Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021 and Other Changes

Federal RegisterFeb 6, 2020

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 79 and 80

[EPA-HQ-OAR-2019-0136; FRL-10003-79-OAR]

RIN 2060-AU42

Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021 and Other Changes

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

Under section 211 of the Clean Air Act, the Environmental Protection Agency (EPA) is required to set renewable fuel percentage standards every year. This action establishes the annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that apply to gasoline and diesel transportation fuel produced or imported in the year 2020. Relying on statutory waiver authority that is available when the projected cellulosic biofuel production volume is less than the applicable volume specified in the statute, EPA is establishing volume requirements for cellulosic biofuel, advanced biofuel, and total renewable fuel that are below the statutory volume targets. We are also establishing the applicable volume of biomass-based diesel for 2021. In addition, we are finalizing changes to the percentage standard calculations to account for volumes of gasoline and diesel we project will be exempted from the renewable volume obligations. Finally, this action finalizes several regulatory changes to the Renewable Fuel Standard (RFS) program including new pathways, flexibilities for regulated parties, and clarifications of existing regulations.

DATES:

This final rule is effective on April 6, 2020.

ADDRESSES:

The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2019-0136. All documents in the docket are listed on the

https://www.regulations.gov

website. Although listed in the index, some information is not publicly available,

e.g.,

CBI or other information whose disclosure is restricted by statute. Certain other material is not available on the internet and will be publicly available only in hard copy form. Publicly available docket materials are available electronically through

https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Julia MacAllister, Office of Transportation and Air Quality, Assessment and Standards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; telephone number: 734-214-4131; email address:

macallister.julia@epa.gov.

SUPPLEMENTARY INFORMATION:

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

Category

NAICS

codes

SIC

codes

Examples of potentially affected entities

Industry

324110

2911

Petroleum refineries.

Industry

325193

2869

Ethyl alcohol manufacturing.

Industry

325199

2869

Other basic organic chemical manufacturing.

Industry

424690

5169

Chemical and allied products merchant wholesalers.

Industry

424710

5171

Petroleum bulk stations and terminals.

Industry

424720

5172

Petroleum and petroleum products merchant wholesalers.

Industry

221210

4925

Manufactured gas production and distribution.

Industry

454319

5989

Other fuel dealers.

North American Industry Classification System (NAICS).

Standard Industrial Classification (SIC).

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

FOR FURTHER INFORMATION CONTACT

section.

Outline of This Preamble

I. Executive Summary

A. Approach To Setting Volume Requirements

B. Cellulosic Biofuel

C. Advanced Biofuel

D. Total Renewable Fuel

E. 2021 Biomass-Based Diesel

F. Annual Percentage Standards

G. Amendments to the RFS and Fuels Programs Regulations

H. Response To Remand of 2016 Standards Rulemaking

II. Authority and Need for Waiver of Statutory Applicable Volumes

A. Statutory Authorities for Reducing Volume Targets

1. Cellulosic Waiver Authority

2. General Waiver Authority

B. Severability

C. Treatment of Carryover RINs

1. Carryover RIN Bank Size

2. EPA's Decision Regarding the Treatment of Carryover RINs

III. Cellulosic Biofuel Volume for 2020

A. Statutory Requirements

B. Cellulosic Biofuel Industry Assessment

1. Review of EPA's Projection of Cellulosic Biofuel in Previous Years

2. Potential Domestic Producers

3. Potential Foreign Sources of Cellulosic Biofuel

4. Summary of Volume Projections for Individual Companies

C. Projection From the Energy Information Administration

D. Cellulosic Biofuel Volume for 2020

1. Liquid Cellulosic Biofuel

2. CNG/LNG Derived From Biogas

3. Total Cellulosic Biofuel in 2020

IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

B. Attainable Volumes of Advanced Biofuel

1. Imported Sugarcane Ethanol

2. Other Advanced Biofuel

3. Biodiesel and Renewable Diesel

a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve Advanced Biofuel Volume

b. Historical Supply of Biodiesel and Renewable Diesel

c. Consideration of Production Capacity and Distribution Infrastructure

d. Consideration of the Availability of Advanced Feedstocks

e. Biodiesel and Renewable Diesel Imports and Exports

f. Attainable and Reasonably Attainable Volumes of Advanced Biodiesel and Renewable Diesel

C. Volume Requirement for Advanced Biofuel

D. Volume Requirement for Total Renewable Fuel

V. Impacts of 2020 Volumes on Costs

A. Illustrative Costs Analysis of 2020 Final Volumes Compared to the 2020 Statutory Volumes Baseline

B. Illustrative Cost Analysis of the 2020 Final Volumes Compared to the 2019 Final Volumes

VI. Biomass-Based Diesel Volume for 2021

A. Statutory Requirements

B. Review of Implementation of the Program and the 2021 Applicable Volume of Biomass-Based Diesel

C. Consideration of Statutory Factors in CAA Section 211(o)(2)(B)(ii)(I)-(VI) for 2021 and Determination of the 2021 Biomass-Based Diesel Volume

D. BBD Volume Requirement for 2021

VII. Percentage Standards for 2020

A. Calculation of Percentage Standards

B. Small Refineries and Small Refiners

1. Changes to the Projected Volume of Gasoline and Diesel for Exempt Small Refineries

2. Projecting the Exempted Volume of Gasoline and Diesel in 2020

C. Final Standards

VIII. Administrative Actions

A. Assessment of the Domestic Aggregate Compliance Approach

B. Assessment of the Canadian Aggregate Compliance Approach

IX. Amendments to the RFS and Fuels Program Regulations

A. Clarification of Diesel RVO Calculations

1. Overview

2. Downstream Re-Designation of Certified Non-Transportation 15 ppm Distillate Fuel to MVNRLM Diesel Fuel

B. Pathway Petition Conditions

C. Esterification Pretreatment Pathway

D. Distillers Corn Oil and Distillers Sorghum Oil Pathways

E. Clarification of the Definition of Renewable Fuel Exporter and Associated Provisions

F. REGS Rule Provisions

1. Flexibilities for Renewable Fuel Blending for Military Use

2. Heating Oil Used for Cooling

3. Separated Food Waste Plans

4. Additional Registration Deactivation Justifications

5. New RIN Retirement Section

6. New Pathway for Co-Processing Biomass With Petroleum to Produce Co-Processed Cellulosic Diesel, Jet Fuel, and Heating Oil

7. Other Revisions to the Fuels Program

a. Testing Revisions

b. Oxygenate Added Downstream in Tier 3

c. Technical Corrections and Clarifications

X. Public Participation

XI. Statutory and Executive Order Reviews

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

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

C. Paperwork Reduction Act (PRA)

D. Regulatory Flexibility Act (RFA)

E. Unfunded Mandates Reform Act (UMRA)

F. Executive Order 13132: Federalism

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

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

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

J. National Technology Transfer and Advancement Act (NTTAA)

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

L. Congressional Review Act (CRA)

XII. Statutory Authority

I. Executive Summary

The Renewable Fuel Standard (RFS) program began in 2006 pursuant to the requirements in Clean Air Act (CAA) section 211(o) that were added through the Energy Policy Act of 2005 (EPAct). The statutory requirements for the RFS program were subsequently modified through the Energy Independence and Security Act of 2007 (EISA), leading to the publication of major revisions to the regulatory requirements on March 26, 2010.

EISA's stated goals include moving the United States (U.S.) toward “greater energy independence and security [and] increas[ing] the production of clean renewable fuels.”

75 FR 14670, March 26, 2010.

Public Law 110-140, 121 Stat. 1492 (2007) (“EISA”).

The statute includes annual volume targets and requires EPA to translate those volume targets (or alternative volume requirements established by EPA in accordance with statutory waiver authorities) into compliance obligations that obligated parties must meet every year. In this action we are establishing the applicable volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel for 2020, and biomass-based diesel (BBD) for 2021.

The 2020 BBD volume requirement was established in the 2019 final rule. 83 FR 63704 (December 11, 2018).

We are also finalizing changes to the percentage standard calculations to account for volumes of gasoline and diesel we project will be exempted from the renewable volume obligations, and establishing the annual percentage standards (also known as “percent standards”) for cellulosic biofuel, BBD, advanced biofuel, and total renewable fuel that would apply to gasoline and diesel produced or imported in 2020.

For a list of the statutory provisions related to the determination of applicable volumes, see the 2018 final rule (82 FR 58486, December 12, 2017; Table I.A-2).

Finally, we are finalizing several regulatory changes to the RFS program to facilitate the implementation of this program going forward including new pathways, flexibilities for regulated parties, and clarifications of existing regulations.

Today, nearly all gasoline used for transportation purposes contains 10 percent ethanol (E10), and on average diesel fuel contains nearly 5 percent of biodiesel and renewable diesel.

However, the market has fallen well short of the statutory volumes for cellulosic biofuel, resulting in shortfalls in the advanced biofuel and total renewable fuel volumes. In this action, we are establishing a volume requirement for cellulosic biofuel at the level we project to be available for 2020, along with an associated applicable percentage standard. For advanced biofuel and total renewable fuel, we are finalizing volume requirements using the “cellulosic waiver authority” that result in advanced biofuel and total renewable fuel volume requirements that are lower than the statutory targets by the same magnitude as the reduction in the cellulosic biofuel reduction. This would effectively maintain the implied statutory volumes for non-cellulosic biofuel and conventional biofuel.

Average biodiesel and/or renewable diesel blend percentages based on EIA's October 2019 Short Term Energy Outlook (STEO) and EPA's Moderated Transaction System (EMTS).

The statutory total renewable fuel, advanced biofuel and cellulosic biofuel requirements for 2020 are 30.0, 15.0 and 10.5 billion gallons respectively. This implies a conventional renewable fuel applicable volume (the difference between the total renewable fuel and advanced biofuel volumes) of 15.0 billion gallons, and a non-cellulosic advanced biofuel applicable volume (the difference between the advanced biofuel and cellulosic biofuel volumes) of 4.5 billion gallons.

The resulting volume requirements for 2020 are shown in Table I-1. Relative to the levels finalized for 2019, the 2020 volume requirements for cellulosic biofuel, advanced biofuel and total renewable fuel would be higher by approximately 170 million gallons. This entire increase for each category is attributable to the increased projection of cellulosic biofuel production in 2020 (see Section III for a further discussion of our cellulosic biofuel projection). We are also establishing the volume requirement for BBD for 2021 at 2.43 billion gallons. This volume is equal to the BBD volume finalized for 2020.

Table I-1—Final Volume Requirements

2019

2020

Statutory

volumes

2020

Proposed

volumes

2020

Final

volumes

2021

Final

volumes

Cellulosic biofuel (billion gallons)

0.42

10.50

0.54

0.59

n/a

Biomass-based diesel (billion gallons)

2.1

≥1.0

N/A

2.43

Advanced biofuel (billion gallons)

4.92

15.00

5.04

5.09

n/a

Renewable fuel (billion gallons)

19.92

30.00

20.04

20.09

n/a

All values are ethanol-equivalent on an energy content basis, except for BBD which is biodiesel-equivalent.

The 2019 volume requirements for cellulosic biofuel, advanced biofuel, and renewable fuel were established in the 2019 final rule (83 FR 63704, December 11, 2018). The 2019 BBD volume requirement was established in the 2018 final rule (82 FR 58486, December 12, 2017).

The 2020 BBD volume requirement of 2.43 billion gallons was established in the 2019 final rule (83 FR 63704, December 11, 2018).

A. Approach To Setting Volume Requirements

For advanced biofuel and total renewable fuel, we are reducing the statutory volumes based on the “cellulosic waiver authority” that result in advanced biofuel and total renewable fuel volume requirements that are lower than the statutory targets by the same magnitude as the reduction in the cellulosic biofuel applicable volume. Further discussion of our cellulosic waiver authority is found in Section II. This follows the same general approach as in the 2018 and 2019 final rules, as well as the 2020 proposed rule. The volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel exceed the required volumes for these fuel types in 2019.

B. Cellulosic Biofuel

The CAA requires EPA to annually determine the projected volume of cellulosic biofuel production for the following year. If the projected volume of cellulosic biofuel production is less than the applicable volume specified in section 211(o)(2)(B)(i)(III) of the statute, EPA must lower the applicable volume used to set the annual cellulosic biofuel percentage standard to the projected volume available. In this rule we are establishing a cellulosic biofuel volume requirement of 0.59 billion ethanol-equivalent gallons for 2020 based on our projection. This volume is 0.17 billion ethanol-equivalent gallons higher than the cellulosic biofuel volume finalized for 2019. Our projection in Section III considers many factors, including the estimate of cellulosic biofuel production received from the Energy Information Administration (EIA);

RIN generation data for past years and 2019 to date that is available to EPA through the EPA Moderated Transaction System (EMTS); the information we have received regarding individual facilities' capacities, production start dates, and biofuel production plans; a review of cellulosic biofuel production relative to EPA's projections in previous annual rules; and EPA's own engineering judgment. To project cellulosic biofuel production for 2020 we used the same general methodology as in the 2018 and 2019 final rules, together with updated data.

Letter from Linda Capuano, EIA Administrator to Andrew Wheeler, EPA Administrator. October 9, 2019. Available in docket EPA-HQ-OAR-2019-0136.

C. Advanced Biofuel

If we reduce the applicable volume of cellulosic biofuel below the volume specified in CAA section 211(o)(2)(B)(i)(III), we also have the authority to reduce the applicable volumes of advanced biofuel and total renewable fuel by the same or a lesser amount. We refer to this as the “cellulosic waiver authority.” The conditions that caused us to reduce the 2019 volume requirement for advanced biofuel below the statutory target remain relevant in 2020.

As in the 2019 final rule, we investigated the projected availability of non-cellulosic advanced biofuels in 2020. In Section IV, we describe our consideration of many factors, including:

• The ability of the market to make advanced biofuels available,

• The ability of the standards we set to bring about market changes in the time available,

• The potential impacts associated with diverting biofuels and/or biofuel feedstocks from current uses to the production of advanced biofuel used in the U.S.,

• The fact that the biodiesel tax credit is currently not available for 2020,

• Current tariffs on imports of biodiesel from Argentina and Indonesia and the proposal to change those tariffs, and

• The cost of advanced biofuels

We also considered the size of the carryover RIN bank. Based on these considerations, we have determined that the statutory volume target for advanced biofuel should be reduced by the same amount as the reduction in the statutory volume target for cellulosic biofuel, consistent with our July 29, 2019, proposal (“the July 29 proposal”). Specifically, the statutory volume target for advanced biofuel should be reduced by 9.91 billion gallons. This maintains the implied statutory volume requirement for non-cellulosic advanced biofuel of 4.5 billion gallons, and results in a final advanced biofuel volume requirement for 2020 of 5.09 billion gallons, which is 0.17 billion gallons higher than the advanced biofuel volume requirement for 2019.

D. Total Renewable Fuel

As we have articulated in previous annual standard-setting rulemakings,

we believe that the cellulosic waiver authority is best interpreted to require equal reductions in advanced biofuel and total renewable fuel. Consistent with previous years, we are reducing total renewable fuel by the same amount as the reduction in advanced biofuel, such that the resulting implied volume requirement for conventional renewable fuel would be 15 billion gallons, the same as the implied volume requirement in the statute. The result is that the final 2020 volume requirement is 20.09 billion gallons.

See,

e.g.,

83 FR 63704 (December 11, 2018).

E. 2021 Biomass-Based Diesel

In EISA, Congress specified increasing applicable volumes of BBD through 2012. Beyond 2012, Congress stipulated that EPA, in coordination with DOE and USDA, was to establish the BBD volume based on a review of the implementation of the program during calendar years specified in the tables in CAA 211(o)(B)(i) and other statutory factors, provided that the required volume for BBD could not be less than 1.0 billion gallons. Starting in 2013, EPA has set the BBD volume requirement above the statutory minimum, most recently resulting in 2.43 billion gallons for 2020. In this rule we are maintaining the BBD volume for 2021 at 2.43 billion gallons.

