[Federal Register Volume 88, Number 132 (Wednesday, July 12, 2023)]
[Rules and Regulations]
[Pages 44468-44593]
[FR Doc No: 2023-13462]

Vol. 88

Wednesday,

No. 132

July 12, 2023

Part II

Environmental Protection Agency

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40 CFR Parts 80 and 1090

Renewable Fuel Standard (RFS) Program: Standards for 2023-2025 and
Other Changes; Final Rule

Federal Register / Vol. 88, No. 132 / Wednesday, July 12, 2023 /
Rules and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 80 and 1090

[EPA-HQ-OAR-2021-0427; FRL-8514-02-OAR]
RIN 2060-AV14

Renewable Fuel Standard (RFS) Program: Standards for 2023-2025
and Other Changes

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Under the Clean Air Act, the Environmental Protection Agency
(EPA) is required to determine the applicable volume requirements for
the Renewable Fuel Standard (RFS) for years after those specified in
the statute. This action establishes the applicable volumes and
percentage standards for 2023 through 2025 for cellulosic biofuel,
biomass-based diesel, advanced biofuel, and total renewable fuel. This
action also establishes the second supplemental standard addressing the
judicial remand of the 2016 standard-setting rulemaking. Finally, this
action makes several regulatory changes to the RFS program, including
changes related to the treatment of biogas and other modifications to
improve the program's implementation. At this time EPA is not
finalizing proposed provisions related to the generation of RINs from
qualifying renewable electricity.

DATES: This rule is effective on September 11, 2023, except for
amendatory instruction 30, which is effective on February 1, 2024, and
amendatory instructions 41 and 42, which are effective on April 1,
2024. The incorporation by reference of certain publications listed in
this regulation is approved by the Director of the Federal Register as
of July 12, 2023. The incorporation by reference of ASTM D1250, ASTM
D4442, ASTM D4444, ASTM D6866, and ASTM E870 was approved by the
Director of the Federal Register as of July 1, 2022. The incorporation
by reference of ASTM D4057, ASTM D4177, ASTM D5842, and ASTM D5854 was
approved by the Director of the Federal Register as of April 28, 2014.
The incorporation by reference of ASTM E711 was approved by the
Director of the Federal Register as of July 1, 2010.

ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2021-0427. All documents in the docket are listed on the
https://www.regulations.gov website. Although listed in the index, some
information is not publicly available, e.g., confidential business
information (CBI) or other information whose disclosure is restricted
by statute. Certain other material is not available on the internet and
will be publicly available only in hard copy form. Publicly available
docket materials are available electronically through https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Dallas Burkholder, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number:<PHONE_NUMBER>; email address: [email protected].

SUPPLEMENTARY INFORMATION: Entities potentially affected by this final
rule are those involved with the production, distribution, and sale of
transportation fuels (e.g., gasoline and diesel fuel), renewable fuels
(e.g., ethanol, biodiesel, renewable diesel, and biogas). Potentially
affected categories include:

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                                                   NAICS \a\
                   Category                          codes          Examples of potentially affected entities
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Industry......................................          112111  Cattle farming or ranching.
Industry......................................          112210  Swine, hog, and pig farming.
Industry......................................          221210  Manufactured gas production and distribution,
                                                                 and distribution of renewable natural gas
                                                                 (RNG).
Industry......................................          324110  Petroleum refineries.
Industry......................................          325120  Biogases, industrial (i.e., compressed,
                                                                 liquefied, solid), manufacturing.
Industry......................................          325193  Ethyl alcohol manufacturing.
Industry......................................          325199  Other basic organic chemical manufacturing.
Industry......................................          424690  Chemical and allied products merchant
                                                                 wholesalers.
Industry......................................          424710  Petroleum bulk stations and terminals.
Industry......................................          424720  Petroleum and petroleum products merchant
                                                                 wholesalers.
Industry......................................          454319  Other fuel dealers.
Industry......................................          562212  Landfills.
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\a\ North American Industry Classification System (NAICS).

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

Table of Contents

I. Executive Summary
    A. Summary of the Key Provisions of This Regulatory Action
    B. Environmental Justice
    C. Impacts of This Rule
    D. Policy Considerations
    E. Endangered Species Act
II. Statutory Requirements and Conditions
    A. Requirement To Set Volumes for Years After 2022
    B. Factors That Must Be Analyzed
    C. Statutory Conditions on Volume Requirements
    D. Authority To Establish Volumes and Percentage Standards for
Multiple Future Years
    E. Considerations for Late Rulemaking
    F. Impact on Other Waiver Authorities
    G. Severability
III. Candidate Volumes and Baselines
    A. Scope of Analysis
    B. Production and Import of Renewable Fuel
    C. Candidate Volumes for 2023-2025
    D. Baselines
    E. Volume Changes Analyzed
IV. Analysis of Candidate Volumes
    A. Climate Change
    B. Energy Security
    C. Costs
    D. Comparison of Impacts
    E. Assessment of Environmental Justice
V. Response To Remand of 2016 Rulemaking
    A. Supplemental 2023 Standard
    B. Authority and Consideration of the Benefits and Burdens
VI. Volume Requirements for 2023-2025
    A. Cellulosic Biofuel
    B. Non-Cellulosic Advanced Biofuel
    C. Biomass-Based Diesel
    D. Conventional Renewable Fuel
    E. Summary of Final Volume Requirements

VII. Percentage Standards for 2023-2025
    A. Calculation of Percentage Standards
    B. Treatment of Small Refinery Volumes
    C. Percentage Standards
VIII. Administrative Actions
    A. Assessment of the Domestic Aggregate Compliance Approach
    B. Assessment of the Canadian Aggregate Compliance Approach
IX. Biogas Regulatory Reform
    A. Background
    B. Biogas Under a Closed Distribution System
    C. RNG Producer as the RIN Generator
    D. Assignment, Separation, Retirement, and Expiration of RNG
RINs
    E. Structure of the Regulations
    F. Implementation Date
    G. Definitions
    H. Registration, Reporting, Product Transfer Documents, and
Recordkeeping
    I. Testing and Measurement Requirements
    J. RFS QAP Under Biogas Regulatory Reform
    K. Compliance and Enforcement Provisions and Attest Engagements
    L. RNG Used as a Feedstock
    M. RNG Imports and Exports
    N. Biogas/RNG Storage Prior to Registration
    O. Single Use for Biogas Production Facilities
    P. Requirements for Parties That Own and Transact RNG RINs
X. Other Changes to Regulations
    A. RFS Third-Party Oversight Enhancement
    B. Deadline for Third-Party Engineering Reviews for Three-Year
Updates
    C. RIN Apportionment in Anaerobic Digesters
    D. BBD Conversion Factor for Percentage Standard
    E. Flexibility for RIN Generation
    F. Changes to Tables in 40 CFR 80.1426
    G. Prohibition on RIN Generation for Fuels Not Used in the
Covered Location
    H. Separated Food Waste Recordkeeping Requirements
    I. Definition of Ocean-Going Vessels
    J. Bond Requirement for Foreign RIN-Generating Renewable Fuel
Producers and Foreign RIN Owners
    K. Definition of Produced from Renewable Biomass
    L. Technical Amendments
XI. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act (NTTAA) and
1 CFR Part 51
    J. Executive Orders 12898 (Federal Actions To Address
Environmental Justice in Minority Populations, and Low-Income
Populations) and 14096 (Revitalizing Our Nation's Commitment to
Environmental Justice for All)
    K. Congressional Review Act (CRA)
XII. Statutory Authority

    A red-line version of the regulatory language that incorporates the
changes in this action is available in the docket for this action.

I. Executive Summary

    The Renewable Fuel Standard (RFS) program began in 2006 pursuant to
the requirements of the Energy Policy Act of 2005 (EPAct), which were
codified in Clean Air Act (CAA) section 211(o). The statutory
requirements were subsequently amended by the Energy Independence and
Security Act of 2007 (EISA). The statute sets forth annual, nationally
applicable volume targets for each of the four categories of renewable
fuel for the years shown below.

     Table I-1--Years for Which the Statute Provides Volume Targets
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                          Category                               Years
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Cellulosic biofuel..........................................   2010-2022
Biomass-based diesel........................................   2009-2012
Advanced biofuel............................................   2009-2022
Renewable fuel..............................................   2006-2022
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    For calendar years after those for which the statute provides
volume targets, the statute directs EPA to determine the applicable
volume targets in coordination with the Secretary of Energy and the
Secretary of Agriculture, based on a review of the implementation of
the program for prior years and an analysis of specified factors:
     The impact of the production and use of renewable fuels on
the environment, including on air quality, climate change, conversion
of wetlands, ecosystems, wildlife habitat, water quality, and water
supply; \1\
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    \1\ CAA section 211(o)(2)(B)(ii)(I).
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     The impact of renewable fuels on the energy security of
the U.S.; \2\
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    \2\ CAA section 211(o)(2)(B)(ii)(II).
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     The expected annual rate of future commercial production
of renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and biomass-based diesel); \3\
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    \3\ CAA section 211(o)(2)(B)(ii)(III).
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     The impact of renewable fuels on the infrastructure of the
U.S., including deliverability of materials, goods, and products other
than renewable fuel, and the sufficiency of infrastructure to deliver
and use renewable fuel; \4\
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    \4\ CAA section 211(o)(2)(B)(ii)(IV).
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     The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
\5\ and
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    \5\ CAA section 211(o)(2)(B)(ii)(V).
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     The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.\6\
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    \6\ CAA section 211(o)(2)(B)(ii)(VI).
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    While this statutory requirement does not apply to cellulosic
biofuel, advanced biofuel, and total renewable fuel until compliance
year 2023, it applied to biomass-based diesel (BBD) beginning in
compliance year 2013. Thus, EPA established applicable volume
requirements for BBD volumes for 2013-2022 in prior rulemakings.\7\
This action establishes the volume targets and applicable percentage
standards for cellulosic biofuel, BBD, advanced biofuel, and total
renewable fuel for 2023-2025. We are also promulgating a number of
regulatory changes intended to improve the operation of the RFS
program. This action describes our rationale for the final volume
targets and regulatory changes. Responses to comments received from
stakeholders on the proposed rule can be found in the associated
Response to Comments (RTC) document.
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    \7\ See, e.g., 87 FR 39600 (July 1, 2022), establishing the 2022
BBD volume requirement.
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    Low-carbon fuels are an important part of reducing greenhouse gas
(GHG) emissions in the transportation sector, and the RFS program is a
key federal policy that supports the development, production, and use
of low-carbon, domestically produced renewable fuels. This ``Set rule''
marks a new phase for the program, one which takes place following the
period for which the Clean Air Act enumerates specific volume targets.
We recognize the important role that the RFS program can play in
providing ongoing support for increasing production and use of
renewable fuels, particularly advanced and cellulosic biofuels. For a
number of years, RFS stakeholders have provided input on what policy
direction this action should take, and the Agency greatly appreciates
the sustained and constructive input we have received from
stakeholders. We appreciate the many comments we received, not only on
the volumes that we proposed on December 30, 2022, but also on the

analyses we conducted and the proposed regulatory changes. EPA looks
forward to continued engagement with stakeholders on the RFS program.

A. Summary of the Key Provisions of This Regulatory Action

1. Volume Requirements for 2023-2025
    Based on our analysis of the factors required in the statute, and
in coordination with the Departments of Agriculture and Energy, we are
establishing the volume targets for three years, 2023 to 2025, as shown
below. We proposed setting standards for three years to strike an
appropriate balance between improving the program by providing
increased certainty over a multiple number of years and recognizing the
inherent uncertainty in longer-term projections. After reviewing
stakeholder comments and considering the statutory deadlines for
establishing RFS volume obligations we have determined that this three-
year timeframe remains appropriate. In addition to the volume targets
for 2023-2025, we are also completing our response to the D.C. Circuit
Court of Appeals' remand of the 2016 RFS annual rule in Americans for
Clean Energy v. EPA, 864 F.3d 691 (2017) (``ACE'') by establishing a
supplemental volume requirement of 250 million gallons of renewable
fuel for 2023. This ``supplemental standard'' follows the
implementation of a 250-million-gallon supplement for 2022 in a
previous action.\8\
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    \8\ See 87 FR 39600, 39628-29 (July 1, 2022) (discussing
approaches for responding to the ACE remand).

