would limit the number of qualified independent-third parties with
appropriate knowledge of the RFS program, which may delay the adoption
of QAPs by facilities. Some comments pointed out that this may harm
existing third parties and provide an advantage to late entry third
parties since many of the most knowledgeable third-party firms have
historically provided engineering review and/or annual attest
requirements. These comments concluded that establishing new
relationships with third-party auditors with limited RFS expertise
could increase compliance costs for participating RIN generators and
decrease the overall quality of assurance provided by the QAP program.
    We are not removing the annual attest engagement and triennial
engineering review requirements for audited producers and importers. We
believe, as some commenters pointed out, that these requirements differ
substantially from QAP audits enough that there is significant value in
the information provided in these activities that are not captured as
part of a QAP.
    We continue to be concerned that allowing one party to perform most
if not all regulatory requirements involving a separate party including
engineering reviews, attest engagements, and QAP implementation will
tie an auditor's financial interests too closely to the RIN generators
being audited. We do not want a program that incentivizes third-party
auditors to fail to report potentially invalid RINs. Furthermore, even
if a third-party did not intend to verify a potentially invalid RIN due
to a potential conflict of interest, having more than one independent
party provide required services under RFS serves to ``check the
checker'' promoting better quality assurance and ensuring that the
goals of the RFS continue to be met. However, we also want to promote
the participation of RIN generators in this program because we believe
that an effectively implemented QAP will also help fulfill RFS goals.
Additionally, we do not want to exclude potential third-party auditors
that have significant knowledge of the RFS program and renewable fuel
production facilities from participating in the QAP program by
establishing provisions that exclude such parties from implementing
QAPs.
    Therefore, in general we are not precluding third-party auditors
from providing QAP services to a RIN generator such as initial
engineering reviews and annual attest engagements. We are, however,
prohibiting third-party auditors from continuing to provide both annual
attest engagements and QAP implementation to the same audited RIN
generator. This means that annual attest engagements and QAP
implementation must be performed by two separate independent parties,
i.e. the QAP auditor can perform one but not both of these services.
For initial and triennial engineering reviews, a third-party auditor
may conduct engineering reviews and QAP auditing services to the same
RIN generator, and to reduce costs to the RIN generator, the third-
party auditor may perform engineering reviews as part of a site visit
required under the QAP.
    For the reasons discussed above, we are finalizing independence
requirements for third-party auditors based on the proposal with some
amendments. We are expanding the independence requirement to include a
prohibition on the buying and trading of RINs by third-party auditors.
We are also modifying the definition of conflict of interest to include
even the appearance of a conflict of interest between a third-party
auditor and an audited RIN generator. This modified definition of
conflict of interest will preclude third-party auditors from generating
RINs for audited RIN generators. However, third-party auditors may
still submit periodic compliance reports. Additionally, in order to
both ``check the checker'' and preclude a single entity from providing
all RFS services to a producer or importer, third-party auditors shall
not be the same party that provides annual attest engagement services
to producers or importers under Sec.  80.1464. Having previously
provided an attest engagement for a producer or importer does not
preclude the third-party auditor from implementing a QAP for

that producer or importer. Third-party auditors can continue to provide
engineering review services for audited producers and importers and may
integrate those services with QAP implementation to the same producer
or importer to reduce costs. We feel that this approach strikes the
correct balance of maintaining auditors that are truly independent from
producers and importers being audited while not excluding knowledgeable
and capable potential third-party auditors from providing valuable QAP
services.
b. Professionally Qualified to Implement a QAP
    Another key element to ensure the effective implementation of QAPs
at renewable fuel production facilities is that auditors have the
necessary professional expertise and credentials. We require that each
renewable fuel production facility undergo an engineering review by a
licensed professional engineer as part of registration. In the NPRM, we
proposed a similar requirement for auditors since the verification of
production capabilities of a quality assurance program should be
similar to the type of review conducted in the engineering review
process for RFS registration. We proposed that independent third-party
auditors would demonstrate that they possess the required professional
expertise during registration. We also proposed to not require that
companies that register as a third-party auditor be solely constituted
of professional engineers to implement an EPA-approved QAP and conduct
facility audits; however, a licensed professional engineer must
supervise and or work in a team with other employees of the third-party
auditing company. We also sought comment on whether we should require
additional expertise (e.g. have third-party auditors have a certified
public accountant on staff or under contract) and whether to establish
a RFS competency requirement similar to requirements outlined in
voluntary consensus standards (established by a voluntary consensus
standards body) for greenhouse gas verification.
    One commenter suggested that the QAP audits be designed by a
professional engineer while the audit can be conducted by a team
supervised by a professional engineer. While many commenters pointed
out that although some portions of the facility site visits require
similar expertise to engineering reviews (i.e. would require the
services of a certified professional engineer), reviewing bills of
lading and other records would require the expertise of a certified
public accountant. Other commenters suggested that having a breadth of
expertise on audit teams will increase the overall effectiveness of
third-party auditors' ability to implement QAPs. Some argued further
that the periodic hiring of a third-party auditor to help supervise or
conduct site visits would be prohibitively costly to audited producers
and importers. On the other hand, one commenter expressed concern about
allowing the third-party auditor to only be required to have a
professional engineer design the audits, but not supervise or attend
the audit. This commenter highlighted that such a responsibility may be
delegated to personnel not qualified to successfully implement a QAP
and ultimately undermine the integrity of a QAP.
    We agree that there are certain elements of the QAPs that would
better be served by third-party auditors with appropriate professional
backgrounds in recordkeeping auditing such as a certified public
accountant. Some of the elements required as a part of a QAP resemble,
but do not mimic entirely, elements that are currently part of annual
attest engagements, for which we require an independent certified
public accountant. However, some elements more closely resemble the
elements required under engineering reviews and thus necessitating a
professional engineer. Since an effective QAP involves the technical
experiences of both professional engineers and certified public
accountants, we are finalizing requirements that third-party auditors
have both the qualifications of a professional engineer and a certified
public accountant.
    We also recognize that third-party auditors may incur substantial
cost if they have to tender the services of both a professional
engineer and a certified public accountant for every periodic site
visit or records review.\13\ We did not intend that every member of a
team be constituted of professional engineers or certified public
accountants, but rather that these qualified professionals would
oversee the development and conducting of site visits and record
reviews. We believe that qualified professionals will naturally take an
active interest and participate in auditing activities since it is
their professional reputations on the line and they may be liable for
potential violations specified in the prohibited activities section at
Sec.  80.1460 and for making false statements to the government under
18 U.S.C. 1001. Therefore, although we are not requiring qualified
professionals on-site to conduct audits at facilities, they do need to
certify audit reports generated from those site visits.
---------------------------------------------------------------------------

    \13\ For this preamble, qualified professionals refers to
certified professional engineers and certified public accountants
that work for or that are acting on behalf of a third-party auditor
to implement a QAP.
---------------------------------------------------------------------------

    One commenter suggested that each member of audit teams have a
four-year college degree. We disagree with this comment since
professional licensure and E&O insurance requirements for those
supervising should serve as a check to help ensure that auditing teams
are composed of competent personnel. The technical nature of auditing
in general and auditing renewable fuel production facilities under RFS
necessitates an appropriate educational background.
    One commenter suggested that audit teams collectively have at least
20 years experience in RFS or related fields to perform audits.
Although we feel that it is most beneficial to the program to have
experience in RFS or related fields to perform audits, a 20 year
experience requirement would be very difficult to monitor and enforce.
The existing professional engineer requirements already include
language that a professional engineer must have professional experience
in the chemical engineering field or related to renewable fuel
production. Based on our experience with third-party auditors that have
informally pre-registered through the interim period and discussions
with other potential third-party auditors, we believe that any third-
party auditor would have to have a significant amount of experience in
RFS or related fields to simply put together a QAP that satisfies
today's requirements. Therefore, we are not adopting a minimum
experience threshold for third-party auditor qualification.
    A few commenters supported requiring third-party auditors to adhere
to a standards established by a voluntary consensus standard body \14\
or that the Agency create its own third-party auditor competency
standard. Others noted that EPA could develop a periodic examination of
RFS standards to gauge the expertise of third-party auditors. However,
while supportive, many commenters noted that the development of such a
standard, which currently does not exist, could significantly delay the
implementation of the QAP program. As we noted in the NPRM, ``several
independent third-parties have developed sufficient expertise with RFS
to provide useful

validation services. . .and we believe that there exist adequate
incentives for parties to ensure that third-party auditors understand
the RFS program sufficiently.'' \15\ We believe that based on our
experience informally pre-registering third-party auditors, that most
potential auditors have an appropriate amount of experience to
successfully implement a QAP. In addition, while we believe that it is
generally good to have professional competency standards, it would take
a significant amount of time to develop such standards, which would
hinder the development of today's QAP program. Therefore, we will
continue to monitor the quality and expertise of third-party auditors
that register to implement QAPs, and may revisit the idea of
establishing a professional competency standard or exam in the future.
---------------------------------------------------------------------------

    \14\ For example, ISO 17024 provides a standard for the
professional certification of greenhouse gas emissions.
    \15\ See 78 FR 12188 (February 21, 2013).
---------------------------------------------------------------------------

    For reasons discussed above, we are finalizing professional
licensure qualifications to include that third-party auditors have
access to both a professional engineer and certified public accountant.
We feel that this combination of expertise would allow third-party
auditors to most effectively implement QAPs. We are also not finalizing
other professional competency standards at this time (i.e. those
specified in a standard established by a voluntary consensus standard
body). We will continue to monitor the effectiveness of third-party
auditors through the annual registration renewable process discussed
below, and may revisit the idea of incorporating additional third-party
auditor professional qualifications or competency exams if necessary.
c. Errors and Omissions Insurance
    Based on the comments received and the discussion below, the Agency
is finalizing a requirement of Errors and Omissions (``E&O'') insurance
for independent third-party auditors from an insurance provider that
possess a financial strength rating in the top four categories from
either Standard & Poor's or Moody's (i.e., AAA, AA, A or BBB for
Standard & Poor's and Aaa, Aa, A, or Baa for Moody's). Auditors will
obtain coverage as they see fit to cover their professional liability
exposure. Additionally, auditors will be required to disclose the level
of E&O coverage they possess in a clause in every contract they enter
into when providing RIN verification services.
    We proposed that to ensure the effective implementation of QAPs at
renewable fuel production facilities, independent third-party auditors
would be required to maintain professional liability insurance
(commonly known as E&O insurance) if offering a QAP. The amount of
insurance was proposed to be, at a minimum, equal to two percent of the
RINs the auditor verifies in a year to cover the replacement of any
RINs verified by an auditor that turn out to be invalid as a result of
auditor error, omission, or negligence. Additionally, we proposed that
independent third-party auditors would be required to use insurance
providers that possess a financial strength rating in the top four
categories from either Standard & Poor's or Moody's (i.e., AAA, AA, A
or BBB for Standard & Poor's and Aaa, Aa, A, or Baa for Moody's). We
explained that requiring E&O insurance would help to achieve the level
of professionalism necessary for the quality assurance program to work
as intended. Possession of E&O insurance would lend business and
financial credibility to a potential QAP auditor.
    The Agency received multiple comments in support of the requirement
that auditors maintain E&O insurance. There were several comments
regarding the levels at which it should be maintained and how those
levels should be calculated. One comment suggested a minimum of
$1,000,000 in E&O insurance, with increases in coverage tied to
increases in the number of RINs an auditor verifies. Another commenter
suggested that E&O coverage be grouped into ``buckets''. For example,
if an auditor verifies less than 10MM RINs, coverage should be $2MM,
and if the auditor verifies between 10MM and 50MM RINs, coverage should
be $5MM, etc. Commenters suggested that given the volatility in the
prices of RINs, the amount of coverage should be tied to number of RINs
verified as opposed to an amount equal to a percentage of RINs
verified, which would vary based on the current price of RINs. The
Agency agrees with this comment that any specified coverage would be
better tied to the number of RINs verified as opposed to a set
percentage of RINs verified.
    In response to comments, the Agency sees the possession of E&O
insurance primarily as an additional layer of auditor scrutiny. In
order to obtain E&O insurance, auditors will have to undergo a robust
underwriting examination that will look at the auditor's business
expertise and financial status, among other factors. It may be that not
all prospective auditors will be able to obtain a policy from an
insurance provider with the required financial strength rating. This
will help ensure that the auditors that do provide QAP services are
qualified and have a track record of success as a company. Moreover,
the Agency views E&O coverage as a market business decision that should
be in the hands of the participants in the market. Auditors can assess
the level of professional liability insurance they feel comfortable
maintaining and their customers can judge that level accordingly in
deciding whether to employ their service or choosing another competing
auditor. The Agency feels it is best that it does not prescribe a
certain level of E&O coverage, but rather simply require that a QAP
provider disclose the level of E&O coverage they possess in a clause in
every contract they enter into when providing RIN verification
services. Customers of QAPs will be fully informed at the time of
entering into a service agreement exactly what level of professional
liability the QAP provider possesses. The disclosure of the level of
coverage would increase transparency of auditors and boost the
integrity of the burgeoning RIN verification market. Finally, by only
requiring possession of E&O coverage, the Agency will not be tasked
with continually calculating and monitoring the level of E&O coverage
maintained by auditors offering a QAP, and will thus be better able to
focus on effective implementation of other key parts of the quality
assurance program.
2. Registration Requirements
    In order to implement and enforce the new quality assurance
program, we proposed that third-party auditors become regulated parties
under the RFS program. To do this, we proposed registration,
recordkeeping, and reporting requirements on third-party auditors to
ensure that appropriate QAPs are executed according to the requirements
specified in the regulations. This would allow the EPA and affected
parties to monitor and have confidence that third-party auditors are
implementing QAPs appropriately. These requirements are similar to
those that we require for other regulated parties under the RFS
program. We proposed that during initial registration third-party
auditors would provide basic company information, copies of E&O
insurance policies, certification of professional qualifications, QAPs
for EPA approval, and a signed affidavit that states that the third-
party auditor is independent of and free from any conflicts of interest
with any renewable fuel producer for which they intend to verify RINs.
We also proposed that during registration third-party auditors would
also identify which facilities they intended to audit, if known, and
that auditors would update their registration

