individual obligated parties facing financial difficulties.
    \139\ In the October 4 document, we solicited comment on EPA's
prior interpretation of the term ``severe economic harm.'' As
discussed in the RTC document accompanying this action, we believe
that the evidence in the record would be insufficient to support a
finding of severe economic harm under any reasonable interpretation
of the phrase advanced by commenters, so do not find it necessary to
assess changes to our interpretation of the phrase at this time.
---------------------------------------------------------------------------

    In addition to reviewing comments on the proposed rule and the
October 4 document, EPA also reviewed market data from 2017 and
previous years to see if there was evidence that the RFS standards are
currently causing severe economic harm, or would be likely to cause
severe economic harm in 2018. Given that the 2018 volumes generated
through the maximum reduction permitted under the cellulosic waiver
authority are nearly the same as the volume requirements for 2017, we
considered:
    1. Whether severe economic harm has occurred to date or is likely
to occur in 2017, and
    2. whether the economic conditions in 2018 might be expected to be
substantially different than those in 2017.
    To determine whether severe economic harm has occurred to date or
is likely to occur in in 2017, we investigated several possible
indicators. These included RIN generation for 2017 relative to 2016,
refinery closures, retail fuel prices, and corn and soybean prices.
Based on our investigation, we do not believe that severe economic harm
has occurred thus far in 2017 to any State, region, or the U.S. as a
result of the 2017 standards, or is likely occur by the end of 2017.
Details of this investigation can be found in a memorandum to the
docket.\140\
---------------------------------------------------------------------------

    \140\ ``Assessment of waivers for severe economic harm or BBD
prices for 2018,'' memorandum from David Korotney to docket EPA-HQ-
OAR-2017-0091.
---------------------------------------------------------------------------

    To determine whether the economic conditions in 2018 might be
expected to be substantially different than those in 2017 in ways that
could affect the economic impact of compliance with the RFS program, we
investigated projections of two primary drivers of the cost of
compliance: Crop-based feedstock futures prices, and projected gasoline
demand. We also investigated the potential market impacts of the final
2018 standards, most specifically in terms of ethanol and biodiesel
consumption.\141\
---------------------------------------------------------------------------

    \141\ ``Market impacts of biofuels,'' memorandum from David
Korotney to docket EPA-HQ-OAR-2017-0091.
---------------------------------------------------------------------------

    Based on the record before us, we do not believe that there is
sufficient evidence to conclude that severe economic harm is occurring
currently in 2017 in any State, region, or the United States, and we do
not believe that market conditions in 2018 are likely to cause
compliance with the applicable standards to be more economically
challenging than it is in 2017. Given that the 2018 standards are very
similar to the 2017 standards, then, we do not believe that further
reductions in the 2018 volume requirements on the basis of severe
economic harm are warranted.

C. Severe Environmental Harm

    EPA received comments in response to the proposal asserting that
there are negative environmental impacts that may be associated with
the RFS program. A significant portion of these concerns center on
feedstock production. Although we are authorized to reduce the
statutory volume targets on the basis of a finding that the
requirements would ``severely harm the . . . environment of a State,
region, or the United States,'' commenters have not presented evidence
sufficient to support a determination to make a reduction on this basis
for 2018. EPA is not making reductions on this basis for 2018. EPA's
response to comments related to perceived environmental harms of the
RFS program is set forth in the RTC document accompanying this rule.

D. Biomass-Based Diesel Waiver Authority

    The BBD waiver authority in CAA section 211(o)(7)(E)(ii) provides
that if EPA determines that there is a significant renewable feedstock
disruption or other market circumstance that would make the price of
BBD increase significantly, then EPA shall, in consultation with the
Secretary of Energy and the Secretary of Agriculture, issue an order to
reduce, for up to a 60-day period, the annual volume requirement for
BBD by an appropriate quantity that does not exceed 15 percent. If EPA
reduces the annual volume requirement for BBD using this waiver
authority, we may also reduce the applicable volume of advanced biofuel
and total renewable fuel by an equal or lesser volume than the
reduction in BBD. In the October 4 document we requested comment on the
expected impact on the price of BBD of the expiration of the biodiesel
blenders tax credit, proposed import duties on biodiesel from Argentina
and Indonesia, or any other factors. We further requested comment on
whether any expected impacts should be considered significant for the
purposes of the BBD waiver authority.
    To investigate whether a reduction in the 2018 BBD volume
requirement would be warranted under CAA section 211(o)(7)(E)(ii), we
considered current and historical prices of unblended biodiesel (B100),
the price of blended biodiesel (in particular, B20), and BBD (D4) RIN
prices. The results of this investigation are described in a memorandum
to the docket.\142\ EPA discussed in the October 4 document the fact
that the Department of Commerce had imposed preliminary tariffs on
biodiesel imported from Argentina and Indonesia, and that such tariffs
could impact the price of BBD. However, these tariffs have not yet been
finalized, nor has EPA observed any significant impact of the
announcement of the preliminary tariffs on the price of biomass-based
diesel.\143\
---------------------------------------------------------------------------

    \142\ ``Assessment of waivers for severe economic harm or BBD
prices for 2018,'' memorandum from David Korotney to docket EPA-HQ-
OAR-2017-0091.
    \143\ ``Assessment of waivers for severe economic harm or BBD
prices for 2018,'' memorandum from David Korotney to docket EPA-HQ-
OAR-2017-0091.
---------------------------------------------------------------------------

    Based on the information before us, including the results of our
investigation and information and comments submitted in response to the
October 4 document, we have concluded that there is not sufficient
evidence of a significant increase to the price of BBD due to feedstock
disruption or other relevant market circumstances to justify reductions
to the 2018 BBD volume requirement using the biomass-based diesel
waiver authority.

VI. Final Biomass-Based Diesel Volume for 2019

    In this section we discuss the BBD applicable volume for 2019. We
are establishing this volume in advance of those for other renewable
fuel categories in light of the statutory requirement in CAA section
211(o)(2)(B)(ii) to establish the applicable volume of BBD for years
after 2012 no later than 14 months before the applicable volume will
apply. We are not at this time establishing the BBD percentage
standards that would apply to obligated parties in 2019 but

intend to do so in late 2018, after receiving EIA's estimate of
gasoline and diesel consumption for 2019. Although the BBD applicable
volume sets a floor for required BBD use, because the BBD volume
requirement is nested within both the advanced biofuel and the total
renewable fuel volume requirements, any BBD produced beyond the
mandated 2019 BBD volume can be used to satisfy both of these other
applicable volume requirements.

