rights to the data generated by a vehicle charging event. Some
vehicle manufacturers have entered into ``user'' agreements with the
vehicle owners that grants them permission to use the vehicle data,
but these agreements do not appear to grant either party exclusive
use rights.
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    In addition to determining the type of information that will be
required for RIN generation for renewable electricity, the EPA proposes
to determine the extent to which parties authorized to generate RINs
would be allowed to use estimates or averages (rather than empirical
data) for the basis of RIN generation. These estimates or averages
could range from relatively simplistic (e.g., assuming 80 percent of EV
charging occurs at home and 20 percent occurs at public charging
stations) to more complex (e.g., utilizing models generated from a
sample of EV behavior to estimate the average electricity use of all
EVs, or a certain type thereof). Allowing the use of estimates or
averages would enable the EPA to consider a wider variety of data and
data providers for participation in RIN generation. Allowing greater
participation through acceptance of averaging or estimation methods may
better allow RINs generated for renewable electricity to be used to
incentivize future growth. For example, allowing the use of estimates
and assumptions could enable the EPA to:
     Allow utilities or other parties to estimate the quantity
of electricity used as transportation fuel by all EVs within their
customer base.
     Allow a hybrid system wherein different types of parties
(i.e., charging station owners, utilities, and/or vehicle
manufacturers) could participate in different segments of the market
(e.g., public charging or home charging).
    Whether it is necessary for the EPA to adopt a system that strictly
requires empirical charging data, rather than a system that allows for
reasonable assumptions, remains undecided. The empirical data approach
would require that large quantities of data be generated, managed, and
provided by the RIN generator. A program of that scope could be
resource intensive for both the RIN generator and the EPA and,
depending on the approach, may prevent large-scale participation,
thereby undermining the potential of the RFS program to stimulate EV
usage, infrastructure, and reduce GHGs.
    A program that relies upon some degree of simplification, through
assumptions, would reduce resource allocation for data generation and
oversight. This reduced complexity may allow for a larger variety of
parties to participate in the RFS program and would likely increase
participation, the number of RINs generated, and encourage future
growth. Allowing the use of assumptions, such as estimates or averages,
would sacrifice some of the precision present in systems that rely on
empirical data, but it may also help mitigate concerns over data
ownership and consumer privacy infringement. For example, if the
quantity of RINs that could be generated annually by an EV were
determined based upon average vehicle miles traveled, rather than
empirical charging data, knowing the size of the fleet for a given year
is all that is required rather than vehicle-specific charging data.
There are privacy and data ownership concerns that may arise with any
structure that requires empirical charging data from the EV. Issues
surrounding data ownership and privacy concerns are present throughout
the structures described below. Some of these structures offer more
established pathways to resolution (e.g., auto manufacturers and
vehicle purchasers through dealer networks) while others may require
the creation of resolution pathways.
    Another important consideration for the EPA in determining the data
requirements to allow for RIN generation for renewable electricity is

whether or not to allow third parties to generate RINs using data as
discussed in the various structures below. These third parties could
serve an important role within these structures as aggregators of the
required data and agents or intermediaries for RIN generation. In some
structures (``Vehicle Owner'') it is difficult to conceive how the
program could effectively work without third parties to manage data and
generate RINs, whereas in other structures (``Electric Utility'' or
``Vehicle Manufacturer'') the potential RIN-generating parties may be
large enough to avoid the need for a third party's involvement. While
allowing third parties to generate RINs could potentially increase
participation in the RFS program, particularly under some of the
structures discussed below, the EPA is concerned that it could also
present an opportunity for the generation of fraudulent RINs by
allowing companies with minimal capital investment to participate in a
lucrative new market only temporarily, making them hard to track and
hold responsible. Additionally, whatever portion of the RIN value is
extracted by the third party for their services cannot be used to
incentivize the use of renewable electricity as transportation fuel.

