be granted based on a significant renewable feedstock disruption or
other market circumstance that would make the price of biomass-based
diesel fuel increase significantly. Neither of these statutory
provisions provides for a comparison of the costs associated with
meeting the biomass-based diesel standard to the benefits of meeting
that standard. Therefore, we do not believe that cost-benefit analyses
are necessary or appropriate in the context of considering the 2012
biomass-based diesel volume of 1.0 bill gallons.
    Based on our review of the production potential of the biodiesel
industry, projections from several sources, and our assessment of
available feedstocks, we believe that the 1.0 billion gallons needed to
satisfy the applicable volume of biomass-based diesel specified in the
statute can be produced in 2012, and that more than 1.0 bill gallons of
production is possible. Moreover, we do not believe that waiving a
portion of the 2012 biomass-based diesel volume of 1.0 bill gallons
under the provisions of 211(o)(7)(E) is appropriate at this time.

III. Final Percentage Standards for 2012

A. Background

    The renewable fuel standards are expressed as a volume percentage,
and are used by each refiner, blender or importer to determine their
renewable volume obligations (RVO). Since there are four separate
standards under the RFS2 program, there are likewise four separate RVOs
applicable to each obligated party. Each standard applies to the sum of
all gasoline and diesel produced or imported for use in the U.S. The
applicable percentage standards are set so that if each regulated party
meets the percentages, then the amount of renewable fuel, cellulosic
biofuel, biomass-based diesel, and advanced biofuel used will meet the
volumes required on a nationwide basis.
    As discussed in Section II.B.6, we are finalizing a required volume
of cellulosic biofuel for 2012 of 8.65 million gallons (10.45 million
ethanol equivalent gallons). The advanced biofuel and total renewable
fuel volumes will not be reduced below the applicable volumes specified
in the statute. The final 2012 volumes used to determine the four
percentage standards are shown in Table III.A-1.

                                      Table III.A-1--Final Volumes for 2012
----------------------------------------------------------------------------------------------------------------
                                              Actual volume                  Ethanol equivalent  volume
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel....................  8.65 mill gal............  10.45 mill gal.
Biomass-based diesel..................  1.0 bill gal.............  1.5 bill gal.
Advanced biofuel......................  2.0 bill gal.............  2.0 bill gal.
Renewable fuel........................  15.2 bill gal............  15.2 bill gal.
----------------------------------------------------------------------------------------------------------------

    The formulas used in deriving the annual renewable fuel standards
are based in part on estimates of the volumes of gasoline and diesel
fuel, for both highway and nonroad uses, that will be used in the year
in which the standards will apply. Producers of other transportation
fuels, such as natural gas, propane, and electricity from fossil fuels,
are not subject to the standards, and volumes of such fuels are not
used in calculating the annual standards. Since the standards apply to
producers and importers of gasoline and diesel, these are the
transportation fuels used to set the standards, and then again to
determine the annual volume obligations of an individual gasoline or
diesel producer or importer.

B. Calculation of Standards

1. How are the standards calculated?
    The following formulas are used to calculate the four percentage
standards applicable to producers and importers of gasoline and diesel
(see Sec.  80.1405):
[GRAPHIC] [TIFF OMITTED] TR09JA12.002

Where:

StdCB,i = The cellulosic biofuel standard for year i, in
percent.
StdBBD,i = The biomass-based diesel standard (ethanol-
equivalent basis) for year i, in percent.
StdAB,i = The advanced biofuel standard for year i, in
percent.
StdRF,i = The renewable fuel standard for year i, in
percent.
RFVCB,i = Annual volume of cellulosic biofuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
RFVBBD,i = Annual volume of biomass-based diesel required
by section 211(o) of the Clean Air Act for year i, in gallons.
RFVAB,i = Annual volume of advanced biofuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
RFVRF,i = Annual volume of renewable fuel required by
section 211(o) of the Clean Air Act for year i, in gallons.
Gi = Amount of gasoline projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
Di = Amount of diesel projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
RGi = Amount of renewable fuel blended into gasoline that
is projected to be consumed in the 48 contiguous states and Hawaii,
in year i, in gallons.
RDi = Amount of renewable fuel blended into diesel that
is projected to be consumed in the 48 contiguous states and Hawaii,
in year i, in gallons.
GSi = Amount of gasoline projected to be used in Alaska
or a U.S. territory in year i if the state or territory opts-in, in
gallons.
RGSi = Amount of renewable fuel blended into gasoline
that is projected to be consumed in Alaska or a U.S. territory in
year i if the state or territory opts-in, in gallons.
DSi = Amount of diesel projected to be used in Alaska or
a U.S. territory in year i if the state or territory opts-in, in
gallons.
RDSi = Amount of renewable fuel blended into diesel that
is projected to be consumed in Alaska or a U.S. territory in year i
if the state or territory opts-in, in gallons.
GEi = The amount of gasoline projected to be produced by
exempt small refineries and small refiners in year i, in gallons, in
any year they are exempt per Sec. Sec.  80.1441 and 80.1442,
respectively.
DEi = The amount of diesel projected to be produced by
exempt small refineries and small refiners in year i, in gallons, in
any year they are exempt per Sec. Sec.  80.1441 and 80.1442,
respectively.

    The four separate renewable fuel standards for 2012 are based in
part on the gasoline and diesel consumption volumes projected by EIA.
The Act requires EPA to base the standards on an EIA estimate of the
amount of gasoline and diesel that will be sold or introduced into
commerce for that year. EIA estimates 8.85 million barrels per day of
gasoline (~136 billion gallons) and 3.36 million barrels per day of
transportation diesel (~ 52 billion gallons) will be sold or introduced
into commerce in 2012.\34\ Because diesel used in ocean-going vessels
is excluded from the RFS2 program, that amount must be subtracted from
the total projected transportation diesel value. EIA estimates
approximately 26,000 barrels per day of transportation diesel will be
used in ocean-going vessels in 2012, resulting in approximately 3.334
million barrels per day (51.11 billion gallons) projected for all other
transportation uses in 2012.
---------------------------------------------------------------------------

    \34\ Letter, Howard K. Gruenspecht, Acting Administrator, U.S.
Energy Information Administration, to Lisa P. Jackson,
Administrator, U.S. Environmental Protection Agency, October 19,
2011.
---------------------------------------------------------------------------

    The gasoline and diesel volumes are adjusted to account for
renewable fuel volumes--ethanol (estimated by EIA) and biodiesel (based
on EIA's Short-Term Energy Outlook (STEO)). For 2012, these values are
0.87 million barrels per day (~13 billion gallons) and 0.119
quadrillion Btu \35\ (~ 0.9 billion gallons), respectively.
---------------------------------------------------------------------------

    \35\ Table 8 ``U.S. Renewable Energy Supply and Consumption,''
Short Term Energy Outlook, U.S. Energy Information Administration,
October 2011.
---------------------------------------------------------------------------

    In addition, because Alaska does not participate in the RFS2
program, the gasoline and diesel volumes must be further reduced by
Alaska's projected share of transportation fuels. To determine the 49-
state values for gasoline and diesel, the amounts of these fuels used
in Alaska is subtracted from the totals provided by DOE. Just as with
its corresponding gasoline and diesel volumes, renewable fuels used in
Alaska are not included in the renewable fuel volumes that are
subtracted from the total gasoline and diesel volume estimates. Section
211(o) of the Clean Air Act requires that the renewable fuel be
consumed in the contiguous 48 states, and any other state or territory
that opts-in to the program (as Hawaii has done). However, because
renewable fuel produced in Alaska is unlikely to be transported to the
contiguous 48 states or to Hawaii, including Alaska's renewable fuel
volumes in the calculation of the standard would not serve the purpose
intended by section 211(o) of the Clean Air Act of ensuring that the
statutorily required renewable fuel volumes are consumed in the 48
contiguous states and any state or territory that opts-in.
    The 2012 Alaska fractions of U.S. consumption are determined from
the most recent (2009) EIA State Energy Data System (SEDS) estimates,
assuming fairly constant Alaska to U.S. year-to-year ratios. We used
Table CT1 ``Energy Consumption Estimates for Major Energy Sources in
Physical Units, 1960-2009, Alaska'' to get total gasoline and ethanol
consumption for Alaska for 2009. We coupled this data with total U.S.
estimates from Table C2 ``Energy Consumption Estimates for Major Energy
Sources in Physical Units, 2009'' to determine the corresponding Alaska
fractions. The gasoline fraction is approximately 0.2%. Ethanol use in
Alaska is estimated at 8.4% of its gasoline consumption (based on the
data in Table CT1), or approximately 0.2% of national ethanol
consumption. Because only transportation diesel fuel is subject to the
RFS program, we need more specific data than that used to calculate the
gasoline and ethanol fractions. We used data from Table C8
``Transportation Sector Energy Consumption Estimates, 2009'' to
calculate the Alaska transportation distillate fuel oil fraction, 0.8%.
Biodiesel use is assumed to be zero. The Alaska and U.S. data just
described are shown in Table III.B-1.

                                       Table III.B-1--Alaska and U.S. Data
----------------------------------------------------------------------------------------------------------------
                                                                                Alaska
                                                                                fraction\x\
                                                      Alaska                        U.S.                 (in
                                                                                percent)
----------------------------------------------------------------------------------------------------------------
Motor Gasoline...........................  6725 Mbbl \a\..............  3283.7 MMbbl \b\...........          0.2
Fuel Ethanol.............................  565 Mbbl \a\...............  262.8 MMbbl \b\............          0.2
Transportation Distillate................  46.1 tBtu \c\..............  5528.3 tBtu \c\............          0.8
----------------------------------------------------------------------------------------------------------------
\a\ Source: EIA State Energy Data System, Table CT1 ``Energy Consumption Estimates for Major Energy Sources in
  Physical Units, 1960-2009, Alaska''.
\b\ Source: EIA State Energy Data System, Table C2 ``Energy Consumption Estimates for Major Energy Sources in
  Physical Units, 2009''.
\c\ Source: EIA State Energy Data System, Table C8 ``Transportation Sector Energy Consumption Estimates, 2009''.
\x\ Calculated value.