information each time they intend to provide QAP services for a new
facility.
    Recognizing that foreign third-party auditors may have unique
challenges compared with domestic third-party auditors, we proposed
additional registration requirements for foreign third-party auditors.
In the March 2010 RFS rulemaking (75 FR 14670, March 26, 2010), we
outlined a number of requirements that applied to foreign RIN owners
(see 40 CFR 80.1467). These additional requirements are designed to
ensure enforcement of RFS regulations at the foreign RIN owner's place
of business and are similar to requirements for foreign parties under
other fuels regulations. For example, foreign RIN owners must submit
reports in English and provide translated documents in English upon
demand from the EPA inspectors or auditors, must submit themselves to
administrative and judicial enforcement powers and provisions of the
United States without limitation based on sovereign immunity, and post
a bond covering a portion of the gallon-RINs that a foreign RIN owner
owns.
    We also proposed that third-party auditors would have to renew
their registration on an annual basis. The effectiveness of this
program is contingent on the integrity of the third-party auditors and
their ability to competently implement approved QAPs. The registration
process is designed to help ensure that QAPs are implemented by
competent, qualified and independent third-party auditors. A third-
party auditor may only verify RINs under the voluntary quality
assurance program if the auditor is registered with the EPA. The
renewed registration submissions must include updates to information
required for initial registration and an affidavit by the auditor that
it is in full compliance with applicable QAP regulations. The affidavit
would include a specific certified statement that the third-party
auditor: (1) Has only verified RINs that it reviewed under an EPA-
approved QAP, (2) has informed the EPA and RIN generators of all
potentially invalid RINs that it discovered, and (3) has fulfilled its
RIN replacement obligation if applicable. Third-party auditors that
fail to accurately and completely renew their registrations will no
longer be registered and therefore can no longer implement QAPs and
verify RINs.
    Finally, we proposed requirements that would preclude the hiring by
third-party auditors of persons that had formerly been employed by a
third-party auditor whose registration had been revoked. We believed
that such a provision was necessary to ensure that third-party auditors
employed competent persons of integrity. We also reserved the right to
revoke a third-party auditor's registration at any time if we determine
that the third-party auditor has failed to meet its regulatory
requirements.
    We received a number of comments on all aspects of the registration
process for third-party auditors. Several commenters were concerned
that the annual registration renewal process for third-party auditors
would overburden the Agency and that the Agency would have difficulty
approving many auditors before the start of new calendar years. This
could potentially disrupt the verification of RINs at facilities that
had an EPA-approved QAP implemented by a previously registered third-
party auditor. These commenters suggested that the EPA should alter the
requirements to automatically approve registration renewals for third-
party auditors if the auditor had not heard back from the Agency after
a period of time, for example 30 or 60 days. This would help ensure the
continued implementation of QAPs and the verification of RINs. We agree
that this would provide more certainty to audited RIN generators and
third-party auditors; therefore, we are modifying the annual
registration renewal requirements to automatically approve third-party
auditor registration renewals if a previously registered third-party
auditor has not received notice of a deficiency from the EPA regarding
its registration renewal materials.
    Many commenters noted that in most ways foreign third-party
auditors should be treated similarly to domestic third-party auditors.
Several comments called upon the EPA to recognize foreign credentials
(i.e., foreign professional engineer certifications) of potentially
third-party auditors. Others supported the EPA's proposal to have
similar bonding and English language requirements to those required by
foreign RIN owners. We agree that foreign professional credentials can
be used to satisfy the professional competency requirements outlined
above, and we are finalizing the additional foreign third-party auditor
requirements as proposed.
    One commenter suggested that the requirement for third-party
auditors to submit a signed affidavit declaring their independence from
audited RIN generators is superfluous. Another commenter suggested that
we expand the affidavit requirement to include any documentation to
support statements in the affidavit and make clear that the affidavit
must be under oath. Such an approach would allow the EPA to go under
the covers of the affidavit statements to ensure that all potential
conflicts of interest are disclosed.
    The affidavit requirement declaring independence is an important
piece of registration and potentially valuable if we have to pursue
actions arising from alleged conflicts of interests. We also recognize
that there are concerns that some parties that have informally pre-
registered during the interim period contract or subcontract out
significant amount of auditing services, and that a simple affidavit
that only applies to the third-party auditor's company may not cover
the parties responsible for actually conducting much of the QAP
implementation work. Therefore, we are expanding the independence
affidavit requirement to include that third-party auditors assert that
contractors and subcontractors employed to facilitate QAP
implementation also adhere to the same conflict of interest standards
in today's action.
    One commenter asked for clarification about the list of facilities
that needed to be supplied during registration that an auditor intended
to audit. The commenter correctly noted that it would be unreasonable
for a third-party auditor to anticipate all facilities they may audit
during a year since they may sign up new clients. To clarify, we intend
for the auditor to report at the time of registration only facilities
that they know they will audit and for which they are seeking to have
an EPA-approved QAP. Auditors will make updates to their registration
information in accordance with the regulations when they sign up new
clients and report that information during annual registration
renewals.
    Some commenters expressed concerns about the ability of the EPA to
deny the registration of third-party that employ persons that were
previously employed by an auditor whose registration was revoked. These
commenters were worried that the EPA would unduly deny the registration
of third-party auditors simply for hiring employees previously employed
by an auditor with a revoked QAP even though the person in question may
have had nothing to do with the circumstances that resulted in the
revocation of the a registration for a previous employer. These
commenters suggested further that the EPA only deny registrations for
third-party auditors if a third-party auditor hires an employee where
the preponderance of data demonstrates that the person was directly
responsible for the revocation of the previous third-party auditor's
QAP.
    We agree that some employees of former third-party auditors whose
registrations had been revoked may not

have had any direct involvement in the questionable activities that led
to the revocation of the former third-party auditor's registration. The
purpose of this provision was to ensure through registration that
qualified professionals or other employees that were responsible for
the EPA revoking a third-party auditor's QAP or registration did not
simply go work for another third-party auditor. However, we believe
that we have enough flexibility through our authority to revoke
registrations and QAPs for cause, e.g. if a third-party auditor and its
employees or contractors fail to appropriately implement a QAP, to help
ensure that only reputable and qualified third-party auditors are
registered to implement a QAP. Additionally, we believe that the
potential liability for violations of RFS requirements of third-party
auditors and its contractors and subcontractors will also adequately
deter third-party auditors from failing to meet their applicable
requirements. Therefore, for reasons discussed above, the EPA is not
finalizing regulatory language granting it the discretion to deny the
registration of a third-party auditor for the hiring or contracting
with prior employees or contractors of auditors whose registrations
were revoked.
3. Other Responsibilities of Auditors
a. Notifying the Agency When There Are Problems
    As discussed in section II.A.4, we are requiring that third-party
auditors notify the EPA and the renewable fuel producer of potentially
invalid RINs, including but not necessarily limited to fraud, errors,
and/or omissions, by the next business day after a problem has been
identified.
b. Identifying Verified RINs in EMTS
    In the NPRM, we proposed to require that third-party auditors be
responsible for tagging RINs as having been ``verified'' in a way that
is clearly visible in EMTS after they have been generated. In the NPRM,
we explained that third-party auditors needed to identify RINs as
having been verified so that downstream parties could know which RINs
have been subjected to review by an auditor and thus can be eligible
for an affirmative defense. We also proposed that the verification of a
RIN in EMTS would be prospective, meaning that a RIN can only be
verified after an auditor has audited a facility in accordance with an
approved QAP and that RINs generated during the interim period will not
be flagged as verified in EMTS. Finally, we proposed that third-party
auditors would have the ability to stop verification of newly generated
RINs should a problem arise during the QAP implementation process.
Since third-party auditors are in the best position to identify
potentially invalid RINs, allowing third-party auditors this
flexibility is necessary to ensure that problems with invalid RINs are
quickly identified and corrected.
    In general, comments received regarding the identification of RINs
as verified in EMTS were supportive. Several commenters expressed the
desire for the EPA to have EMTS fully functional by the effective date
of the rulemaking and ensure that EMTS development provides an
opportunity for affected parties to beta test and provide feedback on
the development and deployment of EMTS. In recognition of these
concerns, verified A-RINs and B-RINs may still be generated outside of
EMTS through December 31, 2014. Additionally, once EMTS is able to
accommodate Q-RIN transactions, parties will have the ability to
generate and input verified Q-RINs within EMTS. Based on current
development pace, this should occur prior to the January 1, 2015 single
QAP start date.
    One commenter suggested that we should not require third-party
auditors to verify RINs in EMTS since this would further distinguish
between RINs generated from small producers, which they anticipated
would be verified through a QAP, and larger producers, which they
argued would not be verified through a QAP. The comment argued further
that the EMTS currently allows parties wishing to buy and sell RINs to
specify which producers they would like to purchase or sell to and that
verification in EMTS is unnecessary. We disagree with this comment.
Partially based on our experience with the informal verification of
RINs through the interim period, keeping track of verified RINs outside
of EMTS is quite burdensome on third-party auditors and obligated
parties that wish to purchase verified RINs and on the Agency when we
need to follow up on potential issues. We believe that ``flagging''
RINs in EMTS is the most cost effective way for obligated parties to
quickly know that RINs being purchased have been verified by an EPA-
approved QAP and will promote the use of the QAP program.
    Therefore, we are finalizing requirements that third-party auditors
verify RINs in EMTS as proposed.
c. Recordkeeping, Reporting, and Attest Engagements
i. Recordkeeping Requirements
    We proposed that third-party auditors would be required to maintain
records of all verification and validation activities related to the
implementation of a quality assurance program. We explained that these
records would serve to demonstrate that a QAP was appropriately
implemented if invalid RINs are reported at a later date.
    Although most comments were generally supportive of requiring
third-party auditors to maintain records similar to other regulated
parties under RFS requirements, one comment sought clarification of the
proposed recordkeeping requirements. This comment argued that as
proposed, the recordkeeping requirements would be too broad, would
include potentially confidential business information and that much of
this information would be duplicative of records already maintained by
other regulated parties under RFS (e.g. RIN generators).
    We believe that renewable fuel producers and importers can address
concerns about the inappropriate disclosure of confidential information
obtained by a third-party auditor through a QAP through private
agreements with the third-party auditor. We also recognize that some
information may be duplicative of records already maintained by other
regulated parties. However, most recordkeeping requirements will not be
kept by other regulated parties under RFS since they are specific to
the QAP implementation activities of third-party auditors. Therefore,
we are finalizing third-party auditor recordkeeping requirements as
proposed.
ii. Reporting Requirements
    Under the existing RFS program, obligated parties, exporters of
renewable fuel, producers and importers of renewable fuels, and any
party who owns RINs must report appropriate information to the EPA on a
regular (e.g. quarterly and/or annual) basis. Similarly, the third-
party auditors are required to submit quarterly reports, in line with
RFS quarterly reporting deadlines, identifying how many RINs the
auditor has verified the previous quarter. In addition, independent
third-party auditors must include the facilities audited and the dates
of those audits. This information allows the EPA to compare a third-
party auditor's reported activity to information gleaned from EMTS to
ensure that third-party auditors are appropriately implementing QAPs.