C. Potential Program Structures

    Allowing the generation of RINs for renewable electricity under the
RFS program provides a potentially significant opportunity to
incentivize investment in EV technologies and infrastructure, as well
as the generation of electricity from biogas. However, the unique
characteristics of the generation and tracking of renewable electricity
from biogas present implementation challenges. The EPA is aware that
how these challenges are dealt with and resolved will have significant
consequences for who can generate RINs for renewable electricity, how
the program is implemented and monitored, the level of program
participation, and the degree to which RINs will be used to incentivize
growth in the number of EVs, the charging infrastructure, and the
generation of electricity from biogas for use as transportation fuel.
    In light of these concerns, the EPA is seeking comment on the type
of structure and accompanying data to be employed in allowing parties
to generate RINs for renewable electricity. The following sections
discuss several potential structures considered by the EPA and informed
by preliminary discussions with several stakeholders. Each of these
structures addresses the two primary RFS requirements for the
generation of RINs for renewable electricity: (a) That renewable
electricity has been generated from approved renewable biomass
(biogas); and (b) That the renewable electricity is used as
transportation fuel. Some of the structures discussed below are better
positioned to verify the first requirement (the generation of
electricity from biogas), while others are better positioned to verify
the latter requirement (that electricity is used as transportation
fuel). All of these structures are being considered on an individual
basis, but could also be considered in the context of a hybrid approach
that would combine multiple structures and/or reserve percentages of
the RINs from renewable electricity for specific structures (e.g.,
vehicle owner and vehicle manufacturers).
    Any of the structures (or hybrids thereof) would impose
significant, additional implementation challenges. The current RFS
program would need to be adjusted to accommodate new registered parties
(e.g., vehicle manufacturers) and the information that those parties
would need to submit during registration or during periodic reporting.
EMTS may need to be modified to accommodate data submissions from new
sources (e.g., vehicle telematics) to more appropriately generate and
track RINs generated from renewable electricity. Additionally, the
complexity of a new or modified renewable electricity regulatory
structure could make assuring the validity of RINs more challenging for
all parties and could increase the potential for fraud. Since the
complexity of generating RINs from any of these discussed structures is
significantly different from traditional renewable fuels, both
submission and review of registrations and reports will likely be
unique. These issues, and other issues related to the implementation of
a new regulatory structure, would need to be addressed.
    The EPA believes that the best-case scenario would be the adoption
of a structure for generating RINs for renewable electricity that would
simultaneously provide greater incentive for EV use and ownership
(thereby reducing air pollution and GHG emissions from vehicles),
increase the amount of renewable electricity produced, and minimize
challenges related to program oversight. As of 2014, however, roughly
11,000 GWh of electricity were generated from biogas, while slightly
less than 700 GWh from all sources were used as transportation fuel.
This means that in the near term, the number of RINs that are able to
be generated from renewable electricity will likely be limited by the
size of the EV fleet. Structures that do not incentivize increased
ownership of EVs are therefore likely to have limited impact on the
quantity of renewable electricity produced in the near term. Any
program that does not induce additional electricity generation from
biogas is not expected to provide additional GHG reductions beyond
those provided by the efficiency of the additional EVs added to the
fleet. Finally, in order to fully understand the implication of our
decision on the structure for the generation of RINs for renewable
electricity, we believe we should take into account the existing and
significant incentives currently in place for the production of EVs and
the generation of electricity from biogas.
    We understand that many of the options under consideration differ
from the typical approach under the RFS of placing authority and
responsibility for RIN generation on the renewable fuel producer. We
believe that a unique approach with respect to renewable electricity
could be justifiable if it provides greater incentives for use of
renewable electricity in the transportation sector and simplifies
program implementation, but we seek comment on this issue.
1. Vehicle Owner Structure
    One possible program structure would be to allow vehicle owners to
use the data on the quantity of electricity used to charge their EVs,
as measured by separate meters or telemetric devices, to generate RINs.
Under this system, the data available to the RIN generator clearly
demonstrate the use of electricity as transportation fuel. Allowing EV
owners to generate RINs for renewable electricity could provide a
direct financial incentive to owners and potential owners of EVs;
however, such a system would have several major challenges that the EPA
believes would prevent this structure from achieving the desired
impact.
    One major issue for EV owners is to measure and keep records of the
amount of electricity used to charge their EVs. Barriers currently
exist for vehicle owners to access and log their vehicle charging
activity. Vehicle owners may opt for a second electricity meter to be
installed by their utility company, which would then provide charging
activity information through a dedicated billing account. The validity
of charging data captured by dedicated EV charging meters would be
verifiable and documented. Alternatively, vehicle owners may opt to
purchase a current measurement device capable of measuring and logging
charging activity.