2. Small Refineries and Small Refiners
    In CAA section 211(o)(9), enacted as part of the Energy Policy Act
of 2005, Congress provided a temporary exemption to small refineries
(those refineries with a crude throughput of no more than 75,000
barrels of crude per day) through December 31, 2010. In RFS1, we
exercised our discretion under section 211(o)(3)(B) and extended this
temporary exemption to the few remaining small refiners that met the
Small Business Administration's (SBA) definition of a small business
(1,500 employees or less company-wide) but did not meet the statutory
small refinery definition as noted above. Because EISA did not alter
the small refinery exemption in any way, the RFS2 program regulations
exempted gasoline and diesel produced by small refineries and small
refiners in 2010 from the renewable fuels standard (unless the
exemption was waived), see 40 CFR 80.1141.
    Under the RFS program, Congress provided two ways that small
refineries can receive a temporary extension of the exemption beyond
2010. One is based on the results of a study conducted by the
Department of Energy (DOE) to determine if small refineries would face
a disproportionate economic hardship under the RFS program. The other
is based on EPA determination of disproportionate economic hardship on
a case-by-case basis in response to refiner petitions.
    In January 2009, DOE issued a study which did not find that small
refineries would face a disproportionate economic hardship under the
RFS program.\36\ The conclusions were based in part on the expected
robust availability of RINs and

EPA's ability to grant relief on a case-by-case basis. As a result,
beginning in 2011 small refiners and small refineries were required to
participate in the RFS program as obligated parties, and there was no
small refiner/refinery volume adjustment to the 2011 standard as there
was for the 2010 standard.
---------------------------------------------------------------------------

    \36\ DOE report ``EPACT 2005 Section 1501 Small Refineries
Exemption Study'', (January, 2009).
---------------------------------------------------------------------------

    Following the release of DOE's 2009 small refinery study, Congress
directed DOE to complete a reassessment and issue a revised report. DOE
recently re-evaluated the impacts of the RFS program on small entities
and concluded that 21 small refineries would suffer a disproportionate
hardship if required to participate in the program.\37\ As a result,
these refineries will be exempt from being obligated parties for a
minimum of two additional years, 2011 and 2012.\38\ In 2009, the
gasoline produced by refineries identified in the DOE report as well as
those refineries exempted through the petition process constituted
approximately 3.6% of total US gasoline, and 4.5% of total US diesel.
Applying these percentages to the 2012 projections of gasoline and
diesel volumes yields exempt small refinery gasoline volume of 4.87
billion gallons and diesel volume of 2.28 billion gallons.
---------------------------------------------------------------------------

    \37\ ``Small Refinery Exemption Study: An Investigation into
Disproportionate Economic Hardship,'' U.S. Department of Energy,
March 2011.
    \38\ Since the standards are applied on an annual basis, the
exemptions are likewise on an annual basis even though the
determination of which refineries would receive an extension to
their exemption did not occur until after January 1, 2011.
---------------------------------------------------------------------------

    CAA section 211(o) requires that the small refinery adjustment also
account for renewable fuels used during the prior year by small
refineries that are exempt and do not participate in the RFS2 program.
Accounting for this volume of renewable fuel would reduce the total
volume of renewable fuel use required of others, and thus directionally
would reduce the percentage standard. However, as we discussed in RFS1,
the amount of renewable fuel that would qualify, i.e., that was used by
exempt small refineries but not used as part of the RFS program, is
expected to be very small. In fact, these volumes would not
significantly change the resulting percentage standards. Whatever
renewable fuels small refineries blend will be reflected as RINs
available in the market; thus there is no need for a separate
accounting of their renewable fuel use in the equations used to
determine the standards. Thus we assign a value of zero to small
refinery renewable fuel use.
    The 2012 standards reflect the exemption of these refineries. In
addition, and separate from the DOE determination, EPA may extend the
exemption for individual small refineries on a case-by-case basis if
they demonstrate disproportionate economic hardship.
    In the NPRM, we stated that ``requests for exemptions that are
approved after the release of the final 2012 RFS standards will not
affect the 2012 standards.'' This position is unchanged from that set
in the final rule establishing the 2011 standards.\39\ At that time, we
stated, ``EPA believes the Act is best interpreted to require issuance
of a single annual standard in November that is applicable in the
following calendar year, thereby providing advance notice and certainty
to obligated parties regarding their regulatory requirements. Periodic
revisions to the standards to reflect waivers issued to small
refineries or refiners would be inconsistent with the statutory text,
and would introduce an undesirable level of uncertainty for obligated
parties.'' However, a few commenters took issue with this approach.
Specifically, these commenters maintain that EPA did not provide notice
and comment opportunities regarding the extensions of the small
refinery exemptions for the current compliance period (2011), and that
EPA cannot grant such extensions (mid-year) without modifying the
standards because such authority is not provided in the statute. In
addition, these commenters extend the application of their comments to
any extensions of exemptions that may occur after issuance of the final
2012 standards. Commenters suggested requiring petitions to be
submitted in time to be considered in the annual standard-setting
process. One commenter also suggested that the volumes waived in 2011
as a result of the small refiner waivers be ``made up'' in setting the
2012 standards. EPA understands the desire of the commenters to have
the annual required volumes of renewable fuels realized. However, while
the statute requires EPA to publish the standards for the following
year by November 30 of the preceding year, there is no provision for
changing the percentage standards once they are set outside of the
waiver provisions of CAA 211(o)(7). In addition, we are not required to
ensure that the biofuel volumes in the statute are precisely met. We
are required to use the specified volumes to set the percentage
standards, but there are no provisions for ensuring that the percentage
standards actually result in the specified volumes actually being
consumed. This outcome is evidenced by the fact that we use projections
of gasoline and diesel volume for the next year which might turn out to
be too high or too low. Insofar as those projections are wrong, the
percentage standards will not produce a demand for biofuels that
exactly corresponds to the volumes in the statute. Thus Congress
allowed for some imprecision to exist in the actual volumes of
renewable fuel that are consumed as a result of the percentage
standards that we set each November, and did not provide a means for
correcting the percentage standards after November to ensure that the
applicable volumes of renewable fuel are exactly met in a given
compliance year.
---------------------------------------------------------------------------

    \39\ See 75 FR 76805, December 9, 2010.
---------------------------------------------------------------------------

3. Final Percentage Standards
    As finalized in the March 26, 2010 RFS2 rule, the standards are
expressed in terms of energy-equivalent gallons of renewable fuel, with
the cellulosic biofuel, advanced biofuel, and total renewable fuel
standards based on ethanol equivalence and the biomass-based diesel
standard based on biodiesel equivalence. However, all RIN generation is
based on ethanol-equivalence. More specifically, the RFS2 regulations
provide that production or import of a gallon of biodiesel will lead to
the generation of 1.5 RINs. In order to ensure that demand for 1.0
billion physical gallons of biomass-based diesel will be created in
2012, the calculation of the biomass-based diesel standard provides
that the required volume be multiplied by 1.5. The net result is a
biomass-based diesel gallon being worth 1.0 gallons toward the biomass-
based diesel standard, but worth 1.5 gallons toward the other
standards.\40\
---------------------------------------------------------------------------

    \40\ 75 FR 14716, March 26, 2010.
---------------------------------------------------------------------------

    The levels of the percentage standards would be reduced if Alaska
or a U.S. territory chooses to participate in the RFS2 program, as
gasoline and diesel produced in or imported into that state or
territory would then be subject to the standard. Neither Alaska nor any
U.S. territory has chosen to participate in the RFS2 program at this
time, and thus the value of the related terms in the calculation of the
standards is zero.
    Note that the terms for projected volumes of gasoline and diesel
use include gasoline and diesel that has been blended with renewable
fuel. Because the gasoline and diesel volumes estimated by EIA include
renewable fuel use, we must subtract the total renewable fuel volume
from the total

gasoline and diesel volume to get total non-renewable gasoline and
diesel volumes, as discussed earlier. The values of the variables
described above are shown in Table III.B.3-2. Terms not included in
this table have a value of zero.

    Table III.B.3-2--Values for Terms in Calculation of the Standards
                               [Bill gal]
------------------------------------------------------------------------
                            Term                                Value
------------------------------------------------------------------------
RFVCB,2012.................................................      0.01045
RFVBBD,2012................................................          1.0
RFVAB,2012.................................................          2.0
RFVRF,2012.................................................        15.20
G2012......................................................       135.39
D2012......................................................        50.68
GE2012.....................................................         4.87
DE2012.....................................................         2.28
RG2012.....................................................        13.31
RD2012.....................................................         0.93
------------------------------------------------------------------------

    Using the volumes shown in Table III.B.3-2, we have calculated the
percentage standards for 2012 as shown in Table III.B.3-3.

          Table III.B.3-3--Final Percentage Standards for 2012
------------------------------------------------------------------------

------------------------------------------------------------------------
Cellulosic biofuel...........................................     0.006%
Biomass-based diesel.........................................      0.91%
Advanced biofuel.............................................      1.21%
Renewable fuel...............................................      9.23%
------------------------------------------------------------------------

IV. Changes to RFS2 Regulations

    As the RFS2 program got underway in the second half of 2010, we
discovered that a number of regulatory provisions were causing
confusion among regulated parties. In some cases the confusion was due
to a lack of specificity in terms, while in others it was due to unique
circumstances that were not sufficiently addressed in the RFS2
regulations. A few amendments are being finalized in order to correct
these problems and to amend regulatory language that inadvertently
misrepresented our intent as reflected in the preamble to the final
RFS2 regulations. In addition, as we have worked with regulated parties
to ensure that the RFS program is operating as intended, we identified
areas in the regulations that could benefit from streamlining. We also
identified one provision in the gasoline benzene regulations that
misrepresented our intent as stated in the preamble. As a result, we
are finalizing a number of amendments to the RFS regulations, and one
amendment to the gasoline benzene regulations, in 40 CFR Part 80.

A. Summary of Amendments

    Below is a table listing the provisions that we are amending in
today's action. We have provided additional explanation for several of
these amendments in Sections IV.B through IV.F below.

              Table IV.A-1--Summary of Technical Amendments
------------------------------------------------------------------------
                Section                            Description
------------------------------------------------------------------------
80.1275(d)(3)..........................  Removed to allow for the
                                          inclusion of transferred
                                          blendstocks in the calculation
                                          of benzene early credits.
80.1401................................  Amended definition of ``annual
                                          cover crop'' to clarify that
                                          the crop has no existing
                                          market to which it can be sold
                                          except for its use as
                                          feedstock for the production
                                          of renewable fuel.
80.1401................................  Amended definition of
                                          ``naphtha'' to clarify that it
                                          applies to hydrocarbons only,
                                          must be commonly or
                                          commercially known as naphtha,
                                          and is used for producing
                                          gasoline.
80.1405(a), (b), and (d)...............  Amended to state the standards
                                          for 2012 and the date of the
                                          annual standards calculation.
80.1405(c).............................  Amended terms ``GEi'' and
                                          ``DEi'' to reference the
                                          amount of gasoline and/or
                                          diesel produced by small
                                          refineries and small refiners
                                          that are exempt pursuant to
                                          Sec.  Sec.   80.1441 and
                                          80.1442.
80.1415(c)(2)..........................  Amended to state the specific
                                          requirements needed for
                                          technical justifications for
                                          applications for Equivalence
                                          Values.
80.1426(f)(1)..........................  Corrected typographical error
                                          in cross reference to
                                          paragraph (f)(6) of Sec.
                                          80.1426.
80.1426(f)(5)(ii)......................  Amended requirements so that
                                          the separated yard waste plans
                                          and separated food waste plans
                                          need not be approved by EPA,
                                          but instead only need to be
                                          accepted by EPA under the
                                          registration provisions.
80.1429(b)(2)..........................  Amended to clarify that
                                          ``fossil-based'' diesel fuel
                                          is different from renewable
                                          diesel fuel.
80.1429(b)(9)..........................  Amended to include RIN
                                          separation limitations on
                                          parties whose non-export RVOs
                                          are solely related to imports
                                          of gasoline and diesel or the
                                          use of blendstocks to produce
                                          gasoline or diesel.
80.1449(a).............................  Amended Production Outlook
                                          Report due date; added
                                          allowance for unregistered
                                          renewable fuel producers and
                                          importers to submit Production
                                          Outlook Reports.
80.1450(d)(1)-(d)(3)...................  Amended to add more specificity
                                          on when updates, addenda, or
                                          resubmittals are required for
                                          engineering reviews and to
                                          include references to foreign
                                          ethanol producers.
80.1451(a)(1)(xi)......................  Amended to clarify that this
                                          section references RFS1 RINs
                                          retired for compliance.
80.1452(b)(2)..........................  Corrected typographical error.
80.1452(b)(4)..........................  Amended to clarify that a RIN-
                                          generating importer must
                                          submit to EMTS the EPA
                                          facility registration number
                                          of the facility at which the
                                          renewable fuel producer or
                                          foreign ethanol producer
                                          produced the batch.
Sec.   80.1452(b)(5)...................  Amended to clarify that for
                                          imports of renewable fuel, the
                                          RIN-generator must submit to
                                          EMTS the EPA facility
                                          registration number of the
                                          importer that imported the
                                          batch.
80.1460(b)(6)..........................  Adds the existing prohibition
                                          against generating a RIN for
                                          fuel for which RINs have
                                          previously been generated.
80.1464(a)(2)(iii), (a)(2)(iv),          Added to clarify that auditors
 (b)(2)(iii), (b)(2)(iv), (c)(1)(iii),    must verify that product
 and (c)(1)(iv).                          transfer documents for RIN
                                          transactions contain the
                                          required information for
                                          obligated parties/exporters
                                          and for renewable fuel
                                          producers/importers.