                                       Table I.A.1-1--Final Volume Targets
                                               [Billion RINs] \a\
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                                                                       2023            2024            2025
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Cellulosic biofuel..............................................            0.84            1.09            1.38
Biomass-based diesel \b\........................................            2.82            3.04            3.35
Advanced biofuel................................................            5.94            6.54            7.33
Renewable fuel..................................................           20.94           21.54           22.33
Supplemental standard...........................................            0.25             n/a             n/a
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\a\ One RIN is equivalent to one ethanol-equivalent gallon of renewable fuel. Throughout this preamble, RINs are
  generally used to describe total volumes in each of the four categories shown above, while gallons are
  generally used to describe volumes for individual types of biofuel such as ethanol, biodiesel, renewable
  diesel, etc. Exceptions include BBD (which is always given in physical volumes) and biogas (which are always
  given in RINs).
\b\ The BBD volumes are in physical gallons (rather than RINs).

    As discussed above, the statute requires that we analyze a
specified set of factors in making our determination of the appropriate
volume requirements. Many of those factors, particularly those related
to economic and environmental impacts, are difficult to analyze in the
abstract. As a result, we needed to identify a set of renewable fuel
volumes to analyze prior to determining the volume requirements that
would be appropriate to establish under the statute. To this end, we
began by using a subset of the statutory factors that are most closely
related to production and consumption of renewable fuel, and other
relevant factors, to identify ``candidate volumes.'' We then analyzed
the impacts of the candidate volumes on the other economic and
environmental factors that the statute lists. The derivation of these
candidate volumes is discussed in Section III. Section IV discusses the
analysis of those candidate volumes for the other economic and
environmental factors. Finally, Section VI discusses our conclusions
regarding the appropriate volume requirements to establish in light of
all of the analyses that we conducted and all of the comments we
received from stakeholders at the public hearing on January 10 and 11,
2023, written comments, letters, and other meetings and input provided
to us.
    The cellulosic biofuel volumes we are finalizing in this rule for
2024 and 2025 are lower than the proposed volumes as they do not
include cellulosic biofuel from eRINs (all eRIN volumes projected in
the proposal have been zeroed out in this final rule). The decreases in
the cellulosic biofuel volumes for 2024 and 2025 are partially offset
by increases in the projected volumes of non-eRIN cellulosic biofuel
(i.e., CNG/LNG derived from biogas and ethanol from corn kernel fiber)
for all three years. The advanced and total biofuel volumes reflect
both these changes in cellulosic biofuel, and our new, higher
projections of the availability of BBD relative to the proposed rule.
The final volumes also reflect our decision to maintain a 15.0 billion
gallon implied conventional biofuel requirement for all three years
(plus an additional 250 million gallon supplemental volume requirement
for 2023 to complete EPA's response to the ACE remand), consistent with
the statutory level from 2015 through 2022, rather than increasing this
volume to 15.25 billion gallons in 2024 and 2025 as we originally
proposed.
    The volume targets that we are establishing in this action have
similar status as those in the statute for the years shown in Table I-
1. Specifically, they are the basis for the calculation of percentage
standards applicable to producers and importers of gasoline and diesel
unless they are waived in a future action using one or more of the
available waiver authorities in CAA section 211(o)(7).
2. Applicable Percentage Standards for 2023-2025
    For years after 2022,\9\ the CAA gives EPA authority to establish
percentage standards for several years simultaneously and at the same
time that it establishes the volume targets for those years. Consistent
with the proposed rule, we are finalizing the percentage standards for
2023, 2024, and 2025. The percentage standards corresponding to the
volume requirements from Table I.A.1-1 are shown below.
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    \9\ Although the statute requires EPA to establish applicable
percentage standards annually by November 30 of the previous year,
as discussed in Section II, this requirement does not apply to years
after 2022. CAA section 211(o)(3).

                                       Table I.A.2-1--Percentage Standards
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                                                                     2023  (%)       2024  (%)       2025  (%)
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Cellulosic biofuel..............................................            0.48            0.63            0.81
Biomass-based diesel............................................            2.58            2.82            3.15
Advanced biofuel................................................            3.39            3.79            4.31
Renewable fuel..................................................           11.96           12.50           13.13
Supplemental standard...........................................            0.14             n/a             n/a
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    The formulas used to calculate the percentage standards in 40 CFR
80.1405(c) require that EPA specify the projected volume of exempt
gasoline and diesel associated with exemptions for small refineries
granted because of disproportionate economic hardship resulting from
compliance with their obligations under the program under CAA section
211(o)(9). For this rulemaking, we have projected that there are not
likely to be small refinery exemptions (SREs) for 2023-2025 based on
the information available at the present time. This issue is discussed
further in Section VII along with the total nationwide projected
gasoline and diesel consumption volumes used in the calculation of the
percentage standards.
    As in previous annual standard-setting rulemakings, the applicable
percentage standards for 2023-2025 are added to the regulations at 40
CFR 80.1405(a).
3. Carryover RINs and Gasoline and Diesel Projections
    EPA assesses the availability of carryover RINs in determining the
volumes under our set authority. Carryover RINs provide important
benefits to the RFS program, including compliance flexibility to
individual obligated parties, liquidity to the RIN market, and
mitigation against market impacts that could occur if RIN generation in
any year exceeds or falls short of the required volume of renewable
fuel.
    In establishing RFS volume requirements for 2020 and 2021 that were
equal to the number of RINs generated in those years, EPA intended that
compliance with the renewable volume obligations would not impact the
total number of available carryover RINs. Since that time, obligated
parties have submitted compliance reports for the 2020 and 2021
compliance years. These reports revealed that there exist significant
differences between the volume of obligated fuel reported by obligated
parties, on the one hand, and the volumes of gasoline and diesel from
EIA that EPA used to calculate the percentage standards for 2020 and
2021 on the other. Higher-than-expected volumes of obligated fuel in
2020 and 2021 meant that the number of RINs that must be retired for
these compliance years was higher than EPA anticipated. As discussed in
greater detail in Section III.C.4 and RIA Chapter 1.10, compliance with
these obligations has required the use of significant quantities of
carryover RINs, resulting in effectively no available carryover RINs
for several renewable fuel categories going into the 2022 compliance
year. In an effort to better project the volume of obligated fuel in
future years, we are adjusting how we project the obligated volume of
gasoline and diesel in 2023-2025. These changes are discussed further
in Section VII.A and RIA Chapter 1.11.
4. Regulatory Provisions for eRINs
    The 2023-2025 proposed rule included a comprehensive program
governing the generation of RINs from renewable electricity produced
from biogas that is used in electric vehicles. The proposed ``eRIN''
regulations laid out a comprehensive approach to eRIN generation and
program implementation, and included details on multiple design
elements, including the entities that would be eligible to generate
eRINs, approaches to ensure the prevention of double-counting of such
RINs, and data requirements for valid eRIN generation. In addition to
the proposed eRIN program, the December 2022 proposal also described
several alternative approaches to how such a program could be
established and implemented.
    In response to the proposal, we received a wide variety of comments
on all aspects of the proposed eRIN program. Stakeholder positions on
the proposed eRIN provisions varied greatly, with some stakeholders
strongly supportive of EPA finalizing the proposed provisions, some who
sought significant modifications to the program while remaining broadly
supportive of eRINs conceptually, and others who opposed, for a variety
of reasons, EPA moving forward to finalize a new eRIN framework. In
light of the significant number of comments provided by stakeholders on
EPA's proposed eRIN approach, and the complexity of many of the topics
raised in those comments, and the consent decree deadline on other
portions of the rule, we are not finalizing the proposed revisions to
the eRIN program at this time. We have adjusted the final volume
requirements for this rulemaking to reflect this decision.
    The large number of comments EPA received on our proposed eRIN
language, representing a range of perspectives, is a clear signal that
stakeholders care a great deal about a potential eRIN program. As
discussed in the proposed rule, EPA's policy goal in developing an eRIN
program would be to support one of the objectives of the RFS program,
which is to increase the use of renewable transportation fuels, in
particular cellulosic biofuels, over time, consistent with the
statute's focus on growth in this category. Moreover, an eRIN program
would support Congress' goals of reducing GHGs and increasing energy
security,\10\ both of which can be affected by the design of that
program. We anticipate that an eRIN program may also have the ancillary
effect of incentivizing increased electrification of the vehicle fleet.
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    \10\ Congress stated that the purposes of EISA, in which the
RFS2 program was enacted, included ``[t]o move the United States
toward greater energy independence and security, to increase the
production of clean renewable fuels, to protect consumers, to
increase the efficiency of products, building, and vehicles, to
promote research on and deploy greenhouse gas capture and storage
options, and to improve the energy performance of the Federal
Government, and for other purposes.'' Public Law 110-140 (2007). See
also, CAA 211(o)(1) (definitions of qualifying biofuel include
requirement that they reduce greenhouse gas emissions by specified
amounts relative to a petroleum baseline).
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    Given strong stakeholder interest in the proposed eRIN program and
the range of potential benefits that the program could provide, EPA
will continue to work on potential paths forward for the eRIN program.
To that end, EPA will continue to assess the comments received on the
proposal. EPA will also seek additional input from stakeholders to
inform potential next steps.

5. Other Regulatory Changes
    We also proposed regulatory changes in several areas to strengthen
EPA's implementation of the RFS program. Stakeholders provided valuable
comment on these proposed modifications, and EPA is finalizing many of
the proposed changes with modifications based on that stakeholder
input. The regulatory changes we are finalizing in this rulemaking
include:
     Modification of the regulatory provisions for biogas-
derived renewable fuels to ensure that biogas is produced from
renewable biomass and used as a transportation fuel and to allow for
the use of biogas as a biointermediate.
     Enhancements to the third-party oversight provisions
including engineering reviews, the RFS quality assurance program, and
annual attest engagements.
     Establishing a deadline for third-party engineering
reviews for three-year registration updates.
     Updating procedures for the apportionment of RINs when
feedstocks qualifying for multiple D-codes (e.g., D3 and D5) are
converted to biogas simultaneously in an anaerobic digester.
     Revising the conversion factor in the formula for
calculating the percentage standard for BBD to reflect increasing
production volumes of renewable diesel.
     Flexibility for RIN generation.
     Reiterating the prohibition on generating RINs for fuels
not used in the covered location.
     Flexibilities for the generation and maintenance of
records for waste feedstocks.
     Clarifying the definition of fuel used in ocean-going
vessels.
     Modifications to the bonding requirements for foreign
parties that participate in the RFS program.
     Other minor changes and technical corrections.
    Each of these regulatory changes is discussed in greater detail in
Section X.
    We proposed but are not finalizing at this time the following
regulatory changes:
     A definition of produced from renewable biomass (discussed
more in Section X.K).
     The proposed changes to the requirements for the
separation of RINs.\11\
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    \11\ See 87 FR 80707 (December 30, 2022).
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    We need more time to consider the public comments received on these
proposed changes.