    The extent of verification challenges related to charging data
captured through an independent current management device is unclear is
unclear and we request comment on this issue. Either of these options
would necessitate an initial financial investment, which could reduce
program participation.
    Even if EV owners were able to log their vehicle charging activity
through one of these options, there would still be a challenge for
program administration because the EPA would need to collect and verify
the accounting accuracy of the charging data compared to number of RINs
generated for each individual EV owner (e.g., potential of ~270,000 EV
owners and hundreds of charging events over the course of one year).
The EPA would also need to invest in IT system upgrades or
modifications to store and process the significant number of additional
registrations and large volume of data. Currently, the RFS program has
approximately 1,200 registrants. The addition of potentially hundreds
of thousands of additional registered parties is not something
currently supported by the registration system and would require a
significant amount of time and resources to implement. Other program
administration challenges include educating EV owners on the
registration, reporting, recordkeeping, and other requirements for RIN
generation under the RFS program. Since EV owners are less likely to be
familiar with the requirements of the RFS program, this would likely
result in a higher chance of noncompliance or violations and pose
further challenges for EPA enforcement. Conversely, the compliance
challenge imposed upon EV owners may be too high, and not worth the
incentive of the RIN value. This could result in less participation by
EV owners in the RFS program, which would be counter to the program
goals. We request comment on the extent to which these program
administration challenges could be minimized or overcome.
    A second major issue would be the need to verify that the vehicle
charging was completed using electricity generated from renewable
biomass. Individual vehicle owners would likely be unable to enter into
direct contracts with independent power producers or investor-owned
utilities in order to demonstrate the renewable content requirements
for RIN generation. Broad EV owner participation would therefore likely
necessitate the creation and maintenance of a novel contract mechanism
by the EPA or the involvement of a third-party aggregator in order to
fulfill the requirements for RIN generation. A substantial degree of
simplification for assuring renewable content, as well as eliminating
charging data measurement and reporting by vehicle owners, could be
achieved through the use of assumptions. The complexity of
administering the vehicle owner structure could be greatly reduced by
modeling usage behavior and then allowing a third party to aggregate
vehicle owners and contract to meet renewable content requirements. The
third party could then distribute RIN value to vehicle owners, less
administrative costs, after the sale of RINs to obligated parties. Some
mechanism for aggregation would be required, as another major issue is
the sale of small numbers of RINs. Under the RFS program, obligated
parties purchase RINs in blocks of millions and are not set up to
purchase small numbers from individual parties. Therefore, aggregation
would almost certainly be a necessity for the vehicle owner structure
or any other structure predicated upon the generation of small numbers
of RINs by a single party.
    It is conceivable that owners of large EV fleets may be willing to
meet the administrative and recordkeeping challenges posed by RIN
generation under a non-assumption based version of the vehicle owner
structure. However, because the number of EVs in fleets is small
relative to the total number of EVs in the market, allowing for this
structure alone would not maximize the number of RINs generated. Under
a strictly empirical data version of the vehicle owner structure, even
EV owners willing and able to create and maintain the necessary records
would likely be dependent on a third-party aggregator to generate and
sell RINs on their behalf, as the registration requirements and
realities of the RIN market \300\ would provide practical barriers to
individual EV owners participating directly. Therefore, without some
allowance for modeling or assumptions, the vehicle owner structure
would be unlikely to achieve the desired impact of promoting increased
generation of renewable electricity and increased EV ownership.
---------------------------------------------------------------------------

