significantly.\112\ Results of this study showed no statistically
significant difference in NOX, non-methane hydrocarbons
(NMHC), or PM when comparing E15 to E10 blends at either aromatics
level.
---------------------------------------------------------------------------

    \111\ Karavalakis, G; Durbin, T; Yang, J; Roth, P., ``Impacts of
Aromatics and Ethanol Content on Exhaust Emissions from Gasoline
Direct Injection (GDI) Vehicles''. University of California, CE-
CERT, April 2018.
    \112\ The EPAct study found T50 to have a meaningful and
statistically significant impact on NMOG, NMHC, NOX, and
PM emissions.
---------------------------------------------------------------------------

    While there are limited data on Tier 3 vehicles, the results of the
Tier 2 and Tier 3 vehicle studies cited above are nevertheless largely
consistent with each other given that ethanol blending also affects
many other fuel properties, and given that ethanol is blended into
gasolines in different ways that affect the collateral property changes
differently. This makes it difficult to interpret trends across the
body of literature without detailed information on multiple fuel
properties. However, since the early 1990s, a number of programs have
studied the effects of ethanol on emissions from earlier vintage
vehicles, and based on these studies, emissions models have been
published, including the Complex Model,\113\ Predictive Model,\114\ and
MOVES simulator,\115\ and the results from the more recent studies are
also largely consistent with them. Namely, ethanol blending causes
slight increases in NOX emissions and slight decreases for
CO emissions. Earlier studies did not evaluate PM emissions from
ethanol blending.
---------------------------------------------------------------------------

    \113\ See ``Complex Model Used to Analyze RFG and Anti-dumping
Emissions Performance Standards,'' available at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/complex-model-used-analyze-rfg-and-anti-dumping.
    \114\ See ``California Gasoline Predictive Models, and CARBOB
Model Development,'' available at https://www.arb.ca.gov/fuels/gasoline/premodel/pmdevelop.htm.
    \115\ See ``Moves and Other Mobile Source Emissions Models,''
available at: https://www.epa.gov/moves.
---------------------------------------------------------------------------

    While some criteria pollutants would have relative and real
increases (NOX and PM) and others have similar decreases
(VOC and CO) on E15 compared to E10, these changes are relatively
small. In the E15 partial waivers, we determined that effects of this
magnitude were too small to cause or contribute 2001 and newer light-
duty vehicles to exceed the vehicles' certified exhaust emissions
standards and we expect that this would also be the case for Tier 3
certified vehicles. While CAA sec. 211(f)(1) does not define specific
criteria for how to determine whether an ethanol blend is substantially
similar to certification test gasoline, we believe that the small
changes in exhaust emissions from E15 relative to Tier 3 E10
certification fuel used in Tier 3 certified vehicles are within the
scope of what we have determined to be sub sim in our prior sub sim
interpretive rulemakings. Therefore, we believe that E15 is sub sim to
Tier 3 E10 certification fuel from the perspective of exhaust
emissions. However, we seek comment and request any additional
information related to the potential effects on the exhaust emissions
of E15 compared to Tier 3 E10 certification fuel, particularly in Tier
3 certified vehicles given the limited data currently available.
b. Evaporative Emissions
    EPA has set evaporative emission standards for motor vehicles since
1971. During the ensuing years, these evaporative standards have
continued to evolve, resulting in additional evaporative emissions
reductions. Consideration of whether E15 is substantially similar to
Tier 3 E10 certification fuel for evaporative emissions requires
consideration of the applicable evaporative emissions standards to
which the particular motor vehicles were certified, in this case Tier 3
motor vehicles. There are now six main components to motor vehicle
evaporative emissions that are important for our standards: (1) Diurnal
(evaporative emissions that come off the fuel system as a motor vehicle
heats up during the course of the day); (2) refueling emissions
(evaporative emissions that come off the fuel system as the vehicle is
refueled); (3) hot soak (evaporative emissions that come off a hot
motor vehicle as it cools down after the engine is shut off); (4)
running loss (evaporative emissions that come off the fuel system
during motor vehicle operation); (5) permeation (evaporative emissions
that come through the walls of elastomers in the fuel system and are
measured as part of the diurnal test); and (6) unintended leaks due to
deterioration/damage that is now largely monitored through onboard
diagnostic standards.
    For hot soak, permeation, and unintended leak evaporative
emissions, we expect that E15 would have a similar effect as Tier 3 E10
certification fuel. In the E15 partial waivers, we stated that we did
not expect that E15 would have an effect on hot soak, permeation, and
unintended leak evaporative emissions based on a review of the data and
on the fact that auto manufacturers have been required to age vehicles
on E10 for evaporative emissions durability testing since MY 2004. We
are not aware of any information suggesting that Tier 3 vehicles would
behave differently since they are aged for evaporative emissions
durability on E15 and certified on Tier 3 E10 certification fuel.
Furthermore, in our review of the testing of permeation on pre-Tier 3
vehicles (i.e., prior to changes made to address permeation) in the E15
partial waiver decisions, while ethanol was shown to significantly
worsen permeation emissions, there was no discernable worsening of the
impacts at higher ethanol concentrations.\116\ Consequently, we do not
anticipate permeation emissions with E15 to be any higher than with
E10.
---------------------------------------------------------------------------

    \116\ See 75 FR 68115-68120 (November 4, 2010) and 76 FR 4675-
4681 (January 26, 2011).
---------------------------------------------------------------------------

    We are proposing two alternative approaches to assessing the
evaporative emissions impacts of E15 with regard to the volatility of
the fuel. First, we compare E15 at 10.0 psi to Tier 3 E10 certification
fuel at 9.0 psi to evaluate differences in evaporative emissions from
refueling, diurnal, and running loss emissions sources. Alternatively,
we compare E15 at 9.0 psi, the fuel without a 1-psi waiver under CAA
sec. 211(h)(4), to Tier 3 E10 certification fuel at 9.0 psi.
    Refueling, diurnal, and running loss evaporative emissions increase
as fuel volatility increases, with gasoline with an RVP of 10.0 psi
producing significantly more vapor for the evaporative emission control
system to capture and purge through the engine than gasoline with an
RVP of 9.0 psi.\117\ However, because we specifically addressed
gasoline volatility in our prior 1981, 1991, and 2008 sub sim
reinterpretations,\118\ we are not proposing to modify our long-
standing

approach to controlling volatility in this action, and because there
are not refueling, diurnal, or running loss evaporative emission
impacts of E15 relative to Tier 3 E10 certification fuel apart from
RVP, we do not believe these evaporative emission impacts are relevant
to our proposed interpretation of sub sim. Furthermore, our existing
regulations promulgated under CAA sec. 211(c) and 211(h) are a
sufficient mechanism to control the RVP of gasoline. Since this
interpretation primarily responds to the fact that we have now changed
Tier 3 certification fuel to include 10 percent ethanol, we do not
believe modification of our sub sim interpretation to set a specific
RVP level would be appropriate.
---------------------------------------------------------------------------

    \117\ These effects are discussed more in Section II.E.
    \118\ See 46 FR 38582 (July 28, 1981), 56 FR 5352 (February 11,
1991), and 73 FR 22277 (April 25, 2008), respectively. Historically,
we have defined sub sim with regards to volatility as being anything
within the general ASTM specifications for volatility for any
location and time of year.
---------------------------------------------------------------------------

    Historically, the primary purpose of the requirement under the
definition of substantially similar that gasoline must meet a
volatility class under the ASTM specification for gasoline was to
ensure that the fuel was physically and chemically similar to gasoline
as to be used in a gasoline-fueled motor vehicle. For example, in the
1980 sub sim interpretative rulemaking, we allowed gasoline-ethanol
blends containing up to 2.0 weight percent oxygen (about 5.5 volume
percent ethanol); such fuel would experience a similar 1-psi increase
to E10 or E15 if produced using the same base gasoline. Even during
1980, certification fuel used for gasoline-fueled motor vehicles was
expected to have an RVP of 9.0 psi.\119\ Therefore, we have not
generally considered the expected increase in RVP resulting from the
addition of RVP when determining whether a fuel is sub sim to gasoline
certification fuel.
---------------------------------------------------------------------------

    \119\ See 40 CFR 86.113-78 (1977).
---------------------------------------------------------------------------

    We determined that such a change was unnecessary and declined to
impose such a limitation when we reinterpreted sub sim in 1991 and in
2008. In 1991, we maintained the view that sub sim fuels need only meet
general ASTM specifications (i.e., any volatility class in ASTM D 4814-
88) for volatility. This was after we promulgated the Phase I and Phase
II RVP standards for gasoline under CAA sec. 211(c) and Congress
enacted CAA sec. 211(h) in 1990, which, as discussed above, we have
interpreted as essentially codifying our regulatory approach to fuel
volatility as it existed prior to 1990. In 2008, when we provided
flexibility for testing gasoline used only in Alaska to meet sub sim
volatility requirements, we chose to maintain the existing volatility
language for gasoline for the rest of the U.S.
    We are also proposing that E15 at 9.0 psi RVP is sub sim to Tier 3
E10 certification fuel at 9.0 psi RVP during the summer. This would
allow us, from a technical standpoint, to consider the impacts of RVP
on evaporative emissions, and in particular on refueling, diurnal, and
running loss evaporative emissions under CAA sec. 211(f)(1). Refueling,
diurnal, and running loss evaporative emissions are mostly a function
of volatility of the fuel. Therefore, if two fuels have the same RVP,
the expected evaporative emissions from the two fuels would be similar.
In this situation, since there is no difference in RVP, E15 at 9.0 psi
RVP would have nearly identical evaporative emissions to E10 at 9.0 psi
RVP from refueling, diurnal, and running loss emissions sources.
    We believe that under CAA sec. 211(f)(1) we only need to determine
that E15 at 9.0 psi RVP is sub sim to Tier 3 E10 certification fuel at
9.0 psi RVP in order for fuel manufacturers and downstream parties to
take advantage of the CAA sec. 211(h)(4) waiver. Congress intended for
gasoline-ethanol blends to have a 1-psi waiver in order to promote
ethanol blending in gasoline. In other words, given the existence of
CAA sec. 211(h)(4), we believe it is appropriate when interpreting sub
sim for CAA sec. 211(f)(1) to compare E15 at 9.0 psi RVP to E10
certification test fuel at 9.0 psi RVP. CAA sec. 211(h)(4) then
provides the 1-psi waiver to E15. Therefore, under this alternative we
would propose to interpret sub sim to apply to gasoline with a maximum
of 9.0 psi RVP during the summer.
    In summary, we expect that E15 would have similar evaporative
emissions effects as Tier 3 E10 certification fuel for Tier 3 light-
duty vehicles with regard to evaporative emissions from permeation, hot
soak, and other unintended evaporative emissions. For refueling,
diurnal and running loss evaporative emissions, we are not proposing to
alter the existing interpretation of substantially similar. As
explained above in our proposed interpretation of CAA sec. 211(h)(4),
we believe it was Congress' intent to allow for gasoline-ethanol
blended fuels containing at least 10 percent ethanol to receive the 1-
psi waiver and we have interpreted sub sim under 211(f)(1) to be
consistent with Congress' intent. Therefore, we are proposing that E15
at 10.0 psi RVP is sub sim to Tier 3 E10 certification test fuel at 9.0
psi RVP when used in Tier 3 vehicles. Alternatively, we propose that
E15 at 9.0 psi RVP is sub sim to Tier 3 E10 certification fuel at 9.0
psi RVP when used in Tier 3 vehicles.
c. Materials Compatibility
    Materials compatibility is a key factor in considering what fuels
or fuel additives are sub sim to certification fuel, insofar as poor
materials compatibility can lead to serious exhaust and evaporative
emission compliance problems not only immediately upon use, but
especially over the full useful life of vehicles and engines. In the
E15 partial waivers, we determined that the use of E15 in MY2001 and
newer light-duty motor vehicles ``will not [result in] materials
compatibility issues that lead to exhaust or evaporative emissions
exceedances.'' \120\ We argued that ``[n]ewer motor vehicles, such as
Tier 2 and NLEV vehicles (MY2001 and newer), on the other hand, were
designed to encounter more regular ethanol exposure compared to earlier
model year motor vehicles'' since EPA's in-use verification program
would require auto manufacturers to place more ``emphasis on real world
motor vehicle testing'' prompting manufacturers to consider
commercially available fuels containing ethanol when developing and
testing their emissions systems.\121\ Based on this assessment plus
confirmatory data from DOE's extensive test program that aged MY2001
and newer vehicles up to 120,000 miles on E15, we concluded that MY2001
and newer vehicles would not have materials compatibility issues with
E15. We expect that Tier 3 certified vehicles would have similar, if
not better, materials compatibility with E15 compared to MY2001 and
newer vehicles since Tier 3 certified vehicles should be designed to
encounter E15 in-use and manufacturers are required to use E15 as an
aging fuel for evaporative durability testing.
---------------------------------------------------------------------------