B. Environmental Justice

    In considering environmental justice in this action, we have sought
to identify and address, as appropriate, disproportionately high and
adverse human health or environmental effects of their programs,
policies, and activities on communities with environmental justice
concerns in the United States.
    This rule is projected to reduce GHG emissions, which would benefit
communities with environmental justice concerns who are
disproportionately impacted by climate change due to a greater reliance
on climate sensitive resources such as localized food and water
supplies which may be adversely impacted by climate change, as well as
having less access to information resources that would enable them to
adjust to such impacts.12 13 The manner in which the market
responds to the provisions in this rule could also have non-GHG
impacts. For instance, replacing petroleum fuels with renewable fuels
will also have potential impacts on water and air exposure for
communities living near biofuel and petroleum facilities given the
potential for biofuel facilities to have increased emissions of certain
criteria pollutants in local communities, resulting in a potential
corresponding decrease in exposure for local communities surrounding
petroleum facilities with less petroleum production. Replacing
petroleum fuels with renewable fuels is also projected to increase food
and fuel prices, the effects of which will be disproportionately borne
by the lowest income individuals. We received extensive comment,
primarily on the proposed eRIN provisions, from community-based and
environmental justice stakeholders expressing concern over the use of
biogas, particularly from landfills and concentrated animal feeding
operations, in the RFS. While EPA is not finalizing eRIN provisions as
part of this rule, we will continue to engage with stakeholders on
impacts of the RFS program related to biogas use and expansion. Our
assessment of potential economic impacts on communities with
environmental justice concerns is provided in Section IV.E.3.
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    \12\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United
States: Fourth National Climate Assessment, Volume II [Reidmiller,
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K.
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.
    \13\ USGCRP, 2016: The Impacts of Climate Change on Human Health
in the United States: A Scientific Assessment. Crimmins, A., J.
Balbus, J.L. Gamble, C.B. Beard, J.E. Bell, D. Dodgen, R.J. Eisen,
N. Fann, M.D. Hawkins, S.C. Herring, L. Jantarasami, D.M. Mills, S.
Saha, M.C. Sarofim, J. Trtanj, and L. Ziska, Eds. U.S. Global Change
Research Program, Washington, DC, 312 pp. http://dx.doi.org/10.7930/J0R49NQX.
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C. Impacts of This Rule

    CAA section 211(o)(2)(B)(ii) requires EPA to assess a number of
factors when determining volume targets for calendar years after those
shown in Table I-1. These factors are described in the introduction to
this Executive Summary, and each factor is discussed in detail in the
Regulatory Impact Analysis (RIA) accompanying this rule. Congress
provided EPA flexibility by enumerating factors to consider without
rigidly mandating the specific steps of analysis that EPA should take
or how EPA should weigh the various factors. For two of these statutory
factors--costs and energy security--we provide monetized impacts for
the purpose of comparing costs and benefits. For the other statutory
factors, we are either unable to quantify impacts, or we provide
quantitative estimated impacts that nevertheless cannot be easily
monetized. Thus, we are unable to quantitatively compare all of the
evaluated impacts of this rulemaking. Regardless of whether we
monetized a factor or not, however, EPA did consider all statutory
factors in this rulemaking, and we find that the final volumes are
appropriate under the set authority when we balance all the relevant
factors. Table ES-1 in the RIA provides a list of all of the impacts
that we assessed, both quantitative and qualitative. Our assessments of
each factor, including the impacts on costs, energy security, climate,
and other environmental and economic factors, are summarized in Section
IV of this document. Additional detail for each of the assessed factors
is provided in RIA Chapters 4 through 10.
    Monetized impacts on cost and energy security are summarized in
Table I.C-1 below using two discount rates (3 percent and 7 percent)
following federal guidance on regulatory impact analyses.\14\
Summarized impacts are calculated in comparison to a No RFS baseline as
discussed in Section III.D and are summed across all three years of
standards.
---------------------------------------------------------------------------

    \14\ Office of Management and Budget (OMB) Circular A-4. Sept.
17, 2003.

    Table I.C-1--Cumulative Monetized Fuel Costs and Energy Security
   Benefits of 2023-2025 Standards With Respect to the No RFS Baseline
                            [2022$, millions]
------------------------------------------------------------------------
                                                   Discount rate
                                         -------------------------------
                                                3%              7%
------------------------------------------------------------------------
Excluding Supplemental Standard:
    Fuel Costs..........................         $23,218         $22,366
    Energy Security Benefits............             524             505
Including 2023 Supplemental Standard:
    Fuel Costs..........................          23,846          22,994
    Energy Security Benefits............             536             517
------------------------------------------------------------------------

D. Policy Considerations

    This rule comes at a time when substantial policy developments and
global events are affecting the transportation energy and environmental
landscape in unprecedented ways. The Inflation Reduction Act (IRA)
makes historic investments in a range of areas, including in clean
vehicle and alternative fuel technologies, that will help decarbonize
the transportation sector and bolster a variety of clean technologies.
Provisions in the IRA will accelerate many of the pollution-reducing
shifts that are already occurring as part of a broad energy transition
in the transportation, power generation, and industrial sectors. Major
new incentives in legislation for cleaner vehicles, carbon capture and
sequestration, biofuels infrastructure, clean hydrogen production, and
other areas have effectively shifted the policy ground--and it is on
this new ground that EPA must develop forward-looking policies and
implement existing regulatory programs, including the RFS program.
    Even as the IRA bolsters future investments in clean transportation
technologies, EPA recognizes that maintaining and strengthening energy
security in the near term remains an important policy consideration.
The war in Ukraine has significantly destabilized multiple global
commodity markets, including petroleum markets, and continues to have
impacts in these areas. In addition, global reductions in refining
capacity, which accelerated during the pandemic, have further tightened
the market for transportation fuels like gasoline and diesel. Programs
like the RFS program help boost energy security by supporting domestic
production of fuels and diversifying the fuel supply, and it has played
an important role in incentivizing the production of low-carbon
alternatives. At the same time, EPA recognizes that the transition to
such alternatives will take time, and that during this transition
maintaining stable fuel supplies and refining assets will continue to
be important to achieving our nation's energy and economic goals as
well as providing consistent investments in a skilled and growing
workforce.
    It is against this backdrop that EPA is establishing RFS volume
requirements for the next three years in this action. The volumes that
EPA is finalizing continue to support ongoing growth in renewable
fuels, recognizing their benefits, and based on EPA's consideration of
the multiple factors identified in the statute. Beyond providing
continued support for fuels like ethanol and biodiesel, this action
provides a strong market signal for the continued growth of low carbon
advanced biofuels, including ``drop-in'' renewable diesel, and
cellulosic biofuels. Renewable fuels are a key policy tool identified
by Congress for decarbonizing the transportation sector, and this
rulemaking sets the stage for further growth and development of low-
carbon biofuels in the coming years.
    In the proposed rule EPA requested comment on multiple volume
scenarios, including limiting the implied volume of conventional
renewable fuel to 15.0 billion gallons in 2024 and 2025, and
establishing RFS volumes with an implied volume of conventional
renewable fuel at or below the E10 blendwall. The volumes we are
finalizing in this rule reflect the scenario on which we requested
comment wherein we are limiting the implied volume of conventional
renewable fuel to 15.0 billion gallons in 2024 and 2025. We have also
included an analysis of the projected impact of the other alternative
scenarios in RIA Chapter 10.6.
    In the proposal EPA also sought public comment on not only the
elements of the proposed rule, but also asked for responses to
questions on various topics that intersect with the larger energy
transition and energy security issues discussed above. For example,
several commenters provided responses on the topic of whether and how
EPA should consider incorporating some measure of carbon intensity into
the RFS program. Many of the commenters who weighed in on this topic
pointed to various non-federal ``clean fuel programs'' that are being
implemented in different states and jurisdictions and urged EPA to
consider changes that would make the RFS program more closely resemble
those programs. Other commenters suggested that the RFS program does
not lend itself well to such changes and that an entirely new framework
would be preferable if EPA were to pursue such carbon intensity-related
changes. Many different stakeholders provided suggestions and
perspectives on lifecycle analysis tools and approaches, and these
comments helped inform the discussion and analysis in this rulemaking
package related to the assessment of environmental impacts of renewable
fuels.
    Multiple commenters also provided input on what RFS-related
policies EPA could pursue to incorporate new pathways and technologies
into the program. For example, some commenters urged EPA to take steps
to integrate carbon capture and storage (CCS) opportunities related to
the production of biofuels into the RFS program, while other commenters
cited various reasons why EPA should refrain from taking such steps.
Similarly, EPA received comment from different stakeholders that took
various positions on whether and how hydrogen should be integrated into
the RFS program. Many stakeholders also shared their perspectives on
how the RFS program can and should be used to further support the
development of sustainable aviation fuels (SAF).
    EPA appreciates commenters' input on these other policy topics
raised in the proposal. We will continue to engage stakeholders on the
topics we raised in the December 2022 proposal and welcome continued
input on RFS policy options and opportunities. These

comments will be used to inform future rulemaking decisions.
    EPA also recognizes the concerns that diverse stakeholders have
shared about the potential impacts from implementation of the RFS
program. Stakeholders have also shared concerns about RIN market
dynamics, including RIN price volatility. EPA understands that
maintaining and strengthening energy security in the near term remains
a policy imperative. The war in Ukraine continues to affect multiple
global commodity markets and reductions in global refining capacity,
which accelerated during the pandemic, have further tightened the
market for transportation fuels like gasoline and diesel. Programs like
the RFS program help boost energy security by supporting domestic
production of fuels and diversifying the fuel supply, and the RFS has
played an important role in incentivizing the production of low-carbon
alternatives. At the same time, EPA recognizes that maintaining stable
fuel supplies and refining assets continues to be important to
achieving our nation's energy and economic goals and retaining a
skilled and necessary workforce.
    Given these factors, and because we are starting a new phase of the
RFS program where Congress has not prescribed volumes and with
prospective standards covering three years, careful administration of
the RFS program and monitoring of its impacts is critical. EPA intends
to use all available data and tools to monitor the implementation of
the RFS program and its impacts. EPA is committed to successful
implementation of the program, and the Clean Air Act provides EPA the
tools to adjust course if appropriate. EPA will monitor a set of
indicators that will help us assess the impact from implementation of
the final Set rule volumes to determine whether EPA should consider
adjusting those volumes or taking other action. These indicators could
include, but are not limited to, the following:
     The prices of biofuels relative to the petroleum-based
fuels they displace;
     The cost to consumers of transportation fuel;
     The prices of biofuel feedstocks and their impacts on food
prices to consumers;
     Changes in domestic energy supply that affect domestic
energy security;
     Changes in domestic energy demand that negatively impact
the energy security of a State, region, or the U.S.;
     The stability of fuel supplies and domestic refining
assets;
     The potential for RIN deficits and noncompliance by
obligated parties;
     Signs of market manipulation in RIN markets;
     RIN prices, generally, as an indicator of how the RFS
program is functioning, including significant increases in RIN prices;
     Various other impacts of the RFS standards, as
appropriate.
    In addition to these indicators, EPA will also monitor the
volatility in D6 (``conventional'') RIN prices. Specifically, as part
of our oversight of program implementation, EPA intends to consider
whether the following volatility measure is met:
     A 50% deviation in the monthly average D6 RIN price,
relative to the 6-month rolling average D6 RIN price, evaluated at the
end of the calendar month and based on EPA data or third-party data, as
EPA determines appropriate. EPA would also consider whether changes in
RFS standards, other related EPA actions, or court decisions have
occurred which affect the relevance of this measure at a particular
time.
    Based on EPA's assessment of these indicators, the Administrator
may then consider using the statutory authorities available under the
Clean Air Act to adjust the volume standards or make other programmatic
changes. For example, EPA has authority to reconsider its volumes and
standards, and has shown its willingness to do so when extreme and
unforeseen events require it, such as revising the 2020 and 2021
volumes to account for changes due to the COVID-19 pandemic. For years
after 2022, CAA section 211(o)(2)(B)(ii) establishes the processes,
criteria, and standards for setting the applicable annual renewable
fuel volumes. That provision provides that the Administrator shall, in
coordination with the Secretary of Energy and the Secretary of
Agriculture and after public notice and opportunity for comment,
determine the applicable volumes of each biofuel category specified
based on a review of implementation of the program during the calendar
years specified in the tables in CAA section 211(o)(2)(B)(i) and an
analysis of the multiple factors, as described in Section II.B of this
action.\15\ Those factors include, for example, the impact of the use
of renewable fuels on the cost to consumers of transportation, and the
impact of the use of renewable fuel on other factors, including job
creation, the price and supply of agricultural commodities, rural
economic development, and food prices. As EPA has stated in previous
actions, we generally do not think it is appropriate to reconsider and
revise previously finalized RFS standards. Revising standards has the
potential to decrease market certainty and create unnecessary market
disruption (which could in turn exacerbate some of the indicators
listed above). At the same time, given the new phase of the program, we
want to reiterate our commitment to monitoring various measures to
ensure successful program implementation and consider adjusting course
if appropriate.
---------------------------------------------------------------------------

