require ongoing, or batch-level monitoring, the QAP would be required
to provide details of the means for collection and evaluation of the
data collected on an ongoing basis.
    We request comment on whether and how the document review and
monitoring discussed here should be more detailed (and/or include
different details) for facilities subject to an Option A QAP than for
those subject to an Option B QAP.

B. Buyer/Seller Contacts

    At the end of an audit, the auditor should know all customers of
and suppliers to the facility, and all parties that distribute
feedstock to and fuel from the facility. We expect the auditor to
contact the customers and suppliers in order to verify sales and
purchases, in accordance with the requirements under the applicable QAP
(i.e., Option A or Option B). We envision this proposed requirement as
a ``spot check''; the auditor should be able to provide a reason for
such calls regarding the entity called, questions asked, etc. We
request comment on whether and how the audit requirements for Buyer and
Seller contacts should differ between facilities subject to an Option A
QAP than for those subject to an Option B QAP.

C. Onsite Visits

    The goal of the onsite visit is to verify that plant has the
technology to produce, store, and blend biofuels at registered levels,
is operating in accordance with the facility's registration, and that
the RINs generated since the last visit are valid. The auditor will
likely use plant maps and photos as part of this analysis, and should
compare and contrast the plant's infrastructure with the third-party
engineering review reports on file with EPA. The auditor should note
the size and number of storage and blending tanks, and observe the
measurement of volume in the tanks. The auditor should determine
whether the process rate is consistent with annual and quarterly
production of the facility, and whether the facility has quality
process controls in place (e.g., are ASTM International specifications
being followed where appropriate).
    We believe that mass and energy balances on the facility are
critical components of any audit. Because integrated facilities will
likely have energy usage that is not directly related to biofuel
production, the auditor should have alternate means of assessing and
correlating energy usage to production.
    The proposed requirements for onsite visits are the same for Option
A QAP and Option B QAPs. We are proposing that an auditor conduct at
least four (4) onsite visits per year, or every three (3) months. We
request comment on this proposed onsite visit frequency. In addition,
we request comment on whether, over time, less frequent audits would be
reasonable under an Option B QAP. We are proposing that new production
facilities should be audited before verification of RINs.
    We expect that each visit could take from one to several days,
depending on the size and complexity of the facility, the availability
of records, changes since the last audit, etc. The proposed required
visits are the minimum. There may be value in visiting more often. It
is possible that there may be some value to requiring unannounced
visits as well, and we request comment on the value and impact that
such unannounced site visits would have on the effectiveness of the
program and its associated costs.

D. RIN Verification

    We are proposing that RINs would be verified only for a specified
period following an audit. Although an audit of any entity usually
certifies what was done, the audits we are proposing are prospective in
that the audits are verifying that past practices and procedures have
been followed, and are currently in place for future RINs that will be
generated. RINs generated after the completion of the audit could then
be verified until the next audit is completed, but for no longer than
100 days after completion of the audit. We believe this prospective
approach is appropriate for the proposed quality assurance program
because the audit would be verifying the starting point from which
future RINs would be generated. In that sense, the upcoming period of
RIN generation is starting with a verified set of conditions. In
addition, it could place a serious impediment in the market for RINs if
their verification followed RIN generation by any significant period of
time.
    To allow for some flexibility around the proposed standard audit
schedule (i.e., quarterly, or roughly every 90 days), we are proposing
that RINs generated for up to 100 days after the last audit could be
verified, unless the real time monitoring data or other information
obtained by the QAP auditor prior to the onsite audit indicates that
RINs are invalid. If another audit was not conducted within 100 days,
RINs could no longer be verified for that facility until a new audit
was conducted. We request comment on this coverage period.
    If a verified RIN was invalidly generated, it would indicate that
the QAP that had been used to verify that RIN was deficient in some
aspect. We request comment on whether, in the event of discovery of
invalid RINs, a more frequent onsite visit schedule should be required.
We are not inclined to require such an outcome at this point because
one of the purposes of the quality assurance programs is to proactively
identify invalidly-generated RINs. In addition, it is highly
anticipated that there will also be situations where no invalid RINs
have been generated for an extended period of time for a given
facility. Under this scenario, less frequent onsite visits may be
warranted. We request comment on whether lower audit frequency levels
should be allowed after a significant period of time with no invalidly
generated RINS, and suggestions as to appropriate reduced onsite visit
frequencies.

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

A. Export and Exporter Provisions

    In this action, we propose to address the following issues
regarding the export of renewable fuels: Exporter RVO requirements,
identification of renewable fuel content for all fuel transfers, and
retirement of RINs at the time of export. The Agency is proposing to
address these issues primarily because the export of renewable fuel,
particularly ethanol and biodiesel, has become more prevalent in the
transportation fuel market. These proposed changes address how RINs
should be handled when renewable fuel is exported. In addition, it will
provide EPA with the data needed to track renewable fuel exports. The
intent is to ensure that exported renewable fuel is not included in
meeting the mandated domestic annual renewable fuel volume requirement.

1. Exporter RVO
    Any volume of renewable fuel which is exported, either neat or
blended, requires calculation of an export RVO. In this rule, we are
making minor changes to the regulations to address concerns that some
regulated parties may be misinterpreting the regulations and only
establishing an RVO for exported renewable fuel that is ``in its neat
form or blended with gasoline or diesel.'' The opening clause of 40 CFR
80.1430(a) clearly provides that an RVO must be satisfied by any party
that ``owns any amount of renewable fuel'' that is exported, and 40 CFR
80.1430(f) also states that ``each exporter of renewable fuel'' must
satisfy an RVO. The portion of 80.1430(a) that provides that the
regulation applies ``whether [the exported renewable fuel] is in its
neat form or blended with gasoline or diesel'' was intended to make the
point, through specific examples, that the regulation applies to both
neat renewable fuels and renewable fuel blends that are exported. Thus,
the reference to ``gasoline or diesel'' blends is illustrative, and
does not exclude other exported renewable fuel blends, such as
biodiesel blended into fuel oils, from the scope of the regulation. We
are proposing changes to 40 CFR 80.1430(a) to remove the references to
examples of fuel blended with ``gasoline and diesel,'' and state in
this section of the regulations that the requirement to establish an
RVO applies whether the exported renewable fuel is in its neat form or
blended.
    We seek comment on what additional amendments, if any, should be
made to the export provisions at 80.1430, the recordkeeping
requirements at 80.1454, and the reporting requirements at 80.1451, to
ensure that exporter RVOs adequately make the RIN market whole for any
exported biofuel for which RINs may have been generated. In particular
EPA seeks comment on whether EPA should limit exporter RVO requirements
in situations where exporters can document that either no RINs were
ever generated for the exported fuel, or that any such RINs were
previously retired.
2. Require Identification of Renewable Fuel Content
    As background, the Federal Trade Commission, as directed by EISA
established labeling requirements for biofuel blends.\13\ EISA
specifically addressed three categories of biodiesel fuel blends,
requiring labels with precise wording for two. First, fuel blends
containing no more than five percent biodiesel and no more than five
percent biomass-based diesel, and that meet ASTM D975 (``Standard
Specification for Diesel Fuel Oils''), need not be labeled. Second,
fuel blends containing more than five but no more than twenty percent
biomass-based diesel or biodiesel ``shall be labeled `contains biomass-
based diesel or biodiesel in quantities between five percent and 20
percent.' '' EISA Sec. 205(b)(2) (emphasis added). Finally, blends
containing more than 20 percent biodiesel or biomass-based diesel
``shall be labeled `contains more than 20 percent biomass-based diesel
or biodiesel.' '' EISA Sec. 205(b)(3) (emphasis added). As fuel blends
containing no more than five percent biomass-based diesel are not
required to be labeled, it is possible that some exporters may believe
that the fuel they are exporting has a lower biofuel content than it
actually does or they may be claiming that it's straight diesel fuel.
---------------------------------------------------------------------------

    \13\ Automotive Fuel Ratings, Certification and Posting Final
Rule, 73 FR 40154, July 11, 2008.
---------------------------------------------------------------------------

    To better document and communicate the biodiesel content of any
biofuel blend throughout the fuel supply chain (not just biofuel blends
containing more than five percent biomass-based diesel), we propose to
extend the existing product transfer document requirements at 40 CFR
80.1453 to fuel blends such that any person that sells or otherwise
transfers title to any biomass-based diesel blend or biodiesel blend to
any other person for resale of the product shall prepare a product
transfer document evidencing such transfer. Such product transfer
documents may be in the form of an invoice, bill of lading, bill of
sale or other written instrument meeting the requirements of this
subsection. All such transfer documents shall include the name of the
transferor, the name of the transferee, the date of transfer, the
volume in gallons of the product transferred, and either the volume in
gallons or percentage of biomass-based diesel or biodiesel that is
contained in the blended product. Each person making such transfer
shall maintain each transfer document required by this subsection for a
period of four years from the transfer date.
3. RIN Retirement Requirements
    The current RFS regulations require exporters to demonstrate
compliance with their exporter RVOs on an annual basis, by February 28
of the year following the compliance year in question. 40 CFR
80.1451(a). EPA is seeking comment on the period of time that should be
allowed for retirement of RINs as a result of renewable fuel export,
and whether the current deficit carry-over provision in
80.1451(a)(1)(xii) should be eliminated for exporters. Given the
volatility in the renewable fuel export market, a shorter time period
may ease concerns for related uncertainty in the RIN market. This
problem was anticipated, as stated in the final RFS2 Rule: ``However,
we are aware of some exporters who sell RINs that they separate as a
source of revenue, with the intention to purchase replacement RINs on
the open RIN market later in the year to comply with their RVOs.'' This
provision was included to allow flexibility for exporters. However, EPA
is considering whether a change is required at this time to prevent
instability and abuse.
    One approach under consideration would require exporters to clearly
demonstrate on a quarterly basis that they have acquired RINs
sufficient to cover volumes exported in the quarter. This shorter time
frame would significantly reduce the window of opportunity for large
exports of renewable fuel without exporters having obtained the RINs
that must ultimately be retired. Alternatively, EPA could require the
immediate retirement of RINs, at the time of export or within a limited
window such as 30 days after export. This would prevent rolling
deficits carried by exporters, and guard against unanticipated market
changes, or even ``shell companies'' closing up shop in order to avoid
the cost of meeting their export RVO. Eliminating the deficit carry-
forward provision as it applies to exporters would also further the
same objectives. EPA solicits comment on these options.