    \120\ See 75 FR 68122-68123 (November 4, 2010); 76 FR 4681
(January 26, 2011).
    \121\ See 75 FR 68122 (November 4, 2010).
---------------------------------------------------------------------------

    As required under the vehicle and certification regulations,\122\
since granting the E15 partial waivers, E15 is now used as an aging
fuel for service accumulation for evaporative durability testing. Auto
manufacturers have used E15 for service accumulation for evaporative
durability testing since at least MY2014. This means that many Tier 2
certified vehicles since MY2014 and all Tier 3 certified vehicles have
been aged on E15 and have been designed with materials capable of
handling E15 for extended periods of time.
---------------------------------------------------------------------------

    \122\ See 40 CFR 86.1824-08(f)(1).
---------------------------------------------------------------------------

    Therefore, we would not expect any materials compatibility issues
from E15 in Tier 3 vehicles and we expect that

E15 would have substantially similar or identical materials
compatibility with Tier 3 E10 certification fuel.
d. Driveability
    A change in the driveability of a motor vehicle that results in
significant deviation from normal operation (e.g., stalling,
hesitation, etc.) would result in increased emissions. These increases
may not be demonstrated in the emission certification test cycles but
instead are present during in-use operation. In addition to consumer
dissatisfaction, a motor vehicle stall and subsequent restart can
result in a significant increase in emissions because HC and CO
emission rates are typically highest during vehicle starts, especially
cold starts. Further, concerns exist if the consumer or operator
tampers with the motor vehicle in an attempt to correct the
driveability issue since consumers may attempt to modify a motor
vehicle from its original certified configuration. Thus, we have
considered whether fuels or fuel additives have an adverse effect on
driveability relative to certification fuel to define what is
substantially similar.
    We concluded in the E15 partial waivers that we did not believe
that E15 would cause driveability concerns for MY2001 and newer light-
duty vehicles. We reviewed the data and information from the over 30
different test programs evaluated to grant the E15 partial waivers and
we found ``no specific reports of driveability, operability or on-board
diagnostics (OBD) issues across many different vehicles and duty cycles
including lab testing and in-use operation.'' \123\
---------------------------------------------------------------------------

    \123\ See 76 FR 4681-82 (January 26, 2011).
---------------------------------------------------------------------------

    After having granted the partial E15 waivers, we believe that Tier
2 and Tier 3 vehicles also have better capability of operating on E15,
since as mentioned above, auto manufacturers have been required to use
E15 as an aging fuel for evaporative durability aging since at least
MY2014.
    We also believe that the producers and distributors of gasoline
adhere to ASTM specifications for gasoline (i.e., ASTM D 4814),\124\
which helps address the driveability of gasoline that contains up to 15
volume percent ethanol. As E15 has been in the market since at least
2012, industry, through ASTM International, has worked to develop
voluntary consensus-based standards to help ensure the quality of E15
made and used in the marketplace. For example, ASTM D4814-18c has
language to ensure that gasoline-ethanol blends have certain physical
and chemical characteristics, like the gasoline-ethanol blend having
distillation parameters falling within specified ranges, to ensure that
when the gasoline-ethanol blended fuel is used, driveability issues
will not arise.\125\
---------------------------------------------------------------------------

    \124\ ASTM Standard D4814, 2019, ``Standard Specification for
Automotive Spark-Ignition Engine Fuel,'' ASTM International, West
Conshohocken, PA, 2003, DOI: 10.1520/C0033-03, www.astm.org.
    \125\ Id.
---------------------------------------------------------------------------

    For these reasons, we believe that E15 would have similar
driveability characteristics to Tier 3 E10 certification fuel.
e. Conclusion
    For reasons described above, we are proposing that E15 is
substantially similar to Tier 3 E10 certification fuel. As discussed
above, when interpreting which fuels and fuel additives are sub sum to
certification fuel under CAA sec. 211(f)(1), we consider those
potential effects of relevance under CAA sec. 211(f)(1) of fuels and
fuel additives on certified motor vehicles' emissions (exhaust and
evaporative), materials compatibility, and driveability. Regarding
emissions, while E15 compared with Tier 3 E10 certification test fuel
would have small emissions changes in Tier 3 vehicles, we expect that
E15 would exhibit similar exhaust and evaporative emissions for Tier 3
vehicles certified on Tier 3 E10 certification fuel. For materials
compatibility and driveability, we expect that due to E15 being used as
a service accumulation fuel for evaporative emissions aging, as well as
our conclusions for MY2001 and newer light-duty motor vehicles
regarding materials compatibility and driveability in the E15 partial
waivers, E15 would be sub sim to Tier 3 E10 certification fuel.
    Our proposed interpretation is limited to gasoline that contains
only ethanol content up to 15 percent as this is the only oxygenate
that we have sufficient data and information to support at this
time.\126\ Other oxygenates (notably isobutanol) may have similar
emissions effects to Tier 3 E10 certification fuel, but we lack the
data and information on emissions, materials compatibility, and
driveability as established for ethanol as part of the E15 partial
waiver decisions and the Tier 3 rulemaking. Therefore, our proposed
interpretation of sub sim for gasoline would interpret gasoline-ethanol
blends containing up to 15 percent ethanol as sub sim, while keeping
the oxygen content limit of 2.7 weight percent for other oxygenates. We
seek comment on whether we should interpret sub sim to encompass other
oxygenates and request any supporting data on the potential effects of
other oxygenates on emissions, materials compatibility, and
driveability of Tier 3 vehicles.
---------------------------------------------------------------------------

    \126\ It should also be noted that we chose to express the
proposed increase in gasoline-ethanol content in terms of volume
percentage versus converting to weight percent oxygenate. We did
this for two reasons. First, as stated, we believe we only have data
and information to support an interpretation for gasoline containing
only ethanol up to 15 volume percent. Second, this avoids the issues
associated with the variability in the density of gasoline.
---------------------------------------------------------------------------

6. Other Aspects of the Proposed Interpretative Rulemaking
a. Effects of Proposed Interpretation of CAA sec. 211(h)(4)
    The proposed new interpretation of ``substantially similar''
interpreting E15 to be sub sim to Tier 3 E10 certification fuel
discussed in this section would make it lawful for refiners and
importers to make and introduce into commerce E15 without the use of
the E15 partial waivers. This proposed interpretation of
``substantially similar'' in conjunction with the proposed
interpretation of CAA sec. 211(h)(4) would also extend the exemption
from the CAA sec. 211(h)(1) upper RVP limit from 9.0 psi to 10.0 psi
for fuels containing 9-15 percent ethanol.
    As previously explained, the deemed to comply provision was
promulgated at the inception of the RVP program when industry had just
begun blending ethanol in gasoline and reflects the highest permissible
ethanol content under the waiver under CAA sec. 211(f)(4).
Specifically, the deemed to comply provision applies where ``the
ethanol portion of the blend does not exceed its waiver condition under
subsection (f)(4) of this section.'' \127\ A plain reading of this
provision therefore, would suggest that it could not apply where the
agency concludes that a fuel is substantially similar to certification
fuels, under CAA sec. 211(f)(1). However, we seek comment on the
continued use of the deemed to comply provision to ease the
demonstration burdens for fuels that do not have a CAA sec. 211(f)(4)
waiver, but nonetheless can be introduced into commerce because they
are substantially similar to Tier 3 E10 certification fuel.
---------------------------------------------------------------------------

    \127\ CAA sec. 211(h)(4)(B).
---------------------------------------------------------------------------

    If we finalize our interpretation of substantially similar proposed
in Section II.C, the 1-psi waiver would be available to fuel
manufacturers, refiners, and importers, in contrast to the approach
discussed in Section II.B, which would only allow downstream parties to
take advantage of the 1-psi waiver. However, retailers that produce E15
via a blender pump would still have

issues complying with EPA fuels regulations at 40 CFR parts 79 and 80
unless they made the E15 solely from DFE and certified gasoline (or
CBOB).
b. Regulatory Amendments
    The technical amendments to our regulations discussed in Section
II.B.2, in the context of our first approach to allow the 1-psi waiver
for E15 during the summer, would also be necessary were EPA to finalize
a new interpretation of ``substantially similar'' that finds that E15
is sub sim to Tier 3 E10 certification fuel. The regulatory changes
would be identical to those discussed in Section II.B.2, as those
regulatory changes would be promulgated to effectuate our new
interpretation of CAA sec. 211(h)(4). In short, we would promulgate
regulatory amendments modifying the ethanol content at 40 CFR 80.27 to
blends of gasoline containing 9-15 percent ethanol. We would also
promulgate regulations removing requirements implemented in the MMR
relating to (1) comingling of E10 and E15; and (2) PTD requirements for
E15 that would no longer be necessary were E15 to receive the 1-psi
waiver. As discussed in Section II.B.2, all other regulations
promulgated as part of the MMR would remain in place.
c. Potential Conditions As Part of CAA sec. 211(f)(1) Interpretative
Rulemaking
    CAA sec. 211(f)(1)(A) prohibits fuel or fuel additive manufacturers
from first introducing into commerce, or increasing the concentration
in use of, any fuel or fuel additive for general use in light-duty
motor vehicles which is not substantially similar to that utilized in
the certification of motor vehicles or engines under CAA sec. 206. As
explained above, we have interpreted the ``substantially similar''
provision several times to allow the introduction into commerce of
certain fuel blends. The language of CAA sec. 211(f)(1) does not
address whether and how EPA can restrict its determination that a
particular fuel is ``substantially similar'' to a certification fuel.
Given the fact that there have now been multiple certification fuels
since 1977, when CAA sec. 211(f)(1) was first enacted, we believe it is
reasonable to interpret this provision as allowing EPA to apply
restrictions on a sub sim determination, where the restrictions are
intended to avoid the kinds of problems that prompted the prohibition
against introduction into commerce. We solicit comment on this
approach, including comments on the specific conditions we should
impose.
    One implication of a sub sim interpretation that includes E15 under
CAA sec. 211(f)(1) would be that a waiver under CAA sec. 211(f)(4) will
no longer be necessary for E15 to be introduced into commerce. This
would in effect remove the conditions of the E15 partial waivers
imposed on fuel and fuel additive manufacturers, in the absence of any
limitations on the sub sim interpretation. This would mean that the
conditions in the E15 partial waivers designed to limit the
introduction into commerce of E15 to only MY2001 and newer light-duty
motor vehicles would not apply. The need for the conditions on the E15
partial waivers may be partially mitigated because we have already put
in place parallel restrictions in our regulations in the E15 MMR
rulemaking at 40 CFR part 80, subpart N.\128\ However, some conditions
in the E15 partial waivers are not part of the MMR. One such condition
is the requirement that fuel and fuel additive manufacturers have an
EPA-approved misfueling mitigation plan (MMP) prior to introducing E15
into commerce. While MMPs generally commit fuel and fuel additive
manufacturers to adhere to regulatory requirements of the MMR, MMPs
also commit these manufacturers to participate in public outreach on
the appropriate use of E15 and allow for specific, additional
misfueling mitigation measures that may apply in a manufacturers
specific situation. Another condition in the E15 partial waivers is
that ethanol producers must manufacture denatured fuel ethanol that
meets industry established quality standards if used to make E15. This
requirement is not currently part of EPA's fuels regulations.
---------------------------------------------------------------------------

    \128\ As noted above, these restrictions remain necessary, and
we are not proposing to lift the prohibition at 40 CFR 80.1504(a)(1)
on the sale, introduction, or use of E15 into MY2000 and older
light-duty motor vehicles, heavy-duty motor vehicles, or nonroad
engines, vehicles, and equipment, nor are we proposing to remove any
of the misfueling mitigation requirements in the E15 MMR.
Consequently, those marketplace protections will be unaffected by
this proposed action.
---------------------------------------------------------------------------

    Furthermore, as discussed, the technical basis to deny the E15
waiver request for MY2000 and older motor vehicles and nonroad products
and promulgate the MMR is unchanged and removing the conditions in the
E15 partial waivers removes a layer of protection against the
misfueling of these vehicles, engines, and equipment.\129\ We denied
the E15 waiver request for MY2000 and older motor vehicles, nonroad
vehicles, engines, and equipment (including motorcycles, and heavy-duty
motor vehicles) due to our engineering assessment that these vehicles,
engines, and equipment may experience emissions failures over these
vehicles, engines, and equipments' full useful lives. Also, as
discussed above, in the MMR we concluded that under CAA sec.
211(c)(1)(A), the likely result would be increased VOC, CO, and
NOX emissions were these particular engines, vehicles and
equipment to use E15. The prohibitions and regulatory requirements were
designed to help mitigate the misfueling of E15 in these vehicles.
---------------------------------------------------------------------------