A. Statutory Requirements

    The statute establishes applicable volume targets for years through
2022 for cellulosic biofuel, advanced biofuel, and total renewable
fuel. For BBD, applicable volume targets are specified in the statute
only through 2012. For years after those for which volumes are
specified in the statute, EPA is required under CAA section
211(o)(2)(B)(ii) to determine the applicable volume of BBD, in
coordination with the Secretary of Energy and the Secretary of
Agriculture, based on a review of the implementation of the program
during calendar years for which the statute specifies the volumes and
an analysis of the following factors:
    1. The impact of the production and use of renewable fuels on the
environment, including on air quality, climate change, conversion of
wetlands, ecosystems, wildlife habitat, water quality, and water
supply;
    2. The impact of renewable fuels on the energy security of the
United States;
    3. The expected annual rate of future commercial production of
renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and BBD);
    4. The impact of renewable fuels on the infrastructure of the
United States, including deliverability of materials, goods, and
products other than renewable fuel, and the sufficiency of
infrastructure to deliver and use renewable fuel;
    5. The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
    6. The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
    The statute also specifies that the volume requirement for BBD
cannot be less than the applicable volume specified in the statute for
calendar year 2012, which is 1.0 billion gallons. The statute does not,
however, establish any other numeric criteria, or provide any guidance
on how the EPA should weigh the importance of the often competing
factors, and the overarching goals of the statute when the EPA sets the
applicable volumes of BBD in years after those for which the statute
specifies such volumes. In the period 2013-2022, the statute specifies
increasing applicable volumes of cellulosic biofuel, advanced biofuel,
and total renewable fuel, but provides no guidance, beyond the 1.0
billion gallon minimum, on the level at which BBD volumes should be
set.
    In establishing the BBD and cellulosic standards as nested within
the advanced biofuel standard, Congress clearly intended to support
development of BBD and especially cellulosic biofuels, while also
providing an incentive for the growth of other non-specified types of
advanced biofuels. That is, the advanced biofuel standard provides an
opportunity for other advanced biofuels (advanced biofuels that do not
qualify as cellulosic biofuel or BBD) to compete with cellulosic
biofuel and BBD to satisfy the advanced biofuel standard after the
cellulosic biofuel and BBD standards have been met.

B. Determination of the 2019 Applicable Volume of Biomass-Based Diesel

    One of the primary considerations in determining the BBD volume for
2019 is a review of the implementation of the program to date, as it
affects BBD. This review is required by the CAA, and also provides
insight into the capabilities of the industry to produce, import,
export, and distribute BBD. It also helps us to understand what
factors, beyond the BBD standard, may incentivize the production and
import of BBD. The number of BBD RINs generated, along with the number
of RINs retired due to export or for reasons other than compliance with
the annual BBD standards from 2011-2018 are shown in Table VI.B.1-1
below.
---------------------------------------------------------------------------

    \144\ Available BBD RINs Generated, Exported BBD RINs, and BBD
RINs Retired for Non-Compliance Reasons information from EMTS.

                                      Table VI.B.1-1--Biomass-Based (D4) RIN Generation and Standards in 2011-2018
                                                             [million RINs or gallons] \144\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                BBD RINs
                                                             BBD RINs      Exported BBD    retired, non-   Available BBD   BBD standard    BBD standard
                                                             generated        (RINs)        compliance       RINs \a\        (gallons)        (RINs)
                                                                                reasons
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................................           1,692              72              98           1,522             800           1,200
2012....................................................           1,737             102              90           1,545           1,000           1,500
2013....................................................           2,739             124             101           2,514           1,280           1,920
2014....................................................           2,710             134              92           2,484           1,630       \b\ 2,490
2015....................................................           2,796             145              32           2,619           1,730       \b\ 2,655
2016....................................................           4,008             203              96           3,709           1,900           2,850
2017....................................................             N/A             N/A             N/A             N/A           2,000           3,000
2018....................................................             N/A             N/A             N/A             N/A           2,100           3,150
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Available BBD RINs may not be exactly equal to BBD RINs Generated minus Exported RINs and BBD RINs Retired, Non-Compliance Reasons, due to rounding.
\b\ Each gallon of biodiesel qualifies for 1.5 RINs due to its higher energy content per gallon than ethanol. Renewable diesel qualifies for between 1.5
  and 1.7 RINs per gallon, but generally has an equivalence value of 1.7. In 2014 and 2015 the number of RINs in the BBD Standard column is not exactly
  equal to 1.5 times the BBD volume standard as these standards were established based on actual RIN generation data for 2014 and a combination of
  actual data and a projection of RIN generation for the last three months of the year for 2015. Some of the volume used to meet the BBD standard was
  renewable diesel.

    In reviewing historical BBD RIN generation and use, we see that the
number of RINs available for compliance purposes exceeded the volume
required to meet the BBD standard in 2011, 2012, 2013, and 2016.
Additional production and use of biodiesel was likely driven by a
number of factors, including demand to satisfy the advanced biofuel and
total renewable fuels standards, the biodiesel tax credit,\145\ and
favorable blending economics. The number of RINs available in 2014 and
2015 was approximately equal to the number required for compliance in
those years, as the standards for these years were finalized at the end
of November 2015 and EPA's intent at that time was to set the standards
for 2014 and 2015 to reflect actual BBD use. In 2016, with RFS
standards established prior to the beginning of the year and the
blenders tax credit in place, available BBD RINs exceeded the volume
required by the BBD standard by 859 million RINs (30 percent). This
indicates that in appropriate circumstances there is demand for BBD
beyond the required volume of BBD.
---------------------------------------------------------------------------

    \145\ The biodiesel tax credit was reauthorized in January 2013.
It applied retroactively for 2012 and for the remainder of 2013. It
was once again extended in December 2014 and applied retroactively
to all of 2014 as well as to the remaining weeks of 2014. In
December 2015 the biodiesel tax credit was authorized and applied
retroactively for all of 2015 as well as through the end of 2016.
    \146\ This is because when an obligated party retires a BBD RIN
to help satisfy their BBD obligation, the nested nature of the BBD
standard means that this RIN also counts towards satisfying their
advanced and total renewable fuel obligations. Advanced RINs count
towards both the advanced and total renewable fuel obligations,
while conventional RINs (D6) count towards only the total renewable
fuel obligation.
---------------------------------------------------------------------------