80.1464(a)(2)(i), (a)(3)(ii),            Amended to clarify that
 (b)(2)(i), (b)(3)(ii).                   auditors must validate RIN
                                          separations for obligated
                                          parties/exporters and for
                                          renewable fuel producers/
                                          importers; amended to correct
                                          typographical error.
80.1465(h)(2); 80.1466(h)(2); and        Amended to remove the option of
 80.1467(e)(1), (e)(2), and (g)(2).       using an alternative
                                          commitment in lieu of paying a
                                          bond and to clarify the amount
                                          of bond a foreign entity must
                                          post.
------------------------------------------------------------------------

    There are also two changes to Table 1 to Sec.  80.1426 that we
proposed in the July 1, 2011 NPRM that we are not finalizing in today's
action, but which instead will be finalized in a separate action. The
first change would amend the table to include ID letters for each
pathway to facilitate references to specific pathways. The second
change would add ``rapeseed'' to the existing pathway that currently
allows canola oil to be used as a valid feedstock in the production of
biodiesel. These two changes are being finalized in a separate action
in order to ensure that multiple changes to Table 1 to Sec.  80.1426
that are made sequentially do not inadvertently result in later changes
over-writing earlier changes.

B. Technical Justification for Equivalence Value Application

    A producer or importer of renewable fuels is required to submit an
equivalence value (EV) application in accordance with Sec.  80.1415(c)
for any renewable fuel that does not have an EV listed in Sec.
80.1415(b). In addition, a producer or importer could apply for an
alternative EV if the producer or importer has reason to believe that a
different EV than that listed in Sec.  80.1415(b) is warranted. Section
80.1415(c) provides the calculation equation for the EV of the
renewable fuel and the requirements for the technical justification to
be submitted in the EV application.
    We have received many inquires from producers and importers of
renewable fuels requesting clarification of the specific requirements
for the technical justification listed in Sec.  80.1415(c). In
addition, based on the many EV applications we have evaluated, we have
found that we needed to request additional information from producers
and importers to better understand the composition of the renewable
fuel they produced, such as intermediate steps and energy inputs in
production process, sources of renewable and non-renewable feedstock,
and so forth, to better evaluate and assign the correct EV to the
producer or importer's renewable fuel.
    Therefore, we are finalizing in this rulemaking amendments to Sec.
80.1415(c)(2) to clarify the current requirements and to include
additional requirements for the technical justification to be submitted
in the EV application. The final amendments to Sec.  80.1415(c)(2)
include:

--A calculation for the requested equivalence value according to the
equation in Sec.  80.1415(c)(1), including supporting documentation for
the energy content (EC) of the renewable fuel such as a certificate of
analysis from a laboratory that verifies the lower heating value in Btu
per gallon of the renewable fuel produced.
--For each feedstock, component or additive used to make the renewable
fuel, provide a description, the percent input and identify whether or
not it is renewable biomass or is derived from renewable biomass.
--For each feedstock that could independently qualify as a renewable
fuel, state whether or not RINs have been previously generated for the
feedstock.
--A description of renewable fuel and the production process, including
a block diagram that shows quantities of all inputs and outputs
required at each step of the production process for the production of
one batch of renewable fuel.

    We received no adverse comments on our proposed changes to Sec.
80.1415(c)(2), and so are finalizing the changes as proposed.

C. Changes to Definitions of Terms

1. Definition of Annual Cover Crop
    As explained in the preamble of the RFS2 final rulemaking, EPA
extended modeling for cellulosic biofuel made from corn stover and
biodiesel/renewable diesel made from waste oils/fats/greases to certain
fuels made from annual cover crops, based on the expectation that
cultivation of annual cover crops, as defined in Sec.  80.1401, will
have little impact on the agricultural commodity markets and therefore
little or no land use impact associated with them. Therefore, certain
fuels (as specified in Table 1 to Sec.  80.1426) derived from annual
cover crop feedstocks qualify for D-codes under the advanced biofuel,
biomass-based diesel, and cellulosic renewable fuel categories.
    Section 80.1401 of the final RFS2 rule defines ``annual cover
crop.'' We proposed to amend the definition of annual cover crop in
order to more clearly define those feedstocks that meet the intent of
including cover crops in several pathways in Table 1 to Sec.  80.1426.
    As explained in the proposal, in order to extend our modeling to
cover crops, we used the rationale that annual cover crops would have
no indirect land use impact since they are planted on land otherwise
used for crop production. Direct greenhouse gas emissions would only be
associated with growing, harvesting and transporting the cover crop,
and then processing into biofuel. (See 75 FR 14794 col. 3.) These
direct impacts could include requiring the farmer to use more
commercial fertilizer in compensation for removing cover crops that
would have been plowed into the field, or in decreasing yield of food
crops. However, our determination that cover crops qualified for D-
codes under the advanced biofuel, biomass-based diesel, and cellulosic
renewable fuel categories was based on the fact that they did not have
any indirect impacts. Thus, we assumed that no additional land would be
required to plant annual cover crops, that cover crops would not
displace primary crop production, and that the use of the cover crop as
a feedstock for renewable fuels would not have secondary impacts on
other agricultural commodity markets. This implies that annual cover
crops would not be planted and harvested for the purpose of being sold
to existing markets. If a cover crop already had an existing market,
then the increased use of cover crops as feedstocks for renewable fuel
production could potentially impact the existing markets. Therefore, we
proposed to amend the current definition for ``annual cover crop'' to
clarify that for purposes of the RFS program the term only includes
crops that have no existing market to which they can be sold except for
the use of the feedstock for renewable fuel. This will ensure that no
unintended land use or significant indirect effects result from the use
of annual cover

crops as feedstocks for renewable fuel production.
    Several parties commented against this change, stating that it is
too restrictive and thus would prevent some crops they considered cover
crops from qualifying as eligible feedstock under the RFS2 program.
While this change clarifies that crops having existing market impacts
would not qualify as cover crops, such exclusion is consistent with the
basis for including the cover crop provision. EPA determined that crops
with no market value could be planted on land without any expected
impact on other crops and thus no expected indirect land use impact.
This amendment clarifies that only crops with no market impact can
qualify as cover crops and is consistent with the underlying analysis.
However, even if a crop does not qualify under this revised cover crop
definition, that does not prevent it from being included as an eligible
feedstock under the RFS2 program. As stated in the proposal, EPA
recognizes that there may be additional fuel pathways requiring
lifecycle greenhouse gas (GHG) assessments and the assignment of
appropriate RIN D-Codes, including those using feedstocks that do not
meet the proposed amended definition of annual cover crop. For further
guidance on the process for requesting EPA evaluation of new fuel
pathways, please refer to the following sites:
    http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-lca-pathways.htm
    http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/lca-petition-instructions.htm#1
2. Definition of ``Naphtha''
    In the RFS2 final rule, we included several RIN-generating pathways
in Table 1 to Sec.  80.1426 for naphtha made from renewable biomass. We
also provided a definition of naphtha in Sec.  80.1401. However, the
definition we finalized was overly broad and did not adequately
represent our intent to limit naphtha to gasoline blendstocks. As a
result, some biofuel producers have expressed interest in interpreting
the term ``naphtha'' to include materials that, while falling within
the boiling range of gasoline, are not used as a blendstock to produce
gasoline.
    To remedy this situation, we proposed to revise the definition of
naphtha to also specify that it applies only to blendstocks which are
composed of only hydrocarbons, are commonly or commercially known as
naphtha, and are used to produce gasoline. We received no adverse
comments on this proposal, and so are finalizing it as proposed.

D. Technical Amendments Related to RIN Generation and Separation

1. RIN Separation Limit for Obligated Parties
    We proposed to amend section Sec.  80.1429(b)(9) to limit the
amount of RINs a company who is an obligated party solely by virtue of
importation of obligated fuel can separate to meet their Renewable
Volume Obligation (RVO). This proposal was designed to prevent abuse of
the obligated party RIN separation provision by a company that imports
a relatively small amount of an obligated volume, but then separates a
large amount of RINs. It was also designed to help prevent hoarding of
RINs by parties that do not need them for compliance purposes, and to
generally increase the liquidity of RINs. EPA structured the original
RFS1 separation regulations around facilitating compliance by obligated
parties who must acquire RINs to meet their RVOs. This change is
consistent with the original design and also ensures that importers can
separate enough RINs to meet their obligations. Overall, commenters
were against this amendment with many companies indicating that they
are currently taking advantage of the ability to separate all RINs in
their possession if they are an obligated party solely related to their
gasoline and/or diesel imports, and that they wish to continue to do
so.
    One commenter opposed this change, stating that the RIN life
limitation would prevent hoarding. EPA does not agree with this; the
life of a RIN prevents use for compliance after a designated amount of
time, see Sec.  80.1447(a)(6), this does not provide an adequate
mechanism to prevent hoarding of RINs.
    Several commenters stated that the carryover provisions prevent RIN
hoarding. EPA does not agree; the carryover provisions, Sec.
80.1428(a)(5), refer only to the ratio of assigned RINs to volumes of
renewable fuel owned at the end of a quarter. There is no limit on the
amount of separated RINs that a party may own at the end of a quarter.
    Several commenters stated that market liquidity would decrease if
obligated importers could not separate all RINs that they own. They
also stated that RINs will be held by fewer obligated parties. We
believe that market liquidity would not be decreased; RIN separation
would still occur according to Sec.  80.1429 and obligated parties
would still have access to the separated RINs needed for compliance. In
fact, to the extent that the provision prevents RIN hoarding, as
intended, it should increase RIN liquidity. EPA has determined that
this will not change or limit who can participate in the RFS program or
become an obligated party; it will only limit the number of RINs that
certain importers can separate. In addition, these obligated importers
and any other RIN owning party can separate RINs without being subject
to the limitation in Sec.  80.1429(b)(9) for any of the reasons
outlined in Sec.  80.1429(b)(2)-(b)(5) and (b)(8).
    One commenter was concerned about how an obligated importer would
know how many RINs they could separate for ``receipt of fuel by an
obligated party'' noting that they will not know their exact RVO until
the end of the compliance year. EPA believes that obligated importers
should separate RINs on the basis of ``receipt of fuel by an obligated
party'' only to the extent necessary to meet their existing obligation.
    One commenter felt that the proposed amendment would limit the
actual capacity of an importer to introduce a volume of renewable fuel
into the marketplace. EPA does not agree with this statement and
believes that limiting RIN separation using the reason ``receipt of
fuel by an obligated party'' would not reduce the amount of renewable
fuel that is in demand and may be sold.
    One commenter requested confirmation of the following statement:
``this change would, in no way, limit the right of a company to
separate RINs from renewable fuel if that entity is acting as a blender
and blending renewable fuel into transportation, heating fuel or jet
fuel.'' EPA confirms the previous statement with one clarification.
Amended Sec.  80.1429 applies ``except as provided in paragraphs (b)(2)
through (b)(5) and (b)(8).'' Since the obligation for blenders to
separate RINs for renewable fuel that they blend to produce a
transportation fuel, heating oil or jet fuel appears in (b)(2), the
limitations in (b)(9) are not applicable to RIN separations pursuant to
that provision. We clarify, however, that (b)(2) applies to blending
``to produce'' a transportation fuel, heating oil or jet fuel. For
example, blending biodiesel at a rate of 5% into motor vehicle diesel
fuel would produce a transportation fuel.
    One commenter indicated that this method of separation helped
companies that did not want to be involved with the RFS program;
allowing obligated importers to transfer renewable fuel without RINs
and not violating the quarterly check outlined in