    \129\ See 75 FR 68127-68138 (November 4, 2010).
---------------------------------------------------------------------------

    There are still millions of MY2000 and older motor vehicles on the
road (although they will over time make a smaller contribution to
vehicle miles travelled) and hundreds of millions of pieces of nonroad
equipment not designed for and prohibited from E15 use. The existing
conditions on the E15 partial waivers under CAA sec. 211(f)(4) help
ensure E15 fuel quality and mitigate the misfueling of vehicles,
engines, and equipment and we believe it is appropriate to continue to
impose the same conditions on parties that introduce E15 into commerce
under a CAA sec. 211(f)(1) sub sim interpretative rulemaking.
Therefore, we are proposing and seek comment on certain limitations,
including those contained in the current CAA sec. 211(f)(4) waiver, as
part of an interpretative rulemaking which defines E15 as substantially
similar to Tier 3 E10 certification fuel under CAA sec. 211(f)(1).
    Additionally, we seek comment on whether this proposed sub sim
interpretation for E15 should be limited to the subset of the national
vehicle and engine fleet to which the current E15 waivers apply (MY2001
and newer light-duty motor vehicles) or on which our assessment in
Section II.C is based (i.e., only to vehicles and engines certified
using Tier 3 E10 certification fuel). While we have not previously
imposed conditions in substantially similar interpretative rulemakings
designed to limit the applicability to certain classes of vehicles,
engines, and equipment, for the reasons explained above, we are seeking
comment in this case. The record has not changed with respect to the
inability of older vehicles, nonroad equipment, motorcycles, or heavy-
duty trucks to use E15, which formed the basis of our denial of the E15
waiver request for such vehicles, engines, and equipment.
    Furthermore, our assessment in Section II.C was limited to only
Tier 3 E10 certification fuel used to certify MY2020 (some earlier)
light-duty vehicles, not all in-use vehicles and

engines that run on gasoline. Such a condition would be in recognition
of the fact that, in contrast to the date when CAA sec. 211(f)(1) was
enacted, not all gasoline vehicles and equipment are certified on the
same gasoline. All other vehicles, engines, and equipment prior to Tier
3 used certification fuel without ethanol, and some nonroad vehicles,
engines, and equipment are still certified using E0. A condition
limiting the applicability of the sub sim interpretative rulemaking to
vehicles certified on Tier 3 certification fuel would recognize the
fact that most vehicles, engines, and equipment were not certified on
E10, and prevent emission exceedances by limiting which vehicles,
engines, and equipment could use E15 under the proposed sub sim
interpretative rulemaking.
    Finally, we seek comment on whether we can impose the existing
waiver conditions in the E15 partial waivers, in their entirety, as
conditions in the proposed substantially similar interpretative
rulemaking. The conditions on the E15 partial waivers provide
additional misfueling mitigation and fuel quality protections, which as
mentioned above some stakeholders believe may need to be bolstered in
the future as E15 becomes more available to consumers.

D. E15 Misfueling Mitigation

    Some stakeholders have raised concerns since the President's
announcement over whether the remaining E15 misfueling mitigation
measures would be sufficient in light of this proposed action.\130\
These stakeholders suggested that a possible consequence of this
proposed action would be an increase in the availability of E15 in the
market resulting in an increase in the potential misfueling of E15 in
nonroad vehicles, engines, and equipment and MY2000 and older light-
duty vehicles. These stakeholders suggested that, in light of their
concerns and advancements in technology since our MMR rule, we seek
comment on a wide range of additional misfueling mitigation measures to
help avoid the misfueling of E15.
---------------------------------------------------------------------------

    \130\ See ``Joint Comments on E15 Education and Outreach'' from
the Outdoor Power Equipment Institute and the National Marine
Manufacturers Association to EPA, January 29, 2019.
---------------------------------------------------------------------------

    While we believe additional misfueling measures are unnecessary at
this time and outside the scope of this proposed action, we recognize
that as E15 and other higher-level ethanol blends become more prevalent
in the marketplace, the use of additional misfueling mitigation
measures may be appropriate. We also recognize that additional
misfueling mitigation measures would most likely place a significant
burden on retailers, many of whom are small businesses, to upgrade fuel
dispensers to implement physical barriers to E15 use or employ radio-
frequency identification (RFID) technology. Therefore, we seek comment
on whether additional misfueling mitigation measures would be
appropriate and we specifically seek comment on the costs and benefits
of such measures on affected parties.

E. E15 Criteria Pollutant and Air Toxics Emission Impacts

    As discussed above, we expect the emissions of E15 to be
substantially similar to those of E10 Tier 3 certification fuel when
used in Tier 3 light-duty vehicles. This section describes expected
emissions effects of the proposed action on evaporative and exhaust
emissions of E15 relative to E10 typically available in the
marketplace.
    Evaporative emissions from vehicles comprise approximately 60
percent of the VOC emissions during summertime conditions from the
current vehicle fleet based on results produced by MOVES2014b, and such
VOC emissions contribute to ambient levels of ozone, PM, and air
toxics, all of which endanger public health and welfare. Today's
vehicles are equipped with charcoal cannisters to capture vapors
generated during refueling as well as daily diurnal temperature
fluctuations. This stored vapor is then drawn into the engine and
combusted during vehicle operation.
    Currently and historically, vehicle manufacturers have been
required to certify their vehicles on test gasoline with a volatility
of 9.0 psi RVP under severe operating conditions similar to what might
be expected on high ozone days. The evaporative emission standards have
been progressively made more stringent over time, such that under the
Tier 3 standards they require essentially zero vapor loss during normal
operation on 9.0-psi fuel. Increasing fuel RVP from 9.0 psi to 10.0 psi
increases fuel vapor generation significantly under summertime
conditions, which can overwhelm a vehicle's evaporative control system
and push it out of compliance. Consequently, controlling the volatility
of gasoline during the summer is important in order to control the
evaporative VOC emissions produced by vehicles and engines in-use.
    This proposal changes the volatility standard that applies to E15
in-use from 9.0 psi to 10.0 psi RVP. Viewing this change in isolation,
one might expect a significant increase in evaporative emissions. To
accurately assess emission impacts in this case, however, we need to
examine current real-world circumstances. Namely, we expect any E15
introduced into the market to displace E10 that is already being sold
and that carries the 1-psi waiver in conventional gasoline areas (E10
has nearly 100 percent market share for gasoline sold in the U.S.). E15
has a slightly lower RVP than E10 when made from the same BOB, a
situation we believe will be the case unless E15 use becomes
widespread.\131\ Thus, to the extent that E15 displaces E10 in the
short term, E15 is expected to lower the volatility of in-use gasoline
by as much as 0.1 psi.\132\
---------------------------------------------------------------------------

    \131\ We believe it would be unlikely for refiners to produce an
E15 CBOB for such a small difference in RVP. However, refiners may
want to create a CBOB with a slightly lower octane level to account
for the increased octane from the additional ethanol in E15 versus
E10. We believe this would only occur if E15 comprised a large part
of a conventional gasoline area's market.
    \132\ ``Determination of the Potential Property Ranges of Mid-
Level Ethanol Blends.'' American Petroleum Institute, Washington,
DC. April 2010.
---------------------------------------------------------------------------

    Use of E15 blends will have other criteria pollutant emission
impacts beyond those related to volatility described above. Assuming
E15 is made from the same BOB as E10, we expect the additional 5 volume
percent ethanol to further dilute hydrocarbon fuel components such as
aromatics, producing changes in several exhaust emissions such as
NOX, NMOG, and benzene.133 134 Ethanol also
causes changes in the volatility profile of the blended fuel, typically
lowering the mid-point distillation temperature (T50) significantly,
and the 90 percent temperature (T90) slightly.\135\ Table II.E-1 shows
predicted fuel property and exhaust emission changes for Tier 2
vehicles using both E10 certification gasoline and a typical market E10
as baselines for comparison. Results using the EPAct model developed
from the EPAct/V2/E-89 study described in Section II.C.5.a suggest E15
blends are expected to produce slightly lower CO, and slightly higher
NOX and PM

compared to their E10 blending base. Changes in NMOG (or VOC) vary in
direction depending on the T50 of the blending base.
---------------------------------------------------------------------------

    \133\ For the effects of sulfur on emissions see Table ES-3 in
``The Effects of Ultra-Low Sulfur Gasoline on Emissions from Tier 2
Vehicles in the In-Use Fleet.'' U.S. EPA Office of Transportation
and Air Quality, Ann Arbor MI. EPA-420-R-14-002, March 2014.
    \134\ For the effects of ethanol and aromatics on emissions see
Tables ES-1 through ES-4 in ``Assessing the Effect of Five Gasoline
Properties on Exhaust Emissions from Light-Duty Vehicles Certified
to Tier 2 Standards: Analysis of Data from EPAct Phase 3 (EPAct/V2/
E-89): Final Report.'' U.S. EPA Office of Transportation and Air
Quality, Ann Arbor MI. EPA-420-R-13-002, March 2013.
    \135\ ``Determination of the Potential Property Ranges of Mid-
Level Ethanol Blends.'' American Petroleum Institute, Washington,
DC. April 2010.

                                        Table II.E-1--Example Emission Impacts of E15 Blends Based on EPAct Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Fuel properties used in analysis             E15 emissions impact relative to indicated
                                                      -------------------------------------------------------                  baseline
                                                                                -------------------------------------------
                                                        Eth. vol  Arom. vol     RVP        T50        T90                            NOX  (%)
                                                          (%)        (%)       (psi)     ([deg]F)   ([deg]F)    CO (%)    NMOG (%)               PM (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline: E10 certification fuel at 9 psi............       10.0       23.0        9.0        200        325  .........  .........  .........  .........
E15 at 9 psi (splash)................................       15.0       21.9        9.0        163        321       -2.5       -5.6        1.8        2.7
E15 at 10 psi (splash)...............................       15.0       21.9       10.0        163        321       -1.3       -8.0        1.8        2.7
Baseline: E10 market fuel at 10 psi..................       10.0       23.0       10.0        180        320  .........  .........  .........  .........
E15 at 10 psi (splash)...............................       15.0       21.9       10.0        160        316       -2.0        2.2        2.5        4.0
E15 at 10 psi (MOVES Fuel Wizard) *..................       15.0       21.7       10.0        167        318       -2.6        1.4        2.7        4.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The MOVES Fuel Wizard attempts to estimate how properties would change in a widespread blending scenario.

    If E15 use becomes widespread in the longer term, refiners may
adjust the base blendstock to accommodate the additional ethanol.
During the rapid expansion of E10 blending between 2007-2012, aromatics
levels were observed to decline by a few volume percent while pump
octane levels stayed constant, and octane match-blending is understood
to have been a contributing factor.136 137 For other fuel
properties, such as sulfur and benzene content, refiner control could
be relaxed slightly for E15 blendstocks with the finished market E15
blend still meeting with the regulatory limits. Moving from E15 splash
blends to match blends may then undo some small emission reductions
occurring when E15 is made from refinery blendstocks designed for E10.
---------------------------------------------------------------------------

    \136\ See Figure 3-4 of the Regulatory Impact Analysis for
``Control of Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle
Emission and Fuel Standards.'' EPA-420-R-14-005, February 2014.
    \137\ See Figure 65 of ``Fuel Trends Report: Gasoline 2006-
2016.'' EPA-420-R-17-005. October 2017.
---------------------------------------------------------------------------

F. E15 Economic Impacts

1. Benefits for E15 RVP
    We anticipate that providing the flexibility to use E15 at 10.0 psi
RVP in the summer could help incentivize retailers to introduce E15
into the marketplace. In situations where denatured fuel ethanol is
cheaper than gasoline, parties may elect to make E15 more widely
available, which may result in a modest decrease in fuel prices at the
pump. This could help to further the use of increased volumes of
renewable fuels under the RFS program, which in turn could provide
energy security benefits.
2. Costs for E15 RVP
    Our proposal to allow E15 to take advantage of the 1-psi waiver in
the summer may help open new market opportunities for E15. However,
fuel manufacturers and distributors of E15 would not be compelled to
make or offer E15 and could choose to offer E15 as dictated by market
demands and individual business decisions.
    Overall, we anticipate very little change in costs regarding the
proposed regulatory provisions to allow E15 to receive the 1-psi waiver
in the summer. This action places no new regulatory burdens on any
party in the gasoline or denatured fuel ethanol distribution system and
modifies, but does not remove, PTD requirements for E15. Hence, we
expect that these proposed provisions would not substantially alter the
cost of compliance for parties that produce and distribute E15.

