To better document and communicate the biodiesel content of any biofuel blend throughout the fuel supply chain (not just biofuel blends containing more than five percent biomass-based diesel), we propose to extend the existing product transfer document requirements at 40 CFR 80.1453 to fuel blends such that any person that sells or otherwise transfers title to any biomass-based diesel blend or biodiesel blend to any other person for resale of the product shall prepare a product transfer document evidencing such transfer.  Such product transfer documents may be in the form of an invoice, bill of lading, bill of sale or other written instrument meeting the requirements of this subsection.  All such transfer documents shall include the name of the transferor, the name of the transferee, the date of transfer, the volume in gallons of the product transferred, and either the volume in gallons or percentage of biomass-based diesel or biodiesel that is contained in the blended product.  Each person making such transfer shall maintain each transfer document required by this subsection for a period of four years from the transfer date.

	3.	RIN Retirement Requirements

	The current RFS regulations require exporters to demonstrate compliance with their exporter RVOs on an annual basis, by February 28 of the year following the compliance year in question.  40 CFR 80.1451(a).  EPA is seeking comment on the period of time that should be allowed for retirement of RINs as a result of renewable fuel export, and whether the current deficit carry-over  provision in 80.1451(a)(1)(xii) should be eliminated for exporters.  Given the volatility in the renewable fuel export market, a shorter time period may ease concerns for related uncertainty in the RIN market.  This problem was anticipated, as stated in the final RFS2 Rule: "However, we are aware of some exporters who sell RINs that they separate as a source of revenue, with the intention to purchase replacement RINs on the open RIN market later in the year to comply with their RVOs."  This provision was included to allow flexibility for exporters.  However, EPA is considering whether a change is required at this time to prevent instability and abuse.

	One approach under consideration would require exporters to clearly demonstrate on a quarterly basis that they have acquired RINs sufficient to cover volumes exported in the quarter.  This shorter time frame would significantly reduce the window of opportunity for large exports of renewable fuel without exporters having obtained the RINs that must ultimately be retired.  Alternatively, EPA could require the immediate retirement of RINs, at the time of export or within a limited window such as 30 days after export.  This would prevent rolling deficits carried by exporters, and guard against unanticipated market changes, or even "shell companies" closing up shop in order to avoid the cost of meeting their export RVO.  Eliminating the deficit carry-forward provision as it applies to exporters would also further the same objectives.   EPA solicits comment on these options.

	B.	"Downstream" Invalidation and Product Transfer Documents

	The definition of "renewable fuel" requires that the fuel be used to replace or reduce the quantity of fossil fuel present in transportation fuel, heating oil, or jet fuel. Several stakeholders have requested that the EPA amend the regulations to address concerns that properly generated RINs may become invalid as a result of the fuel not being used in or as transportation fuel, heating oil, or jet fuel "downstream" of the renewable fuel producer or importer, that is after it has left the custody of the producer or importer. In response to these concerns,  EPA is proposing amendments to clarify and expand on existing requirements regarding the designation of qualifying renewable fuel, and is also proposing new limitations on RIN generation for those types of renewable fuel that can be expected to be used in or as non-qualifying fuel.

	1.	Designation of Intended Renewable Fuel Use

	The existing regulations at § 80.1426(a) and (c) require renewable fuel producers and importers to generate RINs for fuel that: (1) qualifies for a D code pursuant to § 80.1426(f) or has been approved by a petition pursuant to § 80.1416, and (2) is demonstrated to be produced from renewable biomass pursuant to the recordkeeping and reporting requirements in the regulations.  However, § 80.1426(c) also specifies that RINs may not be generated for fuel that is not designated or intended for use as transportation fuel, heating oil or jet fuel, i.e., for a "non-qualifying fuel use".

      We are proposing amendments to §80.1426(a) and (c), and conforming amendments to the product transfer document (PTD) regulations in § 80.1453, to require all renewable fuel producers and importers to designate all RIN-generating renewable fuel as transportation fuel, heating oil or jet fuel on the PTDs that a renewable fuel producer or importer prepares to accompany a fuel shipment.  These changes would standardize the existing "designation" requirement for RIN generators by specifying the location and content of the designations.   The requirement to designate intended fuel uses in PTDs would operate as a constant reminder to renewable fuel producers and importers that RINs may only be generated for fuel intended for use as transportation fuel, heating oil or jet fuel, i.e., qualifying fuel uses, and would facilitate EPA enforcement of the designation requirement.  The regulations would require that designations be made in good faith.  Parties designating fuel for a qualifying fuel use who in fact knew that the fuel would likely be used in a fuel other than transportation or jet fuel or heating oil (a "non-qualifying fuel use") would be in violation of this proposed regulation, and subject to civil penalties.

	We are also proposing to include special conditions, in addition to the PTD requirements, related to the distribution and sale of any renewable fuel that is not typically sold for use in or as transportation fuel, jet fuel, or heating oil.  We propose that these conditions would apply to all RIN-generating renewable fuels other than ethanol, biodiesel, and "drop in" renewable diesel.  Biogas and renewable electricity would also be excluded from these conditions since sections 80.1426(f)(10) and (11) include specific conditions designed to ensure that these fuels are used in transportation fuel.  These special conditions must be satisfied in order for RINs to be generated for those fuels.  We are proposing to include these new requirements together with other conditions for RIN generation in §§ 80.1426(a) and (c), and conforming amendments to the registration, reporting and recordkeeping sections.

      EPA believes that denatured ethanol, biodiesel that meets the ASTM 6751 specifications and renewable diesel that meets the ASTM D 975 Grade No.  1-D or No. 2-D specifications and that is composed of homogenous hydrocarbons are highly likely to be used as transportation fuel, heating oil or jet fuel.  Accordingly, we are proposing that validly generated RINs for these fuels will remain valid regardless of the downstream use of the fuel.  We seek comment on whether these fuels are highly likely to be used only as transportation fuel, heating oil or jet fuel, and on whether other biofuel types should be similarly recognized.  We also seek comment on whether biodiesel and renewable fuel diesel producers who generate RINs should be required to sample and test their fuels to ensure that the fuel is appropriate for use as transportation fuel, and what specific sampling and testing requirements would be appropriate.  For all other fuels, we think that it is appropriate to limit the opportunity for RIN generation to circumstances where the producer or importer has taken actions to ensure that the fuel is used for transportation fuel, heating oil or jet fuel.  Where such actions are taken, we are proposing that RINs generated for qualifying renewable fuel will remain valid regardless of the final downstream use.

      While we are proposing that the special conditions related to renewable fuel that is not typically sold for use in or as transportation fuel, jet fuel, or heating oil would not apply to "drop in" renewable diesel, we also recognize that there is at least one circumstance in which renewable diesel may benefit from being subject to the same special conditions.  Renewable diesel is a product that was originally introduced by companies attempting to create a "drop-in" transportation fuel made from renewable sources that met the same specifications as petroleum based transportation diesel.  Some renewable fuel producers are currently generating RINs for fuel that they claim meets the exiting definition of renewable diesel, but which is not chemically equivalent to a petroleum diesel fuel under the renewable diesel definition.  This product is primarily composed of triglycerides that have not been chemically converted to a hydrocarbon, and can be produced through simple filtration of vegetable oils with little processing equipment or effort.  Further, this product cannot be used as a "drop-in" transportation fuel but instead can only be used at blend levels with diesel fuel that are approved under 40 CFR Part 79, and moreover it is commonly used for non-qualifying fuel uses.  To address these issues, we are proposing to clarify in the definition of "non-ester renewable diesel" that qualifying products must be approved under 40 CFR Part 79 at specific blend levels with diesel fuel.  However, it may also be necessary to differentiate between the two types of renewable diesel ("drop in" and triglycerides) so industry may easily determine which product and which RINs they are purchasing, and to allow EPA enforcement to differentiate between the two products upon inspection of a renewable fuel facility. We request comment on limiting the definition of non-ester renewable diesel, or renewable diesel, to fuel that meets the ASTM D 975 Grade No.  1-D or No. 2-D, and that are homogenous hydrocarbons.  We could then refer to all other fuels that meet the current definition of renewable diesel as viscous non-ester renewable diesel, and they would be subject to the special conditions related to the distribution and sale of renewable fuel that is not typically sold for use in or as transportation fuel, heating oil or jet fuel.  This approach would not remove anyone from the program and could give greater certainty to the industry.

	The new regulatory requirements are designed to ensure that these fuels are in fact used in or as transportation fuel, heating oil or jet fuel, and therefore that RINs are appropriately generated for these fuels. These requirements are necessary because these other renewable fuels are commonly used in non-qualifying fuels.  For instance, butanol is a common chemical feedstock but can also be used in transportation fuel. The EPA believes that the only current allowable use for these other fuels (insofar as RINs are associated with them) would be as a blending component or additive for gasoline or diesel fuels.  We are proposing two options for generating valid RINs for these fuels. First, the renewable fuel producer or importer of these fuels may generate RINs if they maintain contemporaneous records demonstrating that they used the fuel as a blendstock or additive and that the final product is a transportation fuel, heating oil or jet fuel that met all applicable standards.  Second, if the renewable fuel producer or importer does not use the fuel itself as a blendstock or additive for gasoline or diesel fuel, they may still generate RINs if they enter into a contract that requires the party who purchases the fuel to use it as a blendstock or additive for gasoline or diesel fuel, and that meets certain requirements designed to assure that the buyer does, in fact, use the fuel as a blendstock or additive in a transportation fuel, heating oil or jet fuel that meets all applicable standards.

      In order to verify that these fuels are produced for use as a transportation fuel, heating or jet fuel, EPA is proposing conforming registration, recordkeeping and reporting requirements.  We are proposing that parties who generate RINs for the production of these renewable fuels will have to include information in their registration stating if they will be using the fuel as a blendstock or additive at their facility or if they will be selling the fuel to another party who will be using the fuel as a blendstock or additive.  If the renewable fuel producer or importer will be using the fuel as a blendstock or additive, they will be required to describe their blending activities in their registration application.  If the renewable fuel producer or importer will be selling the fuel to another party who will be using the fuel as a blendstock or the fuel was blended into a qualifying fuel downstream of the renewable fuel producer or importer, these parties will need to provide additional information to verify that the fuel was, in fact, blended for a qualifying fuel use.  We solicit comment on how this new registration requirements should apply to currently-registered entities.  Options include requiring an immediate (within 30-60 days) registration update, or allowing the new submissions to occur at the facilities' next 3-year registration update.  We propose that renewable fuel producers or importers who contract with a downstream party to blend their product to make a qualifying renewable fuel be required to include affidavits in their reports from the downstream parties to verify that the fuel was used in or as a qualifying fuel.  This concept is modeled after the existing regulations relating to RIN generation for biogas and renewable electricity, which require the use of downstream affidavits to verify proper use of the fuel.  We also propose that any party who produces or blends these fuels will need to keep records relating to the blending activities to allow the QAP providers and the EPA to verify that RINs were properly generated.  We seek comment on whether these requirements are appropriate for renewable fuels that are not highly likely to be used for qualifying RFS fuels or whether there are other mechanisms that could provide adequate assurance that these fuels are used for transportation fuel, heating oil or jet fuel.