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

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

1. Designation of Intended Renewable Fuel Use
    The existing regulations at Sec.  80.1426(a) and (c) require
renewable fuel producers and importers to generate RINs for fuel that:
(1) Qualifies for a D code pursuant to Sec.  80.1426(f) or has been
approved by a petition pursuant to Sec.  80.1416, and (2) is
demonstrated to be produced from renewable biomass pursuant to the
recordkeeping and reporting requirements in the regulations. However,
Sec.  80.1426(c) also specifies that RINs may not be generated for fuel
that is not designated or intended for use as transportation fuel,
heating oil or jet fuel, i.e., for a ``non-qualifying fuel use''.
    We are proposing amendments to Sec.  80.1426(a) and (c), and
conforming amendments to the product transfer document (PTD)
regulations in Sec.  80.1453, to require all renewable fuel producers
and importers to designate all RIN-generating renewable fuel as
transportation fuel, heating oil or jet fuel on the PTDs that a
renewable fuel producer or importer prepares to accompany a fuel
shipment. These changes would standardize the existing ``designation''
requirement for RIN generators by specifying the location and content
of the designations. The requirement to designate intended fuel uses in
PTDs would operate as a constant reminder to renewable fuel producers
and importers that RINs may only be generated for fuel intended for use
as transportation fuel, heating oil or jet fuel, i.e., qualifying fuel
uses, and would facilitate EPA enforcement of the designation
requirement. The regulations would require that designations be made in
good faith. Parties designating fuel for a qualifying fuel use who in
fact knew that the fuel would likely be used in a fuel other than
transportation or jet fuel or heating oil (a ``non-qualifying fuel
use'') would be in violation of this proposed regulation, and subject
to civil penalties.
    We are also proposing to include special conditions, in addition to
the PTD requirements, related to the distribution and sale of any
renewable fuel that is not typically sold for use in or as
transportation fuel, jet fuel, or heating oil. We propose that these
conditions would apply to all RIN-generating renewable fuels other than
ethanol, biodiesel, and ``drop in'' renewable diesel. Biogas and
renewable electricity would also be excluded from these conditions
since sections 80.1426(f)(10) and (11) include specific conditions
designed to ensure that these fuels are used in transportation fuel.
These special conditions must be satisfied in order for RINs to be
generated for those fuels. We are proposing to include these new
requirements together with other conditions for RIN generation in
Sec. Sec.  80.1426(a) and (c), and conforming amendments to the
registration, reporting and recordkeeping sections.
    EPA believes that denatured ethanol, biodiesel that meets the ASTM
6751 specifications and renewable diesel that meets the ASTM D 975
Grade No. 1-D or No. 2-D specifications are highly likely to be used as
transportation fuel, heating oil or jet fuel. Accordingly, to relieve
burdens associated with identifying what we expect to be de minimis
volumes of these fuels used for non-qualifying purposes, and to avoid
the potential for downstream invalidation of RINs for such fuels and
associated detrimental impacts that such potential may have on RIN
markets, we are proposing that validly generated RINs for these fuels
will remain valid regardless of the downstream use of the fuel.
However, parties upstream from the ultimate consumer who re-designate
any renewable fuel for which RINs were generated for a non-qualifying
use would be subject to the proposed RIN retirement provisions in
80.1433 that are discussed below. We seek comment on whether these
fuels are highly likely to be used only as transportation fuel, heating
oil or jet fuel, and on whether other biofuel types should be similarly
recognized. We also seek comment on whether biodiesel and renewable
fuel diesel producers who generate RINs should be required to sample
and test their fuels to ensure that the fuel is appropriate for use as
transportation fuel, and what specific sampling and testing
requirements would be appropriate. For all other fuels, we think that
it is appropriate to limit the opportunity for RIN generation to
circumstances where the producer or importer has taken actions to
ensure that the fuel is used for transportation fuel, heating oil or
jet fuel. Where such actions are taken, we are proposing that RINs
generated for qualifying renewable fuel will remain valid regardless of
the final downstream use.
    While we are proposing that the special conditions related to
renewable fuel that is not typically sold for use in or as
transportation fuel, jet fuel, or heating oil would not apply to ``drop
in'' renewable diesel, we also recognize that there is at least one
circumstance in which renewable diesel may benefit from being subject
to the same special conditions. Renewable diesel is a product that was
originally introduced by companies attempting to create a ``drop-in''
transportation fuel made from renewable sources that met the same
specifications as petroleum based transportation diesel. Some renewable
fuel producers are currently generating RINs for fuel that they claim
meets the exiting definition of renewable diesel, but which is not
chemically equivalent to a petroleum diesel fuel under the renewable
diesel definition. This product is primarily composed of triglycerides
that have not been chemically converted to a hydrocarbon, and can be
produced through simple filtration of vegetable oils with little
processing equipment or effort. Further, this product cannot be used as
a ``drop-in'' transportation fuel but instead can only be used at blend
levels with diesel fuel that are approved under 40 CFR part 79, and
moreover it is commonly used for non-qualifying fuel uses. To address
these issues, we are proposing to clarify in the definition of ``non-
ester renewable diesel'' that qualifying products must be approved
under 40 CFR part 79 at specific blend levels with diesel fuel.
However, it may also be necessary to differentiate between the two
types of renewable diesel (``drop in'' and triglycerides) so industry
may easily determine which product and which RINs they are purchasing,
and to allow EPA enforcement to differentiate between the two products
upon inspection of a renewable fuel facility. We request comment on
limiting the definition of non-ester renewable diesel, or renewable
diesel, to fuel that meets the ASTM D 975 Grade No. 1-D or No. 2-D, and
that are homogenous hydrocarbons. We could then refer to all other
fuels that meet the current definition of renewable diesel as viscous
non-ester renewable diesel, and they would be subject to the special
conditions related to the distribution and sale of renewable fuel that
is not typically sold for use in or as transportation fuel, heating oil
or jet fuel. This approach would not remove anyone from the program and
could give greater certainty to the industry.
    The new regulatory requirements are designed to ensure that these
fuels are in fact used in or as transportation fuel, heating oil or jet
fuel, and therefore that RINs are appropriately generated for these
fuels. These requirements are necessary because these other renewable
fuels are commonly used in non-qualifying fuels. For instance, butanol
is a common chemical feedstock but can also be used in transportation
fuel. The EPA believes that the only current allowable use for these
other fuels (insofar as RINs are associated with them) would be as a
blending

component or additive for gasoline or diesel fuels. We are proposing
two options for generating valid RINs for these fuels. First, the
renewable fuel producer or importer of these fuels may generate RINs if
they maintain contemporaneous records demonstrating that they used the
fuel as a blendstock or additive and that the final product is a
transportation fuel, heating oil or jet fuel that met all applicable
standards. Second, if the renewable fuel producer or importer does not
use the fuel itself as a blendstock or additive for gasoline or diesel
fuel, they may still generate RINs if they enter into a contract that
requires the party who purchases the fuel to use it as a blendstock or
additive for gasoline or diesel fuel, and that meets certain
requirements designed to assure that the buyer does, in fact, use the
fuel as a blendstock or additive in a transportation fuel, heating oil
or jet fuel that meets all applicable standards.
    In order to verify that these fuels are produced for use as a
transportation fuel, heating or jet fuel, EPA is proposing conforming
registration, recordkeeping and reporting requirements. We are
proposing that parties who generate RINs for the production of these
renewable fuels will have to include information in their registration
stating if they will be using the fuel as a blendstock or additive at
their facility or if they will be selling the fuel to another party who
will be using the fuel as a blendstock or additive. If the renewable
fuel producer or importer will be using the fuel as a blendstock or
additive, they will be required to describe their blending activities
in their registration application. If the renewable fuel producer or
importer will be selling the fuel to another party who will be using
the fuel as a blendstock or the fuel was blended into a qualifying fuel
downstream of the renewable fuel producer or importer, these parties
will need to provide additional information to verify that the fuel
was, in fact, blended for a qualifying fuel use. We solicit comment on
how these new registration requirements should apply to currently-
registered entities. Options include requiring an immediate (within 30-
60 days) registration update, or allowing the new submissions to occur
at the facilities' next 3-year registration update. We propose that
renewable fuel producers or importers who contract with a downstream
party to blend their product to make a qualifying renewable fuel be
required to include affidavits in their reports from the downstream
parties to verify that the fuel was used in or as a qualifying fuel.
This concept is modeled after the existing regulations relating to RIN
generation for biogas and renewable electricity, which require the use
of downstream affidavits to verify proper use of the fuel. We also
propose that any party who produces or blends these fuels will need to
keep records relating to the blending activities to allow the QAP
providers and the EPA to verify that RINs were properly generated. We
seek comment on whether these requirements are appropriate for
renewable fuels that are not highly likely to be used for qualifying
RFS fuels or whether there are other mechanisms that could provide
adequate assurance that these fuels are used for transportation fuel,
heating oil or jet fuel.
2. Required Actions Regarding Fuel for Which RINs Have Been Generated
That Is Used for a Non-Qualifying Fuel Use
    Section 80.1429(f) of the existing regulations provides that any
person who uses or designates a renewable fuel for an application other
than transportation fuel, heating oil or jet fuel (i.e., a non-
qualifying fuel use) must retire any RINs received with that renewable
fuel. Section 80.1429(f) was intended to require the person using or
designating RIN-generating fuel in or for a non-qualifying fuel use to
retire the RINs received with the fuel so that they cannot be used for
RFS compliance. This approach, however, places the burden of using fuel
for a qualifying fuel use on the end user when the fuel has already
been designated upstream as either a qualifying or non-qualifying fuel.
In other words, once the fuel reaches the end user, it has already been
designated as transportation fuel, heating oil or jet fuel, or has been
redesignated for a non-qualifying fuel use. The end user has no part in
the designation or redesignation of the fuel.
    In order to ensure that RINs generated with renewable fuels are
retired if the fuel is redesignated for a non-qualifying fuel use, we
propose to tighten the requirements for RIN retirement for any party
that redesignates a renewable RIN-generating fuel for a non-qualifying
fuel use, and to relieve end users of such an obligation. To accomplish
this, we propose to remove and reserve paragraph 80.1429(f) of the
regulations and to add a new section 80.1433 to require parties that
designate fuel for which RINs were generated for a non-qualifying fuel
use, i.e. for something other than transportation fuel, heating oil, or
jet fuel, to retire an appropriate number and type of RINs. We believe
that any person designating fuel for which RINs have been generated for
a non-qualifying use should make the RIN system whole by retiring an
equivalent number and type of RINs. This approach places the burden of
ensuring an appropriate number of RINs are retired on a party in the
fuel distribution business, rather than an end user. Such parties tend
to have greater expertise in complying with regulatory requirements,
and the potential number of parties potentially subject to these
requirements is far reduced by placing the burden for RIN retirement
upstream of end users. We further propose new subsection 80.1460(g)
which would prohibit a person from designating a qualifying renewable
fuel for which RINs were generated for a non-qualifying fuel use,
unless the requirements of section 80.1433 have been met. The proposed
amendments would require retirement of applicable RINs within a 10 day
period.
3. RIN Generation for Fuel Made With Renewable Fuel Feedstock
    The existing regulations do not provide a pathway for any party to
generate RINs for a fuel produced using another renewable fuel as a
feedstock. Parties seeking to do so, however, may submit a petition
requesting approval pursuant to Sec.  80.1416. 40 CFR 80.1426(c)(6)(ii)
sets forth certain prohibitions that would apply if, in the future, EPA
approved a pathway that allowed a party to generate RINs for a fuel
that was produced using another renewable fuel as a feedstock. These
prohibitions are designed to prevent parties from generating more than
one RIN for the same volume of renewable fuel. For example, the
production of ETBE uses ethanol as a feedstock, and RINs may have been
previously generated if the ethanol used to make the ETBE was
denatured. The ETBE producer in this example should not be allowed to
generate RINs representing the full energy equivalence of the finished
ETBE, if RINs were previously generated for the ethanol feedstock. In
order to address this type of scenario, we are proposing to modify
Sec.  80.1426(c)(6) to prohibit a party from generating new RINs for a
fuel that is made from a feedstock that is a renewable fuel, where the
feedstock that is a renewable fuel was produced by another party,
unless EPA approves a petition under Sec.  80.1416 to allow for the
generation of RINs for a fuel that was produced using another renewable
fuel as a feedstock and the petition and approval include an
enforceable mechanism to prevent double counting of RINs.
    We also propose to amend Sec.  80.1426(f)(4) to address the
potential