    \300\ Obligated parties purchase RINs in quantities of millions
of RINs, far more than any individual EV owner could generate.
---------------------------------------------------------------------------

2. Public Charging Station Structure
    Another potential structure could allow the owners of vehicle
charging stations to generate RINs based on the electricity used by
their charging stations. Charging data from public stations could be
verified by meter billing statements that would be readily available to
participating stations. Allowing charging station owners to generate
RINs could also incentivize the building of additional public charging
infrastructure, which could also impact the willingness of consumers to
purchase and use EVs. If this structure were adopted, it is probable
that the EPA could rely on verifiable empirical charging data (rather
than estimates or averages) for the amount of renewable electricity
used. However, such charging stations would still have to contract with
upstream parties to verify that the renewable electricity used as
transportation fuel for which RINs were generated was consistent with
the quantity of renewable electricity generated from qualifying
renewable biomass supplied to the grid from which the charging stations
withdrew their electricity.
    The program administration challenges for the EPA under this
structure would be to verify and rectify contracts among all of the
parties upstream of the charging station, particularly when there are
multiple parties involved. For example, it is particularly challenging
for the EPA to ensure that RINs are generated only for the quantity of
electricity that is actually produced at a renewable electricity
generation facility if the facility has multiple contracts with
multiple charging stations for a portion of their electricity. The
charging station would not know if they were contracted for a quantity
of electricity that was above the capacity of the renewable electricity
generation facility, and therefore the burden would fall on the EPA, or
others, to conduct this verification. We seek comment on how to
overcome this implementation challenge without imposing overly
burdensome restrictions on how parties set up contracts and conduct
business in this competitive market.
    Additionally, a majority of EV charging is currently performed at
work or home. Therefore, adopting this structure alone would limit the
ability to achieve the desired goals of the RFS program. Even if all
public charging station owners were able to participate in the RFS
program, this structure would not allow for the generation of RINs for
renewable electricity when EVs are not charged at public charging
stations. This would significantly limit the number of RINs that could
be generated for renewable electricity, thereby reducing the
effectiveness of this structure to be used to incentivize ongoing EV
growth. It is possible that this structure could be used in