      2.	Required Actions Regarding Fuel for which RINs have been Generated that is Used for a Non-Qualifying Fuel Use.

	Section 80.1429(f) of the existing regulations provides that any person who uses or designates a renewable fuel for an application other than transportation fuel, heating oil or jet fuel (i.e., a non-qualifying fuel use) must retire any RINs received with that renewable fuel.  Section 80.1429(f) was intended to require the person using or designating RIN-generating fuel in or for a non-qualifying fuel use to retire the RINs received with the fuel so that they cannot be used for RFS compliance.  This approach, however, places the burden of using fuel for a qualifying fuel use on the end user when the fuel has already been designated upstream as either a qualifying or non-qualifying fuel.  In other words, once the fuel reaches the end user, it has already been designated as transportation fuel, heating oil or jet fuel, or has been redesignated for a non-qualifying fuel use.  The end user has no part in the designation or redesignation of the fuel.

      In order to ensure that RINs generated with renewable fuels are retired if the fuel is redesignated for a non-qualifying fuel use, we propose to tighten the requirements for RIN retirement for any party that redesignates a renewable RIN-generating fuel for a non-qualifying fuel use, and to relieve end users of such an obligation.  To accomplish this, we propose to remove and reserve paragraph 80.1429(f) of the regulations and to add a new section 80.1433 to require parties that designate fuel for which RINs were generated for a non-qualifying fuel use, i.e. for something other than transportation fuel, heating oil, or jet fuel, to retire an appropriate number and type of RINs.  We believe that any person designating fuel for which RINs have been generated for a non-qualifying use should make the RIN system whole by retiring an equivalent number and type of RINs.  This approach places the burden of ensuring an appropriate number of RINs are retired on a party in the fuel distribution business, rather than an end user.  Such parties tend to have greater expertise in complying with regulatory requirements, and the potential number of parties potentially subject to these requirements is far reduced by placing the burden for RIN retirement upstream of end users.  We further propose new subsection 80.1460(g) which would prohibit a person from designating a qualifying renewable fuel for which RINs were generated for a non-qualifying fuel use, unless the requirements of section 80.1433 have been met. The proposed amendments would require retirement of applicable RINs within a 10 day period.

	3.	RIN Generation for Fuel Made with Renewable Fuel Feedstock

	The existing regulations do not provide a pathway for any party to generate RINs for a fuel produced using another renewable fuel as a feedstock.  Parties seeking to do so, however, may submit a petition requesting approval pursuant to §80.1416.  40 C.F.R. § 80.1426(c)(6)(ii) sets forth certain prohibitions that would apply if, in the future, EPA approved a pathway that allowed a party to generate RINs for a fuel that was produced using another renewable fuel as a feedstock.  These prohibitions are designed to prevent parties from generating more than one RIN for the same volume of renewable fuel.  For example, the production of ETBE uses ethanol as a feedstock, and RINs may have been previously generated if the ethanol used to make the ETBE was denatured.   The ETBE producer in this example should not be allowed to generate RINs representing the full energy equivalence of the finished ETBE, if RINs were previously generated for the ethanol feedstock.   In order to address this type of scenario, we are proposing to modify § 80.1426(c)(6) to prohibit a party from generating new RINs for a fuel that is made from a feedstock that is a renewable fuel, where the feedstock that is a renewable fuel was produced by another party, unless EPA approves a petition under §80.1416 to allow for the generation of RINs for a fuel that was produced using another renewable fuel as a feedstock and the petition and approval include an enforceable mechanism to prevent double counting of RINs.

	We also propose to amend § 80.1426(f)(4) to address the potential for "double discounting" for non-renewable feedstocks when renewable fuel is produced by co-processing renewable biomass and non-renewable feedstocks to produce a fuel that is partially renewable.  Specifically, we have discovered that the existing regulations may inadvertently cause the number of RINs generated to be discounted twice for the presence of non-renewable feedstocks.  The first would be in the calculation of the equivalence value under §80.1415(c)(1), and the second would be in the calculation of the number of RINs generated under §80.1426(f)(4)(i).  To correct this problem, we are proposing to add a new paragraph (f)(4)(iii) so that for purposes of §80.1426(f)(4) only, the equivalence value does not include a discount for non-renewable feedstocks.

      4. 	Use of Renewable Fuel in Ocean-going Vessels

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

	We seek comment on whether our interpretation of "fuel for use in an ocean-going vessel" creates any potential problems.

	5. 	Treatment of Improperly Separated RINs

	Section 80.1431(a)(1)(viii) currently provides that a RIN that was improperly separated pursuant to 80.1429 is invalid.  Under section 80.1460(c)(1), obligated parties may not use invalid RINs for compliance purposes.   EPA proposes to remove 80.1431(a)(1)(viii) of the regulations, and to add section 80.1460(h), identifying the improper separation of RINs as a prohibited act.  The net effect of these changes would be to allow obligated parties to use RINs that were improperly separated for compliance purposes, since the RINs would no longer be considered invalid.   However, improper RIN separation would continue to be a prohibited act under the regulations.

	EPA seeks comment on whether the RFS regulations should instead maintain section 80.1431(a)(1)(viii), but also require a more comprehensive and robust mechanism to allow parties that acquire separated RINs and EPA to evaluate whether the RINs were properly separated and used in or for a qualifying fuel.  The goal would be to make it easier for EPA and obligated parties to determine whether RINs are valid.   These mechanisms could require a designate and track approach, with corresponding recordkeeping and reporting requirements, similar to the program set forth in the diesel sulfur regulations at 40 C.F.R. Part 80, Subpart I.  In general, under Subpart I, each time custody of fuel is transferred from one facility to another, the transferor must designate the fuel and record its volume. The party who receives custody of the fuel must record the same information, to ensure that each party relies on the same designation and volume for its own compliance purposes.   Maintaining proper PTDs, with proper designations, is also part of the diesel sulfur program's recordkeeping requirements.  EPA seeks comment on whether the RFS regulations should establish similar designation and track requirements addressed at tracking and recording RIN separation events and end use of renewable fuels.

	Additionally, EPA requests comment on whether we should require RIN separators to include with their quarterly reports additional records related to qualifying separation events that are already required as part of the recordkeeping regulations.  See § 80.1454 for a description of the records that must be retained by parties.  EPA believes requiring this information to be reported quarterly will allow EPA to review the information in a more timely way than in the existing structure, where EPA must request it from RIN separators on an ad hoc basis.  Additionally, all parties who separate RINs must sign and certify that the information reported to EPA under the RFS program is true and accurate.

	Inaccurate, misleading, and/or false reports submitted to EPA may be used in a criminal prosecution against the submitter and other culpable persons.  Enhanced reporting requirements for RIN separators would facilitate EPA's ability to investigate and prosecute persons who engage in RIN separation violations.   EPA seeks comment on the type and scope of reporting that would most likely assist EPA in identifying RIN separation violators.

	C.	Treatment of Confidential Business Information

	1.	Overview

	In the March 26, 2010 RFS2 final rule, the EPA addressed a number of confidentiality concerns raised by comments to the rule proposed on May 26, 2009 (74 FR 24904).  At the time, the Agency explained that renewable fuel producers would need to submit information to support their registration and report information to the Agency for implementation of the RFS program. The EPA also confirmed that we would treat any information submitted with a claim that it was confidential business information ("CBI") as CBI in accordance with existing Agency regulations at 40 CFR part 2, subpart B.  Information submitted to the Agency in compliance with the RFS2 final rule has been handled in that fashion. The EPA typically makes confidentiality determinations on a case-by-case basis.  However, subsequent to the implementation of the RFS program, we have received hundreds of requests for information; the need for case-by-case determinations has prevented timely release of non-CBI information.

      Due to the high level of interest in RFS compliance information, the EPA is considering approaches to increasing public access to information collected by the RFS program.  At the same time, we want to ensure that we continue to properly process CBI claims and protect company's confidential information.  The EPA is now proposing to make certain RFS registration and reporting information publicly available because we believe that greater transparency will work hand-in-hand with our QAP process to improve the integrity of information submitted for RFS compliance and deters fraudulent behavior.  As discussed in more detail below, today's action provides affected businesses subject to Part 80, other stakeholders, and the general public an opportunity to comment on the proposal to publish RFS registration and reporting information that would be aggregated into monthly, quarterly, and annual reports.  This action is part of a broader effort to increase transparency and provide information to the public that would promote greater liquidity in the RIN market in a way that assures reasonable oversight of RIN generation.

      Notably also, many interested parties  -  including renewable fuel producers  -  have asked the EPA to publish this information.  Since implementation of the RFS program, the Agency has received numerous requests for this information.  Not only are members of the public and interested stakeholders interested in reviewing this information, many parties to the RFS program are requesting that the Agency release this information in order to make the RFS program more transparent.  The EPA is soliciting comments on whether, for any information in the format proposed for release, there are unique circumstances where disclosing this information would cause substantial harm to a company's competitive position.

	2.	Proposal to Disclose Aggregated RFS Registration Information

	a.	Approach

      The EPA is proposing to summarize and publish aggregated registration and QAP information required under 40 CFR §§ 80.1450 (b), (c), and (g) from independent third-party auditors and renewable fuel producers and importers that are registered with the RFS program.  We propose to publish this information by facility and on a monthly basis.  Each monthly report of registration information will disclose certain registration information for each producer, importer, and QAP.  The monthly reports would be cumulative reports of all registrations accepted by the EPA; they would include existing registrations, new registrations, and registration updates.  For each facility, we would publish the company name, facility name, facility type/fuel product, total permitted capacity, production volume, production process type, feedstocks, D-Code, and any co-products.  This information would be not reveal proprietary production processes.  For example, the production process would be identified by the production process description used in Table 1 to 40 CFR§ 1426, or for a production process approved through the Agency's pathway petition process, it would be identified by the name associated with that process in OTAQReg.  An example of what information we intend to publish appears below:

                              Table VIII.C.2.a-1
                          Example Registration Report
Company Name
Facility Name
Facility Type
Total Permitted Capacity
Production Volume
Feedstock
Process Type
D Code
Co-products
Example Ethanol Company
Example Ethanol  Facility
Ethanol
125000
20
Corn Starch
Wet mill process using biomass or biogas for process energy
6
Distillers grains, corn oil
Example Biodiesel Company
Example Biodiesel Facility
Biodiesel
125000
500
Canola Oil
Trans-esterification using natural gas or biomass for process energy
4
None

      At this time, the EPA is not proposing to publish registration information at the company or batch-level.  We also are not proposing, at this time, to publish registration submissions or information from supplemental registration documents (e.g., heat plans, separated food waste plans).  After publishing these monthly registration reports, we intend to summarize and update the information so that we can publish quarterly and annual registration reports of the same type of information.  The EPA is interested in stakeholder views on this approach.

	b.	Rationale for Proposal

      The EPA believes that the information elements as described above are not entitled to confidential treatment for a number of reasons.  First, this type of registration information is already available through other public outlets.  For example, for publicly-traded companies, this information is filed with the U.S. Security Exchange Commission in their annual 10-K and quarterly 10-Q reports in the company's overview.  In those reports, companies identify their fuel products, production facilities, co-products, production processes, production capacities, actual production volumes, and feedstocks.  Additionally, many producers currently post this type of information on their public websites and issue press releases broadcasting this information.  Regardless of whether a company is publicly traded or posts this information on its website, all renewable fuel producers report this information to the U.S. Department of Energy's National Renewable Energy Laboratory, which publishes the information on their website. Since this information is already publicly available, it would not be eligible for confidential treatment under the Agency's existing CBI regulations under 40 CFR part 2, subpart B, and therefore, it could be released.