for ``double discounting'' for non-renewable feedstocks when renewable
fuel is produced by co-processing renewable biomass and non-renewable
feedstocks to produce a fuel that is partially renewable. Specifically,
we have discovered that the existing regulations may inadvertently
cause the number of RINs generated to be discounted twice for the
presence of non-renewable feedstocks. The first would be in the
calculation of the equivalence value under Sec.  80.1415(c)(1), and the
second would be in the calculation of the number of RINs generated
under Sec.  80.1426(f)(4)(i). To correct this problem, we are proposing
to add a new paragraph (f)(4)(iii) so that for purposes of Sec.
80.1426(f)(4) only, the equivalence value does not include a discount
for non-renewable feedstocks.
4. Use of Renewable Fuel in Ocean-Going Vessels
    Another issue the Agency is aware of concerns the use of renewable
fuel-containing MVNRLM in ocean-going vessels. The definition of
``transportation fuel'' specifically excludes ``fuel for use in ocean-
going vessels.'' 40 CFR 80.1401. In the preamble to the March 26, 2010
RFS rule, the Agency stated that `` `for use in ocean-going vessels'
means residual or distillate fuels other than Motor Vehicle Nonroad
Locomotive and Marine (MVNRLM) intended to be used to power large
ocean-going vessels.'' 75 FR 14670, 14721 (March 26, 2010). The rule
also defines ``fuel for use in ocean going vessels'' as including ECA
marine fuel. 40 CFR 80.1401. Some parties have questioned whether
MVNRLM that is blended into ECA marine fuel is ``fuel for ocean going
vessels'' such that RINs generated for the renewable fuel component of
MVNRLM become invalid upon that use. It is the Agency's interpretation
that the definition of ``fuel for use in an ocean-going vessel'' in
Sec.  80.1401 does not include MVNRLM that is blended into ECA marine
fuel. This is based on the definitions of fuel for use in an ocean-
going vessel and of ECA marine fuel, as explained in the March 2010
rulemaking.\14\ Therefore, RINs that have been or are properly
generated for any renewable fuel component of MVNRLM that is blended to
produce ECA fuel remain valid. EPA notes that the vast majority of
MVNRLM is used for qualifying RFS purposes, and that only a trivial
quantity of such fuels is used to produce ECA fuel for ocean-going
vessels. Given the complexity and regulatory burden that would be
involved in tracking trivial quantities of MVNRLM that may be used in
ECA fuel, the RFS regulations appropriately treat all properly
generated RINS for renewable fuel blended into MVNRLM as valid,
regardless of the possible downstream blending of MVNRLM with ECA fuel.
In addition, under today's proposal, additional regulatory requirements
designed to ensure that renewable fuel is put to a qualifying use would
be imposed on certain types of renewable fuel, as discussed above.
These new requirements would further limit the quantity of renewable
fuel that could ultimately be blended with ECA fuel used in ocean going
vessels.
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    \14\ This does not change the fact that the blend of fuel that
results from blending MVNRLM or NRLM with ECA marine fuel would
still be ECA marine fuel and subject to the sulfur limits that apply
to such fuel.
---------------------------------------------------------------------------

    We seek comment on whether our interpretation of ``fuel for use in
an ocean-going vessel'' creates any potential problems.
5. Treatment of Improperly Separated RINs
    Section 80.1431(a)(1)(viii) currently provides that a RIN that was
improperly separated pursuant to 80.1429 is invalid. Under section
80.1460(c)(1), obligated parties may not use invalid RINs for
compliance purposes. EPA proposes to remove 80.1431(a)(1)(viii) of the
regulations, and to add section 80.1460(h), identifying the improper
separation of RINs as a prohibited act. The net effect of these changes
would be to allow obligated parties to use RINs that were improperly
separated for compliance purposes, since the RINs would no longer be
considered invalid. However, improper RIN separation would continue to
be a prohibited act under the regulations.
    EPA seeks comment on whether the RFS regulations should instead
maintain section 80.1431(a)(1)(viii), but also require a more
comprehensive and robust mechanism to allow parties that acquire
separated RINs and EPA to evaluate whether the RINs were properly
separated and used in or for a qualifying fuel. The goal would be to
make it easier for EPA and obligated parties to determine whether RINs
are valid. These mechanisms could require a designate and track
approach, with corresponding recordkeeping and reporting requirements,
similar to the program set forth in the diesel sulfur regulations at 40
CFR part 80, subpart I. In general, under Subpart I, each time custody
of fuel is transferred from one facility to another, the transferor
must designate the fuel and record its volume. The party who receives
custody of the fuel must record the same information, to ensure that
each party relies on the same designation and volume for its own
compliance purposes. Maintaining proper PTDs, with proper designations,
is also part of the diesel sulfur program's recordkeeping requirements.
EPA seeks comment on whether the RFS regulations should establish
similar designation and track requirements addressed at tracking and
recording RIN separation events and end use of renewable fuels.
    Additionally, EPA requests comment on whether we should require RIN
separators to include with their quarterly reports additional records
related to qualifying separation events that are already required as
part of the recordkeeping regulations. See Sec.  80.1454 for a
description of the records that must be retained by parties. EPA
believes requiring this information to be reported quarterly will allow
EPA to review the information in a more timely way than in the existing
structure, where EPA must request it from RIN separators on an ad hoc
basis. Additionally, all parties who separate RINs must sign and
certify that the information reported to EPA under the RFS program is
true and accurate.
    Inaccurate, misleading, and/or false reports submitted to EPA may
be used in a criminal prosecution against the submitter and other
culpable persons. Enhanced reporting requirements for RIN separators
would facilitate EPA's ability to investigate and prosecute persons who
engage in RIN separation violations. EPA seeks comment on the type and
scope of reporting that would most likely assist EPA in identifying RIN
separation violators.

C. Treatment of Confidential Business Information

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

implementation of the RFS program, we have received hundreds of
requests for information; the need for case-by-case determinations has
prevented timely release of non-CBI information.
    Due to the high level of interest in RFS compliance information,
the EPA is considering approaches to increasing public access to
information collected by the RFS program. At the same time, we want to
ensure that we continue to properly process CBI claims and protect
company's confidential information. The EPA is now proposing to make
certain RFS registration and reporting information publicly available
because we believe that greater transparency will work hand-in-hand
with our QAP process to improve the integrity of information submitted
for RFS compliance and deters fraudulent behavior. As discussed in more
detail below, today's action provides affected businesses subject to
Part 80, other stakeholders, and the general public an opportunity to
comment on the proposal to publish RFS registration and reporting
information that would be aggregated into monthly, quarterly, and
annual reports. This action is part of a broader effort to increase
transparency and provide information to the public that would promote
greater liquidity in the RIN market in a way that assures reasonable
oversight of RIN generation.
    Notably also, many interested parties--including renewable fuel
producers--have asked the EPA to publish this information. Since
implementation of the RFS program, the Agency has received numerous
requests for this information. Not only are members of the public and
interested stakeholders interested in reviewing this information, many
parties to the RFS program are requesting that the Agency release this
information in order to make the RFS program more transparent. The EPA
is soliciting comments on whether, for any information in the format
proposed for release, there are unique circumstances where disclosing
this information would cause substantial harm to a company's
competitive position.
2. Proposal To Disclose Aggregated RFS Registration Information
a. Approach
    The EPA is proposing to summarize and publish aggregated
registration and QAP information required under 40 CFR 80.1450(b), (c),
and (g) from independent third-party auditors and renewable fuel
producers and importers that are registered with the RFS program. We
propose to publish this information by facility and on a monthly basis.
Each monthly report of registration information will disclose certain
registration information for each producer, importer, and QAP. The
monthly reports would be cumulative reports of all registrations
accepted by the EPA; they would include existing registrations, new
registrations, and registration updates. For each facility, we would
publish the company name, facility name, facility type/fuel product,
total permitted capacity, production volume, production process type,
feedstocks, D-Code, and any co-products. This information would not
reveal proprietary production processes. For example, the production
process would be identified by the production process description used
in Table 1 to 40 CFR part 1426, or for a production process approved
through the Agency's pathway petition process, it would be identified
by the name associated with that process in OTAQReg. An example of what
information we intend to publish appears below:

                                                     Table VIII.C.2.a-1--Example Registration Report
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Total
        Company name           Facility name    Facility type    permitted    Production     Feedstock       Process type      D code      Co-products
                                                                  capacity      volume
--------------------------------------------------------------------------------------------------------------------------------------------------------
Example Ethanol Company.....  Example Ethanol  Ethanol........      125,000           20  Corn Starch....  Wet mill                   6  Distillers
                               Facility.                                                                    process using                 grains, corn
                                                                                biomass or                    oil.
                                                                                biogas for
                                                                                process energy.
Example Biodiesel Company...  Example          Biodiesel......      125,000          500  Canola Oil.....  Trans-                     4  None.
                               Biodiesel                                                                    esterification
                               Facility.                                                                    using natural
                                                                                gas or biomass
                                                                                for process
                                                                                energy.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    After publishing these monthly registration reports, we intend to
summarize and update the information so that we can publish quarterly
and annual registration reports of the same type of information. At
this time, the EPA is not proposing to publish registration information
at the broader company-level or more specific batch-level. We also are
not proposing, at this time, to publish registration submissions or
information from supplemental registration documents (e.g., heat plans,
separated food waste plans). The EPA is interested in stakeholder views
on this approach.
b. Rationale for Proposal
    The EPA believes that the information elements as described above
are not entitled to confidential treatment for a number of reasons.
First, this type of registration information is already available
through other public outlets. For example, for publicly-traded
companies, this information is filed with the U.S. Security Exchange
Commission in their annual 10-K and quarterly 10-Q reports in the
company's overview. In those reports, companies identify their fuel
products, production facilities, co-products, production processes,
production capacities, actual production volumes, and feedstocks.
Additionally, many producers currently post this type of information on
their public Web sites and issue press releases broadcasting this
information. Regardless of whether a company is publicly traded or
posts this information on its Web site, all renewable fuel producers
report this information to the U.S. Department of Energy's National
Renewable Energy Laboratory, which publishes the information on their
Web site. Since this information is already publicly available, it
would not be eligible for confidential treatment under the Agency's
existing CBI regulations

under 40 CFR part 2, subpart B, and therefore, it could be released.
    Second, the EPA believes that release of this information would not
cause substantial harm to the competitive position of a Part 80
business submitter. The information elements, submitted under Part 80,
and proposed to be made publicly available consist of information on
renewable fuel producers' facility fuel product, total permitted
capacity, production volume, production process type, feedstocks, D-
Code, and co-products. These information elements do not reveal any
proprietary information, or any other information that would likely
provide insight for competitors to gain an advantage. For example,
consider the Example Ethanol Facility:
     Example Ethanol Facility is a renewable fuel producer that
produces ethanol from corn starch using a wet mill process and
generates D-Code 6 RINs for its ethanol. The production of ethanol from
cornstarch using a wet mill process is typical of an ethanol production
facility, widely-known, and demonstrates that the facility meets RFS
regulatory requirements for RIN generation. The feedstock, process, and
fuel product must comply with an approved RFS pathway, which are
specific to these three information elements and identified in Table 1
to section 1426 or a publicly-available EPA petition approval. These
information elements are necessary for a producer to determine if it
meets RFS requirements. These information elements describe commonly
used renewable fuel production information and do not describe any
particular specifications about an individual facility's unique
processing. Because these information elements are widely known and do
not reveal details about the precise production processes used, they
are not the type of information that a competitor could use to develop
marketing strategies to undermine the producer's competitive position.
Thus, disclosing information elements containing feedstock, process
type, D-Code, and fuel type would not reveal--and could not be used to
determine--an individual facility's production efficiency, production
costs, or pricing structure.
     That the Example Ethanol Facility is permitted to produce
125,000 gallons of ethanol but only produces 20 gallons of ethanol does
not disclose proprietary information. Releasing total permitted
capacity and production volumes do not disclose actual production
rates; nor could it be used to determine facility-level production
rates or the quantity of feedstock used to produce that volume. This
information would not provide a competitor with business insights and/
or any competitive advantage over the Example Ethanol Facility.
Accordingly, the EPA believes that disclosing permitted capacity and
production volumes would not cause substantial harm to a business
submitter's competitive position.
     That the Example Ethanol Facility produced distillers
grains and corn oil as co-products from wet mill process does not
disclose proprietary information. Wet mill processing is widely known
to result in the co-production of distillers grains and corn oil, and
these co-products must be disclosed to the EPA with the producer's
registration for compliance with 40 CFR 80.1426. This is not the type
of information that could be used by a competitor to gain business
insights or advantage over the Example Ethanol Producer. Co-product
information is widely known among the renewable fuel industry and would
not contain details regarding co-product characteristics, production
volume, quality, quantity, production efficiency, costs, or pricing
structure. Therefore, the EPA believes that disclosing a facility's co-
product would not cause substantial harm to business submitter's
competitive position.
3. Proposal To Disclose Aggregated RFS Report Information
a. Approach
    In addition to publishing monthly, quarterly, and annual
registration reports, we are also proposing to publish monthly,
quarterly and/or annual report of information that is required to be
reported to the EPA under 40 CFR 80.1452(b) for renewable fuel
producers and importers. We are proposing to publish this information
in the same manner as registration information--on a corporate and/or
facility-by-facility basis, as described in the chart below. The EPA
intends to publish:
     The name of the renewable fuel producer or importer and
associated registration information (i.e., name, address, feedstock,
process, fuel type, D-Code). The EPA also intends to depict this
information in a variety of formats, including geographically (i.e.,
maps) or tables to identify where renewable fuel production facilities
are located (40 CFR 80.1450(b) and 80.1452(b)(1)).
     The EPA company and facility registration numbers and the
associated registration information of the renewable fuel producers,
foreign ethanol producers and importers that generated RINs in EMTS
during the applicable time period(s) (40 CFR 80.1450(b), 80.1452(b)(2),
80.1452(b)(3), 80.1452(b)(4), and 80.1452(b)(5)). This information will
be provided for each facility where renewable fuel was produced.
     The D-code of RINs generated by the facility during the
time period (40 CFR 80.1452(b)(6)). For each D-code generated at a
facility, the EPA will publish the number of RINs generated (40 CFR
80.1452(b)(12)), volume of fuel produced (40 CFR 80.1452(b)(10)), fuel
type (40 CFR 80.1452(b)(9)), production process (40 CFR 80.1452(b)(7)),
feedstocks (40 CFR 80.1452(b)(13)), and co-products (40 CFR
80.1452(b)(15)).
     The EPA also intends to release the volume of denaturant
(for ethanol), applicable equivalence value, and whether all the
feedstocks used during the time period were claimed to have met the
definition of renewable biomass (40 CFR 80.1452(b)(11), and
80.1452(b)(14)).
An example of the ``reporting'' information the EPA proposes to publish
appears in the chart below:

                                                                                Table VIII.C.3.a-1--Example ``Reporting'' Report
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Renewable fuel                       Location in   Renewable fuel                                                                                Amount of fuel
   RIN  generating  company      Company name        original        Facility name      latitude/       production   D code/fuel type  Feedstocks used     Production      Co-products       Volume of     produced (in        RINs
                                                     producer         and address       longitude      year/month                                           process                         denaturant       gallons?)       generated
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Example Ethanol Company......  Example Ethanol   Example Ethanol   111 Ethanol       Lat/Long......  2010/July.....  5--Renewable      888--Feedstock   888--Grandfathe  Distillers               549.52          27,476          27,476
                                Company.          Company.          Street, City,                                     Fuel/10--Non-     not listed       red (Other).     grains, corn
                                                                    State, ZIP.                                       cellulosic        (used at a                        oil.
                                                                                ethanol (EV       grandfathered
                                                                                1.0).             facility 100%).
Example Biodiesel Company....  Example           Example           222 Biodiesel     Lat/Long......  2010/July.....  4--Biomass-Based  160--Biogenic    180--Transester                   ..............          21,934          32,902
                                Biodiesel         Biodiesel         Way, City,                                        Diesel/20--       Waste Oils/      ification,
                                Company.          Company.          State, ZIP.                                       Biodiesel (EV     Fats/Greases     Dedicated
                                                                                1.5).             100%.            Renewable
                                                                                Biomass
                                                                                Facility.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    As with registration information, the EPA proposes to publish
``reporting'' information in only an aggregated form (at the facility
level, not the batch level), and only on a monthly, quarterly, and/or
annual basis. The EPA will continue to consider the confidential nature
of the batch-level information and may take further action to provide
additional programmatic transparency. The EPA is interested in
stakeholders' views on this approach, including whether facility-level
information is the appropriate level of aggregation or whether it might
be more appropriate to publish batch-level information.
b. Rationale for Proposal
    The EPA believes that the disclosure of certain aggregated RFS
report information is not entitled to confidential treatment for a
number of reasons. First, the information elements in this category
consist of publicly available and widely known information on renewable
fuel producer's company name, facility name, RIN-generating name,
location, production year, fuel product type, RIN D-Code, production
volume, production process type, feedstocks, equivalence value, and
number of RINs generated. Furthermore, disclosing this information is
not likely to cause substantial harm to the competitive position of the
business required to report these information elements under Part 80
because these elements of information do not reveal any proprietary
information, or any other information that would likely provide insight
for competitors to gain an advantage. Furthermore, because these
information elements would be aggregated to the facility level and
further aggregated for the time period of the EPA-published report, the
information would not be presented in a form that any company's
competitors could use to gain a competitive advantage. Aggregating this
information at the facility level and for the monthly, quarterly, and/
or annual time period would prevent competitors from reverse
engineering the information to determine information that could be
considered confidential (e.g., exact amounts of feedstocks used, which
could potentially be used to reveal production efficiencies).
Accordingly, disclosing aggregate information would not cause
substantial harm to the submitter's competitive position. For example:
     The name of the renewable fuel producer or importer and
associated registration information, including facility name,
registration identification numbers, RIN-generating name, location,
production year, fuel type, RIN D-Code, production process type, and
feedstock is non-specific information that is submitted for RFS program
registration. These information elements are necessary for a producer
to determine if it meets RFS requirements. These information elements
describe commonly used renewable fuel production information and do not
describe any particular specifications about an individual facility's
unique processing. Because this information does not reveal details
about the precise production processes used, they are not the type of
information that a competitor could use to develop marketing strategies
to undermine the producer's competitive position. These information
elements do not reveal--and could not be used to determine--an
individual facility's production efficiency, production costs, or
pricing structure. Accordingly, the EPA believes that disclosing the
name of the renewable fuel producer or importer, the facility name,
registration identification numbers, RIN-generating name, location,
production year, fuel type, RIN D-Code, production process type, and
feedstock would not cause substantial harm to business submitter's
competitive position.
     The volume of denaturant, applicable equivalence value,
and whether all the feedstocks used during the time period were claimed
to have met the definition of renewable biomass (40 CFR 80.1452(b)(11),
and 80.1452(b)(14)) is widely-known information that is submitted to
demonstrate RFS program compliance. The volume of denaturant used must
be less than 2% to meet RFS requirements for RIN generation. The
equivalence value is a number that is used to determine how many
gallon-RINs can be generated for a gallon of renewable fuel according
to 40 CFR 80.1426. An affirmation that that the feedstocks a producer
used meets the definition of renewable biomass is required to
demonstrate that the feedstocks a facility registered to use, pursuant
to 40 CFR 80.1450, were actually used. Revealing the volume of
denaturant, equivalence value, and confirming that a producer affirmed
use of renewable biomass would not reveal anything proprietary or
otherwise about the precise production process a given producer is
using, and would not provide any insight that competitors might use to
gain competitive advantage. Rather, this information is commonly-known
information about the renewable fuel produced that demonstrates RFS
regulatory compliance for RIN generation.
4. QAP Plans and Independent Engineering Reviews
    At this time, the EPA is not proposing to publish QAP plans or
independent engineering reviews that are submitted for RFS
registration. For QAP plans and independent engineering reviews that
are claimed as CBI, the EPA proposes to require submission of two
versions of those documents: One clearly marked ``CBI version,'' with
appropriate areas denoted as CBI, and a second ``public version,'' with
CBI information redacted. We would require the submission of both
versions of QAP plans and engineering reviews begin with the effective
date of this rule. For engineering reviews filed pursuant to 40 CFR
80.1450(b)(2), we would require submission for new registrations, and
as necessary for updates pursuant to 40 CFR 80.1450(d)(3). Based on the
Agency's experience with the RFS program, the EPA notes that certain
information should not fall under a claim of CBI because this
information is generally available to the public or widely-known within
the industry, and disclosure of this information would not likely cause
harm to the competitive position of any submitting renewable producer,
importer, or any other party to a RIN transaction.
    If the EPA receives a Freedom of Information Act (FOIA) request for
the CBI version of an engineering review or QAP plan, the EPA would
process the FOIA request pursuant to its CBI regulations under 40 CFR
part 2, subpart B. Submission of the two versions of QAP plans and
engineering reviews (CBI and public versions) would allow the Agency to
clearly understand what information is claimed as CBI, and would also
allow the Agency to make public versions available to the public
without unnecessary delay. The EPA is interested in stakeholder views
on this approach.
5. Request for Comments
    The added transparency of making certain registration and reporting
information available to the public in the form of EPA-published
reports, along with the implementation of the QAP process, will
strengthen the RFS program and act as a deterrent to fraudulently
generated RINs. The EPA solicits comment on all aspects of these
proposals.