    \15\ EPA may consider using an expedited process if EPA
determines such process is appropriate and consistent with statutory
authority.
---------------------------------------------------------------------------

    Apart from EPA's authority to reconsider our RFS standards, CAA
section 211(o)(7)(A) provides the Administrator the discretion to waive
the national quantity of renewable fuel required under the RFS program,
upon petition by one or more States, or by any party subject to the
requirements of the RFS program. The Administrator may also waive the
volume requirements on his own motion. The Administrator may do so only
after consultation with the Secretary of Agriculture and the Secretary
of Energy and after public notice and opportunity for comment.\16\ A
waiver may be issued if the Administrator determines that
implementation of the RFS volume requirements would severely harm the
economy or environment of a State, region, or the United States, or
that there is an inadequate domestic supply. EPA has previously
interpreted this waiver authority in prior responses to requests for a
waiver of the RFS volume requirements \17\ and in annual
rulemakings.\18\ EPA will monitor as appropriate the criteria we have
laid out previously in order to determine whether we should adjust
volume requirements using existing waiver authority under the statute.
These criteria, for example, include whether, under the severe economic
harm waiver authority, the harm is occurring with a high degree of
certainty, the harm is severe, and whether the harm is to an entire
state, region, or the United States.
---------------------------------------------------------------------------

    \16\ EPA may consider using an expedited process if EPA
determines such process is appropriate and consistent with the
statutory waiver authority.
    \17\ See 73 FR 47168 (August 13, 2008) and 77 FR 70752 (November
27, 2012).
    \18\ See, e.g., Renewable Fuel Standard Program--Standards for
2020 and Biomass-Based Diesel Volume for 2021 and Other Changes:
Response to Comments, EPA-420-R-19-018; see also American Fuel &
Petrochemical Manufacturers v. EPA, 937 F.3d 559, 580 (D.C. Cir.
2019) (upholding EPA's interpretation of the severe economic harm
waiver authority in the 2018 RFS rulemaking).
---------------------------------------------------------------------------

    In addition to monitoring the program's implementation for the

potential need to adjust the standards, EPA will also strengthen
existing efforts, and work to develop new tools, to help us monitor and
oversee the RIN market. EPA welcomes ideas from stakeholders impacted
by the RFS program on how to improve market oversight capabilities,
including ideas on how EPA's compliance regulations could be enhanced.
    EPA closely monitors the RIN market, and we take seriously claims
of RIN market manipulation. In March 2016, EPA entered into a
Memorandum of Understanding (MOU) with the Commodity Futures Trading
Commission (CFTC).\19\ This MOU allows EPA to share RIN transaction
data with CFTC to advise EPA on the techniques used to minimize market
manipulation, to increase CFTC's understanding of the RIN market, and
to conduct oversight for this market. Under the MOU, EPA has met with
CFTC to discuss RIN market data and to evaluate strategies to identify
and reduce the potential for manipulation in the RFS program.
---------------------------------------------------------------------------

    \19\ See ``Memorandum of Understanding Between the Environmental
Protection Agency and the Commodity Futures Trading Commission on
the Sharing of Information Available to EPA Related to the
Functioning of Renewable Fuel and Related Markets'' (2016),
available at https://www.epa.gov/sites/production/files/2016-03/documents/epa-cftc-mou-2016-03-16.pdf.
---------------------------------------------------------------------------

    In June 2019, EPA modified certain elements of the RFS compliance
system, in order to improve functioning of the RIN market and prevent
any potential manipulation in the RFS compliance market.\20\ The 2019
rulemaking requires reporting of RIN holdings above a threshold to help
ensure no single party can manipulate the price of RINs through the
sheer size of their holdings.\21\ Underpinning that reform was the
observation that increased transparency would help deter market
participants from amassing an excess of separated RINs, which due to
the concentration in ownership could result in undue influence or
market power. Since EPA implemented these provisions, no company has
had RIN holdings which have exceeded the thresholds set in the rule.
---------------------------------------------------------------------------

    \20\ See 84 FR 27013-27019.
    \21\ See 40 CFR 80.1435.
---------------------------------------------------------------------------

    The 2019 rulemaking also required reporting of RIN transaction
prices to EPA.\22\ EPA has utilized the new reported price data to
supplement third-party RIN price assessment data. EPA has also
increased transparency by aggregating the reporting price data and
making it publicly available on our website.\23\ We believe that
publishing as much data and information on the RIN market as possible,
while still protecting confidential business information, improves
market transparency and helps obligated parties and other market
participants make informed decisions. Since the June 2019 rule, we have
not seen data-based evidence of RIN market manipulation. The potential
for such behavior, however, remains a concern.
---------------------------------------------------------------------------

    \22\ See 40 CFR 80.1451(c)(2).
    \23\ See ``RIN Trades and Price Information,'' available at
https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rin-trades-and-price-information.
---------------------------------------------------------------------------

    We have recently further expanded our oversight and enforcement
capabilities by entering into an MOU with California Air Resources
Board (CARB).\24\ This MOU expands our oversight capabilities and
supports our enforcement activities by leveraging information collected
under California's Low Carbon Fuel Standard to help identify non-
compliance and potential market manipulation in the renewable fuels and
RIN markets. EPA and CARB compliance staff meet regularly to analyze
market forces and participant behavior to ensure that our program meets
the CAA requirements.
---------------------------------------------------------------------------

    \24\ See ``Confidentiality Agreement Between the United States
Environmental Protection Agency Offices of Transportation and Air
Quality and Civil Enforcement and the California Air Resources Board
for the Sharing of Information.'' August 17, 2021 (on file with
EPA).
---------------------------------------------------------------------------

    As we begin to implement the Set Rule volumes, EPA will work with
partners in federal and state governments to assess what new
improvements and modifications could reasonably be made that would
further strengthen market oversight and program implementation.
Furthermore, within 45 days of publication of the final 2023-2025 rule,
EPA will meet with CFTC to review our MOU with CFTC and the sufficiency
of the existing RIN data collection to address potential market
manipulation. EPA will also discuss with CFTC whether the existing MOU
should be revised to allow for the monitoring of daily trades and
whether the existing MOU should be revised to include additional market
oversight experts, such as the Federal Trade Commission.

E. Endangered Species Act

    Section 7(a)(2) of the Endangered Species Act (ESA), 16 U.S.C.
1536(a)(2), requires that federal agencies such as EPA, in consultation
with the U.S. Fish and Wildlife Service (USFWS) and/or the National
Marine Fisheries Service (NMFS) (collectively ``the Services''), ensure
that any action authorized, funded, or carried out by the action agency
is not likely to jeopardize the continued existence of any endangered
or threatened species or result in the destruction or adverse
modification of designated critical habitat for such species. Under ESA
implementing regulations, the action agency is required to formally
consult with the Services for actions that ``may affect'' listed
species or designated critical habitat, unless the Services concur in
writing that the action is not likely to adversely affect ESA-listed
species or critical habitat. 50 CFR 402.14. Consultation is not
required where the action has no effect on such species or habitat. For
several prior RFS annual standard-setting rules, EPA did not consult
with the Services under ESA section 7(a)(2).
    Consistent with ESA section 7(a)(2) and relevant ESA implementing
regulations at 50 CFR part 402, for approximately two years, EPA
engaged in technical assistance and informal consultation discussions
with the Services regarding this rule. On January 30, 2023, EPA
submitted its initial biological evaluation to the Services, and
following continued informal consultation--including regular meetings
and telephone and email communications between EPA and the Services--on
May 20, 2023, EPA submitted to the Services its May 19, 2023 biological
evaluation. On May 31, 2023, EPA provided an addendum to the May 19,
2023 biological evaluation in response to a request from NMFS.\25\ EPA
has determined that this action is not likely to adversely affect
listed species and critical habitat. The Services have confirmed that
EPA's biological evaluation with the May 31, 2023 addendum is
sufficient and USFWS and NMFS intend to proceed with informal
consultation. EPA has prepared an ESA section 7(d) determination
memorandum that discusses our decision to finalize this action before
the informal consultation process is complete, which is also available
in the docket for this action.
---------------------------------------------------------------------------

    \25\ ``Biological Evaluation of the Renewable Fuel Standard
(RFS) Set Rule,'' May 19, 2023, and email from T. Phillips, EPA, to
D. Baldwin, NOAA (May 31, 2023) are both available in the docket for
this action.
---------------------------------------------------------------------------

II. Statutory Requirements and Conditions

A. Requirement to Set Volumes for Years After 2022

    The CAA provides EPA with the authority to establish the applicable
renewable fuel volume targets for calendar years after those specified
in

the Act in Section 211(o)(2).\26\ For total renewable fuel, cellulosic
biofuel, and total advanced biofuel, the CAA provides volume targets
through 2022, after which EPA must establish or ``set'' the volume
targets via rulemaking. For BBD, the CAA only provides volume targets
through 2012; EPA has been setting the biomass-based diesel volume
requirements in annual rulemakings since 2013.
---------------------------------------------------------------------------

    \26\ We refer to CAA section 211(o)(2)(B)(ii) as the ``set
authority.''
---------------------------------------------------------------------------

    This section discusses EPA's statutory authority and additional
factors we have considered due to the lateness of this rulemaking, as
well as the severability of the various portions of this rule.

B. Factors That Must Be Analyzed

    CAA section 211(o)(2)(B)(ii) establishes the processes, criteria,
and standards for setting the applicable annual renewable fuel volumes.
That provision provides that the Administrator shall, in coordination
with the Secretary of Energy and the Secretary of Agriculture,\27\
determine the applicable volumes of each biofuel category specified
based on a review of implementation of the program during the calendar
years specified in the tables in CAA section 211(o)(2)(B)(i) and an
analysis of the following factors:
---------------------------------------------------------------------------

    \27\ In furtherance of this requirement, we have had periodic
discussions with DOE and USDA on this action. These have occurred
with agency staff throughout the proposal and final rule process, as
well as through the OMB interagency process. An additional
memorandum documenting discussions with the Administrator and
Secretaries is also available in the docket for this action.
---------------------------------------------------------------------------

     The impact of the production and use of renewable fuels on
the environment; \28\
---------------------------------------------------------------------------

    \28\ CAA section 211(o)(2)(B)(ii)(I).
---------------------------------------------------------------------------

     The impact of renewable fuels on the energy security of
the U.S.; \29\
---------------------------------------------------------------------------

    \29\ CAA section 211(o)(2)(B)(ii)(II).
---------------------------------------------------------------------------

     The expected annual rate of future commercial production
of renewable fuels; \30\
---------------------------------------------------------------------------

    \30\ CAA section 211(o)(2)(B)(ii)(III).
---------------------------------------------------------------------------

     The impact of renewable fuels on the infrastructure of the
U.S.; \31\
---------------------------------------------------------------------------

    \31\ CAA section 211(o)(2)(B)(ii)(IV).
---------------------------------------------------------------------------

     The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
\32\ and
---------------------------------------------------------------------------

    \32\ CAA section 211(o)(2)(B)(ii)(V).
---------------------------------------------------------------------------

     The impact of the use of renewable fuel on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.\33\
---------------------------------------------------------------------------

    \33\ CAA section 211(o)(2)(B)(ii)(VI).
---------------------------------------------------------------------------

    Congress provided EPA flexibility by enumerating factors to
consider without rigidly mandating the specific steps of analysis that
EPA should take or how EPA should weigh the various factors.
Additionally, we are not aware of anything in the legislative history
of EISA that is authoritative on these issues. Thus, as the Clean Air
Act ``does not state what weight should be accorded to the relevant
factors,'' it ``give[s] EPA considerable discretion to weigh and
balance the various factors required by statute.'' \34\ These factors
were analyzed in the context of the 2020-2022 standard-setting rule
that modified volumes under CAA section 211(o)(7)(F),\35\ which
requires EPA to comply with the processes, criteria, and standards in
CAA section 211(o)(2)(B)(ii). Consistent with our past practice in
evaluating the factors,\36\ we have again determined that a holistic
balancing of the factors is appropriate.\37\
---------------------------------------------------------------------------

