall be free of marker 
solvent yellow 124, and all LM diesel fuel shall be free of marker 
solvent yellow 124 beginning December 1, 2012.
    (3) From June 1, 2012 through November 30, 2012, any diesel fuel 
that contains greater than or equal to 0.10 milligrams per liter of 
marker solvent yellow 124 shall be deemed to be either heating oil or 
500 ppm sulfur LM diesel fuel and shall be prohibited from use in any 
motor vehicle or nonroad diesel engine (excluding locomotive, or marine 
diesel engines).
    (4) From December 1, 2012 through November 30, 2014, any diesel 
fuel that contains greater than or equal to 0.10 milligrams per liter 
of marker solvent yellow 124 shall be deemed to be heating oil and 
shall be prohibited from use in any motor vehicle or nonroad diesel 
engine (including locomotive, or marine diesel engines).
    (5) Except as provided for in paragraph (i) of this section, from 
June 1, 2012 through November 30, 2014, any diesel fuel, other than jet 
fuel or kerosene that is downstream of a truck loading terminal, that 
contains less than 0.10 milligrams per liter of marker solvent yellow 
124 shall be considered motor vehicle diesel fuel or NRLM diesel fuel, 
as appropriate.
    (6) Any heating oil that is required to contain marker solvent 
yellow 124 pursuant to the requirements of this paragraph (f) must also 
contain visible evidence of dye solvent red 164.
    (7) Beginning December 1, 2014 there are no requirements or 
restrictions on the use of marker solvent yellow 124 under this 
subpart.
* * * * *

0
3. Section 80.511 is amended by revising paragraphs (b)(4) and (b)(10) 
to read as follows:

Sec.  80.511  What are the per-gallon and marker requirements that 
apply to NRLM diesel fuel, ECA marine fuel, and heating oil downstream 
of the refiner or importer?

* * * * *
    (b) * * *
    (4) Except as provided in paragraphs (b)(5) through (8) of this 
section, the per-gallon sulfur standard of Sec.  80.510(c) shall apply 
to all NRLM diesel fuel beginning August 1, 2014 for all downstream 
locations other than retail outlets or wholesale purchaser-consumer 
facilities, shall apply to all NRLM diesel fuel beginning October 1, 
2014 for retail outlets and wholesale purchaser-consumer facilities, 
and shall apply to all NRLM diesel fuel beginning December 1, 2014 for 
all locations. This paragraph (b)(4) does not apply to LM diesel fuel 
produced from transmix or interface fuel that is sold or intended for 
sale in areas other than those listed in Sec.  80.510(g)(1) or (g)(2), 
as provided by Sec.  80.513(f).
* * * * *
    (10) For the purposes of this subpart, on any occasion where a 
distributor directly dispenses fuel into vehicles or equipment from a 
mobile facility such as a tanker truck, the distributor shall be 
treated as a retailer, and the mobile facility shall be treated as a 
retail outlet.

0
4. Section 80.513 is amended as follows:
0
a. By revising the section heading.
0
b. By revising the introductory text.
0
c. By revising paragraph (e).
0
d. By adding a new paragraph (f).

Sec.  80.513  What provisions apply to facilities that process 
transmix?

    For purposes of this section, transmix means a mixture of finished 
fuels, such as pipeline interface, that no longer meets the 
specifications for a fuel that can be used or sold without further 
processing. This section applies to refineries (or other facilities) 
that produce diesel fuel from transmix by distillation or other 
refining processes but do not produce diesel fuel by processing crude 
oil. This section only applies to the volume of diesel fuel produced by 
such a processor using these processes, and does not apply to any 
diesel fuel produced by the

[[Page 61294]]