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

    Reporting and product transfer document (PTD) requirements, found
in sections 80.1452 and 80.1453, respectively, currently state that the
reportable event for a RIN purchase or sale occurs on the date of
transfer. Sellers must report the sale of RINs within five (5) business
days of the reportable event via the EPA Moderated Transaction System
(EMTS). Buyers must report the purchase of RINs within ten (10)
business days of the reportable event via EMTS. The date of transfer is
the date on which title of RINs is transferred from the seller to the
buyer. Some buyers and sellers of assigned RINs have expressed concerns
with these requirements stating they have difficulty determining the
date of transfer since title of the renewable fuel is not transferred
until the fuel physically reaches the buyer. Some transactions, for
example those by rail or barge, may take several weeks, and their
current accounting systems do not include a means for capturing the
buyer's receipt date.
    EPA understands this concern, but also recognizes that some
regulated parties have modified their accounting systems to address the
current reporting and PTD requirements in RFS2. We also believe that
for parties separating, retiring, and selling or buying separated RINs,
the current reporting and PTD requirements are effective and should
remain unchanged. Therefore, at this time EPA is not proposing to
replace existing requirements, but is instead proposing an additional,
alternative method for reporting sell and buy transactions involving
assigned RINs only.
    The proposed alternative method for sell and buy transactions of
assigned RINs would redefine the reportable event for both the seller
and the buyer, introduce a unique identifier that the seller must
provide to the buyer, and require the buyer to report the date of
transfer. Buyers and sellers would need to agree on which method they
would be using to report transfers of assigned RINs; either the current
method or the alternative method. EPA believes that this alternative
would provide the regulated community with the flexibility to address
their reporting concerns and also provide EPA with the data necessary
to effectively administer and enforce transactions of assigned RINs.
EPA welcomes comment on this proposed alternative method for reporting
assigned RIN buy and sell transactions.
    We propose that sellers of assigned RINs under the alternative
method be required to do the following:
     Within five (5) business days of shipping renewable fuel
with assigned RINs, report a sell transaction, using the alternative
method, via EMTS;
     Include in the EMTS sell transaction report other required
information per section 80.1452; and
     Provide a PTD to the assigned RIN buyer with a unique
identifier, also reported via EMTS, in addition to the information in
section 80.1453. The date of transfer is not required for the
alternative method.
    We propose that buyers of assigned RINs under the alternative
method be required to do the following:
     Within five (5) business days of receiving a shipment of
renewable fuel with assigned RINs, report a buy transaction, indicating
use of the alternative method, via EMTS;
     Include in the EMTS buy transaction report other required
information per section 80.1452;
     Include in the EMTS buy transaction report the unique
identifier provided by the seller; and
     Include in the EMTS buy transaction report the date the
renewable fuel was received, i.e. the date of transfer.
    If this proposed alternative method is finalized, the EMTS would be
modified to accept such transactions. EPA would provide additional
instruction and guidance at the time of the new EMTS version release.
EPA invites comment on all aspects of this proposal.

IX. Impacts

    The quality assurance program that we are proposing in today's NPRM
would provide a voluntary mechanism for regulated parties to verify
that RINs are validly generated, provide an affirmative defense against
violations if a regulated party transfers an invalidly generated RIN or
uses it for compliance, and provide clarity regarding the
responsibility of regulated parties to replace invalidly generated
RINs. The proposed program would not change the volume requirements of
the RFS program, but instead would help to ensure that those volume
requirements are met. Likewise, the proposed changes to the regulations
governing export of renewable fuel, separation of RINs from wet
gallons, and qualifying uses of renewable fuel would also be intended
to ensure that the RFS volume requirements are met with qualifying
renewable fuel. As a result, there would be no change to the expected
impacts of the RFS program in terms of volumes of renewable fuel
consumed or the associated GHG or energy security benefits. Instead,
the primary impacts of the quality assurance program would be improved
liquidity in the RIN market and improved opportunities for smaller
renewable fuel producers to sell their RINs.
    The quality assurance program that we are proposing in today's
action would be voluntary. As a result, there would be no obligatory
costs. There would likely be costs associated with an individual
party's participation in the quality assurance program. However, the
fact that the quality assurance program would be voluntary means that a
decision to participate will be made independently by each regulated
party, and thus we cannot estimate the costs that might be incurred for
the nation as a whole. Furthermore, any costs incurred would only be
borne if the industry believed that those costs were less than current
costs in the marketplace resulting from efforts to verify, acquire, and
trade RINs.
    In the discussion below, Section IX.A addresses direct costs
associated with implementing Quality Assurance Plans (QAPs), such as
the time required to develop a QAP and the associated recordkeeping and
reporting, site visits to renewable fuel production facilities, costs
for accounting services, etc. Section IX.B addresses potential costs
associated with RIN replacement mechanisms that would be required under
Option A.

A. Direct Costs for Implementing QAPs

    Currently, there are approximately 485 biofuel producers operating
more than 600 biofuel production facilities. These numbers are expected
to increase as the biofuel market expands. While it is unlikely that
all biofuel producers would opt to participate in the quality assurance
program, that was the assumption for these cost estimates in order to
reflect the maximum potential cost of the program.
    EPA staff met with seven parties who are already developing RIN
validation programs for the biofuels industry. We also met with several
industry groups and obligated parties which have been affected by RIN
fraud. These parties all provided informal estimates of the costs
associated with this type of quality assurance program which was used
to inform our cost calculations.
    For those biofuel producers who opt into the quality assurance
program, each biofuel production facility must be visited and assessed
as part of any audit conducted under the proposed quality assurance
program. An auditor would

use an approved QAP as the basis for the verification of biofuel
produced and RINs generated at a facility. In order to verify
production, the auditor must conduct site visits, review documents, and
contact entities that do business with the facility. The proposed
components of audits are described in Section VII.
    We are proposing that production facilities should be visited on a
quarterly basis. New production facilities would be visited prior to
verification of any RINs and, subsequently, according to the standard
quarterly schedule. We expect that each visit could take from one to
several days, depending on the size and complexity of the facility, the
availability of records, changes since the last audit, etc. For some
components of the audit, we propose to require ongoing, or batch-level,
monitoring. The QAP would be required to provide details of the means
for collection and evaluation of the data collected on an ongoing
basis.
    Tables IX.A-1, IX.A-2, and IX.A-3 below itemize the activities
anticipated for each biofuel production facility audit. The estimates
include costs incurred by the biofuel producer (Table IX.A-1), the
auditor (Table IX.A-2), and the EPA (Table IX.A-3). This table does not
include costs associated with the RIN replacement mechanism that some
QAP providers may acquire to cover loss in the event of RIN fraud.
These costs are discussed separately below.