      Second, the EPA believes that release of this information would not cause substantial harm to the competitive position of a Part 80 business submitter.  The information elements in required under Part 80 consist of information on renewable fuel producer's facility fuel product, total permitted capacity, production volume, production process type, feedstocks, D-Code, and co-products.  These information elements do not reveal any proprietary information, or any other information that would likely provide insight for competitors to gain an advantage.  For example, consider the Example Ethanol Facility:

         * Example Ethanol Facility is a renewable fuel producer that produces ethanol from corn starch using a wet mill process and generates D-Code 6 RINs for its ethanol.  The production of ethanol from cornstarch using a wet mill process is typical of an ethanol production facility, widely-known, and demonstrates that the facility meets RFS regulatory requirements for RIN generation.  The feedstock, process, and fuel product must comply with an approved RFS pathway, which are specific to these three information elements and identified in Table 1 to section 1426 or a publicly-available EPA petition approval.  These information elements are necessary for a producer to determine if it meets RFS requirements.  These information elements describe commonly used renewable fuel production information and do not describe any particular specifications about an individual facility's unique processing.  Because these information elements are widely known and do not reveal details about the precise production processes used, they are not the type of information that a competitor could use to develop marketing strategies to undermine the producer's competitive position.  Thus, disclosing information elements containing feedstock, process type, D-Code, and fuel type would not reveal  -  and could not be used to determine  -  an individual facility's production efficiency, production costs, or pricing structure.

         * That the Example Ethanol Facility is permitted to produce 125,000 gallons of ethanol but only produces 20 gallons of ethanol does not disclose proprietary information.   Releasing total permitted capacity and production volumes do not disclose actual production rates; nor could it be used to determine facility-level production rates or the quantity of feedstock used to produce that volume.  This information would not provide a competitor with business insights and/or any competitive advantage over the Example Ethanol Facility.  Accordingly, the EPA believes that disclosing permitted capacity and production volumes would not cause substantial harm to a business submitter's competitive position.

         * That the Example Ethanol Facility produced distillers grains and corn oil as co-products from wet mill process does not disclose proprietary information. Wet mill processing is widely known to result in the co-production of distillers grains and corn oil, and these co-products must be disclosed to the EPA with the producer's registration for compliance with 40 CFR § 80.1426.  This is not the type of information that could be used by a competitor to gain business insights or advantage over the Example Ethanol Producer.  Co-product information is widely known among the renewable fuel industry and would not contain details regarding co-product characteristics, production volume, quality, quantity, production efficiency, costs, or pricing structure.  Therefore, the EPA believes that disclosing a facility's co-product would not cause substantial harm to business submitter's competitive position.

	3.	Proposal to Disclose Aggregated RFS Report Information

	a.	Approach

      In addition to publishing monthly, quarterly, and annual registration reports, we are also proposing to publish monthly, quarterly and/or annual report of information that is required to be reported to the EPA under 40 CFR § 80.1452(b) for renewable fuel producers and importers.  We are proposing to publish this information in the same manner as registration information  -  on a corporate and/or facility-by-facility basis, as described in the chart below.  The EPA intends to publish:

   * The name of the renewable fuel producer or importer and associated registration information (i.e., name, address, feedstock, process, fuel type, D-Code).  The EPA also intends to depict this information in a variety of formats, including geographically (i.e., maps) or tables to identify where renewable fuel production facilities are located (40 CFR §§ 80.1450(b) and 80.1452(b)(1)).

   * The EPA company and facility registration numbers and the associated registration information of the renewable fuel producers, foreign ethanol producers and importers that generated RINs in EMTS during the applicable time period(s) (40 CFR §§ 80.1450(b), 80.1452(b)(2), 80.1452(b)(3), 80.1452(b)(4), and 80.1452(b)(5)).  This information will be provided for each facility where renewable fuel was produced.

   * The D-code of RINs generated by the facility during the time period (40 CFR § 80.1452(b)(6)).  For each D-code generated at a facility, the EPA will publish the number of RINs generated (40 CFR § 80.1452(b)(12)), volume of fuel produced (40 CFR § 80.1452(b)(10)), fuel type (40 CFR § 80.1452(b)(9)), production process (40 CFR § 80.1452(b)(7)), feedstocks (40 CFR § 80.1452(b)(13)), and co-products (40 CFR § 80.1452(b)(15)).

   * The EPA also intends to release the volume of denaturant (for ethanol), applicable equivalence value, and whether all the feedstocks used during the time period were claimed to have met the definition of renewable biomass (40 CFR §§ 80.1452(b)(11), and 80.1452(b)(14)).

An example of the "reporting" information the EPA proposes to publish appears in the chart below:

                              Table VIII.C.3.a-1
                        Example "Reporting" Report
RIN Generating Company
Company Name
Renewable Fuel Original Producer
Facility Name and Address
Location in Latitude/
Longitude
Renewable Fuel Production Year/
Month
D Code/ Fuel Type

Feedstocks Used
Production Process
Co-products
Volume of Denaturant
Amount of Fuel Produced (in gallons?)

RINs Generated
Example Ethanol Company
Example Ethanol Company
Example Ethanol Company
111 Ethanol Street, City, State, ZIP
Lat/Long
2010/July
5   -  Renewable Fuel/10  -  Non-cellulosic ethanol (EV 1.0)
888  -  Feedstock not listed (used at a grandfathered facility 100%)
888  -  Grandfathered (Other)
Distillers grains, corn oil
549.52
27,476
27,476
Example Biodiesel Company
Example Biodiesel Company
Example Biodiesel Company
222 Biodiesel Way, City, State, ZIP
Lat/Long
2010/July
4  -  Biomass-Based Diesel/ 20  -  Biodiesel (EV 1.5)
160  -  Biogenic Waste Oils/Fats/Greases 100%
180  -  Transesterification, Dedicated Renewable Biomass Facility

21,934
32,902

      As with registration information, the EPA proposes to publish "reporting" information in only an aggregated form (at the facility level, not the batch level), and only on a monthly, quarterly, and/or annual basis.  The EPA will continue to consider the confidential nature of the batch-level information and may take further action to provide additional programmatic transparency.  The EPA is interested in stakeholders' views on this approach, including whether facility-level information is the appropriate level of aggregation or whether it might be more appropriate to publish batch-level information.

	b.	Rationale for Proposal

      The EPA finds that the disclosure of certain aggregated RFS report information is not entitled to confidential treatment for a number of reasons.   First, the information elements in this category consist of publicly available and widely known information on renewable fuel producer's company name, facility name, RIN-generating name, location, production year, fuel product type, RIN D-Code, production volume, production process type, feedstocks, equivalence value, and number of RINs generated.  Furthermore, disclosing this information is not likely to cause substantial harm to the competitive position of the business required to report these information elements under Part 80 because these elements of information do not reveal any proprietary information, or any other information that would likely provide insight for competitors to gain an advantage.  Furthermore, because these information elements would be aggregated to the facility level and further aggregated for the time period of the EPA-published report, the information would not be presented in a form that any company's competitors could use to gain a competitive advantage.  Aggregating this information at the facility level and for the monthly, quarterly, and/or annual time period would prevent competitors from reverse engineering the information to determine information that could be considered confidential (e.g., exact amounts of feedstocks used, which could potentially be used to reveal production efficiencies).  Accordingly, disclosing aggregate information would not cause substantial harm to the submitter's competitive position.  For example:

   * The name of the renewable fuel producer or importer and associated registration information, including facility name, registration identification numbers, RIN-generating name, location, production year, fuel type, RIN D-Code, production process type, and feedstock is non-specific information that is submitted for RFS program registration.  These information elements are necessary for a producer to determine if it meets RFS requirements.  These information elements describe commonly used renewable fuel production information and do not describe any particular specifications about an individual facility's unique processing.  Because this information does not reveal details about the precise production processes used, they are not the type of information that a competitor could use to develop marketing strategies to undermine the producer's competitive position.  These information elements do not reveal  -  and could not be used to determine  -  an individual facility's production efficiency, production costs, or pricing structure).  Accordingly, the EPA believes that disclosing the name of the renewable fuel producer or importer, the facility name, registration identification numbers, RIN-generating name, location, production year, fuel type, RIN D-Code, production process type, and feedstock would not cause substantial harm to business submitter's competitive position.

   * The volume of denaturant, applicable equivalence value, and whether all the feedstocks used during the time period were claimed to have met the definition of renewable biomass (40 CFR §§ 80.1452(b)(11), and 80.1452(b)(14)) is widely-known information that is submitted to demonstrate RFS program compliance.  The volume of denaturant used must be less than 2% to meet RFS requirements for RIN generation.  The equivalence value is a number that is used to determine how many gallon-RINs can be generated for a gallon of renewable fuel according to 40 CFR § 80.1426.  An affirmation that that the feedstocks a producer used meets the definition of renewable biomass is required to demonstrate that the feedstocks a facility registered to use, pursuant to 40 CFR § 80.1450, were actually used.  Revealing the volume of denaturant, equivalence value, and confirming that a producer affirmed use of renewable biomass would not reveal anything proprietary or otherwise about the precise production process a given producer is using, and would not provide any insight that competitors might use to gain competitive advantage.  Rather, this information is commonly-known information about the renewable fuel produced that demonstrates RFS regulatory compliance for RIN generation.

	4.	QAP Plans and Independent Engineering Reviews

      At this time, the EPA is not proposing to publish QAP plans or independent engineering reviews that are submitted for RFS registration.  For QAP plans and independent engineering reviews that are claimed as CBI, the EPA proposes to require submission of two versions of those documents: one clearly marked "CBI version," with appropriate areas denoted as CBI, and a second "public version," with CBI information redacted.  We would require the submission of both versions of QAP plans and engineering reviews begin with the effective date of this rule.  For engineering reviews filed pursuant to 40 CFR § 80.1450(b)(2), we would require submission for new registrations, and as necessary for updates pursuant to 40 CFR § 80.1450(d)(3).  Based on the Agency's experience with the RFS program, the EPA notes that certain information should not fall under a claim of CBI because this information is generally available to the public or widely-known within the industry, and disclosure of this information would not likely cause harm to the competitive position of any submitting renewable producer, importer, or any other party to a RIN transaction.

      If the EPA receives a Freedom of Information Act (FOIA) request for the CBI version of an engineering review or QAP plan, the EPA would process the FOIA request pursuant to its CBI regulations under 40 CFR part 2, subpart B.  Submission of the two versions of QAP plans and engineering reviews (CBI and public versions) would allow the Agency to clearly understand what information is claimed as CBI, and would also allow the Agency to make non-CBI publicly available without unnecessary delay.  The EPA is interested in stakeholder views on this approach.

	5.	Request for Comments

      The added transparency of making certain registration and reporting information available to the public in the form of EPA-published reports, along with the implementation of the QAP process, will strengthen the RFS program and act as a deterrent to fraudulently generated RINs.  The EPA solicits comment on all aspects of these proposals.

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

	Reporting and product transfer document (PTD) requirements, found in sections 80.1452 and 80.1453, respectively, currently state that the reportable event for a RIN purchase or sale occurs on the date of transfer.  Sellers must report the sale of RINs within five (5) business days of the reportable event via the EPA Moderated Transaction System (EMTS).  Buyers must report the purchase of RINs within ten (10) business days of the reportable event via EMTS.  The date of transfer is the date on which title of RINs is transferred from the seller to the buyer.  Some buyers and sellers of assigned RINs have expressed concerns with these requirements stating they have difficulty determining the date of transfer since title of the renewable fuel is not transferred until the fuel physically reaches the buyer.  Some transactions, for example those by rail or barge, may take several weeks, and their current accounting systems do not include a means for capturing the buyer's receipt date.