    \34\ See Nat'l Wildlife Fed'n v. EPA, 286 F.3d 554, 570 (D.C.
Cir. 2002) (analyzing factors within the Clean Water Act); accord
Riverkeeper, Inc. v. U.S. EPA, 358 F.3d 174, 195 (2d Cir. 2004)
(same); BP Exploration & Oil, Inc. v. EPA, 66 F.3d 784, 802 (6th
Cir. 1995) (same); see also Brown v. Watt, 668 F.3d 1290, 1317 (D.C.
Cir. 1981) (``A balancing of factors is not the same as treating all
factors equally. The obligation instead is to look at all factors
and then balance the results. The Act does not mandate any
particular balance, but vests the Secretary with discretion to weigh
the elements . . . .'') (addressing factors articulated in the Out
Continental Shelf Lands Act).
    \35\ See 87 FR 39600 (July 1, 2022).
    \36\ See 87 FR 39600, 39607-08 (July 1, 2022).
    \37\ RFS Annual Rules Response to Comments Document at 10.
---------------------------------------------------------------------------

    In addition to those factors listed in the statute, the statute
also directs EPA to consider ``the impact of the use of renewable fuels
on other factors.'' \38\ Moreover, many other factors affect the
statutory factors themselves. Accordingly, consistent with the statute,
we have considered several other factors, including:
---------------------------------------------------------------------------

    \38\ CAA section 211(o)(2)(B)(ii)(VI).
---------------------------------------------------------------------------

     The interaction between volume requirements for years
2023-2025, including the nested nature of those volume requirements and
the availability of carryover RINs.\39\
---------------------------------------------------------------------------

    \39\ This also informs our analysis of the statutory factor
``review of the implementation of the program.'' CAA section
211(o)(2)(B)(ii).
---------------------------------------------------------------------------

     The ability of the market to respond given the timing of
this rulemaking.\40\
---------------------------------------------------------------------------

    \40\ This also informs our analysis of the statutory factor
``the expected annual rate of future commercial production of
renewable fuels.'' CAA section 211(o)(2)(B)(ii)(III).
---------------------------------------------------------------------------

     Our obligation to respond to the ACE remand (Section V).
     The supply of qualifying renewable fuels to U.S. consumers
(Section III.A.5).\41\
---------------------------------------------------------------------------

    \41\ This is based on our analysis of the statutory factor the
expected annual rate of future commercial production of renewable
fuel as well as of downstream constraints on biofuel use, including
the statutory factors relating to infrastructure and costs.
---------------------------------------------------------------------------

     Soil quality (RIA Chapter 3.4).\42\
---------------------------------------------------------------------------

    \42\ Soil quality is closely tied to water quality and is also
relevant to the impact of renewable fuels on the environment more
generally, such that this analysis also informs our analysis of the
statutory factor ``the impact of the production and use of renewable
fuels on the environment.'' CAA section 211(o)(2)(B)(ii)(I).
---------------------------------------------------------------------------

     Environmental justice (Section IV.E and RIA Chapter
8).\43\
---------------------------------------------------------------------------

    \43\ Addressing environmental justice involves assessing the
potential for the use of renewable fuels to have a disproportionate
and adverse health or environmental effect on minority populations,
low-income populations, tribes, and/or indigenous peoples.
---------------------------------------------------------------------------

     A comparison of costs and benefits (Section IV.D).\44\
---------------------------------------------------------------------------

    \44\ The comparison of costs and benefits compares our
quantitative analysis of various statutory factors, including costs
and energy security.
---------------------------------------------------------------------------

C. Statutory Conditions on Volume Requirements

    As indicated above, the CAA affords EPA flexibility to consider
each of the enumerated factors and the weight to give those factors.
However, the CAA does contain three conditions that affect our
determination of the applicable volume requirements:
     A constraint in setting the applicable volume of total
renewable fuel as compared to advanced biofuel, with implications for
the implied volume requirement for conventional renewable fuel.
     Direction in setting the cellulosic biofuel applicable
volume regarding potential future waivers.
     A floor on the applicable volume of BBD.
1. Advanced Biofuel as a Percentage of Total Renewable Fuel
    While the statute provides broad discretion in setting the
applicable volume requirements for advanced biofuel and total renewable
fuel, it also establishes a constraint on the relationship between
these two volume requirements, and this constraint has implications for
the implied volume requirement for conventional renewable fuel. The CAA
provides that the applicable advanced biofuel requirement must ``be at
least the same percentage of the applicable volume of renewable fuel as
in calendar year 2022,'' \45\ meaning that EPA must, at a minimum,
maintain the ratio of advanced biofuel to total renewable fuel that was
established for 2022 for the years in which EPA sets the applicable
volume requirements. In effect, this limits the implied volume of
conventional renewable fuel within the

total renewable fuel volume for years after 2022.
---------------------------------------------------------------------------

    \45\ CAA section 211(o)(2)(B)(iii).
---------------------------------------------------------------------------

    The applicable advanced biofuel volume requirement is 5.63 billion
gallons for 2022.\46\ The total renewable fuel volume requirement for
2022 is 20.63 billion gallons, resulting in an implied conventional
volume requirement of 15 billion gallons. For 2022, then, advanced
biofuel would represent 27.3 percent of total renewable fuel. The
volume requirements we are finalizing in this action for 2023-2025,
shown in Table I.A.1-1, all exceed this 27.3 percent minimum, and thus
the applicable volume requirements that we are finalizing satisfy this
statutory criterion.
---------------------------------------------------------------------------

    \46\ 87 FR 39601.
---------------------------------------------------------------------------

2. Cellulosic Biofuel
    The statute requires that EPA set the applicable cellulosic biofuel
requirement ``based on the assumption that the Administrator will not
need to issue a waiver . . . under [CAA section 211(o)](7)(D)'' for the
years in which EPA sets the applicable volume requirement.\47\ We
interpret this requirement to mean that we must establish the
cellulosic volume requirement at a level that is achievable and not
expected to require us in the future to lower the applicable cellulosic
volume requirement using the cellulosic waiver authority under CAA
section 211(o)(7)(D).\48\ CAA section 211(o)(7)(D) provides that if
``the projected volume of cellulosic biofuel production is less than
the minimum applicable volume established under paragraph (2)(B),'' EPA
``shall reduce the applicable volume of cellulosic biofuel required
under paragraph (2)(B) to the projected volume available during that
calendar year.'' Therefore, we are setting the volume requirements such
that the mandatory waiver of the cellulosic volume is not anticipated
to be triggered in those future years. Operating within this
limitation, and in light of our consideration of the statutory factors
explained in Section VI, we are setting the cellulosic volumes for
2023, 2024, and 2025 at the projected volume available in each year,
respectively, consistent with our past actions in determining the
cellulosic biofuel volume.\49\ These projections, discussed further in
Sections III.B.1 and VI.A, represent our best efforts to project the
growth in the volume of these fuels that can be achieved in 2023-2025.
---------------------------------------------------------------------------

    \47\ CAA section 211(o)(2)(B)(iv).
    \48\ The cellulosic biofuel waiver applies when the projected
volume of cellulosic biofuel production is less than the minimum
applicable volume. CAA section 211(o)(7)(D).
    \49\ See, e.g., 2020-2022 Rule, 87 FR 39600 (July 1, 2022).
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3. Biomass-Based Diesel
    EPA has established the BBD requirement under CAA section
211(o)(2)(B)(ii) since 2013 because the statute only provided BBD
volume targets through 2012. The statute also requires that the BBD
volume requirement be set at or greater than the 1.0 billion gallon
volume requirement for 2012 in the statute, but does not provide any
other numerical criteria that EPA is to consider.\50\ EPA is setting
the BBD volume requirement for 2023, 2024, and 2025 at 2.82, 3.04, and
3.35 billion gallons respectively. These volumes are significantly
greater than 1.0 billion gallon minimum requirement for these years.
---------------------------------------------------------------------------

    \50\ CAA Section 211(o)(2)(B)(iv).
---------------------------------------------------------------------------

D. Authority To Establish Volumes and Percentage Standards for Multiple
Future Years

    EPA is finalizing volume and percentage standards for 2023, 2024,
and 2025 in this single action. In the proposed rule, we sought comment
on volume requirements for 2026, and proposed volumes for 2023, 2024,
and 2025. We also proposed corresponding percentage standards for 2023,
2024, and 2025.
    In the proposal, we discussed how the number of years for which we
might establish standards, and thus the numbers of years for which we
must analyze the impacts of those standards, represented a tension
between providing certainty for stakeholders of future demand and being
able to project renewable fuel supply with reasonable certainty. We
discussed how we focused our assessment of renewable fuel supply on the
three years immediately following the end of the statutory volume
targets (i.e., 2023-2025) as an attempt to find a balance between these
opposing concerns. Additionally, we have considered the statutory
deadlines from promulgating applicable volumes, two of which have
already passed (October 31, 2021, for 2023 applicable volumes, and
October 31, 2022, for 2024 applicable volumes). The statutory deadline
for promulgating the 2025 applicable volumes is later this year on
October 31, 2023. Establishing volume requirements for three years
strikes an appropriate balance between these opposing concerns.
    We acknowledge that establishing volume targets and the associated
percentage standards for a greater number of years would increase
market certainty for obligated parties, biofuel producers, and other
RIN market participants. However, the uncertainty inherent in making
future projections increases for longer timeframes. Moreover, our
experience with the RFS program since its inception is that unforeseen
market circumstances involving not only renewable fuel supply but also
relevant economics mean that fuels markets are continually evolving and
changing in ways that cannot be predicted. These facts affect all
supply-related elements of biofuel: projections of production capacity,
availability of imports, rates of consumption, availability of
qualifying feedstocks, and the gasoline and diesel demand projections
that provide the basis for the calculation of percentage standards.
Greater uncertainty in future projections means a higher likelihood
that those future projections could turn out to be inaccurate, leading
to the potential need to revise them after they are established
through, for instance, one of the statutory waiver provisions. Such
actions to revise applicable standards after they have been set could
be expected to increase market uncertainty.
    Promulgating standards for three years in a single action also
increases the likelihood that we can meet the statutory deadline to
promulgate applicable volumes by 14 months prior to the beginning of
the calendar year. In this action, we are promulgating the 2025 volumes
ahead of the statutory deadline of October 2023. Given the extensive
analysis required to support the volumes, and the associated length of
time necessary for CAA rulemaking actions, promulgating standards for
multiple years facilitates compliance with the statutory requirements.
    Many of the comments we received from stakeholders supported our
proposal to establish standards for three years. While some
stakeholders requested that standards be set for fewer than three
years, others requested that we set standards for more than three
years. Based on our desire to strengthen market certainty by
establishing applicable standards for as many years as is practical,
tempered by the knowledge that longer time periods increase uncertainty
in projected volumes, increasing the potential that applicable
standards might need to be waived at a later date, we continue to
believe that three years represents an appropriate balance at this
time. We are not making a determination in this action that three years
is the appropriate number of years to establish standards under all
circumstances and in all future actions. Indeed, it may be appropriate
in future standard-setting

actions to establish standards for more or less than three years at a
time.
    The CAA requires EPA to promulgate regulations that, regardless of
the date of promulgation, contain compliance provisions applicable to
refineries, blenders, distributors and importers that ensure that the
volumes in CAA section 211(o)(2)(B), which includes set volumes, are
met.\51\ As to setting percentage standards, for years after 2022, the
CAA does not expressly direct EPA to continue to implement volume
requirements through percentage standards established through annual
rulemakings. Furthermore, in establishing volumes for years after 2022,
EPA is directed to review ``the implementation of the program'' in
years during which Congress provided statutory volumes.\52\ Thus,
Congress provided EPA discretion as to how to implement the volume
requirements of the RFS program in years 2023 and beyond.
---------------------------------------------------------------------------

    \51\ CAA section 211(o)(A)(i), (iii).
    \52\ CAA Section 211(o)(2)(B)(ii).
---------------------------------------------------------------------------