Sec.  80.1428(a)(5). EPA notes that all parties have the ability to
separate up to 2.5 RINs per gallon pursuant to Sec.  80.1429. This
amendment, which will limit obligated importers' ability to separate
RINs, would not change this feature. This provision could facilitate
the transfer of fuel with separated RINs to parties not wishing to
receive RINs. Also, small blenders have the ability to delegate all RIN
related responsibilities to the party directly upstream as long as they
are blending less than 125,000 gallons of renewable fuel per year
(Sec.  80.1440). In addition to separating up to their RVO, obligated
importers and any other RIN owning party can separate for any of the
reasons outlined in Sec.  80.1429(b)(2)-(b)(5) and (b)(8) without being
subject to the limitation in (b)(9).
    One commenter argued that the ability to separate as an obligated
importer allowed them more flexibility with RIN transfer dates. EPA
believes that this implies that the party uses its ability to separate
to avoid the requirement in Sec.  80.1428(a)(3) ``an assigned RIN
cannot be transferred to another person without simultaneously
transferring a volume of renewable fuel to that same person.'' The
commenter indicated that a reason for becoming an obligated importer is
to be able to separate all RINs and avoid the previously referenced
regulatory requirement. This also allows them to remain in compliance
with the EMTS transaction reporting time frames laid out on Sec.
80.1452(c). EPA believes that transfer date and the ability to transfer
separated RINs without renewable fuel are not relevant to this
amendment. The commenter's use of the provision is counter to how the
program was set up to ensure the distribution of RINs and could be used
not only to slow the transfer of RINs downstream to the blender or
final user of the renewable fuel, but also allow hoarding. The
commenter also stated that there is no requirement to report physical
fuel inventory and number of assigned RINs (Sec.  80.1428(a)(5)). EPA
has determined that this statement is not accurate pursuant to Sec.
80.1451. Currently, Sec.  80.1451(c)(2)(xiv), requires the volume of
renewable fuel owned at the end of the quarter. This volume must meet
the requirements of Sec.  80.1428(a)(5).
    EPA believes that while commenters were mainly against the
amendment, specific arguments presented supported EPAs reason for the
amendment. For the reasons stated above, we are finalizing the
regulatory changes as proposed.
2. RIN Retirement Provision for Error Correction
    As we stated in the proposal, in some instances, renewable fuel
producers or importers may improperly generate RINs in EMTS as a result
of calculation errors, meter malfunctions or clerical errors. Pursuant
to Sec.  80.1431(a), improperly generated RINs are invalid, and cannot
be used to achieve compliance with any Renewable Volume Obligations
(RVOs).
    EPA sought comment on the possibility of amending Sec.  80.1431 to
provide the regulated community with limited flexibility to allow
certain RINs that were improperly generated to nevertheless be
transferred and used for compliance, provided the RIN-generator retires
equivalent RINs (the same quantity and fuel category (D-code) of RINs
with the same RIN year) in order to make the market whole.
    We sought comment on whether EPA should amend the regulations to
include the flexibility for EPA to allow improperly generated RINs to
be used for compliance, whether the conditions set forth in the
proposal were appropriate, and whether there are additional or
alternative conditions that should be imposed if the flexibility were
to be granted. We proposed that the following general limitations
should apply to any flexibility to allow improperly generated RINs to
be transferred and used for compliance: (1) The RINs must have been
improperly generated as a result of an inadvertent error, (2) the
improperly generated RINs must have the correct D code, (3) the RIN
generator must correct the information submitted to EMTS and retire an
equivalent number and type of any excess RINs that were generated as a
result of the error within a fixed time period of 60 days, (4) the
flexibility to allow improperly generated RINs to be used for
compliance would only apply if the number of excess RINs generated for
a particular batch exceeds the number of RINs that should have been
generated by no more than two percent, and (5) the flexibility to allow
improperly generated RINs to be used for compliance should be limited
to a certain number of times per year per RIN generator.
    We received several comments in support of providing EPA with some
sort of flexibility to allow improperly generated RINs to be used for
compliance, and a few comments that did not support EPA providing any
flexibility of this type. Supporters of the flexibility believe that
this flexibility is necessary for good faith RIN generators who have
made inadvertent mistakes. They argue that the flexibility will avoid
time spent by both EPA and regulated parties tracking invalidly
generated RINs to their current owner when equivalent RINs could be
retired to make the system whole. Commenters believe EPA's time is
better spent investigating more egregious violations. Many supporters
of the flexibility, however, believe that, given the proposed
limitations, the proposed flexibility would be too narrow. Commenters
believe that EPA should take into consideration the totality of the
circumstances, including the number of RINs/percent of the batch that
are invalid, the frequency of improper generation on the part of the
producer and indications of good faith mistake when determining whether
to allow the flexibility for improperly generated RINs to be used for
compliance, rather than imposing strict limitations on the use of the
flexibility.
    EPA believes that providing this type of flexibility will reduce
disruptions to the RIN market while continuing to apply appropriate
pressure on parties that generate, transfer and use RINs to comply with
the regulations. However, EPA disagrees with the commenters that
advocated that the flexibility should be unlimited. EPA believes that
by limiting the use of this flexibility, RIN generators are provided an
incentive to implement and utilize measures and controls to ensure the
validly of information sent to EMTS in a more timely manner. Therefore,
in today's rule in 80.1431(c) and (d), EPA is finalizing an approach
that provides flexibility to RIN generators to retire equivalent RINs
in situations where they have over-generated RINs on a batch due a
broken meter, an inadvertent temperature correction error, or an
inadvertent administrative error. This flexibility may only be used
under certain conditions, though, in order to mitigate harm to the RIN
market, as specified in the regulations and discussed in detail below.
    Some commenters supported the proposed 60-day time allowance for a
RIN generator to correct RIN generation information submitted to EMTS.
The commenters believe 60 days is sufficient to identify and correct
inadvertent mistakes, and the time limit provides an incentive for the
regulated community to regularly verify that RINs have been correctly
generated. On the other hand, another commenter thought that the
correction period should be longer than 60 days. One commenter
suggested 18 months for RIN generators to notify EPA of improperly
generated RINs at which point EPA would determine whether to allow
those invalid RINs to be used for

compliance. The commenter believed this would allow invalid RINs to be
discovered during the attest audit conducted each year concerning the
renewable fuel producer's compliance records.
    Additionally, commenters generally disagreed with EPA's proposal to
limit the flexibility to situations where the number of excess RINs
generated for a particular batch exceeds the number of RINs that should
have been generated by no more than 2%. Commenters argued that a simple
typing error in any digit can easily result in an over-generation that
far exceeds 2%. One commenter suggested that the number of RINs
eligible for the flexibility be limited to no more than 2% of a
specific RVO category (e.g. Cellulosic Biofuel, Advanced Biofuel, etc.)
for any given year. Another suggested that there is no reason to limit
the flexibility this way, and that EPA should maintain discretion to
determine when invalid RINs can be used for compliance, regardless of
what percentage of the RIN batch is invalid. The commenter states that
there is no reasonable equitable basis for limiting the availability of
the flexibility to situations involving an error of no more than 2%,
since there can be significant variability in the size of renewable
fuel batches; for example, 2% of a large batch could consist of more
RINs than an entire batch for a smaller facility.
    In today's final rule, EPA did not limit the ability to use the
flexibility to a certain number of RINs or percentage of a batch as
proposed because we agree with commenters' suggestion that a simple
typing or meter error may result in a large number of excess RINs just
as easily as it could result in an error that constitutes only a small
number of RINs. EPA's decision to eliminate the two percent limitation
may result in more regulated parties taking advantage of the
flexibility created by this rule. Nevertheless, EPA is limiting the use
of the flexibility to situations in which RIN generators who improperly
over-generated RINs on a batch fit certain criteria, including taking
remedial action to retire equivalent RINs within 30 days of the
original invalid RIN generation submission in EMTS, as specified in
80.1431(c)(7). EPA believes that it is appropriate to require RIN
generators to correct the information submitted to EMTS within 30 days
to encourage the regulated community to take prompt corrective action,
which will aid in maintaining market integrity. EPA believes that
limiting the amount of time that RIN generators are afforded to avail
themselves of this flexibility is necessary to provide an incentive to
RIN generators to conduct timely internal inspections of their RIN
generation activities in order to ensure that RINs are properly
generated and the accuracy of RIN information in EMTS.
    We also sought comment on the possibility of establishing a limit
on the number of times this flexibility could be requested within a
compliance period by a given RIN generator. We stated that we believe
such a limitation could encourage RIN generators to take appropriate
measures to avoid generating invalid RINs, and limit the possibility
that RIN generators would intentionally generate invalid RINs to take
advantage of short term RIN price spikes. Some commenters argued that
there should not be a limit on the number of times a RIN generator can
request EPA allow them to use the flexibility, but that if a particular
company regularly generates RINs improperly, that company should be
penalized on a case-by-case basis, taking into account whether the
error was truly a mistake made in good faith.
    EPA disagrees with commenters' belief that RIN generators should
have unlimited access to these flexibilities. EPA believes that the
flexibility should be limited to a set number (namely, five) of
improperly generated batches per year and is finalizing regulations to
that effect in 80.1431(c)(6). By limiting the number of times a RIN
generator may utilize the flexibility to retire equivalent RINs, the
regulations will encourage RIN generators to implement robust measures
and controls to prevent errors from occurring, knowing that the
flexibility is only available to them for five batches each compliance
year. Additionally, limiting the number of batches to which this
flexibility can be applied restricts the ability of RIN generators that
might otherwise intentionally generate invalid RINs to take advantage
of short term RIN price spikes.
    Finally, EPA is finalizing a provision informing the regulated
community that EPA intends to publicly post information concerning RIN
generators utilizing this flexibility in 80.1431(c)(7)(B). By posting
this information, EPA is assisting obligated and other regulated
parties in their due diligence to ensure compliance with all RFS2
regulations. EPA believes that posting information concerning the use
of this flexibility will incentivize proper RIN generation in the
future.
    Further, EPA may remove improperly generated RINs from EMTS if the
RIN generator has failed to properly meet the remedial action
requirements stated in the regulations, as specified in 80.1431(d). EPA
believes this will prevent invalid RINs that do not meet the
requirements in 80.1431(c) from propagating through the market and
being used for compliance purposes, thus preventing additional
violations. While EPA is aware that the proposal did not include the
ability to remove improperly generated RINs, EPA believes this ability
is a logical outgrowth from the comments that EPA should spend more
time investigating egregious violations. This provision will allow EPA
to quickly remove from the market those RINs reported by the RIN
generator to be invalid due to reasons in 80.1431(c)(2), thus affording
EPA more time to spend investigating egregious violations.
    Finally, a number of commenters noted that good faith purchasers
and the ultimate users of the RINs, the obligated parties, should not
be subject to a violation for unwittingly buying and/or retiring
invalid RINs for compliance. EPA disagrees, and believes that the
``buyer beware'' aspect of the RIN trading program is one of the
cornerstones of the program. It provides an important incentive for the
regulated community to comply with the regulations and mandates due
diligence on the part of all RIN buyers. It encourages self-policing on
the part of RIN generators, owners and users in order to keep the
program functioning smoothly. EPA is not making any changes to the
liability sections of RFS2 as a result of these comments and although
today's rule will allow obligated parties to use some invalid RINs for
compliance, the obligated parties and any intermediary party are still
liable for buying and/or transferring invalid RINs.
3. Production Outlook Reports Submission Deadline
    In the final RFS2 regulations, in Sec.  80.1449(a), EPA set the
annual deadline for submitting Production Outlook Reports as March 31
of each year. However, EPA has determined that, in order for the
information contained in the Production Outlook Reports to be most
useful when setting the RFS2 volume requirements and associated
percentage standards for the following calendar year, the reports
should contain the most accurate projections possible. Since the
accuracy of projections tends to increase the closer those projections
are made to the following calendar year, we proposed that the March 31
deadline should be moved to June 1. This revised deadline would still
allow the information contained in the Production Outlook Reports to be
used in the development