	EPA understands this concern, but also recognizes that some regulated parties have modified their accounting systems to address the current reporting and PTD requirements in RFS2.  We also believe that for parties separating, retiring, and selling or buying separated RINs, the current reporting and PTD requirements are effective and should remain unchanged.  Therefore, at this time EPA is not proposing to replace existing requirements, but is instead proposing an additional, alternative method for reporting sell and buy transactions involving assigned RINs only.

	The proposed alternative method for sell and buy transactions of assigned RINs would redefine the reportable event for both the seller and the buyer, introduce a unique identifier that the seller must provide to the buyer, and require the buyer to report the date of transfer.  Buyers and sellers would need to agree on which method they would be using to report transfers of assigned RINs; either the current method or the alternative method.  EPA believes that this alternative would provide the regulated community with the flexibility to address their reporting concerns and also provide EPA with the data necessary to effectively administer and enforce transactions of assigned RINs.  EPA welcomes comment on this proposed alternative method for reporting assigned RIN buy and sell transactions.

	We propose that sellers of assigned RINs under the alternative method be required to do the following:

   *          Within five (5) business days of shipping renewable fuel with assigned RINs, report a sell transaction, using the alternative method, via EMTS;
   *          Include in the EMTS sell transaction report other required information per section 80.1452; and
   *          Provide a PTD to the assigned RIN buyer with a unique identifier, also reported via EMTS, in addition to the information in section 80.1453.  The date of transfer is not required for the alternative method.

We propose that buyers of assigned RINs under the alternative method be required to do the following:

    *          Within five (5) business days of receiving a shipment of renewable fuel with assigned RINs, report a buy transaction, indicating use of the alternative method, via EMTS;
    *          Include in the EMTS buy transaction report other required information per section 80.1452;
    *          Include in the EMTS buy transaction report the unique identifier provided by the seller; and
    *          Include in the EMTS buy transaction report the date the renewable fuel was received, i.e. the date of transfer.

If this proposed alternative method is finalized, the EMTS would be modified to accept such transactions.  EPA would provide additional instruction and guidance at the time of the new EMTS version release.  EPA invites comment on all aspects of this proposal.

IX.	Impacts

	The quality assurance program that we are proposing in today's NPRM would provide a voluntary mechanism for regulated parties to verify that RINs are validly generated, provide an affirmative defense against violations if a regulated party transfers an invalidly generated RIN or uses it for compliance, and provide clarity regarding the responsibility of regulated parties to replace invalidly generated RINs.  The proposed program would not change the volume requirements of the RFS program, but instead would help to ensure that those volume requirements are met.  Likewise, the proposed changes to the regulations governing export of renewable fuel, separation of RINs from wet gallons, and qualifying uses of renewable fuel would also be intended to ensure that the RFS volume requirements are met with qualifying renewable fuel.  As a result, there would be no change to the expected impacts of the RFS program in terms of volumes of renewable fuel consumed or the associated GHG or energy security benefits.  Instead, the primary impacts of the quality assurance program would be improved liquidity in the RIN market and improved opportunities for smaller renewable fuel producers to sell their RINs.

	The quality assurance program that we are proposing in today's action would be voluntary.  As a result, there would be no obligatory costs.  There would likely be costs associated with an individual party's participation in the quality assurance program.  However, the fact that the quality assurance program would be voluntary means that a decision to participate will be made independently by each regulated party, and thus we cannot estimate the costs that might be incurred for the nation as a whole.  Furthermore, any costs incurred would only be borne if the industry believed that those costs were less than current costs in the marketplace resulting from efforts to verify, acquire, and trade RINs.

	In the discussion below, Section IX.A addresses direct costs associated with implementing Quality Assurance Plans (QAPs), such as the time required to develop a QAP and the associated recordkeeping and reporting, site visits to renewable fuel production facilities, costs for accounting services, etc.  Section IX.B addresses potential costs associated with RIN replacement mechanisms that would be required under Option A.

	A.	Direct Costs for Implementing QAPs

	Currently, there are approximately 485 biofuel producers operating more than 600 biofuel production facilities.  These numbers are expected to increase as the biofuel market expands.  While it is unlikely that all biofuel producers would opt to participate in the quality assurance program, that was the assumption for these cost estimates in order to reflect the maximum potential cost of the program.

	EPA staff met with seven parties who are already developing RIN validation programs for the biofuels industry.  We also met with several industry groups and obligated parties which have been affected by RIN fraud.  These parties all provided informal estimates of the costs associated with this type of quality assurance program which was used to inform our cost calculations.

	For those biofuel producers who opt into the quality assurance program, each biofuel production facility must be visited and assessed as part of any audit conducted under the proposed quality assurance program.  An auditor would use an approved QAP as the basis for the verification of biofuel produced and RINs generated at a facility.  In order to verify production, the auditor must conduct site visits, review documents, and contact entities that do business with the facility.  The proposed components of audits are described in Section VII.

	We are proposing that production facilities should be visited on a quarterly basis.   New production facilities would be visited prior to verification of any RINs and, subsequently, according to the standard quarterly schedule.  We expect that each visit could take from one to several days, depending on the size and complexity of the facility, the availability of records, changes since the last audit, etc.  For some components of the audit, we propose to require ongoing, or batch-level, monitoring.  The QAP would be required to provide details of the means for collection and evaluation of the data collected on an ongoing basis.

	Tables IX.A-1, IX.A-2, and IX.A-3 below itemize the activities anticipated for each biofuel production facility audit.  The estimates include costs incurred by the biofuel producer (Table IX.A-1), the auditor (Table IX.A-2), and the EPA (Table IX.A-3).  This table does not include costs associated with the RIN replacement mechanism that some QAP providers may acquire to cover loss in the event of RIN fraud.  These costs are discussed separately below.

                                  Table IX.A-1
              Costs to the Biofuel Producer for Implementing a QAP

 Category
                                    Manager
                                      Time
                                  Prof./Tech.
                                      Time
                                    Clerical
                                      Time
                                      No.
                                    Per yr.
                                    Capital
                                       $
                                     Total
                                     Hours
                                     Total
                                       $
 Site Visit
                                       1
                                       16
                                       4
                                       2

                                       42
                                     3,588
 Reporting
                                       2
                                       12
                                       4
                                       3

                                       54
                                     4,560
 Recordkeeping
                                       0
                                       0
                                       2
                                       3

                                       6
                                      222
                                                                          TOTAL

                                      102
                                     8,370

                                 Table IX.A-2
                Costs to the QAP Auditor for Implementing a QAP

 Category
                                    Manager
                                      Time
                                  Prof./Tech.
                                      Time
                                    Clerical
                                      Time
                                      No.
                                    Per yr.
                                    Capital
                                       $
                                     Total
                                     Hours
                                     Total
                                       $
 Auditor:

 Contract Init.
                                       4
                                       4
                                       2
                                       1
                                      530
                                       10
                                     1,428
 Site Visit
                                       4
                                       16
                                       0
                                       1
                                     1,060
                                       20
                                     3,036
 Follow-up
                                       2
                                       28
                                       5
                                       3
                                     1,060
                                      105
                                     12,459
 Monitoring
                                       2
                                       50
                                       0

                                       52
                                     5,020
 Consultants

                                       4
                                     1,000

                                     4,000
 Reporting
                                       0
                                       4
                                       12

                                       16
                                     1,656
 QAP Prep
                                       2
                                       16
                                       4

                                       22
                                     3,808
 EMTS
                                       0
                                       25
                                       0

                                       25
                                     2,400
 Recordkeeping
                                       0
                                       12
                                       25

                                       37
                                     2,077
                                                                          TOTAL

                                      250
                                     38,839

                                  Table IX.A-3
                    Costs to the EPA for Implementing a QAP

 Category
                                    Manager
                                      Time
                                  Prof./Tech.
                                      Time
                                    Clerical
                                      Time
                                    Capital
                                       $
                                     Total
                                     Hours
                                     Total
                                       $
 Implementation

                                       3

                                       3
                                      267
 EMTS Data Management

                                       1

                                       1
                                       89
                                                                          TOTAL

                                       4
                                      356

 	1.	Time and Cost Assumptions

	The specific times estimated for each task are shown in Tables IX.A-1, IX.A-2, and IX.A-3.  These estimates are based on a number of basic assumptions.  An initial site visit of the facility to be audited is assumed to require two days, and include estimated travel and per diem costs.  For simplicity, we have estimated an average $600 for airfare, $150 for lodging, and $80 for the per diem expenses.  It is assumed that a plant manager would meet briefly with the auditor, and that a plant chemist or other professional would escort the auditor throughout the visit.  Some clerical support would be required to locate files for the related document reviews.

	It was assumed that an auditor would travel and spend half a day on contract initiation.  Any follow up site visits were assumed to be shorter in duration, as the auditor would now be familiar with the facility and its normal operation.  A substantial amount of the auditor's time would be spent in follow up documentation of the facility, such as checking feedstock suppliers, process fuel suppliers, doing volume and mass balances, and monitoring the ongoing operation of the facility.  It was assumed that an auditor would employ specialized consultants and/or local agents to perform some portion of the audit support.

	In addition to tracking facility operation, an auditor would also be responsible for preparing the QAP, maintaining recordkeeping, monitoring and/or brokering activities on EMTS, and assisting with RFS reporting requirements.

	2.	Labor Cost Assumptions

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

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

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

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

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

	3.	Cost Estimate Results

	We made our total cost estimate based on the number of registered biofuel producers in the CDX as of July 2011, assuming that all parties choose to participate in the voluntary quality assurance program.  This assumes 485 RIN generators with 600 biofuel production facilities.  This results in a total cost for the program of $27,576,450.  If all parties are participating in the program and all RINs are verified, this results in a per RIN cost of less that $0.01.  However, these costs are assumed to be linear and we do not expect that there would be any economies of scale in terms of the number of RINs verified by an auditor.  However, we do expect that the per-RIN cost would vary depending on the number of RINs generated by each fuel producer since the effort involved in validating many aspects of renewable fuel production are the same regardless of the size of the facility.
	We do not expect that the costs of participation in the proposed quality assurance program would vary by the D code of RINs.  While RINs with different D codes may command different prices in the market, the verification process for each RIN will be the same regardless of D code.

	B.	Costs for RIN Replacement Mechanisms

      For reasons described previously, some QAP providers may choose a replacement mechanism to insure against invalid RINs.  Such mechanisms would be required under Option A, but would not be required under Option B.  There is large uncertainty in estimating the costs of these mechanisms because it is an entirely new market.  Informal discussions with potential QAP auditors, as well as other parties involved in similar markets or financial surety mechanisms in general, have suggested a broad range of potential costs.  For these reasons the costs for such a mechanism were not included in the analysis above, and EPA welcomes comments on the cost impacts of any potential financial surety mechanisms.

      In order to fully inform cost impacts of the various QAP options, we discuss the relevant cost factors of the three possible types of mechanisms discussed in Section IV above.  The discussion includes RIN banks, RIN escrow accounts, and other traditional financial instruments. As noted previously, these mechanisms are not intended to be inclusive of all possible ways a RIN replacement mechanism could work, and are merely suggestions of potential pathways Option A auditors might follow.

	A RIN bank is a managed repository of valid audited RINs which are available to all members of the bank for replacement purposes.  The costs associated with a RIN bank are directly proportional to the value of the RINs banked, and the number of banked RINs required to meet the obligations of the bank members.  There would also be bank management costs, which would be impacted by the number of bank members, and how the bank is managed in terms of RIN deposit, withdrawal, update, and replacement.  In addition, bank managers would need to come up with a system to maintain current year RINs in the bank, which may involve additional costs for the sale of expiring RINs and any differential in the value of the RIN at the time of deposit and the time of sale or release.  These costs would be born by the members of the bank, but would likely be passed on to RIN purchasers to the maximum extent possible.  These parameters will vary so much from bank to bank that it is impossible to estimate an average per RIN cost across the entire program.  However, it is reasonable to assume that the cost would be effectively the per-RIN value of banked RINs plus some fractional percentage to cover management costs.