    CAA section 211(o)(3)(B)(i) provides that by ``November 30 of each
of calendar years 2005 through 2021, based on the estimate provided [by
EIA], the Administrator . . . shall determine and publish in the
Federal Register, with respect to the following calendar year, the
renewable fuel obligation that ensures that the requirements of
paragraph (2) are met.'' \53\ The next clause (ii) provides further
requirements for the obligation described in clause (i). On its face,
this language does not apply to rulemakings establishing obligations
for years subsequent to 2022. Therefore, EPA is not bound by this
language for those years.
---------------------------------------------------------------------------

    \53\ CAA Section 211(o)(3)(b)(i).
---------------------------------------------------------------------------

    EPA could choose to continue to utilize the same procedures
articulated in CAA section 211(o)(3)(B)(i) for establishing percentage
standards for years beyond 2022. In that case, EPA would establish
standards for 2023 in this rulemaking, and separately set standards for
2024 and 2025 in later actions. However, EPA has chosen to set
percentage standards at one time for several future years (i.e., for
2023, 2024, and 2025). Doing so increases certainty for obligated
parties, renewable fuel producers, and RIN market participants, as both
the applicable volume requirements and the associated percentage
standards can be established in advance of the year in which they
apply. This also provides certainty for obligated parties in
determining compliance deadlines. The regulations at 40 CFR
80.1451(f)(1)(i)(A) provide that compliance will not be required for a
given compliance year until after the percentage standards for the
following year are established. Thus, establishing the percentage
standards through this rulemaking process provides certainty as to the
date of the compliance deadlines for 2022-2024. This action properly
balances creating certainty for obligated parties, renewable fuel
producers, and RIN market participants in establishing percentage
standards and limiting the scope of uncertainty in projections of
future gasoline and diesel consumption by setting percentage standards
only for the next three compliance years.\54\
---------------------------------------------------------------------------

    \54\ See Growth Energy v. Env't Prot. Agency, 5 F.4th 1, 15
(D.C. Cir. 2021) (acknowledging deference to agency's predictive
judgments).
---------------------------------------------------------------------------

    Several commenters supported EPA's proposal to establish volumes
and associated percentage standards for 2023-2025. Other commenters
suggested that EPA should only promulgate percentage standards for 2023
and 2024 because EPA could instead finalize the percentage standards
for 2025 along with the 2026 volumes and percentage standards given the
statutory deadline of October 31, 2024. We discuss responses to these
comments in the RTC document.
    In this action, we are finalizing applicable volume requirements
and the associated percentage standards for 2023-2025, as described
further in Sections VI and VII. We believe that establishing both the
volume requirements and percentage standards for the next three years
strikes an appropriate balance between improving the program by
providing increased certainty over a multiple number of years and
recognizing the inherent uncertainty in longer-term projections.

E. Considerations for Late Rulemaking

    In this rulemaking, we are finalizing applicable volume targets for
the 2023 and 2024 compliance years that miss the statutory
deadlines.\55\ EPA has in the past also missed statutory deadlines for
promulgating RFS standards, including the BBD Standards in 2014-2016,
which were established under CAA section 211(o)(2)(B)(ii), the same
provision under which we are establishing the 2023 and 2024 standards.
The U.S. Court of Appeals for the D.C. Circuit found that EPA retains
authority to promulgate volumes and annual standards beyond the
statutory deadlines, even those that apply retroactively, so long as
EPA exercises this authority reasonably.\56\ In doing so, EPA must
balance the burden on obligated parties of a delayed rulemaking with
the broader goal of the RFS program to increase renewable fuel use.\57\
In upholding EPA's late and retroactive standards in ACE, the court
considered several specific factors, including the availability of RINs
for compliance, the amount of lead time and adequate notice for
obligated parties, and the availability of compliance flexibilities. In
addressing rulemakings that were late (i.e., those issued after the
statutory deadline) but not retroactive, the court emphasized the
amount of lead time and adequate notice for obligated parties.\58\ Most
relevant here is EPA's action in 2015 that established the BBD volume
requirements for 2014-2017.\59\ There, EPA missed the statutory
deadline, that EPA establish an applicable volume target for BBD no
later than 14 months before the first year to which that volume
requirement will apply, for all four years.\60\ The court found that
EPA properly balanced the relevant considerations and had provided
sufficient notice to parties in establishing the applicable volume
requirements for 2014-2017.\61\ A commenter suggested that EPA is
further limited on our promulgation of the 2023 and 2024 standards at
no greater than the 2022 standards. We disagree for the reasons
articulated in the RTC document.
---------------------------------------------------------------------------

    \55\ See CAA Section 211(o)(2)(B)(ii), requiring EPA promulgate
applicable volume requirements no later than 14 months prior to the
first year in which they will apply.
    \56\ Americans for Clean Energy v. EPA, 864 F.3d 691 (D.C. Cir.
2017) (ACE) (EPA may issue late applicable volumes under CAA section
211(o)(2)(B)(ii)); Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C.
Cir. 2014); NPRA v. EPA, 630 F.3d 145, 154-58 (D.C. Cir. 2010).
    \57\ NPRA v. EPA, 630 F.3d 145, 164-65.
    \58\ ACE, 864 F.3d at 721-22.
    \59\ 80 FR 77420, 77427-28, 77430-31 (Dec. 14, 2015).
    \60\ CAA section 211(o)(2)(B)(ii).
    \61\ ACE, 864 F.3d at 721-23.
---------------------------------------------------------------------------

    In this rulemaking, we are exercising our authority to set the
applicable renewable fuel volume requirements for 2023 and 2024 after
the statutory deadline to promulgate volumes no later than 14 months
before the first year to which those volume requirements apply.\62\
This final rule will also be partly retroactive, as the 2023 standards
are being finalized in the middle of the 2023 calendar year.
Nevertheless, we believe that the 2023 standards being finalized in
this action can be met and that the available RIN generation data from
the first quarter of 2023 suggests the market is on track to supply the
volumes we are finalizing for 2023 (see Section VI and RIA Chapter 6).
We are finalizing the 2024 standards prior to

the beginning of the 2024 calendar year and do not expect those
standards to apply retroactively. Additionally, we have provided
obligated parties notice as of December 1, 2022 of the proposed 2023
and 2024 standards, a month ahead of when the 2023 standards would
apply, and over a year in advance of when the 2024 standards would
apply. Additionally, obligated parties will have at least nine months
from the time of promulgation of this final rule before they are
required to submit associated compliance reports for 2023.\63\ There
will additionally be approximately 22 months between the promulgation
of this rule and the compliance deadline for the 2024 standards.\64\
Additionally, all obligated parties will continue to have available
compliance flexibilities such as carry forward deficits, and carryover
RINs to comply with the 2023 and 2024 standards.
---------------------------------------------------------------------------

    \62\ CAA section 211(o)(2)(B)(ii).
    \63\ EPA expects the 2023 compliance deadline to be March 31,
2024. See 40 CFR 80.1451(f)(1)(A).
    \64\ The 2024 compliance deadline is March 31, 2025. 40 CFR
80.1451(f)(1)(A).
---------------------------------------------------------------------------

    In addition, in completing its response to the ACE remand of the
2016 annual rule, we are establishing a supplemental standard for
2023.\65\ This supplemental standard is being promulgated after the
statutory deadline for the 2016 standards (November 30, 2015). However,
the supplemental standard would prospectively apply to gasoline and
diesel produced or imported in 2023, therefore is only partly
retroactive. We further discuss our response to the ACE remand in
Section V.
---------------------------------------------------------------------------

    \65\ We also established a supplemental standard for 2022 in a
prior action. See, e.g., 87 FR 39600 (July 1, 2022).
---------------------------------------------------------------------------

F. Impact on Other Waiver Authorities

    While we are establishing applicable volume requirements in this
action for future years that are achievable and appropriate based on
our consideration of the statutory factors, we retain our legal
authority to waive volumes in the future under the waiver authorities
should circumstances so warrant.\66\ For example, the general waiver
authority under CAA section 211(o)(7)(A) provides that EPA may waive
the volume targets in ``paragraph (2),'' which provides both the
statutory applicable volume tables and EPA's set authority (the
authority to set applicable volumes for years not specified in the
table). Therefore, similar to our exercise of the waiver authorities to
modify the statutory volumes in past annual standard-setting
rulemakings, EPA has the authority to modify the applicable volumes for
2023 and beyond in future actions through the use of our waiver
authorities to modify the applicable volumes we are setting in this
action.
---------------------------------------------------------------------------

    \66\ See J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Intern.,
Inc., 534 U.S. 124, 143-44 (2001) (holding that when two statutes
are capable of coexistence and there is not clearly expressed
legislative intent to the contrary, each should be regarded as
effective).
---------------------------------------------------------------------------

    We note that, as described above, CAA section 211(o)(2)(B)(iv)
requires that EPA set the cellulosic biofuel volume requirements for
2023 and beyond based on the assumption that the Administrator will not
need to waive those volume requirements under the cellulosic waiver
authority. Because we are, in this action, establishing the applicable
volume targets for 2023-2025 under the set authority, we do not believe
we could also waive those requirements using the cellulosic waiver
authority in this same action in a manner that would be consistent with
CAA section 211(o)(2)(B)(iv), since that waiver authority is only
triggered when the projected production of cellulosic biofuel is less
than the ``applicable volume established under [211(o)(2)(B)].'' In
other words, it does not appear that EPA could use both the set
authority and the cellulosic waiver authority to establish volumes at
the same time in this action.
    Establishing the volume requirements for 2023-2025 using our set
authority apart from the cellulosic waiver authority has important
implications for the availability of cellulosic waiver credits (CWCs)
in these years. When EPA reduces cellulosic volumes under the
cellulosic waiver authority, EPA is also required to make CWCs
available under CAA section 211(o)(7)(D)(ii). In this rule we are, for
the first time, establishing a cellulosic biofuel standard without
utilizing the cellulosic waiver authority. We interpret CAA section
211(o)(7)(D)(ii) such that CWCs are only made available in years in
which EPA uses the cellulosic waiver authority to reduce the cellulosic
biofuel volume. Because of this, cellulosic waiver credits would not be
available as a compliance mechanism for obligated parties in these
years absent a future action to exercise the cellulosic waiver
authority. We recognized this likelihood in the recent rule
establishing volume requirements for 2020-2022, where we stated that
CWCs were unlikely to be available in 2023 as part of our rationale for
not requiring the use of cellulosic carryover RINs in setting the
cellulosic volume requirements for 2020-2022. \67\ Some commenters
suggested that we should make CWCs available even in the absence of
exercising our cellulosic waiver authority to provide a price cap on
cellulosic volume, or to provide additional flexibility for obligated
parties. As we do not find authority to issue cellulosic waiver credits
without use of the cellulosic waiver authority, we will not be issuing
CWCs absent a future waiver of the cellulosic standard. Despite the
absence of CWCs, we expect that obligated parties will be able to
satisfy their cellulosic biofuel obligations for these years because we
are proposing to establish the cellulosic biofuel volume requirement
based on the quantity of cellulosic biofuel we project will be produced
and imported in the U.S. each year.
---------------------------------------------------------------------------

    \67\ 87 FR 39616 (July 1, 2022).
---------------------------------------------------------------------------

G. Severability

    As stated in the proposal, we intend for the volume requirements
and percentage standards for each single year covered by this rule
(i.e., 2023, 2024, and 2025) to be severable from the volume
requirements and percentage standards for the other years. Each year's
volume requirements and percentage standards are supported by analyses
for that year. Similarly, we intend for the 2023 supplemental standard
and percentage standard to be severable from the annual volume
requirements and percentage standards.
    We also intend for the other regulatory amendments to be severable
from the volume requirements and percentage standard. The regulatory
amendments are intended to improve the RFS program in general and are
not part of EPA's analysis for the volume requirements and percentage
standards for any specific year. Further, each of the regulatory
amendments in Sections IX and X is severable from the other regulatory
amendments because they all function independently of one another.
    If any of the portions of the rule identified in the preceding
paragraph (i.e., volume requirements and percentage standards for a
single year, the 2023 supplemental standard, the individual regulatory
amendments) is invalidated by a reviewing court, we intend the
remainder of this action to remain effective as described in the
preceding paragraph. To further illustrate, if a reviewing court were
to invalidate the volume requirements and percentage standards and
supplemental standard, we intend the other regulatory amendments to
remain effective. Or, as another example, if a reviewing court
invalidates the BBD conversion factor provisions, we intend the volume
requirements and percentage standards as well as the supplemental
standard and other regulatory amendments to remain effective.