    Most comments we received supported quarterly reporting
requirements for third-party auditors. One comment also expressed
concerns that third-party auditor quarterly reporting was overly
burdensome and that the information we proposed to require that third-
party auditors report is duplicative of information already reported to
the EPA via reports from other parties.
    We continue to believe that periodic reports provides a useful
compliance tool to better ensure that third-party auditors are
effectively implementing QAPs since failure to fulfill reporting
requirements constitutes a violation to the Clean Air Act and may
subject the responsible party to the penalties discussed below.
Although third-party auditor reporting requirements may partially
overlap with some information already reported by other parties, much
of the information reported by third party auditors (e.g., the dates
facilities were audited, the number of RINs verified by a third-party
auditor, etc.) is specific to auditing activities that currently are
not captured in existing reports. Therefore, we are still going to
require that third-party auditors submit quarterly reports that will
capture their auditing activities. However, due to the addition of an
annual attest engagement requirement for third-party auditors
(discussed below) and to accommodate the flexibility of allowing third-
party auditors to use a representative sample of batches to implement
QAPs (also discussed below), we needed to make minor revisions to
third-party auditors' quarterly reporting requirements. Thus, we are
finalizing quarterly reporting requirements for third-party auditors as
proposed with minor modifications.
iii. Attest Engagements
    In the NPRM, we sought comment on whether to require third-party
auditors to have an annual attest engagement similar to those required
of other parties required under Sec.  80.1464.\16\ We explained that
attest engagements may be an appropriate means of verifying the
accuracy of the information reported to us by the third-party auditors
similar to those we require of other parties in RFS.
---------------------------------------------------------------------------

    \16\ Attest engagements are used in many of the Agency's fuels
programs and are similar to financial audits. Attest engagements
consist of an independent, professional review of compliance records
and reports.
---------------------------------------------------------------------------

    The public comments we received generally supported the imposition
of annual attest engagement requirements on third-party auditors. Many
comments highlighted the utility to the Agency with additional
oversight of third-party auditors through an annual attest requirement.
Such measures would help ``check the checker'' and would overall
increase the reliability of verified RINs. Other commenters noted that
since the EPA is creating a new regulated party in the RFS program,
they should have similar requirements including annual attest
requirements to that of other parties regulated under RFS. Lastly, one
comment suggested that the EPA should outline the attest engagement
procedure for third-party auditors in more detail in the final
rulemaking.
    One commenter suggested that third-party auditor annual attest
requirements and more broadly a ``check the checker'' program was not
necessary and overly burdensome. The commenter did not provide
explanation on why such a requirement was unnecessary or too
burdensome.
    We agree with comments that third-party auditors should undergo an
annual attest engagement by an independent third-party. This will help
improve the Agency's oversight of third-party auditors. Having another
third-party conduct the annual attest engagement for the third-party
auditor will mitigate some of the conflict of interests concerns with
third-party auditors providing additional services (e.g. engineering
reviews and completing quarterly compliance reports for RIN generators)
discussed above, which will help ensure that verified RINs under the
QAP program are valid.
    Therefore, consistent with the nearly overwhelming response from
public comments, in today's final rulemaking we are including a
requirement that third-party auditors undergo annual attest engagements
similar to that of other parties regulated under RFS. The attest
engagements will consist of an outside certified public accountant
following procedures outlined in Sec.  80.1464 to determine whether
underlying records, reported items, and transactions agree.
d. Prohibited Activities for Third-Party Auditors
    Since third-party auditors are integral to the successful
implementation of voluntary quality assurance programs, we proposed new
prohibition and liability provisions applicable to third-party
auditors. The prohibitions and liability provisions on third-party
auditors are similar to those for other parties in the RFS and other
fuels programs. Specifically, we proposed the following prohibited
acts: Failing to properly implement an EPA-approved QAP; failing to
timely notify RIN generators and the EPA of potentially invalid RINs;
failing to replace invalid RINs, if applicable; and verifying RINs that
are invalid.
    We also proposed that third-party auditors subject to an
affirmative requirement under this rule be liable for a failure to
comply with the requirement. For example, third-party auditors would be
liable for separate violations for failing to comply with the
registration, reporting and recordkeeping requirements. Like other
fuels programs, if the third-party auditor causes another person to
violate a prohibition or fail to comply with a requirement, the third-
party auditor may be found liable for the violation. Finally, we noted
that third-party auditors would be subject to the penalty and
injunction provisions in section 211(d) of the Clean Air Act and third-
party auditors may be subject to civil penalties of $37,500 for every
day of each such violation and for the amount of economic benefit or
savings resulting from the violation. We sought public comment on the
proposed prohibited activities and liability provisions specific for
third-party auditors.
    We received few public comments on the prohibited activities for
third-party auditors and those public comments generally supported the
proposed prohibited activities. However, one public comment noted that
the proposed regulatory language at Sec.  80.1460(i)(3), which proposed
to hold third-party auditors liable for verifying RINs that were later
determined to be invalid under Sec.  80.1431, was too broad. The
comment argued that such broad-based language unfairly imposed
liability on third-party auditors that may have been misled by
undetectably false information or documentation provided by a RIN
generator. The comment concluded that imposing such a potential
liability on third-party auditors may deter qualified auditing and
accounting firms from participating in the QAP program.
    We agree with concerns that the proposed language at Sec.
80.1460(i)(3) is overly broad and we are therefore modifying the
proposed language to more fairly hold third-party auditors liable for
verifying invalid RINs. In the NPRM, we proposed that third-party
auditors would be prohibited from ``identify[ing] a RIN as verified in
accordance with Sec.  80.1471(e) that is invalid under Sec.  80.1431.''
The intent of this language was to help ensure that third-party
auditors reported all potentially invalid RINs uncovered by an approved
QAP to the EPA. Under Option A, we were concerned that third-party
auditors would verify RINs that may have been invalid to avoid the
potential of having to replace those RINs

since such a cost would be quite high. In light of our decision to not
place a replacement obligation on third-party auditors, we are
modifying the language of this prohibited act to prohibit third-party
auditors from verifying a RIN without ensuring that every applicable
requirement in an approved QAP was met. We believe the newly worded
prohibited activities focuses more on the activities of the auditor
instead of punishing the auditor for misleading information and
documentation supplied by audited RIN generators.
    For reasons discussed above, the EPA is finalizing the proposed
prohibited activities with modification to the proposed regulatory
language at Sec.  80.1460(i)(3). The final prohibitive activities
coupled with the provisions that require third-party auditors to
register annually and the authority we have to revoke an auditor's QAP
for cause will ensure that third-party auditors will appropriately
implement EPA-approved QAPs.

G. Audit Requirements

    Under the quality assurance program, an auditor will use an
approved QAP as the basis for the verification of renewable fuel
produced and RINs generated at a facility. In order to verify
production, the auditor must review documents, monitor facility
activity, and conduct on-site visits. These components, when taken
together, are what constitute an audit of the facility. An on-site
visit to a facility is not in and of itself an audit. Rather, an audit
encompasses all the elements of a QAP, i.e., document review,
monitoring of facility activity, the on-site visit (when required),
etc. The elements of the QAP are discussed in some detail in section
II.E. The following provides some additional detail on the elements of
an audit. As with other provisions of the RFS program, the use of a QAP
and the associated audit will also be available to foreign producers of
renewable fuel.
1. Document Review and Monitoring
    The auditor must ensure that the producer has fulfilled all
applicable record-keeping requirements of Sec.  80.1454. We expect the
auditor to evaluate quarterly reports submitted to the EPA, and that
the reports be year-to-date, as applicable, and from the previous year,
for comparison. These include Activity Reports, RIN transaction
reports, RIN generation reports, and Renewable Fuel producer Co-product
reports. The third-party engineering review and annual attestation
report must also be reviewed.
    Reports submitted to the EPA must be cross-checked with other
records. For instance, the auditor must have access to certificates of
analysis. The auditor must check recent feedstock receipts (if the
producer uses a variety of feedstocks, then the auditor should be
provided with receipts for each feedstock). Integrated facilities may
not have internal sales receipts for feedstock use, so an alternative
paper trail will likely be required. Similar to the feedstock document
review and crosscheck, renewable fuel and co-product delivery
documentation must be part of any audit.
    For all documentation reviews, we expect the auditor to analyze
reports to determine whether a producer is reporting volumes
consistently, and to require (from the producer) explanation for
missing or inaccurate reports. The auditor must investigate
discrepancies between volumes reported and processed. Other reports the
auditor must consider as part of its review include the EIA M22 Survey,
any state reports, federal and state tax returns, and association dues
reports. The auditor must also determine if there is any import or
foreign biofuel producer documentation.
    Of prime concern to the quality assurance program is the
verification of RINs, and there are many aspects to this part of the
audit. The auditor must evaluate monthly RIN generation reports
submitted through EMTS, verify that RINs generated match wet gallons
sold, determine if the facility purchases or separates RINs, and review
product transfer documents for all RIN activity. We are finalizing that
verification elements for the audit may be checked for a representative
sample of batches of renewable fuel according to the sampling
requirements in Sec.  80.127. However, based on the documentation
provided by the producer, the auditor can decide to review all
documentation for all batches. We requested comment on the level of
detail required for document review. A number of commenters indicated
that requiring 100% document review would negatively impact producers
and that a high confidence level could be achieved through random
sampling. We agree with the spirit of these comments, and are
finalizing the program using the criteria for the representative
sampling of batches of renewable fuel in accordance with sampling
guidelines that have already been established in Sec.  80.127, and are
effectively used as part of the annual attest report.
    Furthermore, and in order to ensure that renewable fuel producers
will maintain their records in a manner that will allow third-party
auditors and the EPA to efficiently evaluate whether RINs were properly
generated, we are amending Sec.  80.1426 to state that RINs may only be
generated for fuel that the producer has demonstrated, pursuant to all
applicable recordkeeping requirements of Sec.  80.1454, was produced in
accordance with the applicable pathway listed in Table 1 to Sec.
80.1426(f) or a petition approved by the EPA pursuant to Sec.  80.1416.
Furthermore, RIN generation is only appropriate for renewable fuels
that carry the appropriate designation on their product transfer
documents, according to the new provisions of Sec.  80.1453(a)(12). See
Section III of this preamble for further discussion of PTD
requirements.
2. Buyer/Seller Contacts
    We are finalizing a flexibility that allows for the random sampling
of feedstock supplier invoices and contracts to provide a
representative sample of renewable fuel batches, according to Sec.
80.127. This is an appropriate method for feedstock verification, as it
gives high confidence that the producer was in fact purchasing
renewable biomass as feedstock. We are also finalizing that random
sampling of product transfer documents and other sales-related receipts
for a representative sample of batches of renewable fuel, according to
Sec.  80.127, is an appropriate method for ensuring that the renewable
fuel was sold for transportation purposes.
    We proposed that at the end of an audit, the auditor should know
all customers of and suppliers to the facility, and all parties that
distribute feedstock to and fuel from the facility. We proposed that
the auditor contact all of the customers and suppliers in order to
verify sales and purchases in accordance with the requirements under
the QAP. We envisioned this proposed requirement as a ``spot check;''
the auditor should be able to provide a reason for such calls regarding
the entity called, questions asked, etc.
    We received numerous comments, particularly from biodiesel
producers who collect used cooking oil from thousands of restaurants,
that contacting every supplier would be especially burdensome. Some
commenters indicated that feedstock suppliers who have multiple
auditors contact them for verification may be less willing to sell
feedstock to parties participating in the RFS2 program. Since these
suppliers are not regulated under RFS2, they are under no obligation to
provide this information, which could place an auditor in a difficult
situation. We also received comments indicating that aggregate
compliance is sufficient, and