Given current and recent market conditions, the advanced biofuel requirement is driving the production and use of biodiesel and renewable diesel volumes over and above volumes required through the separate BBD standard, and we expect this to continue. While EPA continues to believe it is appropriate to maintain the opportunity for other advanced biofuels to compete for market share, the vast majority of the advanced biofuel obligations in recent years have been satisfied with BBD. Thus, after a review of implementation of the program to date and considering the statutory factors, we are establishing, in coordination with USDA and DOE, an applicable volume of BBD for 2020 of 2.43 billion gallons.

F. Annual Percentage Standards

The renewable fuel standards are expressed as a volume percentage and are used by each refiner and importer of fossil-based gasoline or diesel to determine their renewable fuel volume obligations.

Four separate percentage standards are required under the RFS program, corresponding to the four separate renewable fuel categories shown in Table I-1. The specific formulas we use in calculating the renewable fuel percentage standards are contained in the regulations at 40 CFR 80.1405. On October 28, 2019, we proposed changes to our percentage standard formulas in 40 CFR 80.1405. (“October 28 Proposal”). These changes were intended to project the exempted volume of gasoline and diesel due to small refinery exemptions, regardless of whether we grant those exemptions prior or after the annual rule. For 2020, we proposed to project exempt volumes are based on a three-year average of the relief recommended by the Department of Energy (DOE) for 2016-2018. In this action, we are finalizing these proposed changes. These changes result in increases to the percentage standards as compared to the percentage standards in the July 29 proposal.

Consistent with these changes, we are also announcing our general policy approach to small refinery exemptions going forward, including for now-pending 2019 petitions as well as for future 2019 and 2020 petitions. Although final decisions on any exemption petition must await EPA's receipt and adjudication of those petitions, EPA intends to grant relief consistent with DOE's recommendations where appropriate. This policy extends to DOE's recommendations of partial (50%) relief: Where appropriate, we intend to grant 50% relief where DOE recommends 50% relief.

The volume of transportation gasoline and diesel used to calculate the proposed percentage standards was based on Energy Information Administration's (EIA) October 2019 Short Term Energy Outlook (STEO), minus an estimate of fuel consumption in Alaska. The final applicable percentage standards for 2020 are shown in Table I.B.6-1. Details, including the projected gasoline and diesel volumes used, can be found in Section VII.

Table I.F-1—Final 2020 Percentage Standards

Percentage standards

Cellulosic biofuel

0.34%

Biomass-based diesel

2.10

Advanced biofuel

2.93

Renewable fuel

11.56

G. Amendments to the RFS and Fuels Programs Regulations

In implementing the RFS program EPA has identified several areas where regulatory changes would assist EPA in implementing the RFS program in future years. EPA requested comment on several of these regulatory changes in the July 29 proposal: Clarification of diesel RVO calculations, pathway petition conditions, a biodiesel esterification pathway, distillers corn oil and distillers sorghum oil pathways, and renewable fuel exporter provisions. Each of these regulatory changes is discussed in greater detail in Section IX.

Additionally, we proposed a number of changes to the RFS regulations as part of the proposed Renewables Enhancement and Growth Support (REGS) Rule.

EPA noted that it was considering finalizing several of those proposed changes along with the 2020 RVO final rule,

and are now finalizing the REGS Rule provisions listed below.

See 81 FR 80828 (November 16, 2016).

See 84 FR 36765 (July 29, 2019).

• Flexibilities for Renewable Fuel Blending for Military Use (REGS Section VIII.E)

• Heating Oil Used for Cooling (REGS Section VIII.F)

• Separated Food Waste Plans (REGS Section VIII.G)

• Additional Registration Deactivation Justifications (REGS Section VIII.J)

• New RIN Retirement Section (REGS Section VIII.L)

• New Pathway for Co-Processing Biomass With Petroleum To Produce Cellulosic Diesel, Jet Fuel, and Heating Oil (REGS Section VIII.M)

• Other Revisions to the Fuels Program (REGS Section IX)

The other provisions proposed in the REGS Rule remain under consideration but are not being finalized at this time.

H. Response to Remand of 2016 Standards Rulemaking

In 2015, EPA established the total renewable fuel standard for 2016, relying in part on the general waiver authority under a finding of inadequate domestic supply.

Several parties challenged that action, and the U.S. Court of Appeals for the D.C. Circuit, in

Americans for Clean Energy

EPA,

864 F.3d 691 (2017) (hereafter “

ACE”

), vacated EPA's use of the general waiver authority under a finding of inadequate domestic supply, finding that such use exceeded EPA's authority under the Clean Air Act. Specifically, EPA had impermissibly considered demand-side factors in its assessment of inadequate domestic supply, rather than limiting that assessment to supply-side factors. The court remanded the rule back to EPA for further consideration in light of the court's ruling.

See 80 FR 77420 (December 14, 2015); CAA section 211(o)(7)(A)(ii).

In the July 29 proposal, we proposed that the applicable 2016 volume requirement for total renewable fuel and the associated percentage standard should not be changed. In light of the many comments received, we are still actively considering this issue. We are therefore not taking final agency action on this issue in today's final rule. We are instead deferring action on this issue to a separate action, which we anticipate in early 2020.

II. Authority and Need for Waiver of Statutory Applicable Volumes

The CAA provides EPA with the authority to promulgate volume requirements below the applicable volume targets specified in the statute under specific circumstances. This section discusses those authorities. As described in the executive summary, we are setting the volume requirement for cellulosic biofuel at the level we project to be available for 2020, and an associated applicable percentage standard. For advanced biofuel and total renewable fuel, we are setting volume requirements and associated applicable percentage standards, based on use of the “cellulosic waiver authority” that would result in advanced biofuel and total renewable fuel volume requirements that are equivalent to the reduction in the cellulosic biofuel

reduction. This would effectively maintain the implied statutory volumes for non-cellulosic advanced and conventional renewable fuel.

A. Statutory Authorities for Reducing Volume Targets

In CAA section 211(o)(2), Congress specified increasing annual volume targets for total renewable fuel, advanced biofuel, and cellulosic biofuel for each year through 2022. However, Congress also recognized that under certain circumstances it would be appropriate for EPA to set volume requirements at a lower level than reflected in the statutory volume targets, and thus provided waiver provisions in CAA section 211(o)(7). Congress also specified increasing annual volume targets for BBD through 2012 and authorized EPA to set volume requirements for subsequent years (

i.e.,

after 2012) in coordination with USDA and DOE, and based upon consideration of specified factors.

1. Cellulosic Waiver Authority

Section 211(o)(7)(D)(i) of the CAA provides that if EPA determines that the projected volume of cellulosic biofuel production for a given year is less than the applicable volume specified in the statute, then EPA must reduce the applicable volume of cellulosic biofuel required to the projected volume available for that calendar year. In making this projection, EPA may not “adopt a methodology in which the risk of overestimation is set deliberately to outweigh the risk of underestimation” but must make a projection that “takes neutral aim at accuracy.”

API

EPA,

706 F.3d 474, 479, 476 (D.C. Cir. 2013). Pursuant to this provision, EPA has set the cellulosic biofuel requirement lower than the statutory volume for each year since 2010. As described in Section III.D, the projected volume of cellulosic biofuel production for 2020 is less than the 10.5 billion gallon volume target in the statute. Therefore, for 2020, we are finalizing a cellulosic biofuel volume lower than the statutory applicable volume, in accordance with this provision.

CAA section 211(o)(7)(D)(i) also provides EPA with the authority to reduce the applicable volume of total renewable fuel and advanced biofuel in years when it reduces the applicable volume of cellulosic biofuel under that provision. The reduction must be less than or equal to the reduction in cellulosic biofuel. For 2020, we are reducing the applicable volumes of advanced biofuel and total renewable fuel under this authority.

EPA has used the cellulosic waiver authority to lower the advanced biofuel and total renewable fuel volumes every year since 2014 as a result of waiving the cellulosic volumes. Further discussion of the cellulosic waiver authority, and EPA's interpretation of it, can be found in the preamble to the 2017 final rule.

See 81 FR 89752-89753 (December 12, 2016); see also

API

EPA,

706 F.3d 474 (D.C. Cir. 2013) (requiring that EPA's cellulosic biofuel projections reflect a neutral aim at accuracy);

Monroe Energy

EPA,

750 F.3d 909, 915-16 (D.C. Cir. 2014) (affirming EPA's broad discretion under the cellulosic waiver authority to reduce volumes of advanced biofuel and total renewable fuel);

Americans for Clean Energy

EPA

(“

ACE”

), 864 F.3d 691, 730-735 (D.C. Cir. 2017) (same);

Alon Refining Krotz Spring, Inc.

EPA,

936 F.3d 628, 662-663 (D.C. Cir. 2019) (same);

American Fuel & Petrochemical Manufacturers

EPA,

937 F.3d 559, 577-78 (D.C. Cir. 2019) (same).

In this action we are using the cellulosic waiver authority to reduce the statutory volume targets for advanced biofuel and total renewable fuel by equal amounts, consistent with our long-held interpretation of this provision and our approach in setting the 2014-2019 standards. This approach considers the Congressional objectives reflected in the volume tables in the statute, and the environmental objectives that generally favor the use of advanced biofuels over non-advanced biofuels.

As described in Section IV, we are reducing the advanced biofuel volume under the cellulosic waiver authority by the amount of the reduction in cellulosic biofuel and providing an equal reduction under the cellulosic waiver authority in the applicable volume of total renewable fuel. We are taking this action both because we do not believe that the statutory volumes can be achieved, and because we believe that backfilling of the shortfall in cellulosic with advanced biofuel would not be appropriate in light of concerns about high costs of the advanced biofuels and the potential for feedstock switching. The volumes of advanced biofuel and total renewable fuel resulting from this exercise of the cellulosic waiver authority provide for an implied volume allowance for conventional renewable fuel of 15 billion gallons, and an implied volume allowance for non-cellulosic advanced biofuel of 4.5 billion gallons, equal to the implied statutory volumes for 2020. As discussed in Section IV, we also believe that the resulting volume of advanced biofuel is attainable, and that the resulting volume of total renewable fuel can be made available by the market.

See 81 FR 89752-89753 (December 12, 2016). See also 78 FR 49809-49810 (August 15, 2013); 80 FR 77434 (December 14, 2015). Advanced biofuels are required to have lifecycle GHG emissions that are at least 50% less than the baseline defined in EISA. Non-advanced biofuels are required to have lifecycle GHG emissions that are at least 20% less than the baseline defined in EISA unless the fuel producer meets the grandfathering provisions in 40 CFR 80.1403. Beginning in 2015, all growth in the volumes established by Congress come from advanced biofuels.

2. General Waiver Authority

Section 211(o)(7)(A) of the CAA provides that EPA, in consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the applicable volumes specified in the Act in whole or in part based on a petition by one or more States, by any person subject to the requirements of the Act, or by the EPA Administrator on his own motion. Such a waiver must be based on a determination by the Administrator, after public notice and opportunity for comment that: (1) Implementation of the requirement would severely harm the economy or the environment of a State, a region, or the United States; or (2) there is an inadequate domestic supply.

EPA received comments requesting that EPA should use the general waiver authority to further reduce volumes under findings of inadequate domestic supply and/or severe harm to the economy or environment, as well as comments to the contrary. Based on our review of the comments and updated data, and consistent with EPA's rationale and decisions in setting the 2019 standards, we decline to exercise our discretion to reduce volumes under the general waiver authority. Further discussion of these issues is found in the Response To Comments (“RTC”) document.

See also “Endangered Species Act No Effect Finding for the 2020 Final Rule.”

B. Severability

The various portions of this rule are severable. Specifically, the following portions are severable from each other: The percentage standards for 2020 (described in Section VII); the 2021 BBD volume requirement (Section VI); the administrative actions (Section VIII); and the regulatory amendments (Section IX). In addition, each of the regulatory amendments is severable from the other regulatory amendments. If any of the above portions is set aside by a reviewing court, we intend the remainder of this action to remain effective. For instance, if a reviewing court sets aside one of the regulatory amendments, we intend for the 2020 percentage standards to go into effect.

C. Treatment of Carryover RINs

Consistent with our approach in the rules establishing the RFS standards for

2013 through 2019, we have also considered the availability and role of carryover RINs in setting the cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements for 2020. Neither the statute nor EPA regulations specify how or whether EPA should consider the availability of carryover RINs in exercising our statutory authorities.

As noted in the context of the rules establishing the RFS standards for 2014 through 2019, we believe that a bank of carryover RINs is extremely important in providing obligated parties compliance flexibility in the face of substantial uncertainties in the transportation fuel marketplace, and in providing a liquid and well-functioning RIN market upon which success of the entire program depends.

Carryover RINs provide flexibility in the face of a variety of unforeseeable circumstances that could limit the availability of RINs and reduce spikes in compliance costs, including weather-related damage to renewable fuel feedstocks and other circumstances potentially affecting the production and distribution of renewable fuel. On the other hand, carryover RINs can be used for compliance purposes, and in the context of the 2013 RFS rulemaking we noted that an abundance of carryover RINs available in that year, together with possible increases in renewable fuel production and import, justified maintaining the advanced and total renewable fuel volume requirements for that year at the levels specified in the statute.

In general, we have authority to consider the size of the carryover RIN bank in deciding whether and to what extent to exercise any of our discretionary waiver authorities.

EPA's approach to the consideration of carryover RINs in exercising our cellulosic waiver authority was affirmed in

Monroe Energy

and

ACE.

CAA section 211(o)(5) requires that EPA establish a credit program as part of its RFS regulations, and that the credits be valid for obligated parties to show compliance for 12 months as of the date of generation. EPA implemented this requirement through the use of RINs, which can be used to demonstrate compliance for the year in which they are generated or the subsequent compliance year. Obligated parties can obtain more RINs than they need in a given compliance year, allowing them to “carry over” these excess RINs for use in the subsequent compliance year, although our regulations limit the use of these carryover RINs to 20 percent of the obligated party's RVO. For the bank of carryover RINs to be preserved from one year to the next, individual carryover RINs are used for compliance before they expire and are essentially replaced with newer vintage RINs that are then held for use in the next year. For example, vintage 2018 carryover RINs must be used for compliance in 2019, or they will expire. However, vintage 2019 RINs can then be “banked” for use in 2020.

See 80 FR 77482-87 (December 14, 2015), 81 FR 89754-55 (December 12, 2016), 82 FR 58493-95 (December 12, 2017), and 83 FR 63708-10 (December 11, 2018).

See 79 FR 49793-95 (August 15, 2013).

These discretionary waiver authorities include the discretionary portion of the cellulosic waiver authority, CAA section 211(o)(7)(D)(i) (“the Administrator may also reduce the applicable volume of renewable fuel and advanced biofuels requirement”), the general waiver authority, CAA section 211(o)(7)(A) (“The Administrator . . . may waive the requirements”), and the BBD waiver authority with regard to the extent of the reduction in the BBD volume, CAA section 211(o)(7)(E)(ii) (“the Administrator . . . shall issue an order to reduce . . . the quantity of biomass-based diesel . . . by an appropriate quantity”).

Monroe Energy

EPA,

750 F.3d 909 (D.C. Cir. 2014);

ACE,

864 F.3d at 713.

The RIN system was established in accordance with CAA section 211(o)(5), which authorizes the generation of credits by any person who refines, blends, or imports renewable fuel in excess of the requirements of the statute.

In the RFS1 and RFS2 rulemakings, we also established a 20 percent rollover cap on the amount of an obligated party's RVO that can be met using previous-year RINs.