                                           Table IX.A-1--Costs to the Biofuel Producer for Implementing a QAP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Prof./tech.
                Category                   Manager time        time        Clerical time   Number per yr     Capital $      Total hours       Total $
--------------------------------------------------------------------------------------------------------------------------------------------------------
Site Visit..............................               1              16               4               2  ..............              42           3,588
Reporting...............................               2              12               4               3  ..............              54           4,560
Recordkeeping...........................               0               0               2               3  ..............               6             222
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............  ..............  ..............  ..............             102           8,370
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                              Table IX.A-2--Costs to the QAP Auditor for Implementing a QAP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Prof./tech.
                Category                   Manager time        time        Clerical time  Number per yr.     Capital $      Total hours       Total $
--------------------------------------------------------------------------------------------------------------------------------------------------------
Auditor:
Contract Init...........................               4               4               2               1             530              10           1,428
Site Visit..............................               4              16               0               1           1,060              20           3,036
Follow-up...............................               2              28               5               3           1,060             105          12,459
Monitoring..............................               2              50               0  ..............  ..............              52           5,020
Consultants.............................  ..............  ..............  ..............               4           1,000  ..............           4,000
Reporting...............................               0               4              12  ..............  ..............              16           1,656
QAP Prep................................               2              16               4  ..............  ..............              22           3,808
EMTS....................................               0              25               0  ..............  ..............              25           2,400
Recordkeeping...........................               0              12              25  ..............  ..............              37           2,077
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............  ..............  ..............  ..............             250          38,839
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

    Managerial--$110 per hour.
    Technical/Professional--$96 per hour.
    Clerical--$37 per hour.
    For the Agency costs, the work was assumed to be performed by a GS-
13 technical employee, doubled and rounded up, for an hourly rate of
$89.
3. Cost Estimate Results
    We made our total cost estimate based on the number of registered
biofuel producers in the CDX as of July 2011, assuming that all parties
choose to participate in the voluntary quality assurance program. This
assumes 485 RIN generators with 600 biofuel production facilities. This
results in a total cost for the program of $27,576,450. If all parties
are participating in the program and all RINs are verified, this
results in a per RIN cost of less that $0.01. However, these costs are
assumed to be linear and we do not expect that there would be any
economies of scale in terms of the number of RINs verified by an
auditor. However, we do expect that the per-RIN cost would vary
depending on the number of RINs generated by each fuel producer since
the effort involved in validating many aspects of renewable fuel
production are the same regardless of the size of the facility.
    We do not expect that the costs of participation in the proposed
quality assurance program would vary significantly by the D code of
RINs. While RINs with different D codes may command different prices in
the market, the verification process for each RIN is expected to be
similar regardless of D code, with the biggest cost differences in
feedstock verification.

B. Costs for RIN Replacement Mechanisms

    For reasons described previously, some QAP providers may choose a
replacement mechanism to insure against invalid RINs. Such mechanisms
would be required under Option A, but would not be required under
Option B. There is large uncertainty in estimating the costs of these
mechanisms because it is an entirely new market. Informal discussions
with potential QAP auditors, as well as other parties involved in
similar markets or financial surety mechanisms in general, have
suggested a broad range of potential costs. For these reasons the costs
for such a mechanism were not included in the analysis above, and EPA
welcomes comments on the cost impacts of any potential financial surety
mechanisms.
    In order to fully inform cost impacts of the various QAP options,
we discuss the relevant cost factors of the three possible types of
mechanisms discussed in Section IV above. The discussion includes RIN
banks, RIN escrow accounts, and other traditional financial
instruments. As noted previously, these mechanisms are not intended to
be inclusive of all possible ways a RIN replacement mechanism could
work, and are merely suggestions of potential pathways Option A
auditors might follow.
    A RIN bank is a managed repository of valid audited RINs which are
available to all members of the bank for replacement purposes. The
costs associated with a RIN bank are directly proportional to the value
of the RINs banked, and the number of banked RINs required to meet the
obligations of the bank members. There would also be bank management
costs, which would be impacted by the number of bank members, and how
the bank is managed in terms of RIN deposit, withdrawal, update, and
replacement. In addition, bank managers would need to come up with a
system to maintain current year RINs in the bank, which may involve
additional costs for the sale of expiring RINs and any differential in
the value of the RIN at the time of deposit and the time of sale or
release. These costs would be born by the members of the bank, but
would likely be passed on to RIN purchasers to the maximum extent
possible. These parameters will vary so much from bank to bank that it
is impossible to estimate an average per RIN cost across the entire
program. However, it is reasonable to assume that the cost would be
effectively the per-RIN value of banked RINs plus some fractional
percentage to cover management costs.
    A RIN escrow account would work very much like a RIN bank, but
would be funded by a single auditor instead of a group of auditors, and
would be supervised and managed by a third-party escrow agent. The
advantage of this option is that an auditor would have total control
over the funding of the escrow. However, an auditor using an escrow
account would be solely responsible for the funding of the account, and
so would be required to maintain a balance equal to a much larger
percentage of its potential replacement responsibility than it might be
if using a RIN bank. The cost of a RIN escrow account is entirely
dependent upon the number and value of the RINs covered by the escrow.
    Traditional financial instruments, such as surety bonds, letters of
credit, or expanded insurance coverage, are also options under Option
A. The cost for this type of coverage is dependent on the level of risk
determined by the surety provider, as well as the value of the RINs to
be covered. This type of financial instrument would most likely provide
a maximum dollar amount of coverage, which would translate into a per
RIN cost depending on the number of RINs covered, relative to the
number of RINs audited by the QAP provider purchasing the financial
protection. EPA has learned that the cost of these policies vary
greatly among the parties looking into these options. For this reason,
this type of financial protection was not included in the cost analysis
outlined above.

X. Public Participation

    We request comment by April 18, 2013 on all aspects of this
proposal, including but not limited to the following:
     The RIN replacement cap of 2% and the limited exemption of
2%.
     A potential regulatory change in which renewable fuel
producers would be prohibited from separating RINs.
     The proposed components of QAPs.
     The proposed elements of RIN replacement mechanisms,
including the inclusion of E&O insurance.
     The costs associated with indemnifying auditor
verification of RINs.
     Mechanisms to ensure that auditors are not complicit in
fraud.
    This section describes how you can participate in this process.

A. How do I submit comments?

    We are opening a formal comment period by publishing this document.
We will accept comments through April 18, 2013. If you have an interest
in the program described in this document, we encourage you to comment
on any aspect of this rulemaking. We request comment on various topics
throughout this proposal.
    Your comments will be most useful if you include appropriate and
detailed supporting rationale, data, and analysis. If you disagree with
parts of the

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

B. Will there be a public hearing?

    We will hold a hearing on March 19, 2013, Room 1153 EPA East,
Washington, DC 20004, beginning at 10:00 a.m. local time. If you would
like to present testimony at the public hearing, we ask that you notify
the contact person listed above under FOR FURTHER INFORMATION CONTACT
at least ten days before the hearing. You should estimate the time you
will need for your presentation and identify any needed audio/visual
equipment. We suggest that you bring copies of your statement or other
material for the EPA panel and the audience. It would also be helpful
if you send us a copy of your statement or other materials before the
hearing. We will make a tentative schedule for the order of testimony
based on the notifications we receive. This schedule will be available
on the morning of the hearing. In addition, we will reserve a block of
time for anyone else in the audience who wants to give testimony. We
will conduct the hearing informally, and technical rules of evidence
won't apply. We will arrange for a written transcript of the hearing
and keep the official record of the hearing open for 30 days to allow
you to submit supplementary information. You may make arrangements for
copies of the transcript directly with the court reporter.

XI. Statutory and Executive Order Review

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

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
action is a ``significant regulatory action'' because it raises novel
legal and policy issues. Accordingly EPA submitted this action to the
Office of Management and Budget (OMB) for review under Executive Orders
12866 and 13563 and any changes made in response to OMB recommendations
have been documented in the docket for this action.
    This action is being proposed today as a result of several cases of
fraudulently generated RINs. As discussed above, several biodiesel
production companies have been identified as having generated RINs that
did not represent qualifying renewable fuel. While these invalid RINs
represented a very small amount (about 5%) of the nationwide biodiesel
volume in the 2009--2011 timeframe, the net result is that this fraud
has impacted the liquidity of the biodiesel RIN market as some
biodiesel RINs are perceived as having less value than others. In
addition, as a result of fraudulent activities, obligated parties have
been subject to monetary penalties and the additional cost of
purchasing new RINs to cover the invalid RINs, even though they
purchased the original RINs in good faith believing that they were
valid. These issues have raised novel legal and policy issues for the
RFS program and EPA believes it is necessary put in place an additional
regulatory mechanism that could provide an alternative way to assure
that RINs used for compliance are valid to restore confidence in the
RIN market and level the playing field for large and small producers.

B. Paperwork Reduction Act

    The information collection requirements in this proposed rule have
been submitted for approval to the Office of Management and Budget
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The
Information Collection Request (ICR) document prepared by EPA has been
assigned EPA ICR number 2473.01.
    The RFS program requires that specified volumes of renewable fuel
be used as transportation fuel, heating oil, and/or jet fuel each year.
Obligated parties demonstrate compliance with the RFS standards through
the acquisition of unique Renewable Identification Numbers (RINs)
assigned by the producer or importer to every batch of renewable fuel
produced or imported. Validly generated RINs show that a certain volume
of qualifying renewable fuel was produced or imported. The RFS program
also includes provisions stipulating the conditions under which RINs
are invalid, the liability carried by a party that transfers or uses an
invalid RIN, and how invalid RINs must be treated.
    In this action we are proposing a voluntary quality assurance
program intended to provide a more structured way to assure that the
RINs entering commerce are valid. The voluntary quality assurance
program for RINs would provide a means for regulated parties to ensure
that RINs are properly generated, through audits of production
facilities conducted by independent third parties using quality
assurance plans (QAPs).
    The annual public reporting and recordkeeping burden for this
collection is estimated to be 320 hours per response. A document
entitled ``Supporting Statement for Renewable Fuels Standard (RFS2)
Voluntary RIN Quality Assurance Program (Proposed Rule)'' has been
placed in the public docket. The supporting statement provides a
detailed explanation of the Agency's estimates by collection activity.
The estimates contained the supported statement are briefly summarized
here:
    Total No. of Respondents: 485.
    Total Burden Hours: 192,270.
    Total Cost to Respondents: $ 4,062,000.

Burden is defined at 5 CFR 1320.3(b).
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.
    To comment on the Agency's need for this information, the accuracy
of the provided burden estimates, and any suggested methods for
minimizing respondent burden, EPA has established a public docket for
this rule, which includes this ICR, under Docket ID number EPA-HQ-OAR-
2012-0621. Submit any comments related to the ICR to EPA and OMB. See
ADDRESSES section at the beginning of this notice for where to submit
comments to EPA. Send comments to OMB at the Office of Information and
Regulatory Affairs, Office of Management and Budget, 725 17th Street
NW., Washington, DC 20503, Attention: Desk Office for EPA. Since OMB is
required to make a decision concerning the ICR between 30 and 60

days after February 21, 2013, a comment to OMB is best assured of
having its full effect if OMB receives it by March 25, 2013. The final
rule will respond to any OMB or public comments on the information
collection requirements contained in this proposal.

C. Regulatory Flexibility Act

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

------------------------------------------------------------------------
                                     Defined as small
             Industry               entity by SBA if:    NAICS \a\ codes
------------------------------------------------------------------------
Petroleum refineries.............  <=1,500 employees..            324110
------------------------------------------------------------------------
\a\ North American Industrial Classification System.