of the final rulemaking setting the standards for the following year.
    We received one comment on the proposed Production Outlook Reports
deadline of June 1 that suggested August 31, or as late as possible
that still ensures the information is useful in the development of the
final RFS standards for the following year. EPA believes, however, that
if the deadline is set later in the year, there would be insufficient
opportunity for EPA to quality check the incoming data prior to
incorporating it into the analysis for developing the RFS2 volume
requirements and associate percentage standards for the following
calendar year. EPA strives to make the most accurate projections
possible, so without time to check the data quality, there could be
inaccuracies in the volume requirements that lead to market disruption.
    Another commenter suggested that having the Production Outlook
Reports deadline immediately after the May 31 attest engagement
deadline would place a significant burden on regulated parties at that
time, and suggests a deadline of June 30 for the Production Outlook
Reports. EPA believes that it is not a significant burden for regulated
parties to submit the Production Outlook Report at the same time as the
attest engagement report, especially considering the attest audit and
report are typically conducted by independent third-party auditors,
rather than the regulated parties themselves.
    For the reasons stated above, EPA believes that the proposed June 1
deadline for Production Outlook Reports is reasonable and should not be
moved to later in the year. Therefore, EPA is finalizing the June 1
deadline for Production Outlook Reports.
4. Attest Procedures
    In the final RFS2 regulations, EPA required in Sec.
80.1464(c)(1)(i) and (c)(2)(ii) that RIN owners conduct attest
procedures for RIN transaction and RIN activity reports that involve
RIN separations. This requirement was intended to be included in the
attest procedures for obligated parties and exporters as well as for
renewable fuel producers and RIN-generating importers, in order to
confirm that RINs are being properly separated by all parties
participating in the RIN market. Thus, we proposed amendments to Sec.
80.1464(a)(2)(i) and (a)(3)(ii) for obligated parties and exporters as
well as to Sec.  80.1464(b)(2)(i) and (3)(ii) for renewable fuel
producers and RIN-generating importers to include attest procedures
concerning verification of RIN separation.
    Additionally, in the final RFS2 regulations, EPA required in Sec.
80.1464 that auditors of RIN generation reports verify that product
transfer documents (PTDs) include the required information. EPA
believes it would be beneficial for auditors to verify the required
information is present on PTDs for RIN transactions for all parties,
including obligated parties, renewable fuel producers and importers and
RIN owners. Thus, we proposed amendments to Sec.  80.1464(a)(2), (b)(2)
and (c)(1) to require auditors to verify that the PTDs for a
representative sample of RINs sold and purchased contains the
information required in Sec.  80.1453.
    We received one comment that stated that the attestation procedures
should be comparable for all reporting activities of all regulated
parties. EPA believes, however, that the proposed regulatory changes to
the attest engagement procedures apply consistently to all regulated
parties in that all parties are responsible for ensuring that RINs that
they separate, purchase or use for compliance have been properly
separated and that they have associated PTDs with all of the required
information. Another commenter states that obligated parties should not
be required to audit RIN separation activities in addition to RIN
purchases. Again, EPA feels this additional check on RIN separation
activities will ensure that the RINs are properly separated and that
renewable fuel is actually being blended for use as transportation
fuel, heating oil or jet fuel. Therefore, EPA is finalizing the
amendments to the attest engagement procedures as proposed.

E. Technical Amendments Related to Registration & Recordkeeping

1. Construction Discontinuance & Completion Documentation
    The registration requirements in Sec.  80.1450(b)(1)(vi) state that
for facilities claiming the exemption described in Sec.  80.1403(c) or
(d), evidence must be submitted demonstrating the date that
construction commenced. However, the registration requirements do not
explicitly require the submission of evidence demonstrating that they
meet the other requirements described in Sec.  80.1403(c)(1) and (2) or
(d)(1), (2) and (3).
    In order to verify that facilities which claim to qualify for an
exemption under Sec.  80.1403(c) or (d) in fact meet all of the
qualification requirements for such an exemption, we proposed to amend
Sec.  80.1450(b)(1)(vi) to include requirements that the owner or
operator of facilities claiming exemption under Sec.  80.1403(c) submit
evidence demonstrating that construction was not discontinued for a
period of 18 months after construction began, and that construction was
completed by December 19, 2010. Similarly, we proposed that for
facilities claiming the exemption under Sec.  80.1403(d), evidence be
submitted demonstrating that construction was not discontinued for a
period of 18 months after construction began and that construction was
completed within 36 months of the commenced construction date.
    We received comments that EPA should not adopt these proposed
amendments because the requirements would be overly burdensome and
unnecessary due to the fact that the majority of all facilities that
have claimed the exemption under Sec.  80.1403 have already been
registered and therefore these amended requirements would have no
effect on these facility's registration. Secondly, the commenter stated
that the proposed requirement to submit evidence that construction was
not discontinued for a period of 18 months is unreasonable because it
is unclear how a facility could prove a lack of construction activity.
Thirdly, the commenter stated that the proposed amendment to submit
evidence that construction was timely completed was unnecessary because
a facility's operation activity such as production of fuel was enough
to serve as evidence that construction was completed. The commenter
suggested that EPA only request evidence to demonstrate that these
requirements are met from facilities that EPA believes did not rightly
claim the exemption under Sec.  80.1403.
    In order to fully assess the concerns raised by the commenters, EPA
has decided to investigate this issue in more detail and analyze some
additional options. Therefore, at this time, EPA is not taking final
action with respect to this proposed amendment.
2. Third-Party Engineering Reviews
    The regulations stipulate that producers of renewable fuels and
foreign ethanol producers are required to update their registration
information, and submit an updated independent third-party engineering
review, every 3 years after their initial registration in accordance
with Sec.  80.1450(d)(3). We have received many inquiries regarding the
start date that EPA uses to determine the 3 year period after which the
producer must submit an updated independent third party engineering
review (such as the registration acceptance date, the third-party
professional engineer's signature date

on the engineering review report, or the due date for engineering
reviews.
    Given the lack of clarity in the current regulations, we proposed
amendments to specify the time frame for submission of updated
independent third-party engineering reviews which included a simplified
method that would group producers according to the calendar year they
were or will be registered, and set a fixed time frame for registration
updates for each group. We proposed to amend Sec.  80.1450(d)(3) to
stipulate that for all producers of renewable fuel and foreign ethanol
producers for which registration was accepted by EPA in calendar year
2010, that the updated registration information and independent third-
party engineering review would be submitted to EPA within the three
months prior to January 1, 2014, and within three months prior to
January 1 of every third calendar year thereafter. For all producers of
renewable fuel and foreign ethanol producers registered in any calendar
year after 2010, the updated registration information and independent
third-party engineering review would be submitted to EPA within three
months prior to January 1 of every third calendar year after the first
year the producer's registration was accepted by EPA. For example, a
producer registered in 2011 would be required to submit an updated
independent third-party engineering review by January 1, 2015, and by
January 1 every three calendar years thereafter.
    We received comments that supported the adoption of the proposed
amendments for a simplified method of grouping producers according to
the calendar year that they were or will be registered to determine the
due date for submission of the updated registration information and
independent third-party engineering review. The commenter suggested
that we provide a clear method to determine the due date for individual
facilities to further help with the compliance of this requirement. We
agree with the commenter that providing more clarity and guidance would
help facilities comply with this requirement. Therefore, in the near
future and well before the due date for any updated engineering
reviews, we plan to compile and publish a guidance document that will
provide the date in which each facility's registration was accepted,
the calendar year in which each facility will be grouped, and the
corresponding triennial due dates for the updated engineering review
for each calendar year group. This guidance document will be published
on the RFS public Web site. Parties must also comply with all other
applicable requirements in 40 CFR Part 80, Subpart M. This guidance
does not, in any way, alter the requirements of the renewable fuel
program regulations, and does not establish or change legal rights or
obligations.
    In addition, we are removing from the final rule the proposed 3
months allowance period prior to triennial due date. The reason we
included a 3 months allowance was to ensure that the updated
engineering reviews were not submitted so early as to not provide
appropriately updated information as of the three-year submission
deadline. We believed at the time of the proposal that the inclusion of
the 3 month window would ensure that facilities conduct their
engineering review closer to the end of the 3 year period, which we
assumed would provide the most up-to-date information. However, now we
believe that the inclusion of this 3 month period is unnecessary since
the owners or operators of a facility can determine for themselves when
it is appropriate to coordinate and conduct the engineering review for
their facility and that the regulatory requirement for ``updated''
engineering reviews provide sufficient clarity that the information
submitted to EPA must reflect the up-to-date information.
    Therefore, we are finalizing in this rulemaking the proposed
simplified method to group facilities based on the calendar year in
which their facility's registration was accepted by EPA with the due
date for the updated registration and independent third party
engineering review to be submitted to EPA by January 31st of every 3
calendar years, starting from the acceptance date of the facility's
initial registration. We are allowing the engineering reviews to be
submitted at the end of January due to possible scheduling concerns
during the holiday season.
3. Foreign Ethanol Producers
    We proposed that the amendments to the registration requirements in
Sec.  80.1450 also apply to foreign ethanol producers. As defined in
Sec.  80.1401, foreign ethanol producers are foreign producers that
produce ethanol for use in transportation fuel, heating oil or jet fuel
but who do not add denaturant to their product. Therefore, foreign
ethanol producers do not technically produce ``renewable fuel'' as
defined in our regulations. As discussed in the preamble to the Direct
Final Rule published on May 1, 2010 (see 75 FR 26032), the result of
the amendments made in the Direct Final Rule is to require foreign
ethanol facilities that produce ethanol that ultimately becomes part of
a renewable fuel for which RINs are generated to provide EPA the same
registration information as foreign renewable fuel facilities that
export their product to the United States. In both cases the required
registration information is important for enforcement purposes,
including verifying the use of renewable biomass as feedstock and the
assignment of appropriate D codes. Therefore, we believe amendments to
the registration requirements that we make in this final rule should
also be applicable to foreign ethanol producers for the same reasons.
We did not receive comments on this proposed change, so we are
finalizing the amendment as proposed.

F. Additional Amendments and Clarifications

1. Third-Party Engineering Review Addendum
    We have received many inquires as to whether an addendum to the
existing independent third-party engineering review is sufficient to
meet the requirement that all producers of renewable fuel and foreign
ethanol producers submit an updated independent third-party engineering
review if they make changes to their facility that will qualify the
renewable fuel that is produced for a renewable fuel category or D code
that is not already reflected in the producer's registration
information. In some circumstances the majority of the information
verified in the existing independent third-party engineering review
would remain the same, and duplicating the entire effort does not
appear necessary. We believe the concept of allowing the submission of
an addendum in lieu of a updated independent third-party engineering
review is reasonable and therefore we are finalizing to amend the
requirements in Sec.  80.1450(d)(1) to state that a producer of
renewable fuel or foreign ethanol producer may submit an addendum to
the existing independent third-party engineering review on file with
EPA provided the addendum meets all the requirements in Sec.
80.1450(b)(2) and verifies for EPA the most up-to-date information at
the producer's existing facility. The updated independent third-party
engineering review or addendum shall be submitted at least 60 days
prior to producing the new type of renewable fuel and must meet all the
same requirements stipulated in Sec.  80.1450(b)(2) for the independent
third-party engineering review, including a new site visit conducted by
the third party to verify any changes to the facility that allows it