In implementing the RFS program, we have observed that an adequate carryover RIN bank serves to make the RIN market liquid wherein RINs are freely traded in an open market making them readily available and accessible to those obligated parties who need them for compliance at prices established by that open market. Just as the economy as a whole functions best when individuals and businesses prudently plan for unforeseen events by maintaining inventories and reserve money accounts, we believe that the RFS program functions best when sufficient carryover RINs are held in reserve for potential use by the RIN holders themselves, or for possible sale to others that may not have established their own carryover RIN reserves. Were there to be too few RINs in reserve, then even minor disruptions causing shortfalls in renewable fuel production or distribution, or higher than expected transportation fuel demand (requiring greater volumes of renewable fuel to comply with the percentage standards that apply to all volumes of transportation fuel, including the unexpected volumes) could lead to the need for a new waiver of the standards and higher compliance costs, undermining the market certainty so critical to the RFS program. Moreover, a significant drawdown of the carryover RIN bank leading to a scarcity of RINs may stop the market from functioning in an efficient manner (

i.e.,

one in which there are a sufficient number of reasonably available RINs for obligated parties seeking to purchase them), even where the market overall could satisfy the standards. For all of these reasons, the collective carryover RIN bank provides a necessary programmatic buffer that both facilitates individual compliance, provides for smooth overall functioning of the program, and is consistent with the statutory provision allowing for the generation and use of credits.

See 75 FR 14670 (March 26, 2010) and 72 FR 23900 (May 1, 2007).

See 75 FR 14734-35 (March 26, 2010) and 72 FR 23934-35 (May 1, 2007).

Here we use the term “buffer” as shorthand reference to all of the benefits that are provided by a sufficient bank of carryover RINs.

1. Carryover RIN Bank Size

We estimate that there are currently approximately 3.48 billion total carryover RINs available, an increase of 1.29 billion RINs from the previous estimate of 2.19 billion total carryover RINs in the July 29 proposal.

We also estimate that there are currently approximately 680 million advanced carryover RINs available (which are a subset of the 3.48 billion total carryover RINs), an increase of 290 million RINs from the previous estimate in the July 29 proposal. This increase in the carryover RIN bank is primarily the result of the millions of RINs that were unretired by small refineries that were granted hardship exemptions after the July 29 proposal.

These volumes of carryover RINs are approximately 17 percent of the 2020 total renewable fuel volume requirement and 13 percent of the 2020 advanced biofuel volume requirement, which are less than the 20 percent maximum limit permitted by the RFS regulations to be carried over for use in complying with the 2020 standards.

The calculations performed to estimate the number of carryover RINs currently available can be found in the memorandum, “Carryover RIN Bank Calculations for 2020 Final Rule,” available in the docket.

Information about the number of small refinery exemptions (SREs) granted and the volume of RINs not required to be retired as a result of those exemptions can be found at:

https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions.

See 40 CFR 80.1427(a)(5).

However, there remains considerable uncertainty surrounding the ultimate size of the carryover RIN bank available for compliance with the 2020 standards for several reasons, including the possibility of additional small refinery exemptions, higher or lower than expected transportation fuel demand (requiring greater or lower volumes of renewable fuel to comply with the percentage standards that apply to all

volumes of transportation fuel), and the impact of 2019 RFS compliance on the bank of carryover RINs. In addition, we note that there have been enforcement actions in past years that have resulted in the retirement of carryover RINs to make up for the generation and use of invalid RINs and/or the failure to retire RINs for exported renewable fuel. Future enforcement actions could have similar results and require that obligated parties and/or renewable fuel exporters settle past enforcement-related obligations in addition to complying with the annual standards, thereby potentially creating demand for RINs greater than can be accommodated through actual renewable fuel blending in 2020. In light of these uncertainties, the net result could be a bank of total carryover RINs larger or smaller than 17 percent of the 2020 total renewable fuel volume requirement, and a bank of advanced carryover RINs larger or smaller than 13 percent of the 2020 advanced biofuel volume requirement.

2. EPA's Decision Regarding the Treatment of Carryover RINs

We have evaluated the volume of carryover RINs currently available and considered whether it would justify an intentional drawdown of the carryover RIN bank in setting the 2020 volume requirements. We also carefully considered the comments received, including comments on the role of carryover RINs under our waiver authorities and the policy implications of our decision.

For the reasons described throughout Section II.C, we do not believe we should intentionally draw down the carryover RIN bank in setting the 2020 volumes. The current bank of carryover RINs provides an important and necessary programmatic and cost spike buffer that will both facilitate individual compliance and provide for smooth overall functioning of the program. We believe that a balanced consideration of the possible role of carryover RINs in achieving the statutory volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel, versus maintaining an adequate bank of carryover RINs for important programmatic functions, is appropriate when EPA exercises its discretion under its statutory authorities, and that the statute does not specify the extent to which EPA should require a drawdown in the bank of carryover RINs when it exercises its waiver authorities. Therefore, for the reasons noted above and consistent with the approach we took in the rules establishing the RFS standards for 2014 through 2019, we have decided to maintain our proposed approach and are not setting the 2020 volume requirements at levels that would envision an intentional drawdown in the bank of carryover RINs. We note that we may or may not take a similar approach in future years; we will assess the situation on a case-by-case basis going forward and take into account the size of the carryover RIN bank in the future and any lessons learned from implementing past rules.

In their comments on the 2020 NPRM, parties generally expressed two opposing points of view. Commenters representing obligated parties supported EPA's proposed decision to not assume a drawdown in the bank of carryover RINs in determining the appropriate volume requirements, reiterating the importance of maintaining the carryover RIN bank in order to provide obligated parties with necessary compliance flexibilities, better market trading liquidity, and a cushion against future program uncertainty. Commenters representing renewable fuel producers, however, stated that not accounting for carryover RINs goes against Congressional intent of the RFS program to increase renewable fuel volumes every year and deters investment in cellulosic and advanced biofuels. A full description of comments received, and our detailed responses to them, is available in the RTC document in the docket.

III. Cellulosic Biofuel Volume for 2020

In the past several years, production of cellulosic biofuel has continued to increase. Cellulosic biofuel production reached record levels in 2018, driven largely by CNG and LNG derived from biogas.

The projected volume of cellulosic biofuel production in 2019 is even higher that the volume produced in 2018. Production of liquid cellulosic biofuel has also increased in recent years, even as the total production of liquid cellulosic biofuels remains much smaller than the production volumes of CNG and LNG derived from biogas (see Figure III-1). This section describes our assessment of the volume of qualifying cellulosic biofuel that we project will be produced or imported into the U.S. in 2020, and some of the uncertainties associated with those volumes.

The majority of the cellulosic RINs generated for CNG/LNG are sourced from biogas from landfills; however, the biogas may come from a variety of sources including municipal wastewater treatment facility digesters, agricultural digesters, separated municipal solid waste (MSW) digesters, and the cellulosic components of biomass processed in other waste digesters.

ER06FE20.000

In order to project the volume of cellulosic biofuel production in 2020, we considered numerous factors, including EIA's projection of cellulosic biofuel production in 2020, the accuracy of the methodologies used to project cellulosic biofuel production in previous years, data reported to EPA through EMTS, and information we collected through meetings with representatives of facilities that have produced or have the potential to produce qualifying volumes of cellulosic biofuel in 2020.

There are two main elements to the cellulosic biofuel production projection: Liquid cellulosic biofuel and CNG/LNG derived from biogas. To project the range of potential production volumes of liquid cellulosic biofuel we used the same general methodology as the methodology used in the 2018 and 2019 final rules. We have adjusted the percentile values used to select a point estimate within a projected production range for each group of companies based on updated information (through September 2019) with the objective of improving the accuracy of the projections. To project the production of cellulosic biofuel RINs for CNG/LNG derived from biogas, we used the same general year-over-year growth rate methodology as in the 2018 and 2019 final rules, with updated RIN generation data through September 2019. This methodology reflects the mature status of this industry, the large number of facilities registered to generate cellulosic biofuel RINs from these fuels, and EPA's continued attempts to refine its methodology to yield estimates that are as accurate as possible. This methodology is an improvement on the methodology that EPA used to project cellulosic biofuel production for CNG/LNG derived from biogas in the 2017 and previous years (see Section III.B for a further discussion of the accuracy of EPA's methodology in previous years). The methodologies used to project the production of liquid cellulosic biofuels and cellulosic CNG/LNG derived from biogas are described in more detail in Sections III.D-1 and III.D-2.

The balance of this section is organized as follows. Section III.A provides a brief description of the statutory requirements. Section III.B reviews the accuracy of EPA's projections in prior years, and also discusses the companies EPA assessed in the process of projecting qualifying cellulosic biofuel production in the U.S. Section III.C discusses EIA's projection of cellulosic biofuel production in 2020. Section III.D discusses the methodologies used by EPA to project cellulosic biofuel production in 2020 and the resulting projection of 0.59 billion ethanol-equivalent gallons.

A. Statutory Requirements

CAA section 211(o)(2)(B)(i)(III) states the statutory volume targets for cellulosic biofuel. The volume of cellulosic biofuel specified in the statute for 2020 is 10.5 billion gallons. The statute provides that if EPA determines, based on a letter provided to the EPA by EIA, that the projected volume of cellulosic biofuel production in a given year is less than the statutory volume, then EPA shall reduce the applicable volume of cellulosic biofuel to the projected volume available during that calendar year.

CAA section 211(o)(7)(D)(i). The U.S. Court of Appeals for the District of Columbia Circuit evaluated this requirement in

API

EPA,

706 F.3d 474, 479-480 (D.C. Cir. 2013), in the context of a challenge to the 2012 cellulosic biofuel standard. The Court stated that in projecting potentially available volumes of cellulosic biofuel EPA must apply an “outcome-neutral methodology” aimed at providing a prediction of “what will

actually

happen.”

Id.

at 480, 479. The Court also determined that Congress did not require “slavish adherence by EPA to the EIA estimate” and that EPA could “read the phrase `based on' as requiring great respect but allowing deviation consistent with that respect.” In addition, EPA has consistently interpreted the term “projected volume of cellulosic biofuel production” in CAA section 211(o)(7)(D)(i) to include volumes of cellulosic biofuel likely to be made available in the U.S., including from both domestic production

and imports (

see, e.g.,

80 FR 77420 (December 14, 2015) and 81 FR 89746 (December 12, 2016)). This interpretation is consistent with the statutory direction to establish the cellulosic volume at the “projected volume available.” We do not believe it would be reasonable to include in the projection all cellulosic biofuel produced throughout the world, regardless of likelihood of import to the U.S., since volumes that are not imported would not be available to obligated parties for compliance and including them in the projection would render the resulting volume requirement and percentage standards unachievable through the use of cellulosic biofuel RINs.

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

and we are also required to make cellulosic waiver credits available.

Our consideration of the 2020 volume requirements for advanced biofuel and total renewable fuel is presented in Section IV.

CAA section 211(o)(7)(D)(i).

See CAA section 211(o)(7)(D)(ii); 40 CFR 80.1456.

B. Cellulosic Biofuel Industry Assessment

In this section, we first explain our general approach to assessing facilities or groups of facilities (which we collectively refer to as “facilities”) that have the potential to produce cellulosic biofuel in 2020. We then review the accuracy of EPA's projections in prior years. Next, we discuss the criteria used to determine whether to include potential domestic and foreign sources of cellulosic biofuel in our projection for 2020. Finally, we provide a summary table of all facilities that we expect to produce cellulosic biofuel in 2020.

In order to project cellulosic biofuel production for 2020, we have tracked the progress of a number of potential cellulosic biofuel production facilities, located both in the U.S. and in foreign countries. We considered a number of factors, including EIA's projection of cellulosic biofuel production in 2020, information from EMTS, the registration status of potential biofuel production facilities as cellulosic biofuel producers in the RFS program, publicly available information (including press releases and news reports), and information provided by representatives of potential cellulosic biofuel producers. As discussed in greater detail in Section III.D.1, our projection of liquid cellulosic biofuel is based on a facility-by-facility assessment of each of the likely sources of cellulosic biofuel in 2020, while our projection of CNG/LNG derived from biogas is based on an industry-wide assessment. To make a determination of which facilities are most likely to produce liquid cellulosic biofuel and generate cellulosic biofuel RINs in 2020, each potential producer of liquid cellulosic biofuel was investigated further to determine the current status of its facilities and its likely cellulosic biofuel production and RIN generation volumes for 2020. Both in our discussions with representatives of individual companies and as part of our internal evaluation process, we gathered and analyzed information including, but not limited to, the funding status of these facilities, current status of the production technologies, anticipated construction and production ramp-up periods, facility registration status, and annual fuel production and RIN generation targets.

1. Review of EPA's Projection of Cellulosic Biofuel in Previous Years

As an initial matter, it is useful to review the accuracy of EPA's past cellulosic biofuel projections. The record of actual cellulosic biofuel production, including both cellulosic biofuel (which generate D3 RINs) and cellulosic diesel (which generate D7 RINs), and EPA's projected production volumes from 2015-2019 are shown in Table III.B-1. These data indicate that EPA's projection was lower than the actual number of cellulosic RINs made available in 2015,

higher than the actual number of RINs made available in 2016 and 2017, and lower than the actual number of RINs made available in 2018. Based on our current projection of cellulosic biofuel production for 2019 based on data through September 2019, EPA's projection of cellulosic biofuel in 2019 also appears likely to be lower than actual RIN generation in 2019. The fact that the projections made using this methodology have been somewhat inaccurate, under-estimating the actual number of RINs made available in 2015, 2018, and likely 2019, and over-estimating in 2016 and 2017, reflects the inherent difficulty with projecting cellulosic biofuel production. It also emphasizes the importance of continuing to make refinements to our projection methodology in order to make our projections more accurate.

EPA only projected cellulosic biofuel production for the final three months of 2015, since data on the availability of cellulosic biofuel RINs (D3+D7) for the first nine months of the year were available at the time the analyses were completed for the final rule.

Table III.B.1-1—Projected and Actual Cellulosic Biofuel Production (2015-2018)

[Million gallons]

Projected volume

Liquid

cellulosic

biofuel

CNG/LNG

derived from biogas

Total

cellulosic

biofuel

Actual production volume

Liquid

cellulosic

biofuel

CNG/LNG

derived from

biogas

Total

cellulosic

biofuel

2015

0.5

52.8

53.3

2016

207

230

4.1

186.2

190.3

2017

298

311

11.8

239.5

251.3

2018

274

288

10.6

303.2

313.8

2019

399

418

15.5

418.2

433.7

As noted in Section III.A. above, EPA has consistently interpreted the term “projected volume of cellulosic biofuel production” to include volumes of cellulosic biofuel likely to be made available in the U.S., including from both domestic production and imports. The volumes in this table therefore include both domestic production of cellulosic biofuel and imported cellulosic biofuel.

Projected volumes for 2015 and 2016 can be found in the 2014-2016 Final Rule (80 FR 77506, 77508, December 14, 2015); projected volumes for 2017 can be found in the 2017 Final Rule (81 FR 89760, December 12, 2016); projected volumes for 2018 can be found in the 2018 Final Rule (82 FR 58503, December 12, 2017); projected volumes for 2019 can be found in the 2019 Final Rule (83 FR 63704, December 11, 2018).

Actual production volumes are the total number of RINs generated minus the number of RINs retired for reasons other than compliance with the annual standards, based on EMTS data.

Total cellulosic biofuel may not be precisely equal to the sum of liquid cellulosic biofuel and CNG/LNG derived from biogas due to rounding.

Projected and actual volumes for 2015 represent only the final 3 months of 2015 (October-December) as EPA used actual RIN generation data for the first 9 months of the year.

