which have optimized their processes to accommodate them. Furthermore,
the fact that the tax credit for biodiesel has not been renewed, and if
renewed could be in the form of a producer's tax credit rather than a
blender's tax credit, has resulted in added uncertainty regarding the
potential for volumes to be made available to the United States at
levels above the proposed volume.
    We believe that the factors and considerations noted above are all
appropriately considered in our exercise of the broad discretion
provided under the cellulosic waiver authority, and that a
comprehensive consideration of these factors supports our proposed
approach.\55\ Some of the considerations discussed in this proposal are
clearly related to the availability of non-cellulosic biofuels (e.g.,
historic data on supply, expiration of the biodiesel blenders' tax
credit, and anticipated decreasing growth in production of advanced
feedstocks), while others clearly focus on the potential benefits and
costs of requiring use of available volumes (e.g., relative cost of
advanced biofuels to the petroleum fuels they displace, GHG reduction
benefits and energy security benefits). One important consideration
does not fall neatly in these two categories--the likelihood that
higher advanced biofuel standards would be satisfied by diversion of
advanced feedstocks from other uses or diversion of foreign advanced
biofuel from foreign markets, and the diminished benefits associated
with such diversions. We believe, in the exercise of our discretion
under the cellulosic waiver authority, and as discussed in more detail
below, that it would not be appropriate to set the advanced biofuel
volume requirement at a level that would lead to such diversions.
Accordingly, we have factored this consideration into our assessment of
available supplies. In other words, we first identify below volumes
that we believe would be reasonably attainable in 2018 without these
diversions, and then discuss whether or not other considerations, such
as cost and GHG benefits, indicate that it would be appropriate to set
the advanced biofuel volume requirement so as to require use of such
reasonably attainable volumes to partially backfill for missing
cellulosic volumes.
    If finalized, the net impact of today's proposal would be that the
volume requirement for advanced biofuel for 2018 would be 40 million
gallons less than the applicable volume used to derive the 2017
percentage standard.

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

    As described in Section II.A, when making reductions in advanced
biofuel and total renewable fuel under the cellulosic waiver authority,
the statute limits those reductions to no more than the reduction in
cellulosic biofuel. As described in Section III.D, we are proposing a
2018 applicable volume for cellulosic biofuel of 238 million gallons,
representing a reduction of 6,762 million gallons from the statutory
target of 7,000 million gallons. As a result, 6,762 million gallons is
the maximum volume reduction for advanced biofuel and total renewable
fuel that is permissible using the cellulosic waiver authority.\56\ If
we were to use the cellulosic waiver authority to this maximum extent,
the resulting 2018 volumes would be 4.24 and 19.24 billion gallons for
advanced biofuel and total renewable fuel, respectively, following
standard rounding methods applied to the applicable volumes expressed
in billion gallons with two decimal places, as done in previous annual
standard-setting rulemakings.
---------------------------------------------------------------------------

    \56\ If we determined it necessary to provide further reductions
to address inadequate domestic supply or severe economic or
environmental harm, such further reductions would only be possible
using the general waiver authority.

   Table IV.A-1--Lowest Permissible Volume Requirements Using Only the
                       Cellulosic Waiver Authority
                            [Million gallons]
------------------------------------------------------------------------
                                                               Total
                                             Advanced        renewable
                                              biofuel          fuel
------------------------------------------------------------------------
Statutory target........................          11,000          26,000
Maximum reduction permitted under the              6,762           6,762
 cellulosic waiver authority............
Lowest 2018 volume requirement permitted           4,238          19,238
 using only the cellulosic waiver
 authority..............................
------------------------------------------------------------------------

    We are authorized under the cellulosic waiver authority to reduce
the advanced biofuel and total renewable fuel volumes ``by the same or
a lesser'' amount as the reduction in the cellulosic biofuel volume.
Thus, we are not required to use the authority to its maximum extent.
Indeed, in exercising the cellulosic waiver authority in setting
standards for 2014-2017, we did not use the full extent of the
authority. 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 or
what appropriate volume reductions (within the range permitted by
statute) should be. Thus, EPA could potentially set the 2018 advanced
biofuel standard at a level that is designed to partially backfill for
the shortfall in cellulosic biofuel. However, based on our
consideration of the factors described in more detail below, we are
proposing to use the full extent of the cellulosic waiver authority.
The proposed advanced biofuel applicable volume is, therefore, 4.24
billion gallons.\57\
---------------------------------------------------------------------------

    \57\ We specify the volume requirements as billion gallons with
two decimal places to be consistent with the volume targets as given
in the statute. The only exception is for cellulosic biofuel which
we specify in million gallons due to the substantial reduction from
the statutory target. However, calculations are typically shown in
million gallons for all four standards for clarity.
---------------------------------------------------------------------------

B. Reasonably Attainable Volumes of Advanced Biofuel

    After use of the cellulosic waiver authority to reduce volumes of
cellulosic biofuel, the statute does not specify conditions or any
criteria or factors that EPA should consider in determining whether,
and to what extent, to use the authority to reduce advanced biofuel and
total renewable

fuel. Thus, under the cellulosic waiver authority, Congress provided
EPA with broad discretion to lower advanced biofuel and total renewable
fuel applicable volumes in instances where it lowers the cellulosic
biofuel requirement, as we are proposing to do in today's rule. In
exercising this broad discretion, we need not require use of the
maximum achievable volumes as would be the case if we were using the
general waiver authority based on a finding of inadequate domestic
supply, as we did for total renewable fuels in the 2014-2016 RFS
standards rule.
    As noted above, a higher advanced biofuel volume requirement has a
greater potential to increase the incentive for switching advanced
biofuel feedstocks from existing uses to biofuel production. Such
market reactions could cause disruptions and/or price increases in the
non-biofuel markets that currently use these feedstocks. Increasing the
required volumes of advanced biofuels without giving the market
adequate time to adjust by increasing supplies could also result in
diversion of advanced biofuels from foreign countries to the U.S.
without increasing total global supply. Increasing the supply of
advanced biofuels in this way (by shifting the end use of advanced
feedstocks to biofuel production and satisfying the current markets for
these advanced feedstocks with non-qualifying or petroleum based
feedstocks or simply shifting advanced biodiesel or renewable diesel
from foreign to domestic use) would likely not produce the additional
GHG benefits that might otherwise be expected. We are proposing that we
not set the advanced volume requirement at a level that would require
such diversions. Our individual assessments of reasonably attainable
volumes reflect this approach. That is, while we refer to them as
``reasonably attainable'' volumes for convenience, they represent those
volumes that are not likely to lead to feedstock diversions. Greater
volumes could likely be made available if feedstock diversions were not
of concern.
1. Imported Sugarcane Ethanol
    The predominant available source of advanced biofuel other than
cellulosic biofuel and BBD is imported sugarcane ethanol. For both the
2016 and 2017 standards, we used a volume of 200 million gallons of
imported sugarcane ethanol for purposes of determining the reasonably
attainable volume of advanced biofuel. In using this volume of
sugarcane ethanol, we attempted to balance indications of lower
potential imports from recent data with indications that higher volumes
were possible based on older data. We also pointed to the high
variability in ethanol import volumes in the past (including of
Brazilian sugarcane ethanol, the predominant form of imported ethanol,
and the only significant source of imported advanced 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.
    The data currently available on 2016 ethanol imports suggests that
we overestimated the volume of sugarcane ethanol imports for that year.
Despite the fact that the applicable standards for 2016 were set prior
to the beginning of 2016, and despite suggestions from UNICA \58\ that
2016 imports could reach as high as 2 billion gallons, total ethanol
imports only reached 34 million gallons. The low observed 2016 volume
indicates that an increase in the advanced biofuel standard does not
necessarily result in an increase in imports of sugarcane ethanol, and
also implies that even California's Low Carbon Fuel Standard (LCFS),
which applies in addition to the RFS program, has not resulted in the
large volumes of advanced ethanol imports that some stakeholders
believed would occur.
---------------------------------------------------------------------------

    \58\ UNICA is the Brazilian Sugarcane Industry Association.

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

[GRAPHIC] [TIFF OMITTED] TP21JY17.001

    While the low import levels of sugarcane ethanol in 2014 and 2015
could, at least in part, be attributed to the fact that the applicable
RFS standards had not been set prior to the beginning of the compliance
period, this was not true for 2016. The experience in 2016 suggests
that 200 million gallons may be too high for the purposes of projecting
reasonably attainable volumes of advanced biofuel for 2018. At the same
time, higher import volumes than those which occurred in 2016 are
clearly possible, and could potentially be achieved under the influence
of a higher RFS standard. Taking all of these considerations into
account, we propose to use 100 million gallons of imported sugarcane
ethanol for the purposes of projecting reasonably attainable volumes of
advanced biofuel for 2018. This level takes into account the lower than
expected import volumes that occurred in 2016, but also the fact that
higher volumes have occurred in past years.
    We recognize that there are factors that could result in lower
import volumes of sugarcane ethanol in 2018 than 100 million gallons.
These include weather and harvests in Brazil, world ethanol demand and
prices, and constraints associated with the E10 blendwall in the U.S.
Also, global sugar consumption has continued to increase steadily,
while production has decreased. If the trend continues, Brazilian
production of sugar could increase, with a concurrent reduction in
production of ethanol.\59\ On the other hand, the world average price
of sugar is projected to remain relatively flat between 2016 and 2018,
suggesting little change in sugar production and implying that ethanol
production in Brazil might likewise remain unchanged.\60\ In light of
these and other considerations discussed above, we request comment on
whether it would be appropriate to use a volume of imported sugarcane
ethanol different than 100 million gallons in the final determination
of the advanced biofuel volume requirement for 2018.
---------------------------------------------------------------------------

    \59\ ``Sugar--World Markets and Trade,'' USDA, November 2016.
    \60\ ``Commodity Markets Outlook,'' World Bank Group, January
2017.
---------------------------------------------------------------------------

2. Biodiesel and Renewable Diesel
    With regard to biodiesel and renewable diesel, there are many
different factors that could potentially influence the total reasonably
attainable volume of these fuels (including both advanced and non-
advanced forms) used as transportation fuel or heating oil in the
United States.\61\ These factors could include the availability of
qualifying biodiesel and renewable diesel feedstocks, the production
capacity of biodiesel and renewable diesel facilities (both in the
United States and internationally), the market's ability to distribute
biodiesel, and diesel engine manufacturers' recommendations for
biodiesel use in the engines they produce. The degree to which these
and other factors may affect the total supply of biodiesel and
renewable diesel in 2018, is discussed in Section V.B.2.
---------------------------------------------------------------------------

    \61\ For a further discussion of the factors that influence the
availability of biodiesel and renewable diesel see Section V.B.2 of
the preamble and a further discussion of these factors from the 2017
final rule (81 FR 89781--89789, December 12, 2016).
---------------------------------------------------------------------------

    However, the primary considerations in our determination of the
reasonably attainable volumes of advanced biodiesel and renewable
diesel for 2018 are a review of the supply of advanced biodiesel and
renewable diesel in previous years, the uncertain impact of the
expiration of the biodiesel tax credit

on biodiesel production and importation, the projected growth in
production of advanced biodiesel and renewable diesel feedstocks in
2018, and consideration of the extent to which our decision in setting
advanced biofuel requirements could influence the market.\62\ A review
of the volumes of advanced biodiesel and renewable diesel made
available in previous years is especially useful in projecting the
potential for growth in such fuels, since for these fuels there are a
number of complex and inter-related factors (including the expiration
of the biodiesel tax credit) that are likely to affect the total
supply. We also believe the likely growth in production of feedstocks
used to produce these fuels is an important factor to consider. This is
because the maximum energy security and GHG reduction value associated
with the growth in the use of advanced biofuels is obtained when that
growth is associated with an increase in advanced feedstock production,
rather than a switching of existing advanced feedstocks from other
uses. Such feedstock switching could result in unintended negative
consequences, such as market disruption in the renewable oils market,
which could offset some of the anticipated benefits of the production
and use of advanced biofuels.
---------------------------------------------------------------------------

    \62\ 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). 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 Sec.  80.1426
that can be used to produce fuel that qualifies for D4 or D5 RINs.
These feedstocks include 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 Sec.  80.1426).
---------------------------------------------------------------------------