	A RIN escrow account would work very much like a RIN bank, but would be funded by a single auditor instead of a group of auditors, and would be supervised and managed by a third-party escrow agent.  The advantage of this option is that an auditor would have total control over the funding of the escrow.  However, an auditor using an escrow account would be solely responsible for the funding of the account, and so would be required to maintain a balance equal to a much larger percentage of its potential replacement responsibility than it might be if using a RIN bank.  The cost of a RIN escrow account is entirely dependent upon the number and value of the RINs covered by the escrow.

	Traditional financial instruments, such as surety bonds, letters of credit, or expanded insurance coverage, are also options under Option A.  The cost for this type of coverage is dependent on the level of risk determined by the surety provider, as well as the value of the RINs to be covered.  This type of financial instrument would most likely provide a maximum dollar amount of coverage, which would translate into a per RIN cost depending on the number of RINs covered, relative to the number of RINs audited by the QAP provider purchasing the financial protection.  EPA has learned that the cost of these policies vary greatly among the parties looking into these options.  For this reason, this type of financial protection was not included in the cost analysis outlined above.

X.	Public Participation

	We request comment by [INSERT DATE 30 DAYS AFTER DATE OF PUBLIC HEARING], which is 30 days following the date of the public hearing, on all aspects of this proposal, including but not limited to the following:

      ::	The RIN replacement cap of 2% and the limited exemption of 2%

      ::	A potential regulatory change in which renewable fuel producers would be prohibited from separating RINs

      ::	The proposed components of QAPs

      ::	The proposed elements of RIN replacement mechanisms, including the inclusion of E&O insurance.

      ::	The costs associated with indemnifying auditor verification of RINs.

      ::	Mechanisms to ensure that auditor are not complicit in fraud

This section describes how you can participate in this process.

	A.	How do I submit comments?

	We are opening a formal comment period by publishing this document.  We will accept comments through [INSERT DATE 30 DAYS AFTER DATE OF PUBLIC HEARING].  If you have an interest in the program described in this document, we encourage you to comment on any aspect of this rulemaking.  We request comment on various topics throughout this proposal.

	Your comments will be most useful if you include appropriate and detailed supporting rationale, data, and analysis.  If you disagree with parts of the proposed program, we encourage you to suggest and analyze alternate approaches to meeting the goals described in this proposal. You should send all comments, except those containing proprietary information, to our Air Docket (see ADDRESSES) before the end of the comment period.  If you submit proprietary information for our consideration, you should clearly separate it from other comments by labeling it ``Confidential Business Information (CBI).''  You should send CBI directly to the contact person listed under FOR FURTHER INFORMATION CONTACT instead of the public docket.  This will help ensure that no one inadvertently places proprietary information in the docket.  If you want us to use your confidential information as part of the basis for the final rule, you should send a non-confidential version of the document summarizing the key data or information.  We will disclose information covered by a claim of confidentiality only through the application of procedures described in 40 CFR Part 2.  If you do not identify information as confidential when we receive it, we may make it available to the public without notifying you.

	B.	Will there be a public hearing?

	We will hold a hearing on February 27, 3013 at XXXlocationXXX Washington, DC, at 9:00 am local time.  If you would like to present testimony at the public hearing, we ask that you notify the contact person listed above under FOR FURTHER INFORMATION CONTACT at least ten days before the hearing. You should estimate the time you will need for your presentation and identify any needed audio/visual equipment.  We suggest that you bring copies of your statement or other material for the EPA panel and the audience.  It would also be helpful if you send us a copy of your statement or other materials before the hearing.  We will make a tentative schedule for the order of testimony based on the notifications we receive.  This schedule will be available on the morning of the hearing.  In addition, we will reserve a block of time for anyone else in the audience who wants to give testimony.  We will conduct the hearing informally, and technical rules of evidence won't apply.  We will arrange for a written transcript of the hearing and keep the official record of the hearing open for 30 days to allow you to submit supplementary information.  You may make arrangements for copies of the transcript directly with the court reporter.

XI.	Statutory and Executive Order Review

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

	Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is a "significant regulatory action" because it raises novel legal and policy issues.  Accordingly EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13563 and any changes made in response to OMB recommendations have been documented in the docket for this action.

	This action is being proposed today as a result of several cases of fraudulently generated RINs.  As discussed above, several biodiesel production companies have been identified as having generated RINs that did not represent qualifying renewable fuel.   While these invalid RINs represented a very small amount (about 5%) of the nationwide biodiesel volume in the 2009 - 2011 timeframe, the net result is that this fraud has impacted the liquidity of the biodiesel RIN market as some biodiesel RINs are perceived as having less value than others.  In addition, as a result of fraudulent activities, obligated parties have been subject to monetary penalties and the additional cost of purchasing new RINs to cover the invalid RINs, even though they purchased the original RINs in good faith believing that they were valid.  These issues have raised novel legal and policy issues for the RFS program and EPA believes it is necessary put in place an additional regulatory mechanism that could provide an alternative way to assure that RINs used for compliance are valid to restore confidence in the RIN market and level the playing field for large and small producers.

B.	Paperwork Reduction Act

	The information collection requirements in this proposed rule have been submitted for approval to the Office of Management and Budget (OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.  The Information Collection Request (ICR) document prepared by EPA has been assigned EPA ICR number 2473.01.

	The RFS program requires that specified volumes of renewable fuel be used as transportation fuel, heating oil, and/or jet fuel each year.  Obligated parties demonstrate compliance with the RFS standards through the acquisition of unique Renewable Identification Numbers (RINs) assigned by the producer or importer to every batch of renewable fuel produced or imported.  Validly generated RINs show that a certain volume of qualifying renewable fuel was produced or imported.  The RFS program also includes provisions stipulating the conditions under which RINs are invalid, the liability carried by a party that transfers or uses an invalid RIN, and how invalid RINs must be treated.

	In this action we are proposing a voluntary quality assurance program intended to provide a more structured way to assure that the RINs entering commerce are valid.  The voluntary quality assurance program for RINs would provide a means for regulated parties to ensure that RINs are properly generated, through audits of production facilities conducted by independent third parties using quality assurance plans (QAPs).

	The annual public reporting and recordkeeping burden for this collection is estimated to be 320 hours per response.  A document entitled "Supporting Statement for Renewable Fuels Standard (RFS2) Voluntary RIN Quality Assurance Program (Proposed Rule)" has been placed in the public docket.  The supporting statement provides a detailed explanation of the Agency's estimates by collection activity.  The estimates contained the supported statement are briefly summarized here:

	TOTAL NO. OF RESPONDENTS:  485
	TOTAL BURDEN HOURS:   192,270
	TOTAL COST TO RESPONDENTS:  $ 4,062,000

Burden is defined at 5 CFR 1320.3(b).

	An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.  The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR Part 9.

	To comment on the Agency's need for this information, the accuracy of the provided burden estimates, and any suggested methods for minimizing respondent burden, EPA has established a public docket for this rule, which includes this ICR, under Docket ID number EPA-HQ-OAR-2012-0621.  Submit any comments related to the ICR to EPA and OMB.  See ADDRESSES section at the beginning of this notice for where to submit comments to EPA.  Send comments to OMB at the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW, Washington, DC 20503, Attention: Desk Office for EPA.  Since OMB is required to make a decision concerning the ICR between 30 and 60 days after [Insert date of publication in the Federal Register.], a comment to OMB is best assured of having its full effect if OMB receives it by [Insert date 30 days after publication in the Federal Register.].  The final rule will respond to any OMB or public comments on the information collection requirements contained in this proposal.

C.	Regulatory Flexibility Act

	The Regulatory Flexibility Act generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.  Small entities include small businesses, small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of this rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201 (see table below); (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. The following table provides an overview of the primary SBA small business categories potentially affected by this regulation:

Industry

Defined as small entity by SBA if:
NAICS [a] codes
Petroleum refineries

<=1,500 employees.
324110
		a North American Industrial Classification System.

	The program proposed in today's action is a voluntary quality assurance program intended to provide a more structured way to assure that RINs entering commerce are valid.  As a result of the recent fraud issue, obligated parties are reluctant to purchase RINs from smaller refiners because of the uncertainty of their validity.  While this voluntary program could be beneficial for both larger and smaller refineries it could be particularly beneficial for smaller petroleum refineries if they choose to participate.  In the current climate, these smaller producers have been forced to offer their RINs at a significant discount relative to RINs from larger producers, assuming they can find obligated parties or distributors willing to purchase them at all.  While there will be some cost to opt into the program, we believe these costs will be offset by leveling the playing field between larger producers and small producers, allowing small producers to effectively compete in the market.

	After considering the economic impacts of this action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities.  This action will not impose any requirements on small entities. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.

D.	Unfunded Mandates Reform Act

	This rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. The agency has determined that this action does not contain a Federal mandate that may result in expenditures of $100 million or more for the private sector in any one year.  Because the program outlined in this proposal is optional, entities subject to this rule will have the flexibility to participate or not.  Thus, this action is not subject to the requirements of sections 202 or 205 of the UMRA.  This action is also not subject to the requirements of section 203 of the UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments.

E.	Executive Order 13132 (Federalism)

	Executive Order 13132, entitled "Federalism" (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure "meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications."  "Policies that have federalism implications" is defined in the Executive Order to include regulations that have "substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government."

	This action does not have federalism implications.  It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132.  These rules will apply to manufacturers of on-highway engines and not to state or local governments. Thus, Executive Order 13132 does not apply to this action.

	In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between EPA and State and local governments, EPA specifically solicits comments on this proposed rule from State and local officials.

F.	Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments)

	This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000).  This rule will be implemented at the Federal level and impose compliance costs only on engine manufacturers who elect to participate in the program. Thus, Executive Order 13175 does not apply to this rule.

	EPA specifically solicits additional comment on this proposed action from tribal officials.

G.	Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks

	EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation.  This rule is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

H.	Executive Order 13211 (Energy Effects)

	This action is not a "significant energy action" as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.  We have concluded that any energy impacts of this rule will be negligible because the voluntary QAP audit process would ensure that the volume consumption goals of the statute are met while addressing the unique features of the RFS program that have resulted in inefficiencies and poor liquidity in the RIN market.

I.	National Technology Transfer Advancement Act

	Section 12(d) of the National Technology Transfer and Advancement Act of 1995 ("NTTAA"), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note) directs the agencies to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials, specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies.  NTTAA directs EPA to provide Congress, through OMB, explanations when the EPA decides not to use available and applicable voluntary consensus standards.

	This proposed rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards.

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

	Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice.  Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.

	Today's action proposes a voluntary set of regulatory provisions that could provide regulated parties with a specific mechanism for demonstrating that they have conducted due diligence to verify the validity of RINs.  Therefore, EPA has determined that this action will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations.

XII.	Statutory Authority

Statutory authority for the rule finalized today can be found in section 211 of the Clean Air Act, 42 U.S.C. 7545. Additional support for the procedural and compliance related aspects of today's rule, including the recordkeeping requirements, come from Sections 114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 7601(a).