Actual production in 2019 is a projection based on actual data from January-September 2019 and a projection of likely production for October-December 2019.

EPA's projections of liquid cellulosic biofuel were higher than the actual volume of liquid cellulosic biofuel produced each year from 2015 to 2018.

Depending on liquid cellulosic biofuel production in the last 3 months or 2019, our projection for 2019 may ultimately be an over-projection or under-projection of actual production, however at this time it appears likely to result in an over-projection. As a result of the over-projections in 2015-2016 (and the anticipated over-projection in 2017), and in an effort to take into account the most recent data available and make the liquid cellulosic biofuel projections more accurate, EPA adjusted our methodology in the 2018 final rule.

The adjustments to our methodology adopted in the 2018 final rule resulted in a projection that is close to the volume of liquid cellulosic biofuel produced in 2018 and appear likely to result in a reasonably accurate projection in 2019. In this final rule we are again applying the approach we first used in the 2018 final rule: Using percentile values based on actual production in previous years, relative to the projected volume of liquid cellulosic biofuel in these years. We have adjusted the percentile values to project liquid cellulosic biofuel production based on actual liquid cellulosic biofuel production in 2016 to 2019. We believe that the use of the methodology (described in more detail in Section III.D.1), with the adjusted percentile values, results in a projection that reflects a neutral aim at accuracy since it accounts for expected growth in the near future by using historical data that is free of any subjective bias.

We note, however, that because the projected volume of liquid cellulosic biofuel in each year was very small relative to the total volume of cellulosic biofuel, these over-projections had a minimal impact on the accuracy of our projections of cellulosic biofuel for each of these years.

82 FR 58486 (December 12, 2017).

We next turn to the projection of CNG/LNG derived from biogas. For 2018 and 2019, EPA used an industry-wide approach, rather than an approach that projects volumes for individual companies or facilities, to project the production of CNG/LNG derived from biogas. EPA used a facility-by-facility approach to project the production of CNG/LNG derived from biogas from 2015-2017. Notably the facility-by-facility methodology resulted in significant over-estimates of CNG/LNG production in 2016 and 2017, leading EPA to develop the alternative industry wide projection methodology first used in 2018. This updated approach reflects the fact that this industry is far more mature than the liquid cellulosic biofuel industry, with a far greater number of potential producers of CNG/LNG derived from biogas. In such cases, industry-wide projection methods can be more accurate than a facility-by-facility approach, especially as macro market and economic factors become more influential on total production than the success or challenges at any single facility. The industry-wide projection methodology slightly under-projected the production of CNG/LNG derived from biogas in 2018 and appears likely to slightly under-project the production of these fuels in 2019. However, the difference between the projected and actual production volume of these fuels was smaller than in 2017.

As further described in Section III.D.2, EPA is again projecting production of CNG/LNG derived from biogas using the industry-wide approach. We calculate a year-over-year rate of growth in the renewable CNG/LNG industry and apply this year-over-year growth rate to the total number of cellulosic RINs generated and available to be used for compliance with the annual standards in 2018 to estimate the production of CNG/LNG derived from biogas in 2020.

We have applied the growth rate to the number of available 2018 RINs generated for CNG/LNG derived from biogas as data from this year allows us to adequately account for not only RIN generation, but also for RINs retired for reasons other than compliance with the annual standards. While more recent RIN generation data is available, the retirement of RINs for reasons other than compliance with the annual standards generally lags RIN generation, sometimes by up to a year or more.

To project the volume of CNG/LNG derived from biogas in 2020, we multiply the number of 2018 RINs generated for these fuels and available to be used for compliance with the annual standards by the calculated growth rate to project production of these fuels in 2019 and then multiply the resulting number by the growth rate again to project the production of these fuels in 2020.

The production volumes of cellulosic biofuel in previous years also highlight that the production of CNG/LNG derived from biogas has been significantly higher than the production of liquid cellulosic biofuel in previous years. This is likely the result of a combination of several factors, including the mature state of the technology used to produce CNG/LNG derived from biogas relative to the technologies used to produce liquid cellulosic biofuel and the relatively low production cost of CNG/LNG derived from biogas (discussed in further detail in Section V). These factors are unlikely to change in 2020. While we project production volumes of liquid cellulosic biofuel and CNG/LNG derived from biogas separately, the actual volume of each fuel type produced may be higher or lower than projected.

2. Potential Domestic Producers

There are several companies and facilities located in the U.S. that have either already begun producing cellulosic biofuel for use as transportation fuel, heating oil, or jet fuel at a commercial scale,

or are anticipated to be in a position to do so at some time during 2020. The RFS program provides a strong financial incentive for domestic cellulosic biofuel producers to sell any fuel they produce for domestic consumption.

To date nearly all cellulosic biofuel produced in the U.S. has been used domestically

and all the domestic facilities we have contacted in deriving our projections intend to produce fuel on a commercial scale for domestic consumption and plan to use approved pathways. These factors give us a high degree of confidence that cellulosic biofuel RINs will be generated for all cellulosic biofuel produced by domestic commercial scale facilities. To generate RINs, each of these facilities must be registered with EPA under the RFS program and comply with all the regulatory requirements. This includes using an approved RIN-generating pathway and verifying that their feedstocks meet the definition of renewable biomass. Most of the domestic companies and facilities considered in our assessment of potential cellulosic biofuel producers in 2019 have already successfully

completed facility registration, and have successfully generated RINs.

A brief description of each of the domestic companies (or group of companies for cellulosic CNG/LNG producers and the facilities using Edeniq's technology) that EPA believes may produce commercial-scale volumes of RIN generating cellulosic biofuel by the end of 2020 can be found in a memorandum to the docket for this final rule.

General information on each of these companies or group of companies considered in our projection of the potentially available volume of cellulosic biofuel in 2020 is summarized in Table III.B.4-1.

For a further discussion of EPA's decision to focus on commercial scale facilities, rather than R&D and pilot scale facilities, see the 2019 proposed rule (83 FR 32031, July 10, 2018).

According to data from EMTS, the average price for a 2019 cellulosic biofuel RINs sold in 2019 (through September 2019) was $1.30. Alternatively, obligated parties can satisfy their cellulosic biofuel obligations by purchasing an advanced (or biomass-based diesel) RIN and a cellulosic waiver credit. The average price for a 2019 advanced biofuel RINs sold in 2019 (through September 2019) was $0.43 while the price for a 2019 cellulosic waiver credit is $1.77 (EPA-420-B-18-052).

The only known exception was a small volume of fuel produced at a demonstration scale facility exported to be used for promotional purposes.

Most of the facilities listed in Table III.B.3-1 are registered to produce cellulosic (D3 or D7) RINs with the exception of several of the producers of CNG/LNG derived from biogas and Red Rock Biofuels. EPA is unaware of any outstanding issues that would reasonably be expected to prevent these facilities from registering as cellulosic biofuel producers and producing qualifying cellulosic biofuel in 2020.

“Cellulosic Biofuel Producer Company Descriptions (May 2019),” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

3. Potential Foreign Sources of Cellulosic Biofuel

In addition to the potential sources of cellulosic biofuel located in the U.S., there are several foreign cellulosic biofuel companies that may produce cellulosic biofuel in 2020. These include facilities owned and operated by Beta Renewables, Enerkem, Ensyn, GranBio, and Raizen. All of these facilities use fuel production pathways that have been approved by EPA for cellulosic RIN generation provided eligible sources of renewable feedstock are used and other regulatory requirements are satisfied. These companies would therefore be eligible to register their facilities under the RFS program and generate RINs for any qualifying fuel imported into the U.S. While these facilities may be able to generate RINs for any volumes of cellulosic biofuel they import into the U.S., demand for the cellulosic biofuels they produce is expected to be high in their own local markets.

EPA's projection of cellulosic biofuel production in 2020 includes cellulosic biofuel that is projected to be imported into the U.S. in 2020, including potential imports from all the registered foreign facilities under the RFS program. We believe that due to the strong demand for cellulosic biofuel in local markets and the time necessary for potential foreign cellulosic biofuel producers to register under the RFS program and arrange for the importation of cellulosic biofuel to the U.S., cellulosic biofuel imports from foreign facilities not currently registered to generate cellulosic biofuel RINs are generally highly unlikely in 2020. For purposes of our 2020 cellulosic biofuel projection we have excluded potential volumes from foreign cellulosic biofuel production facilities that are not currently registered under the RFS program.

Cellulosic biofuel produced at three foreign facilities (Ensyn's Renfrew facility, GranBio's Brazilian facility, and Raizen's Brazilian facility) generated cellulosic biofuel RINs for fuel exported to the U.S. since 2017; projected volumes from each of these facilities are included in our projection of available volumes for 2020. EPA has also included projected volume from two additional foreign facilities. These two facilities (Enerkem's Canadian facility and Ensyn's Port-Cartier, Quebec facility) have both completed the registration process as cellulosic biofuel producers. We believe that it is appropriate to include volume from these facilities in light of their proximity to the U.S., the proven technology used by these facilities, the volumes of cellulosic biofuel exported to the U.S. by the company in previous years (in the case of Ensyn), and the company's stated intentions to market fuel produced at these facilities to qualifying markets in the U.S. All of the facilities included in EPA's cellulosic biofuel projection for 2020 are listed in Table III.B.4-1.

4. Summary of Volume Projections for Individual Companies

General information on each of the cellulosic biofuel producers (or group of producers, for producers of CNG/LNG derived from biogas and producers of liquid cellulosic biofuel using Edeniq's technology) that factored into our projection of cellulosic biofuel production for 2020 is shown in Table III.B.4-1. This table includes both facilities that have already generated cellulosic RINs, as well as those that have not yet generated cellulosic RINs, but are projected to do so by the end of 2020. As discussed above, we have focused on commercial-scale cellulosic biofuel production facilities. Each of these facilities (or group of facilities) is discussed further in a memorandum to the docket.

“Cellulosic Biofuel Producer Company Descriptions (May 2019),” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

Table III.B.4-1—Projected Producers of Cellulosic Biofuel for U.S. Consumption in 2020

Company name

Location

Feedstock

Fuel

Facility capacity

(million gallons per year)

Construction start date

First production

CNG/LNG Producers

Various

Biogas

CNG/LNG

Various

Various.

Edeniq

Various

Corn Kernel Fiber

Ethanol

Various

October 2016.

Enerkem

Edmonton, AL, Canada

Separated MSW

Ethanol

2012

September 2017.

Ensyn

Renfrew, ON, Canada

Wood Waste

Heating Oil

2005

2014.

Ensyn

Port-Cartier, QC, Canada

Wood Waste

Heating Oil

10.5

June 2016

January 2018.

GranBio

São Miguel dos Campos, Brazil

Sugarcane bagasse

Ethanol

Mid 2012

September 2014.

QCCP/Syngenta

Galva, IA

Corn Kernel Fiber

Ethanol

Late 2013

October 2014.

Red Rock Biofuels

Lakeview, OR

Wood Waste

Diesel, Jet Fuel, Naphtha

July 2018

1Q 2020.

Raizen

Piracicaba City, Brazil

Sugarcane bagasse

Ethanol

January 2014

July 2015.

C. Projection From the Energy Information Administration

Despite generating cellulosic RINs in previous years Poet-DSM's facility has not been included in Table III.B.4-1 after announcing their plans to suspend commercial production at this facility.

The Facility Capacity is generally equal to the nameplate capacity provided to EPA by company representatives or found in publicly available information. Capacities are listed in physical gallons (rather than ethanol-equivalent gallons). If the facility has completed registration and the total permitted capacity is lower than the nameplate capacity, then this lower volume is used as the facility capacity.

Where a quarter is listed for the first production date EPA has assumed production begins in the middle month of the quarter (

i.e.,

August for the 3rd quarter) for the purposes of projecting volumes.

For more information on these facilities see “December 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020),” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

The nameplate capacity of Enerkem's facility is 10 million gallons per year. However, we anticipate that a portion of their feedstock will be non-biogenic municipal solid waste (MSW). RINs cannot be generated for the portion of the fuel produced from non-biogenic feedstocks. We have taken this into account in our production projection for this facility (See “May 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI”).

This date reflects the first production of ethanol from this facility. The facility began production of methanol in 2015.

Section 211(o)(3)(A) of the CAA requires EIA to “provide to the Administrator of the Environmental Protection Agency an estimate, with respect to the following calendar year, of the volumes of transportation fuel, biomass-based diesel, and cellulosic biofuel projected to be sold or introduced into commerce in the United States.” EIA provided these estimates to EPA on October 9, 2019.

With regard to domestically produced cellulosic ethanol, the EIA estimated that the available volume in 2020 would be 7 million gallons. In its letter, EIA did not identify the facilities on which their estimate of liquid cellulosic biofuel production was based. EIA did, however, indicate in the letter that it only included domestic production of cellulosic ethanol in their projections. These EIA projections, therefore, do not include cellulosic biofuel produced by foreign entities and imported into the U.S., nor estimates of cellulosic diesel, cellulosic heating oil or CNG/LNG produced from biogas, which together represent approximately 99 percent of our projected cellulosic biofuel volume for 2020. When limiting the scope of our projection to the companies assessed by EIA, we note that our volume projections are similar. EPA projects approximately 5 million gallons of cellulosic ethanol will be produced domestically in 2020.

Letter from Linda Capuano, EIA Administrator to Andrew Wheeler, EPA Administrator. October 9, 2019. Available in docket EPA-HQ-OAR-2019-0136.

D. Cellulosic Biofuel Volume for 2020

1. Liquid Cellulosic Biofuel

For our 2020 liquid cellulosic biofuel projection, we use the same general approach as we have in projecting these volumes in previous years. We begin by first categorizing potential liquid cellulosic biofuel producers in 2020 according to whether or not they have achieved consistent commercial scale production of cellulosic biofuel to date. We refer to these facilities as consistent producers and new producers, respectively. Next, we define a range of likely production volumes for 2020 for each group of companies. Finally, we use a percentile value to project from the established range a single projected production volume for each group of companies in 2020. As in the 2018 and 2019 final rules, we calculated percentile values for each group of companies based on the past performance of each group relative to our projected production ranges. This methodology is briefly described in this section and is described in detail in memoranda to the docket.

“December 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI” and “Calculating the Percentile Values Used to Project Liquid Cellulosic Biofuel Production for the 2020 FRM,” memorandums from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

We first separate the list of potential producers of cellulosic biofuel (listed in Table III.B.4-1) into two groups according to whether the facilities have achieved consistent commercial-scale production and cellulosic biofuel RIN generation. We next defined a range of likely production volumes for each group of potential cellulosic biofuel producers. The low end of the range for each group of producers reflects actual RIN generation data over the last 12 months for which data were available at the time our technical assessment was completed (October 2018-September 2019).

For potential producers that have not yet generated any cellulosic RINs, the low end of the range is zero. For the high end of the range, we considered a variety of factors, including the expected start-up date and ramp-up period, facility capacity, and the number of RINs the producer expects to generate in 2020.

The projected range for each group of companies is shown in Tables III.D.1-1 and III.D.1-2.

Consistent with previous years, we have considered whether there is reason to believe any of the facilities considered as potential cellulosic biofuel producers for 2020 is likely to produce a smaller volume of cellulosic biofuel in 2020 than in the previous 12 months for which data are available. At this time, EPA is not aware of any information that would indicate lower production in 2020 from any facility considered than in the previous 12 months for which data are available. Despite generating cellulosic RINs in previous years Poet-DSM's facility has not been included in our projection of cellulosic biofuel production in 2020 after announcing their plans to suspend commercial production at this facility.

As in our 2015-2019 projections, EPA calculated a high end of the range for each facility (or group of facilities) based on the expected start-up date and a six-month straight-line ramp-up period. The high end of the range for each facility (or group of facilities) is equal to the value calculated by EPA using this methodology, or the number of RINs the producer expects to generate in 2020, whichever is lower.