III. RIN Market Reforms

A. Overview of RFS Compliance

    The RFS program began in 2006, pursuant to the requirements in CAA
sec. 211(o) that were added through the Energy Policy Act of 2005
(EPAct). The statutory requirements for the RFS program were
subsequently modified through the Energy Independence and Security Act
of 2007 (EISA), leading to the publication of major revisions to the
regulatory requirements on March 26, 2010.\138\
---------------------------------------------------------------------------

    \138\ See 75 FR 14670 (March 26, 2010).
---------------------------------------------------------------------------

    Under CAA sec. 211(o), EPA is required to set renewable fuel
percentage standards every year.\139\ To comply, obligated parties
\140\ can purchase and blend the requisite volumes of renewable fuels
into the petroleum-derived transportation fuels they produce or import.
However, to allow the market to function more efficiently and avoid
market disruption, in implementing the statutorily-required credit
program, and to assist obligated parties in meeting their individual
RVOs, Congress directed EPA to establish, through a transparent public
rulemaking process, a system for the generation and use of renewable
fuel program credits.\141\ The credits created under this program are
known as RINs. RINs are credits that are generated upon production of
qualifying renewable fuel and ultimately used by obligated parties to
demonstrate compliance. Renewable fuel producers and importers generate
and assign RINs to the renewable fuel they produce or import. These
RINs are then transferred with the renewable fuel to the downstream
parties that blend the renewable fuel into transportation fuel. In lieu
of blending the renewable fuels themselves to demonstrate compliance,
obligated parties have the option to instead purchase RINs from other
parties that blend renewable fuels.
---------------------------------------------------------------------------

    \139\ See, e.g., final rule establishing the RFS standards for
2019 and biomass-based diesel volume for 2020 (83 FR 63704, December
11, 2018).
    \140\ Obligated parties are refiners and importers of gasoline
and diesel fuel. See 40 CFR 80.1406.
    \141\ See CAA sec. 211(o)(5).
---------------------------------------------------------------------------

    The assigned RINs that accompany the renewable fuel can primarily
be separated from the fuel if the fuel is purchased by an obligated
party or blended into transportation fuel. Once separated, RINs can be
traded as a separate commodity from the renewable fuel. Obligated
parties accumulate RINs over the course of the year, either by buying
renewable fuel with assigned RINs that they separate and retain for
compliance (and either blend the fuel themselves or rely on others to
do on their behalf), or by purchasing separated RINs on the open
market. All RIN

transactions, including the generation of RINs, RIN trades, and the
retirement of RINs to satisfy an obligated party's RVOs, are reported
to EPA using the EPA Moderated Transaction System (EMTS).\142\
---------------------------------------------------------------------------

    \142\ Public EMTS data can be found on EPA's website at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/public-data-renewable-fuel-standard.
---------------------------------------------------------------------------

    The annual RVOs for a given obligated party are calculated by
multiplying the obligated party's total annual production and import of
gasoline and diesel fuel by four annual percent standards corresponding
to the four renewable fuel categories established by Congress.\143\
Each obligated party must obtain sufficient RINs of each category to
demonstrate compliance with its individual RVOs for the four annual
percentage standards. Obligated parties comply on an annual average
basis, through their annual compliance report to EPA that identifies
their obligation based on gasoline and diesel production/import and
identifies the RINs acquired and retired for that year's compliance.
Thus, compliance under the RFS program requires obligated parties to
understand how to calculate their individual obligations based on the
four percentage standards, and then to plan for their annual compliance
demonstration through RIN acquisition, either through blending or
through trading, over the course of the year. There are also associated
registration, reporting, and recordkeeping requirements.
---------------------------------------------------------------------------

    \143\ The 2019 percentage standards for cellulosic biofuel,
biomass-based diesel, advanced biofuel, and total renewable fuel are
0.230%, 1.73%, 2.71%, and 10.97%, respectively. The cellulosic and
biomass-based diesel standards are nested within the advanced
biofuel standard, which is itself nested in the total renewable fuel
standard. This implies a conventional renewable fuel percentage
standard of 8.26%. See 83 FR 63704 (December 11, 2018).
---------------------------------------------------------------------------

B. RIN Market Assessment

    Renewable fuel producers and importers generate RINs by entering
their renewable fuel production or import information into EMTS. When a
renewable fuel producer or importer transfers ownership of the fuel to
another party, the assigned RINs usually transfer as well. Both parties
must report information about the RIN transaction to EMTS within five
days of the transfer. Parties must also report in EMTS when they
separate RINs from fuel, when they trade separated RINs with another
party, and when they retire RINs for compliance or other reasons. EMTS
effectively acts as an electronic platform that records RIN
transactions, conducts RIN title transfers between parties, and
maintains a RIN account balance for each registered party.
    RINs are transacted through contracts or on the spot market, in
bilateral trades directly between buyers and sellers, or facilitated by
third-party brokers. EPA designed the RIN system to operate as a
relatively ``open'' trading market in order to maximize liquidity and
ensure a robust marketplace for RINs. For example, in establishing the
original trading program, EPA attempted to provide as much compliance
flexibility as possible and did not place limits on the number of
allowable RIN trades, nor restrict the types of parties that could
acquire and trade RINs. Several stakeholders from across the fuels
industries supported the trading system we finalized in 2007.\144\ In
the RFS1 final rule preamble, we summarized the comments of several
parties as saying ``that unlimited trading among all interested parties
would increase liquidity and transparency in the RIN market,'' and
``that increasing the number of participants would facilitate the
acquisition of RINs by obligated parties and promote economic
efficiency.'' \145\
---------------------------------------------------------------------------

    \144\ See Chapter 5.4.3 of ``Regulation of Fuels and Fuel
Additives: Renewable Fuel Standard Program--Summary and Analysis of
Comments.'' EPA 420-R-07-006, April 2007, available at https://www.epa.gov/sites/production/files/2015-08/documents/420r07006.pdf.
    \145\ See 72 FR 23944 (May 1, 2007).
---------------------------------------------------------------------------

    Individual transaction prices are generally not made public, but
some services, such as OPIS and Argus, offer daily price information on
commodities such as RINs from a subset of parties that trade in the RIN
market. The public can access this information for a fee paid to these
service providers. Recently, EPA began posting aggregated weekly RIN
price information reported to EPA through EMTS on our public website,
which is updated monthly.\146\ RIN prices are a function of multiple
factors, including but not limited to changes in petroleum prices,
agricultural feedstock (e.g., corn, soy) prices, and expectations of
future market shifts and standards. RIN prices may also fluctuate as
the market responds to RFS standards and expectations of future EPA
policy decisions.
---------------------------------------------------------------------------

    \146\ See https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rin-trades-and-price-information. The RIN Price
dataset shows historical, weekly, volume-weighted average RIN price
data for separated RINs as reported to EPA through EMTS. Price
filters are applied to the data set to remove outliers and data is
aggregated to protect confidential business information.

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

[GRAPHIC] [TIFF OMITTED] TP21MR19.000

    While there are many different factors that impact RIN prices, a
review of the historical RIN price data demonstrates that RIN prices
generally follow expected market principles. For example, in the early
years of the RFS program (2010-2012) D6 RIN prices (for mostly corn
ethanol) were generally only a few cents. During this time, the implied
conventional biofuel volume (the difference between the total renewable
fuel volume and the advanced biofuel volume and the only volume to
which D6 RINs can be applied) could be met by blending ethanol as E10.
The blending of ethanol up to E10 was driven by economic factors rather
than financial incentives provided by the RFS program.\147\ First,
ethanol has a relatively high octane value, and thus is attractive as a
gasoline blendstock component. Second, ethanol was cheaper on a
volumetric (per gallon) basis than gasoline during this time period,
and it was therefore economic to blend at levels up to 10 percent.
Third, though ethanol contains about one-third less energy than
gasoline on a per-gallon basis, that fuel economy difference between
E10 and gasoline without ethanol (E0) is relatively small
(approximately 3 percent) and is largely unnoticed by consumers. In
light of these factors, the blending of ethanol up to E10 was
economically viable for blenders in these years. The D6 RIN price was
therefore very low, approximately equal to the transaction costs of
trading RINs between parties.
---------------------------------------------------------------------------

    \147\ Until 2013, the price for D6 (conventional biofuel) RINs,
the vast majority of which were generated for ethanol produced from
corn starch, was negligible (See Figure III.B-1). The Volumetric
Ethanol Excise Tax Credit was also available to ethanol blenders
through 2011.
---------------------------------------------------------------------------

    In 2013, however, the implied conventional biofuel volume
established by the RFS program exceeded the volume of ethanol that
could be blended into gasoline at a rate of up to 10 percent (the E10
blendwall). To meet the aggregate RVOs, obligated parties now needed to
acquire RINs beyond those that were available from blending ethanol as
E10. These additional RINs had to come from either blending ethanol
into higher-level ethanol blends (e.g., E85) or blending non-ethanol
biofuels (such as biodiesel or renewable diesel beyond what was needed
to satisfy the biomass-based diesel (BBD) and advanced biofuel volume
standards). Blending ethanol into higher level blends, unlike the
blending of ethanol into E10 blends, was not an economically viable
practice in 2013 (nor is it currently) absent the incentives provided
by the RFS program (i.e., the RIN price). Although ethanol has a higher
octane value than gasoline, the existing vehicle fleet in the United
States does not realize an additional benefit from the higher octane
level of high ethanol blends such as E85. Further, consumers notice the
decrease in fuel economy (between 15 and 27 percent) in such blends.
This is because ethanol contains about one-third less energy than
gasoline on a per-gallon basis. The sale of higher-level ethanol blends
is also limited to flexible fuel vehicles, and relatively few retail
stations offer these higher-level ethanol blends due to the combination
of the high cost of the infrastructure upgrades to enable most existing
stations to sell E85 and the low demand for E85, even among FFV
owners.\148\ The relatively low number of stations selling E85 has also
hindered the competitiveness of the pricing of the few retail stations
that do sell these blends. As a result, in most cases obligated parties
have turned to additional volumes of biodiesel and renewable diesel
instead of E85 or other higher level ethanol blends to meet their
implied conventional biofuel volume obligation and therefore their
total renewable fuel obligation.\149\ D4 (BBD) RINs, generated for
biodiesel and renewable diesel, have in effect served as a ceiling for
D6 RIN prices since excess D4 RINs can be used to satisfy an obligated
party's total renewable fuel obligation. As a result, the D6 RIN price
rose to just slightly below the D4 RIN price. With a few exceptions
(such as in the first half of 2017) when the total renewable fuel
obligation has been at or below the E10 blendwall, the D6 RIN price has
generally moved in

conjunction with the D4 RIN price since 2013.
---------------------------------------------------------------------------

    \148\ Pouliot, S., Liao, K.A., Babcock, B.A.; ``Estimating
Willingness to Pay for E85 in the United States Using an Intercept
Survey of Flex Motorists.'' Working Paper 16-WP 562, Center for
Agricultural and Rural Development, Iowa State University, June
2018.
    \149\ While biodiesel and renewable diesel remain considerably
more expensive than diesel fuel, the recently expired tax subsidy
for them, coupled with a lesser infrastructure hurdle enabled them
to be a more economical option than higher level ethanol blends in
recent years.
---------------------------------------------------------------------------

    D5 RIN prices similarly followed distinct pricing patterns prior to
reaching the E10 blendwall in 2013 and in the years since 2013. Prior
to reaching the blendwall, a significant volume of the D5 RINs were
generated for imported sugarcane ethanol. Since sugarcane ethanol was
generally more expensive to produce than corn ethanol (driven by high
world sugar prices), the D5 RIN price generally reflected the price
difference between corn ethanol and sugarcane ethanol during this time
period. When the E10 blendwall was reached in 2013 it became much more
expensive to blend additional volumes of ethanol (both for corn ethanol
and sugarcane ethanol) since additional ethanol had to be sold in
higher-level ethanol blends. As a result, the primary fuels used to
satisfy the implied volume of ``other advanced'' biofuels (the
remaining advanced biofuel volume after subtracting the required
volumes of BBD and cellulosic biofuel) in 2013 and the following years
have been biodiesel and renewable diesel. The D5 RIN price in these
years has followed the D4 RIN price, with the few cents difference
between the two RIN prices reflecting the fact that, unlike D4 RINs, D5
RINs can only be used towards an obligated party's advanced biofuel and
total renewable fuel obligations (and not the BBD obligation).
    As with D6 and D5 RIN prices, D4 RIN prices generally follow
expected market fundamentals. D4 RIN prices are generally equal to the
difference between the market prices of biodiesel and petroleum diesel,
after accounting for the biodiesel tax credit. For each year from 2010
through 2017, a $1 per gallon biodiesel blenders tax credit from the
Internal Revenue Service has also been available. In some years, such
as 2013 and 2016, this tax credit was available prospectively (i.e.,
the tax credit was in place throughout the year). In other cases, such
as in 2012 and 2017, the tax credit was only available retroactively
(i.e., the tax credit was not extended until near the end of the year
or after the year had ended but applied to all qualifying biodiesel and
renewable diesel blended in that year). The biodiesel blenders tax
credit has not yet been extended to 2018 or 2019 by Congress.\150\ For
years in which the biodiesel tax credit was not in place prospectively,
the D4 RIN prices generally reflected the market's confidence that the
tax credit would ultimately be applicable. A recent paper investigating
the price of D4 RINs and economic fundamentals further supports this
view of the D4 RIN market stating that ``movements in the D4 RIN price
at frequencies of a month or longer are well explained by two economic
fundamentals: the spread between the biodiesel and Ultra Low Sulfur
Diesel prices and whether the biodiesel tax credit is in effect.''
\151\
---------------------------------------------------------------------------