records such as EMTS transactions, receipts, and product transfer
documents would further prove that appropriate feedstocks were used and
sales were completed properly. Moreover, there was not a single comment
in favor of this provision. Therefore, the Agency is not finalizing the
requirements of direct contact with all feedstock suppliers and direct
contact with all purchasers of renewable fuel but rather a
representative sample of contacts.
3. On-Site Visits
    The goal of the on-site visit is to verify that the plant has the
technology to produce, store, and blend biofuels at registered levels,
is operating in accordance with the facility's registration, and that
the RINs generated since the last visit are valid. The auditor will
likely use plant maps and photos as part of this analysis, and should
compare and contrast the plant's infrastructure with the third-party
engineering review reports on file with the EPA. The auditor should
note the size and number of storage and blending tanks, and observe the
measurement of volume in the tanks. The auditor should determine
whether the process rate is consistent with annual and quarterly
production of the facility, and whether the facility has quality
process controls in place (e.g., are ASTM International specifications
being followed where appropriate).
    We believe that mass and energy balances on the facility are
critical components of any audit. Because integrated facilities will
likely have energy use that is not directly related to biofuel
production, the auditor should have alternate means of assessing and
correlating energy use to production. We proposed that an auditor
conduct at least four (4) on-site visits per year for QAP B, or every
three (3) months.\17\
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    \17\ Note that there are 4 site visits for a QAP A or QAP B used
during the interim period. See Sec.  80.1472(b) of the regulations.
---------------------------------------------------------------------------

    The majority of commenters indicated that quarterly on-site visits
would impose an undue burden on both the auditor as well as the
producer. They noted that the cost of such visits would be excessively
high, and there would be little to no benefit, given the amount of
other data collected as part of the audit process. Other commenters
recommended a tiered system that consisted of more frequent audits
during the first year, followed by some form of phase-out for site
visits thereafter. A few commenters indicated that quarterly on-site
visits were appropriate. In considering these comments, the agency
determined that the cost for the producer of adhering to a rule that
required quarterly visits outweighed the benefits provided by the
additional on-site visits. Therefore, for the single new QAP, we are
finalizing that the auditor must conduct at least two on-site visits
per year or at least one on-site visit along with ongoing remote
monitoring.
    If an auditor elects to conduct remote monitoring as a substitute
for one of the two required on-site visits per year, the remote
monitoring procedures must be approved by EPA prior to use. The remote
monitoring setup may include equipment such as video cameras, tank
level sensors and/or infrared cameras that clearly show tank levels
where level sensors are not in place. Modifications may not be done to
remote monitoring systems after the EPA review, unless the EPA has pre-
authorized the changes in writing. In no instance shall a facility go
more than 380 days between physical on-site visits overseen by a
licensed professional engineer. For new production facilities, the
first on-site visit must be part of an audit, and the audit must be
completed prior to the verification of RINs.
    We expect that each on-site visit could take from one to several
days, depending on the size and complexity of the facility, the
availability of records, changes since the last audit, etc. Auditors
are free to perform more on-site visits than the minimum required if
deemed necessary.
4. RIN Verification
    RINs will be verified only for a specified period following an
audit. Although an audit of any entity usually certifies what was done,
audits are prospective in that the audits are verifying that past
practices and procedures have been followed, and are currently in place
for future RINs that will be generated. RINs generated after the
completion of the audit can then be verified until the next audit is
completed, but for no longer than 100 days after completion of the
previous audit. (Note that there may not be more than 200 days between
on-site visits, unless remote monitoring is used, in which case there
may not be more than 380 days between on-site visits). We believe this
prospective approach is appropriate for the quality assurance program
because the audit would be verifying the starting point from which
future RINs would be generated. In that sense, the upcoming period of
RIN generation is starting with a verified set of conditions. In
addition, it could place a serious impediment in the market for RINs if
their verification followed RIN generation by any significant period of
time.\18\
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    \18\ The only exception to the issuance of verified RINs only
after the audit has occurred is the limited provision for
verification of RINs issued prior to the audit, during the interim
period, as discussed in section II.B.
---------------------------------------------------------------------------

    To allow for some flexibility around the standard audit schedule
(i.e., quarterly, or roughly every 90 days), RINs generated for up to
100 days after the last audit can be verified, unless the real time
monitoring data or other information obtained by the QAP auditor prior
to the on-site audit indicated that RINs were invalid. If another audit
was not conducted within 100 days, RINs could no longer be verified for
that facility until a new audit was conducted.
    We are finalizing that the on-site visit schedule remain the same,
regardless of findings during the audit. Some commenters indicated that
lower audit frequency levels should be allowed after a significant
period of time with no invalidly generated RINs. We feel that by
reducing the overall number of audits required, it sufficiently
decreases the burden on auditors and producers, while at the same time,
maintains the integrity of the program.

III. Additional Changes Related to the Definition and Treatment of
Invalid RINs

A. Export and Exporter Provisions

    In the NPRM, we proposed a number of regulatory changes regarding
how RINs should be handled when renewable fuel is exported. Our intent
was to ensure that exported renewable fuel is not included in meeting
the mandated domestic annual renewable fuel volume requirement. We
received a number of comments, primarily in support of these changes,
and have made some minor changes to the proposed amendments in this
final rule.
1. Exporter RVO (ERVO)
    A volume of any renewable fuel which is exported, either neat or
blended, requires the exporter to calculate an RVO and retire a like
number and type of RINs as were generated for the exported renewable
fuel. We proposed and are finalizing a minor change to the regulations
to address concerns that some regulated parties may be misinterpreting
the existing regulations and only establishing an RVO for exported
renewable fuel that is in its neat form or blended with gasoline or
diesel. The opening clause of 40 CFR 80.1430(a) provides that an RVO
must be satisfied by any party that exports ``any amount

of renewable fuel,'' and 40 CFR 80.1430(f) also states that ``each
exporter of renewable fuel'' must satisfy an RVO. The portion of Sec.
80.1430(a) stating that the regulation applies ``whether [the exported
renewable fuel] is in its neat form or blended with gasoline or
diesel'' was intended to point out through specific examples that the
regulation applies to both neat and blended renewable fuels, not to
limit the fuel blends to gasoline and diesel. It was not intended to
exclude other exported renewable fuel blends, such as biodiesel blended
into fuel oils, from the scope of the regulation. We are amending 40
CFR 80.1430(a) to simply state that the requirement to establish an RVO
applies whether the exported renewable fuel is in its neat form or
blended. Commenters on the proposed rule unanimously supported this
change.
    We also sought comment on whether the EPA should eliminate exporter
RVO obligations in two situations: (1) Where exporters can document
that no RINs were generated for the exported fuel, or (2) where
exporters can demonstrate that any RINs generated for the fuel were
previously retired ``upstream'' of the exporter. Regarding the first
situation, most commenters supported the idea that renewable fuel for
which RINs were not generated should not create an RVO for the fuel
exporter. The EPA believes this change is consistent with the
fundamental purpose of the exporter RVO; i.e., RINs are retired so the
RINs generated for the fuel do not artificially inflate the RIN market
and misrepresent the amount of renewable fuel produced for domestic
use. If the renewable fuel is never intended for domestic use and no
RINs are generated for it, then there is no reason for RINs to be
retired upon export. Renewable fuel produced in the U.S. for export
only can be clearly labeled as such on product transfer documents and
RINs need not be generated for it. An exporter who exports renewable
fuel for which RINs were never generated will not incur an RVO for such
export, provided certain conditions are met. This final rule amends 40
CFR 80.1430 to set out this allowance, and to add the conditions that
any exporter who does not incur an RVO for exported renewable fuel
because no RINs were generated for it only does so for volumes
purchased directly from the fuel producer. Further, the exporter must
be able to show that no RINs were generated for the exported renewable
fuel. This demonstration is made through fulfillment of the conforming
recordkeeping requirement at 40 CFR 80.1454(a)(6) that the exporter
must maintain an affidavit or affidavits from the renewable fuel
producer of the RIN-less exported fuel, attesting that no RINs were
generated for the specific volume of exported fuel. These requirements
are intended to further the programmatic goal of generating RINs only
for fuel that is intended for domestic production and retiring any RINs
associated with renewable fuel that is ultimately exported.
    Regarding the second situation, while one commenter supported the
idea of eliminating the RVO where the exporter can document that RINs
were already retired (but not retired for compliance with an RVO) for
the exported volume, another commenter asserted that such an allowance
would complicate the RIN-tracking system and make it more difficult for
the EPA to establish how much renewable fuel is being exported. The EPA
believes such a provision would also complicate the retirement and
compliance reporting requirements. Also, it is unlikely, given the
functioning of the RIN market, that RINs would be retired by someone
upstream of the exporter but not for compliance with an RVO. For these
reasons, the EPA has decided not to add a provision allowing an
exemption from the exporter RVO for renewable fuel for which RINs have
already been retired (but not for compliance with an RVO) upstream.
    In summary, the exporter RVO is incurred only for fuel for which
RINs were generated and must be fulfilled only by the exporter and not
by any upstream parties.
2. Require Identification of Renewable Fuel Content
    Pursuant to Section 205 of the EISA, fuel blends containing up to
five percent biodiesel or up to five percent biomass-based diesel, and
that meet ASTM D975 (``Standard Specification for Diesel Fuel Oils''),
need not be labeled as containing biofuel. Fuel blends containing more
than five but less than twenty percent biodiesel or biomass-based
diesel must be labeled ``contains biomass-based diesel or biodiesel in
quantities between 5 percent and 20 percent'' and blends containing
more than twenty percent must be labeled ``contains more than 20
percent biomass-based diesel or biodiesel.'' \19\ Under current FTC
regulations, blends containing more than 20 percent biodiesel or
biomass-based diesel must also be labeled with the precise blend
level.\20\ Since all renewable fuel volumes for which RINs were
generated, including any quantity blended into conventional fuel,
trigger an RVO on export, exporters must be aware if any part of their
fuel volume is renewable fuel. Given the lack of disclosure for blends
of up to five percent and the non-specific disclosure for 5-20 percent
blends, there is growing concern that renewable fuel may be exported
without the required exporter RVO being calculated and fulfilled.
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    \19\ See EISA, section 205(b).
    \20\ See 73 FR 40155 (July 11, 2008), ``Federal Trade Commission
Automotive Fuel Ratings, Certification and Posting; Final Rule.''
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    In the NPRM, we proposed that a person transferring any biomass-
based diesel blend or biodiesel blend to any other person (including
blends of less than five percent) shall include in the PTD a disclosure
of the specific renewable fuel blend level. The PTD disclosure would
include the name of the transferor, the name of the transferee, the
date of transfer, the volume in gallons of the product transferred, and
either the volume in gallons or the percentage of biomass-based diesel
or biodiesel that is contained in the blended product.
    We received a number of comments on this issue. Many commenters
opposed the mandatory disclosure of renewable content blend level,
asserting that it would disrupt the existing fuel transportation and
pipeline system in place and prove costly, impractical, and
unnecessary. Currently, some blended renewable fuel is shipped through
fungible distribution systems, such as a common carrier pipeline. This
diesel has some percentage of renewable fuel in it, as allowed by ASTM
D975 and the pipeline's specification requirements, but the precise
amount of renewable fuel is immaterial to the quality of the fuel. If
the proposed PTD provisions were finalized, these commenters generally
argued that the carriers could have to ship distinct, segregated
batches of fuel based on different renewable fuel content ratings. This
could be both expensive (requiring additional holding tanks and other
physical improvements to the system, as well as requiring additional
testing of the fuel) and time consuming (delaying shipments
downstream). Commenters also suggested that the proposed PTD
requirements would be contrary to the idea of allowing blended diesel
to operate as a drop-in fuel, which encourages the development and
purchase of biodiesel. Commenters also stated that it is not easy, at
the terminal level, to determine the precise content of a blend and
would cause delay and a ripple effect of increased costs to the
terminal operators and downstream buyers.