More information on the data and methods EPA used to calculate each of the ranges in these tables in contained in “December 2019 Liquid Cellulosic Biofuel Projections for 2020 CBI” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136. We have not shown the projected ranges for each individual company. This is because the high end of the range for some of these companies are based on the company's production projections, which they consider confidential business information (CBI). Additionally, the low end of the range for facilities that have achieved consistent commercial scale production is based on actual RIN generation data in the most recent 12 months, which is also claimed as CBI.

Table III.D.1-1—2020 Production Ranges for New Producers of Liquid Cellulosic Biofuel

[Million ethanol-equivalent gallons]

Companies included

Low end of

the range

High end of

the range

Enerkem, Ensyn (Port Cartier facility), BioEnergy, Red Rock Biofuels

Rounded to the nearest million gallons.

Table III.D.1-2—2020 Production Ranges for Consistent Producers of Liquid Cellulosic Biofuel

[Million ethanol-equivalent gallons]

Companies included

Low end of

the range

High end of

the range

Facilities using Edeniq's technology (registered facilities), Ensyn (Renfrew facility), GranBio, QCCP/Syngenta, Raizen

Rounded to the nearest million gallons.

After defining likely production ranges for each group of companies, we next determined the percentile values to use in projecting a production volume for each group of companies. We calculated the percentile values using actual production data from 2016 through 2019.

The first full year in which EPA used the current methodology for developing the range potential production volumes for each company was 2016, while 2019 is the most recent year for which we have data.

To calculate the percentile value that would have resulted in a projection equal to actual production for 2019 we projected actual liquid cellulosic biofuel production for 2019 using data through September 2019 and an updated projection of liquid cellulosic biofuel production for October-December 2019.

For each group of companies and for each year from 2016-2019, Table III.C.1-3 shows the projected ranges for liquid cellulosic biofuel production (from the 2014-16, 2017, 2018, and 2019 final rules), actual production, and the percentile values that would have resulted in a projection equal to the actual production volume.

Table III.D.1-3—Projected and Actual Liquid Cellulosic Biofuel Production in 2016-2019

[Million gallons]

Low end of

the range

High end of

the range

Actual

production

Actual

percentile

New Producers

2016

1.06

1st

2017

8.79

27th

2018

2.87

6th

2019

0.00

0th

Average

N/A

9th

Consistent Producers

2016

3.28

43rd

2017

3.5

3.02

−14th

2018

7.74

4th

2019

15.51

5th

Average

N/A

10th

We have not averaged the low and high ends of the ranges, or actual production, as we believe it is more appropriate to average the actual percentiles from 2016-2019 rather than calculating a percentile value for 2016-2019 in aggregate. This approach gives equal weight to the accuracy of our projections for each year from 2016-2019, rather than allowing the average percentiles calculated to be dominated by years with greater projected volumes.

Based upon

this analysis, EPA has projected cellulosic biofuel production from new producers at the 9th percentile of the calculated range and from consistent producers at the 10th percentile.

These percentiles are calculated by averaging the percentiles that would have produced cellulosic biofuel projections equal to the volumes produced by each group of companies in 2016-2019. Prior to 2016, EPA used different methodologies to project available volumes of cellulosic biofuel and thus believes it inappropriate to calculate percentile values based on projections from those years.

Actual production is calculated by subtracting RINs retired for any reason other than compliance with the RFS standards from the total number of cellulosic RINs generated.

Companies characterized as new producers in the 2014-2016, 2017, 2018, and 2019 final rules were as follows: Abengoa (2016), CoolPlanet (2016), DuPont (2016, 2017), Edeniq (2016, 2017), Enerkem (2018, 2019), Ensyn Port Cartier (2018, 2019), GranBio (2016, 2017), IneosBio (2016), and Poet (2016, 2017).

Companies characterized as consistent producers in the 2014-2016, 2017, 2018, and 2019 final rules were as follows: Edeniq Active Facilities (2018, 2019), Ensyn Renfrew (2016-2019), GranBio (2018, 2019), Poet (2018, 2019), Quad County Corn Processors/Syngenta (2016-2019), and Raizen (2019).

For more detail on the calculation of the percentile values used in this final rule see “Calculating the Percentile Values Used to Project Liquid Cellulosic Biofuel Production for 2020 FRM,” available in EPA docket EPA-HQ-OAR-2019-0136.

EPA used a similar projection methodology for 2015 as in 2016-2018, however we only projected cellulosic biofuel production volume for the final 3 months of the year, as actual production data were available for the first 9 months. We do not believe it is appropriate to consider data from a year for which 9 months of the data were known at the time the projection was made in determining the percentile values used to project volume over a full year.

We then used these percentile values, together with the ranges determined for each group of companies discussed above, to project a volume for each group of companies in 2020. These calculations are summarized in Table III.D.1-4.

Table III.D.1-4—Projected Volume of Liquid Cellulosic Biofuel in 2020

[Million ethanol-equivalent gallons]

Low end of

the range

High end of

the range

Percentile

Projected

volume

Liquid Cellulosic Biofuel Producers; Producers without Consistent Commercial Scale Production

9th

Liquid Cellulosic Biofuel Producers; Producers with Consistent Commercial Scale Production

10th

Total

N/A

Volumes rounded to the nearest million gallons.

Volumes do not add due to rounding.

2. CNG/LNG Derived From Biogas

For 2020, EPA is using the same industry wide projection approach as used for 2018 and 2019 based on a year-over-year growth rate to project production of CNG/LNG derived from biogas used as transportation fuel.

EPA calculated the year-over-year growth rate in CNG/LNG derived from biogas by comparing RIN generation from October 2018 to September 2019 (the most recent 12 months for which data are available) to RIN generation in the 12 months that immediately precede this time period (October 2017 to September 2018). The growth rate calculated using this data is 37.9 percent.

These RIN generation volumes are shown in Table III.D.2-1.

Historically RIN generation for CNG/LNG derived from biogas has increased each year. It is possible, however, that RIN generation for these fuels in the most recent 12 months for which data are available could be lower than the preceding 12 months. We believe our methodology accounts for this possibility. In such a case, the calculated rate of growth would be negative.

This growth rate is higher than the growth rates used to project CNG/LNG volumes in the 2019 final rule (29.0%, see 83 FR 63717, December 11, 2018) and the 2018 final rule (21.6%, see 82 FR 58502, December 12, 2017).

Table III.D.2-1—Generation of Cellulosic Biofuel RINs for CNG/LNG Derived From Biogas

[Million gallons]

RIN generation

(October 2017-September 2018)

RIN generation

(October 2018-September 2019)

Year-over-year

increase

278,134,565

383,605,247

37.9%

EPA then applied

this 37.9 percent year-over-year growth rate to the total number of 2018 cellulosic RINs generated and available for compliance for CNG/LNG. This methodology results in a projection of 576.8 million gallons of CNG/LNG derived from biogas in 2020. In this rule, as in the 2018 and 2019 final rules, we are again applying the calculated year-over-year rate of growth to the volume of CNG/LNG actually supplied in 2018 (taking into account actual RIN generation as well as RINs retired for reasons other than compliance with the annual volume obligations) to provide an updated projection of the production of these fuels in 2019, and then applying the rate of growth to this updated 2019 projection to project the production of these fuels in 2020.

Further detail on the data used to calculate each of these numbers in this table, as well as the projected volume of CNG/LNG derived from biogas used as transportation fuel in 2020 can be found in “December 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020)” memorandum from Dallas Burkholder to EPA Docket PA-HQ-OAR-2019-0136.

To calculate this value, EPA multiplied the number of 2018 RINs generated and available for compliance for CNG/LNG derived from biogas (303.2 million), by 1.379 (representing a 37.9 percent year-over-year increase) to project production of CNG/LNG in 2019, and multiplied this number (418.2 million RINs) by 1.379 again to project production of CNG/LNG in 2020.

We believe that projecting the production of CNG/LNG derived from biogas in this manner appropriately takes into consideration the actual recent rate of growth of this industry, and that this growth rate accounts for both the potential for future growth and the challenges associated with increasing RIN generation from these fuels in future years. This methodology may not be appropriate to use as the projected volume of CNG/LNG derived from biogas approaches the total volume of CNG/LNG that is used as transportation fuel, as RINs can be generated only for CNG/LNG used as transportation fuel. We do not believe that this is yet a constraint as our projection for 2020 is below the total volume of CNG/LNG that is currently used as transportation fuel.

EPA is aware of several estimates for the quantity of CNG/LNG that will be used as transportation fuel in 2020. As discussed in a paper prepared by Bates White for the Coalition for Renewable Gas (“Renewable Natural Gas Supply and Demand for Transportation.” Bates White Economic Consulting, April 5, 2019) these estimates range from nearly 600 million ethanol-equivalent gallons in 2020 (February 2019 STEO) to over 1.5 billion gallons (Fuels Institute—US Share). As discussed in further detail in a memorandum to the docket (“December 2019 Assessment of Cellulosic Biofuel Production from Biogas (2020)” memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136) we believe the higher projections are likely to be more accurate. Thus, the volume of CNG/LNG used as transportation fuel would not appear to constrain the number of RINs generated for this fuel in 2020.

3. Total Cellulosic Biofuel in 2020

After projecting production of cellulosic biofuel from liquid cellulosic biofuel production facilities and producers of CNG/LNG derived from biogas, EPA combined these projections to project total cellulosic biofuel production for 2020. These projections are shown in Table III.D.3-1. Using the methodologies described in this section, we project that 0.59 billion ethanol-equivalent gallons of qualifying cellulosic biofuel will be produced in 2020. We believe that projecting overall production in 2020 in the manner described above results in a neutral estimate (neither biased to produce a projection that is too high nor too low) of likely cellulosic biofuel production in 2020.

Table III.D.3-1—Projected Volume of Cellulosic Biofuel in 2020

Projected

volume

Liquid Cellulosic Biofuel Producers; Producers without Consistent Commercial Scale Production (million gallons)

Liquid Cellulosic Biofuel Producers; Producers with Consistent Commercial Scale Production (million gallons)

CNG/LNG Derived from Biogas (million gallons)

577

Total (billion gallons)

0.59

Rounded to the nearest million gallons.

Unlike in previous years, we have rounded the final projected volume of cellulosic biofuel to the nearest 10 million gallons as proposed. This is consistent with the volumes in the tables containing the statutory volume targets for cellulosic biofuel through 2022, which also specify volumes to no more than the nearest 10 million gallons (and in many cases only to the nearest 100 million gallons). While in previous years we have rounded the required cellulosic biofuel volume to the nearest million gallon, the projected volume of cellulosic biofuel has grown such that this level of precision is unnecessary, and likely unfounded. By rounding to the nearest 10 million gallons the total projected volume of cellulosic biofuel is affected in the most extreme case by only 5 million gallons, or approximately 1 percent of the total projected volume. The uncertainty in the projected volume of cellulosic biofuel is significantly higher than any error introduced by rounding the projected volume to the nearest 10 million gallons.

IV. Advanced Biofuel and Total Renewable Fuel Volumes for 2020

The national volume targets for advanced biofuel and total renewable fuel to be used under the RFS program each year through 2022 are specified in CAA section 211(o)(2)(B)(i)(I) and (II). Congress set annual renewable fuel volume targets that envisioned growth at a pace that far exceeded historical growth and, for years after 2011, prioritized that growth as occurring principally in advanced biofuels (contrary to previous growth patterns where most growth was in conventional renewable fuel). Congressional intent is evident in the fact that the implied statutory volume requirement for conventional renewable fuel is 15 billion gallons for all years after 2014, while the advanced biofuel volume requirements, driven largely by growth in cellulosic biofuel, continue to grow each year through 2022 to a total of 21 billion gallons. Early growth in conventional renewable fuels was expected to provide a bridge to the new, more beneficial cellulosic biofuels in the later years.

See, for instance, comments from Growth Energy where they note that “ . . . producers of starch ethanol . . . are leading investors in cellulosic biofuels, which may be derived from corn.” Page 31 of “Comments from Growth Energy on proposed 2018 standards,” available in docket EPA-HQ-OAR-2019-0136.

Due to a projected shortfall in the availability of cellulosic biofuel, and consistent with our long-held interpretation that the cellulosic waiver authority is best interpreted to provide equal reductions to advanced biofuel and total renewable fuel volumes, we are reducing the statutory volume targets for both advanced biofuel and total renewable fuel for 2020 by the maximum amount permitted under the cellulosic waiver authority, 9.91 billion gallons. Section IV.A explains the volumetric limitation on our use of the cellulosic waiver authority to reduce advanced biofuel and total renewable fuel volumes. Section IV.B presents our technical analysis of the reasonably attainable and attainable volumes of advanced biofuel. Sections IV.C and IV.D further explain our decision to exercise the maximum discretion available under the cellulosic waiver authority to reduce advanced biofuel and total renewable fuel, respectively.

To begin, we have evaluated the capabilities of the market and are making a finding that the 15.0 billion gallons specified in the statute for advanced biofuel cannot be reached in 2020. This is primarily due to the expected continued shortfall in cellulosic biofuel; production of this fuel type has consistently fallen short of the statutory targets by 90 percent or more, and as described in Section III, we project that it will fall far short of the statutory target of 10.5 billion gallons in 2020. For this and other reasons described in this section we are reducing the advanced biofuel statutory target by 9.91 billion gallons for 2020.

In previous years when we have used the cellulosic waiver authority, we have determined the extent to which we should reduce advanced biofuel volumes by considering a number of different factors under the broad discretion which that authority provides, including:

• The availability of advanced biofuels (

e.g.,

historic data on domestic supply, expiration of the biodiesel blenders' tax credit, potential imports of biodiesel in light of the Commerce Department's determination on tariffs on biodiesel imports from Argentina and Indonesia, potential imports of sugarcane ethanol, and anticipated changes in the production of feedstocks for advanced biodiesel and renewable diesel)

• The energy security and greenhouse gas (GHG) impacts of advanced biofuels

• The availability of carryover RINs

• The intent of Congress as reflected in the statutory volumes tables to substantially increase the use of advanced biofuels over time

• Increased costs associated with the use of advanced biofuels, and

• The increasing likelihood of adverse unintended impacts associated with use of advanced biofuel volumes achieved through diversion of foreign fuels or substitution of advanced feedstocks from other uses to biofuel production.

Before the 2018 standards were set, the consideration of these factors led us to conclude that it was appropriate to set the advanced biofuel standard in a manner that would allow the partial backfilling of missing cellulosic volumes with non-cellulosic advanced biofuels.

In the 2018 and 2019 standards final rules, we concluded that partial backfilling of missing cellulosic biofuel volumes with advanced biofuel was not warranted, primarily due to a shortfall in reasonably attainable volumes of advanced biofuels, high costs, the potential for feedstock switching and/or foreign fuel diversion which could compromise GHG benefits and disrupt markets, and an interest in preserving the existing carryover RIN bank.

65 66

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

See 82 FR 58504 (December 12, 2017).

See 83 FR 63719 (December 11, 2018).

For 2020, we have determined that the concerns surrounding partial backfilling of missing cellulosic biofuel with advanced biofuel remain valid. As a result, we are reducing the statutory volume target for advanced biofuel by the same amount as the reduction in cellulosic biofuel. This results in the non-cellulosic component of the advanced biofuel volume requirement being equal to 4.50 billion gallons in 2020, which is the same as the implied statutory volume requirement for non-cellulosic advanced biofuel for 2020.