    The prices paid for advanced biofuel and BBD RINs beginning in
early 2013 through the end of 2016 also support the conclusion that
advanced biofuel and/or total renewable fuel standards provide a
sufficient incentive for additional biodiesel volume beyond what is
required by the BBD standard. Because the BBD standard is nested within
the advanced biofuel and total renewable fuel standards, and therefore
can help to satisfy three RVOs, we would expect the price of BBD RINs
to exceed that of advanced and conventional renewable RINs.\146\ If,
however, BBD RINs are being used by obligated parties to satisfy their
advanced biofuel obligations, above and beyond the BBD standard, we
would expect the prices of advanced biofuel and BBD RINs to
converge.\147\ Further, if BBD RINs are being used (or are expected to
be used) to satisfy obligated parties' total renewable fuel obligation,
above and beyond their BBD and advanced biofuel requirements we would
expect the price for all three RIN types to converge.
---------------------------------------------------------------------------

    \147\ We would still expect D4 RINs to be valued at a slight
premium to D5 and D6 RINs in this case (and D5 RINs at a slight
premium to D6 RINs) to reflect the greater flexibility of the D4
RINs to be used towards the BBD, advanced biofuel, and total
renewable fuel standard. This pricing has been observed over the
past several years.
---------------------------------------------------------------------------

    When examining RIN price data from 2012 through September 2017,
shown in Figure VI.B.2-1 below, we see that beginning in early 2013 and
through September 2017 the advanced RIN price and BBD RIN prices were
approximately equal. Similarly, from early 2013 through late 2016 the
conventional renewable fuel and BBD RIN prices were approximately
equal. This suggests that the advanced biofuel standard and/or total
renewable fuel standard are capable of incentivizing increased BBD
volumes beyond the BBD standard, and operated in this manner starting
in 2013.\148\ While final standards were not in place throughout 2014
and most of 2015, EPA had issued proposed rules for both of these
years. In each year, the market response was to supply volumes of BBD
that exceeded the proposed BBD standard in order to help satisfy the
proposed advanced and total biofuel standards.\149\ Additionally, the
RIN prices in these years strongly suggests that obligated parties and
other market participants anticipated the need for BBD RINs to meet
their advanced and total biofuel obligations, and responded by
purchasing advanced biofuel and BBD RINs at approximately equal prices.
We do note, however, that in 2012 the BBD RIN price was significantly
higher than both the advanced biofuel and conventional renewable fuel
RIN prices. In 2012 the E10 blendwall had not yet been reached, and it
was likely more cost effective for most obligated parties to satisfy
the portion of the advanced biofuel requirement that exceeded the BBD
and cellulosic biofuel requirements with advanced ethanol.
---------------------------------------------------------------------------

    \148\ Although we did not issue a rule establishing the final
2013 standards until August of 2013, we believe that the market
anticipated the final standards, based on EPA's July 2011 proposal
and the volume targets for advanced and total renewable fuel
established in the statute. (76 FR 38844, 38843, July 1, 2011).
    \149\ EPA proposed a BBD standard of 1.28 billion gallons (1.92
billion RINs) for 2014 in our November 2013 proposed rule. The
number of BBD RINs available in 2014 was 2.67 billion. EPA proposed
a BBD standard of 1.70 billion gallons (2.55 billion RINs) for 2015
in our June 2015 proposed rule. The number of BBD RINs available in
2015 was 2.92 billion.

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

[GRAPHIC] [TIFF OMITTED] TR12DE17.002

    In raising the 2013 BBD volume above the 1 billion gallon minimum
mandated by Congress, the EPA sought to ``create greater certainty for
both producers of BBD and obligated parties'' while also acknowledging
that, ``the potential for somewhat increased costs is appropriate in
light of the additional certainty of GHG reductions and enhanced energy
security provided by the advanced biofuel volume requirement of 2.75
billion gallons.'' \150\ Unknown at that time was the degree to which
the required volumes of advanced biofuel and total renewable fuel could
incentivize volumes of BBD that exceeded the BBD standard. In 2012 the
available supply of BBD RINs exceeded the required volume of BBD by a
very small margin (1,545 million BBD RINs were made available for
compliance towards meeting the BBD requirement of 1,500 million BBD
RINs). The remainder of the 2.0 billion-gallon advanced biofuel
requirement was satisfied with advanced ethanol, which was largely
imported from Brazil.\151\ From 2012 to 2013 the statutory advanced
biofuel requirement increased by 750 million gallons. If EPA had not
increased the required volume of BBD for 2013, and the advanced biofuel
standard had proved insufficient to increase the supply of BBD beyond
the statutory minimum of 1.0 billion gallons, an additional 750 million
gallons of non-BBD advanced biofuels beyond the BBD standard would have
been needed to meet the advanced biofuel volume requirement.
---------------------------------------------------------------------------

    \150\ 77 FR 59458, 59462 (September 27, 2012).
    \151\ 594 million advanced ethanol RINs were generated in in
2012.
---------------------------------------------------------------------------

    The only advanced biofuel other than BBD available in appreciable
quantities in 2012 and 2013 was advanced ethanol, the vast majority of
which was imported sugarcane ethanol. EPA had significant concerns as
to whether or not the supply of advanced ethanol could increase this
significantly (750 million gallons) in a single year. These concerns
were heightened by the approaching E10 blendwall, which increased the
challenges associated with supplying increasing volumes of ethanol to
the U.S. If neither BBD volumes nor advanced ethanol volumes increased
sufficiently, EPA was concerned that some obligated parties might be
unable to acquire the advanced biofuel RINs necessary to demonstrate
compliance with their RVOs in 2013. Therefore, as discussed above, EPA
increased the volume requirement for BBD in 2013 to help create greater
certainty for BBD producers (by ensuring demand for their product above
the 1.0 billion gallon statutory minimum) and obligated parties (by
ensuring that sufficient RINs would be available to satisfy their
advanced biofuel RVOs). Since 2013, however, EPA has gained significant
experience implementing the RFS program. As discussed above, RIN
generation data has consistently demonstrated that the advanced biofuel
volume requirement, and to a lesser degree the total renewable fuel
volume requirement, are capable of incentivizing the supply of BBD
above and beyond the BBD volume requirement.
    Finally, we note that the BBD industry in the U.S and abroad has
matured since EPA first increased the required volume of BBD beyond the
statutory minimum in 2013. To assess the maturity of the biodiesel
industry, EPA compared information on BBD RIN generation by company
from 2012 and 2016 (the most recent year for which complete RIN
generation is available). In 2012, the annual average RIN generation
per company producing BBD was about 11 million RINs (about 7.3 million
gallons) with approximately 50 percent of companies producing less the
1 million gallons of BBD a year. The agency heard from multiple
commenters during the 2012 and 2013 rulemakings that higher volume
requirements for BBD would provide greater certainty for the emerging
BBD industry and encourage further investment. Since that time, the BBD
industry has matured in a number of critical areas, including growth in
the size of companies, the consolidation of the industry, and more
stable funding and access to capital. In 2012, the BBD industry was
characterized by smaller companies with dispersed market share. By
2016, the average BBD RIN generation per company had climbed to almost
33 million RINs (22 million gallons) annually, a 3-fold increase. Only
27 percent of the companies produced less than 1 million gallons of
BBD.
    We are conscious of public comments claiming that BBD volume
requirements that are a significant portion of the

advanced volume requirements effectively dis-incentivize the future
development of other promising advanced biofuel pathways. A variety of
different types of advanced biofuels, rather than a single type such as
BBD, would positively impact energy security (e.g., by increasing the
diversity of feedstock sources used to make biofuels, thereby reducing
the impacts associated with a shortfall in a particular type of
feedstock) and increase the likelihood of the development of lower cost
advanced biofuels that meet the same GHG reduction threshold as
BBD.\152\
---------------------------------------------------------------------------