    The program proposed in today's action is a voluntary quality
assurance program intended to provide a more structured way to assure
that RINs entering commerce are valid. As a result of the recent fraud
issue, obligated parties are reluctant to purchase RINs from smaller
refiners because of the uncertainty of their validity. While this
voluntary program could be beneficial for both larger and smaller
refineries it could be particularly beneficial for smaller petroleum
refineries if they choose to participate. In the current climate, these
smaller producers have been forced to offer their RINs at a significant
discount relative to RINs from larger producers, assuming they can find
obligated parties or distributors willing to purchase them at all.
While there will be some cost to opt into the program, we believe these
costs will be offset by leveling the playing field between larger
producers and small producers, allowing small producers to effectively
compete in the market.
    After considering the economic impacts of this action on small
entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. This action
will not impose any requirements on small entities. We continue to be
interested in the potential impacts of the proposed rule on small
entities and welcome comments on issues related to such impacts.

D. Unfunded Mandates Reform Act

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

E. Executive Order 13132 (Federalism)

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
    This action does not have federalism implications. It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. These rules will apply to
manufacturers of on-highway engines and not to state or local
governments. Thus, Executive Order 13132 does not apply to this action.
    In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comments on this proposed rule
from State and local officials.

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

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

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

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

H. Executive Order 13211 (Energy Effects)

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

inefficiencies and poor liquidity in the RIN market.

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs the agencies to use voluntary consensus standards in its
regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g., materials, specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by voluntary consensus standards bodies. NTTAA directs EPA to
provide Congress, through OMB, explanations when the EPA decides not to
use available and applicable voluntary consensus standards.
    This proposed rulemaking does not involve technical standards.
Therefore, EPA is not considering the use of any voluntary consensus
standards.

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

    Executive Order 12898 (59 FR 7629, February 16, 1994) establishes
federal executive policy on environmental justice. Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
    Today's action proposes a voluntary set of regulatory provisions
that could provide regulated parties with a specific mechanism for
demonstrating that they have conducted due diligence to verify the
validity of RINs. Therefore, EPA has determined that this action will
not have disproportionately high and adverse human health or
environmental effects on minority or low-income populations.

RFS Renewable Identification Number (RIN) Quality Assurance Program

XII. Statutory Authority

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

List of Subjects in 40 CFR Part 80

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

    Dated: January 31, 2013.
Lisa P. Jackson,
Administrator.

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

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 continues to read as follows:

    Authority:  42 U.S.C. 7414, 7521(1), 7545 and 7601(a).

Subpart M--[ Renewable Fuel Standard]

0
2. Section 80.1401 is amended by adding in alphabetical order the
definitions of ``A-RIN'', ``B-RIN'', ``Independent Third-Party
Auditor'', ``Non-qualifying fuel'', ``Quality assurance audit'',
``Quality assurance plan'', and ``Verified RIN'' and revising the
definition of ``Non-ester renewable diesel''.
    The added and revised text read as follows:

Sec.  80.1401  Definitions.

* * * * *
    A-RIN means a RIN verified by a registered independent third-party
auditor using a QAP that has been approved under Sec.  80.1469(a)
following the audit process described in Sec.  80.1472.
* * * * *
    B-RIN means a RIN verified by a registered independent third-party
auditor using a QAP that has been approved under Sec.  80.1469(b)
following the audit process described in Sec.  80.1472.
* * * * *
    Independent Third-Party Auditor means a party meeting the
requirements of Sec.  80.1471(b) that conducts QAP audits and verifies
RINs.
* * * * *
    Non-ester renewable diesel, also known as renewable diesel, means
renewable fuel which is all of the following:
    (1) A fuel which can be used at a blend level approved under 40 CFR
Part 79 in an engine designed to operate on conventional diesel fuel,
or be heating oil or jet fuel.
    (2) Not a mono-alkyl ester.
    Non-qualifying fuel use means a use of renewable fuel in an
application other than transportation fuel, heating oil, or jet fuel.
    Quality Assurance Audit means an audit of a renewable fuel
production facility conducted by an independent third-party auditor in
accordance with a QAP that meets the requirements of Sec.  80.1469.
    Quality Assurance Plan, or QAP, means the list of elements that an
independent third-party auditor will check to verify that the RINs
generated by a renewable fuel producer or importer are valid.
* * * * *
    Verified RIN means a RIN generated by a renewable fuel producer
that was subject to a QAP audit executed by an independent third-party
auditor, and determined by the independent third-party auditor to be
valid. Verified RINs include both A-RINs and B-RINs.
0
3. Section 1402 is added to read as follows.

Sec.  80.1402  Information Submitted under 40 CFR part 80 Subpart M.

    Sections 2.201 through 2.215 of 40 CFR part 2, subpart B, do not
apply to the following information:
    (a) Registration information submitted pursuant to Sec. Sec.
80.1450(b), (c), and (g) that is not entitled to confidential treatment
includes company name, facility name, facility type, fuel type,
permitted capacity, production volume, feedstocks, production process,
D-Code, and co-products.
    (b) Reporting information submitted pursuant to reporting
requirements in 40 CFR 1452(b) that is not entitled to confidential
treatment includes company name, RIN-generating company name, renewable
fuel producer, facility name and address, facility location, renewable
fuel production month and year, fuel type, D-Code, feedstocks,
production process, volume of fuel produced, and number of RINs
generated.
0
4. Section 80.1426 is amended as follows:
0
a. By revising paragraph (a)(1)(i) and (a)(1)(ii);
0
b. Adding paragraphs (a)(1)(iii);
0
c. By revising paragraphs (c)(1) and (c)(6);
0
d. By revising paragraphs (f)(4)(i)(A)(1) and (f)(4)(i)(B);
0
e. By adding paragraph (f)(4)(iii);
0
f. By revising paragraph (f)(12); and
0
g. By adding paragraph (f)(14).
    The additions and revisions reads as follows:

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

    (a) * * *
    (1) * * *
    (i) Qualifies for a D code pursuant to Sec.  80.1426(f), or as
otherwise approved by EPA, and is demonstrated pursuant to the
reporting requirements of Sec.  80.1451 and the recordkeeping
requirements of Sec.  80.1454, or other records maintained by the
producer, to be produced in accordance with the applicable pathway.
    (ii) Is designated on a product transfer document (PTD) for use as
transportation fuel, heating oil, or jet fuel in accordance with Sec.
80.1453(a)(12); and
    (iii) For renewable electricity, biogas, and any renewable fuel
other than ethanol, biodiesel, or renewable diesel, is distributed and
sold in accordance with Sec.  80.1426(f)(10), Sec.  80.1426(f)(11), or
Sec.  80.1426(f)(12), as appropriate.
* * * * *
    (c) * * *
    (1) Fuel producers and importers may not generate RINs for fuel
that does not satisfy the requirements of subsection (a)(1) of this
section.
* * * * *
    (6) A party is prohibited from generating RINs for a volume of fuel
that it produces if the fuel has been produced by a process that uses a
renewable fuel as a feedstock, and the renewable fuel that is used as a
feedstock was produced by another party, except that RINs may be
generated for such fuel if allowed by EPA in response to a petition
submitted pursuant to Sec.  80.1416 and the petition approval specifies
a mechanism to prevent double counting of RINs.
* * * * *
    (f) * * *
    (4) * * *
    (i) * * *
    (A) * * *
    (1) VRIN shall be calculated according to the following
formula:

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

Where:

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

VRIN = EV * Vs * R

Where:

VRIN = RIN volume, in gallons, for use in determining the
number of gallon-RINs that shall be generated for the batch.
EV = Equivalence value for the batch of renewable fuel per Sec.
80.1415, subject to qualification in paragraph (f)(4)(iii) of this
section.
Vs = Standardized volume of the batch of renewable fuel
at 60 [deg]F, in gallons, calculated in accordance with paragraph
(f)(8) of this section.
R = The renewable fraction of the fuel as measured by a carbon-14
dating test method as provided in paragraph (f)(9) of this section.
* * * * *
    (iii) In determining the RIN volume VRIN according to
paragraph (f)(4)(i)(A) or (f)(4)(i)(B) of this section, the equivalence
value used to determine VRIN which is calculated according
to Sec.  80.1415 shall use a value of 1.0 to represent R, the renewable
content of the renewable fuel.
* * * * *
    (12)(i) For purposes of this section, any renewable fuel other than
ethanol, biodiesel, or renewable diesel is considered renewable fuel
and the producer or importer may generate RINs for such fuel only if
all of the following apply:
    (A) The fuel is produced from renewable biomass and qualifies for a
D code in Table 1 to this section or has been otherwise approved by the
Administrator;
    (B) The fuel producer or importer maintains records demonstrating
that the fuel was produced for use as a transportation fuel, heating
oil or jet fuel by:
    (1) Blending the renewable fuel into gasoline or diesel fuel to
produce a transportation fuel, heating oil or jet fuel that meets all
applicable standards;
    (2) Entering into a written contract for the sale of a the
renewable fuel, which specifies the purchasing party shall blend the
fuel into gasoline or diesel fuel to produce a transportation fuel,
heating oil or jet fuel that meets all applicable standards; or
    (3) Entering into a written contract for the sale of the renewable
fuel, which specifies that the fuel shall be used in its neat form as a
transportation fuel, heating oil or jet fuel that meets all applicable
standards.
    (C) The fuel was sold for use in or as a transportation fuel, and
for no other purpose; and
    (ii) Reserved.
    (iii) Reserved.
* * * * *
    (14) For purposes of Table 1 to this section, process heat produced
from combustion of gas at a renewable fuel facility is considered
derived from biomass if the gas is biogas.
    (i) For biogas directly transported to the facility without being
placed in a commercial distribution system, all of the following
conditions must be met:
    (A) The producer has entered into a written contract for the
procurement of a specific volume of biogas with a specific heat
content.
    (B) The volume of biogas was sold to the renewable fuel production
facility, and to no other facility.
    (C) The volume and heat content of biogas injected into the
pipeline and the volume of gas used as process heat are measured by
continuous metering.
    (ii) For biogas that has been gathered, processed and injected into
a common carrier pipeline, all of the following conditions must be met:
    (A) The producer has entered into a written contract for the
procurement of a specific volume of biogas with a specific heat
content.
    (B) The volume of biogas was sold to the renewable fuel production
facility, and to no other facility.
    (C) The volume of biogas that is withdrawn from the pipeline is
withdrawn in a manner and at a time consistent with the transport of
fuel between the injection and withdrawal points.
    (D) The volume and heat content of biogas injected into the
pipeline and the volume of gas used as process heat are measured by
continuous metering.
    (E) The common carrier pipeline into which the biogas is placed
ultimately serves the producer's renewable fuel facility.
    (iii) The process heat produced from combustion of gas at a
renewable fuel facility described in paragraph (f)(12)(i) of this
section shall not be considered derived from biomass if any other party
relied upon the contracted volume of biogas for the creation of RINs.
0
5. Section 80.1429 is amended by adding paragraph (b)(10) and removing
and reserving paragraph (f) to read as follows:

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

* * * * *
    (b) * * *
    (10) Any party that produces a volume of renewable fuel may
separate any RINs that have been generated to represent that volume of
renewable fuel or that blend if that party retires the

separated RINs to replace invalid RINs according to Sec.  80.1474.
* * * * *
0
6. In Sec.  80.1430 revise paragraph (a), (b), and (e) to read as
follows:

Sec.  80.1430  Requirements for exporters of renewable fuel.