The impact of our exercise of the cellulosic waiver authority is that after waiving the statutory volume target for cellulosic biofuel down to the projected available level, and then reducing the statutory volume target for advanced biofuel by the same amount, the resulting volume requirement for advanced biofuel for 2020 is 5.09 billion gallons. This volume requirement is 170 million gallons more than the applicable volume used to derive the 2019 percentage standard. Furthermore, after applying the same reduction to the statutory volume target for total renewable fuel, the volume requirement for total renewable fuel is also 170 million gallons more than the applicable volume used to derive the 2019 percentage standard. These increases are entirely attributable to a 170 million gallon increase in the cellulosic biofuel volume requirement. The implied volumes of non-cellulosic advanced biofuel and conventional renewable fuel will remain the same as in 2019 at 4.5 and 15 billion gallons respectively.

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

As described in Section II.A, when making reductions in advanced biofuel and total renewable fuel under the cellulosic waiver authority, the statute limits those reductions to no more than the reduction in cellulosic biofuel. As described in Section III.C, we are establishing a 2020 applicable volume for cellulosic biofuel of 590 million gallons, representing a reduction of 9,910 million gallons from the statutory target of 10,500 million gallons. As a result, 9,910 million gallons is the maximum volume reduction for advanced biofuel and total renewable fuel that is permissible using the cellulosic waiver authority. Use of the cellulosic waiver authority to this maximum extent would result in volumes of 5.09 and 20.09 billion gallons for advanced biofuel and total renewable fuel, respectively.

Table IV.A-1—Lowest Permissible Volumes Using Only the Cellulosic Waiver Authority

[Million gallons]

Advanced

biofuel

Total

renewable fuel

Statutory target

15,000

30,000

Maximum reduction permitted under the cellulosic waiver authority

9,910

Lowest 2020 volume requirement permitted using only the cellulosic waiver authority

5,090

20,090

We are authorized under the cellulosic waiver authority to reduce the advanced biofuel and total renewable fuel volumes “by the same or a lesser” amount as the reduction in the cellulosic biofuel volume.

As discussed in Section II.A, EPA has broad discretion in using the cellulosic waiver authority in instances where its use is authorized under the statute, since Congress did not specify factors that EPA must consider in determining whether to use the authority to reduce advanced biofuel or total renewable fuel, nor what the appropriate volume reductions (within the range permitted by statute) should be. Thus, we have the authority to set the 2020 advanced biofuel volume requirement at a level that is designed to partially backfill for the shortfall in cellulosic biofuel. However, as discussed below, we do not believe this would be appropriate for 2020.

CAA section 211(o)(7)(D)(i).

B. Attainable Volumes of Advanced Biofuel

We have evaluated whether it would be appropriate to require 5.09 billion ethanol-equivalent gallons of advanced biofuel for 2020. In doing so, we have considered both attainable and reasonably attainable volumes of advanced biofuel to inform our exercise of the cellulosic

waiver authority. As we explained in the 2019 final rule, both “reasonably attainable” and “attainable” are terms of art defined by EPA.

Volumes described as “reasonably attainable” are those that can be reached with minimal market disruptions, increased costs, reduced GHG benefits, and diversion of advanced biofuels or advanced biofuel feedstocks from existing uses. Volumes described as “attainable,” in contrast, are those we believe can be reached but would likely result in market disruption, higher costs, and/or reduced GHG benefits. Neither “reasonably attainable” nor “attainable” are meant to convey the “maximum achievable” level, which, as we explained in the 2017 final rule, we do not consider to be an appropriate target under the cellulosic waiver authority.

Finally, we note that our assessments of the “reasonably attainable” and “attainable” volumes of non-cellulosic advanced biofuels are not intended to be as exacting as our projection of cellulosic biofuel production, described in Section III of this rule.

83 FR 63704, 63721 (December 11, 2019).

Our consideration of “reasonably attainable” volumes is not intended to imply that “attainable” volumes are unreasonable or otherwise inappropriate. As we explain in this section, we believe that an advanced biofuel volume of 5.09 billion gallons, although not reasonably attainable, is attainable, and that establishing such volume is an appropriate exercise of our cellulosic waiver authority.

81 FR 89762 (December 12, 2016). The maximum achievable volume may be relevant to our consideration of whether to exercise the general waiver authority on the basis of inadequate domestic supply. However, for 2020, we have determined that after exercising our cellulosic waiver authority to the full extent permitted, the resulting advanced biofuel volume is attainable. Therefore, further reductions using the general waiver authority on the basis of inadequate domestic supply are not necessary.

The statute directs EPA to lower the cellulosic biofuel volume to the projected production level where that level falls short of the statutory volume. Under

API

EPA,

706 F.3d 474, 479-80 (D.C. Cir. 2013), we must project this production level with neutral aim at accuracy, that is, make a technical determination about the market's ability to produce cellulosic biofuels. By contrast, the discretionary portion of the cellulosic waiver authority does not explicitly require EPA to project the availability of advanced biofuels, but instead confers broad discretion on EPA. Moreover, while we have chosen to estimate reasonably attainable and attainable volumes of advanced biofuel, these volumes do not equate to projected production alone. Rather, in exercising the discretionary portion of the cellulosic waiver authority, we also consider a range of policy factors—such as costs, greenhouse gas emissions,

energy security, market disruptions, etc., as described throughout this section.

As in prior rulemakings, we begin by considering what volumes of advanced biofuels are reasonably attainable. In

ACE,

the Court noted that in assessing what volumes are “reasonably attainable,” EPA had considered the availability of feedstocks, domestic production capacity, imports, and market capacity to produce, distribute, and consume renewable fuel.

These considerations include both demand-side and supply-side factors.

We are taking a similar approach for 2020. We are establishing the advanced biofuel volume requirement at a level that takes into consideration both the benefits and drawbacks of an increase in the implied non-cellulosic advanced biofuel volume requirement, as well as the ability of the market to make such increased volumes available.

See

ACE,

864 F.3d at 735-36.

See id. at 730-35.

Our individual assessments of reasonably attainable volumes of each type of advanced biofuel reflect this approach. As discussed in further detail in this section, we find that 70 million gallons of imported advanced ethanol, 50 million gallons of other advanced biofuels, and 2.77 billion gallons of advanced biodiesel and renewable diesel are reasonably attainable. Together with our projected volume of 590 million gallons of cellulosic biofuel, the sum of these volumes is 5.00 billion gallons.

This is the volume of advanced biofuel that we believe is reasonably attainable.

0.07 + 0.05 + 2.77 × 1.55 + 0.59 = 5.00.

As described in Section IV.A above, 5.09 billion gallons is the lowest level that we could set under the cellulosic waiver authority. Since the volume that we have determined to be reasonably attainable—5.00 billion gallons—is less than the lowest volume we can set under the cellulosic waiver authority, we also have considered whether the market can make more than 5.00 billion gallons of advanced biofuel, notwithstanding the potential for feedstock/fuel diversions. That is, we assess whether 5.09 billion gallons is merely “attainable,” as opposed to “reasonably attainable.” In particular, we assess whether additional volumes of advanced biodiesel and renewable diesel are attainable. We conclude that 2.83 billion gallons of advanced biodiesel and renewable diesel are attainable, notwithstanding potential feedstock/fuel diversions. This quantity of advanced biodiesel and renewable diesel, together with the cellulosic biofuel, sugarcane ethanol, and other advanced biofuels described above, will enable the market to make available 5.09 billion gallons of advanced biofuels.

1. Imported Sugarcane Ethanol

The predominant available source of advanced biofuel other than cellulosic biofuel and BBD has historically been imported sugarcane ethanol. Imported sugarcane ethanol from Brazil is the predominant form of imported ethanol and the only significant source of imported advanced ethanol. In setting the 2019 standards, we estimated that 100 million gallons of imported sugarcane ethanol would be reasonably attainable.

This was based on a combination of data from recent years demonstrating relatively low import volumes and older data indicating that higher volumes were possible. We also noted the high variability in ethanol import volumes in the past (including of Brazilian sugarcane ethanol), increasing gasoline consumption in Brazil, and variability in Brazilian production of sugar as reasons that it would be inappropriate to assume that sugarcane ethanol imports would reach the much higher levels suggested by some stakeholders.

83 FR 63704 (December 11, 2018).

At the time of the 2019 standards final rule, we used available data from a portion of 2018 to estimate that import volumes of sugarcane ethanol were likely to fall significantly below the 200 million gallons we had assumed when we set the 2018 standards. Since the 2019 final rule, new data reveals a continued trend of low imports. Specifically, import data for all of 2018 is now available and indicates that imports of sugarcane ethanol reached just 54 million gallons.

ER06FE20.001

Data for 2019 through August indicate that advanced ethanol imports reached 95 million gallons. While we cannot project precisely what total import volumes will be by the end of 2019, as a first approximation is may be reasonable to assume that the monthly rate of import is consistent throughout the year. If so, then total 2019 imports could be 143 million gallons.

However, there is little evidence that the increase potentially exhibited in 2019 would continue into 2020 as there is no consistent upward or downward trend after 2013. Moreover, several factors create disincentives for increasing imports above the levels in recent years, including the E10 blendwall, the potential existence of a recurring tax credit for biodiesel and renewable diesel with which sugarcane ethanol competes within the advanced biofuel category, and the fact that imported sugarcane ethanol typically costs more than corn ethanol.

As a result of these factors and the lower levels that have occurred in recent years, we believe it would be appropriate to reduce the expected volume of imported sugarcane ethanol below 100 million gallons.

The difference between D5 and D6 RIN prices can also influence the relative attractiveness to consumers of advanced ethanol compared to conventional ethanol. However, there has been considerable variability in this particular RIN price difference over the last few years.

Imports of sugarcane ethanol appear to have stabilized in the 2014 to 2018 timeframe in comparison to previous years. The average for these years is 67 million gallons. Due to the difficulty in precisely projecting future import volumes as described further below, we believe that a rounded value of 70 million gallons would be more appropriate and thus we use 70 million gallons of imported sugarcane ethanol for the purposes of projecting reasonably attainable volumes of advanced biofuel for 2020. We believe the volume of fuel imported in previous years is a reasonable way to project the reasonably attainable volume of sugarcane ethanol in 2020.

In the July 29 proposal, we projected that 60 million gallons of imported sugarcane ethanol would be available in 2020. Our revised estimate of 70 million gallons reflects updated data on 2018 imports as well as a more robust quantitative approach to calculating recent actual imports.

We note that the future projection of imports of sugarcane ethanol is inherently imprecise and that actual imports in 2020 could be lower or higher than 70 million gallons. Factors that could affect import volumes include uncertainty in the Brazilian political climate, weather and harvests in Brazil, world ethanol demand and prices, constraints associated with the E10 blendwall in the U.S., the status of the biodiesel tax credit which affects the economic attractiveness of sugarcane ethanol's primary competitor, world demand for and prices of sugar, and the cost of sugarcane ethanol relative to that of corn ethanol. After considering these factors, and in light of the high degree of variability in historical imports of sugarcane ethanol, we believe that 70

million gallons is reasonably attainable for 2020.

Given the relatively small volumes of sugarcane ethanol we are projecting (approximately 1 percent of the advanced biofuel standard), even a significant deviation in its actual availability would likely have negligible impact on the market's ability to meet the advanced biofuel volumes.

2. Other Advanced Biofuel

In addition to cellulosic biofuel, imported sugarcane ethanol, and advanced biodiesel and renewable diesel, there are other advanced biofuels that can be counted in the determination of reasonably attainable volumes of advanced biofuel for 2020. These other advanced biofuels include non-cellulosic CNG, naphtha, heating oil, and domestically produced advanced ethanol. However, the supply of these fuels has been relatively low in the last several years.

Table IV.B.2-1—Historical Supply of Other Advanced Biofuels

[Million ethanol-equivalent gallons]

CNG/LNG

Heating oil

Naphtha

Domestic

ethanol

Total

2013

2014

2015

2016

2017

2018

Excludes consideration of D5 renewable diesel, as this category of renewable fuel is considered as part of biodiesel and renewable diesel as discussed in Section IV.B.3.

The significant decrease after 2014 in CNG/LNG from biogas as advanced biofuel with a D code of 5 is due to the re-categorization in 2014 of landfill biogas from advanced (D code 5) to cellulosic (D code 3).

Subsequently, total supply of these other advanced biofuels has exhibited no consistent trend during 2015 to 2018. The average during those four years was 54 million gallons. However, due to the high variability, and consistent with the approach we are taking for estimating volumes of imported sugarcane ethanol, we believe that this average should be rounded to the nearest 10 million gallons. As a result, we have used 50 million gallons to represent other advanced biofuels in the context of estimating attainable volumes of advanced biofuel.

As with sugarcane ethanol, we have not conducted an in-depth assessment of the volume of other advanced biofuels that could be made available to the U.S. without diverting this fuel from other markets. We believe the volume of fuel supplied in previous years is a reasonable way to project the reasonably attainable volume of other advanced biofuels in 2020.

79 FR 42128 (July 18, 2014).

As with sugarcane ethanol, given the relatively small volumes of other advanced biofuels we are projecting (approximately 1% of the advanced biofuel standard), even a significant deviation in its actual availability would likely have negligible impact on the market's ability to meet the advanced biofuel volumes.

We acknowledge that, in the July 29 proposal, we proposed using 60 million gallons of other advanced biofuel in estimating attainable volumes of advanced biofuel. This value was based on the same data shown in Table IV.B.2-1, but using a more qualitative approach wherein 60 million gallons was deemed representative of both historical volumes and those that could be attained in 2020. For this final rule we have chosen to use a mathematical approach that is consistent with the approach we have taken for imported sugarcane ethanol, and which we believe represents a more robust methodology for making future projections. As the change in the projected 2020 volume of other advanced biofuel is very small, we do not believe this change in approach meaningfully affects the broader assessment of advanced biofuel volumes. Moreover, we note that this final action uses a volume of imported sugarcane ethanol that is 10 million gallons higher than that proposed, while simultaneously using a volume of other advanced that is 10 million gallons lower than that proposed. The net effect on projections of advanced biofuel for both of these changes combined is zero.

We recognize that the potential exists for additional volumes of advanced biofuel from sources such as jet fuel, liquefied petroleum gas (LPG), butanol, and liquefied natural gas (as distinct from CNG), as well as non-cellulosic CNG from biogas produced in digesters. However, since they have been produced, if at all, in only de minimis and sporadic amounts in the past, we do not have a reasonable basis for projecting substantial volumes from these sources in 2020.

No RIN-generating volumes of these other advanced biofuels were produced in 2018, and less than 1 million gallons total in prior years.

3. Biodiesel and Renewable Diesel

Having projected the available volume of cellulosic biofuel, and the reasonably attainable volumes of imported sugarcane ethanol and “other” advanced biofuels, we next assess the availability of advanced biodiesel and renewable diesel by considering a wide range of factors. First, we calculate the amount of advanced biodiesel and renewable diesel that would be needed to meet the 5.09 billion ethanol-equivalent gallon advanced requirement were we to exercise our maximum discretion under the cellulosic waiver authority discussed in Section IV.A. This calculation, shown in Table IV.B.3-1, helps inform the exercise of our waiver authorities. Second, we consider the historical availability of these fuels, including the impacts of biodiesel tax policy and tariffs. Third, we consider other factors that could potentially limit the availability of these fuels including the production capacity of advanced biodiesel and renewable diesel production facilities, and the ability for the market to distribute and use these fuels. Fourth, we assess the availability of advanced feedstocks. As part of this analysis, we consider the volume of advanced biodiesel and renewable diesel that can be made available with minimal diversions of advanced feedstocks and biofuels from existing uses,

i.e.,

the reasonably attainable volume of advanced biodiesel and renewable diesel. We calculate this volume based on our projection of growth in qualifying feedstocks and on the reasonably attainable volume calculated in the 2019 final rule. Fifth, we consider how changes to the import and export of advanced biodiesel and

renewable diesel could impact the available volume of these fuels.