III. Candidate Volumes and Baselines

    The statute requires that we analyze a specified set of factors in
making our determination of the appropriate volume requirements to
establish for years after 2022, and further requires that we review
implementation of the program in prior years. The statutory factors are
listed in Section II.B. Because many of those factors, particularly
those related to economic and environmental impacts, are difficult to
analyze in the abstract, we have therefore opted to analyze those
factors based on specific ``candidate volumes'' for each category of
renewable fuel. To accomplish this, we first derived a set of renewable
fuel volumes from the statutory factors most closely related to
renewable fuel supply and other relevant factors. The development of
these candidate volumes helps further our consideration of the
statutory factor to analyze the expected annual rate of future
commercial production of renewable fuels and provide us with renewable
fuel volumes with which to perform the remaining analyses required by
the statute. We used these candidate volumes to conduct analyses of the
other environmental and economic factors. Finally, we determined, based
on the results of all of the analyses (those that went into developing
the candidate volumes, described in this section, and the subsequent
analyses performed using these candidate volumes, described in Sections
IV and VI), the volume requirements that would be appropriate to
establish. Our approach can be summarized as a three-step process:
    1. Development of candidate volumes (described in this section).
    2. Multifactor analysis based on those candidate volumes (described
in Section IV).
    3. Determination of applicable volume requirements based on a
consideration of all factors analyzed (described in Section VI).
    We acknowledge that we are taking a different approach to
developing candidate volumes in this rule than we did under the reset
authority in the 2020-2022 rule. The primary difference is that in the
2020-2022 rule the candidate volumes for non-cellulosic advanced
biofuel and conventional renewable fuel were generally in the implied
statutory volumes for these fuel types in comparison to the statutory
volumes. In this rule we are establishing volumes for 2023-2025, a time
period for which there are no statutory targets. We therefore developed
the candidate volumes for non-cellulosic biofuel and conventional
biofuel based primarily on a consideration of supply-related factors,
with a consideration of other relevant factors as noted in the
following sections. This approach is generally consistent with the
approach we took for developing the candidate cellulosic biofuel
volumes in the 2020-2022 rule, as the statutory cellulosic biofuel
volumes were far beyond the quantity of these fuels that could be
supplied.
    For the first step in this process, we analyzed a subset of the
statutory factors that are most closely related to supply of and demand
for renewable fuel. These supply-and-demand-related factors
(hereinafter ``supply-related factors'') \68\ include the production
and use of renewable fuels (as a necessary prerequisite to analyzing
their impacts under CAA section 211(o)(2)(B)(ii)(I), (II), (V), and
(VI))), the expected annual rate of future commercial production of
renewable fuels (CAA section 211(o)(2)(B)(ii)(III)), and the
sufficiency of infrastructure to deliver and use renewable fuel (CAA
section 211(o)(2)(B)(ii)(IV)). Consideration of these supply-related
statutory factors necessarily included a consideration of imports and
exports of renewable fuel, consumer demand for renewable fuel, the
availability of qualifying feedstocks, and other relevant factors as
discussed in the following sections. Since the statute also requires us
to review the implementation of the program in prior years, an analysis
of renewable fuel supply includes not just projections for the future
but also an assessment of the historical supply of renewable fuel.
While we focused on supply-related factors, as discussed further in the
following sections we also considered other information such as trends
in statutory volumes, GHG reduction implications, and market
expectations resulting from our proposed rule.
---------------------------------------------------------------------------

    \68\ We use this shorthand (``supply-related factors'') only for
ease of explanation in the context of identifying candidate volumes
for analysis under CAA section 211(o)(2)(B)(ii). We recognize that
this shorthand (``supply-related factors'') utilizes the term
``supply'' in a manner that is incongruent with the D.C. Circuit's
interpretation of the scope of the term ``supply'' in the general
waiver authority provision in CAA section 211(o)(7)(A). ACE, 864
F.3d at 710. (holding that the term ``inadequate domestic supply''
under the general waiver authority excludes ``demand-side
factors''). References to ``supply-related factors'' in the context
of our discussion of the candidate volumes for analysis under CAA
section 211(o)(2)(B)(ii) have no bearing on our interpretation of
the term ``inadequate domestic supply'' under the general waiver
authority under CAA section 211(o)(7)(A).
---------------------------------------------------------------------------

    This section describes the derivation of ``candidate volumes''
based on a consideration of supply-related factors as the first step in
our consideration of all factors that we are required to analyze under
the statute. The candidate volumes represent those volumes that might
be reasonable to require based on the supply-related factors, but which
have not yet been evaluated in terms of the other economic and
environmental factors. Basing the candidate volumes primarily on
supply-related considerations is a reasonable first step because doing
so narrows the scope for the multifactor analysis in a commonsense way.
This step better enables our analysis of the remaining statutory
factors. The candidate volumes we have identified in this final rule
are similar to, but slightly higher than the candidate volumes in the
proposed rule. Specifically, the candidate cellulosic biofuel volumes
are higher for all three years (after accounting for the fact that we
are not finalizing the proposed eRIN provisions in this rule). The
candidate volumes for non-cellulosic advanced biofuels in this final
rule are higher than the candidate volumes from the proposed rule for
2023-2025. Finally, the candidate volumes for conventional biofuel in
this final rule are lower than the candidate volumes in the proposed
rule for all three years, due to lower projected gasoline consumption.
Section VI provides our rationale for the final volume requirements in
light of all the analyses that we conducted.
    In this final rule we updated the candidate volumes after
considering the comments we received on our proposed rule as well as
additional data not available at the time the analyses for the proposed
rule were completed. We received many comments on the supply-related
factors that informed the candidate volumes, including comments related
to renewable fuel production capacity, the availability of feedstocks
to produce renewable fuel, the quantity of renewable fuel that can be
consumed in the transportation sector, and the ability for the
incentives provided by the RFS program to incentivize increased
renewable fuel production and use. These comments, along with more
recent data, led us to increase the candidate volumes for CNG/LNG
derived from biogas, ethanol produced from corn kernel fiber, biomass-
based diesel, and other advanced biofuels projected to be produced or
imported in 2023-2025, and corresponding increases to the candidate
volumes for these fuel types relative to the proposal. Our
consideration of comments on the proposed rule and additional data also
resulted in slight decreases to the candidate volumes of conventional
renewable fuel for 2023-2025.
    Our updated projections of projected renewable fuel production and
imports, including a brief discussion of the

relevant comments and new data that informed these projections, can be
found in Section III.B. Section III.C summarizes the candidate volumes
we analyzed. Finally, Sections III.D and III.E describe, respectively,
the No RFS baseline that we believe would be the most appropriate point
of reference for the analysis of the other statutory factors, and the
volume changes calculated in comparison to that baseline.

A. Scope of Analysis

    In Section II.D we discuss our statutory authority to establish RFS
volumes and percentage standards for multiple years in a single rule.
As discussed in that section, in this final rule we are establishing
volumes and percentage standards for three years, 2023-2025. Consistent
with this decision, Sections III.B and III.C discuss our determination
of the candidate volumes for each year covered by this rule.

B. Production and Import of Renewable Fuel

1. Cellulosic Biofuel
    Cellulosic biofuel is defined as renewable fuel derived from any
cellulose, hemi-cellulose, or lignin that has lifecycle greenhouse gas
emissions that are at least 60 percent less than the baseline lifecycle
greenhouse gas emissions.\69\ In the past several years, production of
cellulosic biofuel has continued to increase. Cellulosic biofuel
production reached record levels in 2022, driven by compressed natural
gas (CNG) and liquified natural gas (LNG) derived from biogas. This
section describes our assessment of the rate of production of
qualifying cellulosic biofuel from 2023 to 2025, and some of the
uncertainties associated with these volumes. Further detail on our
projections of the rate of cellulosic biofuel production and import can
be found in RIA Chapter 6.1.
---------------------------------------------------------------------------

    \69\ 40 CFR 80.1401.
    [GRAPHIC] [TIFF OMITTED] TR12JY23.000

a. CNG/LNG Derived From Biogas
    To be eligible to generate RINs for CNG/LNG derived from biogas,
biogas from qualifying sources first must be collected and upgraded to
enable its use in CNG/LNG vehicles. This upgrading process involves
removing undesirable components and contaminants from biogas. Biogas
that has been upgraded and distributed via a closed, private
distribution system is called ``treated biogas'' while biogas that has
been upgraded and distributed via the natural gas commercial pipeline
system is referred to as renewable natural gas (RNG). RNG is
essentially indistinguishable from fossil-based natural gas and can be
used interchangeably and transported through the same pipelines. While
treated biogas is typically used to fuel CNG/LNG vehicles at the site
where it is produced, RNG is injected into the natural gas commercial
pipeline system. Once injected into the natural gas commercial pipeline
system, RNG can be used in a variety of applications, including to fuel
CNG/LNG vehicles, for generating electricity, for residential heating,
and for other industrial or commercial purposes.
    In the proposed rule we projected the use of CNG/LNG produced from
RNG \70\ in 2023-2025 using an industry-wide projection of the rate of
growth calculated from RIN generation over the previous 24 months.
While some commenters argued that EPA should project future production
of CNG/LNG from RNG based on a facility-by-facility assessment, many
supported the proposed methodology of using an industry-wide rate of
growth to project production in future years. Many of the commenters
who generally supported the rate of growth approach, however, requested
that EPA use a higher rate of growth that considered data beyond just
the most recent 24 months. These comments are discussed briefly at the
end of this section, and in greater detail in the RTC document. In this
final rule we are using an industry-wide rate of growth based on RIN
generation data

from 2015-2022 to project the production and use of RNG as CNG/LNG. As
discussed later in this section, we believe the growth rate calculated
using data from 2015-2022 better reflects the potential production and
use of RNG as CNG/LNG through 2025. This results in a significantly
higher rate of grow in the final rule (25.0%) relative to the proposed
rule (13.1%), and higher projected volumes of RNG use as CNG/LNG for
each year from 2023-2025.
---------------------------------------------------------------------------

    \70\ We note that as described in the biogas regulatory reform
provisions in Section IX, we define RNG to mean biogas that has been
upgraded to commercial pipeline quality and placed onto the natural
gas commercial pipeline system. We also define the term ``treated
biogas'' to refer to biogas that has undergone treatment for use as
transportation fuel but that is not placed onto the natural gas
commercial pipeline system (i.e., it is distributed via a closed,
private distribution system). For purposes of this section of the
preamble, we use the term RNG to refer collectively to treated
biogas and RNG.
---------------------------------------------------------------------------

    In projecting the production and use of RNG used as CNG/LNG in
2023-2025 we primarily considered two potential limiting factors. The
first factor considered was the quantity of RNG we project will be
produced from qualifying biogas in 2023-2025. Because biogas must be
upgraded to enable its use in CNG/LNG vehicles, the quantity of RNG
that we project will be produced sets a maximum for the quantity of
biogas that can be used in vehicles as CNG/LNG. The second major factor
we consider is the quantity of RNG that is capable of being used as
transportation fuel in CNG/LNG vehicles. As discussed above, RNG can be
used in many different applications and a variety of factors, including
limitations related to the demand for CNG/LNG from vehicles, fueling
infrastructure, and demand for RNG from other sectors can all impact
the quantity of CNG/LNG used in vehicles. Our projection of the
quantity of RNG used as CNG/LNG that will be produced and used in 2023-
2025 is described briefly in this section, and in greater detail in RIA
Chapter 6.1.3.
    To project qualifying RNG production for this final rule we used an
industry wide projection approach that is similar, though not
identical, to the approach used to project the production of RNG used
as CNG/LNG in previous RFS rules as well as in the proposed rule. While
the approach we are using to project the production of CNG/LNG is
similar to the approach used in previous years and the proposal, we are
now using a broader range of data to calculate the growth rate used to
project future projection. This reflects our consideration of an
appropriate growth rate following engagement with stakeholders and
review of both new data and commenter submissions on the proposal. More
detail on our consideration of the appropriate rate of growth is
provided later in this section. We have successfully used an industry
wide projection methodology in previous years and continue to believe
it better reflects the projected growth of the industry in light of
potential limiting factors (which are more likely to be market based
than technology based) than a projection based on an assessment of each
potential RNG producer.
    To project the production of qualifying RNG we calculated a year-
over-year growth rate and applied this growth rate to the total
production of RNG used as CNG/LNG in 2022 (the most recent year for
which complete data are available). To calculate the year-over-year
growth rate we considered RIN generation data for RNG used as CNG/LNG
from 2015-2022 instead of just the most recent 24 months for the
proposal. We believe a rate of growth based on this larger set of data
better reflects the potential for RNG production in 2023-2025. We also
note that this rate of growth is within the range of the growth rates
suggested by RNG producers in the public comment period (generally 20-
30%) and closer to, though still less than, estimated RNG production
from the Coalition for Renewable Natural Gas based on their analysis of
new RNG facilities under construction and in development.\71\ The data
used to calculate the projected rate of growth for RNG and the
resulting projections of RNG production in 2023-2025 are shown in Table
III.B.1.a-1 and Table III.B.1.a-2.
---------------------------------------------------------------------------

    \71\ Further discussion of the growth rate used to project the
production of CNG/LNG derived from biogas, and our reasons for
considering data beyond the most recent 24 months, can be found in
RTC Section 3.2.2.