    The volume of advanced biodiesel and renewable diesel projected to
be available based on a consideration of these factors is less than the
total volume of biodiesel and renewable diesel we believe could be
produced (based solely on an assessment of the available production
capacity) or consumed (based on an assessment of the ability of the
market to distribute and use biodiesel and renewable diesel).
Production capacity and the ability for the market to distribute and
use biodiesel and renewable diesel are therefore not constraining
factors in our assessment of the reasonably attainable volume of
advanced biodiesel and renewable diesel in 2018.
    Before considering the projected growth in the production of
qualifying feedstocks that could be used to produce advanced biodiesel
and renewable diesel, it is helpful to review the supply of biodiesel
and renewable diesel to the United States in recent years. While
historic data and trends alone are insufficient to project the volumes
of biodiesel and renewable diesel that could be provided in future
years, historic data can serve as a useful frame of reference in
considering future volumes. Past experience suggests that a high
percentage of the biodiesel and renewable diesel used in the United
States (from both domestic production and imports) qualifies as
advanced biofuel.\63\ In previous years, biodiesel and renewable diesel
produced in the United States has been almost exclusively advanced
biofuel.\64\ Imports of advanced biodiesel have increased in recent
years, however, as seen in Table IV.B.2-1. Volumes of imported advanced
biodiesel and renewable diesel have varied significantly from year to
year, as they are impacted both by domestic and foreign policies, as
well as economic factors.
---------------------------------------------------------------------------

    \63\ From 2011 through 2016 over 95% of all biodiesel and
renewable diesel supplied to the United States (including
domestically-produced and imported biodiesel and renewable diesel)
qualified as advanced biodiesel and renewable diesel (9,372 million
gallons of the 9,850 million gallons) according to EMTS data.
    \64\ From 2011 through 2016 over 99.9% of all the domestically
produced biodiesel and renewable diesel supplied to the United
States qualified as advanced biodiesel and renewable diesel (8,258
million gallons of the 8,265 million gallons) according to EMTS
data.

                                  Table IV.B.2-1--Advanced (D4 and D5) Biodiesel and Renewable Diesel From 2011 to 2016
                                                                  [Million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2011            2012            2013          2014 \b\        2015 \b\          2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)......................       967 (N/A)     1,014 (+47)    1,376 (+362)     1,303 (-73)     1,253 (-50)    1,633 (+380)
Domestic Renewable Diesel (Annual Change)...............        58 (N/A)        11 (-47)        92 (+81)       155 (+63)       175 (+20)       221 (+46)
Imported Biodiesel (Annual Change)......................        44 (N/A)         40 (-4)      156 (+116)       130 (-26)      261 (+131)      561 (+300)
Imported Renewable Diesel (Annual Change)...............         0 (N/A)        28 (+28)      145 (+117)       129 (-16)        121 (-8)       170 (+49)
Exported Biodiesel and Renewable Diesel (Annual Change).        48 (N/A)       102 (+54)       125 (+23)        134 (+9)        133 (-1)        129 (-4)
                                                         -----------------------------------------------------------------------------------------------
    Total (Annual Change)...............................     1,021 (N/A)       991 (-30)    1,644 (+653)     1,583 (-61)     1,677 (+94)    2,456 (+779)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data for 2011-2016 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
  supply in each year.
\b\ RFS required volumes for these years were not established until December 2015.

                                   Table IV.B.2-2--Conventional (D6) Biodiesel and Renewable Diesel From 2011 to 2016
                                                                  [Million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2011            2012            2013          2014 \b\        2015 \b\          2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)......................         0 (N/A)          0 (+0)          6 (+6)          1 (-5)          0 (+0)          0 (+0)
Domestic Renewable Diesel (Annual Change)...............         0 (N/A)          0 (+0)          0 (+0)          0 (+0)          0 (+0)          0 (+0)
Imported Biodiesel (Annual Change)......................         0 (N/A)          0 (+0)        31 (+31)        52 (+21)        74 (+22)       113 (+39)
Imported Renewable Diesel (Annual Change)...............         0 (N/A)          0 (+0)        53 (+53)         0 (-53)      106 (+106)        43 (-63)

Exported Biodiesel and Renewable Diesel (Annual Change).         0 (N/A)          0 (+0)          0 (+0)          0 (+0)          0 (+0)          1 (+1)
    Total (Annual Change)...............................         0 (N/A)          0 (+0)        90 (+90)        53 (-37)      180 (+127)       155 (-25)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data for 2011-2016 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
  supply in each year.
\b\ RFS required volumes for these years were not established until December 2015.

    Since 2011 the year-over-year changes in the volume of advanced
biodiesel and renewable diesel in the United States have varied
greatly, from a low of negative 61 million gallons from 2011 to 2012 to
a high of 779 million gallons from 2015 to 2016. These changes were
likely influenced by a number of 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
United States and foreign countries, and the volumes of renewable fuels
(particularly advanced biofuels) required by the RFS. This historical
information does not indicate that the maximum previously observed
increase of 779 million gallons of advanced biodiesel and renewable
diesel would be reasonable to expect from 2017 to 2018, nor does it
indicate that the low growth rates observed in other years represent
the limit of potential growth in 2018. Rather, these data illustrate
both the magnitude of the increases in advanced biodiesel and renewable
diesel in previous years and the significant variability in these
increases.
    The historic data indicates that the biodiesel tax policy in the
United States can have a significant impact on the supply of biodiesel
and renewable diesel in any given year. While the biodiesel blenders
tax credit has applied in each year from 2010-2016, it has only been in
effect during the calendar year in 2011, 2013 and 2016, while other
years it has been applied retroactively. The biodiesel blenders tax
credit expired at the end of 2009 and was re-instated to apply
retroactively in 2010 and extend through the end of 2011 in December
2010. Similarly, after expiring at the end of 2011, 2013, and 2014 the
tax credit was re-instated in January 2013 (for 2012 and 2013),
December 2014 (for 2014), and December 2015 (for 2015 and 2016). 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 supply of advanced biodiesel and renewable diesel over
the previous year (653 million gallons and 779 million gallons
respectively). However, following this large increase in 2013, the
supply of advanced biodiesel and renewable diesel in 2014 and 2015 was
minimal, only 33 million gallons from 2013 to 2015. This pattern is
likely the result of both accelerated production and/or importation of
biodiesel and renewable diesel in the final few months of 2013 to take
advantage of the expiring tax credit as well as relatively lower
volumes of biodiesel and renewable diesel production and import in 2014
and 2015 than would have occurred if the tax credit had been in
place.\65\
---------------------------------------------------------------------------

    \65\ We also acknowledge that the fact that EPA did not finalize
the required volumes of renewable fuel under the RFS program for
2014 and 2015 until December 2015 likely had an impact on the volume
of advanced biodiesel and renewable diesel supplied in these years.
---------------------------------------------------------------------------

    We believe it is reasonable to anticipate a similar production
pattern in 2016 through 2018 as observed in 2013 through 2015; that
increases in the volumes of advanced biodiesel and renewable diesel
will be modest in 2017-2018, following a significant increase in 2016.
Available RIN generation data further supports this pattern. Very high
volumes of advanced biodiesel and renewable diesel were supplied in the
last quarter of 2016, likely driven by a desire to capture the expiring
tax credit, while significantly smaller volumes of these fuels were
supplied in the first quarter of 2017.\66\ We request comment on the
likely impact of the expiration of the blenders tax credit on supplies
of biodiesel and renewable diesel in 2018.
---------------------------------------------------------------------------

    \66\ According to data on EPA's public Web site, RINs were
generated for 823 million gallons of biomass-based diesel in the
last quarter of 2016 while RINs were generated for 444 million
gallons of biomass-based diesel in the first quarter of 2017. The
vast majority of advanced biodiesel and renewable diesel qualifies
as biomass-based diesel.
---------------------------------------------------------------------------

    In addition to a review of the historical supply of advanced
biodiesel and renewable diesel and consideration of the possible impact
of the expiration of the biodiesel tax credit (discussed above) EPA has
also focused on the expected increase in the availability of advanced
biodiesel and renewable diesel feedstocks in 2018 in projecting the
reasonably attainable volume of biodiesel and renewable diesel in the
context of the 2018 advanced biofuel standard. We acknowledge that the
availability of advanced biodiesel and renewable diesel in 2018 is not
strictly tied to the increase in the availability of the feedstocks
used to produce these fuels, and that it may be possible to realize
higher volumes of advanced biodiesel and renewable diesel in 2018
through a diversion of advanced feedstocks from other uses, or a
diversion of advanced biodiesel and renewable diesel from existing
markets in other countries. We perceive the net benefits associated
with such increased advanced biofuel and renewable fuel supply to be
significantly less than the net benefits associated with the production
of additional advanced biodiesel and renewable diesel with the use of
newly-available advanced feedstocks. This is both because of the
potential disruption and associated cost impacts to other industries
resulting from feedstock switching, as well as reduced GHG reduction
benefit related to use of feedstocks for biofuel production that would
have been used for other purposes, and must now be backfilled with
other feedstocks with potentially lesser environmental benefits. By
focusing our assessment of the reasonably attainable volume of
biodiesel and renewable diesel on the expected growth in the production
of advanced feedstocks (rather than the total supply of these
feedstocks in 2018, which would include feedstocks currently being used
for non-biofuel purposes), we are attempting to minimize the incentives
for the RFS program to increase the supply of advanced biodiesel and
renewable diesel through feedstock switching.
    Advanced biodiesel and renewable diesel feedstocks include both
waste oils, fats and greases and oils from planted crops. While we
believe a small

increase in supply of waste oils, fats, and greases may be possible in
2018, we believe this increase is limited as much of these oils, fats,
and greases are already being recovered and used in biodiesel and
renewable diesel production or for other purposes. Many of the planted
crops that supply vegetable oil for advanced biodiesel and renewable
diesel production are primarily grown as livestock feed with the oil as
a co-product or by-product, rather than specifically as biodiesel and
renewable diesel feedstocks.\67\ This is true for soy beans and corn,
which are the two largest sources of feedstock from planted crops used
for biodiesel production in the United States.\68\ This means that the
planted acres of these crops are likely to be made based on the
projected demand for livestock feed, rather than for vegetable oil to
produce biofuels or for other markets, as the vegetable oils produced
are not the primary source of revenue for these crops.
---------------------------------------------------------------------------

    \67\ For example, corn oil is a co-product of corn grown
primarily for feed or ethanol production, while soy and canola oil
are primarily grown as livestock feed.
    \68\ According to EIA data 6,096 million pounds of soy bean oil
and 1,306 million pounds of corn oil were used to produce biodiesel
in the United States in 2016. Other significant sources of feedstock
were yellow grease (1,389 million pounds), canola oil (1,130 million
pounds), white grease (578 million pounds), tallow (332 million
pounds), and poultry fat (220 million pounds). Numbers from EIA's
February 2017 Monthly Biodiesel Production Report. Available at
https://www.eia.gov/biofuels/biodiesel/production/archive/2016/2016_12/biodiesel.pdf.
---------------------------------------------------------------------------

    Increasing the demand for advanced biodiesel and renewable diesel
beyond the projected increase in the feedstocks used to produce these
fuels would likely require diverting volumes of advanced biodiesel and
renewable diesel (or the feedstocks used to produce these fuels) from
existing markets to be used to produce biofuels supplied to the United
States. Increasing the short-term supply of advanced biodiesel and
renewable diesel to the United States in this manner (simply shifting
the end use of advanced feedstocks to biodiesel and renewable diesel
production and meeting non-biofuel demand for these feedstocks with
conventional renewable and/or petroleum based feedstocks) may not
advance the full GHG or energy security goals of the RFS program. In a
worst case scenario, higher standards could cause supply disruptions to
a number of markets as biodiesel and renewable diesel producers seek
additional supplies of advanced feedstocks and the parties that
previously used these feedstocks, both within and outside of the fuels
marketplace, seek out alternative feedstocks. This could result in
significant cost increases, for both biodiesel and renewable diesel as
well as other products produced from renewable oils.
    We believe the most reliable source for projecting the expected
increase in vegetable oils in the United States is USDA's World
Agricultural Supply and Demand Estimates (WASDE). At this time the most
current version of the WASDE report only projects domestic vegetable
oil production through 2017. Based on domestic vegetable oil production
from 2011-2016 as reported by WASDE, the average annual increase in
vegetable oil production in the United States was 0.288 million metric
tons per year.\69\ Assuming a similar increase in domestic vegetable
oil production from 2017 to 2018, this quantity of vegetable oils could
be used to produce approximately 65 million gallons of advanced
biodiesel or renewable diesel.\70\
---------------------------------------------------------------------------