to produce a different renewable fuel that is not currently reflected
in their registration on file with EPA.
2. RIN Generation for Fuel Imported From a Registered Foreign Producer
    In RFS2, EPA finalized provisions allowing importers to generate
RINs for renewable fuel imported from a foreign producer only under
certain circumstances. The importer may only generate RINs for fuel
imported from a foreign renewable fuel producer or foreign ethanol
producer if that producer is registered with EPA and has received EPA
company and facility identification numbers pursuant to Sec.  80.1450.
Pursuant to Sec.  80.1426(c)(4), the importer is prohibited from
generating RINs for fuel imported from a foreign producer that is not
registered with EPA. In the proposed rulemaking, EPA proposed to
clarify that when an importer is generating RINs for fuel imported from
a registered foreign renewable fuel producer or foreign ethanol
producer, the importer must submit to EPA via EMTS the importer's
company identification number, the facility identification number of
the import facility where the batch was imported, and the facility
identification number for the foreign renewable fuel or ethanol
producer that produced the batch of fuel for which the importer is
generating RINs. EPA did not receive comments on these clarifications,
and is therefore finalizing them as proposed in Sec.  80.1452(b)(4) and
(5).
3. Bond Posting
    We proposed to amend paragraphs (e)(1), (e)(2) and (g)(2) of Sec.
80.1467 to make them consistent with Sec.  80.1467(g)(1). These
proposed amendments were intended to clarify that the amount of the
posted bond must cover the number of gallon RINs that are sold and/or
transferred, and also those RINs held and/or obtained by the foreign
entity, including those held and/or obtained to comply with a foreign
importer's RVO requirements. We also proposed to amend Sec. Sec.
80.1465-80.1467 by striking Sec. Sec.  80.1465(h)(2)(iii),
80.1466(h)(2)(iii) and 80.1467(e)(2)(iii), which allowed entities to
make alternative commitments in lieu of posting bonds. EPA believes
that this method is vague, unnecessary, and unenforceable.
    One commenter at the hearing is against the removal of the
regulation allowing foreign producers to make alternative commitments
as it may discourage foreign renewable fuel producers from entering the
U.S. market. EPA disagrees as no foreign producer has used an
alternative commitment to date, and most foreign renewable fuel
producers do not post bonds and instead rely on the renewable fuel
importers to generate RINs for renewable fuel that is imported. For
those reasons and the reasons described above, we are finalizing the
proposed changes to the bond posting regulations as proposed.
4. Prohibition Against Repeat Generation of RINs
    We are finalizing our proposal to add a new paragraph (b)(6) to the
prohibited acts of Sec.  80.1460 to specify in this section of the
regulations that RINs may not be generated for any fuel for which RINs
have previously been generated. Pursuant to Sec.  80.1401, a RIN is a
unique number generated to represent a volume of renewable fuel. If
more than one RIN is generated for a particular volume, the RIN will no
longer be unique, and is therefore improperly generated and cannot be
used to demonstrate compliance with the renewable volume obligations.
While generating RINs for a particular volume of fuel for which RINs
have already been generated is already prohibited, we are amending the
regulations to include this prohibition in Sec.  80.1460 for clarity.
5. Acceptance of Separated Yard Waste and Food Waste Separation Plans
    We proposed to amend Sec.  80.1426(f)(5)(ii)(A) to remove the
requirement that the separated yard waste plan and separated food waste
plan must be approved by EPA, and instead only require that these two
plans be submitted and accepted by EPA under the registration
procedures specified in Sec.  80.1450(b)(1)(vii). The details and
information required to be submitted in the separated yard waste plan
and separated food waste plan are not overly burdensome or complex, and
therefore we believe it does not warrant a specific EPA approval, but
that EPA acceptance of these plans through the registration procedures
is sufficient.
    We received comments that supported the adoption of this amendment
for separated food waste plan and separated yard waste plan. We also
received comments suggesting that we also adopt this amendment for the
separated MSW plan. The commenter stated that although the separated
MSW plan requires somewhat more information than the separated yard and
food waste plans, the same logic applies in that the separated MSW plan
will also be subject to EPA review as part of the producer's
registration process and therefore requiring a separate duplicate
approval for the separated MSW plan is not necessary.
    First, we would like to clarify that there is not a duplicate
approval process for the separated MSW plan that serves as a separate
additional requirement for the producer's registration. Similar to the
proposed acceptance process for the producer's separated yard and food
waste plan, the approval process for the producer's separated MSW plan
will equally serve as verification of compliance as part of the
producer's registration. Secondly, we disagree with the commenter that
the separated MSW plan only requires somewhat more information than the
separated yard and food waste plans, and that the same logic applies in
terms of the review process. For the separated MSW plan, producers are
required to provide ongoing verification that there is separation of
recyclable paper, cardboard, plastics, rubber, textiles, metals, and
glass wastes to the extent reasonably practicable, including: The
extent and nature of the recycling that occurred prior to receipt of
the waste material, identification of available recycling technology
and practices that are appropriate for removing recycling materials
from the waste stream, and identification of the technology or
practices selected for implementation, including an explanation for
such selection, and reasons why other technologies or practices were
not implemented. In addition, producers are also required to provide
contracts relevant to materials recycled from municipal waste streams
and certification that recycling is conducted in a manner consistent
with goals and requirements of applicable State and local laws relating
to recycling and waste management as part of their registration
process. For the separated yard and food waste plan, the producers are
only required to provide ongoing verification that the separated yard
waste or food waste was kept separate since generation from other waste
materials, and for food waste, contain only incidental amounts of other
components. We believe the information submitted in the separated MSW
plan will be considerably more complex than information submitted in
the separated yard and food waste plans, and therefore, will require
EPA conduct a much more comprehensive review and also consider many
additional factors to ensure that the producer has met the all the
requirements stipulated. Based on the factors discussed, we believe
that it is not reasonable to apply the same proposed acceptance process
for separated yard and food waste plan to the separated MSW plan.

    Therefore, we are finalizing in this rulemaking only for separated
yard waste plan and separated food waste plan to amend the requirement
that the plans must be approved by EPA, and instead only require that
the plans will be accepted by EPA under the registration procedures
specified in Sec.  80.1450(b)(1)(vii).
6. Transferred Blendstocks in Early Benzene Credit Generation
Calculations
    Today's rule also finalizes one minor correction to the gasoline
benzene regulations which would clarify how refiners should account for
transferred blendstocks in their early benzene credit generation
calculations. Under current rules, refineries which generated early
benzene credits are required to reduce gasoline benzene during an early
credit generation period by at least 10% compared to the refinery's
benzene baseline, and are also required to make specific operational
changes and/or improvements in benzene control technology to reduce
gasoline benzene levels.\41\ Refineries which reduce their gasoline
benzene by at least 10%, in part by transferring reformate to another
refinery, could also generate early benzene credits, provided the
transferee refinery treated the reformate in specific benzene-reduction
processing units.\42\ See 72 FR 8486-87 (Feb. 26, 2007). However, the
gasoline benzene regulations also contain an additional provision that
requires all blendstock streams transferred to, from or between
refineries to be excluded from a refinery's early credit generation
calculations (except for reformate as described previously). This led
to an inconsistent comparison of a refinery's benzene during an early
credit generation period with a refinery's benzene baseline (which
included blendstocks transferred to the refinery), which was not EPA's
intent.
---------------------------------------------------------------------------

    \41\ Early credit generation periods were July 1, 2007 through
December 31, 2007, and calendar years 2008, 2009 and 2010.
    \42\ Refineries produce gasoline by combining several different
blendstocks produced by various refinery processing units. Reformate
is a blendstock which contains approximately 80% of all benzene
found in gasoline, per the MSAT2 regulatory impact analysis.
---------------------------------------------------------------------------

    As described in the preamble of the gasoline benzene final rule,
EPA intended that refineries not be allowed to generate early benzene
credits exclusively through blendstock trading, without making any
other qualifying reductions (see 72 FR 8487), but that refineries could
generate early benzene credits in part through qualifying reductions
and ``in part'' through other means such as blendstock transfers (see
72 FR 8496-97). However, the current regulations do not allow this
approach, and this inconsistency has caused confusion among refiners
about how to calculate the amount of early credits generated. Refiners
have generally followed the approach set out in the preamble (as EPA in
fact intended), and included all blendstocks transferred to a refinery
in the refinery's early credit generation calculations. Refiners
typically keep records on transferred blendstocks for 1-2 years, and
thus do not have sufficient data to exclude transferred blendstocks
from their early credit generation calculations.
    EPA recently became aware of this inconsistency and is amending the
regulations to make them consistent with EPA's intent as described in
the preamble. This rule amends the gasoline benzene regulations at 40
CFR 80.1275(d)(3) by deleting that provision. This will allow a
refinery to include blendstocks transferred to the refinery in the
refinery's early benzene credit generation calculations (all other
conditions, including treatment which removes benzene in transferred
reformate streams still applying, of course). Consistent with EPA's
original intent, today's rule also allows a refinery to include
transferred blendstocks in past early credit generation calculations,
provided the refinery met all of the other requirements for generating
early benzene credits. EPA is finalizing this change to include
transferred blendstocks in past early credit generation calculation not
only because this was EPA's intent at the time of the benzene gasoline
rulemaking, but because some refiners have reasonably relied upon that
stated intent in devising their compliance strategies.
    All of the comments received on this change to the regulations were
in support of this change. Commenters generally noted that the change
was needed in order to align the language in the regulations with the
intent stated in the preamble.

V. Annual Administrative Announcements

    In the RFS2 final rule, we stated our intent to make two
announcements each year:
     Set the price for cellulosic biofuel waiver credits that
will be made available to obligated parties in the event that we reduce
the volume of cellulosic biofuel below the applicable volume specified
in the Clean Air Act (CAA), and
     Announce the results of our annual assessment of the
aggregate compliance approach for U.S. planted crops and crop residue.
    The biofuel waiver credit price being announced today was
calculated in accordance with the specifications in Sec.  80.1456(d).
Since the manner in which EPA calculates the waiver credit price is
precisely set forth in EPA regulations (which were issued through a
notice-and-comment process), and since some of the variables necessary
to compute the price have only recently become available, EPA did not
propose a waiver credit price for comment. Similarly, because EPA's
assessment of the aggregate compliance approach announced today was
conducted using data sources, methodology, and criteria that were
identified and explained in the preamble to the RFS2 final rule, it was
not necessary to present a preliminary annual assessment for comment in
the NPRM.

A. 2011 Price for Cellulosic Biofuel Waiver Credits

    Section 211(o)(7)(D) of the CAA requires that whenever EPA sets the
applicable volume of cellulosic biofuel at a level lower than that
specified in the Act, EPA is to provide a number of cellulosic credits
for sale that is no more than the EPA-determined applicable volume.
Congress also specified the formula for calculating the price for such
waiver credits: Adjusted for inflation, the credits must be offered at
the price of the higher of 25 cents per gallon or the amount by which
$3.00 per gallon exceeds the average wholesale price of a gallon of
gasoline in the United States.\43\ The inflation adjustment is for
years after 2008. EPA regulations provide that the inflation adjustment
is calculated by comparing the most recent Consumer Price Index for All
Urban Consumers (CPI-U) for the ``All Items'' expenditure category as
provided by the Bureau of Labor Statistics that is available at the
time EPA sets the cellulosic biofuel standard to the comparable value
that was reported soonest after December 31, 2008.\44\
---------------------------------------------------------------------------

    \43\ More information on wholesale gasoline prices can be found
on the Department of Energy's (DOE), Energy Information
Administration's (EIA) Web site at: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMA_EPM0_PBR_NUS_DPG&f=M.
    \44\ See U.S. Department of Labor, Bureau of Labor Statistics
(BLS), Consumer Price Index Web site at: http://www.bls.gov/cpi/.
---------------------------------------------------------------------------