conjunction with another structure--one in which the public charging
structure is used to account for the public charging of EVs and another
structure is used to account for the private charging of EVs. Such a
hybrid system could enable the value of the RINs generated for
renewable electricity sold at charging stations to incentivize
increased public charging infrastructure while capturing a larger
proportion of EV charging events. It may also be possible to register
public charging stations or fleet owners under the current regulations
while the structure adopted to allow for RINs to be generated for home
charging remains undecided. We request comment on this approach.
    Another challenge of this structure is that many of the public
charging stations are owned by municipalities or other entities that
may find it difficult, due to human resource or other constraints, to
make their charging data available and participate in the RFS program.
These challenges, though unique to charging stations, are not
materially different than the challenges that were outlined in the
vehicle owner structure for smaller entities generating RINs and
participating in the RFS program. Whether adopted alone, or in concert
with another structure to capture home charging, the difficulties
associate with recordkeeping, reporting, and the likely need to
aggregate small RIN generators so that they may participate in the RIN
market are present and will need solutions prior to the public charging
structure being ready for implementation.
3. Electric Utility Structure
    While the other structures discussed here allow one to more easily
quantify and verify the amount of electricity used as transportation
fuel, they are far removed from the point where one can verify that the
feedstock used to generate the renewable electricity was actually
qualifying renewable biomass (i.e., biogas from landfills or other
qualified biomass sources). In contrast, an electric utility structure
may be more effective at ensuring that the electricity was derived from
a qualified source of biogas, but less effective at quantifying how
much was actually used as transportation fuel. Utilities would likely
have no direct knowledge of the amount of such electricity that was
actually used as transportation fuel (except in circumstances where a
dedicated EV charging meter had been installed) and would need to
contract with downstream parties to obtain this information. Program
administration challenges under the electric utility structure would
include verifying and rectifying contracts among all the parties
upstream and downstream of the transmission of electricity to the
vehicle charger. Due to the restructuring of many utilities in the
U.S., multiple parties may have to be regularly contractually connected
in order for the electric utility to be the RIN generator. An
additional administrative challenge would be verifying that RINs are
only generated for the quantity of electricity actually produced at a
renewable electricity generation facility if the facility has contracts
with multiple utilities or charging stations for a portion of their
electricity. We seek comment on how to overcome this implementation
challenge without imposing overly burdensome restrictions on how
parties set up contracts and conduct business in this competitive
market.
    There are several additional reasons beyond the physical connection
to the qualified biomass being converted to electricity as to why an
electric utility structure may be desirable. Depending on the design of
the program, value from RINs generated by utilities could incentivize
new forms of biomass to electricity generation or drive the increased
use of biogas to generate renewable electricity, providing GHG
benefits. It could also provide a source of revenue for utilities to
help offset the cost of upgrading electricity distribution
infrastructure, which would likely be necessary if EVs are adopted to a
significant degree. Finally, as the parties that sell electricity to
the end users, utilities would conceptually be best positioned to
provide renewable electricity to EV owners at discounted rates.
    A version of this form of structure has been adopted by the State
of California in their Low Carbon Fuel Standard Program (LCFS). Under
the LCFS, electric utilities generate credits based upon the number of
EVs in their service territories. The amount of electricity used by
each vehicle is estimated based on data from a limited number of EV
owners with separate meters to directly measure the amount of
electricity used to charge their vehicles. The LCFS program also allows
public charging stations and fleet owners to generate credits based on
charging data. The system addresses the potential for generating
multiple credits for the same charging event by allowing utilities to
generate credits based on estimates of the electricity used only for
the home charging of EVs, while allowing public charging stations and
fleet owners to generate credits based on their own charging data.\301\
An important provision of the LCFS is that the utilities are required
to use the LCFS credit proceeds for the direct benefit of EV owners, a
provision that is not currently a part of the EPA's RFS program. While
some utilities may pass revenue from RIN generation along to customers
if a utility structure was adopted, the generally non-competitive
nature of utilities is likely to limit the degree to which customers
directly benefit from any RIN revenue.
---------------------------------------------------------------------------

    \301\ The LCFS program does not involve EV manufacturers as the
source of charging data or as parties eligible to generate LCFS
credits.
---------------------------------------------------------------------------

    Unlike the RFS program, the LCFS program has no requirement that
the electricity used to generate the LCFS credits come from any
specific source. Their program relies on a grid average carbon
intensity to determine the amount of LCFS credits that are to be
awarded for each charging event. This is fundamentally different from
the requirements under the RFS program, where credits may only be
generated for electricity generated from qualifying renewable biomass
sources.
    The use of grid average carbon intensity also obscures another
important issue which will need to be resolved by any national
structure for RINs generated for renewable electricity: Most facilities
generating electricity from biogas are independent power producers
(IPPs) not owned by electric utility companies. In 1978, the Public
Utility Regulatory Policy Act (PURPA) was passed, granting qualifying
facilities the right to be able to generate and sell electricity to
utility companies at the utility's avoided cost.\302\ The allowance of
IPPs was expected to reduce electricity costs for consumers by allowing
cheaper generation sources to participate in the market. Perhaps
unintentionally, PURPA set the stage for the erosion of the regulatory
consensus surrounding the vertically integrated utility model in much
of the U.S. Today, many once vertically integrated utility companies
have divested or separated their transmission, distribution, and
generation services. In many parts of the country, the notion of
``utility'' is tantamount to the entity responsible for providing
electric distribution services. The implication of this for any program
structure for generating RINs for renewable electricity is that there
is an added layer of complication because the utility that is
delivering the electricity in such areas is rarely the owner/operator
of the biogas electricity generation facility. For example, in 2014,
roughly 11,000 GWh of electricity

were generated from biogas, less than 1,000 GWh of which were generated
by traditional electric utilities.
---------------------------------------------------------------------------