    \152\ All types of advanced biofuel, including BBD, must achieve
lifecycle GHG reductions of at least 50 percent.
---------------------------------------------------------------------------

    With the considerations discussed above and in Section IV.B.2 in
mind, as well as our analysis of the factors specified in the statute,
we are setting the applicable volume of BBD at 2.1 billion gallons for
2019. We believe this volume sets the appropriate floor for BBD, and
that the volume of advanced biodiesel and renewable diesel actually
used in 2019 will be driven by the level of the advanced biofuel and
total renewable fuel standards that the Agency will establish for 2019.
We have considered the required statutory factors in reaching our
decision, as summarized in Section C, below, and in a memorandum to the
docket (the ``2019 BBD docket memorandum'').\153\
---------------------------------------------------------------------------

    \153\ ``Memorandum to docket: Draft Statutory Factors Assessment
for the 2019 Biomass-Based Diesel (BBD) Applicable Volumes.'' See
Docket EPA-HQ-OAR-2017-0091.
---------------------------------------------------------------------------

    We believe our final 2019 BBD volume requirement strikes the
appropriate balance between providing a market environment where the
development of other advanced biofuels is incentivized, while also
maintaining support for the BBD industry. Based on our review of the
data, and the nested nature of the BBD standard within the advanced
standard, we conclude that the advance standard continues to drive the
ultimate volume of BBD supplied. Given the success of the industry in
the past few years, as well as the substantial increases in the BBD
volume being driven by the advanced standard, we have determined that a
volume requirement greater than 2.1 billion gallons for BBD in 2019 is
not necessary to provide support for the BBD industry. Setting the BBD
standard in this manner continues to allow a considerable portion of
the advanced biofuel volume to be satisfied by either additional
gallons of BBD or by other unspecified and potentially less costly
types of qualifying advanced biofuels.

C. Consideration of Statutory Factors Set Forth in CAA Section
211(o)(2)(B)(ii)(I)-(VI) for 2019

    As noted earlier in Section IV.B., the BBD volume requirement is
nested within the advanced biofuel requirement and the advanced biofuel
requirement is, in turn, nested within the total renewable fuel volume
requirement. This means that any BBD produced beyond the mandated BBD
volume can be used to satisfy both these other applicable volume
requirements. The result is that in considering the statutory factors
we must consider the potential impacts of increasing or decreasing BBD
in comparison to other advanced biofuels.\154\ For a given advanced
biofuel standard, greater or lesser BBD volume requirements do not
change the amount of advanced biofuel used to displace petroleum fuels;
rather, increasing the BBD requirement may result in the displacement
of other types of advanced biofuels that could have been used to meet
the advanced biofuels volume requirement. While in recent years EPA has
annually increased the BBD volume requirement, EPA is, as we proposed,
maintaining the 2.1 billion gallon standard for 2019 based on our
review of the statutory factors and the considerations noted above and
in the 2018 BBD Docket Memorandum. In particular, as EPA noted above in
section VI.B., the BBD industry is more mature, and we have increased
BBD volumes significantly in recent years so that the BBD standard is
now over twice the minimum statutory volume required in CAA section
211(o)(2)(B)(i). In these circumstances we do not believe that an
additional increase in the required BBD required volume is necessary to
support the industry in 2019.
---------------------------------------------------------------------------

    \154\ While excess BBD production could also displace
conventional renewable fuel under the total renewable standard, as
long as the BBD applicable volume is significantly lower than the
advanced biofuel applicable volume our action in setting the BBD
applicable volume is not expected to displace conventional renewable
fuel under the total renewable standard, but rather other advanced
biofuels.
---------------------------------------------------------------------------

    Consistent with our approach in setting the final BBD volume
requirement for 2018, EPA's primary assessment of the statutory factors
for the 2019 BBD applicable volume is that because the BBD requirement
is nested within the advanced biofuel volume requirement, we expect
that the 2019 advanced volume requirement, when set next year, will
determine the level of BBD production and imports that occur in
2019.\155\ Therefore, EPA continues to believe that the same overall
volume of BBD would likely be supplied in 2019 even if we were to
mandate a somewhat lower or higher BBD volume for 2019 in this final
rule. Thus, we do not expect our 2019 BBD volume requirement to result
in a difference in the factors we consider pursuant to CAA section
211(o)(2)(B)(ii)(I)-(VI).
---------------------------------------------------------------------------

    \155\ Even though we are not setting the 2019 advanced biofuel
volume requirement as part of this rulemaking, we expect that the
2019 advanced volume requirement will be considerably higher than
the 2019 BBD requirement, consistent with past practice and,
therefore, that the BBD volume requirement for 2019 would not be
expected to impact the volume of BBD that is actually produced and
imported during the 2019-time period.
---------------------------------------------------------------------------

    As an additional supplementary assessment, we have considered the
potential impacts of selecting an applicable volume of BBD other than
2.1 billion gallons in 2019. Setting a requirement higher or lower than
2.1 billion gallons in 2019 would only be expected to impact BBD
volumes on the margin, protecting to a greater or lesser degree BBD
from competition with other potential advanced biofuels. In this
supplementary assessment we have considered all of the statutory
factors found in CAA section 211(2)(B)(ii), and as described in the
2019 BBD docket memorandum, our assessment does not appear, based on
available information, to provide a reasonable basis for setting a
higher or lower volume requirement for BBD than 2.1 billion gallons for
2019.
    Overall and as described in the 2019 BBD docket memorandum, we have
determined that both the primary assessment and the supplemental
assessment of the statutory factors specified in CAA section
211(o)(2)(B)(ii)(I)-(VI) for the year 2019 does not provide significant
support for setting the BBD standard at a level higher or lower than
2.1 billion gallons in 2019.