    \150\ As of February 28, 2019.
    \151\ Irwin, S.H., K. McCormack, and J.H. Stock (2018). ``The
Price of Biodiesel RINs and Economic Fundamentals,'' NBER Working
Paper Series, Working Paper 25341.
---------------------------------------------------------------------------

    Finally, the D3 RIN price has generally followed the combined
prices of the cellulosic waiver credit (CWC) and the D4/D5 RIN price.
Each year since 2010, we have reduced the required volume of cellulosic
biofuel from the statutory volumes using the cellulosic waiver
authority set forth in CAA sec. 211(o)(7)(D). When EPA takes this
action, the statute requires that we make CWCs available for purchase
to obligated parties at a price determined using a formula given in the
statute. CWCs can be used to satisfy an obligated party's cellulosic
biofuel obligation, but unlike a D3 (or D7) RIN, a CWC cannot be used
towards satisfying an obligated party's advanced biofuel or total
renewable fuel obligations. Thus, a D3 RIN has the ``compliance
equivalency'' of a CWC plus a D5 (or D4) RIN. As expected, the D3 RIN
price has generally been slightly less than the sum of the CWC price
and the D4/D5 RIN price. This price point reflects the compliance
certainty that the CWC offers (CWCs cannot later be determined to be
invalid) as well as the fact that CWCs can simply be purchased directly
from EPA at the compliance deadline rather than purchased in relatively
small quantities from biofuel producers or blenders.
    Obligated parties that purchased RINs on the market for compliance
in 2013 saw their D6 RIN prices substantially increase from the year
prior (see Figure III.B.1). Though this increase in D6 RIN prices was
the result of structural changes in the market, as described above,
increasing D6 RIN prices did raise concerns regarding whether market
manipulation played some role in elevated prices. Some RFS stakeholders
petitioned EPA to change the definition of obligated party, arguing in
part that the current point of obligation facilitates price
manipulation. In response to those petitions, EPA conducted an
extensive analysis of RIN prices and market dynamics. After studying
the data, we concluded that RIN prices generally reflected market
fundamentals and that obligated parties (including parties that
purchase separated RINs) recover the cost of RINs in the market price
of the gasoline and diesel fuel they sell.\152\
---------------------------------------------------------------------------

    \152\ See ``Denial of Petitions for Rulemaking to Change the RFS
Point of Obligation'' (2017), available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100TBGV.pdf.
---------------------------------------------------------------------------

C. President's Directive

    Some RFS stakeholders have voiced concerns regarding whether
elevated RIN prices and excessive RIN price volatility are being caused
at least in part by some type of market manipulation. In comments to
proposed EPA rulemakings, litigation filings and arguments, and via
meetings with EPA staff, some stakeholders have described conditions
that they believe make the RIN market vulnerable to anti-competitive
behavior. For example, commenters have described a thin market volume,
opaque price signals, and inelastic demand and supply curves and have
provided specific examples of behavior they find manipulative, such as
phantom RIN offers that suddenly vanish and reappear at higher prices
after a party attempts to buy them at the purported asking price.\153\
These stakeholders also speculate that, as a result of market
conditions and price volatility, anti-competitive behavior is taking
place. For example, commenters have argued that a small number of
sophisticated market participants control a large number of ``surplus''
RINs that they hoard and use to squeeze the market.
---------------------------------------------------------------------------

    \153\ See, e.g., comments from Monroe Energy (Docket Item No.
EPA-HQ-OAR-2018-0167-0622).
---------------------------------------------------------------------------

    We take these claims of market manipulation seriously and have
taken formal action previously to investigate claims of manipulation.
In March 2016, EPA entered into a Memorandum of Understanding (MOU)
with the Commodity Futures Trading Commission (CFTC).\154\ Under the
MOU, we provided CFTC with certain RIN data for analysis in order to
facilitate an EPA investigation.
---------------------------------------------------------------------------

    \154\ See ``Memorandum of Understanding Between the
Environmental Protection Agency and the Commodity Futures Trading
Commission on the Sharing of Information Available to EPA Related to
the Functioning of Renewable Fuel and Related Markets'' (2016),
available at https://www.epa.gov/sites/production/files/2016-03/documents/epa-cftc-mou-2016-03-16.pdf.
---------------------------------------------------------------------------

    Although we have yet to see data-based evidence of RIN market
manipulation, the potential for such behavior is a concern, and we have
already formally solicited comment from stakeholders on potential
changes that might address such issues. In the 2018 RVO proposal, we
broadly sought input on potential regulatory changes related to RIN
trading as well as on ways to increase program

transparency.\155\ We received comments from stakeholders suggesting a
number of regulatory changes related to who may purchase RINs, the
duration for which RINs could be held, and other potential requirements
related to the buying, selling, or holding of RINs. We also received a
number of suggestions for increasing the amount of data related to the
RIN market that we make publicly available. We evaluated these ideas,
and in the 2019 RVO proposal, we listed those that were under
consideration for implementation at that time, including: Prohibiting
parties other than obligated parties from purchasing separated RINs;
requiring public disclosure if a party holds a certain percentage of
the RIN market; requiring obligated parties to retire RINs for
compliance purposes on a more frequent basis; and publicly posting
information on RIN prices, small refinery exemptions, and RIN holdings
by different categories of entities.\156\ We requested comment on the
expected impact that these specific changes could have on the RIN
market, either positively or negatively.
---------------------------------------------------------------------------

    \155\ See 82 FR 34206 (July 21, 2017).
    \156\ See 83 FR 32024 (July 10, 2018).
---------------------------------------------------------------------------

    We received many comments in support of publicly posting more RFS
program data. In response, in September 2018, we began publishing
weekly aggregated RIN prices, as reported in EMTS by sellers and
buyers, as well as weekly aggregated transaction volumes. We believe
publishing as much data and information on the RIN market as possible,
while still protecting confidential business information, improves
market transparency and helps obligated parties and other market
participants make informed decisions. We also believe that these data
can reduce information asymmetry among market participants increasing
confidence in the market. In addition, we began publishing information
on small refinery exemption requests received and granted by EPA and
the volumes of gasoline and diesel fuel exempted. This helped all
obligated parties account for the potential volume exempted under these
provisions and make adjustments to their compliance strategies
accordingly.
    We also received a wide variety of comments regarding the other
ideas we put forth for comment in the 2019 RVO: prohibiting parties
other than obligated parties from purchasing separated RINs, requiring
public disclosure if a party holds a certain percentage of the RIN
market, and requiring obligated parties to retire RINs for compliance
purposes on a more frequent basis. Some commenters expressed support
for these ideas and offered others for our consideration while some
commenters opposed both the specific reform proposals and the general
concept of interfering with the open RIN market in any way. Summaries
of, and responses to, those comments are included throughout this
action as we explain the rationale behind the proposals we are making
today.
    On October 11, 2018, President Trump issued a White House statement
\157\ explaining that EPA was being directed to initiate a rulemaking
to address RIN price manipulation claims and increase transparency in
the RIN market. Specifically, the memorandum directs EPA to consider
potential reforms to the RIN regulations, including but not limited to
the following proposals:
---------------------------------------------------------------------------

    \157\ See ``President Donald J. Trump is Expanding Waivers for
E15 and Increasing Transparency in the RIN Market'' Fact Sheet,
available at: https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-expanding-waivers-e15-increasing-transparency-rin-market.
---------------------------------------------------------------------------

     Prohibiting entities other than obligated parties from
purchasing separated RINs.
     Requiring public disclosure when RIN holdings held by an
individual actor exceed specified limits.
     Limiting the length of time a non-obligated party can hold
RINs.
     Requiring the retirement of RINs for the purpose of
compliance be made in real time.
    Pursuant to this directive, we are proposing these reforms.

D. Objectives

    We are interested in ensuring that the RIN market works efficiently
and is free of anti-competitive behavior. We affirm that price
manipulation through anti-competitive behavior, similar to what is
referred to as cornering or squeezing the market, and false or
misleading representations in transactions, is antithetical to
effective market operation and should be discouraged.\158\ Were such
anti-competitive behaviors to occur, it could undermine the confidence
of market participants in the RIN market and undermine the RFS program
itself. Consequently, in this action, we are proposing regulatory
changes based upon the President's Directive that could help prevent
anti-competitive behavior. For each reform, we evaluated comments
already submitted to EPA describing its advantages and disadvantages.
We also evaluated how a reform could be designed and implemented,
whether a reform could be gamed or have unintended consequences, and
what potential burden and cost it could place on regulated parties and
on EPA. In Section III.E, we describe our evaluation in detail for each
reform, including sharing comments received from stakeholders on
similar market reform ideas solicited in prior rulemakings.
---------------------------------------------------------------------------

    \158\ Such behaviors may also violate the anti-fraud and anti-
manipulation provisions of the Commodity Exchange Act. See, e.g.,
Section 9(a)(2) of the CEA, 7 U.S.C. 13(a)(2) (2012), states that it
is a felony for ``Any person to manipulate or attempt to manipulate
the price of any commodity in interstate commerce . . . or to corner
or attempt to corner any such commodity or knowingly to deliver or
cause to be delivered for transmission through the mails or
interstate commerce by telegraph, telephone, wireless, or other
means of communication false or misleading or knowingly inaccurate
reports concerning crop or market information or conditions that
affect or tend to affect the price of any commodity in interstate
commerce.'' Section 6(c)(1) of the CEA, 7 U.S.C. 9(1) (2012), titled
Prohibition against manipulation, states that ``it shall be unlawful
for any person, directly or indirectly, to use or employ, or attempt
to use or employ, in connection with . . . a contract of sale of any
commodity in interstate commerce . . . any manipulative or deceptive
device or contrivance. . . .''
---------------------------------------------------------------------------

    EPA designed the RIN system and regulations to maximize compliance
flexibility and market liquidity. We realize that new market
restrictions could impact that flexibility and liquidity. For example,
we note the numerous comments received on the 2019 RVO rule stating
that changes to the RIN market structure could reduce liquidity,
increase volatility, and make the RIN market function less efficiently,
increasing costs to obligated parties and consumers.\159\ In addition,
a white paper on the President's Directive recently released by the
American Petroleum Institute (API) cautions that ``the proposed
regulatory changes are likely to create additional significant problems
of their own'' and that ``history suggests that regulatory agencies
should be extremely cautious in changing established rules in regulated
markets.'' \160\ Interested stakeholders have also suggested that some
reforms could impact the ability of small, less recognized, or new
renewable fuel producers and blenders to enter the market. Finally, we
understand that some reforms could inadvertently affect otherwise
legitimate market behavior. For example, parties that make a profit on
the RIN market are not necessarily conducting

manipulative or anti-competitive behavior and may very well be
increasing market efficiency and liquidity with their actions.
Therefore, we have taken into consideration the potential for reforms
to harm the RIN market in this proposed action.
---------------------------------------------------------------------------

    \159\ See, e.g., comments to the 2019 RVO rule from Steptoe &
Johnson LLP on behalf of the National Association of Convenience
Stores (NACS) and the Society of Independent Gasoline Marketers of
America (SIGMA), BP, and American Petroleum Institute (API) in
Docket No. EPA-HQ-OAR-2018-0167.
    \160\ See ``An Analysis of the Renewable Fuel Standard's RIN
Market'', Covington & Burling LLP, February 15, 2019, available at
https://www.api.org/~/media/Files/Policy/Fuels-and-Renewables/2019/
RIN-market-paper.pdf.
---------------------------------------------------------------------------

    We are proposing regulatory changes in this action for all four
reforms identified in the President's Directive and request comments on
both the positive and negative consequences of each reform. We intend
to finalize the reforms that we conclude are beneficial for the RFS
program, the RIN market, and the RFS stakeholders, and do not impose
unnecessary burden. For all four reforms outlined in this action, we
focus on separated RINs only; we believe the physical storage
limitations faced by renewable fuel already reduce the opportunity for
price manipulation of assigned RINs and that the existing regulations
at 40 CFR 80.1428 already include anti-hoarding provisions for RINs
attached to renewable fuel. Furthermore, for each of the four reforms,
we evaluate whether we should limit the proposed regulatory provision
to D6 RINs only. Stakeholder concerns over market manipulation focused
mainly on D6 RINs because, as described in Section III.B, in 2013 the
overall demand for RINs increased due to the increased RVO set in the
statute while the supply of D6 RINs remained nearly flat due to the E10
blendwall.\161\ D6 RINs are also the predominant RIN type generated,
and therefore impacts on D6 RIN prices have much larger consequences
for obligated parties than impacts on the prices of other RIN
types.\162\ For each reform discussed in Section III.E, we explain
whether it is feasible to propose that the reform apply to D6 RINs only
and our rationale. We seek comment on narrowing the scope of the
proposals in this action to D6 RINs only.
---------------------------------------------------------------------------