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

    ERVOCB,k = VOLk* EVk

Where:

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

    (2) Biomass-based diesel.

ERVOBBD,k = VOLk* EVk

Where:

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

    (3) Advanced biofuel.

ERVOAB,k = VOLk* EVk

Where:

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

    (4) Renewable fuel.

ERVORF,i = VOLk* EVk

Where:

ERVORF,i = The Renewable Volume Obligation for renewable
fuel for discrete volume k, in gallons.
k = A discrete volume of exported renewable fuel that is exported in
a single shipment.
VOLk = The standardized volume of discrete volume k, in
gallons, calculated in accordance with Sec.  80.1426(f)(8).
EVk = The equivalence value associated with discrete
volume k.
* * * * *
    (e) For renewable fuels that are in the form of a blend at the time
of export, the exporter shall determine the volume of exported
renewable fuel based on one of the following:
* * * * *
0
7. Section 80.1431 is amended by removing and reserving paragraph
(a)(1)(viii) and revising paragraph (b) introductory text to read as
follows:

Sec.  80.1431  Treatment of invalid RINs.

    (a) * * *
    (1) * * *
    (viii) [Reserved]
* * * * *
    (b) Except as provided in Sec.  80.1473, the following provisions
apply in the case of RINs that are invalid:
* * * * *
0
8. Section 80.1433 is added to read as follows:

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

    (a) Any party that designates any amount of fuel originally
produced as renewable fuel, whether in its neat form or blended, for an
application that is not transportation fuel, heating oil, or jet fuel
shall retire an appropriate number and type of RINs according to one of
the following equations and as specified in paragraph (b).
    (1) Except as provided in (a)(5), Cellulosic biofuel.

RINRETCB,i = [Sigma](VOLk*
EVk)i

Where:

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

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

RINRETBBD,i = [Sigma](VOLk*
EVk)i

Where:

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

    (3) Advanced biofuel.

RINRETAB,i = [Sigma](VOLk*
EVk)i

Where:

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

    (4) Renewable fuel.

RINRETRF,i = [Sigma](VOLk*
EVk)i

Where:

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

    (5) If the party has reason to know that the fuel would have
qualified as cellulosic diesel if not put to a non-qualifying fuel use,
it must choose either the formula specified in paragraph (a)(1) or that
in paragraph (a)(2) to calculate the number and type of RINs that must
be retired.
    (b) For the purposes of calculating the number of RINs that must be
retired under paragraphs (a) of this section:
    (1) If the equivalence value for the discrete volume k can be
determined pursuant to Sec.  80.1415 based on its

composition, then the appropriate equivalence value shall be used in
the calculation pursuant to paragraph (a).
    (2) If the discrete volume k is known to be biomass-based diesel
but the composition is unknown, the EVk shall be 1.5.
    (3) If neither the category nor composition of discrete volume k
can be determined, the EVk shall be 1.0.
    (c) VOLk shall be based on one of the following:
    (1) Information from the supplier of the blend of the concentration
of fuel originally produced as renewable fuel in the blend;
    (2) Determination of the renewable portion of the blend using
Method B or Method C of ASTM D 6866 (incorporated by reference, see
Sec.  80.1468), or an alternative test method as approved by the EPA;
or
    (3) Assuming the maximum concentration of the renewable fuel in the
blend as allowed by law and/or regulation.
    (d) [Reserved]
    (e) All RINs retired pursuant to this section shall be identified
in EMTS according the following schedule:
    (1) Within ten (10) business days of the designation of a fuel for
which RINs were generated for a use other than as transportation fuel,
heating oil, or jet fuel.
    (f) Any volume of fuel which is designated for a purpose other than
as transportation fuel, heating oil or jet fuel cannot be redesignated
as renewable fuel.
0
9. Section 80.1450 is amended as follows:
0
a. By adding paragraph (b)(1)(ix); and
0
b. By revising paragraph (g) and
0
c. By adding paragraph (h).
    The revisions and additions read as follows:

Sec.  80.1450  What are the registration requirements under the RFS
program?

* * * * *
    (b)* * *
    (1)* * *
    (ix) For a producer or importer or any renewable fuel other than
ethanol, biodiesel, renewable diesel, biogas or renewable electricity:
    (A) A description of the renewable fuel and how it will be blended
to into gasoline or diesel fuel to produce a transportation fuel,
heating oil or jet fuel that meets all applicable standards;
    (B) A statement regarding whether the renewable fuel producer or
importer will blend the renewable fuel into gasoline or diesel fuel or
enter into a written contract for the sale and use of a specific
quantity of the renewable fuel with a party who blends the fuel into
gasoline or diesel fuel to produce a transportation fuel, heating oil
or jet fuel that meets all applicable standards;
    (C) If the renewable fuel producer or importer enters into a
written contract for the sale and use of a specific quantity of the
renewable fuel with a party who blends the fuel into gasoline or diesel
fuel to produce a transportation fuel, heating oil or jet fuel, provide
    (1) the name, location and contact information for the party that
will blend the renewable fuel, and
    (2) a copy of the contract that requires the party to blend the
renewable fuel into gasoline or diesel fuel to produce a transportation
fuel, heating oil or jet fuel that meets all applicable standards;
* * * * *
    (g) Any independent third-party auditor described in Sec.  80.1471
must register with EPA as an independent third-party auditor and
receive an EPA issued company identification number prior to conducting
quality assurance audits pursuant to Sec.  80.1472. Registration
information must be submitted at least 30 days prior to conducting
audits of renewable fuel production facilities. The independent third-
party auditor must provide to EPA the following:
    (1) The information specified under Sec.  80.76, if such
information has not already been provided under the provisions of this
part.
    (2) Documentation of professional qualifications as described in
Sec.  80.1450(b)(2)(i)(A) and Sec.  80.1450(b)(2)(i)(B).
    (3) Documentation of professional liability insurance as described
in Sec.  80.1471(c).
    (4) Any quality assurance plans as described in Sec.  80.1469.
    (5) Name, address, and company and facility identification number
of all renewable fuel production facilities that the independent third-
party auditor intends to audit under Sec.  80.1472.
    (6) An affidavit from each renewable fuel producer or foreign
renewable fuel producer stating its intent to have the independent
third-party auditor conduct a quality assurance audit of any of the
renewable fuel producer's or foreign renewable fuel producer's
facilities.
    (7) An affidavit stating that an independent third-party auditor is
independent, as described in paragraphs Sec.  80.1471(b), of any
renewable fuel producer or foreign renewable fuel producer.
    (8) Proof of a RIN replacement instrument, if applicable, as
described under Sec.  80.1470.
    (9) The name and contact information for each person employed (or
under contract) by the independent third-party auditor to conduct
audits or verify RINs, as well as the name and contact information for
the Professional Engineer performing the review.
    (10) Registration updates.--
    (i) Any independent third-party auditor who makes changes to its
quality assurance plan(s) that will allow it to audit new renewable
fuel production facilities, as defined in Sec.  80.1401 that is not
reflected in the producer's registration information on file with EPA
must update its registration information and submit a copy of an
updated QAP on file with EPA at least 60 days prior to producing the
new type of renewable fuel.
    (ii) Any independent third-party auditor who makes any other
changes to a QAP that will affect the third-party auditor's
registration information but will not affect the renewable fuel
category for which the producer is registered per paragraph (b) of this
section must update its registration information 7 days prior to the
change.
    (iii) Independent third-party auditors must update their QAPs at
least 60 days prior to verifying RINs generated by a renewable fuel
facility uses a new pathway.
    (iv) Independent third-party auditors must update their QAPs at
least 60 days prior to verifying RINs generated by any renewable fuel
facility not identified in their existing registration.
    (11) Registration renewal. Registrations for independent third-
party auditors expire at the end of the calendar year, December 31,
after EPA has approved a registration under this paragraph (g) unless:
    (i) The independent third-party auditor resubmits all information,
updated as necessary, described in Sec.  80.1450(g)(1) thru (g)(7) no
later than October 31; and
    (ii) The independent third-party auditor submits an affidavit
affirming that he or she has only verified RINs using a QAP approved
under Sec.  80.1469, notified all appropriate parties of all
potentially invalid RINs as described in Sec.  80.1471(d), and
fulfilled all of his or her RIN replacement obligations under Sec.
80.1474.
    (12) Revocation of Registration.
    (i) The Administrator may issue a notice of intent to revoke the
registration of a third-party auditor if the Administrator determines
that the auditor has failed to fulfill any requirement of this subpart.
The notice of intent shall include an explanation of the reasons for
the proposed revocation.

    (ii) Within 60 days of receipt of the notice of intent to revoke,
the independent third-party auditor may submit written comments
concerning the notice, including but not limited to a demonstration of
compliance with the requirements which provide the basis for the
proposed revocation. Communications should be sent to the following
address:

U.S. Mail: U.S. Environmental Protection Agency, Fuels Programs
Registration (6406J), 1200 Pennsylvania Avenue NW., Washington, DC
20460.
Commercial Delivery: U.S. Environmental Protection Agency, Fuels
Programs Registration, Room 647C,<PHONE_NUMBER>, 1310 L Street NW.,
Washington, DC 20005.

The Administrator shall review and consider any such submission before
taking final action concerning the proposed revocation.

    (iii) If the auditor fails to respond in writing within 60 days to
the notice of intent to revoke, the revocation shall become final by
operation of law and the Administrator shall notify the independent
third-party auditor of such revocation.
    (iv) EPA may deny the registration of an independent third-party