    \69\ According to the April 2017 WASDE report, US vegetable oil
production in the 2015/2016 agricultural marketing year is estimated
to be 11.20 million metric tons. According to the January 2013 WASDE
report, US vegetable oil production in the 2010/2011 agricultural
marketing year was 9.76 million metric tons.
    \70\ To calculate this volume we have used a conversion of 7.7
pounds of feedstock per gallon of biodiesel. This is based on the
expected conversion of soy oil (http://extension.missouri.edu/p/G1990), which is the largest source of feedstock used to produce
advanced biodiesel and renewable diesel. We believe that it is also
a reasonable conversion factor to use for all virgin vegetable oils.
---------------------------------------------------------------------------

    In addition to virgin vegetable oils, we also expect increasing
volumes of distillers corn oil to be available for use in 2018. 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. EPA is proposing to use the results of the World
Agricultural Economic and Environmental Services (WAEES) model to
project the growth in the production of distillers corn oil.\71\ In
assessing the likely increase in the availability of distillers corn
oil from 2017 to 2018, the authors of the WAEES model considered the
impacts of an increasing adoption rate of distillers corn oil
extraction technologies at domestic ethanol production facilities, as
well as increased corn oil extraction rates enabled by advances in this
technology. The projected increase in the production of distillers corn
oil, if devoted entirely to biofuel production, could be used to
produce approximately 42 million gallons of biodiesel or renewable
diesel in 2018.\72\ We believe that this is a reasonable projection.
While the vast majority of the increase in advanced biodiesel and
renewable diesel feedstocks produced in the United States from 2016 to
2017 is expected to come from virgin vegetable oils and distillers corn
oil, increases in the supply of other sources of advanced biodiesel and
renewable diesel feedstocks, such as biogenic waste oils, fats, and
greases, may also occur. These increases, however, are expected to be
modest, as many of these feedstocks that can be recovered economically
are already being used for the production of biodiesel or renewable
diesel, or in other markets. In total, we expect that increases in
feedstocks produced in the United States are sufficient to produce
approximately 100 million more gallons of advanced biodiesel and
renewable diesel in 2018 relative to 2017.
---------------------------------------------------------------------------

    \71\ For the purposes of this proposed rule, EPA relied on WAEES
modeling results submitted as comments on the 2017 final rule
(Kruse, J., ``Implications of Higher Biodiesel Volume Obligations
for Global Agriculture and Biofuels'', 2016, World Agricultural
Economic and Environmental Services (WAEES), EPA-HQ-OAR-2016-0004-
2904 (Attachment 13)).
    \72\ Kruse, J., ``Implications of Higher Biodiesel Volume
Obligations for Global Agriculture and Biofuels'', 2016, World
Agricultural Economic and Environmental Services (WAEES), EPA-HQ-
OAR-2016-0004-2904 (Attachment 13).
---------------------------------------------------------------------------

    We have also considered the expected increase in the imports of
advanced biodiesel and renewable diesel produced in other countries. In
previous years, significant volumes of foreign produced advanced
biodiesel and renewable diesel have been supplied to markets in the
United States (see Table IV.B.2-1 above). These significant imports
were likely the result of a strong U.S. demand for advanced biodiesel
and renewable diesel, supported by both the RFS standards, the LCFS in
California, and the biodiesel blenders tax credit. At this time the
impacts of the expiration of the biodiesel blenders tax credit on the
volumes of foreign-produced biodiesel and renewable diesel imported
into the United States, is highly uncertain. In light of this
uncertainty, we do not believe it is reasonable at this point to
project increasing volumes of imported advanced biodiesel and renewable
diesel in 2018, and for the purposes of projecting the reasonably
attainable volume of advanced biodiesel and renewable diesel in 2018 we
have assumed that imported volumes of biodiesel and renewable diesel
will not increase from the volumes imported in 2017.\73\ This approach
also seeks to minimize the incentives to increase the

supply of advanced biodiesel and renewable diesel by diverting fuels
that would otherwise be used in foreign countries to the United States.
We believe the historic volumes of imported advanced biodiesel and
renewable diesel support this projection, with a slight decrease in the
total volume of imported biodiesel and renewable diesel in 2014 after
the expiration of the biodiesel blenders tax credit, followed by a
slight increase in 2015 after the tax credit was reinstated in December
2015 (see Table IV.B.2-1).
---------------------------------------------------------------------------

    \73\ We further note that there have been recent efforts to
reinstate the biodiesel tax credit as a producers tax credit, rather
than a blenders tax credit. If the biodiesel tax credit were
reinstated as a producers tax credit it would not apply to foreign
biodiesel producers, further impacting the likely supply of imported
advanced biodiesel and renewable diesel.
---------------------------------------------------------------------------

    After a careful consideration of the historic supply of advanced
biodiesel and renewable diesel to the United States in previous years,
the likely impact of the expiration of the biodiesel tax credit, and an
assessment of the availability of feedstocks used to produced advanced
biodiesel and renewable diesel in 2018, EPA has determined, for the
purposes of our proposal, that approximately 2.5 billion gallons of
advanced biodiesel and renewable diesel is reasonably attainable for
use in our determination of the advanced biofuel standard for 2018.
This volume is 100 million gallons higher than the volume of advanced
biodiesel and renewable diesel determined to be reasonably attainable
and appropriate for the purposes of deriving the advanced biofuel
standard in 2017.
    The 100 million gallon increase in advanced biodiesel and renewable
diesel that we project will be reasonably attainable for 2018
represents a smaller annual increase in advanced biodiesel and
renewable diesel than we assumed in deriving the 2017 advanced biofuel
standard (approximately 300 million gallons). We believe that this is
reasonable because the circumstances we are facing in this action are
different from those we were facing in the 2017 final rule. The primary
differences are a smaller projected increase in advanced feedstock
production in the United States and the expiration of the biodiesel tax
credit. While the biodiesel blenders tax credit was still in effect at
the end of 2016 when EPA completed the 2017 final rule, this tax credit
has since expired. It is uncertain whether the tax credit will be
renewed for 2017 and 2018 as it has in the past.
3. 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 2018. These other advanced
biofuels include biogas, naphtha, heating oil, butanol, jet fuel, and
domestically-produced advanced ethanol. However, the supply of these
fuels has been relatively low in the last several years.

                                              Table IV.B.3-1--Historical Supply of Other Advanced Biofuels
                                                          [Million ethanol-equivalent gallons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Renewable       Domestic
                                                                CNG         Heating oil       Naphtha       diesel \a\        ethanol          Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013....................................................              26               0               3              64              23             116
2014....................................................              20               0              18              15              26              79
2015....................................................               0               1              24               8              25              58
2016....................................................               0               2              26               8              27              63
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Some renewable diesel generates D5 rather than D4 RINs as a result of being produced through co-processing with petroleum or being produced from the
  non-cellulosic portions of separated food waste or annual cover crops.

    The downward trend over time in 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).\74\ Apart from
biogas, total supply of advanced biofuel other than imported sugarcane
ethanol has been relatively constant during 2014-2016. Based on this
historical record, we propose to find that 60 million gallons would be
reasonably attainable in 2018.\75\
---------------------------------------------------------------------------

    \74\ 79 FR 42128, July 18, 2014.
    \75\ For the purposes of determining the availability of total
renewable fuel, we propose to use a volume of 40 million gallons of
non-ethanol other advanced biofuel and 20 million gallons of
advanced domestic ethanol (see discussion in Section V.B.2).
---------------------------------------------------------------------------

    We recognize that the potential exists for additional volumes of
advanced biofuel from sources such as jet fuel, liquefied petroleum gas
(LPG), and liquefied natural gas (as distinct from compressed natural
gas), as well as non-cellulosic biogas such as from digesters. However,
since they have been produced in only de minimis amounts in the past,
we do not have a basis for projecting substantial volumes from these
sources in 2018. For the final rule, we may modify our projection of 60
million gallons for other advanced biofuel as information becomes
available.
4. Total Advanced Biofuel
    The total volume of advanced biofuel that we believe is reasonably
attainable in 2018 is the combination of cellulosic biofuel and the
sources described above: Imported sugarcane ethanol, biodiesel and
renewable diesel which qualifies as BBD, and other advanced biofuels
such as advanced biogas that does not qualify as cellulosic biofuel,
heating oil, naphtha, domestic advanced ethanol, and advanced renewable
diesel that does not qualify as BBD. Our assessment of the reasonably
attainable volumes of these sources, discussed in the preceding
sections, is summarized below. We note that the reasonably attainable
volumes of each of these advanced biofuels cannot themselves be viewed
as volume requirements. These volumes are merely one part of the
analysis used to determine the volume requirement for advanced biofuel.
As discussed in more detail in Section V.C below, there are many ways
that the market could respond to the percentage standards we establish,
including use of higher or lower volumes of these fuel types than
discussed in this section. In addition, as discussed below, we do not
believe it would be appropriate to require use of all volumes we have
determined to be reasonably attainable.

      Table IV.B.4-1--Potential Volumes of Advanced Biofuel in 2018
          [Million ethanol-equivalent gallons except as noted]
------------------------------------------------------------------------

------------------------------------------------------------------------
Cellulosic biofuel......................................             238
Advanced biodiesel and renewable diesel (ethanol-            3,875/2,500
 equivalent volume/physical volume).....................
Imported sugarcane ethanol..............................             100
Other advanced..........................................              60
                                                         ---------------
    Total advanced biofuel..............................           4,273
------------------------------------------------------------------------

C. Proposed Advanced Biofuel Volume Requirement for 2018

    Based on the information presented above, we believe that 4.27
billion gallons of advanced biofuel would be reasonably attainable in
2018. This volume is 30 million gallons higher than the 4.24 billion
gallons that would result from reducing the applicable volume of
advanced biofuel by the same amount as the proposed reduction to the
statutory applicable volume of cellulosic biofuel (see Section III for
a discussion of the proposed cellulosic biofuel standard for 2018).
Requiring use of the additional 30 million gallons to partially
backfill for missing cellulosic volumes would be expected to result in
GHG reduction and energy security benefits. In exercising the
cellulosic waiver authority in past years, we sought to capture such
benefits by requiring a partial backfilling of missing cellulosic
volumes with volumes of non-cellulosic biofuel we determined to be
reasonably attainable and appropriate. We did so, notwithstanding
consideration of the increase in costs associated with our actions.\76\
However, this year we are proposing to balance these considerations in
a different manner in setting the 2018 standards, placing a greater
emphasis on cost considerations.\77\
---------------------------------------------------------------------------

    \76\ See, e.g., Response to Comments Document for the 2014-16
Rule, pages 628-631, available at https://www.epa.gov/sites/production/files/2015-12/documents/420r15024.pdf.
    \77\ EPA notes that while the factors considered under the
cellulosic waiver authority to reduce volumes could apply to volumes
beyond the reduction in cellulosic biofuel, EPA is limited in the
exercise of its cellulosic waiver authority to reductions up to the
amount of the reduction in cellulosic biofuel. Any further
reductions would require a determination under the general waiver
authority that the volumes would result in severe economic or
environmental harm, or that there is an inadequate domestic supply.
---------------------------------------------------------------------------