    Some commenters supported the idea of requiring a general label of
renewable fuel content if less than five percent, but still opposed
disclosure of the specific blend level. One commenter supported the
disclosure of blend level, but suggested that residential heating oil
should be exempt from the requirement because heating oil trucks would
be unable to print all the required information on the tickets they
generate for fuel sold. Some commenters suggested that below a de
minimis level, e.g., one percent or some other level, the renewable
fuel content should not need to be disclosed on the PTD or that
disclosure should only be required where a party has actual knowledge
of the renewable fuel content. Commenters also noted that the proposal
lacks specificity as to how the requirements would be enforced, what
degree of accuracy is required for testing the blend level, and the
specific language to be used on the PTDs.
    Other commenters supported the proposal to require disclosure of
precise renewable fuel blend level in PTDs. These commenters stated
that such disclosure would improve the safety of the marketplace for
buyers, both with respect to RIN validity and the physical properties
of the fuel. If a renewable fuel blend of five percent or less is not
labeled, a blender might add in up to five percent more biodiesel or
biomass-based diesel and sell it onward still without a label, though
the resulting blend would be greater than five percent. This process
could theoretically occur multiple times, resulting in significant
concentrations of biodiesel or biomass-based diesel in diesel without
notice to purchasers. Such concentrations would also result in the
missed retirement of RINs for such renewable content upon export.
    Having considered all comments on this issue, we are not finalizing
the requirements for disclosure of specific blend levels for any blend
volume of any renewable fuel beyond what is already required by EISA
and other regulations, noted above. This will relieve the potential
burden and disruptions that may have occurred in the fuel distribution
system and marketplace.
    However, since the underlying purpose of these proposed
requirements was to ensure that exporters are aware of their
responsibility to fulfill an exporter RVO by making them aware of the
renewable fuel content of their exports, we are taking this opportunity
to remind exporters of their obligations under 40 CFR Sec.  80.1430(e).
If followed appropriately, this paragraph already provides the needed
structure and directions for exporters to determine the renewable fuel
content of their exported volumes and calculate their RVOs, regardless
of whether the blend level is specified in PTDs of the fuel they
receive. 40 CFR 80.1430(e) states that the exporter shall determine the
volume of renewable fuel blended with other fuel at the time of export
by one of three methods. The regulation makes it clear that this is not
a discretionary determination by the exporter, and the exporter must
use one of these three methods for determining renewable fuel content
of any exported fuel blend.
    First, the type of renewable fuel and blend level may be specified
in documents provided by the seller, according to Sec.  80.1430(e)(1).
This will usually be in the form of a product transfer document. For
example, as discussed above, renewable diesel and biodiesel blends
above 20 percent will most likely contain the specific blend level, per
current FTC requirements, and blends between one percent and 20 percent
may be labeled with the specific blend level, though this specific
disclosure is not required by regulation or law. If the blend type and
level is specifically stated by the supplier, the exporter may rely on
such a statement to determine the volume of renewable fuel being
exported and the exporter RVO.
    The second way the renewable fuel content may be determined by the
exporter is by testing the fuel for renewable fuel content using method
B or C of ASTM 6866 or an alternative test method as approved by the
EPA, per Sec.  80.1430(e)(2).
    The third way the exporter may determine the renewable fuel content
of any exported fuel is by assuming the fuel contains the maximum
concentration of renewable fuel allowed by law and/or regulation, per
Sec.  80.1430(e)(3). Therefore, for diesel that is not labeled as
containing renewable fuel, the exporter must assume the volume contains
five percent biodiesel or biomass-based diesel because that is the
maximum concentration currently allowed without label by regulation.
For diesel labeled as containing between five percent and 20 percent
renewable diesel or biodiesel, the exporter must assume the fuel
contains 20 percent because 20 percent is the maximum concentration
that could be contained in that volume. If the exporter does not wish
to assume the maximum percentage allowed by law (be it five percent or
20 percent), then it can use the testing method allowed in Sec.
80.1430(e)(2) to determine the precise fuel content. Importantly, and
as noted above, the exporter is responsible for determining the
renewable fuel content, even when the content is not necessarily stated
on the PTD for diesel.
    Regardless of which method is used to determine the renewable fuel
content of exported volumes, the exporter must report their exported
volume and RVO annually, per the existing regulations at 40 CFR
80.1451(a). Records demonstrating the method used to reach that
determination (including any applicable testing results) must be
maintained per 40 CFR 80.1454(a).
    By clarifying that the exporter RVO is five percent of the exported
volume for diesel not carrying a renewable fuel content label and is 20
percent of the exported volume for diesel labeled as containing between
five percent and 20 percent renewable diesel or biodiesel, we have
greater confidence that the underlying policy goal--to retire an
appropriate number and type of RINs for any volume of exported
renewable fuel--will be fulfilled. At the same time, if the exporter
does not want to assume that maximum level, he or she can test the fuel
at the time of export to determine if there is no renewable fuel
content or some content less than five percent or less than 20 percent,
and accordingly reduce the exporter RVO. Keeping the burden on
exporters to determine the volume of renewable fuel they export and
clarifying that they must assume the maximum percentage allowed by law
where no percentage is specifically labeled on the PTD documents is the
most straightforward way to remove RINs associated with exported fuel
from the marketplace while alleviating the concerns expressed regarding
the proposed specific blend-level PTD disclosure.
3. RIN Retirement Requirements
    The current RFS regulations require exporters to demonstrate
compliance with their ERVOs on an annual basis, in the same way that
obligated parties fulfill their RVOs. We proposed in the NPRM that a
shorter deadline for exporters' fulfillment of their RVOs and
eliminating the deficit carryover provision \21\ for exporters may ease
concerns related to uncertainty in the export market. Reducing the
amount of time available for exporters to meet their RVOs is intended
to discourage ``shell companies'' being formed for the purpose of
exporting renewable fuel without retiring appropriate RINs and then
folding before the retirement deadline in order to avoid the cost of

meeting the RVO. They would also reduce incentives for exporters to
profit from selling RINs received with renewable fuel to obligated
parties at a time of high RIN prices and then purchasing and retiring
RINs to meet their RVO when prices drop. We also suggested, as an
option, that exporters could be required simply to demonstrate on a
quarterly basis that they have acquired RINs sufficient to cover their
RVO in that quarter.
---------------------------------------------------------------------------

    \21\ Under Sec.  80.1427(b), an obligated party or exporter of
renewable fuel may under certain conditions carryover a renewable
volume obligation deficit until the end of the following compliance
year.
---------------------------------------------------------------------------

    We received a number of comments regarding these suggestions, the
majority of which were in favor of eliminating the deficit carryover
allowance for exporters and reducing the time available for compliance
with the RVO after export. Some commenters suggested the RVO should be
met ``immediately'' upon export, while others suggested thirty days,
quarterly, sixty days or annual retirement to meet the exporter's RVO.
Some suggested that RINs still attached to exported fuel should be
immediately retired, whereas for fuel purchased without RINs still
attached, the exporter should be given more time to fulfill its RVO.
Many commenters cited ongoing concerns of exporters gaming the system
by retiring RINs late (if at all) and suggested that shortening the
time frame for compliance would tighten up this ``loose'' area of the
RIN market and improve all other participants' understanding of what
RINs are available for purchase at a given point in time. Other
commenters suggested leaving the exporter RVO provisions as they are,
because the exporter market has ``calmed down'' and exporters need the
flexibility to carryover RIN retirement obligations to the next
compliance year if needed.
    Having considered all the comments on this issue, the EPA believes
the advantages of requiring more immediate and ongoing fulfillment of
the exporter RVO and elimination of the deficit carryover provision for
exporters far outweigh the potential disadvantages and burdens on
exporters. While the EPA does not believe that ``immediate'' retirement
is required upon export, we believe 30 days is a reasonable deadline by
which to require the retirement of RINs of the same number and type as
were originally generated for the exported renewable fuel. This final
rule therefore includes a provision at 40 CFR 80.1430(f) to set the
retirement deadline for fulfilling the exporter's RVO at thirty (30)
days from the date of export. It also removes the deficit carryover
provision for exporters from the RVO formulae at Sec.  80.1430(b) and
from 80.1427. In order to ensure that 2014 ERVOs incurred after
December 31, 2013 and prior to the effective date of the final rule are
still fulfilled, the final rule also includes a new provision at Sec.
80.1430(g) that all 2014 ERVOs existing and unfulfilled as of the
effective date of the final rule must be satisfied by the compliance
demonstration deadline for the 2013 compliance period. This will give
exporters sufficient time to retire RINs in fulfillment of their
existing ERVOs, which may include previously reported carryover ERVOs
from the previous year. The requirement for exporters to report all
such retirements in quarterly reports and annual reports remains the
same as is currently written in 40 CFR 80.1451(c)(2) and 80.1451(a)(1),
respectively.

B. ``Downstream'' Invalidation and Product Transfer Documents

    In the NPRM, the EPA proposed to clarify and expand existing
requirements regarding the designation of qualifying renewable fuel, in
response to concerns that properly generated RINs may become invalid if
the fuel is not ultimately used in or as transportation fuel, heating
oil, or jet fuel. We also proposed additional PTD and tracking
requirements for renewable fuels that are not generally expected to be
used for a qualifying purpose, i.e., as transportation fuel, heating
oil or jet fuel. We received numerous comments regarding these changes,
and are finalizing them as proposed with only minor changes.
1. Designation of Intended Renewable Fuel Use
    In the NPRM we proposed that all renewable fuel producers and
importers must designate all RIN-generating renewable fuel as
transportation fuel, heating oil or jet fuel on the PTDs prepared to
accompany a fuel shipment. The NPRM stated that designations of
intended use must be made in good faith; in other words, parties
designating fuel for a qualifying use who in fact know or have reason
to know that the fuel would likely not be used in or as transportation
or jet fuel or heating oil would be in violation of the regulation, and
subject to civil penalties.
    Many commenters supported these PTD requirements, while some
suggested that fuel traditionally used for conforming purposes (e.g.
biodiesel) should not be required to meet the additional PTD
designation requirements. Some commenters believed the extra language
on PTDs would cause unnecessary expense and burden on producers and
others involved in further transfers of the renewable fuel, and that
the language was especially unnecessary if the PTD was also required to
include a disclosure of any renewable fuel content, as discussed above
in section III.A.2.
    After considering these comments, the EPA believes the additional
PTD designations of intended use will cause minimal burden on regulated
parties while providing useful information to blenders and end users
downstream of the producer. Given that we are not finalizing the
provisions requiring disclosure of specific blend levels for all
renewable fuels, this basic PTD language will provide at least a basic
disclosure that a blended fuel contains renewable content. There is
therefore no redundancy in the disclosure, and it provides useful
information to all potential purchasers.
    We have made two minor adjustments in the required PTD language in
the final rule. First, we removed any implication that there are
negative consequences for the fuel's end user if the fuel is used for
an improper purpose, i.e., not as transportation fuel, heating oil or
jet fuel. The purpose of the PTD is to state the fuel's intended and
appropriate end use and creates no burden or obligation on the end
user. The second change is the addition of a sentence declaring that
any person exporting the renewable fuel is subject to the provisions of
Sec.  80.1430. This statement creates no new right or obligation for
exporters, but simply gives exporters additional notice that they are
subject to the RFS, specifically the provisions requiring retirement of
RINs for any RIN-generating fuel they export.
    In addition to the PTD requirements, we also proposed that parties
generating RINs for any renewable fuel not typically sold for use in or
as transportation fuel, jet fuel, or heating oil must collect and
submit documents certifying the fuel's appropriate end use. The EPA
believes that denatured ethanol, biodiesel, and renewable diesel that
meets ASTM 975-13a Grade No. 1-D or No. 2-D specifications are highly
likely to be used as transportation fuel, heating oil or jet fuel and
are therefore not subject to the additional documentation requirements.
For all other renewable fuels, we proposed limiting the opportunity for
RIN generation to circumstances where the RIN generator has taken
actions to ensure that the fuel is used for transportation fuel,
heating oil or jet fuel. Where the producer or importer has fulfilled
the applicable registration requirements, at Sec.  80.1450(b)(1)(ix),
RINs generated for such fuel will remain valid regardless of the fuel's
ultimate use. In the final rule, we are adding