blending of blendstocks. For the purposes of this section, pipeline 
interface means the mixture between different fuels that abut each 
other during shipment by pipeline.
* * * * *
    (e) From June 1, 2012 through June 1, 2014, NRLM diesel fuel 
produced by a facility that processes transmix is subject to the 
standards of Sec.  80.510(c), except that LM diesel fuel produced from 
transmix is subject to the sulfur standard of Sec.  80.510(a). This 
paragraph (e) does not apply to NRLM or LM diesel fuel that is sold or 
intended for sale in the areas listed in Sec.  80.510(g)(1) or (g)(2).
    (f) Beginning June 1, 2014, LM diesel fuel produced from transmix 
is subject to the sulfur standard of Sec.  80.510(a), provided that the 
conditions in this paragraph are satisfied. Diesel fuel produced from 
transmix that does not meet the conditions in this paragraph is subject 
to the sulfur standard in Sec.  80.510(c).
    (1) The fuel must be produced from transmix.
    (2) The fuel must not be sold or intended for sale in the areas 
listed in Sec.  80.510(g)(1) or (g)(2).
    (3) A facility producing 500 ppm LM diesel fuel must obtain 
approval from the Administrator for a compliance plan. The compliance 
plan must detail how the facility will segregate any 500 ppm LM diesel 
fuel produced subject to the standards under Sec.  80.510(a) from the 
producer through to the ultimate consumer from fuel having other 
designations. The compliance plan must identify the entities that 
handle the 500 ppm LM through to the ultimate consumer. No more than 4 
separate entities shall handle the 500 ppm LM between the producer and 
the ultimate consumer. The compliance plan must also identify all 
ultimate consumers to whom the refiner supplies the 500 ppm LM diesel 
fuel. The compliance plan must detail how misfueling of 500 ppm LM into 
vehicles or equipment that require the use of 15 ppm diesel fuel will 
be prevented.
    (i) Producers of 500 ppm LM diesel fuel must be registered with EPA 
under Sec.  80.597 prior to the distribution of any 500 ppm LM diesel 
fuel after June 1, 2014.
    (ii) Producers of 500 ppm LM must initiate a PTD that meets the 
requirements in paragraph (f)(3)(iii) of this section.
    (iii) All transfers of 500 ppm LM diesel fuel must be accompanied 
by a PTD that clearly and accurately states the fuel designation; the 
PTD must also meet all other requirements of Sec.  80.590.
    (iv) Batches of 500 ppm LM may be shipped by pipeline provided that 
such batches do not come into physical contact in the pipeline with 
batches of other distillate fuel products that have a sulfur content 
greater than 15 ppm.
    (v) The volume of 500 ppm LM shipped via pipeline under paragraph 
(f)(3)(iv) of this section may swell by no more than 2% upon delivery 
to the next party. Such a volume increase may only be due to volume 
swell due to temperature differences when the volume was measured or 
due to normal pipeline interface cutting practices notwithstanding the 
requirement under paragraph (f)(3)(iv) of this section.
    (vi) Entities that handle 500 ppm LM must calculate the balance of 
500 ppm LM received versus the volume delivered and used on an annual 
basis.
    (vii) The records required in this section must be maintained for 
five years, by each entity that handles 500 ppm LM and be made 
available to EPA upon request.
    (4) All parties that take custody of 500 ppm LM must segregate the 
product from other fuels and observe the other requirements in the 
compliance plan approved by EPA pursuant to paragraph (f)(3) of this 
section.

0
5. Section 80.572 is amended by revising the section heading and 
paragraph (d) to read as follows:

Sec.  80.572  What labeling requirements apply to retailers and 
wholesale purchaser-consumers of Motor Vehicle, NR, LM and NRLM diesel 
fuel and heating oil beginning June 1, 2010?

* * * * *
    (d) From June 1, 2010 and beyond, for pumps dispensing LM diesel 
fuel subject to the 500 ppm sulfur standard of Sec.  80.510(a):

LOW SULFUR LOCOMOTIVE AND MARINE DIESEL FUEL (500 ppm Sulfur Maximum)
WARNING
Federal law prohibits use in nonroad engines or in highway vehicles or 
engines.
* * * * *

0
6. Section 80.597 is amended by revising paragraph (d)(3)(ii) to read 
as follows:

Sec.  80.597  What are the registration requirements?

* * * * *
    (d) * * *
    (3) * * *
    (ii) Fuel designated as 500 ppm LM diesel fuel.
* * * * *

0
7. Section 80.598 is amended by revising paragraph (b)(9)(ii) to read 
as follows:

Sec.  80.598  What are the designation requirements for refiners, 
importers, and distributors?

* * * * *
    (b) * * *
    (9) * * *
    (ii) Until June 1, 2014, any distillate fuel containing greater 
than or equal to 0.10 milligrams per liter of marker solvent yellow 124 
required under Sec.  80.510(d), (e), or (f) must be designated as 
heating oil except that from June 1, 2010, through November 30, 2012, 
it may also be designated as LM diesel fuel as specified under Sec.  
80.510(e).
* * * * *

0
8. Section 80.601 is amended by revising paragraph (a)(2) to read as 
follows:

Sec.  80.610  What acts are prohibited under the diesel fuel sulfur 
program?

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

0
9. Section 80.1401 is amended by revising the definition of ``Heating 
Oil'' to read as follows:

Sec.  80.1401  Definitions.