    In Section V.D we present illustrative cost projections for
sugarcane ethanol and soybean biodiesel in 2018, the two advanced
biofuels that have been most widely supplied in previous years and that
would be most likely to provide the marginal volume of advanced biofuel
in 2018. Our projected costs for sugarcane ethanol range from $0.58-
$1.53 per ethanol-equivalent gallon of gasoline displaced ($0.87-$2.29
for every gallon of gasoline displaced) and the costs for soybean
biodiesel range from $0.83-$1.13 per ethanol-equivalent gallon of
diesel displaced ($1.36-$1.85 for every gallon of diesel replaced).\78\
These costs are high on a per gallon basis compared to the petroleum
fuels they displace. In light of these comparative costs, we believe it
is reasonable to forgo the marginal benefit that might be achieved by
establishing the advanced biofuel standard to require an additional 30
million gallons. See Section V.D for a further discussion of the
projected cost of this proposed rule.
---------------------------------------------------------------------------

    \78\ These ethanol-equivalent gallon costs are calculated by
dividing the total projected cost for soybean biodiesel ($33-$45
million) and sugarcane ethanol ($23-$61 million) by the proposed
decrease in the required volume advanced biofuel for 2018 (40
million ethanol-equivalent gallons). All costs comparisons are on an
energy-equivalent, rather than a volumetric, basis.
---------------------------------------------------------------------------

    Based on consideration of the volumes that may be reasonably
attainable in 2018, along with a balancing of the costs and benefits
associated with the option of setting the advanced biofuel standard at
a level that would require use of all volumes that we have estimated
could be reasonably attainable, we are proposing an advanced biofuel
volume requirement of 4.24 billion gallons for 2018. This proposed
reasonably attainable and appropriate volume requirement for advanced
biofuel for 2018 would represent a decrease of 40 million gallons from
the 2017 advanced biofuel volume requirement of 4.28 billion gallons.
As discussed in Section I.E, we request comment on use of the general
waiver authority to further reduce the required volume of advanced
biofuel (with a corresponding reduction to the total renewable fuel
requirement) in an effort to increase the energy independence impacts
of the RFS program.
    We propose to use the cellulosic waiver authority to provide an
equivalent reduction in the applicable volume of total renewable fuel
as the reduction we are proposing for advanced biofuel. That step is
described in more detail in Section V.A, together with our proposed
assessment that no further increment of reduction is required for total
renewable fuel in 2018.

V. Total Renewable Fuel Volume for 2018

    The national volume targets of 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). For 2018 the statute stipulates a volume
target of 26 billion gallons. Since we are proposing to reduce the
statutory volume target for cellulosic biofuel to reflect the projected
production volume of that fuel type in 2018, we are authorized under
CAA section 211(o)(7)(D)(i) to reduce the advanced biofuel and total
renewable fuel targets by the same or a lesser amount. We also have the
authority to reduce any volume target pursuant to the general waiver
authority in CAA section 211(o)(7)(A) under specific conditions as
described in Section II.A.2, including based on a finding of
``inadequate domestic supply.'' Our proposed assessment indicates that
there will be adequate supply of total renewable fuel in 2018 to meet a
total renewable fuel volume requirement of 19.24 billion gallons that
would result from the use of the cellulosic waiver authority alone. The
use of the general waiver authority for 2018 to further reduce the
total renewable fuel standard on the basis of supply considerations
would therefore not be necessary. As a result, the implied volume for
conventional renewable fuel (calculated by subtracting the advanced
volume from the total volume) would be 15.0 billion gallons, consistent
with the statutory targets provided in the statute for 2018.

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

    In Section IV.B we explained our proposed use of the cellulosic
waiver authority to reduce the 11 billion gallon 2018 statutory volume
target for advanced biofuel to 4.24 billion gallons for purposes of
setting the 2018 advanced biofuel volume standard. This represents a
reduction of 6.76 billion gallons.
    As discussed in Section II.A.1, we believe that the cellulosic
waiver provision is best interpreted to require equal reductions in
advanced biofuel and total renewable fuel. We have consistently
articulated this interpretation.\79\ We also believe this
interpretation is consistent with statutory language and best
effectuates the objectives of the statue. If EPA were to reduce the
total renewable fuel volume requirement by a lesser amount than the
advanced biofuel volume requirement, we would effectively increase the
opportunity for conventional biofuels to participate in the RFS program
beyond the implied statutory cap of 15 billion gallons.\80\
---------------------------------------------------------------------------

    \79\ For instance, see discussion in the final rules setting the
2013, 2014-2016, and 2017 standards: 78 FR 49809-49810, August 15,
2013; 80 FR 77434, December 14, 2015; 81 FR 89752-89753, December
12, 2016.
    \80\ Since the advanced biofuel volume requirement is nested
within the total renewable fuel volume requirement, the statutory
implied volume for conventional renewable fuel in the statutory
tables can be discerned by subtracting the applicable volume of
advanced biofuel from that of total renewable fuel. Performing this
calculation with respect to the tables in CAA section 211(o)(2)(B)
indicates a Congressional expectation that in the time period 2015-
2022, advanced biofuel volumes would grow from 5.5 to 21 billion
gallons, while the implied volume for conventional renewable fuel
would remain constant at 15 billion gallons.

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

    Applying an equal reduction of 6.76 billion gallons to both the
statutory target for advanced biofuel and the statutory target for
total renewable fuel results in a total renewable fuel volume of 19.24
billion gallons as shown in Table IV.A-1. If we were to determine that
there is a basis to exercise the general waiver authority, described in
Section II.A.2, we could provide further reductions. However, as
described below in Section V.B, we believe that there will be adequate
supply to meet a total renewable fuel volume requirement of 19.24
billion gallons in 2018. This means that we believe that 15.0 billion
gallons of conventional renewable fuel is reasonably attainable, and
that further reductions in the total renewable fuel applicable volume
using the general waiver authority are not necessary to address supply
issues. We note that EPA has received numerous comments in previous
annual standard rulemakings asserting that there are negative
environmental impacts that may be associated with the RFS program.\81\
A significant portion of these concerns center on feedstock production,
particularly feedstocks used to produce conventional biofuels. Although
we are authorized to reduce the statutory volume targets on the basis
of a finding of ``severe environmental harm,'' we are not proposing any
reductions on this basis. Similarly, although EPA is authorized to
reduce volumes on the basis of a finding of ``severe economic harm,''
we are not proposing any reductions on that basis.
---------------------------------------------------------------------------

    \81\ For instance, see public comments provided in response to
the proposed 2017 standards in docket EPA-HQ-OAR-2016-0004.
---------------------------------------------------------------------------

B. Assessing Attainable Volumes

    As noted above, the proposed volume requirement for total renewable
fuel was derived by applying the same volume reduction to the statutory
volume target for total renewable fuel as we are proposing for advanced
biofuel, using the cellulosic waiver authority. This section describes
our proposed determination that there will be adequate renewable fuel
to meet an applicable volume requirement of 19.24 billion gallons in
2018. We have evaluated available sources of renewable fuel to
determine if in the aggregate it appears that a total renewable fuel
volume of 19.24 billion gallons is reasonably attainable. Since we
believe that this volume is indeed reasonably attainable, as discussed
below, we propose that it is unnecessary to consider further reductions
through use of the general waiver authority on the basis of an
inadequate domestic supply. Therefore, in this assessment, we have not
attempted to identify the maximum reasonably achievable volume of total
renewable fuel based on the sum of estimates of each type of renewable
fuel, such as total ethanol, biodiesel and renewable diesel, biogas,
and other non-ethanol renewable fuels, as we would do if we were
proposing to use the general waiver authority based on a finding of
inadequate domestic supply. However, as noted previously, we are
soliciting comment on whether it would be appropriate to exercise the
general waiver authority.
    As for previous annual standard-setting rulemakings, we note that
it is a very challenging task to estimate the available volumes in
light of the myriad complexities of the fuels market and how individual
aspects of the industry might change in the future, and also because we
cannot precisely predict how the market will respond to the standards
we set. This is the type of assessment that is not given to precise
measurement and necessarily involves considerable exercise of judgment.
    Our investigation into whether the total renewable fuel volume
shown in Table V.A-1 is reasonably attainable in 2018 was driven
primarily by a consideration of the reasonable availability of ethanol,
biodiesel, and renewable diesel. We also considered smaller
contributions from non-ethanol cellulosic and other types of renewable
fuels (i.e., naphtha, heating oil, butanol, and jet fuel). After
estimating what we consider to be the reasonably attainable supply of
ethanol in 2018, and taking into account the estimates of non-ethanol
cellulosic biofuel supply discussed in Section III.D above and
estimates of the supply of other non-ethanol renewable fuels discussed
in Section IV.B.3, we considered whether the reasonably attainable
supply of total biodiesel and renewable diesel would be adequate to
satisfy a requirement of 19.24 billion gallons.\82\ The following
sections provide our preliminary assessment of ethanol and biodiesel/
renewable diesel volumes.
---------------------------------------------------------------------------

    \82\ As noted earlier, ``reasonably attainable'' volumes may be
less than the ``maximum achievable'' volumes we would seek to
identify when using the general waiver authority based on a finding
of inadequate domestic supply. It follows that if there are
sufficient reasonably attainable volumes of renewable fuel to
satisfy a total renewable fuel requirement of 19.24 billion gallons,
then there is no basis for a finding that there is an inadequate
domestic supply to satisfy a 19.24 billion gallon requirement.
---------------------------------------------------------------------------

    The proposed volume requirements are based on the data available to
EPA at the time of this proposal. However, we recognize that there is
uncertainty related to some of this data with respect to the volume of
renewable fuels that can be supplied in the United States in 2018 and
the economic and environmental impacts associated with requiring
renewable fuel use. We request comment on the data presented in this
proposed rule, and invite commenters to submit additional data relevant
to these issues. Additional data could also indicate that it would be
appropriate to finalize volume requirements lower than indicated in
this proposed rule, through use of either the general waiver authority
in CAA section 211(o)(7)(A) or as a result of a lower projection of
cellulosic biofuel production, combined with corresponding increased
waivers of advanced and total renewable fuel using the cellulosic
waiver authority in CAA section 211(o)(7)(D).
    We note that in prior annual RFS rulemaking actions, some
stakeholders have commented to EPA that the Agency should exercise its
discretion to use the general waiver authority to reduce volumes to
avoid severe harm to the economy or environment of a state, region, or
the United States. For example, some commenters suggested that
standards that would result in ethanol use beyond the blendwall would
cause severe economic harm, justifying use of the general waiver
authority. Additionally, as discussed in Section I.E, we also request
comment on use of the general waiver authority to reduce the required
volume of renewable fuel in an effort to increase the energy
independence impacts of the RFS program. EPA invites comment and data
on these issues, including data and analysis that would support
different use of the waiver authorities than we are proposing in
today's action, such as use of the general waiver authority to achieve
greater reductions than proposed.
1. Ethanol
    Ethanol is the most widely produced and consumed biofuel, both
domestically and globally. Since the beginning of the RFS program, the
total volume of renewable fuel produced and consumed in the United
States has grown substantially each year, primarily due to the
increased production and use of corn ethanol. However, the rate of
growth in the supply of ethanol to the U.S. market has decreased in
recent years as the gasoline market has become saturated with gasoline
that contains 10 volume percent ethanol (E10), favorable blending
economics have diminished, and efforts to expand the use of higher
ethanol blends such as E15 and E85

have not been sufficient to maintain past growth rates in total ethanol
supply. Although we believe that use of higher ethanol blends is
growing and can continue to grow, the low number of retail stations
selling these higher-level ethanol blends, along with poor price
advantages compared to E10, and a limited number of flexible fuel
vehicles (FFVs), among other considerations, represent challenges to
the rate of growth of ethanol as a transportation fuel in the United
States.
    In the 2014-2016 final rule, we discussed in detail the factors
that constrain growth in ethanol supply and the opportunities that
exist for pushing the market to overcome those constraints.\83\ That
discussion generally remains relevant for 2018 just as it was relevant
for 2017, though we believe that the supply of ethanol can be somewhat
higher in 2018 than in 2017.
---------------------------------------------------------------------------

    \83\ 80 FR 77456-77465, December 14, 2015.
---------------------------------------------------------------------------

    Ethanol supply is not currently limited by production and import
capacity, which is in excess of 15 billion gallons.\84\ Instead, the
amount of ethanol supplied is constrained by the following:
---------------------------------------------------------------------------

    \84\ ``RFA 2016 Annual Industry Outlook,'' docket EPA-HQ-OAR-
2016-0004.
---------------------------------------------------------------------------