    \161\ We acknowledge that the stock of D6 RINs has fluctuated
over time due to market shifts, EPA actions, and other factors, and
that a larger stock of RINs puts downward pressure on RIN prices.
    \162\ According to data from EMTS approximately 78 percent of
all RINs generated in 2018 were D6 RINs.
---------------------------------------------------------------------------

E. Proposed Approach to Individual Regulatory Reforms

    For each potential reform, we discuss the basic concept, its
implications for the program and marketplace, the scope and design of
the specific regulatory modification in question, and other relevant
details. Broadly speaking, EPA is interested not only in comments on
specific individual reforms, but also on how the various reforms might
work in combination, and the degree to which the reforms provide, or
detract from, symmetry in the marketplace, so that one set of actors is
not advantaged at the expense of another set operating in the same
market.
1. Reform One: Public Disclosure if RIN Holdings Exceed Certain
Threshold
    The first potential reform from the President's Directive that we
address in this action is a requirement for public disclosure when a
party's RIN holdings exceed a certain threshold. The fundamental
concept underpinning this reform is that increased transparency can
help deter market actors from amassing an excess of separated RINs,
which due to the concentration in ownership of available supplies could
result in undue influence or market power. This reform could also let
market participants know the underlying status of the market. A
concentration of separated RINs, if sufficiently large in scope, could
be used by a party to manipulate the market by artificially affecting
prices in any direction. The most extreme examples of market power are
monopolies, but concentration can be a concern even for markets with
many participants when only a few control the majority of available
supply at any given point in time.
    In this action, we are proposing to set two thresholds that would
work in tandem to identify parties that have amassed RINs in excess of
normal business practices, which could indicate an intent to assert an
inappropriate influence on the market. These thresholds would apply to
holdings of separated D6 RINs only. The first threshold would be
triggered if a party's end-of-day separated D6 RIN holdings exceeded
three percent of the total implied conventional biofuel volume
requirement (e.g., 15 billion gallons for compliance year 2018) set for
that year by EPA in the RVO rule, which is the total renewable fuel
volume requirement minus the advanced fuel volume requirement. A party
without an RVO (a non-obligated party) that triggered the first
threshold would notify EPA of an exceedance at the end of the quarter.
An obligated party that triggered the first threshold would apply the
second threshold by comparing its end-of-day separated D6 RIN holdings
with 130 percent of its individual implied conventional RVO. Only
obligated parties that triggered both the first and second thresholds
would notify EPA of an exceedance at the end of the quarter. In this
action, we are proposing to publish on our website on a quarterly basis
the names of any parties that report exceeding the thresholds. We are
also proposing that the RIN holdings of corporate affiliates be
included in a party's calculations to determine if they trigger a
threshold. The definition of corporate affiliate, calculation of the
thresholds and specifics of the reporting requirements are discussed in
more detail below.
    The purpose of putting into place a disclosure requirement is
twofold: first, to provide transparency in the market regarding how
often certain RIN position thresholds are reached and exceeded, and
second, to disincentivize such behavior by requiring public disclosure.
If the threshold were ever exceeded, public disclosure would alert
market participants and where appropriate prompt a closer review of the
circumstances by EPA. Were the threshold to be exceeded, we could then
consider further actions to investigate for anti-competitive behavior
and help prevent similar behavior in the future. We seek comment on
what those further actions might entail, including actions to address
concerns within the broader RIN market generally.
    It is important to emphasize that we use the term ``threshold'' in
this proposed regulatory modification to mean a level that may be
exceeded, with only a disclosure consequence if exceeded. We use the
term ``limit'' in this action to mean a level that may not be exceeded,
with a potential enforcement consequence if exceeded. As an alternative
to the RIN holding thresholds we are proposing, we seek comment on
establishing a RIN holdings limit, whereby we would prohibit parties
from holding more than a certain level of RINs. Other marketplaces have
established such limits, and we discuss the distinction, as well as the
reasons for pursuing the threshold/disclosure approach, below. We seek
comment on this alternative proposal and on the issue generally.
    Regulatory bodies supervising markets regularly take measures to
prevent excessive market power, and it is useful when considering new
regulations in the RIN market to assess the tools used in other
comparable areas. Tools used in other markets to accomplish similar
market power-limiting objectives include collecting market participant
data, conducting market surveillance, publicly disclosing market
information, and restricting the activity of certain market
participants. Physical commodity markets are not typically regulated
with holdings thresholds or limits, however, because the physical
restrictions to hoarding, like limited physical storage space, obviate
the need for regulatory restriction and oversight. Rather,

holding thresholds and limits are usually reserved for futures and
derivative markets where such physical constraints do not serve as a
check on market concentration. For example, the CFTC currently
maintains limits on the number of open positions \163\ that parties can
take at a given time in nine agricultural markets.\164\ Other entities
registered with the CFTC, called Exchanges, impose and enforce position
limits on a large number of remaining futures and options.
---------------------------------------------------------------------------

    \163\ An open position refers to a contract for the purchase or
sale of a commodity fur future delivery. See CFTC Regulation 150.2,
17 CFR 150.2 (2012), available at https://ecfr.io/Title-17/se17.2.150_12.
    \164\ See CFTC Regulation 150.2, 17 CFR 150.2 (2012), available
at https://ecfr.io/Title-17/se17.2.150_12.
---------------------------------------------------------------------------

    RINs do not fall neatly into either category; they are neither
limited by physical storage space nor a derivative. In looking for
analogs in other regulated markets, it is therefore helpful to see how
other environmental allowance markets operate for purposes of
comparison. For this action, we looked at other environmental credit
programs and their markets to better understand options for the RIN
market and found that different markets operate with different
approaches. For example, the California Air Resources Board (CARB)
enforces an allowance holding limit in the California Cap-and-Trade
Program for greenhouse gas emissions; \165\ the Regional Greenhouse Gas
Initiative (RGGI) \166\ enforces a credit purchasing limit in the RGGI
cap-and-trade program credit auctions; and the Government of Canada
enforced a limit in its Federal Renewable Fuels Regulations on the
number of compliance credits a primary supplier can own at the end of
each month.\167\ On the other hand, neither EPA's Acid Rain
Program\168\ nor California's Low Carbon Fuel Standard (LCFS) \169\ has
limits or thresholds on allowance or credit holdings, and we are
unaware of any state Renewable Portfolio Standard (RPS) program \170\
that enforces a renewable energy credit holding threshold or limit.
---------------------------------------------------------------------------

    \165\ More information on California's Cap and Trade program can
be found at https://www.arb.ca.gov/cc/capandtrade/capandtrade.htm.
Information about the allowance holding limit can be found in
``Facts About Cap and Trade: Market Oversight and Enforcement''
(2011), available at https://www.arb.ca.gov/cc/capandtrade/market_oversight.pdf.
    \166\ The Regional Greenhouse Gas Initiative (RGGI) is a
cooperative effort among the states of Connecticut, Delaware, Maine,
Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and
Vermont to cap and reduce CO2 emissions from the power
sector. More information on RGGI can be found at https://www.rggi.org. Information about the credit purchasing limit can be
found in ``CO2 Allowance Auctions Frequently Asked
Questions'' (2017), available at https://www.rggi.org/sites/default/files/Uploads/Auction-Materials/38/RGGI_CO2_Allowance_Auction_FAQs_Jan_10_2017.pdf.
    \167\ More information on Canada's Federal Renewable Fuel
Regulations, including about the credit limit, can be found in
``Questions & Answers on the Federal Renewable Fuels Regulations''
(2012), available at https://www.canada.ca/en/environment-climate-change/services/canadian-environmental-protection-act-registry/publications/revised-questions-answers-renewable-fuels.html.
    \168\ More information on EPA's Acid Rain Program can be found
at https://www.epa.gov/airmarkets/acid-rain-program.
    \169\ More information on California's LCFS Program can be found
at https://www.arb.ca.gov/fuels/lcfs/lcfs.htm.
    \170\ An RPS is a regulatory method mandating utility companies
operating within a certain jurisdiction to increase production of
energy from renewable resources. More information on RPS programs
can be found in ``Chapter 5. Renewable Portfolio Standards'' of
``EPA Energy and Environment Guide to Action'' (2015), available at
https://www.epa.gov/sites/production/files/2017-06/documents/guide_action_full.pdf.
---------------------------------------------------------------------------

a. Implications and Discussion
    We believe that requiring public disclosure by parties that exceed
a certain RIN holding threshold could prove beneficial for the market
as a whole. It could disincentivize parties from gaining market power,
signal potentially harmful behavior to competitors, regulators, and
policy makers, and be used to justify stronger preventative actions.
However, this reform could also have detrimental effects, especially if
not designed properly. Excess market power is very difficult to
quantify in any given market, even if regulators have perfect knowledge
of all market conditions. A real risk exists of setting a RIN holding
threshold in this rulemaking incorrectly. If a threshold is set too
low, it could unnecessarily compromise market efficiency and liquidity
and interfere with obligated parties' ability to comply with
regulations by disincentivizing them from holding the necessary
quantity of RINs to meet their RVO. We therefore believe that a
threshold with a consequence of public disclosure is appropriate rather
than a holding limit with an enforcement consequence. A threshold
serves as a deterrent and warning bell without the risk of
unnecessarily causing harm. We also believe that, in the face of
insufficient evidence of any identified parties currently exhibiting
what might be considered excessive market power, public disclosure is
an appropriate first action. EPA could follow up with more restrictive
measures later if warranted and seeks comment on what follow-up actions
might be appropriate.
    The following sections outline the various considerations we made
in designing this proposed measure.
b. Scope
    As discussed in Section III.D, for each of the four potential
reforms, we evaluated whether we could limit the scope of the measure
to D6 RINs. For this provision of publicly disclosing when a party
exceeds a RIN holding threshold, we concluded that we could limit its
scope to D6 RINs without compromising its intended effect. Also, we
believe that we can practically design and propose a maximum D6 RIN
holding threshold without setting one for D3, D4, or D5 RINs. Not only
have D6 RINs raised the most stakeholder concern, as discussed above,
but the nested nature of the RVOs and the unique characteristics of
other RIN markets (e.g., D3) would make covering all RIN categories
considerably more complicated. As also discussed in Section III.D, we
are further limiting our proposal of this measure to separated RINs
because we believe the physical storage limitations faced by renewable
fuel already reduce the opportunity for price manipulation of assigned
RINs and that the existing regulations at 40 CFR 80.1428 already
include anti-hoarding provisions for RINs attached to renewable fuel.
Finally, we are proposing that this threshold cover any vintage D6 RINs
that are available for compliance with the current year RVO. We seek
comment on these proposed aspects of this reform.
c. Methodology for the RIN Holding Threshold \171\
---------------------------------------------------------------------------

    \171\ We refer to the threshold in the singular in the title to
describe the overall policy, but as described in this section, we
are actually proposing a dual threshold approach.
---------------------------------------------------------------------------

    In this action, we are proposing to set two holding thresholds. As
stated above, it is extremely difficult to pinpoint a specific market
share that would equate to concerning market power. Therefore, we
approach this reform by instead estimating the holding level that we
believe would be consistent with legitimate market needs. We recognize
that legitimate holdings for obligated parties relate to the number of
RINs they need for compliance with their RVO, so we logically conclude
that an obligated party threshold should relate to its RVO. We also
recognize that non-obligated parties have no RVO and require a
different threshold methodology. Non-obligated parties have less need
to hold RINs than obligated parties because they have no compliance use
for them, so we believe their threshold should generally be set lower.
Thus, we believe one lower threshold that covers everybody and a second
higher threshold that adjusts to the compliance needs of obligated

parties together would adequately constrain a market with a very wide
range of participants. Both non-obligated parties and obligated parties
would be held to similar incentives.
    We are proposing a primary D6 RIN holding threshold for all RIN-
holding parties relative to the implied conventional biofuel volume
requirement finalized by EPA each year. We determine the implied
conventional biofuel volume requirement by subtracting the advanced
fuel volume requirement from the total renewable fuel volume
requirement because D6 RINs can only be used to meet the implied
conventional biofuel portion of the total RVO. For example, if the
implied conventional biofuel volume requirement were 15 billion in a
given year, a certain percentage of 15 billion would be the primary
threshold for that year. A threshold relative to the volume requirement
adjusts over time to the size of the annual standard rather than to the
number of RINs in the market. The benefit of this approach is that the
volume requirement does not change, so parties know exactly what level
to avoid at all times. This approach is similar to the calculation of
the allowance holding limit used in the linked cap-and-trade programs
implemented by California and Quebec.\172\
---------------------------------------------------------------------------