    In contrast to its directions to EPA for setting the price of a
cellulosic biofuel waiver credit, Congress afforded the Agency
considerable flexibility in designing regulations specifying the
permissible uses of the credits. The CAA states that EPA regulations
``shall

include such provisions, including limiting the credits' uses and
useful life, as the Administrator deems appropriate to assist market
liquidity and transparency, to provide appropriate certainty for
regulated entities and renewable fuel producers, and to limit any
potential misuse of cellulosic biofuel credits to reduce the use of
other renewable fuels, and for such other purposes as the Administrator
determines will help achieve the goals of this subsection.'' The final
RFS2 regulations provide a detailed discussion of how we designed the
provisions for cellulosic biofuel waiver credits in keeping with the
statutory language. In short, 2012 cellulosic biofuel waiver credits
(or ''waiver credits'') are only available for the 2012 compliance
year. Waiver credits will only be made available to obligated parties,
and they are nontransferable and nonrefundable. Further, obligated
parties may only purchase waiver credits up to the level of their
cellulosic biofuel RVO less the number of cellulosic biofuel RINs that
they own. A company owning cellulosic biofuel RINs and cellulosic
waiver credits may use both types of credits if desired to meet their
RVOs, but unlike RINs, waiver credits may not be carried over for use
in the next calendar year. Obligated parties may not use waiver credits
to meet a prior year deficit obligation. Finally, unlike cellulosic
biofuel RINs which may also be used to meet an obligated party's
advanced and total renewable fuel obligations, waiver credits may only
be used to meet a cellulosic biofuel RVO. An obligated party will still
need to additionally and separately acquire RINs to meet their advanced
biofuel and total renewable fuel obligations.
    For the 2012 compliance period, since the applicable volume of
cellulosic biofuel used to set the annual cellulosic biofuel standard
is lower than the volume for 2012 specified in the CAA, we are making
cellulosic waiver credits available to obligated parties for end-of-
year compliance should they need them at a price of $0.78 per credit.
To calculate this price, EPA first determined the average wholesale
(refinery gate) price of gasoline using the most recent 12 months of
data available from the EIA Web site on September 30, 2011. Based on
this data, we calculated an average price of gasoline for the period
July 2010 to June 2011 of $2.44. In accordance with the Act, we then
calculated the difference of the inflation-adjusted value of $3.00, or
$3.22, and $2.44, which yielded $0.78. Next, we compared the value of
$0.78 to the inflation-adjusted value of $0.25, or $0.27. The Act
requires EPA to use the greater of these two values as the price for
cellulosic biofuel waiver credits.
    The derivation of this value is more fully explained in a
memorandum submitted to the docket for this rulemaking,\45\ and a more
complete description of the statutory requirements and their
application can be found in the RFS2 final rule.\46\ The price for the
2013 compliance period, if necessary, will be set when we announce the
2013 cellulosic biofuel standard.
---------------------------------------------------------------------------

    \45\ See memo to docket number EPA-HQ-OAR-2010-0133 from Scott
Christian, on the subject of ``Calculating the price for cellulosic
biofuel waiver credits,'' dated September 30, 2011.
    \46\ 75 FR 14726-14728.
---------------------------------------------------------------------------

B. Assessment of the Domestic Aggregate Compliance Approach

    The RFS2 regulations contain a provision for renewable fuel
producers who use planted crops and crop residue from U.S. agricultural
land that relieves them of the individual recordkeeping and reporting
requirements concerning the specific land from which their feedstocks
were harvested. To enable this approach, EPA established a baseline
number of acres for U.S. agricultural land in 2007 (the year of EISA
enactment) and determined that as long as this baseline number of acres
was not exceeded, it was unlikely that new land outside of the 2007
baseline would be devoted to crop production based on historical trends
and economic considerations. We therefore provided that renewable fuel
producers using planted crops or crop residue from the U.S. as
feedstock in renewable fuel production need not comply with the
individual recordkeeping and reporting requirements related to
documenting that their feedstocks are renewable biomass, unless EPA
determines through one of its annual evaluations that the 2007 baseline
acreage of agricultural land has been exceeded.
    In the final RFS2 regulations, EPA committed to make an annual
finding concerning whether the 2007 baseline amount of U.S.
agricultural land has been exceeded in a given year and publish this
finding in the Federal Register by November 30 of the same year. If the
baseline is found to have been exceeded, then producers using U.S.
planted crops and crop residue as feedstocks for renewable fuel
production would be required to comply with individual recordkeeping
and reporting requirements to verify that their feedstocks are
renewable biomass.
    Based on data provided by the USDA Farm Service Agency (FSA) and
Natural Resources Conservation Service (NRCS), we have estimated that
U.S. agricultural land reached approximately 392 million acres in 2011,
and thus did not exceed the 2007 baseline acreage. This acreage
estimate is based on the same methodology used to set the 2007 baseline
acreage for U.S. agricultural land in the RFS2 final rulemaking.
Specifically, we started with FSA crop history data for 2011, from
which we derived a total estimated acreage of 392 million acres. We
then subtracted the amount of land estimated to be participating in the
Grasslands Reserve Program (GRP) and Wetlands Reserve Program (WRP) by
the end of Fiscal Year 2011, 275,000 acres, to yield an estimate of
approximately 392 million acres of U.S. agricultural land in 2011. The
USDA data used to make this calculation can be found in the docket to
this rule.

C. Assessment of the Canadian Aggregate Compliance Approach

    On March 15, 2011, EPA issued a notice of receipt of and solicited
public comment on a petition for EPA to authorize the use of an
aggregate approach for compliance with the Renewable Fuel Standard
renewable biomass requirements, submitted by the Government of Canada.
The petition requested that EPA determine that an aggregate compliance
approach will provide reasonable assurance that planted crops and crop
residue from Canada meet the definition of renewable biomass. After
through consideration of the petition, all supporting documentation
provided and the public comments received, EPA determined that the
criteria for approval of the petition were satisfied and approved the
use of an aggregate compliance approach to renewable biomass
verification for planted crops and crop residue grown in Canada.
    The Government of Canada utilized several types of land use data to
demonstrate that the land included in their 124 million acre baseline
is cropland, pastureland or land equivalent to U.S. Conservation
Reserve Program land that was cleared or cultivated prior to December
19, 2007, and was actively managed or fallow and nonforested on that
date (and is therefore RFS2 qualifying land). The total agricultural
land in Canada in 2011 is estimated at 121 million acres. This total
agricultural land area includes 95.6 million acres of cropland and
summer fallow, 15.6 million acres of pastureland and 9.8 million acres
of agricultural land under conservation practices. This

acreage estimate is based on the same methodology used to set the 2007
baseline acreage for Canadian agricultural land in the RFS2 response to
petition. The data used to make this calculation can be found in the
docket to this rule.

VI. Comments Outside the Scope of This Rulemaking

    In their comments responding to the NPRM, a number of parties used
the opportunity to raise concerns that were not directly related to the
issues and provisions we were addressing in the NPRM, such as the
proposed standards for 2012, the applicable volume of biomass-based
diesel for 2013, and the various proposed changes to the regulations
designed to clarify intent and streamline implementation. Neither did
these comments address setting the price for cellulosic biofuel credits
or EPA's annual evaluation of the U.S. aggregate compliance approach
for renewable biomass. In some cases, commenters requested EPA action
in some other area, such as the following:
     Request for EPA to implement a more robust biofuel quality
assurance program
     Request for EPA to mandate that 50% of all vehicles be
E100 capable by 2017
     Request for EPA to encourage legislation that allows corn
ethanol to be categorized as advanced biofuel
     Request for EPA to pursue changes to the statute that
would make valid renewable fuels feedstock-neutral.
    In other cases, commenters raised issues related to other areas not
addressed in our NPRM, such as the following:
     Other state and federal fuel regulations
     Retail dispensing requirements and misfueling of E15 in
non-flexible fueled vehicles
     Need for continuing federal incentives for biofuels, such
as tax subsidies
     Relative energy security implications of imported
petroleum versus imported biofuels
     Delayed RINs
     Definition of heating oil.
    While we are taking these comments under consideration as we
continue to implement the RFS2 program, these comments are outside the
scope of today's action. In some cases, they are also outside our
authority. Thus, we are not providing substantive responses to them at
this time.
    We also received comments in a number of other areas that, while
outside the scope of this rulemaking, we believe would benefit from a
response to clarify our position and/or intentions. These issues are
addressed below.
    One commenter provided a copy of a copyrighted report, ``Energy
Life-Cycle Assessment Of Soybean Biodiesel Revisited''. Similarly, both
Monsanto and RFA provided comments on the lifecycle GHG impacts of corn
ethanol, indicating that it should be a higher GHG reduction than what
was calculated by EPA as part of the RFS2 final rule and that we should
reevaluate corn ethanol lifecycle emissions based on new studies that
are available. Another commenter requested that we investigate the GHG
impacts of the oleochemical industry increasing the use of palm oil as
a feedstock as animal fats are increasingly diverted to the production
of biofuels. We will consider the information and analyses provided as
part of any future updates to our lifecycle evaluations of these
biofuels.
    Another commenter urged EPA to quickly certify additional
feedstocks for cellulosic biofuels under the RFS. We are moving forward
responding to a series of petitions requesting EPA approval of other
pathways, including both feedstock-specific pathways (e.g., palm oil
and sorghum) and company- or process-specific pathways. A discussion of
the process involved and a list of the current pathways we are
currently evaluating can be found at: http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2-lca-pathways.htm.
    We appreciate that multiple stakeholders are highly interested in
the timeline on which EPA is conducting these analyses. We note that
the analysis required for the RFS fuel pathway determinations as
required under CAA 211(o) are comprehensive in nature, and EPA is
committed to ensuring they are conducted in an appropriately rigorous
fashion.
    Some commenters noted that regulated parties are having difficulty
complying with the requirement that the RIN transfer date in EMTS and
on product transfer documents (PTDs) be the actual title transfer date.
Some of these commenters requested EPA enforcement discretion to allow
biofuel producers and first purchasers to update their electronic
systems in order to be in compliance with the title transfer date
regulatory requirement. Two commenters specified that this enforcement
discretion should be issued for six months in order to provide these
companies with sufficient time to update their systems. EPA believes
that the proposed enforcement discretion would likely introduce
confusion for anyone who attempts to review and match transactions with
records.
    In contrast, several commenters requested that EPA reconsider its
position that the RIN transfer date reported to EMTS and identified on
PTDs must be the actual title transfer date. One commenter requested
that EPA allow invoice dates to be used in lieu of title transfer dates
as title transfer does not usually coincide with customer payments and
ultimately place a burden on the selling company's cash flow. While we
understand that some parties would prefer to use a date other than the
true title transfer date for purposes of EMTS reporting and PTDs, we
believe this would violate the clear language and intent of the
regulations.
    One commenter requested that EPA provide adjustment mechanisms to
allow corrections in EMTS after noting that EMTS is a ``forward
looking'' system, meaning that EMTS transactions cannot be modified
once submitted. EPA is looking at several ways and has updated the RFS2
remedial action Web page since the comment period closed. EPA will
continually update its guidance for regulated parties to correct
violations that true mistakes on the following Web page: http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2remedialactions.htm.
    Additionally, in this rule, EPA is finalizing a regulation
amendment giving EPA discretion to allow invalidly generated RINs to be
used for compliance purposes on a case-by-case basis (see Section IV).
    Several commenters requested that EPA edit Q&As 7.8 and 10.6 as
they conflict with the regulations. EPA will review and make edits to
the RFS2 Q&As in order to ensure agreement with the regulations as
appropriate at a later date.

VII. Public Participation

    Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided opportunity for
submitting written public comments following the proposal that we
published on July 1, 2011 (76 FR 38844), and we considered these
comments in developing the final rule. Public comments and EPA
responses are discussed throughout this preamble.