     Overall gasoline use and the volume of ethanol that can be
blended into gasoline as E10 (typically referred to as the E10
blendwall).
     The number of retail stations that offer higher ethanol
blends such as E15 and E85.
     The number of vehicles that can both legally and
practically consume E15 and/or E85.
     Relative pricing of E15 and E85 versus E10 and the ability
of RINs to affect this relative pricing.
     The supply of gasoline without ethanol (E0).
    The applicable standards that we set under the RFS program provide
incentives for the market to overcome many of these ethanol-related
constraints.
    While in the short term the RFS program is unlikely to have a
direct effect on overall gasoline demand or the number of vehicles
designed to use higher ethanol blends, it can provide incentives for
changes in some other market factors, such as the number of retail
stations that offer higher ethanol blends and the relative pricing of
those higher ethanol blends in comparison to E10.
a. Ethanol Concentration in the Gasoline Pool
    As stated in the 2014-2016 final rule and in the 2017 final rule,
we continue to believe that there are real constraints on the ability
of the market to exceed an average nationwide ethanol content of 10
percent. However, these constraints do not have the same significance
at all ethanol concentrations above 10 percent. Instead, for the state
of infrastructure that can be available in 2018, the constraints
represent a continuum of mild resistance to growth at the first
increments above 10 percent ethanol and evolve to significant obstacles
at higher levels of ethanol. In short, the E10 blendwall is not the
barrier that some stakeholders believe it to be, but neither are
increases in poolwide ethanol concentrations above 10 percent unlimited
in the 2018 timeframe. These views are demonstrated by the fact that
the poolwide ethanol concentration of all gasoline increased
dramatically until about 2010, after which growth has been much slower
and has remained very close to 10.0 percent. In 2016, the average
ethanol concentration reached 10.05 percent.\85\
---------------------------------------------------------------------------

    \85\ According to the March, 2017 version of EIA's Short-Term
Energy Outlook, total ethanol consumption in 2016 was 14,406 mill
gal, while total gasoline consumption was 143,367 mill gal.
[GRAPHIC] [TIFF OMITTED] TP21JY17.000

    We continue to believe that the constraints associated with the E10
blendwall do not represent a firm barrier that cannot be crossed.
Rather, the E10 blendwall marks the transition from relatively
straightforward and easily achievable increases in ethanol consumption
as E10 to those increases in ethanol consumption as E15 and E85 that
are more challenging to achieve.
    However, we also recognize that the market is not unlimited in its
ability to respond to the standards we set. This is true both for
expanded use of ethanol and for non-ethanol renewable fuels. The fuels
marketplace in the United States is large, diverse, and complex, made
up of many different players with different, and often competing,
interests. Substantial growth in the renewable fuel volumes beyond
current levels will require action by many different parts of the fuel
market, and a constraint in any one part of the market can act to limit
the growth in renewable fuel supply. Whether notable constraints are in
the technology development and commercialization stages, as has been
the case with cellulosic biofuels, the development of distribution
infrastructure as is the case with ethanol, or in the accessibility of
feedstocks as with biodiesel, the end result is that these constraints
limit the annual growth rate in the availability of renewable fuel as
transportation fuel, heating oil, or jet fuel. These constraints were
discussed in detail in the 2014-2016 final rule and summarized in the
2017 final rule, and while the market continues to grow, we believe
that the same constraints will operate to limit growth in the
availability of renewable fuel in 2018 as well, both for ethanol and
non-ethanol renewable fuels.\86\ Other factors outside the purview of
the RFS program also impact the availability of renewable fuel,
including the price of crude oil and global supply and demand of both
renewable fuels and their feedstocks. These factors add uncertainty to
the task of estimating the attainability of renewable fuel requirements
in the future.
---------------------------------------------------------------------------

    \86\ See 80 FR 77450 (December 14, 2015) and 81 FR 89774
(December 12, 2016).
---------------------------------------------------------------------------

    The total volume of ethanol that can be supplied is a function of
total volume of gasoline that is used, as well as the potential for
sales of different ethanol fuel blends (i.e., E0, E15, and E85).
According to the April, 2017 version of EIA's Short-Term Energy Outlook
(STEO), the Department of Energy projects that total use of gasoline
energy in 2018 will be 17.198 Quadrillion Btu.\87\ This is somewhat
lower than the total projected gasoline energy use that we used in
setting the 2017 standards. As a result, the projected volume of
ethanol that can be sold as E10 in 2018 is also somewhat lower.
---------------------------------------------------------------------------

    \87\ Derived from Table 4a of the STEO, converting consumed
gasoline and ethanol projected volumes into energy using conversion
factors supplied by EIA. Excludes gasoline consumption in Alaska.
For further details, see ``Calculation of proposed % standards for
2018'' in docket EPA-HQ-OAR-2017-0091.

                       Table V.B.1.iii-1--Projected Gasoline Energy Use and E10 Blendwall
----------------------------------------------------------------------------------------------------------------
                                                          2017                             2018
----------------------------------------------------------------------------------------------------------------
STEO edition.................................  October, 2016............  April, 2017.
Quad Btu.....................................  17.288...................  17.198.
Equivalent volume of E10 if there were no E0,  14,362...................  14,287.
 E15, or E85.
----------------------------------------------------------------------------------------------------------------

    The volumes of E15 and E85 used in the near term will continue to
be primarily a function of the number of retail service stations that
offer it since the number of vehicles that are legally permitted to use
E15 (2001 model year and later) and E85 (flexible fuel vehicles, or
FFVs) currently exceeds the retail dispensing capacity by a substantial
margin. We acknowledge that a larger percentage of FFVs in the fleet
could increase the volume of E85 consumed, but in the short term we
believe that it is the relatively very small number of retail stations
offering E85 that is operating as the primary constraint on the volumes
of E85 sold, and to a lesser extent the relative price of higher
ethanol blends and E10.
    Growth in the number of retail stations offering E15 and/or E85 has
been relatively slow, but accelerated in 2016 as a result of USDA's
Biofuels Infrastructure Partnership (BIP) program and the ethanol
industry's Prime the Pump program. While these grant programs have
increased E15 and E85 offerings at retail, we expect the programs to be
fully phased in by the end of 2017 and thus have no influence on
further growth in the number of retail stations offering E15 and E85 in
2018. In the 2017 final rule, we noted that while the BIP program was
intended to be fully phased in by the end of 2016, it was not expected
to meet this deadline. The BIP program permits states to extend
implementation by up to two additional years. Currently, we have no
reason to believe that the BIP program will not be fully implemented by
the end of 2017; indeed, this was our assumption in projecting
attainable volumes in the context of the 2017 final rule. Similarly,
the Prime the Pump program was expected to complete all projects by the
end of 2017.
b. Assessment of E0 in the Gasoline Pool
    For the 2016 and 2017 standards, we based the total renewable fuel
volume requirement in part on the expectation that the RFS program
would result in all but a tiny portion--estimated at 200 million
gallons--of gasoline to contain at least 10 percent ethanol. We based
this determination on the fact that higher volume requirements would
provide an incentive for the market to transition from E0 to E10 and
other higher level ethanol blends through the RIN mechanism, but that
recreational marine engines represented a market segment that we
believed would be particularly difficult to completely transition from
E0 since they are used in a water environment where there is a greater
potential for water contamination of the fuel.
    While we continue to believe that the market is capable of reaching
a point wherein all but about 200 million gallons contains some amount
of ethanol, we note that this did not occur in 2016 despite the fact
that the 2016 standards were based in part on the expectation that it
would occur. As described in a memorandum to the docket, we now
estimate that the volume of E0 used in 2016 was about 500 million
gallons.\88\ While this is considerably less than the historical
volumes of E0 cited by some stakeholders in response to the proposed
2016 standards, it does suggest that the market chose to respond to the
2016 standards by increasing the use of non-ethanol renewable fuels
such as biodiesel rather than by reducing E0 use down to 200 million
gallons. We do

not yet have adequate information about the use of E0 in 2017, but we
believe it is reasonable to adjust our approach to estimating the
volume of ethanol that is reasonably attainable in 2018 to account for
the likely market response to the applicable standards in terms of E0
volumes.
---------------------------------------------------------------------------

    \88\ ``Estimate of E0 use in 2016,'' memorandum from David
Korotney to docket EPA-HQ-OAR-2017-0091.
---------------------------------------------------------------------------

c. Ethanol Supply Volume for Assessment of Total Renewable Fuel
    Given that the BIP and Prime the Pump grant programs are expected
to be fully phased in by the end of 2017, we expect less growth in E15
and E85 supply in 2018 than in 2017. Moreover, any growth in ethanol
use due to higher volumes of E15 and E85 may be offset by a higher
volume of E0 as discussed above in terms of total ethanol supply. For
example, a 40 million gallon increase in the volume of E85 supplied in
2018 could be offset by a 250 million gallon increase in the volume of
E0 supplied.\89\ Therefore, for the purposes of determining whether
19.24 billion gallons of renewable fuel is reasonably attainable in
2018, we believe that it would be appropriate to assume that the
poolwide ethanol concentration would be the same in 2018 as the level
used in the determination of the final 2017 standards. This level was
10.13 percent.\90\ Based on the projected 2018 gasoline energy use
shown in Table V.B.1.iii-1, this ethanol concentration would correspond
to 14,479 million gallons of ethanol in 2018.\91\
---------------------------------------------------------------------------

    \89\ Alternatively, a 250 million gallon increase in the volume
of E0 supplied could be offset by a 500 million gallon increase in
the volume of E15 supplied or an increase of 17 million gallons of
biodiesel supplied.
    \90\ 14,561 million gallons of ethanol in 143,683 million
gallons of gasoline. See Table V.B.1.iv-1, 81 FR 89780.
    \91\ We note that the purpose of our analysis here is to
establish an amount of ethanol that is reasonably attainable to be
supplied as transportation fuel. To the extent stakeholders believe
higher amounts can be supplied, that would simply confirm our
decision not to exercise the general waiver authority on the ground
of inadequate domestic supply.
---------------------------------------------------------------------------

    The market will ultimately determine the extent to which compliance
with the annual standards is achieved through the use of greater
volumes of ethanol versus other, non-ethanol renewable fuels. We
nevertheless believe that while the market could supply a volume of
ethanol greater than 14,479 million gallons, this volume represents a
reasonably attainable level of ethanol supply in 2018 that takes into
account the constraints to fuel supply that we have noted. For the
final rule, we intend to use an updated version of the STEO as well as
a more detailed assessment of the volumes of E15 and E85 that may be
reasonably attainable in 2018.
    As described in the 2017 final rule, we do not believe that setting
the applicable standards at levels exceeding those we believe to be
reasonably attainable would result in dramatic increases in the number
of additional retail stations offering E15 or E85 in 2018 beyond those
that may be upgraded through independent efforts.\92\ We do not
believe, for instance, that the core concerns retailers have with
liability over equipment compatibility and misfueling for E15 would
change if the RFS volume requirements were increased significantly.
Similarly, while higher RFS volume requirements could make it
incrementally more attractive for retailers to upgrade infrastructure
to offer E15, the concerns they have expressed in the past about high
capital costs and opportunities for return on their investment would
remain. With regard to E85, we continue to believe that the full value
of the RIN is not passed through to retail fuel prices, diluting the
influence that the RFS program would otherwise have on E85 sales.\93\
Moreover, in light of these constraints on RIN pass-through and the
unpredictability of crude oil prices, many retailers are concerned
about the return on investment for the substantial capital costs
required for retail stations to offer E85. Notably, as pointed out in
the 2017 final rule, some retail station owners who had offered E85
have stopped doing so as a result of poor sales, despite the annual
increases in the RFS standards in previous years.\94\
---------------------------------------------------------------------------

    \92\ For instance, see 81 FR 89779, December 12, 2016.
    \93\ See more detailed discussion in Section 2.3.8 of the
Response to Comments document for the 2017 final rule (EPA-HQ-OAR-
2016-0004).
    \94\ See 81 FR 89778, December 12, 2016.
---------------------------------------------------------------------------

2. Biodiesel and Renewable Diesel
    While the market constraints on ethanol supply are relatively well
understood, it is more difficult to identify and assess the market
components that may limit potential growth in the use of all qualifying
forms of biodiesel and renewable diesel in 2018. Therefore, as
discussed in the introduction to Section V.B, after estimating the
supply of ethanol in 2018, and taking into account the estimates of
non-ethanol cellulosic biofuel supply discussed in Section III.D and
estimates of other non-ethanol renewable fuel supply discussed in
Section IV.B.3, we considered whether the supply of total biodiesel and
renewable diesel would be adequate to satisfy the remainder of the
volume needed to achieve a requirement of 19.24 billion gallons.
    In Section V.A we described how use of the cellulosic waiver
authority to provide a volume reduction for total renewable fuel that
equals that provided for advanced biofuels yields a volume of 19.24
billion gallons. In addition to the ethanol volume discussed in Section
V.B.1.iv above, cellulosic biogas can also contribute to this total
volume of renewable fuel, as described more fully in Section III.C.
While other renewable fuels such as naphtha, heating oil, butanol, and
jet fuel can be expected to continue growing in 2018, collectively, we
expect them to contribute considerably less than ethanol and biodiesel/
renewable diesel to the total volume of renewable fuel supplied in
2018. These fuels were discussed in Section IV.B.3. Based on these
estimates, about 2.9 billion gallons of biodiesel and renewable diesel,
including both advanced and conventional biodiesel and renewable
diesel, would be needed in order to meet a total renewable fuel volume
requirement of 19.24 billion gallons (see Table V.B.2-1 below).