renewable gasoline to the list of fuels that are highly likely to be
used for a conforming purpose and renewable gasoline is therefore not
subject to the additional requirements for all other RIN-generating
renewable fuels.
    There are two ways for the RIN generator to demonstrate that the
fuel is sold for use as transportation fuel, heating oil or jet fuel.
First, if the RIN generator uses the fuel itself as a blendstock or
additive for gasoline or diesel fuel, it must maintain contemporaneous
records demonstrating that it used the fuel as a blendstock or additive
and that the final product is a transportation fuel, heating oil or jet
fuel that met all applicable standards. Second, if the RIN generator
does not use the fuel itself as a blendstock or additive for gasoline
or diesel fuel, it may enter into a sales contract (or show a string of
contracts) that requires the ultimate purchaser to use the fuel as a
blendstock or additive for gasoline or diesel fuel, and that meets
certain requirements designed to assure that the end user does, in
fact, use the fuel as a blendstock or additive in a transportation
fuel, heating oil or jet fuel that meets all applicable standards.
    We sought comment on these requirements generally, and also how
these new registration requirements should apply to currently
registered entities.
    One commenter agreed that the proposed requirements would help
ensure that the fuels are used for the appropriate RFS purposes and no
other purposes, and suggested that the requirements should apply
immediately to currently registered entities who should update their
registrations as soon as practicable. Other commenters, however,
disagreed with the proposal, stating that the producers' involvement
with the fuel should end at the time of sale and that such tracking is
beyond the appropriate scope of the QAP system. Another commenter
suggested that providing affidavits of appropriate use should be a
burden placed on the end user, not the producer or RIN generator.
Another commenter stated that these requirements only complicate an
already complicated system.
    After considering all comments, the EPA is finalizing the proposed
registration, reporting and recordkeeping requirements for fuels not
typically used as transportation fuel, heating oil or jet fuel as
proposed. We believe that the RIN-generators are in the best position
to collect and submit information regarding end use, because they are
already regulated and registered parties, and they are the ones
receiving the financial benefits of RIN generation. Therefore, it is
appropriate to require RIN generators to be able to demonstrate,
through the affidavits of third-party end users, that the renewable
fuel they produce is indeed being used or is intended for use for a
qualifying purpose. While we recognize that this will require
additional paperwork collection and submission, the benefits of such
additional work outweigh the potential burdens on RIN generators.
    Given the lag time between publication of this rule and the
effective date of the final rule, we have determined that for parties
already registered to generate RINs for these fuels, registrations must
be updated as of the effective date of this rule. This should provide
sufficient time for the initial collection of end user affidavits.
    In determining which fuels are typically sold for use in or as
transportation fuel, jet fuel, or heating oil, we realized that some
fuels currently meeting the definition of ``renewable diesel'' should
be subject to the same additional requirements to demonstrate
appropriate end use. Some renewable fuel producers are currently
generating RINs for fuel that they claim meets the existing definition
of renewable diesel, but which is not chemically equivalent to a
petroleum diesel fuel and is therefore not a drop-in fuel. This product
is primarily composed of triglycerides that have not been chemically
converted to a hydrocarbon, through simple filtration of vegetable
oils. It cannot be used as a drop-in transportation fuel but can only
be used at blend levels with diesel fuel that are approved under 40 CFR
part 79. To address this issue, we proposed to amend the definition of
``non-ester renewable diesel'' so that qualifying fuels must be
approved under 40 CFR part 79 at specific blend levels with diesel
fuel. This would explicitly allow those renewable fuels that are not
fungible in their neat form with petroleum-based fuels to qualify as
renewable diesel, while specifying that the end product must be
fungible with petroleum diesel.
    We also suggested that in order to differentiate between the two
types of renewable diesel (``drop in'' and other) we could limit the
definition of renewable diesel to fuels that meet the ASTM D 975 Grade
No. 1-D or No. 2-D specifications, and that are homogenous
hydrocarbons. We could then refer to all other fuels that meet the
current definition of renewable diesel as viscous non-ester renewable
diesel, effectively removing these ``other'' fuels from the definition
of renewable diesel.
    We received a number of comments in support of altering the
definition to distinguish between renewable diesel that is fungible
with conventional diesel and that which is not. One commenter
additionally suggested that fuel not qualifying under the limited
definition of renewable diesel should not qualify for RIN generation at
all, or should have to petition for a new pathway in order to generate
RINs. Other commenters suggested that triglycerides should never be
considered renewable fuel capable of generating RINs.
    After considering all comments on this issue, we determined that it
is clearer to distinguish between fungible drop-in renewable diesels
meeting ASTM D 975-13a Grade No. 1-D or No. 2-D specifications and
other renewable fuels that can be blended at levels allowed under 40
CFR part 79 to create a product fungible with transportation fuel
(petroleum diesel). However, the final rule creates this distinction
within the definition of ``renewable diesel'' instead of creating a new
definition of ``viscous non-ester renewable diesel,'' to avoid further
complicating the system and creating a new class of renewable fuel. We
are therefore amending the definition of renewable diesel to include
two classes of renewable diesel, one that meets ASTM D975-13a Grade No.
1-D or No. 2-D specifications and one that does not. Both classes of
renewable diesel must not be mono-alkyl esters. The first class of
renewable diesel must meet the ASTM D 975-13a Grade No. 1-D or No. 2-D
specifications and must be suitable for use in an engine designed to
operate on conventional diesel. The second class of renewable diesel
must be a fuel or fuel additive registered under 40 CFR part 79 and be
intended for use in an engine designed to operate on conventional
diesel. As discussed above, any renewable diesel that does not meet the
ASTM D975-13a Grade No. 1-D or No. 2-D specifications, i.e. that is in
the second class of the new definition of renewable diesel, is subject
to the additional registration, recordkeeping and reporting
requirements for fuels not typically sold for an RFS qualifying use. We
do not find it necessary, as some suggested, to prohibit RIN generation
for renewable diesel not meeting an ASTM specification. The increased
recordkeeping and tracking requirements for renewable diesel not
meeting the ASTM D975-13a Grade No. 1-D or 2-D specifications are
designed to ensure the fuel is used for an RFS qualifying use and
therefore is properly eligible for RIN generation.
    In the NPRM, we also proposed new requirements at Sec.  80.1433 for
any party

selling or transferring a volume of renewable fuel for which RINs were
generated, if that party knew or had reason to know that the volume
would ultimately be used for a non-conforming purpose. We proposed that
such a party would be obligated to redesignate the fuel (by removing
the PTD designation of intended use) and to retire a like quantity and
type of RINs as were originally generated for the volume. We also
proposed a new prohibited act provision at Sec.  80.1460(g) that
established a failure to retire RINs when the designation of an RFS
intended use was removed as a prohibited act. Upon further
consideration, we have determined that these new retirement and
redesignation requirements and the associated prohibited act provision
are not needed to meet the program goal of ensuring that RIN-generating
renewable fuel is used for an RFS qualifying fuel use, i.e., as
transportation fuel, heating oil or jet fuel in the United States.
Having added the requirements for `intended use' PTD language to
accompany all volumes of renewable fuel for which RINs were generated
and new requirements for tracking and recordkeeping of actual end use
for fuels not traditionally used for a qualifying use, we feel that the
program goal of ensuring appropriate end use is already addressed and
managed through the regulations. We are therefore not finalizing the
proposed Sec.  80.1433 and conforming prohibited act provision for
sellers and transferors of RIN-generating renewable fuel.
2. Required Actions Regarding Fuel for Which RINs Have Been Generated
That Is Redesignated for a Non-Qualifying Fuel Use
    Section 80.1429(f) of the existing regulations provides that any
person who uses or designates a renewable fuel for an application other
than transportation fuel, heating oil or jet fuel (i.e., a non-
qualifying fuel use) must retire any RINs received with that renewable
fuel. This approach, however, places the burden of using fuel for a
qualifying use on the end user (who may under the existing regulations
have no idea of the appropriate use requirements) when the fuel already
should have been redesignated upstream and the use restriction removed.
In other words, once the fuel reaches the end user, it should be
clearly designated either for use as a transportation fuel, heating oil
or jet fuel and sold as such, or should have been redesignated for a
non-qualifying fuel use and the redesignator should have retired an
appropriate number of RINs. Redesignation in this context simply means
the removal of the PTD statement of intended end use required under
section 1453(a)(12). A party removing this designation might also
include a statement that the fuel is intended for some other specific
use, but such additional or other specifications are not required under
the regulations.
    As noted above in section III.B.1, a transferor who uses the PTD
language designating the fuel for use as transportation fuel, heating
oil or jet fuel must not know or have reason to know that the fuel will
be used for some other purpose. To do so would be a prohibited act and
subject the transferor to civil penalties. Any person redesignating
fuel for which RINs have been generated for a non-qualifying use must
make the RIN system whole by retiring an equivalent number and type of
RINs. The end user, on the other hand, has no obligation under the RFS
to use fuel in a particular way or to retire RINs if the fuel is used
for a non-qualifying purpose. The original producer or RIN generator
for the fuel is similarly protected under this system, because the RINs
are not invalidated by an improper end use. If RINs were generated for
the fuel and it is sold for use as a transportation fuel, heating oil,
or jet fuel (and any other additional requirements are met for special
fuel types, see section III.B.1 of this Preamble), then the RINs
generated for that fuel are valid and cannot be invalidated by any
action of the end user.
    To ensure that RINs generated with renewable fuels are retired if
the fuel is redesignated for a non-qualifying fuel use, we proposed and
are finalizing new requirements for any party that redesignates a
renewable RIN-generating fuel for a non-qualifying fuel use. To
accomplish this, we are removing and reserving Sec.  80.1429(f) of the
regulations and adding a new Sec.  80.1433 to require parties that
designate fuel for which RINs were generated for a non-qualifying fuel
use, i.e. for something other than transportation fuel, heating oil, or
jet fuel, to retire an appropriate number and type of RINs. We are also
adding a new Sec.  80.1460(g) which prohibits a person from designating
a qualifying renewable fuel for which RINs were generated for a non-
qualifying fuel use, unless the requirements of Sec.  80.1433 have been
met, i.e. an appropriate number and type of RINs were retired when the
fuel was redesignated. These changes will relieve end users of the
obligation to retire RINs.
    Commenters on this issue supported the proposed changes for
redesignators and removal of the retirement requirement for end users.
Based on our initial rationale and the lack of any comments to the
contrary, we are finalizing these changes as proposed. One commenter
considered the proposed 10 day retirement deadline too short and
suggested it should be extended to 15 days, starting on the date the
fuel is re-designated or sold. The EPA foresees no harm in extending
the deadline for Sec.  80.1433 retirements, so is finalizing a 15 day
deadline.
3. RIN Generation for Fuel Made With Renewable Fuel Feedstock
    The existing regulations do not provide a pathway for the
generation of RINs for a fuel produced using another renewable fuel as
a feedstock. Parties seeking to do so, however, may submit a petition
requesting approval pursuant to Sec.  80.1416. 40 CFR 80.1426(c)(6)(ii)
sets forth certain prohibitions that would apply if, in the future, the
EPA approved a pathway that allowed a party to generate RINs for a fuel
that was produced using another renewable fuel as a feedstock. These
prohibitions are designed to prevent parties from generating more than
one RIN for the same volume of renewable fuel. In the NPRM, the EPA
proposed to modify Sec.  80.1426(c)(6) to prohibit a party from
generating RINs for a fuel made from a renewable fuel feedstock, where
the feedstock was produced by another party, unless the EPA approves a
petition under Sec.  80.1416 and the petition and approval include an
enforceable mechanism to prevent double counting of RINs. Having
received no adverse comments on this proposal, we are finalizing the
new paragraph as proposed.
    We also proposed to amend Sec.  80.1426(f)(4) to address the
potential for ``double discounting'' for non-renewable feedstocks when
renewable fuel is produced by co-processing renewable biomass and non-
renewable feedstocks to produce a fuel that is partially renewable. To
correct this problem, we proposed to add a new paragraph (f)(4)(iii) so
that for purposes of Sec.  80.1426(f)(4) only, the equivalence value
does not include a discount for non-renewable feedstocks. Having
received no adverse comments on this proposal, we are finalizing the
new paragraph as proposed.
4. Use of Renewable Fuel in Ocean-Going Vessels
    Another issue the Agency is aware of concerns the use of renewable
fuel-containing Motor Vehicle, Nonroad, Locomotive and Marine diesel
fuel (MVNRLM) in ocean-going vessels. The definition of
``transportation fuel'' specifically excludes ``fuel for use in