These analyses support three key findings. First, were EPA to exercise the cellulosic waiver authority to the maximum extent, we would require an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons, of which we estimate 4.37 billion ethanol-equivalent gallons (2.83 billion actual gallons of biodiesel and renewable diesel) would be met by advanced biodiesel and renewable diesel. Second, the reasonably attainable volume of advanced biodiesel and renewable diesel, which can be achieved with minimal diversions of advanced feedstocks and biofuels (2.77 billion gallons) is slightly lower than this volume. This finding, together with the high cost of advanced biofuels, supports our decision to exercise the cellulosic waiver authority to the maximum extent and not to permit backfilling of missing cellulosic volumes with additional advanced biofuels. Third, 2.83 billion gallons of advanced biodiesel and renewable diesel are attainable by the market. These findings, together with additional discussions in the RTC document and docket memoranda, supports our decisions to neither require the use of additional volumes of advanced biofuel to backfill for the shortfall in cellulosic biofuel nor to further waive volumes under the general waiver authority.

We note that we have not attempted to determine the maximum achievable volume of these fuels. While the maximum achievable volume of advanced biodiesel and renewable diesel in 2020 is likely greater than 2.83 billion gallons we do not believe it would be appropriate to require a greater volume of these fuels due to the high cost and increased likelihood of adverse unintended impacts associated with these fuels.

a. Volume of Advanced Biodiesel and Renewable Diesel To Achieve Advanced Biofuel Volume

We begin by calculating the volume of advanced biodiesel and renewable diesel that would be needed to meet the 2020 advanced biofuel volume were EPA to exercise the cellulosic waiver authority to the maximum extent. This important benchmark informs EPA's consideration of our waiver authorities, albeit as only one factor among many. Specifically, in past annual rules where the reasonably attainable volume of biodiesel and renewable diesel has exceeded this benchmark, as was the case in 2017 and 2018, EPA has considered whether or not to allow additional volumes of these fuels to backfill for missing cellulosic biofuel volumes. By contrast, where the reasonably attainable volume of advanced biodiesel and renewable diesel has been less than this benchmark, as was the case in 2019, this weighs in favor of exercising the cellulosic waiver authority to the maximum extent so as to minimize diversions of advanced biofuels and feedstocks and the associated harms and the need for additional volumes of high cost advanced biofuel. Relatedly, were EPA to find that volume of advanced biodiesel and renewable diesel needed to meet this benchmark is not attainable, that would weigh in favor of EPA exercising its discretion under additional waiver authorities, to the extent available, to make further reductions to the advanced biofuel volume.

As shown in Table IV.B.3-1, were EPA to exercise the cellulosic waiver authority to the maximum extent, the required volume of advanced biofuel

would be 5.09 billion ethanol-equivalent gallons. After subtracting from this volume the available volume of cellulosic biofuel and reasonably attainable volumes of imported sugarcane ethanol and “other” advanced biofuels, we estimate that approximately 2.83 billion gallons of advanced biodiesel and renewable diesel would be needed to meet the 2020 advanced biofuel volume.

To calculate the volume of advanced biodiesel and renewable diesel that would generate the 4.37 billion RINs needed to meet the advanced biofuel volume EPA divided the 4.37 billion RINs by 1.55, which is the approximate average (weighted by the volume of these fuels expected to be produced in 2020) of the equivalence values for biodiesel (generally 1.5) and renewable diesel (generally 1.7).

Table IV.B.3-1—Determination of Volume of Biodiesel and Renewable Diesel Needed in 2020 To Achieve 5.09 Billion Gallons of Advanced Biofuel

[Million ethanol-equivalent gallons except as noted]

Target 2020 advanced biofuel volume requirement absent any backfilling of missing cellulosic biofuel

5,090

Cellulosic biofuel

590

Imported sugarcane ethanol

Other advanced

Calculated advanced biodiesel and renewable diesel needed (ethanol-equivalent gallons/physical gallons)

4,380\2,826

b. Historical Supply of Biodiesel and Renewable Diesel

We next consider the volumes of advanced biodiesel and renewable diesel supplied in previous years, as well as the impacts of biodiesel tax policy and tariffs on these volumes. A review of the volumes of advanced biodiesel and renewable diesel used in previous years is especially useful in projecting the potential availability of these fuels, since there are a number of complex and inter-related factors beyond simply total production capacity (including the availability of advanced biodiesel and renewable diesel feedstocks,

the expiration of the biodiesel tax credit, changes to tariffs on biodiesel from Argentina and Indonesia, import and distribution infrastructure, and other market-based factors) that could affect the supply of advanced biodiesel and renewable diesel. While historic data and trends alone are insufficient to project the volumes of biodiesel and renewable diesel that could be provided in future years, historic data can serve as a useful reference in considering future volumes.

Throughout this section we refer to advanced biodiesel and renewable diesel as well as advanced biodiesel and renewable diesel feedstocks. In this context, advanced biodiesel and renewable diesel refer to any biodiesel or renewable diesel for which RINs can be generated that satisfy an obligated party's advanced biofuel obligation (

i.e.,

D4 or D5 RINs). While cellulosic diesel (D7) can also contribute towards an obligated party's advanced biofuel obligation, these fuels are discussed in Section III rather than in this section. An advanced biodiesel or renewable feedstock refers to any of the biodiesel, renewable diesel, jet fuel, and heating oil feedstocks listed in Table 1 to 40 CFR 80.1426 or in petition approvals issued pursuant to section 80.1416, that can be used to produce fuel that qualifies for D4 or D5 RINs. These feedstocks include, for example, soy bean oil; oil from annual cover crops; oil from algae grown photosynthetically; biogenic waste oils/fats/greases; non-food grade corn oil; camelina sativa oil; and canola/rapeseed oil (See pathways F, G, and H of Table 1 to section 80.1426).

Past experience suggests that a high percentage of the biodiesel and renewable diesel used in the U.S. (from both domestic production and imports) qualifies as advanced biofuel.

previous years, biodiesel and renewable diesel produced in the U.S. have been almost exclusively advanced biofuel.

Volumes of imported biodiesel and renewable diesel, which include both advanced and conventional biodiesel and renewable diesel, have varied significantly from year to year, as they are impacted both by domestic and foreign policies, as well as many economic factors. Production, import, export, and total volumes of advanced biodiesel and renewable diesel are shown in Table IV.B.3-2, while volumes of conventional biodiesel and renewable diesel are shown in the following Table IV.B.3-3.

From 2011 through 2018 approximately 96 percent of all biodiesel and renewable diesel

supplied to the U.S. (including domestically produced and imported biodiesel and renewable diesel) qualified as advanced biodiesel and renewable diesel (14,214 million gallons of the 14,869 million gallons) according to EMTS data. This section focuses on the availability of advanced biodiesel and renewable diesel to meet the advanced biofuel volume. For a discussion of the availability of all biodiesel and renewable diesel that could be used to meet the total renewable fuel volume see “Updated market impacts of biofuels in 2020,” memorandum from David Korotney to docket EPA-HQ-OAR-2019-0136.

From 2011 through 2018 over 99.9 percent of all the domestically produced biodiesel and renewable diesel supplied to the U.S. qualified as advanced biodiesel and renewable diesel (12,268 million gallons of the 12,275 million gallons) according to EMTS data.

For this final rule EPA reviewed the data available in EMTS and updated historical renewable fuel production and RIN generation data. This updated data can be found in “Historical RIN supply as of 8-12-19,” memorandum from David Korotney to EPA docket EPA-HQ-OAR-2019-0136. Tables in this final rule that contain historical data (such as Tables IV.B.3-2, IV.B.3-3, VI.B.1-1 and VI.B.1-2) have been updated accordingly.

Table IV.B.3-2

—Advanced (D4 and D5) Biodiesel and Renewable Diesel From 2011 to 2019

[Million gallons]

2011

2012

2013

2014

2015

2016

2017

2018

2019

Domestic Biodiesel

969

984

1,364

1,296

1,245

1,581

1,530

1,843

1825

(Annual Change)

(N/A)

(+15)

(+380)

(−68)

(−51)

(+336)

(−51)

(+313)

(−18)

Domestic Renewable Diesel

112

158

174

236

251

306

531

(Annual Change)

(N/A)

(−9)

(+62)

(+46)

(+16)

(+62)

(+15)

(+55)

(+225)

Imported Biodiesel

153

130

261

562

462

175

246

(Annual Change)

(N/A)

(−4)

(+114)

(−23)

(+131)

(+301)

(−100)

(−287)

(+71)

Imported Renewable Diesel

145

130

120

165

191

178

256

(Annual Change)

(N/A)

(+28)

(+117)

(−15)

(−10)

(+45)

(+26)

(−13)

(+78)

Exported Biodiesel and Renewable Diesel

129

166

154

122

(Annual Change)

(N/A)

(+36)

(+16)

(+3)

(+7)

(+35)

(+37)

(−12)

(−32)

Total

1,039

1,033

1,690

1,627

1,706

2,415

2,268

2,348

2,736

(Annual Change)

(N/A)

(−6)

(+657)

(−63)

(+79)

(+709)

(−147)

(+80)

(+388)

All data from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.

RFS required volumes for these years were not established until December 2015.

Data for 2019 is based on actual production and import data through September 2019, and a projection for October-December 2019. For more information on how the volumes for 2019 were determined see “Projecting Advanced Biofuel Production and Imports for 2019 (November 2019),” Memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports.

Table IV.B.3-3—Conventional (D6) Biodiesel and Renewable Diesel From 2011 to 2019

[Million gallons]

2011

2012

2013

2014

2015

2016

2017

2018

2019

Domestic Biodiesel

(Annual Change)

(N/A)

(−2)

(+1)

(+0)

(−1)

(+0)

Domestic Renewable Diesel

(Annual Change)

(N/A)

(+0)

Imported Biodiesel

113

(Annual Change)

(N/A)

(+0)

(+31)

(+21)

(+22)

(+39)

(-113)

(+0)

Imported Renewable Diesel

(Annual Change)

(N/A)

(+0)

(+70)

(−68)

(+85)

(−42)

(−43)

(−1)

Exported Biodiesel and Renewable Diesel

(Annual Change)

(N/A)

(+0)

(+1)

(+0)

(−1)

(+0)

Total

102

160

157

(Annual Change)

(N/A)

(−2)

(+102)

(−47)

(+105)

(−3)

(−155)

(−1)

All data from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RINs retired for reasons other than demonstrating compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the volume in each year.

RFS required volumes for these years were not established until December 2015.

While a significant number of D6 RINs have been generated for biodiesel and renewable diesel in 2019 in recent years nearly all of these RINs have later been retired for reasons other than compliance with the volume obligations. Since D6 RIN prices have been relatively low in 2019 and the biodiesel tax credit is currently not available we are not projecting any production or import of D6 biodiesel or renewable diesel in 2019.

Total is equal to domestic production of biodiesel and renewable plus imported biodiesel and renewable diesel minus exports.

As we explained above, to meet an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons we project that the market would supply 2.83 billion gallons of advanced biodiesel and renewable diesel. This volume (2.83 billion gallons) is approximately 90 million gallons greater than the volume of these fuels projected to be supplied in 2019 based on data through September 2019. Since 2011, the year-over-year changes in the volume of advanced biodiesel and renewable diesel used in the U.S. have varied greatly, from a low of 147 million fewer gallons from 2016 to 2017 to a high of 709 million additional gallons from 2015 to 2016. These changes were likely influenced by multiple factors such as the cost of biodiesel feedstocks and petroleum diesel, the status of the biodiesel blenders tax credit, growth in marketing of biodiesel at high volume truck stops and centrally fueled fleet locations, demand for biodiesel and renewable diesel in other countries, biofuel policies in both the U.S. and foreign countries, and the volumes of renewable fuels (particularly advanced biofuels) required by the RFS. This historical information does not indicate that the maximum previously observed increase of 709 million gallons of advanced biodiesel and renewable diesel would be reasonable to expect in 2020, nor does it indicate that the low (or negative) growth rates observed in other years would recur. Rather, these data illustrate both the magnitude of the changes in advanced biodiesel and renewable diesel in previous years and the significant variability in these changes.

The historic data indicates that the biodiesel tax policy in the U.S. can have a significant impact on the volume of biodiesel and renewable diesel used in the U.S. in any given year.

While the biodiesel blenders tax credit has applied in each year from 2010 to 2017, it has only been prospectively in effect during the calendar year in 2011, 2013, and 2016, while other years it has been applied retroactively. Each of the years in which the biodiesel blenders tax credit was in effect during the calendar year (2013 and 2016) resulted in significant increases in the volume of advanced biodiesel and renewable diesel used in the U.S. over the previous year (656 million gallons and 742 million gallons respectively). However, following these large increases in 2013 and 2016, there was little to no growth in the use of advanced biodiesel and renewable diesel in the following years. More recent data from 2019 suggests that while the availability of the tax credit certainly incentivizes an increasing supply of biodiesel and renewable diesel, supply increases can also occur in the absence of the tax credit, likely as the result of the incentives provided by the RFS program and other economic factors. The availability of this tax credit also provides biodiesel and renewable diesel with a competitive advantage relative to other advanced biofuels that do not qualify for the tax credit.

We note that the status of the tax credit does not impact our assessment of the reasonably attainable volume of advanced biodiesel and renewable diesel in 2020 as that assessment is primarily based on feedstock availability. The status of the tax credit could potentially affect the maximum achievable volume of these fuels, but our assessment demonstrates that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable whether or not the tax credit is renewed prospectively (or retrospectively) for 2020.

For a further discussion of the impact of the tax credit on the supply of biodiesel and renewable diesel, see the discussion from the proposed rule (84 FR 36783, July 29, 2019).

Another important factor highlighted by the historic data is the tariffs imposed by the U.S. on biodiesel imported from Argentina and Indonesia. In December 2017 the U.S. International Trade Commission adopted tariffs on biodiesel imported from Argentina and Indonesia.

According to data from EIA,

no biodiesel was imported from Argentina or Indonesia since September 2017, after a preliminary decision to impose tariffs on biodiesel imported from these countries was announced in August 2017. As a result of these tariffs, total imports of biodiesel into the U.S. were significantly lower in 2018 than they had been in 2016 and 2017. The decrease in imported biodiesel did not, however, result in a decrease in the volume of advanced biodiesel and renewable diesel supplied to the U.S. in 2018. Instead, higher domestic production of advanced biodiesel and renewable diesel, in combination with lower exported volumes of domestically produced biodiesel, resulted in an overall increase in the volume of advanced biodiesel and renewable diesel supplied in 2018. On July 9, 2019, the Department of Commerce published a preliminary determination to reduce the countervailing duty on biodiesel imported from Argentina.

If finalized this could result in increasing volumes of biodiesel imports from Argentina in future years.

“Biodiesel from Argentina and Indonesia Injures U.S. Industry, says USITC,” Available online at:

https://www.usitc.gov/press_room/news_release/2017/er1205ll876.htm.

See “EIA Biomass-Based Diesel Import Data” available in docket EPA-HQ-OAR-2019-0136.

84 FR 32714 (July 9, 2019).

The historical data suggests that the 2.83 billion gallons of advanced biodiesel and renewable diesel projected to be used to meet an advanced biofuel volume of 5.09 billion ethanol-equivalent gallons is attainable. This would represent a projected increase of approximately 90 million gallons from 2019 to 2020. This increase is less than the average increase in the volume of advanced biodiesel and renewable diesel used in the U.S. from 2011 through 2019 (212 million gallons per year) and significantly less than the highest annual increase during this time (742 million gallons from 2015 to 2016). We note, however, that this assessment does not consider the sources of feedstock that would be used to meet this increase, or the potential impacts of supplying 2.83 billion gallons of advanced biodiesel and renewable diesel, which are discussed in greater detail in the following sections.

c. Consideration of Production Capacity and Distribution Infrastructure

After reviewing the historical volume of advanced biodiesel and renewable diesel used in the U.S., EPA next considers other factors that may impact the production, import, and use of advanced biodiesel and renewable diesel in 2020. The production capacity of registered advanced biodiesel and renewable diesel production facilities is highly unlikely to limit the production of these fuels, as the total production capacity for biodiesel and renewable diesel at registered facilities in the U.S. (4.1 billion gallons) exceeds the volume of these fuels that are projected to be needed to meet the advanced biofuel volume for 2020 after exercising the cellulosic waiver authority (2.83 billion gallons).