    \172\ See ``Facts About Holding Limit for Linked Cap-and-Trade
Programs'' (September 14, 2018), available at https://www.arb.ca.gov/cc/capandtrade/holding_limit.pdf.
---------------------------------------------------------------------------

    In this action, we are proposing to set a secondary threshold for
obligated parties. We recognize that larger obligated parties with
large RVOs have valid reasons to accumulate and hold a volume of RINs
that might exceed the primary threshold, not only to meet their next
annual compliance obligation but also to bank additional RINs for
compliance with the following year's obligation. As explained in
Section III.D, many instances of RIN accumulation are legitimate and
are not related to price manipulation, making it that much harder for
regulators to pinpoint the instances of RIN accumulation that are not
based on legitimate commercial or compliance needs. For example,
parties that anticipate an increase in the price of RINs and/or the
quantity of RINs they will need for compliance purposes in future years
may choose to acquire RINs beyond their needs for the current year for
use in the following year. Therefore, we recognize that the threshold
would have to somehow account for and allow RINs held to meet
compliance obligations. For example, exemptions to position limits in
futures and options markets are granted by the CFTC or Exchanges on a
case-by-case basis to parties that demonstrate valid commercial stakes
in the underlying physical market.\173\ In addition, parties that are
covered by the cap and have an emissions compliance obligation under
the California Cap-and-Trade Program are allowed to hold more
allowances than parties not covered by the cap. While all parties
participating in the California Cap-and-Trade Program are subject to
the same fixed annual holding limit, parties with a compliance
obligation qualify for a limited exemption from the holding limit.
Allowances placed in a covered entity's compliance account (from which
the entity can no longer remove or trade allowances) up to the limited
exemption do not count against the holding limit. The limited exemption
is based on lagged values of the entity's reported emissions and is
large enough to cover the entity's cumulative emissions obligations.
This ensures that entities with compliance obligations greater than the
holding limit can still acquire and hold compliance instruments to
comply with their obligations.\174\ We seek comment on the general
concept of a secondary threshold for obligated parties in the RFS
program.
---------------------------------------------------------------------------

    \173\ A position limit refers to a limit on the number of
contracts for the purchase or sale of a commodity for future
delivery a party can hold. See CFTC Regulation 150.2, 17 CFR 150.2
(2012) at https://ecfr.io/Title-17/se17.2.150_12.
    \174\ See ``Facts About Limited Exemption from the Holding
Limit'' (December 1, 2017), available at https://www.arb.ca.gov/cc/capandtrade/limited_exemption.pdf.
---------------------------------------------------------------------------

d. Setting the Primary Threshold
    We are proposing that all RIN-holding parties would be subject to a
primary threshold for disclosure. We are proposing one approach to
calculating the primary threshold that adjusts depending on how many
RVOs are in effect. For anytime between April 1 and December 31, when
only one set of annual RVOs is in effect, we are proposing that the
primary threshold would equal three percent of the annual implied
conventional biofuel volume requirement established by EPA in a rule
promulgated each year to set the annual renewable fuel standards. In
our hypothetical example, this would amount to three percent of 15
billion D6 RINs, or 450 million D6 RINs. For anytime between January 1
and March 31, when two sets of annual RVOS are in effect, we are
proposing that the primary threshold would be three percent of 125
percent of the annual implied conventional biofuel volume requirement.
We are proposing that the threshold in the first quarter of the year
should be 125 percent of the other months because parties may need to
hold RINs for two overlapping RVOs in that quarter rather than just
one. In our hypothetical example, this would amount to three percent of
18.75 billion D6 RINs, or 562.5 million D6 RINs. We propose that a
party's RIN balance at the end of each day in EMTS would be combined
with any RINs in pending trades at the end of the day. We seek comment
on this approach.
    To determine the primary threshold of three percent, we considered
thresholds in other programs as well as an analysis of RFS RIN
holdings. We looked at the linked cap-and-trade programs implemented by
California and Quebec as examples. They use a formula that calculates a
holding limit of about three percent of their combined annual allowance
budgets every year.\175\ Based on our discussions with CARB concerning
the implementation and effectiveness of that threshold, we are
proposing a similar level. We therefore conclude that a holding limit
or threshold of three percent of an allowance or credit standard can
identify parties which have acquired RIN holdings larger than necessary
for normal business operations and which may indicate an effort to
assert inappropriate market power. To help inform our assessment of a
three-percent threshold, we conducted a screening analysis using
individual-level data to evaluate historical market shares.
Specifically, we looked at daily D6 RIN holdings aggregated by company
between April 1, 2017 and April 1, 2018, compared to the overall
market. For simplicity, we looked at D6 RINs of all vintages. Using our
proposed equations for the primary threshold, we found that in that
one-year period, 13 out of 126 obligated parties would have exceeded
the three percent primary threshold. None of the 280 non-obligated
parties that held separated D6 RINs in that time period exceeded the
three percent primary threshold.\176\
---------------------------------------------------------------------------

    \175\ See calculation in the memorandum, ``California and Quebec
Holding Limit Percentages,'' available in the docket for this
action.
    \176\ See calculation in the memorandum, ``Threshold
Calculations for D6 RIN Holding Parties,'' available in the docket
for this action.
---------------------------------------------------------------------------

    We seek comment on the general approach of setting the primary D6
RIN holding threshold relative to the implied conventional biofuel
volume requirement and the specific application of a three-percent
threshold. We also seek comment on the actual thresholds that this
calculation generates, whether it is appropriate, and whether it could
harm any market participants and, if so,

how. We also considered setting two primary thresholds, one for
obligated parties set at three percent and a lower one for non-
obligated parties set at one percent (an obligated party would still
apply the secondary threshold if it exceeded its primary threshold). In
our hypothetical example, a one percent threshold would amount to 150
million RINs from April 1 to December 31 and 188 million RINs from
January 1 to March 31. We considered this approach because a one
percent primary threshold for non-obligated parties could potentially
meet the objectives outlined in Sections III.E.3 and III.E.4 in a
simplified and more streamlined way than the various reforms proposed
in those sections. In our screening analysis, we found that two non-
obligated parties would have exceeded the one percent threshold during
the time period analyzed, though we did not consider whether the
parties were affiliated with an obligated party, as described
below.\177\ We seek comment on this considered approach of limiting
non-obligated parties using just one reform, a lower primary threshold
of one percent.
---------------------------------------------------------------------------

    \177\ See calculation in the memorandum, ``Threshold
Calculations for D6 RIN Holding Parties,'' available in the docket
for this action.
---------------------------------------------------------------------------

    We considered but are not proposing setting a threshold relative to
total separated D6 RINs available in the market. The downside of this
approach is that the quantity of total available RINs changes
continuously, and it is not possible for market participants to know
what it is at every moment. This makes it difficult to calculate the
threshold at any given time. Another downside of this approach is that
it uses all unretired, separated D6 RINs as a proxy for available D6
RINs because that is the best information that either the market or EPA
has. If a party were to keep D6 RINs off the market, as is alleged by
some parties, then our proxy would become an overestimate of the actual
number of D6 RINs available. Thus, this approach would underestimate a
party's market share. In considering this approach, we also could not
find a universal standard for the level of market share that
constitutes an inappropriate or concerning level of market power. The
only example we could find of another environmental credit program that
implements a market share limit is the RGGI program, which applies a
25-percent limit to the number of credits a party can purchase at a
single credit auction.\178\ Though this is not a holding limit or
threshold per se, it is a limit that relates to preventing a party from
establishing undue market power. Therefore, if we were to choose this
approach to setting a threshold in the final rule, we would consider a
D6 RIN holding threshold at or around 25 percent of total available D6
RINs. In our screening analysis, we compared maximum individual end-of-
day D6 RIN holdings in every quarter between 2013 and 2018 to total
available D6 RINs in that quarter. We looked at all, non-expired D6
RINs regardless of the year in which they were generated.\179\ We found
that the maximum market share over that entire time period, by any
individual RIN holder, was 18 percent. In other words, on one day, one
party held 18 percent of the 9.9 billion D6 separated RINs available on
that day. In that particular case, an obligated party hit the 18-
percent level in the first quarter of 2017, at a time when other
obligated parties were retiring hundreds of millions of RINs in single
EMTS transactions for the upcoming compliance deadline. This activity
dropped the total available RINs in the market suddenly and
drastically. Setting aside those periods of time where significant and
sudden RIN retirements were occurring, the maximum level of D6 RINs
that any one party held at a time was between 10 and 14 percent of all
D6 RINs.\180\ These figures are commensurate with the gasoline and
diesel production market share of the largest refiners. We seek comment
on our proposal to set the primary threshold relative to the annual
implied conventional biofuel volume requirement and on the alternative
approach considered but not proposed.
---------------------------------------------------------------------------

    \178\ See ``CO2 Allowance Auctions Frequently Asked
Questions'' (January 10, 2017), available at https://www.rggi.org/sites/default/files/Uploads/Auction-Materials/38/RGGI_CO2_Allowance_Auction_FAQs_Jan_10_2017.pdf.
    \179\ CAA sec. 211(o)(5) requires that EPA establish a credit
program as part of its RFS regulations, and that the credits be
valid to show compliance for 12 months as of the date of generation.
EPA implemented this requirement through the use of RINs, which can
be used to demonstrate compliance for the year in which they are
generated or the subsequent compliance year. Obligated parties can
obtain more RINs than they need in a given compliance year, allowing
them to ``carry over'' these excess RINs for use in the subsequent
compliance year, although use of these carryover RINs is limited to
20 percent of the obligated party's RVO.
    \180\ The full analysis is detailed in the memorandum, ``Daily
Comparison of Individual RIN Holdings to Total Available RINs,''
available in the docket for this action.
---------------------------------------------------------------------------

e. The Secondary Threshold
    If a RIN-holding party exceeded the primary threshold, it would
indicate that its D6 RIN holdings were a sizeable share of the market.
For parties with no RVO, this would signal a position that could
potentially command market power with the potential to artificially
influence price. For obligated parties, however, a second test would be
needed to evaluate their holdings against their compliance obligation
because that could explain their sizeable holdings. For the secondary
threshold, we are proposing that an obligated party would compare its
implied conventional biofuel RVO to its D6 RIN holdings of all
vintages, on a daily basis. If the D6 RIN holdings are more than 130
percent of the implied conventional biofuel RVO on any day, the
obligated party would trigger the public disclosure requirement. We are
proposing one approach to calculating the secondary threshold that
adjusts depending on how many RVOs are in effect. We want to account
for the fact that, generally, an obligated party holds more D6 RINs in
the first three months of the year when it is preparing to retire for
the prior year's obligation while also accumulating RINs for the
current year's obligation.
    For days between April 1 and December 31, an obligated party would
multiply its gasoline and diesel production and import volume from the
prior year by the difference between the renewable fuel percentage
standard from the prior year and the advanced fuel percentage standard
from the prior year. It would also account for any deficit volume it
carried over from the prior year. See the proposed equations at 40 CFR
80.1435 for more detail on this proposed approach.
    For days between January 1 and March 31, an obligated party would
multiply its gasoline and diesel production and import volume from the
prior year by 125 percent of the difference between the renewable fuel
percentage standard from the prior year and the advanced fuel
percentage standard from the prior year. It would also account for any
deficit volume it carried over two years ago to the prior year. See the
proposed equations at 40 CFR 80.1435 for more detail on this proposed
approach. We are proposing that obligated parties who triggered the
primary threshold would conduct this secondary threshold calculation at
least quarterly using daily RIN holding levels and implied conventional
biofuel RVOs.
    We also considered requiring the calculations at the end of the
compliance year when the actual annual RVO becomes known. For example,
on March 31, when a large obligated party reports to EPA its actual
gasoline and diesel production and import volume and its RVOs for the
prior year, it could also evaluate its daily D6 RIN holdings against
the implied conventional biofuel