VIII. Statutory and Executive Order Reviews

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 or
policy issues. Accordingly, EPA submitted this action to the Office of
Management and Budget (OMB) for review under Executive Orders 12866 and
13563 (76 FR 3821, January 21, 2011) and any changes made in response
to OMB recommendations have been documented in the docket for this
action.
    The economic impacts of the RFS2 program on regulated parties,
including the impacts of the required volumes of renewable fuel, were
already addressed in the RFS2 final rule promulgated on March 26, 2010
(75 FR 14670). This action finalizes the percentage standards
applicable in 2012 based on the volumes that were analyzed in the RFS2
final rule. This action is also finalizing technical amendments to the
RFS2 regulations that have been determined to have no adverse economic
impact on regulated parties since they generally clarify existing
requirements.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden.
While there are three regulatory amendments in today's rule that affect
the recordkeeping and reporting burdens for regulated parties, we
believe that the information collections already approved for the RFS2
program's general recordkeeping and reporting requirements, or the
information collection already under review, would also cover the these
technical amendments.
    The regulatory changes are listed in Table VIII.B-1.

    Table VIII.B-1--Technical Amendments Affecting Recordkeeping and
                                Reporting
------------------------------------------------------------------------
                Section                            Description
------------------------------------------------------------------------
80.1449(a).............................  Amended Production Outlook
                                          Report due date; added
                                          allowance for unregistered
                                          renewable fuel producers and
                                          importers to submit Production
                                          Outlook Reports.
80.1450(b)(1)(vi)......................  Amended to require submission
                                          of additional evidence as part
                                          of registration to verify
                                          eligibility for exemptions in
                                          Sec.   80.1403(c) or (d).
80.1450(d)(1)-(d)(3)...................  Amended to add more specificity
                                          on when updates, addenda, or
                                          resubmittals are required for
                                          engineering reviews and to
                                          include references to foreign
                                          ethanol producers.
------------------------------------------------------------------------

    With regard to Production Outlook Reports, the change in due date
is not expected to have any impact on the reporting burden. In
addition, EPA recently prepared an Information Collection Request (ICR)
document to permit the submission of voluntary Production Outlook
Reports by domestic and foreign renewable fuels producers. The parties
affected by the ICR are not regulated parties under the RFS2 program.
The ICR has been submitted for approval to OMB under the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq. and may be identified by EPA ICR
number 2409.01. Documents related to the ICR have been placed in docket
number EPA-HQ-OAR-2005-0161, which is accessible at http://www.regulations.gov.
    On October 14, 2010, EPA published a notice in the Federal Register
announcing our intent to submit the proposed ICR for voluntary
Production Outlook Reports to OMB for approval. (See 75 FR 63173). The
60-day comment period closed on December 14, 2010. No comments were
received. On February 8, 2011, EPA published a Federal Register notice
announcing submission of the ICR to OMB. Additional comments were
solicited via an additional comment period through March 10, 2011.\47\
---------------------------------------------------------------------------

    \47\ See ``Agency Information Collection Activities; Submission
to OMB for Review and Approval; Comment Request; Production Outlook
Reports for Un-Registered Renewable Fuel Producers (New
Collection),'' 76 FR 6781 (February 8, 2011). The document
identification number for this notice is EPA-HQ-OAR-2005-0161-3221.
The document identification number for the supporting statement is
EPA-HQ-OAR-2005-0161-3222.
---------------------------------------------------------------------------

    The Office of Management and Budget (OMB) has previously approved
the information collection requirements contained in the existing
regulations at 40 CFR Part 80, Subpart M under the provisions of the
Paperwork Reduction Act, 44 U.S.C. 3501 et seq. This would include the
following approved information collections (with OMB control numbers
and expiration dates listed in parenthesis): ``Renewable Fuels Standard
Program: Petition and Registration'' (OMB Control Number 2060-0367,
expires March 31, 2013); ``Renewable Fuels Standard (RFS2)'' (OMB
Control Number 2060-0640, expires July 31, 2013); ``Regulations of
Fuels and Fuel Additives: 2011 Renewable Fuels Standard--Petition for
International Aggregate Compliance Approach'' OMB Control Number 2060-
0655, expires February 28, 2014). Detailed and searchable information
about these and other approved collections may be viewed on the Office
of Management and Budget (OMB) Paperwork Reduction Act Web site, which
is accessible at http://www.reginfo.gov/public/do/PRAMain. With regard
to the technical amendments in Sec.  80.1450, we believe that these
information collections already approved for the RFS2 program's general
recordkeeping and reporting requirements would also cover the
amendments in today's final rule.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) 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 today's 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; (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.
    After considering the economic impacts of today's final rule on
small entities, we certify that this action will not have a significant
economic impact on a substantial number of small entities. The impacts
of the RFS2 program on small entities that are directly regulated under
the RFS2 program were already addressed in the RFS2 final rule
promulgated on March

26, 2010 (75 FR 14670). This rule simply:
     Reduces the applicable volume of cellulosic biofuels in
2012 based on our projection of 2012 production levels.
     Establishes percentage standards for 2012 based either on
this production projection (for cellulosic biofuels) or statutory
levels (for advanced biofuels, biomass-based diesel, and total
renewable fuel).
     Makes minor technical amendments to the regulations.
    Therefore, this action will not impose any additional requirements
on small entities beyond those which have already been evaluated.

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.
This rule simply:
     Reduces the applicable volume of cellulosic biofuels in
2012 based on our projection of 2012 production levels.
     Establishes percentage standards for 2012 based either on
this production projection (for cellulosic biofuels) or statutory
levels (for advanced biofuels, biomass-based diesel, and total
renewable fuel).
     Makes minor technical amendments to the regulations.
    Thus, this action is not subject to the requirements of sections
202 or 205 of UMRA.
    This action is also not subject to the requirements of section 203
of UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments.

E. Executive Order 13132: Federalism

    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. This action only applies to
gasoline, diesel, and renewable fuel producers, importers, distributors
and marketers and makes relatively minor corrections and modifications
to the RFS2 regulations. A summary of the concerns raised, and EPA's
response to those concerns, is provided in this preamble.

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
transportation fuel refiners, blenders, marketers, distributors,
importers, exporters, and renewable fuel producers and importers.
Tribal governments would be affected only to the extent they purchase
and use regulated fuels. Thus, Executive Order 13175 does not apply to
this action.

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

    EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying
only to those regulatory actions that concern health or safety risks,
such that the analysis required under section 5-501 of the EO has the
potential to influence the regulation. This action is not subject to EO
13045 because it does not establish an environmental standard intended
to mitigate health or safety risks and because it implements specific
standards established by Congress in statutes.

H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use

    This rule is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (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. This action
simply finalizes the annual standards for cellulosic biofuels for 2012
and clarifying changes and minor technical amendments to the
regulations.

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 EPA 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 Agency decides not to use
available and applicable voluntary consensus standards.
    This action does not involve technical standards. Therefore, EPA
did not consider 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 (EO) 12898 (59 FR 7629 (Feb. 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.
    EPA has determined that this final rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it does not
affect the level of protection provided to human health or the
environment. This action does not relax the control measures on sources
regulated by the RFS2 regulations and therefore will not cause
emissions increases from these sources.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2). Therefore, this rule will be effective on the date of
publication.

IX. 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

    Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Diesel fuel,
Fuel additives, Gasoline, Imports, Labeling, Motor vehicle pollution,
Penalties, Petroleum, Reporting and recordkeeping requirements.

    Dated: December 22, 2011.
Lisa P. Jackson,
Administrator.
    For the reasons set forth in the preamble, 40 CFR part 80 is
amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

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

    Authority:  42 U.S.C. 7414, 7542, 7545, and 7601(a).

Sec.  80.1275  [Amended]

0
2. In Sec.  80.1275, remove paragraph (d)(3).

0
3. Section 80.1401 is amended by revising the definitions of ``Annual
cover crop'' and ``Naphtha'' to read as follows:

Sec.  80.1401  Definitions.

* * * * *
    Annual cover crop means an annual crop, planted as a rotation
between primary planted crops, or between trees and vines in orchards
and vineyards, typically to protect soil from erosion and to improve
the soil between periods of regular crops. An annual cover crop has no
existing market to which it can be sold except for its use as feedstock
for the production of renewable fuel.
* * * * *
    Naphtha means a blendstock falling within the boiling range of
gasoline which is composed of only hydrocarbons, is commonly or
commercially known as naphtha, and is used to produce gasoline.
* * * * *

0
4. Section 80.1405 is revised to read as follows:

Sec.  80.1405  What are the Renewable Fuel Standards?

    (a) (1) Renewable Fuel Standards for 2010.
    (i) The value of the cellulosic biofuel standard for 2010 shall be
0.004 percent.
    (ii) The value of the biomass-based diesel standard for 2010 shall
be 1.10 percent.
    (iii) The value of the advanced biofuel standard for 2010 shall be
0.61 percent.
    (iv) The value of the renewable fuel standard for 2010 shall be
8.25 percent.
    (2) Renewable Fuel Standards for 2011.
    (i) The value of the cellulosic biofuel standard for 2011 shall be
0.003 percent.
    (ii) The value of the biomass-based diesel standard for 2011 shall
be 0.69 percent.
    (iii) The value of the advanced biofuel standard for 2011 shall be
0.78 percent.
    (iv) The value of the renewable fuel standard for 2011 shall be
8.01 percent.
    (3) Renewable Fuel Standards for 2012.
    (i) The value of the cellulosic biofuel standard for 2012 shall be
0.006 percent.
    (ii) The value of the biomass-based diesel standard for 2012 shall
be 0.91 percent.
    (iii) The value of the advanced biofuel standard for 2012 shall be
1.21 percent.
    (iv) The value of the renewable fuel standard for 2012 shall be
9.23 percent.
    (b) EPA will calculate the value of the annual standards and
publish these values in the Federal Register by November 30 of the year
preceding the compliance period.
    (c) EPA will calculate the annual renewable fuel percentage
standards using the following equations:
[GRAPHIC] [TIFF OMITTED] TR09JA12.003

Where:

StdCB,i = The cellulosic biofuel standard for year i, in
percent.
StdBBD,i= The biomass-based diesel standard for year i,
in percent.
StdAB,i= The advanced biofuel standard for year i, in
percent.
StdRF,i= The renewable fuel standard for year i, in
percent.
RFVCB,i= Annual volume of cellulosic biofuel required by
42 U.S.C. 7545(o)(2)(B) for year i, or volume as adjusted pursuant
to 42 U.S.C. 7545(o)(7)(D), in gallons.
RFVBBD,i= Annual volume of biomass-based diesel required
by 42 U.S.C. 7545 (o)(2)(B) for year i, in gallons.
RFVAB,i= Annual volume of advanced biofuel required by 42
U.S.C. 7545(o)(2)(B) for year i, in gallons.
RFVRF,i= Annual volume of renewable fuel required by 42
U.S.C. 7545(o)(2)(B) for year i, in gallons.
Gi= Amount of gasoline projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
Di= Amount of diesel projected to be used in the 48
contiguous states and Hawaii, in year i, in gallons.
RGi= Amount of renewable fuel blended into gasoline that
is projected to be consumed in the 48 contiguous states and Hawaii,
in year i, in gallons.
RDi= Amount of renewable fuel blended into diesel that is
projected to be consumed in the 48 contiguous states and Hawaii, in
year i, in gallons.
GSi= Amount of gasoline projected to be used in Alaska or
a U.S. territory, in year i, if the state or territory has opted-in
or opts-in, in gallons.
RGSi= Amount of renewable fuel blended into gasoline that
is projected to be consumed in Alaska or a U.S. territory, in year
i, if the state or territory opts-in, in gallons.
DSi= Amount of diesel projected to be used in Alaska or a
U.S. territory, in year i, if the state or territory has opted-in or
opts-in, in gallons.
RDSi= Amount of renewable fuel blended into diesel that
is projected to be consumed in Alaska or a U.S. territory, in year
i, if the state or territory opts-in, in gallons.
GEi= The amount of gasoline projected to be produced by
exempt small refineries and small refiners, in year i, in gallons in
any year they are exempt per Sec. Sec.  80.1441 and 80.1442.
DEi= The amount of diesel fuel projected to be produced
by exempt small refineries and small refiners in year i, in gallons,
in any year they are exempt per Sec. Sec.  80.1441 and 80.1442.