Significant registered production also exists internationally. Similarly, the ability for the market to distribute and use advanced biodiesel and renewable diesel appears unlikely constrain the growth of these fuels to a volume lower than 2.83 billion gallons. The investments required to distribute and use this volume of biodiesel and renewable diesel are expected to be manageable by the marketplace given the RIN value incentive, as this volume is approximately 90 million gallons greater than the volume of biodiesel and renewable diesel produced, imported, and used in the U.S. in 2019. The magnitude of the increase projected

from 2019 to 2020 (90 million gallons) is much smaller than the increases observed in previous years. These factors further support our finding that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable.

The production capacity of the sub-set of biodiesel and renewable diesel producers that generated RINs in 2018 is approximately 2.9 billion gallons. See “Biodiesel and Renewable Diesel Registered Capacity (March 2019)” Memorandum from Dallas Burkholder to EPA Docket EPA-HQ-OAR-2019-0136.

d. Consideration of the Availability of Advanced Feedstocks

We next consider the availability of advanced feedstocks that can be used to produce advanced biodiesel and renewable diesel. This assessment has two parts. First, we assess whether there are sufficient advanced feedstocks to produce 2.83 billion gallons of advanced biodiesel and renewable diesel. We find that the quantity of feedstocks exceeds the amount needed to do so, further supporting our conclusion that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable. Second, we assess whether the growth in advanced feedstocks suffices to produce 2.83 billion gallons of advanced biodiesel and renewable diesel without diverting advanced feedstocks or biofuels from existing uses,

i.e.,

the reasonably attainable volume. We find that the reasonably attainable volume falls slightly short at 2.77 billion gallons.

We believe the most reliable source for projecting the expected increase in virgin vegetable oils in the U.S. is USDA's World Agricultural Supply and Demand Estimates (WASDE). At the time of our assessment for this rule, the October 2019 version was the most current version of the WASDE report. The October 2019 WASDE projects that production of vegetable oil in the U.S. in the 2019/2020 market year will be sufficient to produce approximately 3.6 billion gallons of biodiesel and renewable diesel (including both advanced and conventional biofuels) if the entire volume of vegetable oil was used to produce these fuels. Additional advanced biodiesel and renewable diesel could also be produced from waste fats, oils, and greases as they have been in past years.

Thus, the availability of domestic vegetable oils, in combination the potential to source additional feedstocks from waste fats, oils, and greases, supports our conclusion that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable.

See “Projections of FOG biodiesel and renewable diesel 2015-2018,” memorandum from David Korotney to EPA Docket, EPA-HQ-OAR-2019-0136.

In addition, the global production of vegetable oil projected in the 2019/2020 marketing year in the October 2019 WASDE would be sufficient to produce approximately 59.3 billion gallons of biodiesel and renewable diesel (including both advanced and conventional biofuels).

While it would not be reasonable to assume that all, or even a significant portion, of global vegetable oil production globally or domestically could be available to produce biodiesel or renewable diesel supplied to the U.S. for a number of reasons,

the large global supply of vegetable oil further indicates that 2.83 billion gallons of advanced biodiesel and renewable diesel is attainable in 2020.

The October 2019 WASDE projects production of vegetable oils in 2019/2020 in the U.S. and the World to be 12.58 and 207.50 million metric tons respectively. To convert projected vegetable oil production to potential biodiesel and renewable diesel production we have used a conversion of 7.7 pounds of feedstock per gallon of biodiesel or renewable diesel (World Agricultural Supply and Demand Estimates. United States Department of Agriculture, Office of the Chief Economist. October 10, 2019. ISSN 1554-9089). In addition, global production of biodiesel is projected to be 44.2 billion liters (11.7 billion gallons) in 2020 according to the July 2019 OECD-FAO Agricultural Outlook. Based on the projected production of biodiesel by country we estimate that over 80% of this biodiesel (all biodiesel except that produced in Columbia, Indonesia, Malaysia, and Thailand) could qualify as advanced biofuel if the feedstocks meet the definition of renewable biomass.

These reasons include the demand for vegetable oil in the food, feed, and industrial markets both domestically and globally; constraints related to the production, import, distribution, and use of significantly higher volumes of biodiesel and renewable diesel; and the fact that biodiesel and renewable diesel produced from much of the vegetable oil available globally would not qualify as an advanced biofuel under the RFS program.

We now turn to the reasonably attainable volume of advanced biodiesel and renewable diesel, which we find to be 2.77 billion gallons. This volume represents the amount of advanced biodiesel and renewable diesel that can be supplied without relying on the diversion of advanced biofuels and feedstocks from existing uses and the associated harms of such diversions. We calculate this volume by summing the reasonable attainable volume from last year's final rule (2.61 billion gallons) with the volume that can be produced from the projected increase in advanced feedstocks from 2019 to 2020 (159 million gallons).

As discussed in more detail in this section, this 159 million gallons increase is projected to be comprised of 94 million gallons from increased vegetable oil production, 17 million gallons from distillers corn oil, and 48 million gallons from waste fats, oils, and greases.

We acknowledge that an increase in the required use of advanced biodiesel and renewable diesel could be realized through the production or collection of additional advanced feedstocks, a diversion of advanced feedstocks from other uses, or a diversion of advanced biodiesel and renewable diesel from existing markets in other countries. As already explained, the volume of advanced biodiesel and renewable diesel and their corresponding feedstocks projected to be produced globally exceeds the volume projected to be required in 2020 (2.83 billion gallons of advanced biodiesel and renewable diesel and the corresponding volume of advanced feedstocks) by a significant margin. However, we expect that increases in advanced biofuel and renewable fuel volumes beyond those that can be produced from the projected growth in advanced feedstock production and/or consumption (

e.g.,

by diverting advanced feedstocks or advanced biodiesel and renewable diesel from existing markets and uses) would be increasingly likely to incur adverse unintended impacts.

The volume of advanced biodiesel and renewable diesel projected to be used to meet the advanced biofuel volume (2.83 billion gallons) is approximately 1 billion gallons greater than the volume of these fuels we projected would be used to meet the advanced biofuel volume for 2022 in the 2010 RFS final rule analyses (1.82 billion gallons). For a further discussion of this issue see Section 4.2.2.4 of the RTC.

This is because of several factors, notably the potential disruption of the current biogenic fats, oils, and greases market, the associated cost impacts to other industries resulting from feedstock diversion, and the potential adverse effect on lifecycle GHG emissions and energy security associated with feedstocks for biofuel production that would have been used for other purposes and which must then be backfilled with other feedstocks.

Similarly, increasing the supply of biodiesel and renewable diesel to the U.S. by diverting fuel that would otherwise have been used in other countries results in higher lifecycle GHG emissions than if the supply of these fuels was increased by an increased collection of waste fats and oils or increased production of feedstocks that are byproducts of other industries, especially if this diversion results in increased consumption of petroleum fuels in the countries that would have otherwise consumed the biodiesel or renewable diesel. By assessing the expected growth in the production of advanced feedstocks, we are attempting to minimize the incentives for the RFS program to increase the supply of advanced

biodiesel and renewable diesel through feedstock switching or diverting biodiesel and renewable diesel from foreign markets to the U.S.

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

Advanced biodiesel and renewable diesel feedstocks include both waste oils, fats, and greases; and oils from planted crops. The projected growth in these feedstocks is expected to be modest relative to the volume of these feedstocks that is currently being used to produce biodiesel and renewable diesel. Most of the waste oils, fats, and greases that can be recovered economically are already being recovered and used in biodiesel and renewable diesel production or for other purposes. The availability of animal fats will likely increase with beef, pork, and poultry production. Most of the vegetable oil used to produce advanced biodiesel and renewable diesel that is sourced from planted crops comes from crops primarily grown for purposes other than providing feedstocks for biodiesel and renewable diesel, such as for livestock feed, with the oil that is used as feedstock for renewable fuel production a co-product.

This is true for soybeans and corn, which are the two largest sources of feedstock from planted crops used for biodiesel production in the U.S.

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We do not believe that the increased demand for soybean oil or corn oil caused by a higher 2020 advanced biofuel standard would result in an increase in soybean or corn prices large enough to induce significant changes in agricultural activity.

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However, production of these feedstocks is likely to increase over time as crop yields, oil extraction rates, and demand for the primary products increase.

For example, corn oil is a co-product of corn grown primarily for animal feed or ethanol production, while soy and canola are primarily grown as livestock feed.

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According to EIA data 7,542 million pounds of soy bean oil and 2,085 million pounds of corn oil were used to produce biodiesel in the U.S. in 2018. Other significant sources of feedstock were yellow grease (1,668 million pounds), canola oil (total volume withheld, but monthly data suggests greater than 700 million pounds), and white grease (618 million pounds).”Monthly Biodiesel Production Report with Data for February 2019,” U.S. Energy Information Administration. April 2019.

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This position is supported by several commenters, including the American Soybean Association (EPA-HQ-OAR-2019-0136-0177) and the Nebraska Soybean Association (EPA-HQ-OAR-2019-0136-0117).

Based on the October 2019 WASDE report the projected increase in vegetable oil production in the U.S. from the 2018/2019 marketing year to the 2019/2020 marketing year is 0.33 million metric tons per year.

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This additional quantity of vegetable oils could be used to produce approximately 94 million additional gallons of advanced biodiesel or renewable diesel in 2020 relative to 2019.

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U.S. vegetable oil production is projected to be 12.25 million metric tons in the 2018/2019 agricultural marketing year and 12.58 million metric tons in the 2019/2020 agricultural marketing year.

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To calculate this volume, we have used a conversion of 7.7 pounds of feedstock per gallon of biodiesel or renewable diesel. This is based on the expected conversion of soybean oil (

http://extension.missouri.edu/p/G1990

), which is the largest source of feedstock used to produce advanced biodiesel and renewable diesel. Conversion rates for other types of vegetable oils used to produce biodiesel and renewable diesel are similar to those for soybean oil.

In the 2019 final rule we also noted that the WASDE projected a decrease in trade of both oilseeds and vegetable oils. The projected decrease in oilseed trade was likely due to tariffs enacted by China on soybean exports from the U.S. While the projected trade in oilseeds is expected to increase slightly from 2018/2019 to 2019/2020, trade in vegetable oils is projected to decrease by 0.12 million metric tons from 2018/2019 to 2019/2020. If converted to biodiesel, this volume of vegetable oils could be used to produce approximately 34 million additional gallons of advanced biodiesel or renewable diesel in 2020 relative to 2019. As in the 2019 final rule, we did not include in our projection of the reasonably attainable volumes the potential biodiesel or renewable diesel that could theoretically be produced from the oilseeds and vegetable oil projected to remain in the U.S. due to changes in trade of these products. This is because any biodiesel and renewable diesel produced from soybeans previously exported are necessarily diverted from other uses (even if the reason for this diversion is the tariffs, rather than the RFS program), and biodiesel produced from these diverted feedstocks is therefore more likely to have the adverse unintended effects as previously discussed.

In addition to virgin vegetable oils, we also expect increasing volumes of distillers corn oil

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to be available for use in 2020. The WASDE report does not project distillers corn oil production, so EPA must use an alternative source to project the growth in the production of this feedstock. For this final rule we use results from the World Agricultural Economic and Environmental Services (WAEES) model to project the growth in the production of distillers corn oil.

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In assessing the likely increase in the availability of distillers corn oil from 2019 to 2020, the authors of the WAEES model considered the effects of an increasing adoption rate of distillers corn oil extraction technologies at domestic ethanol production facilities, as well as increased corn oil extraction rates enabled by advances in this technology. The WAEES model projects that production of distillers corn oil will increase by approximately 130 million pounds from the 2018/2019 to the 2019/2020 agricultural marketing year. This quantity of feedstock could be used to produce approximately 17 million gallons of advanced biodiesel or renewable diesel. We believe it is reasonable to use these estimates from the WAEES model for these purposes based on the projected increase in the use of corn oil extraction and corn oil yield increases.

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Distillers corn oil is non-food grade corn oil produced by ethanol production facilities.

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For the purposes of this rule, EPA relied on WAEES modeling results submitted as comments by the National Biodiesel Board on the 2020 proposed rule (Kruse, J., “Implications of an Alternative 2021 Biomass Based Diesel Volume Obligation for Global Agriculture and Biofuels,” August 26, 2019, World Agricultural Economic and Environmental Services (WAEES)).

While much of the increase in advanced biodiesel and renewable diesel feedstocks produced in the U.S. from 2019 to 2020 is expected to come from virgin vegetable oils and distillers corn oil, increases in the supply of other sources of advanced biodiesel and renewable diesel feedstocks, such as biogenic waste fats, oils, and greases (FOG), could also occur. In scenarios with increases to the advanced biofuel and biomass-based diesel volume requirements in 2020 and 2021 the WAEES model projects minimal increases in the volume of biodiesel produced from total other fats and oils in the 2018/2019 and 2019/2020 marketing years.

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Conversely, an assessment conducted by LMC International in 2017 and submitted in comments on our 2018 proposed rule projected that the waste oil supply in the U.S. could increase by approximately 2.4 million metric tons from 2016 to 2022.

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This estimate represents a growth rate of approximately 0.4 billion tons per year, or enough feedstock to produce approximately 115 million gallons of biodiesel and renewable diesel per year. This estimate, however, only accounts for potential sources of feedstock and

not for the economic viability of recovering waste oils.

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The WAEES model projects a 7 million gallon increase in 2019/2020 and a 16 million gallon increase in 2020/2021. See Kruse, J., “Implications of an Alternative Biomass Based Diesel Volume Obligation for Global Agriculture and Biofuels,” August 26, 2019, World Agricultural Economic and Environmental Services.

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LMC International.

Global Waste Grease Supply.

August 2017 (EPA-HQ-OAR-2017-0091-3880).

To project the increase in the use of biogenic FOG we used historical data to determine the increase in the use of these feedstocks to produce biodiesel and renewable diesel. From 2015-2018, advanced biodiesel and renewable diesel produced from biogenic FOG increased by an average of 48 million gallons per year.

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This annual increase is higher than the increase in the use of these feedstocks projected by the WAEES model, but lower than the potential increase projected by LMC. We have included an additional 48 million gallons of advanced biodiesel and renewable diesel from FOG in our assessment of the reasonably attainable volume for 2020, consistent with the observed annual increase in advanced biodiesel and renewable diesel produced from these feedstocks in recent years.

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“Projections of FOG biodiesel and renewable diesel 2015-2018,” memorandum from David Korotney to EPA Docket, EPA-HQ-OAR-2019-0136.

In total, we project that increases in feedstocks produced in the U.S. are sufficient to produce approximately 159 million more gallons of advanced biodiesel and renewable diesel in 2020 relative to 2019. This number includes 94 million gallons from increased vegetable oil production, 17 million gallons from increased corn oil production, and 48 million gallons from increased waste oil collection. This increase does not include the projected 34 million gallons of biodiesel that could be produced from the projected reduction in vegetable oil trade since decreases in exported volumes of vegetable oils represent feedstocks diverted from use in other countries. Our projection also does not consider factors that could potentially affect the availability of advanced biofuel feedstocks th

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