ocean-going vessels''. See 40 CFR 80.1401. In the preamble to the March
26, 2010 RFS rule, the Agency stated that ```fuels for use in ocean-
going vessels' means residual or distillate fuels other than MVNRLM
intended to be used to power large ocean-going vessels.'' 75 FR 14670,
14721 (March 26, 2010). The rule also defines ``fuel for use in ocean
going vessels'' as including ECA marine fuel. See 40 CFR 80.1401. Some
parties have questioned whether MVNRLM that is blended into ECA marine
fuel is ``fuel for ocean going vessels'' such that RINs generated for
the renewable fuel component of MVNRLM become invalid upon that use. It
is the Agency's interpretation that the definition of ``fuel for use in
an ocean-going vessel'' in Sec.  80.1401 does not include MVNRLM that
is blended into ECA marine fuel. This is based on the definitions of
fuel for use in an ocean-going vessel and of ECA marine fuel, as
explained in the March 2010 rulemaking.\22\ Therefore, RINs that have
been or are properly generated for any renewable fuel component of
MVNRLM that is blended to produce ECA fuel remain valid. The EPA notes
that the vast majority of MVNRLM is used for qualifying RFS purposes,
and that only a trivial quantity of such fuels is used to produce ECA
fuel for ocean-going vessels. Given the complexity and regulatory
burden that would be involved in tracking trivial quantities of MVNRLM
that may be used in ECA fuel, the RFS regulations appropriately treat
all properly generated RINs for renewable fuel blended into MVNRLM as
valid, regardless of the possible downstream blending of MVNRLM with
ECA fuel. In addition, new regulatory requirements designed to ensure
that renewable fuel is put to a qualifying use would be imposed on
certain types of renewable fuel, as discussed above. These new
requirements would further limit the quantity of renewable fuel that
could ultimately be blended with ECA fuel used in ocean going vessels.
---------------------------------------------------------------------------

    \22\ This does not change the fact that the blend of fuel that
results from blending MVNRLM or NRLM with ECA marine fuel would
still be ECA marine fuel and subject to the sulfur limits that apply
to such fuel.
---------------------------------------------------------------------------

    We sought comment on whether our interpretation of ``fuel for use
in an ocean-going vessel'' created any potential problems. The Agency
received several supportive comments and no comments against the
proposed interpretation of ``fuel for use in an ocean-going vessel''.
Therefore, the Agency is finalizing the proposed interpretation.
5. Treatment of Improperly Separated RINs
    Under existing regulations, a RIN that was improperly separated
pursuant to Sec.  80.1429 is invalid and obligated parties may not use
any invalid RINs for compliance purposes. In the NPRM, the EPA proposed
to remove the provision that improperly separated RINs are invalid, and
to add a provision identifying the improper separation of RINs as a
prohibited act. The net effect of these changes would allow obligated
parties to use RINs that were improperly separated for compliance
purposes, since the RINs would no longer be considered invalid.
However, improper RIN separation would continue to be a prohibited act
under the regulations. We received a number of comments in support of
this approach and therefore are finalizing it as written.
    The EPA sought comment on whether the RFS regulations should
instead maintain Sec.  80.1431(a)(1)(viii), but also require a more
comprehensive and robust mechanism to allow parties that acquire
separated RINs and the EPA to evaluate whether the RINs were properly
separated and used in or for a qualifying fuel. We received one comment
in support of the proposal but a number of comments in opposition to
this alternative idea, asserting that the RIN-related regulations are
already complex and this would add additional complexity without a
significant benefit in return. The simpler proposed alternative (above)
was widely favored. The EPA is therefore not finalizing any additional
requirements for tracking of separation events and separated RINs.
    Additionally, the EPA requested comment on whether we should
require RIN separators to include with their quarterly reports
additional records related to qualifying separation events that are
already required to be reported in basic form in quarterly reports.
Enhanced reporting requirements for RIN separators could facilitate the
EPA's ability to investigate and prosecute persons who engage in RIN
separation violations. The EPA sought comment on the type and scope of
reporting that would most likely assist the EPA in identifying RIN
separation violators. We received no comments on this issue and are not
prepared at this time to finalize additional reporting requirements
regarding RIN separation. We intend to continue to evaluate this
question and will take up the issue in a subsequent action if we
determine it is warranted. As we are not finalizing a change, RIN
separators will continue to be required to provide in quarterly reports
a list and certain details of all RIN separation events occurring in
that quarter, per 40 CFR 80.1451(c)(1).

C. Treatment of Confidential Business Information

1. Proposed Disclosure of Certain Registration and Reported Information
    Due to the high level of interest in RFS compliance information
since implementation of the RFS program, the EPA proposed to make
certain RFS registration and reporting information public. The release
of this information was intended to improve the integrity of
information submitted for RFS compliance and deter fraudulent behavior,
and was part of a broader effort to increase transparency and provide
information to the public that would promote greater liquidity in the
RIN market. We solicited comments on all aspects of the proposed
information releases, and in particular whether there are unique
circumstances where disclosing this information would cause substantial
harm to a company's competitive position.
    We received a substantial number of comments on our proposed
Confidential Business Information (CBI) determination, many of which
raised legitimate concerns regarding the appropriateness and lawfulness
of the EPA releasing the proposed information. Given our desire to
finalize the proposed QAP program in a timely manner and the
significant serious issues raised on the CBI question, we are not
finalizing a CBI determination in this action. We intend to continue to
evaluate the issues raised in comment and if appropriate will make a
CBI determination in a future action.
    The EPA proposed to summarize and publish two classes of
information: Registration information and information from quarterly
reports. First, we proposed to publish registration and QAP information
required under 40 CFR 80.1450(b), (c), and (g) from independent third-
party auditors and renewable fuel producers and importers registered
with the RFS program, by facility and on a monthly basis. For each
facility, we would publish the company name, facility name, facility
type/fuel product, total permitted capacity, production volume,
production process type, feedstocks, D-Code, and any co-products. After
publishing these monthly registration reports, we proposed to summarize
and update the information in quarterly and annual registration reports
of the same type of information.
    Second, we proposed to publish monthly, quarterly and/or annual
report of information reported to the EPA

under 40 CFR Sec.  80.1452(b) by renewable fuel producers and
importers, on a facility-by-facility basis. This information included:
     The name of the renewable fuel producer or importer and
associated registration information (i.e., name, address, feedstock,
process, fuel type, D-Code).
     The EPA company and facility registration numbers and the
associated registration information of the renewable fuel producers,
foreign ethanol producers and importers that generated RINs in EMTS
during the applicable time period(s).
     The D-code of RINs generated by the facility during the
time period (40 CFR 80.1452(b)(6)). For each D-code generated at a
facility, the number of RINs generated (40 CFR 80.1452(b)(12)), volume
of fuel produced (40 CFR 80.1452(b)(10)), fuel type (40 CFR
80.1452(b)(9)), production process (40 CFR 80.1452(b)(7)), feedstocks
(40 CFR 80.1452(b)(13)), and co-products (40 CFR 80.1452(b)(15)).
     The volume of denaturant (for ethanol), applicable
equivalence value, and whether all the feedstocks used during the time
period were claimed to have met the definition of renewable biomass (40
CFR 80.1452(b)(11) and 80.1452(b)(14)).
    The EPA believed that these data were not entitled to confidential
treatment because we believed much of this information was already
publicly available and widely known, for example renewable fuel
producers' company names, facility names, RIN-generating names,
locations, production years, fuel product types, RIN D-Codes,
production volumes, production process types, feedstocks, equivalence
values, and number of RINs generated. We also believed that disclosing
this information was not likely to cause substantial harm to the
competitive position of the business required to report these
information elements under Part 80 because these elements of
information do not reveal any proprietary information, or any other
information that would likely provide insight for competitors to gain
an advantage. Furthermore, because these information elements would be
aggregated to the facility level and further aggregated for the time
period of the EPA-published report, we did not believe the information
could be used by a competitor to gain a competitive advantage.
    We received a number of comments on this proposal. Many commenters
noted that the most sensitive aspects of the information proposed for
release are not already publicly available or widely known. The EPA's
assumption on this point was mistaken. Further, many commenters
discussed at length the ways in which release of the data could cause
competitive harm. For example, release of actual production volumes
over time could reveal a company's market share and position, percent
capacity production rate, marketing strategy and business partnerships
with other entities such as feedstock suppliers. Feedstock type and
production process type, in concert with other released data, could be
reverse-engineered to reveal the producers' process efficiencies,
feedstock use rates and other proprietary information. Some commenters
asserted that release of the data would have a disproportionately large
negative impact on small producers, whose processes and business
relationships are typically more sensitive and guarded than large
producers'.
    Given the recognition that much of this information is not already
public or widely available and the many concerns expressed about
potential harm to competitive position, the EPA is not finalizing the
proposed release of registration and reported information. The decision
not to finalize the proposed release of data is not a determination
that the information proposed for release necessarily deserves
confidential treatment, for example in response to a FOIA request. Such
requests will continue to be evaluated on a case-by-case basis. The EPA
will continue its current practice to treat as CBI any registration or
reported information claimed as confidential, unless a specific
determination to the contrary is made in a given case. Today's decision
is simply a determination that, at this time, we are not prepared to
make a class determination that the information proposed for release in
the NPRM is not CBI.
2. Treatment of QAPs and Independent Engineering Reviews
    For QAP plans and independent engineering reviews that are claimed
as CBI, the EPA proposed to require submission of two versions of those
documents: One clearly marked ``CBI version,'' with appropriate areas
denoted as CBI, and a second ``public version,'' with CBI information
redacted. Based on the Agency's experience with the RFS program, the
EPA noted that certain information should not fall under a claim of CBI
because it is generally available to the public or widely-known within
the industry, and disclosure would not likely cause harm to the
competitive position of any submitting renewable producer, importer, or
any other party to a RIN transaction. If the EPA receives a Freedom of
Information Act (FOIA) request for the CBI version of an engineering
review or QAP plan, the EPA would process the FOIA request pursuant to
its CBI regulations under 40 CFR part 2, subpart B. Submission of the
two versions of QAP plans and engineering reviews (CBI and public
versions) would allow the Agency to clearly understand what information
is claimed as CBI, and would also allow the Agency to make public
versions available to the public without unnecessary delay. We received
no adverse comments on this approach and are finalizing as proposed.