VII. Percentage Standards for 2018

    The renewable fuel standards are expressed as volume percentages
and are used by each obligated party to determine their Renewable
Volume Obligations (RVOs). Since there are four separate standards
under the RFS program, there are likewise four separate RVOs applicable
to each obligated party. Each standard applies to the sum of all non-
renewable gasoline and diesel produced or imported. The percentage
standards are set so that if every obligated party meets the
percentages by acquiring and retiring an appropriate number of RINs,
then the amount of renewable fuel, cellulosic biofuel, BBD, and
advanced biofuel used will meet the applicable volume requirements on a
nationwide basis.

    Sections III through V provide our rationale and basis for the
volume requirements for 2018.\156\ The volumes used to determine the
percentage standards are shown in Table VII-1.
---------------------------------------------------------------------------

    \156\ The 2018 volume requirement for BBD was established in the
2017 final rule.

 Table VII-1--Volumes for Use in Setting the 2018 Applicable Percentage
                                Standards
                            [Billion gallons]
------------------------------------------------------------------------

------------------------------------------------------------------------
Cellulosic biofuel......................................           0.288
Biomass-based diesel \a\................................            2.10
Advanced biofuel........................................            4.29
Renewable fuel..........................................           19.29
------------------------------------------------------------------------
\a\ Represents physical volume.

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

A. Calculation of Percentage Standards

    To calculate the percentage standards, we are following the same
methodology for 2018 as we have in all prior years. The formulas used
to calculate the percentage standards applicable to producers and
importers of gasoline and diesel are provided in 40 CFR 80.1405. The
formulas rely on estimates of the volumes of gasoline and diesel fuel,
for both highway and nonroad uses, which are projected to be used in
the year in which the standards will apply. The projected gasoline and
diesel volumes are provided by EIA, and include projections of ethanol
and biodiesel used in transportation fuel. Since the percentage
standards apply only to the non-renewable gasoline and diesel produced
or imported, the volumes of ethanol and biodiesel are subtracted out of
the EIA projections of gasoline and diesel.
    Transportation fuels other than gasoline or diesel, such as natural
gas, propane, and electricity from fossil fuels, are not currently
subject to the standards, and volumes of such fuels are not used in
calculating the annual percentage standards. Since under the
regulations the standards apply only to producers and importers of
gasoline and diesel, these are the transportation fuels used to set the
percentage standards, as well as to determine the annual volume
obligations of an individual gasoline or diesel producer or importer.
    As specified in the RFS2 final rule,\157\ the percentage standards
are based on energy-equivalent gallons of renewable fuel, with the
cellulosic biofuel, advanced biofuel, and total renewable fuel
standards based on ethanol equivalence and the BBD standard based on
biodiesel equivalence. However, all RIN generation is based on ethanol-
equivalence. For example, the RFS regulations provide that production
or import of a gallon of qualifying biodiesel will lead to the
generation of 1.5 RINs. The formula specified in the regulations for
calculation of the BBD percentage standard is based on biodiesel-
equivalence, and thus assumes that all BBD used to satisfy the BBD
standard is biodiesel and requires that the applicable volume
requirement be multiplied by 1.5. However, BBD often contains some
renewable diesel, and a gallon of renewable diesel typically generates
1.7 RINs.\158\ In addition, there is often some renewable diesel in the
conventional renewable fuel pool. As a result, the actual number of
RINs generated by biodiesel and renewable diesel is used in the context
of our assessing reasonably attainable volumes for purposes of deriving
the applicable volume requirements and associated percentage standards
for advanced biofuel and total renewable fuel, and likewise in
obligated parties' determination of compliance with any of the
applicable standards. While there is a difference in the treatment of
biodiesel and renewable diesel in the context of determining the
percentage standard for BBD versus determining the percentage standard
for advanced biofuel and total renewable fuel, it is not a significant
one given our approach to determining the BBD volume requirement. Our
intent in setting the BBD applicable volume is to provide a level of
guaranteed volume for BBD, but as described in Section VI.B, we do not
expect the BBD standard to be binding. That is, we expect that actual
supply of BBD, as well as supply of conventional biodiesel and
renewable diesel, will be driven by the advanced biofuel and total
renewable fuel standards.
---------------------------------------------------------------------------

    \157\ See 75 FR 14670 (March 26, 2010).
    \158\ Although in some cases a gallon of renewable diesel
generates either 1.5 or 1.6 RINs.
---------------------------------------------------------------------------

B. Small Refineries and Small Refiners

    In CAA section 211(o)(9), enacted as part of the Energy Policy Act
of 2005, and amended by the Energy Independence and Security Act of
2007, Congress provided a temporary exemption to small refineries \159\
through December 31, 2010. Congress provided that small refineries
could receive a temporary extension of the exemption beyond 2010 based
either on the results of a required DOE study, or based on an EPA
determination of ``disproportionate economic hardship'' on a case-by-
case basis in response to small refinery petitions. In reviewing
petitions, EPA, in consultation with the Department of Energy,
evaluates whether the small refinery has demonstrated either
disproportionate impacts or viability impairment, and may grant
refineries exemptions upon demonstration of either criterion.
---------------------------------------------------------------------------

    \159\ A small refiner that meets the requirements of 40 CFR
80.1442 may also be eligible for an exemption.
---------------------------------------------------------------------------

    EPA has granted exemptions pursuant to this process in the past.
However, at this time no exemptions have been approved for 2018, and
therefore we have calculated the percentage standards for 2018 without
any adjustment for exempted volumes. EPA is maintaining its approach
that any exemptions for 2018 that are granted after the final rule is
released will not be reflected in the percentage standards that apply
to all gasoline and diesel produced or imported in 2018.\160\
---------------------------------------------------------------------------

    \160\ Further discussion of this issue can be found in the
Response to Comments document in the docket for this action.
---------------------------------------------------------------------------

C. Final Standards

    The formulas in 40 CFR 80.1405 for the calculation of the
percentage standards require the specification of a total of 14
variables covering factors such as the renewable fuel volume
requirements, projected gasoline and diesel demand for all states and
territories where the RFS program applies, renewable fuels projected by
EIA to be included in the gasoline and diesel demand, and exemptions
for small refineries. The values of all the variables used for this
final rule are shown in Table VII.C-1.\161\
---------------------------------------------------------------------------

    \161\ To determine the 49-state values for gasoline and diesel,
the amounts of these fuels used in Alaska is subtracted from the
totals provided by DOE because petroleum based fuels used in Alaska
do not incur RFS obligations. The Alaska fractions are determined
from the June 29, 2016 EIA State Energy Data System (SEDS), Energy
Consumption Estimates.