List of Subjects in 40 CFR Part 80

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

Dated: _______________________

______________________________
Lisa P. Jackson,
Administrator.

For the reasons set forth in the preamble, 40 CFR part 80 is amended as follows:

PART 80 -- REGULATION OF FUELS AND FUEL ADDITIVES

1.	The authority citation for part 80 continues to read as follows:
Authority: 42 U.S.C. 7414, 7542, 7545, and 7601(a).

Subpart M -- [Amended]

2.  Section 80.1401 is amended by adding the definitions of "A-RIN", "B-RIN", "Independent Third-Party Auditor", "Quality assurance plan", "Quality assurance audit", and "Verified RIN" to read as follows:

§80.1401	Definitions.

*     *     *     *     *

A-RIN means a RIN verified by a registered independent third-party auditor using a QAP that has been approved under §80.1469(a) following the audit process described in §80.1472.

B-RIN means a RIN verified by a registered independent third-party auditor using a QAP that has been approved under §80.1469(b) following the audit process described in §80.1472.

Independent Third-Party Auditor means a party meeting the requirements of §80.1471(b) that conducts QAP audits and verifies RINs.

Non-ester renewable diesel, also known as renewable diesel, means renewable fuel which is all of the following:

      (1) A fuel which can be used at a blend level approved under 40 CFR Part 79 in an engine designed to operate on conventional diesel fuel, or be heating oil or jet fuel.

      (2) Not a mono-alkyl ester.

Non-qualifying fuel use means a use of renewable fuel in an application other than transportation fuel, heating oil, or jet fuel.

Quality Assurance Plan, or QAP, means the list of elements that an independent third-party auditor will check to verify that the RINs generated by a renewable fuel producer or importer are valid.

Quality Assurance Audit means an audit of a renewable fuel production facility conducted by an independent third-party auditor in accordance with a QAP that meets the requirements of §80.1469.

Verified RIN means a RIN generated by a renewable fuel producer that was subject to a QAP audit executed by an independent third-party auditor, and determined by the independent third-party auditor to be valid.  Verified RINs include both A-RINs and B-RINs.

*     *     *     *     *

3.  Section 1402, currently reserved, is amended to read as follows.

§ 80.1402  Information Submitted under 40 CFR part 80 Subpart M

Sections 2.201 through 2.215 of 40 CFR part 2, subpart B, do not apply to the following information:

      (a)	 Registration information submitted pursuant to §§ 80.1450(b), (c), and (g) that is not entitled to confidential treatment includes company name, facility name, facility type, fuel type, permitted capacity, production volume, feedstocks, production process, D-Code, and co-products.

      (b)	Reporting information submitted pursuant to reporting requirements in 40 CFR § 1452(b) that is not entitled to confidential treatment includes company name, RIN-generating company name, renewable fuel producer, facility name and address, facility location, renewable fuel production month and year, fuel type, D-Code, feedstocks, production process, volume of fuel produced, and number of RINs generated.

4.  Section 80.1426 is amended as follows:

a.  By revising paragraph (a)(1)(i)
b. adding paragraphs (a)(1)(iii) and (a)(1)(iv).
c.  By revising paragraphs (c)(1) and (c)(6).
d.  By revising paragraphs (f)(4)(i)(A)(1) and (f)(4)(i)(B).
e.  By adding paragraph (f)(4)(iii).
e.  By revising paragraph (f)(12).
f.  By adding paragraph (f)(13).

§ 80.1426   How are RINs generated and assigned to batches of renewable fuel by renewable fuel producers or importers?

(a) *     *     *

   (1) *     *     *

      (i)  Qualifies for a D code pursuant to § 80.1426(f), or EPA has approved a petition for use of a D code pursuant to § 80.1416, and is demonstrated pursuant to the reporting requirements of § 80.1451 and the recordkeeping requirements of § 80.1454, or other records maintained by the producer, to be produced in accordance with the applicable pathway in § 80.1426(f) or a petition approved by EPA pursuant to § 80.1416.

      *    *    *

      (ii)  Is designated on a product transfer document (PTD) for use as transportation fuel, heating oil, or jet fuel in accordance with §80.1453(a)(12); and
      (iv) For renewable electricity, biogas, and any renewable fuel other than ethanol, biodiesel, or renewable diesel, is distributed and sold in accordance with §80.1426(f)(10), §80.1426(f)(11), or §80.1426(f)(12), as appropriate.

*     *     *     *     *

(c) *     *     *

   (1) Fuel producers and importers may not generate RINs for fuel that does not satisfy the requirements of subsection (a)(1) of this section.

*     *     *     *     *

   (6) A party is prohibited from generating RINs for a volume of fuel that it produces if the fuel has been produced by a process that uses a renewable fuel as a feedstock, and the renewable fuel that is used as a feedstock was produced by another party, except that RINs may be generated for such fuel if allowed by EPA in response to a petition submitted pursuant to §80.1416 and the petition approval specifies a mechanism to prevent double counting of RINs.

*     *     *     *     *

(f) *     *     *

   (4)	*	*	*
       (i)	*	*	*
      (A)	*	*	*
            (1)  	VRIN shall be calculated according to the following formula:

                            VRIN = EV * Vs * FER / (FER + FENR)

            Where:

            VRIN =	RIN volume, in gallons, for use in determining the number of gallon-RINs that shall be generated for the batch.
            EV =	Equivalence value for the batch of renewable fuel per §80.1415, subject to qualification in paragraph (f)(4)(iii) of this section.
            Vs =	Standardized volume of the batch of renewable fuel at 60 [o]F, in gallons, calculated in accordance with paragraph (f)(8) of this section.
            FER =	Feedstock energy from renewable biomass used to make the transportation fuel, in Btu.
            FENR =	Feedstock energy from non-renewable feedstocks used to make the transportation fuel, heating oil, or jet fuel, in Btu.

*     *     *     *     *

            (B)	Method B.  VRIN shall be calculated according to the following formula:

                                    VRIN = EV * Vs * R

            Where:

            VRIN =	RIN volume, in gallons, for use in determining the number of gallon-RINs that shall be generated for the batch.
            EV =	Equivalence value for the batch of renewable fuel per §80.1415, subject to qualification in paragraph (f)(4)(iii) of this section.
            Vs =	Standardized volume of the batch of renewable fuel at 60 [o]F, in gallons, calculated in accordance with paragraph (f)(8) of this section.
            R =	The renewable fraction of the fuel as measured by a carbon-14 dating test method as provided in paragraph (f)(9) of this section.

*	*	*	*

      (iii)	In determining the RIN volume VRIN according to paragraph (f)(4)(i)(A) or (f)(4)(i)(B) of this section, the equivalence value used to determine VRIN which is calculated according to §80.1415 shall use a value of 1.0 to represent R, the renewable content of the renewable fuel.

*	*	*	*

   (12)(i) For purposes of this section, any renewable fuel other than ethanol, biodiesel, or renewable diesel is considered renewable fuel and the producer or importer may generate RINs only if all of the following apply:

(A) The fuel is produced from renewable biomass and qualifies for a D code in Table 1 to this section or has received approval for use of a D code by the Administrator;
    (B) The fuel producer or importer demonstrates that the fuel was produced for use as a transportation fuel, heating oil or jet fuel by:
          (1) Blending the renewable fuel into gasoline or diesel fuel to produce a transportation fuel, heating oil or jet fuel that meets all applicable standards;
          (2) Entering into a written contract for the sale and use of a specific quantity of the renewable fuel with a party who blends the fuel into gasoline or diesel fuel to produce a transportation fuel, heating oil or jet fuel that meets all applicable standards; or
          (3) Demonstrating that the fuel is being used in its neat form as a transportation fuel, heating oil or jet fuel that meets all applicable standards.
      (C) The fuel was sold for use in a transportation fuel, and for no other purpose; and

         (ii) Reserved.
         (iii) Reserved.

   (13) For purposes of Table 1 to this section, process heat produced from combustion of gas at a renewable fuel facility is considered derived from biomass if the gas is biogas.

        (i) For biogas directly transported to the facility without being placed in a commercial distribution system, all of the following conditions must be met:

          (A) The producer has entered into a written contract for the procurement of a specific volume of biogas with a specific heat content.
          (B) The volume of biogas was sold to the renewable fuel production facility, and to no other facility.
          (C) The volume and heat content of biogas injected into the pipeline and the volume of gas used as process heat are measured by continuous metering.

        (ii) For biogas that has been gathered, processed and injected into a common carrier pipeline, all of the following conditions must be met:

          (A) The producer has entered into a written contract for the procurement of a specific volume of biogas with a specific heat content.
          (B) The volume of biogas was sold to the renewable fuel production facility, and to no other facility.
          (C) The volume of biogas that is withdrawn from the pipeline is withdrawn in a manner and at a time consistent with the transport of fuel between the injection and withdrawal points.
          (D) The volume and heat content of biogas injected into the pipeline and the volume of gas used as process heat are measured by continuous metering.
          (E) The common carrier pipeline into which the biogas is placed ultimately serves the producer's renewable fuel facility.

         (iii) The process heat produced from combustion of gas at a renewable fuel facility described in paragraph (f)(12)(i) of this section shall not be considered derived from biomass if any other party relied upon the contracted volume of biogas for the creation of RINs.

5.  Section 80.1429 is amended by adding paragraph (b)(10) and revising paragraph (f) to read as follows:

§ 80.1429   Requirements for separating RINs from volumes of renewable fuel.

*     *     *     *     *

(b) *     *     *

(10) Any party that produces a volume of renewable fuel may separate any RINs that have been generated to represent that volume of renewable fuel or that blend if that party retires the separated RINs to replace invalid RINs according to §80.1474.

*     *     *     *     *
(f) [Reserved]

*     *     *     *     *

6.  Section 80.1430 is amended by ....  to read as follows:

§ 80.1430   Requirements for exporters of renewable fuel.

(a) 	Any party that owns any amount of renewable fuel, whether in its neat form or blended, that is exported from any of the regions described in §80.1426(b) shall acquire sufficient RINs to comply with all applicable Renewable Volume Obligations under paragraphs (b) through (e) of this section representing the exported renewable fuel.

(b) 	Exporter Renewable Volume Obligations. An exporter of renewable fuel shall determine its Exporter Renewable Volume Obligations from the volumes of the renewable fuel exported.

   (1) Cellulosic biofuel.

      ERVOCB,k = VOLk* EVk

      Where:

      ERVOCB,k= 	The Exporter Renewable Volume Obligation for cellulosic biofuel for discrete volume k in gallons.
      k = 	A discrete volume of renewable fuel that the exporter knows or has reason to know is cellulosic biofuel that is exported in a single shipment.
      VOLk= 	The standardized volume of discrete volume k, in gallons, calculated in accordance with §80.1426(f)(8).
      EVk= 	The equivalence value associated with discrete volume k.

   (2) Biomass-based diesel.

      ERVOBBD,k = VOLk* EVk

      Where:

      ERVOBBDI,k= 	The Exporter Renewable Volume Obligation for biomass-based diesel for discrete  volume k, in gallons.
      k = 	A discrete volume of renewable fuel that is biodiesel or renewable diesel and is exported in a single shipment.
      VOLk= 	The standardized volume of discrete volume k calculated in accordance with §80.1426(f)(8).
      EVk= 	The equivalence value associated with discrete volume k.

   (3) Advanced biofuel.

      ERVOAB,k= VOLk* EVk

      Where:

      ERVOAB,k= 	The Exporter Renewable Volume Obligation for advanced biofuel for discrete volume k,  in gallons.
      k = 	A discrete volume of renewable fuel that is advanced biofuel (including biomass-based diesel, renewable diesel, cellulosic biofuel and other advanced biofuel) and is exported in a single shipment.
      VOLk= 	The standardized volume of discrete volume k, in gallons, calculated in accordance with §80.1426(f)(8).
      EVk= 	The equivalence value associated with discrete volume k.