D. Proposed Changes to Section 80.1452--EPA Moderated Transaction
System (EMTS) Requirements--Alternative Reporting Method for Sell and
Buy Transactions for Assigned RINs

    In the NPRM, we suggested alternative reporting and PTD
requirements found in Sec. Sec.  80.1452 and 80.1453, respectively,
which would allow buyers and sellers of assigned RINs flexibility
concerning the invoice date reported to EMTS through the use of a
unique identifier identified in advance between buying and selling
parties. Some buyers and sellers of assigned RINs have expressed
concerns with these requirements, stating they have difficulty
determining the date of transfer since title of the renewable fuel is
not transferred until the fuel physically reaches the buyer. Some
transactions, for example those by rail or barge, may take several
weeks, and their current accounting systems do not include a means for
capturing the buyer's receipt date. We noted that such an alternative
method would require substantial modification to the EMTS to accept
such transactions.
    We received a number of comments in support of adding flexibility
in the reporting and PTD requirements. However, we did receive one
comment from an obligated party stating that they and other parties had
spent a substantial amount of resources in developing accounting
systems to implement the current regulatory provisions and that such a
change in flexibility would necessitate a major overhaul of accounting
systems that have been functioning adequately for the past several
years at significant cost to industry.
    We believe that it is important to note that such changes to EMTS
incur significant costs to both the Agency and industry. We also
understand both the need for flexibility and the potential

costs to industry when we allow new flexibility in our reporting
systems. While we agree that there may be some value in adding
flexibility to make buying and selling transaction function more
smoothly in EMTS, we are not prepared at this time to institute such a
change to EMTS. Nor do we wish to disrupt the significant cost borne by
industry to comply with existing reporting and PTD requirements.
Therefore, we are not finalizing the proposed changes to the reporting
and PTD requirements in Sec. Sec.  80.1452 and 80.1453. However, we may
consider further action on this at a later date.

IV. Impacts

    The quality assurance program that we are finalizing in today's
final rulemaking provides a voluntary mechanism for regulated parties
to verify that RINs are validly generated, provides an affirmative
defense against violations if a regulated party transfers an invalidly
generated RIN or uses it for compliance, and provides clarity regarding
the responsibility of regulated parties to replace invalidly generated
RINs. The program does not change the volume requirements of the RFS
program, but instead helps to ensure that those volume requirements are
met. Likewise, the changes to the regulations governing export of
renewable fuel, separation of RINs from wet gallons, and qualifying
uses of renewable fuel are also intended to ensure that the RFS volume
requirements are met with qualifying renewable fuel. As a result, there
is no change to the expected impacts of the RFS program in terms of
volumes of renewable fuel consumed or the associated GHG or energy
security benefits. Instead, the primary impacts of the quality
assurance program will be improved liquidity in the RIN market and
improved opportunities for smaller renewable fuel producers to sell
their RINs.
    The quality assurance program finalized today is voluntary. As a
result, there are no obligatory costs. There will be costs associated
with an individual party's participation in the quality assurance
program. However, the fact that the quality assurance program is
voluntary means that a decision to participate will be made
independently by each regulated party. Furthermore, any costs incurred
will only be borne if the industry believes that those costs are less
than current costs in the marketplace resulting from efforts to verify,
acquire, and trade RINs.
    Regulated parties face high costs if they unintentionally purchase
invalid RINs (including civil penalties as well as the cost of
purchasing additional RINs to meet their RVOs). Although they may make
expenditures to implement the QAPs, they are making that investment to
reduce the risk of incurring those future costs. As rational actors,
the EPA anticipates that regulated parties will not spend more on QAPs
than the costs they intend to avoid. Therefore, the EPA estimates that
this rule will result in a net reduction in social costs.
    As of June 2014, there are 559 biofuel producers operating more
than 754 biofuel production facilities. Of these, there are 244
biomass-based diesel producers operating 261 biomass-based diesel
production facilities. These numbers are expected to increase as the
biofuel market expands. While it is unlikely that all biofuel producers
will opt to participate in the quality assurance program, that was the
assumption for the upper cost estimate range in order to reflect the
maximum potential cost of the program.
    The EPA staff consulted with a variety of parties who are expected
to be involved in developing RIN validation programs for the biofuels
industry. These parties include current and potential RIN auditors,
conventional and biofuel industry groups, and obligated parties which
have been affected by RIN fraud. These parties all provided informal
estimates of the costs associated with this type of quality assurance
program which were used to inform our cost calculations.
    For those biofuel producers who opt into the quality assurance
program, each biofuel production facility must be visited and assessed
as part of any audit conducted under the quality assurance program. An
auditor will use an approved QAP as the basis for the verification of
biofuel produced and RINs generated at a facility. In order to verify
production, the auditor must conduct site visits, review documents, and
contact entities that do business with the facility. The proposed
components of audits are described in Section II.
    For producers choosing to take advantage of the QAPs, we require
that production facilities be visited on a semi-annual basis. New
production facilities shall be visited prior to verification of any
RINs and subsequently according to the RFS QAP schedule. We estimate
that each visit could take from one to several days, depending on the
size and complexity of the facility, the availability of records,
changes since the last audit, etc.
    Tables IV-1, IV-2, and IV-3 below itemize the activities
anticipated for each biofuel production facility audit. The estimates
include costs incurred by the biofuel producer (Table IV-1), the
auditor (Table IV-2), and the EPA (Table IV-3). While we project costs
for the QAP auditors, we expect they will recoup their costs by
charging the producers in most cases for their audit and RIN
verification services.

                                            Table IV-1--Costs to the Biofuel Producer for Implementing a QAP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Prof./tech.
                Category                   Manager time        time        Clerical time  Number per yr.     Capital $      Total hours       Total $
--------------------------------------------------------------------------------------------------------------------------------------------------------
Site Visit..............................               1              16               4               2  ..............              42           3,588
Reporting...............................               2              12               4               2  ..............              36           3,040
Recordkeeping...........................               0               0               2               2  ..............               4             148
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............  ..............  ..............  ..............              82           6,776
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                               Table IV-2--Costs to the QAP Auditor for Implementing a QAP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Prof./tech.
                Category                   Manager time        time        Clerical time  Number per yr.     Capital $      Total hours       Total $
--------------------------------------------------------------------------------------------------------------------------------------------------------
Auditor.................................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
Contract Init...........................               4               4               2               1             530              10           1,428
Site Visit..............................               4              16               0               1           1,060              20           3,036
Follow-up...............................               2              24              10               2           1,060              72           5,778

Monitoring..............................               2              50               0  ..............  ..............              52           5,020
Consultants.............................  ..............  ..............  ..............               1           1,000  ..............           1,000
Reporting...............................               0               4              12               2  ..............              32           1,656
QAP Prep................................               2               8               4               2  ..............              28           2,272
EMTS....................................               0              25               0  ..............  ..............              25           2,400
Recordkeeping...........................               0              12              25  ..............  ..............              37           2,077
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............  ..............  ..............  ..............             276          24,667
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                   Table IV-3--Costs to the EPA for Implementing a QAP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Prof./tech.
                        Category                           Manager time        time        Clerical time     Capital $      Total hours       Total $
--------------------------------------------------------------------------------------------------------------------------------------------------------
Implementation..........................................  ..............               3  ..............  ..............               3             267
EMTS Data Management....................................  ..............               1  ..............  ..............               1              89
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............               4  ..............  ..............               4             356
--------------------------------------------------------------------------------------------------------------------------------------------------------

A. Time and Cost Assumptions

    The specific times estimated for each task are shown in Tables IV-
1, IV-2, and IV-3. These estimates are based on a number of basic
assumptions. An initial site visit of the facility to be audited is
assumed to require two days, and include estimated travel and per diem
costs. For simplicity, we have estimated an average $600 for airfare,
$150 for lodging, and $80 for the per diem expenses. It is assumed that
a plant manager would meet briefly with the auditor, and that a plant
chemist or other professional would escort the auditor throughout the
visit. Some clerical support would be required to locate files for the
related document reviews.
    It was assumed that an auditor would travel and spend half a day on
contract initiation. Any follow up site visits were assumed to be
shorter in duration, as the auditor would now be familiar with the
facility and its normal operation. A substantial amount of the
auditor's time would be spent in follow up documentation of the
facility, such as checking feedstock suppliers, process fuel suppliers,
doing volume and mass balances, and monitoring the ongoing operation of
the facility. It was assumed that an auditor would employ a specialized
consultant and/or local agent to perform some portion of the audit
support.
    In addition to tracking facility operation, an auditor would also
be responsible for preparing the QAP, maintaining recordkeeping,
monitoring and/or brokering activities on EMTS, and assisting with RFS
reporting requirements.

B. Labor Cost Assumptions

    The labor costs used in this cost estimation are average mean wages
for each labor category, as provided in the Bureau of Labor and
Statistics Report dated May 2011. Based on this data, we used the
following hourly wages for each employee type:

Managerial $55.04 per hour
Technical/Professional $47.81 per hour
Clerical $18.35 per hour

Doubling to account for company overhead and benefits, and for
convenience, rounding to the dollar, gives the following hourly rates:

Managerial $110 per hour
Technical/Professional $96 per hour
Clerical $37 per hour

For the Agency costs, the work was assumed to be performed by a GS-13
technical employee, doubled and rounded up, for an hourly rate of $89.

C. Cost Estimate Results

    We considered two scenarios to provide a range of cost estimates
with the first estimate assuming that all currently registered biofuel
production facilities participate in the program and the second
estimate assuming that just the biomass-based diesel production
facilities participate. The first estimate represents our maximum total
cost estimate based on the number of registered biofuel producers as of
June 2014. This assumption of total participation by all biofuel
producers equates to 559 RIN generators with 754 biofuel production
facilities. This results in a maximum total cost for the program,
including recordkeeping and reporting costs, of $22,386,702. If all
parties are participating in the program and all RINs are verified,
this results in a per-RIN cost of less than $0.01. However, we do
expect that the per-RIN cost would vary depending on the number of RINs
generated by each fuel producer since the effort involved in validating
many aspects of renewable fuel production is the same regardless of the
size of the facility.
    We do not expect that the costs of participation in the quality
assurance program will vary significantly by the D code of RINs. While
RINs with different D codes may command different prices in the market,
the verification process for each RIN is expected to be similar
regardless of D code, with the biggest cost differences in feedstock
verification. For this reason we use the same estimated unit costs for
the second estimate, where we assume that only the biomass-based diesel
production facilities participate in the QAP program. There are
currently 244 biomass-based diesel producers operating 261 biomass-
based diesel production facilities. The total cost for the program,
including recordkeeping and reporting costs, if just these facilities
participated is estimated to be $8,091,431.

V. Public Participation

    Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided an opportunity
for submitting written public comments following the proposal that we
published on February 21, 2013 (78 FR 12158). We also held a public
hearing on April 18, 2013, at which a number of parties provided both
verbal and written testimony. All comments received, both verbal and
written, are

available in the EPA docket EPA-HQ-OAR-2012-0621 and were considered in
developing the final rule. Public comments and the EPA responses are
discussed throughout this preamble.

VI. Statutory and Executive Order Review

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

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
action is a ``significant regulatory action'' because it raises novel
legal and policy issues. Accordingly the EPA submitted this action to