Table V.B.2-1--Determination of Volume of Biodiesel and Renewable Diesel
 Needed in 2018 To Achieve 19.24 Billion Gallons of Total Renewable Fuel
          [Million ethanol-equivalent gallons except as noted]
------------------------------------------------------------------------

------------------------------------------------------------------------
Total renewable fuel volume.............................          19,238
Ethanol.................................................          14,479
Non-ethanol cellulosic biofuel..........................             223
Other non-ethanol renewable fuels \a\...................              40
Biodiesel and renewable diesel needed (ethanol-              4,496/2,901
 equivalent volume/physical volume).....................
------------------------------------------------------------------------
\a\ Includes naphtha, heating oil, butanol, and jet fuel. See further
  discussion in Section IV.B.3.

    A starting point in developing a projection of the attainable
supply of biodiesel and renewable diesel in 2018 is a review of the
volumes of these fuels supplied for RFS compliance in previous years.
In examining the data, both the absolute volumes of the supply of
biodiesel and renewable diesel in previous years, as well as the rates
of growth between years are relevant considerations. The volumes of
biodiesel and renewable diesel (including D4, D5, and D6 biodiesel and
renewable diesel) supplied each year from 2011 through 2016 are shown
below, along with the volume of these fuels projected for 2017 in the
2017 final rule.

[GRAPHIC] [TIFF OMITTED] TP21JY17.002

    After examining the historical data (shown in the figure above) we
believe it is very likely that there will be a sufficient supply of
biodiesel and renewable diesel (volumes at least as high as 2.9 billion
gallons) in 2018 to meet the total renewable fuel volume requirement
after exercising the cellulosic waiver authority. Indeed, there would
be sufficient supply of biodiesel and renewable diesel to meet the 2018
total renewable fuel volume requirement after using the cellulosic
waiver authority even if there was no increase in the supply of these
fuels from 2017 to 2018. Alternatively, even if the supply of biodiesel
and renewable diesel in 2017 falls short of the projected supply from
the 2017 final rule, an increase in supply from 2016 to 2018 equal to
the average annual supply increase observed from 2011-2016 would be
sufficient to meet the total renewable fuel requirement for 2018 after
using the cellulosic waiver authority.
    In assessing the probative value of historical data on the supply
of biodiesel and renewable diesel, we must also consider the extent to
which historic supply and growth rates can be seen as representing what
is possible with the RFS standards and other incentives in place. The
years with the highest historic growth rates (2013 and 2016) were years
in which both tax incentives and RFS incentives were in place to
incentivize growth through the entire year.\95\ While the biodiesel
blenders tax credit expired at the end of 2016, we believe it is
reasonable to assume the incentives provided by the RFS standards in
2017 and 2018 will be sufficient to enable the supply of biodiesel and
renewable diesel to reach 2.9 billion gallons in 2018 despite the
current absence of the tax credit. The absence of the tax credit would
be expected to have two primary potential impacts on the supply of
biodiesel and renewable diesel in 2018; lower imported volumes of
biodiesel and renewable diesel and a lesser economic incentive for
blenders and retailers to offer fuel blends containing biodiesel and
renewable diesel (which could potentially impact both domestic and
foreign biodiesel and renewable diesel producers). Imported volumes of
these fuels could be impacted if the loss of the economic incentive
previously provided by the tax credit results in other markets offering
higher value to potential importers of biodiesel and renewable diesel
than the United States.\96\ Similarly, the loss of the tax credit could
impact the ability for blenders and retailers of biodiesel and
renewable diesel blends to offer these fuels at prices that are
competitive with petroleum diesel. We note, however, that these
potential impacts of the loss of the tax credit could be offset, in
whole or in part, by rising RIN values associated with biodiesel and
renewable diesel. We believe the most likely impact of the absence of
the tax credit will be a decrease in the rate of growth of the supply
of biodiesel and renewable diesel to the United States in 2017 and
2018, rather than an absolute decrease in the supply of these
fuels.\97\
---------------------------------------------------------------------------

    \95\ While the rule finalizing the 2013 RFS RVOs was not
finalized until August 2013, EPA announced the proposed volume
requirements for 2013 in January 2013. EPA did not propose to use
our waiver authorities to reduce the statutory advanced or total
renewable fuel volume requirements. We believe the market
anticipated the final RVOs in 2013 and responded accordingly.
    \96\ While this could also impact domestic producers, leading
some to consider exporting the biodiesel or renewable diesel they
produce to foreign markets. Domestic producers, however, would have
to amend their current distribution systems to enable them to supply
fuel to foreign markets, while parties that are currently importing
biodiesel and renewable diesel to the United States must simply
divert the deliveries to new destinations.
    \97\ The most recent years in which the biodiesel tax credit was
not available during the year in which it applied were 2014 and
2015. The total supply of biodiesel and renewable diesel decreased
by 98 million gallons from 2013 to 2014 and then increased by 221
million gallons from 2014 to 2015, averaging an increase of
approximately 100 million gallons over these two years. We also note
that the RVOs for 2014 and 2015 were not finalized until December
2015. We believe that it is reasonable to project that the supply of
biodiesel and renewable diesel could increase by at least this
amount (100 million gallons per year) from 2017 to 2018 without the
biodiesel tax credit, but with the 2018 RFS requirements in place to
incentivize the necessary supply.
---------------------------------------------------------------------------

    Ultimately, we believe the historic data provides a reasonable
guide for assessing the potential growth of advanced biodiesel and
renewable diesel in 2018. We recognize that there

are limitations in the probative value of past growth rates to assess
what can be done in the future, however we believe there is significant
value in considering historical data, especially in cases where the
future growth rate is expected to be largely determined by the same
variety of complex and interdependent factors that have factored into
historical growth, as is the case for 2018.
    In the 2017 final rule EPA assessed a number of factors that could
potentially constrain the supply of biodiesel and renewable diesel to
the United States. The list of factors considered included feedstock
availability, the capacity of the market to produce, import, and
distribute biodiesel and renewable diesel, the retail infrastructure
capacity, the ability for the market to consume biodiesel and renewable
diesel in approved engines, and consumer response. We noted that in
each of these areas there are challenges that will need to be overcome
to enable the continued growth in the supply of biodiesel and renewable
diesel in the United States, but nevertheless concluded that the market
was capable of supplying 2.9 billion gallons of biodiesel and renewable
diesel (including both advanced and conventional biodiesel and
renewable diesel) to the United States in 2017.\98\ The global supply
of feedstocks projected to be available for biodiesel and renewable
diesel production significantly exceeds the quantity necessary to
produce 2.9 billion gallons of biodiesel and renewable diesel.\99\
Similarly, an assessment of the production capacity of registered
biodiesel and renewable diesel production facilities conducted for the
2017 final rule demonstrates that there is sufficient production
capacity to produce 2.9 billion gallons of biodiesel and renewable
diesel in 2018.\100\ Finally, we believe that there will be sufficient
infrastructure in place to enable the distribution, sale, and use of
2.9 billion gallons of biodiesel and renewable diesel in 2018. Comments
received from the National Biodiesel Board, as well as from the
National Association of Truck Stop Owners (which represents parties
with significant experience and investment in the distribution and
sales of biodiesel) on our 2017 proposed rule support this projection,
suggesting that parties have already begun making the necessary
investments to distribute and sell the volumes of biodiesel and
renewable diesel necessary to meet the required volume of total
renewable fuel in 2017 (and thus 2018), after exercising the cellulosic
waiver authority.\101\
---------------------------------------------------------------------------

    \98\ 81 FR 89781, December 12, 2016.
    \99\ A study conducted by LMC International in 2016 projected
the global availability of feedstocks for use in advanced biodiesel
and renewable diesel production would be sufficient to produce
approximately 9.2 billion gallons of these fuels in 2018. The OECD-
FAO Agricultural Outlook 2016-2025 estimated global biodiesel
production at approximately 8.8 billion gallons in 2016, rising to
9.3 billion gallons in 2018. This suggests that the 2.6 billion
gallons of biodiesel and renewable diesel consumed in the U.S. in
2016 (according to EMTS data) was approximately 30% of the global
supply of these fuels. 30% of the 9.3 billion gallons of biodiesel
and renewable diesel projected to be produced in 2018 (or the 9.2
billion gallons based on projected available feedstocks from the LMC
international projection) is approximately 2.8 billion gallons. We
believe the RFS program is capable of the marginal increase in U.S.
consumption of the global biodiesel supply necessary to supply 2.9
billion gallons of biodiesel to the United States in 2018. While we
believe some of the assumptions made by LMC International in this
study were overly optimistic and the study did not project the
quantity of these feedstocks available to supply the U.S. biodiesel
and renewable diesel markets, we nevertheless believe this study,
along with other information reviewed in preparing the 2017 final
rule, demonstrate that sufficient feedstocks will be available in
2018 to supply 2.9 billion gallons of biodiesel and renewable diesel
to the United States (See 81 FR 89767-89769, December 12, 2016, for
a further discussion of the availability of biodiesel and renewable
diesel feedstocks).
    \100\ ``Biodiesel and Renewable Diesel Registered Capacity
(October 2016)'', Memorandum from Dallas Burkholder to EPA Docket
EPA-HQ-OAR-2016-0004. In this assessment we determined that
biodiesel and renewable diesel production capacity at registered
facilities in the United States was approximately 4.2 billion
gallons. Registered production capacity of biodiesel and renewable
diesel facilities in the United States that generated RINs in 2015
or 2016 was approximately 3.1 billion gallons, and actual supply of
biodiesel and renewable diesel from these facilities in 2016 was
approximately 1.72 billion gallons. Significant additional
production capacity also exists at registered biodiesel and
renewable diesel production facilities outside of the United States.
    \101\ See testimony of Michael Whitney, Musket Corporation, June
9, 2016 (Chicago Room), comments from NATSO (EPA-HQ-OAR-2016-0004-
1830), comments from NBB (EPA-HQ-OAR-2016-0004-2904), and comments
from REG (EPA-HQ-OAR-2016-0004-3477). A fuller discussion of these
comments is contained in the 2017 final rule (81 FR 89746, December
12, 2016).
---------------------------------------------------------------------------