Table III.B.1.a-1--Generation of Cellulosic Biofuel RINs for RNG Used as
                                 CNG/LNG
                      [Ethanol-equivalent gallons]
------------------------------------------------------------------------
                                       2022 RIN
  2015 RIN generation  (million       generation        Year-over-year
              RINs)                 (million RINs)       increase  (%)
------------------------------------------------------------------------
139.9...........................              666.1                25.0
------------------------------------------------------------------------

                            Table III.B.1.a-2--Projected Generation of Qualifying RNG
                                          [Ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                Growth rate    Volume  (million
                    Year                                 Date type                   (%)             RINs)
----------------------------------------------------------------------------------------------------------------
2022........................................  Actual.........................             N/A                665
2023........................................  Projection.....................            25.0                831
2024........................................  Projection.....................            25.0              1,039
2025........................................  Projection.....................            25.0              1,299
----------------------------------------------------------------------------------------------------------------

    We next considered how much of the qualifying RNG produced in 2023-
2025 could be used as transportation fuel in the form of CNG/LNG. While
the volumes of RNG use as CNG/LNG in Table III.B.1.a-2. appear to be
approaching the upper limit (estimated to be 1.4-1.75 billion ethanol-
equivalent gallons) of all CNG/LNG capable of being used as
transportation fuel in 2023-2025 in CNG/LNG vehicles in the fleet,
these 2023-2025 volumes are still below the total quantity of CNG/LNG
projected to be used as transportation fuel in 2023-2025.\72\ Thus, the
entire quantity of qualifying RNG produced in 2023-2025 could still be
used as transportation fuel and be able to generate RINs under the RFS
program. We therefore used the volumes in Table III.B.1.a-2 as the
candidate volumes for RNG use as CNG/LNG in 2023-2025.
---------------------------------------------------------------------------

    \72\ See RIA Chapter 6.1.3 for a further discussion of our
estimate of CNG/LNG used as transportation fuel in 2023-2025.
---------------------------------------------------------------------------

    We received many comments on our projected volume for RNG used as
CNG/LNG in our proposed rule. While some commenters supported the
proposed volumes, many stakeholders involved in

the production, distribution, and use of RNG as CNG/LNG stated that the
projected volumes were too low. In particular, they stated that the
growth in RNG use as CNG/LNG in recent years was significantly impacted
by the COVID pandemic and did not reflect projected growth in this
industry through 2025. Some commenters also noted significant
investment in expanding RNG production which they claimed supported a
much higher growth rate in the projected volume of biogas used in CNG/
LNG vehicles.\73\
---------------------------------------------------------------------------

    \73\ See RTC Section 3.2.2 for a summary of these comments and a
more detailed response.
---------------------------------------------------------------------------

    In this final rule we used a growth rate based on a longer time-
period (2015-2022) than in both our proposed rule and previous RFS
rules. We believe the higher growth rate that results from using
additional data better reflects the likely production of RNG use as
CNG/LNG in 2023-2025 than using a growth rate based on the last 24
months of data. Using data from 2015-2022 strikes a balance between
using the most recent data available and not focusing exclusively on
data from the last 24 months, during which the industry may still have
been recovering from the impacts of the COVID pandemic. As noted
earlier, the growth rate that results from using this additional data
is supported by the public comments (which generally requested that EPA
use growth rates that ranged from 20 to 30 percent), as well as the
data received during the public comment period on the large number of
RNG production facilities that are currently under construction or in
the project development phase. Finally, we note that the limited data
available from early 2023 suggest that 25% growth is achievable in
2023.\74\
---------------------------------------------------------------------------

    \74\ Further discussion of the growth rate used to project the
production of CNG/LNG derived from biogas, and our reasons for
considering data beyond the most recent 24 months, can be found in
RTC Section 3.2.2.
---------------------------------------------------------------------------

b. Ethanol From Corn Kernel Fiber
    While there are several different technologies currently being
developed to produce liquid fuels from cellulosic biomass, these
technologies are by and large highly unlikely to produce significant
quantities of cellulosic biofuel by 2025. One exception is the
production of ethanol from corn kernel fiber (CKF), for which several
different companies have developed processes. Many of these processes
involve co-processing of both the starch and cellulosic components of
the corn kernel making it difficult to quantify what portion of the
ethanol they produce is from cellulosic biomass.
    In the proposed rule we noted the potential for the production of
cellulosic ethanol from CKF in 2023-2025. We did not, however, project
any production of ethanol from CKF in 2023-2025 beyond the few
facilities that were currently registered as cellulosic biofuel
producers. At the time of the proposal no facilities had yet requested
to register as cellulosic biofuel producers using analytical methods
consistent with recently published guidance.\75\ Since the proposal,
however, a number of facilities have approached EPA with registration
requests. In this final rule we are now projecting that the production
of ethanol from CKF will increase from 7 million gallons in 2023 to 77
million gallons in 2025. These projections, which are described further
in the remainder of this section and in greater detail in RIA Chapter
6.1 are based on projections of the number of facilities we expect will
register as cellulosic biofuel producers and the expected rate of
cellulosic biofuel production at each facility.
---------------------------------------------------------------------------

    \75\ Guidance on Qualifying an Analytical Method for Determining
the Cellulosic Converted Fraction of Corn Kernel Fiber Co-Processed
with Starch. Compliance Division, Office of Transportation and Air
Quality, U.S. EPA. September 2022 (EPA-420-B-22-041).
---------------------------------------------------------------------------

    To be eligible to generate cellulosic RINs, facilities that are co-
processing starch and cellulosic components of the corn kernel must be
able to determine the amount of ethanol that is produced from the
cellulosic portion of the corn kernel. This requires the ability to
accurately and reliably calculate the amount of ethanol produced from
the cellulosic portion as opposed to the starch portion of the corn
kernel; EPA has to date had significant concerns with facilities'
abilities to accurately perform this calculation. In September 2022 EPA
published a document providing updated guidance on analytical methods
that could be used to quantify the amount of ethanol produced when co-
processing corn kernel fiber and corn starch. \76\ This guidance
highlighted several outstanding critical technical issues that need to
be addressed.
---------------------------------------------------------------------------

    \76\ Guidance on Qualifying an Analytical Method for Determining
the Cellulosic Converted Fraction of Corn Kernel Fiber Co-Processed
with Starch. Compliance Division, Office of Transportation and Air
Quality, U.S. EPA. September 2022 (EPA-420-B-22-041).
---------------------------------------------------------------------------

    Since issuing the proposed rule EPA has continued to have
substantive discussions with technology providers intending to use
analytical methods consistent with the guidance document and owners of
facilities intending to register as cellulosic biofuel producers using
these analytical methods. The technology providers have indicated that
using analytical methods consistent with those in the guidance document
they can demonstrate that approximately 1.5% of the ethanol produced
from existing corn ethanol facilities is produced from cellulosic
biomass.
    Based on the information from the technology providers, we believe
that 1.5% of cellulosic ethanol can generally be produced from corn
kernel fiber at existing ethanol facilities with few, if any,
additional processing units or process changes. We are aware that many
ethanol facilities are working with the technology providers in order
to register their facilities to produce cellulosic ethanol. We are
therefore projecting volumes of ethanol from corn kernel fiber through
2025 that include production from facilities that have not yet
registered as cellulosic biofuel producers, but are expected to do so
during this time period. The projected production of cellulosic ethanol
from CKF, shown in Table III.B.1.b-1, are based on projections of when
facilities will register as cellulosic biofuel producers under the RFS
program and begin producing fuel. The projection methodology for
cellulosic ethanol production from CKF used in this final rule is
discussed further in RIA Chapter 6.1.2.

       Table III.B.1.b-1--Projected Production of Ethanol From CKF
                      [Ethanol-equivalent gallons]
------------------------------------------------------------------------
                                                        Volume  (million
                         Year                                RINs)
------------------------------------------------------------------------
2023.................................................                  7
2024.................................................                 51
2025.................................................                 77
------------------------------------------------------------------------

c. Other
    For the 2023-2025 timeframe, we expect that commercial scale
production of cellulosic biofuel in the U.S. beyond CNG/LNG derived
from biogas and ethanol produced from CKF will be very limited. There
are several cellulosic biofuel production facilities in various stages
of development, construction, and commissioning that may be capable of
producing commercial scale volumes of cellulosic biofuel by 2025. These
facilities generally are focusing on producing cellulosic hydrocarbons
that could be blended into gasoline, diesel, and jet fuel from
feedstocks such as separated municipal solid waste (MSW) and slash,
precommercial thinnings, and tree residue. In light of the fact that no
parties have achieved consistent production of liquid cellulosic
biofuel

in the U.S. or consistently exported liquid cellulosic biofuel to the
U.S., production and import of liquid cellulosic biofuel in 2023-2025
is highly uncertain and likely to be relatively small (see RIA Chapter
6.1.4 for more detail on the potential production of liquid cellulosic
biofuel through 2025). For the candidate volumes we have projected no
production of these fuels in 2023-2025.
d. eRINs
    As noted in the Executive Summary, we are not finalizing the
proposed revisions to the eRIN program in this rulemaking. We are
therefore not including any volume from renewable electricty in our
projections of the production and import of cellulosic biofuel. eRINs
were projected to be a significant source of cellulosic biofuel in the
proposed rule in 2024 and 2025 (representing 600 million and 1.2
billion RINs in 2024 and 2025 respectively). Because we no longer
included projected volumes of eRINs, our projections of the production
and imports of total cellulosic biofuel for 2024 and 2025 in this final
rule are lower than the proposed rule, despite the higher projections
for RNG used in vehicles as a renewable form of CNG/LNG and ethanol
produced from CKF in this final rule.
2. Biomass-Based Diesel
    Since 2010, when the BBD volume requirement was added to the RFS
program, production of BBD has generally increased year-on-year. The
volume of BBD supplied in any given year is influenced by a number of
factors, including: production capacity, feedstock availability and
cost, available incentives including the RFS program, the availability
of imported BBD, the demand for BBD in foreign markets, and several
other economic factors.
    The vast majority of fuel that qualifies as BBD is biodiesel and
renewable diesel. Both these fuels are produced from animal fat and
vegetable oils and are replacements for diesel fuel, however they
differ in their production processes and chemical composition.
Biodiesel is an oxygenated fuel that is generally produced using a
transesterification process. Renewable diesel is a hydrocarbon fuel
that closely resembles petroleum diesel that is generally produced by
hydrotreating renewable feedstocks. From 2010 through 2015 the vast
majority of BBD supplied to the U.S. was biodiesel. While biodiesel is
still the largest source of BBD supplied to the U.S., the supply of
renewable diesel in 2022 was nearly as large as the supply of