  Table VII.C-1--Values for Terms in Calculation of the 2018 Standards
                                  \162\
                            [Billion gallons]
------------------------------------------------------------------------
            Term                     Description               Value
------------------------------------------------------------------------
RFVCB......................  Required volume of                    0.288
                              cellulosic biofuel.
RFVBBD.....................  Required volume of biomass-            2.10
                              based diesel.
RFVAB......................  Required volume of advanced            4.29
                              biofuel.
RFVRF......................  Required volume of                    19.29
                              renewable fuel.
G..........................  Projected volume of                  143.22
                              gasoline.
D..........................  Projected volume of diesel.           54.76
RG.........................  Projected volume of                   14.71
                              renewables in gasoline.
RD.........................  Projected volume of                    2.53
                              renewables in diesel.
GS.........................  Projected volume of                       0
                              gasoline for opt-in areas.
RGS........................  Projected volume of                       0
                              renewables in gasoline for
                              opt-in areas.
DS.........................  Projected volume of diesel                0
                              for opt-in areas.
RDS........................  Projected volume of                       0
                              renewables in diesel for
                              opt-in areas.
GE.........................  Projected volume of                    0.00
                              gasoline for exempt small
                              refineries.
DE.........................  Projected volume of diesel             0.00
                              for exempt small
                              refineries.
------------------------------------------------------------------------

    Projected volumes of gasoline and diesel, and the renewable fuels
contained within them, were provided by EIA on October 11, 2017, as
required in the statute at CAA section 211(o)(3)(A).
---------------------------------------------------------------------------

    \162\ See ``Calculation of final % standards for 2018'' in
docket EPA-HQ-OAR-2017-0091.
---------------------------------------------------------------------------

    Using the volumes shown in Table VII.C-1, we have calculated the
percentage standards for 2018 as shown in Table VII.C-2.

           Table VII.C-2--Final Percentage Standards for 2018
------------------------------------------------------------------------

------------------------------------------------------------------------
Cellulosic biofuel......................................           0.159
Biomass-based diesel....................................            1.74
Advanced biofuel........................................            2.37
Renewable fuel..........................................           10.67
------------------------------------------------------------------------

VIII. Administrative Actions

A. Assessment of the Domestic Aggregate Compliance Approach

    The RFS regulations specify an ``aggregate compliance'' approach
for demonstrating that planted crops and crop residue from the U.S.
complies with the ``renewable biomass'' requirements that address lands
from which qualifying feedstocks may be harvested.\163\ In the 2010
RFS2 rulemaking, EPA established a baseline number of acres for U.S.
agricultural land in 2007 (the year of EISA enactment) and determined
that as long as this baseline number of acres was not exceeded, it was
unlikely that new land outside of the 2007 baseline would be devoted to
crop production based on historical trends and economic considerations.
The regulations specify, therefore, that renewable fuel producers using
planted crops or crop residue from the U.S. as feedstock in renewable
fuel production need not undertake individual recordkeeping and
reporting related to documenting that their feedstocks come from
qualifying lands, unless EPA determines through one of its annual
evaluations that the 2007 baseline acreage of 402 million acres
agricultural land has been exceeded.
---------------------------------------------------------------------------

    \163\ 40 CFR 80.1454(g).
---------------------------------------------------------------------------

    In the 2010 RFS2 rulemaking, EPA committed to make an annual
finding concerning whether the 2007 baseline amount of U.S.
agricultural land has been exceeded in a given year. If the baseline is
found to have been exceeded, then producers using U.S. planted crops
and crop residue as feedstocks for renewable fuel production would be
required to comply with individual recordkeeping and reporting
requirements to verify that their feedstocks are renewable biomass.
    The Aggregate Compliance methodology provided for the exclusion of
acreage enrolled in the Grassland Reserve Program (GRP) and the
Wetlands Reserve Program (WRP) from the estimated total U.S.
agricultural land. However, the 2014 Farm Bill terminated the GRP and
WRP as of 2013 and USDA established the Agriculture Conservation
Easement Program (ACEP) with wetlands and land easement components. The
ACEP is a voluntary program that provides financial and technical
assistance to help conserve agricultural lands and wetlands and their
related benefits. Under the Agricultural Land Easements (ACEP-ALE)
component, USDA helps Indian tribes, state and local governments, and
non-governmental organizations protect working agricultural lands and
limit non-agricultural uses of the land. Under the Wetlands Reserve
Easements (ACEP-WRE) component, USDA helps to restore, protect and
enhance enrolled wetlands. The WRP was a voluntary program that offered
landowners the opportunity to protect, restore, and enhance wetlands on
their property. The GRP was a voluntary conservation program that
emphasized support for working grazing operations, enhancement of plant
and animal biodiversity, and protection of grassland under threat of
conversion to other uses.
    USDA and EPA concur that the ACEP-WRE and ACEP-ALE represent a
continuation in basic objectives and goals of the original WRP and GRP.
Therefore, in preparing this year's assessment of the total U.S. acres
of agricultural land, the acreage enrolled in the ACEP-WRE and ACEP-ALE
was excluded.
    Based on data provided by the USDA Farm Service Agency (FSA) and
Natural Resources Conservation Service (NRCS), we have estimated that
U.S. agricultural land reached approximately 376 million acres in 2017,
and thus did not exceed the 2007 baseline acreage. This acreage
estimate is based on the same methodology used to set the 2007 baseline
acreage for U.S. agricultural land in the RFS2 final rulemaking, with
the GRP and WRP substitution as noted above. Specifically, we started
with FSA crop history data for 2017, from which we derived a total
estimated acreage of 379,220,752 acres. We then subtracted the ACEP-ALE
and ACEP-WRE enrolled areas by the end of Fiscal Year 2017, 2,777,887
acres, to yield an estimate of 376,442,865 acres or approximately 376
million acres of U.S. agricultural land in 2017. The USDA data used to
make this derivation can be found in the docket to this rule.\164\
---------------------------------------------------------------------------

    \164\ As in 2016, USDA again provided EPA with 2017 data from
the discontinued GRP and WRP programs. Given this data, EPA
estimated the total U.S. agricultural land both including and
omitting the GRP and WRP acreage. In 2017, combined land under GRP
and WRP totaled 349,146 acres. Subtracting the GRP, WRP, ACEP-WRE,
and ACEP-ALE acreage yields an estimate of 376,093,719 acres or
approximately 376 million total acres of U.S. agricultural land in
2017. Omitting the GRP and WRP data yields approximately the same
376 million acres of U.S. agricultural land in 2017.