   (4) Renewable fuel.

      ERVORF,i= VOLk* EVk

      Where:

      ERVORF,i= 	The Renewable Volume Obligation for renewable fuel for discrete volume k, in gallons.
      k = 	A discrete volume of exported renewable fuel that is exported in a single shipment.
      VOLk= 	The standardized volume of discrete volume k, in gallons, calculated in accordance with §80.1426(f)(8).
      EVk= 	The equivalence value associated with discrete volume k.

*	*	*	*	*

(e) 	For renewable fuels that are in the form of a blend at the time of export, the exporter shall determine the volume of exported renewable fuel based on one of the following:

*	*	*	*	*

7.  Section 80.1431 is amended by revising paragraph (a)(1)(viii) and paragraph (b) to read as follows:

§ 80.1431   Treatment of invalid RINs.

(a) *     *     *

	(1) *     *     *

      (viii) [Reserved]

*	*	*	*

(b) Except as provided in § 80.1473, the following provisions apply in the case of RINs that are invalid:
   	(1) Upon determination by any party that RINs owned are invalid, the party must keep copies and adjust its records, reports, and compliance calculations in which the invalid RINs were used. The party must retire the invalid RINs in the applicable RIN transaction reports under § 80.1451(c)(2) for the quarter in which the RINs were determined to be invalid.
   	(2) Invalid RINs cannot be used to achieve compliance with the Renewable Volume Obligations of an obligated party or exporter, regardless of the party's good faith belief that the RINs were valid at the time they were acquired.
   	(3) Any valid RINs remaining after invalid RINs are retired must first be applied to correct the transfer of invalid RINs to another party before applying the valid RINs to meet the party's Renewable Volume Obligations at the end of the compliance year.

8.  Section 80.1433 is added to read as follows:

§80.1433 	Requirements for parties that designate fuel for which RINs were generated for an application that is not transportation fuel, heating oil, or jet fuel.

(a)	Any party that designates any amount of fuel originally produced as renewable fuel, whether in its neat form or blended, for an application that is not transportation fuel, heating oil, or jet fuel shall retire an appropriate number and type of RINs according to one of the following equations and as specified in paragraph (b).

      (1)       Except as provided in (a)(5), Cellulosic biofuel.

   RINRETCB,i= Σ(VOLk* EVk)i

   Where:

   RINRETCB,i= 	The quantity of cellulosic biofuel RINs that must be retired for day i, in gallons.
   k = 	A discrete volume of fuel which the party designated for use in an application other than as transportation fuel, heating oil or jet fuel and which the party knows or has reason to know would have qualified as cellulosic biofuel if not put to a non-qualifying fuel use.
   VOLk= 	The standardized volume of discrete volume k, in gallons, calculated in accordance with §80.1426(f)(8).
   EVk= 	The equivalence value associated with discrete volume k.

   (2) Except as provided in (a)(5), Biomass-based diesel.

   RINRETBBD,i= Σ(VOLk* EVk)i

   Where:

   RINRETBBD,i= 	The quantity of biomass-based diesel RINs that must be retired for day i, in gallons.
   k = 	A discrete volume of fuel which the party designated for use in an application other than as transportation fuel, heating oil or jet fuel and which the party knows or has reason to know would have qualified as biomass-based diesel if not put to a non-qualifying fuel use.
   VOLk= 	The standardized volume of discrete volume k, in gallons, calculated in accordance with §80.1426(f)(8).
   EVk= 	The equivalence value associated with discrete volume k.

   (3) Advanced biofuel.

   RINRETAB,i= Σ(VOLk* EVk)i

   Where:

   RINRETAB,i= 	The quantity of advanced biofuel RINs that must be retired for day i, in gallons.
   k = 	A discrete volume of fuel which the party designated for use in an application other than as transportation fuel, heating oil or jet fuel and which the party knows or has reason to know would have qualified as advanced biofuel if not put to a non-qualifying fuel use.
   VOLk= 	The standardized volume of discrete volume k, in gallons, calculated in accordance with §80.1426(f)(8).
   EVk= 	The equivalence value associated with discrete volume k.

   (4) Renewable fuel.

   RINRETRF,i= Σ(VOLk* EVk)i

   Where:

   RINRETRF,i= 	The quantity of renewable fuel RINs that must be retired for day i, in gallons.
   k = 	A discrete volume of fuel which the party designated for use in an application other than as transportation fuel, heating oil or jet fuel and which the party knows or has reason to know would have qualified as renewable fuel if not put to a non-qualifying fuel use.
   VOLk= 	The standardized volume of discrete volume k, in gallons, calculated in accordance with §80.1426(f)(8).
   EVk= 	The equivalence value associated with discrete volume k.

      (5)       If the party has reason to know that the fuel would have qualified as cellulosic diesel if not put to a non-qualifying fuel use, it must choose either the formula specified in paragraph (a)(1) or that in paragraph (a)(2) to calculate the number and type of  RINs that must be retired.

(b)	For the purposes of calculating the number of RINs that must be retired under paragraphs (a) of this section:

      (1)	If the equivalence value for the discrete volume k can be determined pursuant to §80.1415 based on its composition, then the appropriate equivalence value shall be used in the calculation pursuant to paragraph (a).
      (2)	If the discrete volume k is known to be biomass-based diesel but the composition is unknown, the EVk shall be 1.5.
      (3)	If neither the category nor composition of discrete volume k can be determined, the EVk shall be 1.0.

(c)	VOLk  shall be based on one of the following:

      (1)	Information from the supplier of the blend of the concentration of fuel originally produced as renewable fuel in the blend;
      (2)	Determination of the renewable portion of the blend using Method B or Method C of ASTM D 6866 (incorporated by reference, see §80.1468), or an alternative test method as approved by the EPA; or
      (3)	Assuming the maximum concentration of the renewable fuel in the blend as allowed by law and/or regulation.

(d)	[Reserved]

(e)	All RINs retired pursuant to this section shall be identified in EMTS according the following schedule:

      (1)	Within ten (10) business days of the designation of a fuel for which RINs were generated for a use other than as transportation fuel, heating oil, or jet fuel.

(f)	Any volume of fuel which is designated for a purpose other than as transportation fuel, heating oil or jet fuel cannot be redesignated as renewable fuel.

9.  Section 80.1450 is amended as follows:

a. By adding paragraph (b)(1)(ix).
b. By revising paragraph (g) and adding paragraph (j).

§ 80.1450   What are the registration requirements under the RFS program?

*     *     *     *     *

(b)*     *     *

(1)*     *     *

(ix) For a producer or importer or any renewable fuel other than ethanol, biodiesel, renewable diesel, biogas or renewable electricity:

(A) A description of the renewable fuel and how it will be blended to into gasoline or diesel fuel to produce a transportation fuel, heating oil or jet fuel that meets all applicable standards;

(B) A statement regarding whether the renewable fuel producer or importer will blend the renewable fuel into gasoline or diesel fuel or enter into a written contract for the sale and use of a specific quantity of the renewable fuel with a party who blends the fuel into gasoline or diesel fuel to produce a transportation fuel, heating oil or jet fuel that meets all applicable standards;

(C) If the renewable fuel producer or importer enters into a written contract for the sale and use of a specific quantity of the renewable fuel with a party who blends the fuel into gasoline or diesel fuel to produce a transportation fuel, heating oil or jet fuel, provide

(1) the name, location and contact information for the party that will blend the renewable fuel, and

(2) a copy of the contract that requires the party to blend the renewable fuel into gasoline or diesel fuel to produce a transportation fuel, heating oil or jet fuel that meets all applicable standards;

*     *     *     *

(g) Any independent third-party auditor described in §80.1471 must register with EPA as an independent third-party auditor and receive an EPA issued company identification number prior to conducting quality assurance audits pursuant to §80.1472. Registration information must be submitted at least 30 days prior to conducting audits of renewable fuel production facilities. The independent third-party auditor must provide to EPA the following:

   (1) The information specified under § 80.76, if such information has not already been provided under the provisions of this part.

   (2) Documentation of professional qualifications as described in §80.1450(b)(2)(i)(A) and §80.1450(b)(2)(i)(B).

   (3) Documentation of professional liability insurance as described in §80.1471(c).

   (4) Any quality assurance plans as described in §80.1469.

   (5) Name, address, and company and facility identification number of all renewable fuel production facilities that the independent third-party auditor intends to audit under §80.1472.

   (6) An affidavit from each renewable fuel producer or foreign renewable fuel producer stating its intent to have the independent third-party auditor conduct a quality assurance audit of any of the renewable fuel producer's or foreign renewable fuel producer's facilities.

   (7) An affidavit stating that an independent third-party auditor is independent, as described in paragraphs §80.1471(b), of any renewable fuel producer or foreign renewable fuel producer.

   (8) Proof of a RIN replacement instrument, if applicable, as described under §80.1470.

   (9) The name and contact information for each person employed (or under contract) by the independent third-party auditor to conduct audits or verify RINs, as well as the name and contact information for the Professional Engineer performing the review.

   (10) Registration updates.  --
      (i) Any independent third-party auditor who makes changes to its quality assurance plan(s) that will allow it to audit new renewable fuel production facilities, as defined in § 80.1401 that is not reflected in the producer's registration information on file with EPA must update its registration information and submit a copy of an updated QAP on file with EPA at least 60 days prior to producing the new type of renewable fuel.
      (ii) Any independent third-party auditor who makes any other changes to a QAP that will affect the third-party auditor's registration information but will not affect the renewable fuel category for which the producer is registered per paragraph (b) of this section must update its registration information 7 days prior to the change.
      (iii) Independent third-party auditors must update their QAPs at least 60 days prior to verifying RINs generated by a renewable fuel facility uses a new pathway.
       (iv) Independent third-party auditors must update their QAPs at least 60 days prior to verifying RINs generated by any renewable fuel facility not identified in their existing registration.
   (11) Registration renewal.  Registrations for independent third-party auditors expire at the end of the calendar year, December 31, after EPA has approved a registration under this paragraph (g) unless:
      (i)  The independent third-party auditor resubmits all information, updated as necessary, described in §80.1450(g)(1) thru (g)(7) no later than October 31; and
      (ii) The independent third-party auditor submits an affidavit affirming that he or she has only verified RINs using a QAP approved under §80.1469, notified all appropriate parties of all potentially invalid RINs as described in §80.1471(d), and fulfilled all of his or her RIN replacement obligations under §80.1474.
   (12) Revocation of Registration.
   	(i) The Administrator may issue a notice of intent to revoke the registration of a third-party auditor if the Administrator determines that the auditor has failed to fulfill any requirement of this subpart. The notice of intent shall include an explanation of the reasons for the proposed revocation.
      (ii) Within 60 days of receipt of the notice of intent to revoke, the independent third-party auditor may submit written comments concerning the notice, including but not limited to a demonstration of compliance with the requirements which provide the basis for the proposed revocation.  Communications should be sent to the following address: XX  The Administrator shall review and consider any such submission before taking final action concerning the proposed revocation.
      (iii) If the auditor fails to respond in writing within 60 days to the notice of intent to revoke, the revocation shall become final by operation of law and the Administrator shall notify the independent third-party auditor of such revocation.
      (iv) EPA may deny the registration of an independent third-party auditor if the independent third-party auditor employs any person that was previously employed by an independent third-party auditor whose registration was revoked.
*    *    *
(j) Registration shall be on forms, and following policies, established by the Administrator.