    Since finalizing the 2017 rule, EPA has continued to monitor the
development of the biodiesel and renewable diesel industry, including
the ability for the market to produce/import, distribute, and consume
these fuels. Based on the data available to EPA at this time, including
data considered in the 2017 final rule, we believe that the market is
capable of producing, distributing, and using 2.9 billion gallons of
biodiesel and renewable diesel in 2018. EPA is unaware of any
information that would lead us to conclude that our assessment that the
biodiesel and renewable diesel market is capable of supplying 2.9
billion gallons to the United States in 2017 is no longer reasonable,
nor are we aware of any factors (other than the absence of the
biodiesel blenders tax credit) that will likely negatively impact the
ability for the market to supply biodiesel and renewable diesel in 2018
relative to 2017. We therefore do not see any significant marketplace
impediments that are likely to prevent the supply of 2.9 billion
gallons of biodiesel and renewable diesel in 2018 and believe that
despite the loss of the biodiesel blenders tax credit the 2.9 billion
gallon supply of biodiesel and renewable diesel projected to be
available in 2017 can also be supplied in 2018.
    We recognize that the market may not necessarily respond to the
proposed total renewable standard by supplying exactly 2.9 billion
gallons of biodiesel and renewable diesel to the transportation fuels
market in the United States in 2018, but that the market may instead
supply a lower or higher volume of biodiesel and renewable diesel with
corresponding changes in the supply of other types of renewable fuel.
As a result, we believe there is less uncertainty with respect to the
attainability of the total volume requirement of 19.24 billion gallons
than there is concerning the projected 2.9 billion gallons of biodiesel
and renewable diesel that we have used in determining the adequacy of
supply of total renewable fuel for 2018.
3. Total Renewable Fuel Supply
    In Section V.A we described how use of the cellulosic waiver
authority to provide a volume reduction for total renewable fuel that
equals that provided for advanced biofuels yields a volume of 19.24
billion gallons. Based on our assessment of supply of ethanol and
biodiesel/renewable diesel, along with smaller amounts of non-ethanol
cellulosic biofuel and other non-ethanol renewable fuels, we believe
that a total of 19.24 billion gallons of renewable fuel is reasonably
attainable in 2018. As a result, we do not propose any further
reductions on the basis of an ``inadequate domestic supply'' using the
general waiver authority.
    Our use of the cellulosic waiver authority alone to set the
advanced biofuel and total renewable fuel volume requirements would
result in an implied volume for non-advanced (i.e., conventional)
renewable fuel of 15.0 billion gallons. This would be equal to the
statutory implied volume for 2018. We anticipate that this volume would
be comprised primarily of corn-ethanol with lesser amounts of
conventional biodiesel and renewable diesel. As shown in Table
V.B.1.iii-1, the volume of ethanol that can be consumed as E10 in 2018
is projected to be 14.29 billion gallons. Thus, the implied volume for

conventional renewable fuel would exceed this value by 0.71 billion
gallons.\102\
---------------------------------------------------------------------------

    \102\ We note, however, that some volume of advanced ethanol is
expected to be used in 2018. This additional volume of implied
conventional biofuel above the volume of ethanol that can be
supplied as E10 (less any advanced ethanol used in 2018) could be
met with any combination of E15, E85, biodiesel, and renewable
diesel.
---------------------------------------------------------------------------

C. Market Responses to the Advanced Biofuel and Total Renewable Fuel
Volume Requirements

    Because the transportation fuel market is dynamic and complex, and
the RFS standards that we set can be satisfied through use of a wide
variety of renewable fuels, we cannot precisely predict the mix of
different fuel types that will result from the standards we are
proposing. In this section we describe a range of possible outcomes,
and doing so provides a means of demonstrating that the proposed
standards can reasonably be satisfied through multiple possible paths.
    We evaluated a number of scenarios with varying levels of E0, E15,
E85, imported sugarcane ethanol, advanced biodiesel and renewable
diesel, and conventional biodiesel and renewable diesel. In doing so we
sought to capture a reasonable range of possibilities for each
individual source, based both on levels achieved in the past and how
the market might respond to the applicable standards. Each of the rows
in Table V.C-1 represents a scenario in which the proposed total
renewable fuel and advanced biofuel standards would be satisfied.

                        Table V.C-1--Volume Scenarios Illustrating Possible Compliance With the Proposed 2018 Volume Requirements
                                                                  [Million gallons] a b
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Minimum
                                                                                Total         volume of
                                                                                Total  ethanol     Sugarcane    biodiesel  and     advanced
                           E85                                  E15             E0              \c\           ethanol        renewable     biodiesel and
                                                                                diesel \d\       renewable
                                                                                diesel \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
200.....................................................             600             200          14,430               0           2,934           2,543
200.....................................................             600             500          14,399               0           2,954           2,543
200.....................................................             600             500          14,399             100           2,954           2,479
200.....................................................             600             500          14,399             300           2,954           2,350
200.....................................................             600             500          14,399             500           2,954           2,221
200.....................................................           1,200             200          14,461             300           2,914           2,350
350.....................................................             600             500          14,498             500           2,890           2,221
350.....................................................           1,200             200          14,560               0           2,850           2,543
350.....................................................           1,200             200          14,560             100           2,850           2,479
350.....................................................           1,200             200          14,560             300           2,850           2,350
350.....................................................           1,200             200          14,560             500           2,850           2,221
350.....................................................           1,200             500          14,529             100           2,870           2,479
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Assumes for the purposes of these scenarios that supply of other advanced biofuel other than imported sugarcane ethanol, BBD, and renewable diesel
  (e.g., domestic ethanol, heating oil, naphtha, etc.) is 60 mill gal, and that the cellulosic biofuel proposed volume requirement is 238 mill gal, of
  which 15 mill gal is ethanol and the remainder is primarily biogas.
\b\ Biodiesel + renewable diesel is given in physical gallons, and can be converted into ethanol-equivalent gallons by multiplying by 1.55. Other
  categories are given as ethanol-equivalent volumes.
\c\ For the range of total ethanol shown in this table, the poolwide average ethanol content would range from 10.08% to 10.18%.
\d\ Includes supply from both domestic producers as well as imports.

    The scenarios in the tables above are not the only ways that the
market could choose to meet the total renewable fuel and advanced
biofuel volume requirements that we are establishing in this action.
Indeed, other combinations are possible, with volumes higher than the
highest levels we have shown above or, in some cases, lower than the
lowest levels we have shown. The scenarios above cannot be treated as
EPA's views on the only, or even most likely, ways that the market may
respond to the proposed 2018 volume requirements. Instead, the
scenarios are merely illustrative of the various ways that it could
play out. Our purpose in generating the list of scenarios above is only
to illustrate a range of possibilities which demonstrate that the
standards we are establishing in this action can reasonably be met.
    We continue to believe, as we stated in previous rulemakings, that
it would be inappropriate to construct a new scenario based on the
highest or lowest volumes in each category that are shown in the table
above. Thus, for instance, while every scenario in Table V.C-1
represents 4.24 billion gallons of advanced biofuel and 19.24 billion
gallons of total renewable fuel, combining the lowest volume of E0
shown in the table with the highest volumes of E15, E85, sugarcane
ethanol, total biodiesel and renewable diesel, and advanced biodiesel
and renewable diesel shown in the table, would result in 4.74 billion
gallons of advanced biofuel and 19.40 billion gallons of total
renewable fuel. We do not believe that such volumes would be reasonably
attainable for 2018. Conversely, combining the highest volume of E0
shown in the table with the lowest volumes of E15, E85, sugarcane
ethanol, total biodiesel and renewable diesel, and advanced biodiesel
and renewable diesel shown in the table, would result in 3.74 billion
gallons of advanced biofuel and 19.08 billion gallons of total
renewable fuel. Such volumes would be below the levels that we believe
are reasonably attainable to require in 2018. We have more confidence
in the ability of the market to attain the proposed volume requirements
for advanced biofuel and total renewable fuel than we have in the
ability of the market to achieve a specific level of, say, biodiesel,
or E85.
    With regard to E85, under highly favorable conditions related to
growth in the number of E85 retail stations, retail pricing, and
consumer response to that pricing, it is possible that E85 volumes as
high as 350 million gallons could be reached. For instance, growth

in the number of retail stations offering E85 may increase more rapidly
than historical rates following the completion of USDA's BIP grant
program and the ethanol industry's Prime the Pump program (both of
which we have assumed will be fully phased in by the end of 2017). If
so, the total number of retail stations offering E85 could perhaps
increase from about 3,100 today to more than 5,000 in 2018. Also, it is
possible that increases in the price of D6 RINs since the release of
the 2017 final rule can help to increase the E85 price discount
relative to E10 if producers and marketers of E85 pass on more of the
value of the RIN to the prices offered to customers at retail,
providing greater incentive to FFV owners to refuel with E85 instead of
E10. Under such circumstances, an E85 price discount as high as 30
percent might be possible. Indeed, E85 price discounts this high have
been reached in the past in some locales.\103\ Efforts to increase the
visibility of E85, including expanded marketing and education, can also
help to increase E85 sales. Sales volumes of E85 higher than 400
million gallons are very unlikely, but are possible if pump
installations increase significantly and the market can overcome
constraints associated with E85 pricing at retail and consumer
responses to those prices.
---------------------------------------------------------------------------

    \103\ For instance, data from the Fuels Institute indicates that
3% of E85 price discounts were above 30% at surveyed retail stations
in 2015.
---------------------------------------------------------------------------

    Similarly, under favorable conditions, it is possible that E15
volumes as high as 1,200 million gallons could be reached in 2018 as
shown in Table V.D-1. This volume could be reached through some
combination of different changes such as the following:
     Following the conclusion of the BIP program and Prime the
Pump program, it is possible that the growth rate for retail stations
offering E15 could be higher than historical rates, potentially
reaching as high as 2,700 in 2018 (average for the year).
     Sales of E15 could be as high as 50 percent of all
gasoline sales at stations selling both E10 and E15 under favorable
pricing conditions rather than the 15 percent we assumed in the 2017
final rule, based on limited data from Iowa.
     Additional terminals could produce E15 in 2018 beyond
those that are expected to do so in 2017.\104\
---------------------------------------------------------------------------

    \104\ HWRT Oil Company intends to eventually offer E15 from 17
additional terminals in addition to the four announced on July 19,
2016. ``HWRT & RFA Announce First-Ever Offering of Pre-blended
E15,'' docket EPA-HQ-OAR-2016-0004.
---------------------------------------------------------------------------

    As the table above illustrates, the volume requirements could
result in the consumption of 2.95 billion gallons of biodiesel and
renewable diesel in 2018. This level is less than our estimate of the
production capacity for all registered domestic biodiesel and renewable
diesel production facilities, though slightly higher than the 2.9
billion gallons that we used in the context of determining whether a
total renewable fuel volume requirement of 19.24 billion gallons in
2018 would be reasonably attainable. Given the necessarily imprecise
nature of our estimate of the ability of the market to supply about 2.9
billion gallons of biodiesel and renewable diesel for purposes of
meeting a total renewable fuel volume requirement of 19.24 billion
gallons in 2018, volumes as high as 2.95 billion gallons and
potentially higher are possible.
    Finally, out of the maximum of about 2.9 billion gallons of
biodiesel and renewable diesel shown in Table V.C-1, 2.54 billion
gallons could be advanced biodiesel. While this is slightly higher than
the 2.5 billion gallons that we used in determining the advanced
biofuel volume requirement, it could be supplied from current biodiesel
and renewable diesel domestic production capacity,\105\ though this
would possibly involve additional feedstock switching as discussed in
Section IV.
---------------------------------------------------------------------------

    \105\ ``Biodiesel and Renewable Diesel Registered Capacity
(October 2016)'', Memorandum from Dallas Burkholder to EPA Docket
EPA-HQ-OAR-2016-0004. In this assessment we determined that
biodiesel and renewable diesel production capacity at registered
facilities in the United States was approximately 4.2 billion
gallons. Registered production capacity of biodiesel and renewable
diesel facilities in the United States that generated RINs in 2015
or 2016 was approximately 3.1 billion gallons, and actual supply of
biodiesel and renewable diesel from these facilities in 2016 was
approximately 1.72 billion gallons. Significant additional
production capacity also exists at registered biodiesel and
renewable diesel production facilities outside of the United States.
---------------------------------------------------------------------------