RVO for the year. The downside to this approach is that the red flag
for potentially problematic market power could come long after the
excessive RIN holding level occurs, in some cases over a year later.
This delay between the RIN holding level and public disclosure of the
exceedance would decrease the effectiveness of the reform and hamper
its intended purpose of deterrence and market notification. Therefore,
we are not proposing such an option. We seek comment on the quarterly
interval proposed. We chose 130 percent because it allows for holdings
of 100 percent of their implied conventional biofuel RVO, 20 percent
for banking, and 10 percent for additional flexibility and uncertainty.
This flexibility would, for example, cover potentially invalid D6 RINs
that may not be sold or retired according to the existing part 80
regulations. With the secondary threshold in place, an obligated party
with end-of-day D6 RIN holdings in a given quarter below the primary
threshold would not trigger public disclosure, while an obligated party
with D6 RIN holdings above the primary threshold would conduct a second
test against 130 percent of their implied conventional biofuel RVO to
date to determine whether public disclosure would be triggered.
    In our screening analysis, we found that in the 2017 compliance
year, thirteen obligated parties would have exceeded a three-percent
primary threshold and would have applied the secondary threshold. We
found that three would have also exceeded the 130-percent threshold at
least once.\181\ We note that we were unable to fully aggregate
holdings and RVOs by corporate affiliates, as described further below,
or account for RINs that an obligated party was holding for a small
refinery with an exemption approval from EPA.\182\ Nonetheless, this
analysis suggests that a few obligated parties might have to report
triggering the proposed D6 RIN holding threshold in the future. We seek
comment on proposing to set the secondary threshold at 130 percent of
the implied conventional biofuel RVO to date for obligated parties and
the 125 percent factor that would be applied in the first quarter of
the year.
---------------------------------------------------------------------------

    \181\ We aggregated all facilities by their company ID in EMTS
to get a company total for both RIN holdings and thresholds. See
calculations in the memorandum, ``Threshold Calculations for D6 RIN
Holding Parties,'' available in the docket for this action.
    \182\ While our analysis could not account for this, our
proposed regulations do.
---------------------------------------------------------------------------

f. Aggregating RIN Holdings
    Market power can be applied in an anti-competitive way when a party
controls a sufficiently large share of available supply, in this case
separated D6 RINs. As already described, we are proposing in this
action to require a RIN holding reporting threshold on at least each
individual entity registered to transact RINs in EMTS. However, two
individual entities with independent registration profiles in EMTS may
be affiliated and may have control over each other's RIN holdings and
each other's actions. For example, two entities may be subsidiaries of
the same parent company or one entity may be the official financial
asset trading arm of the other. In each of these cases, each entity may
have control over a larger RIN holding than its individual EMTS account
would suggest.
    In addition, we note that a RIN holding threshold applied to
individual parties, without regard to their affiliations, would create
a large gaming opportunity. One party that wanted to gain market power
but evade the RIN holding reporting threshold provision could spin-off
various subsidiaries that would each hold RINs below the reporting
threshold. It is our intent to design this reform to prevent such
gaming.
    As a result, we are proposing in this action that a party would
aggregate its RIN holdings with the holdings of all other parties with
overlapping ownership or corporate control for evaluation against the
thresholds. This methodology is similarly applied by CARB for the
California cap-and-trade credit holding limit and by RGGI for the RGGI
program auction purchasing limit. We provide a few examples to
illustrate this proposed concept. If an obligated party were owned by a
non-obligated party, then the combined D6 RIN holdings would first be
applied against the primary threshold. If the primary threshold were
triggered, then the combined D6 RIN holdings would be applied against
the secondary threshold using the obligated party's implied
conventional biofuel RVO. If two non-obligated parties were affiliated
by corporate ownership, then their combined D6 RIN holdings would be
applied against the primary threshold only. If two obligated parties
were affiliated by corporate ownership, then their combined D6 RIN
holdings would be applied against the primary threshold first and then,
if necessary, against the secondary threshold using the obligated
parties' implied combined conventional biofuel RVO. Were we to finalize
any other approaches to establishing RIN holding thresholds for
reporting, we would intend to require that the RIN holdings of all
parties affiliated by corporate ownership would nevertheless still be
aggregated together.
    In order to propose a definition for the term ``corporate
affiliate,'' we reviewed how other environmental credit programs define
and apply this concept. California's Cap-and-Trade Program applies a
shared, single allowance holding limit to entities and their direct
corporate associations, which they generally define as when one entity
has more than 50-percent ownership in another entity or when two
entities share a common parent (i.e., when there is a common entity of
which the two entities are subsidiaries). In addition, the California
Cap-and-Trade Program requires that entities report, when requested,
information related to indirect corporate associations, which they
define as ownership of more than 20 percent but less than or equal to
50 percent.\183\ For the RGGI program auction purchase limit, corporate
association occurs when one applicant has more than 20-percent
ownership in another applicant or when one party has 20-percent
ownership in two applicants (parent company).\184\
---------------------------------------------------------------------------

    \183\ See ``Chapter 3.1.A: Disclosure of Corporate Associations,
Consultants or Advisors, and Knowledgeable Employees'' of ``Cap-and-
Trade Regulation Instructional Guidance'' (February 2015), available
at https://www.arb.ca.gov/cc/capandtrade/guidance/guidance.htm.
    \184\ See ``Auction Notice for CO2 Allowance Auction
42 on December 05, 2018'' (October 9, 2018), available at https://www.rggi.org/sites/default/files/Uploads/Auction-Materials/42/Auction_Notice_Oct_09_2018.pdf.
---------------------------------------------------------------------------

    In this action, we are proposing that two parties are corporate
affiliates if one has more than 20-percent ownership in the other or if
both parties are owned more than 20 percent by the same parent company.
We are proposing a ``more than 20'' percent ownership level because it
is consistent with the value that the other programs apply. For this
proposed provision on a D6 RIN holding threshold, we are proposing that
only corporate affiliates registered to own RINs in EMTS would be
included in the RIN holding aggregation. Corporate affiliates that are
not registered in EMTS to own RINs would not need to be included in the
threshold calculations as these affiliates cannot hold RINs.\185\
---------------------------------------------------------------------------

    \185\ For diagrams and examples of different types of
affiliates, see the memorandum, ``Affiliates and Groups Definitional
Relationship and Requirements,'' available in the docket for this
action.
---------------------------------------------------------------------------

    We considered but are not proposing to require aggregation of RIN
holdings for comparison to the threshold among parties with a
contractual relationship, for example if there is an implicit or

explicit agreement in place for one to purchase RINs for the other. As
such, an obligated party that has a contract in place with a trader or
a blender for delivery of D6 RINs would not add those D6 RINs to its
holdings for comparison to the threshold until delivery occurred. We
realize that this proposed approach would omit some RINs from the
threshold comparison that could be under a party's control. However, we
believe that a methodology for including such contractual relationships
in the aggregation would be too complex and could result in double-
counting RINs. We seek comment on our proposed approach to defining
corporate affiliate and on omitting contractual affiliates from the RIN
holding aggregation.
g. CBI Determination
    We are proposing to require public disclosure of the name of a
party that reported exceeding the EPA-set RIN holding threshold. We are
not proposing to publicly disclose the actual RIN holding level, the
amount by which it exceeded the threshold, when it exceeded the
threshold, how many times it did so, or which threshold was applied. As
such, we are proposing to determine that a yes/no answer to this
threshold question does not qualify as CBI under the CAA. We find that
whether a party exceeded a RIN-holding threshold provides very little
insight into its actual RIN holding level, its gasoline or diesel
production or import volume, or any other information that competitors
could use to discern sensitive information.
    In responding to a Freedom of Information Act (FOIA) request in
2013, we determined that certain data collected and stored by EMTS at
that time were CBI, including a party's RIN holdings at the end of the
quarter.\186\ We recognize that in our evaluation of disclosing whether
an entity exceeded a RIN holding threshold, we therefore need to
carefully consider whether the underlying RIN holding level is
sufficiently masked. In other words, we need to ensure that we do not
disclose underlying CBI data or allow the CBI to be computed, back-
calculated, or otherwise discerned using other publicly available data.
Since the actual RIN level cannot be discerned or back-calculated by
knowing whether the threshold was exceeded, we believe our proposed
public disclosure accomplishes this objective.
---------------------------------------------------------------------------

    \186\ See EPA's FOIA Request Confidentiality Determination
document (Docket Item No. EPA-HQ-OAR-2016-0041-0023).
---------------------------------------------------------------------------

    Under the approach proposed in this action, a large obligated party
that triggers the primary threshold would apply the secondary threshold
of 130 percent of its implied conventional fuel RVO to date, which in
turn is calculated by multiplying a publicly known percentage standard
with its annual gasoline and diesel production or import volume. We
recognize that fuel production volume and import volume are closely
protected by refiners and importers as sensitive information that could
potentially harm competitiveness if disclosed. Therefore, in our
evaluation of public disclosure, we also need to consider whether fuel
volume could be computed, back-calculated, or otherwise discerned by
publishing whether a party exceeded an RVO-relative threshold. We find
that it could not, since neither the threshold nor any numbers above it
relates to or requires a specific fuel volume. The threshold and the
figure of comparison are ratios and do not disclose or make discernable
information about the actual fuel production or import volume.
    We also considered whether any information related to this proposed
disclosure could warrant CBI treatment, such as information that has
not yet gone through a formal CBI determination process by EPA. We do
not believe the information we propose to disclose constitutes CBI
because, as previously discussed, the underlying RIN holding level is
sufficiently masked. We believe it is in the interest of the market and
the program to publicly disclose exceedances of the proposed threshold.
We are proposing a threshold in this action that is sufficiently high
to only be exceeded by volume of RINs that is likely more than a party
would need for compliance or for any other legitimate business need. We
believe that our proposed threshold is consistent with the level of RIN
holdings that could cause excessive market power, and we want to
protect the integrity and functioning of the RIN market by deterring
potentially anti-competitive behavior through public disclosure. We
also note that the disclosure would come after the sale were completed
and would not be associated with a date or dates, so disclosing the
threshold-related information could not interfere with a sale
negotiated in the past. Finally, we note that a company can control
whether it exceeds the threshold and therefore whether its exceedance
will be publicly disclosed by ensuring that its RIN holdings never
exceed the threshold. In this way, a company has the power to control
whether this information is released.
    We seek comment on whether publication of whether the parties in a
corporate affiliate group exceeded the RIN holding threshold would
disclose underlying CBI or otherwise would likely result in substantial
competitive harm to a particular company. Please identify the specific
data element and explain how the public release of that particular
value would or would not be likely to result in disclosure of
underlying CBI or otherwise cause substantial competitive harm. If the
concern is that the release of being above a threshold would allow
competitors to derive a CBI value for an individual facility or
company, specifically describe the mechanism by which this could occur.
Describe any unique process or aspect of a facility or company that
would be revealed if the data were made publicly available. If the
value would disclose underlying CBI only when used in combination with
other publicly available data, then identify the information that could
be revealed, describe how it would be calculated or otherwise
discerned, explain why the information is sensitive, describe the
competitive harm that its disclosure would be likely to cause, and
identify the source of the other data. If the data are physically
published, such as in a book, industry trade publication, or federal
agency publication, provide the title, volume number (if applicable),
author(s), publisher, publication date, frequency of publication, and
International Standard Book Number (ISBN), or other identifier. For
data published on a website, provide the address of the website, the
date the website was last visited, and identify the website publisher
and content author. Avoid conclusory and unsubstantiated statements or
general assertions regarding potential harm.
    In summary, we have found that the information described in this
section for public disclosure is clearly not entitled to CBI treatment.
We are describing our finding and the rationale behind it in this
notice of proposed rulemaking because we expect this finding to be of
high interest to stakeholders. We encourage those with CBI concerns to
submit comments, which we will take into consideration in the
finalization of this rulemaking.
h. Reporting and Recordkeeping Requirements
    In this action, we are proposing that parties would calculate the
threshold for each day, and parties that triggered the threshold for a
day would be required

to report the event to EPA by the quarterly reporting deadlines
specified in Table 1 to 40 CFR 80.1452. We seek comment on the proposed
quarterly frequency and whether quarterly notice allows for too much
lag between an exceedance and disclosure . For a corporate affiliate
group that triggered the threshold together, each registered party
would be required to separately notify EPA of the event. We are
proposing to add a yes/no question on triggering the threshold to the
RIN Activity Report that all RIN-holding parties are already required
to submit to EPA quarterly. The party would select ``no'' if the
threshold was never triggered during the given quarter or ``yes'' if it
was triggered at least once in the quarter. The submitting official
would be required to certify the completeness and accuracy of that
answer upon report submission. We are also proposing that independent
auditors would need to review all daily threshold calculations during
the attest engagement process and would need to include in their attest
engagement report to EPA confirmation that the party notified EPA as
required of all instances of the threshold being triggered. This would
include confirmation that the D6 RIN holdings and RVOs, if applicable,
of all corporate affiliates were fully and properly accounted for in
the calculations. We therefore are proposing that parties registered to
hold RINs be required to keep as records all threshold calculations,
including corporate affiliate values, and provide those records to the
auditor for review.
    The proposed calculation would use gasoline and diesel production
and import volumes from the prior compliance year as a proxy for
volumes in the current year. We recognize that the calculations could
be an inaccurate representation of current year volumes in some cases,
such as mergers or big changes in import volumes from year to year.