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

B. Assessment of the Canadian Aggregate Compliance Approach

    The RFS regulations specify a petition process through which EPA
may approve the use of an aggregate compliance approach for planted
crops and crop residue from foreign countries.\165\ On September 29,
2011, EPA approved such a petition from the Government of Canada.
---------------------------------------------------------------------------

    \165\ 40 CFR 80.1457.
---------------------------------------------------------------------------

    The total agricultural land in Canada in 2017 is estimated at 117.8
million acres. This total agricultural land area includes 95.5 million
acres of cropland and summer fallow, 12.5 million acres of pastureland
and 9.8 million acres of agricultural land under conservation
practices. This acreage estimate is based on the same methodology used
to set the 2007 baseline acreage for Canadian agricultural land in
EPA's response to Canada's petition. The data used to make this
calculation can be found in the docket to this rule.

C. RIN Market Operation

    Some stakeholders have expressed concerns that the current
regulatory provisions related to RIN trading render the RFS program
vulnerable to market manipulation. The EPA takes such issues seriously.
The RIN system was originally designed with an open trading market in
order to maximize its liquidity and ensure a robust marketplace for
RINs. However, the EPA is interested in assessing whether and how the
current trading structure provides an opportunity for market
manipulation. To that effect, the EPA sought comment and input on this
issue, including on potential changes to the RIN trading system that
might help address these concerns. We received comments from
stakeholders suggesting a number changes to the RIN trading system.
While EPA received many comments that are helpful to highlight
opportunities for improvement to the RIN system, we are not in a
position to make significant changes to the RIN system at this time.
However, we intend to explore these suggested changes and are open to
suggestions for making changes in the future that are within our
authority and would help to improve the function and liquidity of the
RIN system.
    Separate from evaluating the RIN trading options in the RFS
program, the EPA is working with appropriate market regulators to
analyze targeted concerns of some stakeholders. Although the EPA has
not seen evidence of manipulation in the RIN market, the EPA is not a
commodity market regulatory agency, and thus we do not have expertise
in this field. Claims of market manipulation prompted the EPA to
execute a memorandum of understanding (MOU) with the U.S. Commodity
Futures Trading Commission (CFTC), which has the authority and
expertise to investigate such claims.
    In the meantime, the EPA has continued to explore additional ways
to increase program transparency in order to support the program and
share data with all stakeholders. The EPA already publishes RFS program
data on our Web site, including data related to RIN generation, sales
and holdings, and annual compliance.\166\ We are interested in
providing more information, to the extent consistent with our
obligations to protect confidential business information (CBI). The EPA
sought comment on specific data elements and posting frequency that
stakeholders believe would be useful to help with market transparency
and liquidity. We received comments from stakeholders suggesting a
number of different types of data that commenters suggested would be
useful to the industry and public. The EPA will need to further
evaluate each of these suggestions to determine which information we
can be post and, if so, whether we can post it at the frequency that
was suggested by the commenters. Our decisions with respect to these
suggestions must necessarily strike a balance between achieving the
greatest transparency possible, while working within the limitations of
our authority and resources (including technology systems), and
protecting information that is claimed as CBI.
---------------------------------------------------------------------------

    \166\ For public data on the RFS and other EPA fuel programs,
refer to: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/public-data-and-registration-lists-fuel-programs.
---------------------------------------------------------------------------

IX. Public Participation

    Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided opportunity for
submitting written public comments following the proposal that we
published on July 21, 2017 (82 FR 34206), and we also held a public
hearing on August 1, 2017, at which many parties provided both verbal
and written testimony. All comments received, both verbal and written,
are available in Docket ID No. EPA-HQ-OAR-2017-0091 and we considered
these comments in developing the final rule. Public comments and EPA
responses are discussed throughout this preamble and in the
accompanying Response to Comment document, which is available in the
docket for this action.

X. Statutory and Executive Order Reviews

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

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

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

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

C. Paperwork Reduction Act (PRA)

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

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, the impact of concern is any significant
adverse economic impact on small entities. An agency may certify that a
rule will not have a significant economic impact on a substantial
number of small entities if the rule relieves regulatory burden, has no
net burden, or otherwise has a positive economic effect on the small
entities subject to the rule.
    The small entities directly regulated by the RFS program are small
refiners, which are defined at 13 CFR 121.201. We have evaluated the
impacts of this final rule on small entities from two perspectives: As
if the 2018 standards

were a standalone action or if they are a part of the overall impacts
of the RFS program as a whole.
    When evaluating the standards as if they were a standalone action
separate and apart from the original rulemaking which established the
RFS2 program, then the standards could be viewed as increasing the
advanced and total renewable fuel volumes required of obligated parties
by 10 million gallons between 2017 and 2018. To evaluate the impacts of
the volume requirements on small entities relative to 2017, EPA has
conducted a screening analysis \167\ to assess whether it should make a
finding that this action would not have a significant economic impact
on a substantial number of small entities. Currently available
information shows that the impact on small entities from implementation
of this rule would not be significant. EPA has reviewed and assessed
the available information, which shows that obligated parties,
including small entities, are generally able to recover the cost of
acquiring the RINs necessary for compliance with the RFS standards
through higher sales prices of the petroleum products they sell than
would be expected in the absence of the RFS program.168 169
This is true whether they acquire RINs by purchasing renewable fuels
with attached RINs or purchase separated RINs. The costs of the RFS
program are thus generally being passed on to consumers in the highly
competitive marketplace. Even if we were to assume that the cost of
acquiring RINs were not recovered by obligated parties, and we used the
maximum values of the illustrative costs discussed in Section IV.E of
this preamble and the gasoline and diesel fuel volume projections and
wholesale prices from the October 2017 version of EIA's Short-Term
Energy Outlook, and current wholesale fuel prices, a cost-to-sales
ratio test shows that the costs to small entities of the RFS standards
are far less than 1 percent of the value of their sales.
---------------------------------------------------------------------------

    \167\ ``Screening Analysis for the Final Renewable Fuel Standard
Program Renewable Volume Obligations for 2018,'' memorandum from
Dallas Burkholder, Nick Parsons, and Tia Sutton to EPA Air Docket
EPA-HQ-OAR-2017-0091.
    \168\ For a further discussion of the ability of obligated
parties to recover the cost of RINs see ``A Preliminary Assessment
of RIN Market Dynamics, RIN Prices, and Their Effects,'' Dallas
Burkholder, Office of Transportation and Air Quality, US EPA. May
14, 2015, EPA Air Docket EPA-HQ-OAR-2015-0111.
    \169\ Knittel, Christopher R., Ben S. Meiselman, and James H.
Stock. ``The Pass-Through of RIN Prices to Wholesale and Retail
Fuels under the Renewable Fuel Standard.'' Working Paper 21343. NBER
Working Paper Series. Available online at http://www.nber.org/papers/w21343.pdf.
---------------------------------------------------------------------------