D. Impacts of 2018 Standards on Costs

1. Illustrative Cost Savings Associated With Reducing Statutory
Cellulosic Volumes
    To provide an illustrative estimate of the cost of the proposed
2018 RFS volume requirements, EPA has compared the proposed 2018 volume
requirements to the statutory volume that would be required absent the
exercise of our cellulosic waiver authority under CAA section
211(o)(7)(D)(i) to reduce the applicable volume of cellulosic
biofuel.\106\ As described in other sections of this proposed rule, we
believe that the additional 6.76 billion gallons of cellulosic biofuel
envisioned by the statute will not be produced in 2018. Therefore,
estimating costs of this volume reduction is inherently challenging.
However, we have taken the relatively straightforward methodology of
multiplying the per-gallon costs associated with the volumes that would
be required under this proposal by the amount of cellulosic renewable
fuel proposed to be waived. This comparison results in a cost savings
estimated to be at least $6.2-$11.8 billion.
---------------------------------------------------------------------------

    \106\ EPA is also using its discretion to reduce the advanced
biofuel and total renewable fuel requirements using the cellulosic
waiver authority. This discretionary action is based partially on
the costs of advanced biofuels and provides additional cost savings.
---------------------------------------------------------------------------

    To estimate the overall cost savings from waiving the cellulosic
renewable fuel volumes, EPA has taken the following steps. First, EPA
determined the magnitude of the volume reduction of cellulosic biofuel
we are proposing in this rule, relative to the statutory volume. In
this rule we are proposing to reduce the required volume of cellulosic
biofuel by approximately 6.76 billion gallons, with corresponding
reductions in the advanced biofuel and total renewable fuel standards.
Second, we estimated the per gallon costs of producing cellulosic
ethanol derived from corn kernel fiber that would be expected in
complying with the proposed standards. Third, the per gallon costs of
cellulosic biofuel from corn fiber were multiplied by the volume of
cellulosic renewable fuels being waived from the statutory levels to
the proposed cellulosic renewable fuel volumes.\107\
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    \107\ The cost estimates for cellulosic biofuel provided in this
section are primarily intended to provide a cost estimate for this
rule. The proposed cellulosic biofuel standard is based on EPA's
projection of cellulosic biofuel production in 2018.
---------------------------------------------------------------------------

    While there may be growth in other cellulosic sources, for this
exercise we believe it is appropriate to use corn kernel fiber as the
representative cellulosic renewable fuel since the majority of liquid
cellulosic biofuel in 2018 is expected to be produced using this
technology. The application of this technology in the future could
result in significant incremental volumes of cellulosic biofuel. In
addition, as explained in Section III, we believe that production of
the major alternative cellulosic biofuel--CNG/LNG derived from biogas--
is likely to plateau eventually due to a limitation in the number of
vehicles capable of using this form of fuel. To estimate the per gallon
costs of corn kernel fiber ethanol, we focus on wholesale level costs.
These cost estimates do not consider taxes, retail margins, or other
costs or transfers that occur at or after the point of blending
(transfers are payments within

society and are not additional costs). We do not attempt to estimate
potential cost savings related to avoided infrastructure costs (e.g.,
the cost savings of not having to provide pumps and storage tanks
associated with higher-level ethanol blends). When estimating per
gallon costs, we consider the costs of ethanol on an energy equivalent
basis to gasoline (i.e., per energy equivalent gallon), since more
ethanol gallons must be consumed to go the same distance as gasoline
due to the ethanol's lower energy content.
    Table V.D-1 below presents the cost savings associated with this
proposed rule.\108\ The statutory cellulosic volume set in EISA for
2018 is seven billion gallons (ethanol equivalent). The proposed
cellulosic volume requirement for this annual rule is 238 million
gallons (ethanol equivalent). The amount of cellulosic renewable fuels
being waived is approximately 6.76 billion gallons (ethanol
equivalent), or approximately 4.51 billion gallons on a gasoline
equivalent basis. The per-gallon cost difference estimates for
cellulosic ethanol ranges $1.37-$2.62 gallon on a gasoline equivalent
basis, compared to gasoline.\109\ Multiplying those per-gallon cost
differences by the amount of cellulosic biofuel waived in this proposed
rule, 4,510 million gallons of gasoline equivalent, results in
approximately $6.2-$11.8 billion in cost savings.
---------------------------------------------------------------------------

    \108\ Details of the data and assumptions used can be found in a
Memorandum available in the docket entitled ``Cost Impacts of the
Proposed 2018 Annual Renewable Fuel Standards'', Memorandum from
Michael Shelby, Dallas Burkholder, and Aaron Sobel to EPA Docket
EPA-HQ-OAR-2017-0091.
    \109\ For the purposes of the cost estimates in this Section EPA
has not attempted to adjust the price of the petroleum fuels to
account for the impact of the RFS program. Rather, we have simply
used the wholesale price projections for gasoline and diesel as
reported in EIA's STEO.

  Table V.D-1--Impacts of the Difference Between EISA Volumes for the Cellulosic Biofuel Standard and Proposed
                                            Cellulosic Volume in 2018
----------------------------------------------------------------------------------------------------------------
                                                                                2018 EISA
                                                                                cellulosic     2018 Proposed
                                                                                volume         cellulosic
                                                                                standard          volume
----------------------------------------------------------------------------------------------------------------
Cellulosic Volume Required (Million Ethanol-Equivalent Gallons) \110\..........           7,000              238
Change in Required Cellulosic Biofuels (Million Gallons as Ethanol)............  ..............          (6,762)
GGE \111\......................................................................  ..............          (4,510)
Cost Difference Between Cellulosic Corn Fiber-Derived Ethanol and Gasoline Per   ..............      $1.37-$2.62
 Gallon ($/GGE) \112\..........................................................
Estimated Cost Difference in Meeting Cellulosic Biofuel Volume (Billion $)\113\  ..............   $(6.2)-$(11.8)
----------------------------------------------------------------------------------------------------------------

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    \110\Overall fuel volumes may not match due to rounding.
    \111\ Gasoline gallon equivalent; due to the difference in
energy content between ethanol and gasoline, one gallon of ethanol
is energy-equivalent to approximately 67% of a gallon of gasoline;
6,762 million gallons of ethanol is energy-equivalent to
approximately 4,510 million gallons of gasoline.
    \112\ Approximate costs are rounded to the cents place.
    \113\ Approximate costs are rounded to the first decimal place.
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2. Illustrative Cost Analysis Using the 2017 Baseline
    We recognize that for the purpose of estimating the cost of the
proposed 2018 RFS volume requirements that a number of different
scenarios using different ``baselines'' would be of interest to
stakeholders. Therefore, in this section we are also providing an
illustrative cost analysis that shows the costs as compared to those
associated with the preceding year's standard, which as discussed in
section IV.C. is a reduction of 40 million gallons of advanced biofuel
in comparison to 2017.\114\
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    \114\ There is also a reduction of 40 million gallons in the
proposed 2018 applicable volume of total renewable fuel as compared
to the 2017 volume. However, in light of the nested standards, that
reduction is entirely attributable to the reduction in the advanced
volume.
---------------------------------------------------------------------------

    It is important to note that these ``illustrative costs'' do not
attempt to capture the full impacts of this proposed rule. These
estimates are provided solely for the purpose of showing how the cost
to produce a gallon of a ``representative'' renewable fuel compares to
the cost of petroleum fuel. There are a significant number of caveats
that must be considered when interpreting these cost estimates. There
are a number of different feedstocks that could be used to produce
biofuels, and there is a significant amount of heterogeneity in the
costs associated with these different feedstocks and fuels. Some
renewable fuels may be cost competitive with the petroleum fuel they
replace; however, we do not have cost data on every type of feedstock
and every type of fuel. Therefore, we do not attempt to capture this
range of potential costs in our illustrative estimates.
    The annual standard-setting process encourages consideration of the
RFS program on a piecemeal (i.e., year-to-year) basis, which may not
reflect the full, long-term costs and benefits of the program. For the
purposes of this proposed rule, EPA did not quantitatively assess other
direct and indirect costs or benefits of changes in renewable fuel
volumes such as infrastructure costs, investment, GHG emissions and air
quality impacts, or energy security benefits, which all are to some
degree affected by the annual standards. While some of these impacts
were analyzed in the 2010 final rulemaking that established the current
RFS program, we have not analyzed these impacts for the 2018 volume
requirements. We framed the analyses we have performed for this
proposed rule as ``illustrative'' so as not to give the impression of
comprehensive estimates.
    EPA is providing an illustrative cost analysis for the proposed
reduction in the overall advanced biofuel volume of 40 million ethanol
equivalent gallons using four different scenarios, assuming this
reduction in advanced biofuel volumes is comprised of (1) cellulosic
biofuel from CNG/LNG, (2) cellulosic biofuel from corn kernel fiber,
(3) soybean oil BBD, or (4) sugarcane ethanol from Brazil. Showing the
illustrative costs of soybean oil BBD and sugarcane ethanol is
consistent with the methodology EPA developed for previous rulemakings.
Since EPA has also developed per gallon cost estimates for corn kernel
fiber ethanol and cellulosic biofuel from CNG/LNG, we are also
including costs for these hypothetical scenarios for informational
purposes. However, this discussion should not be interpreted as
suggesting that the various renewable fuel types discussed are
necessarily available in the marketplace. The availability of different
types of renewable fuel is discussed in other sections of this
preamble; in this section we assess costs

as if the different fuel types are available, without intending to
suggest that they are.
    In previous annual RFS rules, EPA provided an illustrative cost
estimate for the entire change in the total renewable fuel volume
standard assuming it was satisfied with conventional (i.e., non-
advanced) corn ethanol. As there is no proposed change in the 2018
conventional volume relative to the 2017 volume, all of the changes in
both the advanced and total renewable fuel volumes are properly
attributed to advanced biofuel.
    As described earlier, we are focusing on the wholesale level in our
cost scenarios, and do not consider taxes, retail margins, additional
infrastructure, or other costs or transfers that occur at or after the
point of blending. More background information on this section,
including details of the data sources used and assumptions made for
each of the scenarios, can be found in a Memorandum available in the
docket.\115\
---------------------------------------------------------------------------

    \115\ ``Cost Impacts of the Proposed 2018 Annual Renewable Fuel
Standards'', Memorandum from Michael Shelby, Dallas Burkholder, and
Aaron Sobel to EPA Docket EPA-HQ-OAR-2017-0091.
---------------------------------------------------------------------------

    Table V.D-2 below presents estimates of per energy-equivalent
gallon costs for producing soybean biodiesel, Brazilian sugarcane
ethanol, CNG/LNG derived from landfill biogas, and cellulosic ethanol
derived from corn fiber relative to the petroleum fuels they replace at
the wholesale level. For each of the four scenarios, these per gallon
costs are then multiplied by the 40 million ethanol-equivalent gallon
reduction in the proposed 2018 advanced standard relative to the
previous 2017 standard to obtain an overall cost estimate.

    Table V.D-2--Illustrative Costs of the Proposed 40 Million Gallon
 Reduction to the Advanced Biofuel Volume Requirements in 2018 Relative
                     to the 2017 Volume Requirements
------------------------------------------------------------------------

------------------------------------------------------------------------
                       Soybean Biodiesel Scenario
------------------------------------------------------------------------
Cost Difference Between Soybean Biodiesel and Petroleum      $1.36-$1.85
 Diesel Per Gallon ($/DGE) \116\........................
Annual Change in Overall Costs (Million $) \117\........     $(45)-$(33)
------------------------------------------------------------------------
                  Brazilian Sugarcane Ethanol Scenario
------------------------------------------------------------------------
Cost Difference Between Sugarcane Ethanol and Gasoline       $0.87-$2.29
 Per Gallon ($/GGE) \118\...............................
Annual Change in Overall Costs (Million $)..............     $(61)-$(23)
------------------------------------------------------------------------
              CNG/LNG Derived from Landfill Biogas Scenario
------------------------------------------------------------------------
Cost Difference Between CNG/LNG Derived from Biogas and    $(0.06)-$0.05
 Natural Gas ($/EGE)....................................
Annual Change in Overall Costs (Million $)..............         $(2)-$2
------------------------------------------------------------------------
                   Corn Fiber-Derived Ethanol Scenario
------------------------------------------------------------------------
Cost Difference Between Cellulosic Corn Fiber-Derived        $1.37-$2.62
 Ethanol and Gasoline Per Gallon ($/GGE)................
Annual Change in Overall Costs (Million $)..............     $(70)-$(36)