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

0
10. Section 80.1426 is amended by revising paragraph (a)(1)(ii) 
introductory text and adding (a)(1)(iii) to read as follows:

[[Page 61295]]

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

    (a) * * *
    (1) * * *
    (ii) Is demonstrated to be produced from renewable biomass pursuant 
to the reporting requirements of Sec.  80.1451 and the recordkeeping 
requirements of Sec.  80.1454; and
* * * * *
    (iii) Was produced in compliance with the registration requirements 
of Sec.  80.1450, the reporting requirements of Sec.  80.1451, the 
recordkeeping requirements of Sec.  80.1454, and all other applicable 
regulations of this subpart M.
* * * * *

0
11. Section 80.1450 is amended by adding new paragraph (b)(1)(ix) to 
read as follows:

Sec.  80.1450  What are the registration requirements under the RFS 
program?

* * * * *
    (b) * * *
    (1) * * *
    (ix) For a producer of fuel oil meeting paragraph (2) of the 
definition of heating oil in Sec.  80.1401:
    (A) An affidavit from the producer of the fuel oil stating that the 
fuel oil for which RINs are generated will be sold for the purposes of 
heating interior spaces of homes or buildings to control ambient 
climate for human comfort, and no other purpose.
    (B) Affidavits from existing final end users of the fuel oil 
stating that the fuel oil for which RINs are generated is being used 
for purposes of heating interior spaces of homes or buildings to 
control ambient climate for human comfort, and no other purpose.
* * * * *

0
12. Section 80.1451 is amended by adding a new paragraph (b)(1)(ii)(T) 
to read as follows:

Sec.  80.1451  What are the reporting requirements under the RFS 
program?

* * * * *
    (b) * * *
    (1) * * *
    (ii) * * *
    (T) Producers of fuel oil that meets the paragraph (2) of the 
definition of heating oil in Sec.  80.1401, shall report, on a 
quarterly basis, all the following for each volume of fuel oil:
    (1) Total volume of fuel oil produced and sold to end users, in 
units of U.S. gallon, and the respective heating content of the fuel 
oil, in units of BTU per U.S. gallon.
    (2) Total volume of fuel oil for which RINs were generated, in 
units of U.S. gallon, and the respective quantities of fuel oil sold to 
end users, names and locations of the buildings in which the fuel oil 
was used to heat interior spaces of those buildings to control ambient 
climate for human comfort, and the RIN numbers assigned to each batch 
of fuel oil.
    (3) For each batch of transferred fuel oil for which RINs are 
generated that the renewable fuel producer claims to meet paragraph (2) 
of the definition of heating oil in Sec.  80.1401 and is sold for those 
purposes, affidavits from the end user of the fuel that includes, but 
not limited to, the following information:
    (i) Quantity of fuel oil received from producer.
    (ii) Quantity of fuel oil used for purposes of heating interior 
spaces of homes or buildings to control ambient climate for human 
comfort, and no other purpose.
    (iii) Date the fuel oil was received from producer.
    (iv) Blend level of the fuel oil in petroleum based fuel oil when 
received (if applicable).
    (v) Quantity of assigned RINs received with the renewable fuel, if 
applicable.
    (vi) Quantity of assigned RINs that the end user separated from the 
renewable fuel, if applicable.
* * * * *

0
13. Section 80.1453 is amended by adding a new paragraph (d) to read as 
follows:

Sec.  80.1453  What are the product transfer document (PTD) 
requirements for the RFS program?

* * * * *
    (d) For fuel oil meeting paragraph (2) of the definition of heating 
oil in Sec.  80.1401, the PTD which is used to transfer ownership or 
custody of the renewable fuel shall state: ``This volume of renewable 
fuel is designated and intended to be used to heat interior spaces of 
homes or buildings to control ambient climate for human comfort. Do NOT 
use for process heat or any other purpose, pursuant to 40 CFR Sec.  
80.1460(g).''

0
14. Section 80.1454 is amended by adding new paragraph (b)(7) to read 
as follows:

Sec.  80.1454  What are the recordkeeping requirements under the RFS 
program?

* * * * *
    (b) * * *
    (7) Copies of all contracts which describe the fuel oil under 
contract with each end user.
* * * * *

0
15. Section 80.1460 is amended by adding a new paragraph (g).

Sec.  80.1460  What acts are prohibited under the RFS program?

* * * * *
    (g) Failing to use a renewable fuel for its intended use. No person 
shall use qualifying fuel oil that meets paragraph (2) of the 
definition of heating oil in Sec.  80.1401 in an application other than 
to heat interior spaces of homes or buildings to control ambient 
climate for human comfort.
* * * * *
[FR Doc. 2012-23713 Filed 10-5-12; 8:45 am]
BILLING CODE 6560-50-P