10.  Section 80.1451 is amended as follows:

a.  By revising paragraphs (a)(1)(ix), (a)(1)(x), (a)(1)(xi), (a)(1)(xii), and (a)(1)(xiii).
b.  By adding paragraphs (a)(1)(xiv), (a)(1)(xv), and (a)(1)(xvi).
c.  By adding paragraph (b)(1)(ii)(T).
d.  By revising paragraphs (c)(2)(x), (c)(2)(xi), (c)(2)(xii), (c)(2)(xiii), (c)(2)(xiv), (c)(2)(xv), and (c)(2)(xvi).
e.  By adding paragraphs (c)(2)(xvii) and (c)(2)(xviii).
f.  By revising paragraph (g).
g.  By adding paragraph (h).

§ 80.1451   What are the reporting requirements under the RFS program?

(a) *     *     *

(1) *     *     *

(ix) The total current-year RINs by category of renewable fuel, as those fuels are defined in §80.1401 (i.e., cellulosic biofuel, biomass-based diesel, advanced biofuel, renewable fuel, and cellulosic diesel), retired for compliance that are invalid as defined in §80.1431(a).

(x) The total prior-year RINs by renewable fuel category, as those fuels are defined in §80.1401, retired for compliance.

(xi) The total prior-year RINs by renewable fuel category, as those fuels are defined in §80.1401, retired for compliance that are invalid as defined in §80.1431(a).

(xii) The total cellulosic biofuel waiver credits used to meet the party's cellulosic biofuel RVO.

(xiii) A list of all RINs generated prior to July 1, 2010 that were retired for compliance in the reporting period.

(xiv) A list of all RINs that were retired for compliance in the reporting period and are invalid as defined in §80.1431(a).

(xv) Any deficit RVO(s) carried into the subsequent year.

(xvi) Any additional information that the Administrator may require.

*     *     *     *     *

(b)*      *     *

(1)(i)*      *      *

(ii) *     *     *

(T) Producers or importers of any renewable fuel other than ethanol, biodiesel, renewable diesel, biogas or renewable electricity, shall report, on a quarterly basis, all the following for each volume of fuel:

(1) Total volume of fuel produced, total volume of renewable fuel blended into gasoline and diesel fuel, and the percentage of renewable fuel blended into each batch of finished fuel;

(2) If the renewable fuel producer or importer enters into a written contract for the sale and use of a specific quantity of the renewable fuel with a party who blends the fuel into gasoline or diesel fuel to produce a transportation fuel, heating oil or jet fuel, the name, location and contact information for each party the blends the fuel, and affidavits from the party that include the following information:

   (i) Quantity of renewable fuel received from the producer or importer.
   (ii) Date the renewable fuel was received from producer.
   (iii) A description of the fuel that the renewable fuel was blended into and the blend ratios for each batch
   (iv) A description of the finished fuel, and a statement that the fuels met all applicable standards and was sold for use as a transportation fuel, heating oil or jet fuel;
   (v) Quantity of assigned RINs received with the renewable fuel, if applicable, and
   (vi) Quantity of assigned RINs that the end user separated from the renewable fuel, if applicable.

(c) *     *     *

(2) *     *     *

(x) The total current-year RINs retired that are invalid as defined in §80.1431(a).

(xi) The total prior-year RINs retired.

(xii) The total prior-year RINs retired that are invalid as defined in §80.1431(a).

(xiii) The number of current-year RINs owned at the end of the quarter.

(xiv) The number of prior-year RINs owned at the end of the quarter.

(xv) The number of RINs generated.

(xvi) The volume of renewable fuel (in gallons) owned at the end of the quarter.

(xvii) The total 2009 and 2010 retired RINs reinstated.

(xviii) Any additional information that the Administrator may require.

*     *     *     *     *

(g) All independent third-party auditors.  Any party that is an independent third-party auditor as defined in §80.1471 that verifies RINs must submit to EPA reports according to the schedule, and containing all the information, that is set forth in this paragraph (g).

(1)(i) For RINs verified beginning on January 1, 2014, RIN generation verification reports for each facility audited by the independent third-party auditor shall be submitted according to the schedule specified in paragraph (f)(2) of this section.

(ii) The RIN generation verification reports shall include all the following information for each batch of renewable fuel produced or imported verified, where "batch" means a discrete quantity of renewable fuel produced or imported and assigned a unique batch-RIN per §80.1426(d):

(A) The RIN generator's name.

(B) The RIN generator's EPA company registration number.

(C) The renewable fuel producer EPA facility registration number.

(D) The importer EPA facility registration number and foreign renewable producer company registration number, if applicable.

(E) The applicable reporting period.

(F) The quantity of RINs generated for each batch according to §80.1426.

(G) The production date of each batch.

(H) The fuel type of each batch.

(I) The volume of denaturant and applicable equivalence value of each batch.

(J) The volume of each batch produced.

(K) The volume and type of each feedstock used to produce the batch.

(L) Which batches met the definition of Renewable Biomass.

(M) The quantity and type of co-products produced.

(N) Any additional information the Administrator may require.

(2) RIN verification activity reports shall be submitted to EPA according to the schedule specified in paragraph (f)(2) of this section. Each report shall summarize RIN verification activities for the reporting period. The quarterly RIN verification activity reports shall include all of the following information:

(i) The submitting party's name.

(ii) The submitting party's EPA company registration number.

(iii) The number of current-year RINs verified at the start of the quarter.

(iv) The number of prior-year RINs verified at the start of the quarter.

(v) The total current-year RINs verified.

(vi) The total prior-year RINs verified.

(vii) The number of current-year RINs verified at the end of the quarter.

(viii) The number of prior-year RINs verified at the end of the quarter.

(ix) A list of all RINs subject to the audit that were not verified or that were identified as Potentially Invalid RINs (PIRs) pursuant to 80.1474, along with a narrative description of why the RINs were not verified or were identified as PIRs.

(x) Any additional information that the Administrator may require.

(3) All reports required under this paragraph (g) must be signed and certified as meeting all the applicable requirements of this subpart by the independent third-party auditor or a responsible corporate officer of the independent third-party auditor.

(h) All reports required under this section shall be submitted on forms and following procedures prescribed by the Administrator.

11.  Section 80.1452 is amended by adding paragraph (g) as follows.

§ 80.1452   What are the requirements related to the EPA-Moderated Transaction System (EMTS)?

*     *     *     *     *

(g)  Alternative method of reporting buy and sell transactions in EMTS.  For buyers and sellers of assigned RINs that agree to utilize this alternative reporting method, the reporting requirements of paragraph(c) of this section are modified as follows:

   (1)	The seller of assigned RINs shall do the following:

      (i)	Report the sell transaction in EMTS within five (5) business days of shipping, and;
      (ii)	Indicate that the alternative reporting method is being utilized; and
      (iii)	Report the date the renewable volume is shipped in place of the date of transfer (c)(7) in the EMTS sell transaction report; and
      (iv)	Report a unique identifier and provide a product transfer document (PTD) that meets all requirement of § 80.1453 and that includes the unique identifier agreed upon by the buyer and seller.

   (2)	The buyer of assigned RINS shall do the following:

      (i)	Report the buy transaction in EMTS within five (5) business days of receipt;
      (ii)	Indicate that the alternative reporting method is being utilized;
      (iii)	Include the unique identifier provided by the seller under paragraph (g)(1)(iii) in the EMTS buy transaction report; and
      (iv) Report the date the renewable volume is received in place of the date of transfer (c)(7)  in the EMTS buy transaction report.

12.  Section 80.1453 is amended as follows:

a.  Revising paragraph (a) introductory text and paragraph (a)(5); and
b.  Adding paragraphs (a)(12), and (a)(13).

§80.1453	What are the product transfer document (PTD) requirements for the RFS program?

(a) On each occasion when any party transfers ownership of neat and/or blended renewable fuels or separated RINs subject to this subpart, the transferor must provide to the transferee documents identifying the renewable fuel, designated fuel uses, and any RINs generated for the fuel (whether assigned or separated) which include all of the following information, as applicable:

*	*	*	*

   (5)  Name and blend level of all blending components in a product containing renewable fuel, if applicable.

*	*	*	*

   (12) For the transfer of renewable fuel with or without RINs, an accurate and clear statement on the product transfer document of the fuel type from Table 1 to § 80.1426, and designation of the fuel use(s) intended by the transferor, as follows:

      (i)  Ethanol. "This volume of neat or blended ethanol is designated and intended for use as transportation fuel or jet fuel in the 48 U.S. contiguous states and Hawaii. Any other use in the 48 U.S. contiguous states and Hawaii is a violation of 40 C.F.R § 80.1460(g), unless the requirements in § 80.1433 are met."
      (ii) Biodiesel. " This volume of neat or blended biodiesel is designated and intended for use as transportation fuel, heating oil or jet fuel in the 48 U.S. contiguous states and Hawaii. Any other use in the 48 U.S. contiguous states and Hawaii is a violation of 40 C.F.R § 80.1460(g), unless the requirements in § 80.1433 are met."
      (iii) Renewable Heating oil.  "This volume of heating oil is designated and intended for use as heating oil. Any other use in the 48 U.S. contiguous states and Hawaii is a violation of 40 C.F.R § 80.1460(g), unless the requirements in § 80.1433 are met."
      (iv) Renewable Diesel.  "This volume of neat or blended renewable diesel is designated and intended for use as transportation fuel, heating oil or jet fuel in the 48 U.S. contiguous states and Hawaii.  Any other use in the 48 U.S. contiguous states and Hawaii is a violation of 40 C.F.R § 80.1460(g), unless the requirements in § 80.1433 are met."
      (v) Naphtha. " This volume of neat or blended naphtha is designated and intended for use as transportation fuel or jet fuel in the 48 U.S. contiguous states and Hawaii.  This naphtha may only be used as a gasoline blendstock or jet fuel. Any other use in the 48 U.S. contiguous states and Hawaii is a violation of 40 C.F.R §80.1460(g), unless the requirements in § 80.1433 are met."
      (vi) Butanol. "This volume of neat or blended butanol is designated and intended for use as transportation fuel or jet fuel in the 48 U.S. contiguous states and Hawaii.  This butanol may only be used as a gasoline blendstock or jet fuel. Any other use in the 48 U.S. contiguous states and Hawaii is a violation of 40 C.F.R § 80.1460(g), unless the requirements in § 80.1433 are met."
      (vii) Renewable fuels other than ethanol, biodiesel, heating oil, renewable diesel, naptha or butanol.   "This volume of neat or blended renewable fuel is designated and intended to be used as transportation fuel, heating oil, or jet fuel in the 48 U.S. contiguous states and Hawaii.  Any other use in the 48 U.S. contiguous states and Hawaii is a violation of 40 C.F.R §80.1460(g), unless the requirements in § 80.1433 are met."

13.  Section 80.1454 is amended as follows:

a.  By adding paragraph (b)(7).
b.  By revising paragraphs (l), (m), (n), (o), and (p).
c.  By adding paragraphs (q) and (r).

§ 80.1454   What are the recordkeeping requirements under the RFS program?

*     *     *     *     *

(b) *     *     *

   (7) Records related to the implementation of a QAP under §80.1469.

*     *     *     *     *
(l) Requirements for producers or importers of any renewable fuel other than ethanol, biodiesel, renewable diesel, biogas or renewable electricity.  A renewable fuel producer that generates RINs for any renewable fuel other than ethanol, biodiesel, renewable diesel, biogas or renewable electricity shall keep all of the following additional records:

   (1) Documents demonstrating the total volume of renewable fuel produced, total volume of renewable fuel blended into gasoline and diesel fuel, and the percentage of renewable fuel blended into each batch of finished fuel;