    While the screening analysis described above supports a
certification that this rule would not have a significant economic
impact on small refiners, we continue to believe that it is more
appropriate to consider the standards as a part of ongoing
implementation of the overall RFS program. When considered this way,
the impacts of the RFS program as a whole on small entities were
addressed in the RFS2 final rule (75 FR 14670, March 26, 2010), which
was the rule that implemented the entire program required by the Energy
Independence and Security Act of 2007 (EISA 2007). As such, the Small
Business Regulatory Enforcement Fairness Act (SBREFA) panel process
that took place prior to the 2010 rule was also for the entire RFS
program and looked at impacts on small refiners through 2022.
    For the SBREFA process for the RFS2 final rule, EPA conducted
outreach, fact-finding, and analysis of the potential impacts of the
program on small refiners, which are all described in the Final
Regulatory Flexibility Analysis, located in the rulemaking docket (EPA-
HQ-OAR-2005-0161). This analysis looked at impacts to all refiners,
including small refiners, through the year 2022 and found that the
program would not have a significant economic impact on a substantial
number of small entities, and that this impact was expected to decrease
over time, even as the standards increased. For gasoline and/or diesel
small refiners subject to the standards, the analysis included a cost-
to-sales ratio test, a ratio of the estimated annualized compliance
costs to the value of sales per company. From this test, it was
estimated that all directly regulated small entities would have
compliance costs that are less than one percent of their sales over the
life of the program (75 FR 14862, March 26, 2010).
    We have determined that this final rule will not impose any
additional requirements on small entities beyond those already
analyzed, since the impacts of this rule are not greater or
fundamentally different than those already considered in the analysis
for the RFS2 final rule assuming full implementation of the RFS
program. This rule establishes the 2018 advanced and total renewable
fuel volume requirements at levels 10 million gallons higher than the
2017 volume requirements, and significantly below the statutory volume
targets. This exercise of EPA's waiver authority reduces burdens on
small entities, as compared to the burdens that would be imposed under
the volumes specified in the Clean Air Act in the absence of waivers--
which are the volumes that we assessed in the screening analysis that
we prepared for implementation of the full program. Regarding the BBD
standard, we are maintaining the volume requirement for 2019 at the
same level as 2018. While this volume is an increase over the statutory
minimum value of 1 billion gallons, the BBD standard is a nested
standard within the advanced biofuel category, which we are
significantly reducing from the statutory volume targets. As discussed
in Section VI, we are setting the 2019 BBD volume requirement at a
level below what is anticipated will be produced and used to satisfy
the reduced advanced biofuel requirement. The net result of the
standards being established in this action is a reduction in burden as
compared to implementation of the statutory volume targets, as was
assumed in the RFS2 final rule analysis.
    While the rule will not have a significant economic impact on a
substantial number of small entities, there are compliance
flexibilities in the program that can help to reduce impacts on small
entities. These flexibilities include being able to comply through RIN
trading rather than renewable fuel blending, 20 percent RIN rollover
allowance (up to 20 percent of an obligated party's RVO can be met
using previous-year RINs), and deficit carry-forward (the ability to
carry over a deficit from a given year into the following year,
providing that the deficit is satisfied together with the next year's
RVO). In the RFS2 final rule, we discussed other potential small entity
flexibilities that had been suggested by the SBREFA panel or through
comments, but we did not adopt them, in part because we had serious
concerns regarding our authority to do so.
    Additionally, as we realize that there may be cases in which a
small entity may be in a difficult financial situation and the level of
assistance afforded by the program flexibilities is insufficient. For
such circumstances, the program provides hardship relief provisions for
small entities (small refiners), as well as for small refineries.\170\
As required by the statute, the RFS regulations include a hardship
relief provision (at 40 CFR 80.1441(e)(2)) that allows for a small
refinery to petition for an extension of its small refinery exemption
at any time based on a showing that compliance with the requirements of
the RFS program would result in the refinery experiencing a
``disproportionate economic hardship.'' EPA regulations

provide similar relief to small refiners that are not eligible for
small refinery relief (see 40 CFR 80.1442(h)). EPA evaluates these
petitions on a case-by-case basis and may approve such petitions if it
finds that a disproportionate economic hardship exists. In evaluating
such petitions, EPA consults with the U.S. Department of Energy, and
takes the findings of DOE's 2011 Small Refinery Study and other
economic factors into consideration. EPA successfully implemented these
provisions by evaluating petitions for exemption from 14 small
refineries for the 2016 RFS standards.\171\
---------------------------------------------------------------------------

    \170\ See CAA section 211(o)(9)(B).
    \171\ EPA is currently evaluating 2 additional 2016 petitions,
bringing the total number of petitions for 2016 to 16.
---------------------------------------------------------------------------

    Given that this final rule would not impose additional requirements
on small entities, would decrease burden via a reduction in required
volumes as compared to statutory volume targets, would not change the
compliance flexibilities currently offered to small entities under the
RFS program (including the small refinery hardship provisions we
continue to successfully implement), and available information shows
that the impact on small entities from implementation of this rule
would not be significant viewed either from the perspective of it being
a standalone action or a part of the overall RFS program, we have
therefore concluded that this action would have no net regulatory
burden for directly regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

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

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.

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

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

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

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

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

    This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This action establishes the required
renewable fuel content of the transportation fuel supply for 2018,
consistent with the CAA and waiver authorities provided therein. The
RFS program and this rule are designed to achieve positive effects on
the nation's transportation fuel supply, by increasing energy
independence and lowering lifecycle GHG emissions of transportation
fuel.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

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

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

L. Congressional Review Act (CRA)

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

XI. Statutory Authority

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

List of Subjects in 40 CFR Part 80

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

    Dated: November 30, 2017.
E. Scott Pruitt,
Administrator.
    For the reasons set forth in the preamble, EPA amends 40 CFR part
80 as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

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

    Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart M--Renewable Fuel Standard

0
2. Section 80.1405 is amended by adding paragraph (a)(9) to read as
follows:

Sec.  80.1405  What are the Renewable Fuel Standards?

    (a) * * *
    (9) Renewable Fuel Standards for 2018.
    (i) The value of the cellulosic biofuel standard for 2018 shall be
0.159 percent.
    (ii) The value of the biomass-based diesel standard for 2018 shall
be 1.74 percent.
    (iii) The value of the advanced biofuel standard for 2018 shall be
2.37 percent.
    (iv) The value of the renewable fuel standard for 2018 shall be
10.67 percent.
* * * * *
[FR Doc. 2017-26426 Filed 12-11-17; 8:45 am]
BILLING CODE 6560-50-P