    \302\ See PURPA Sec.  210.
---------------------------------------------------------------------------

    This disaggregation introduces a potential challenge to the
electric utility structure. Any utility-based structure would likely
need to determine whether to allow utilities to contract with IPPs
currently generating electricity from biogas or require that the
utilities directly generate electricity from biogas in order to
generate RINs for renewable electricity. Allowing utilities to contract
with IPPs would likely result in the greatest participation in the RFS
program, but may limit the procurement of new biogas generation in the
near term (until the amount of electricity used as transportation fuel
nears the amount of electricity presently generated from biogas).
Alternatively, requiring that utilities generate the RINs for biogas
generation capacity they either already own or newly procure could
provide an incentive for increasing the amount of electricity generated
from biogas, but would likely reduce utilities' participation in the
RFS program.\303\ Regardless of whether program participation is
affected by IPP contracting, there is a tradeoff between these two
alternative programs which would have ramifications for how the RIN
value might be used.\304\ If contracting with IPPs was allowed, more of
the RIN value could be reserved for incentivizing EVs but there would
be little change in electricity generation from biogas as a result of
RIN generation (additional GHG reductions unlikely). If contracting
with IPPs was not allowed, more electricity generation from biogas may
be built (additional GHG reduction possible), but a much smaller
fraction of the RIN value would likely remain to incentivize EVs.
---------------------------------------------------------------------------

    \303\ Substituting the IPPs as the RIN generators would face
other challenges. Unlike utilities, IPPs do not have a customer base
from which to aggregate the total electricity used as transportation
fuel. Secondly, as of 2013, the average size of an IPP biogas
project was 3.2 Megawatts. This is diminutive relative to utility-
scale projects and it is doubtful that many of these producers would
have the resources to be able to participate in the RFS program
independently. Third-party aggregators would likely be required to
manage the RINs generated by IPPs. Also, if IPPs were generating the
RINs, the role (especially financially) of the utility would be
greatly diminished and the administrative costs of participating in
RFS may not be justifiable. This could present an obstacle if
neither the utility nor the renewable electricity producers have
sufficient capacity or incentive to participate in the RFS program.
    \304\ It is unclear that providing the RIN value to IPPs or
utilities would result in an increase in electricity generation from
biogas. Under PURPA, biogas facilities are guaranteed the utility's
avoided cost of generation. Additionally, many state and federal
production tax credits, investment tax credits, and compliance
market credits (RECs, etc.) are already accrued by these facilities;
contributing to the current large supply of electricity generation
from biogas in relation to the EV market demand. Nevertheless,
despite the preexisting level of subsidization, many potential
biogas generating projects remain undeveloped. Additional
information would be helpful to understand the degree to which the
value of the RIN would result in additional generation of biogas for
electricity.
---------------------------------------------------------------------------

    In summary, the utility centric structure has some advantages, such
as most directly providing the linkage to the renewable nature of the
RINs generated, and could provide funds for the upgrading of
electricity distribution infrastructure. In addition, the utility
structure could be used in conjunction with the public charging
structure used to separately capture private and public charging of
EVs. There remain several challenges to the adoption of the utility
centric structure however. The disaggregated nature of electricity
generation from biogas would provide program administration challenges.
A decision about whether or not to allow utilities to contract with
IPPs to fulfill the requirement that the renewable electricity was
generated from biogas would have to be made. Finally, questions remain
as to the degree to which utilities, many of which are publicly
regulated entities, would be legally able to participate in the RFS
program as RIN generators, or whether they would be dependent on third
parties to generate RINs on their behalf. We request comment from such
entities regarding potential legal issues that may limit or prevent
their participation.
4. Vehicle Manufacturer Structure
    An additional RIN generation structure option would be a program
that would use charging data collected by the vehicle manufacturer as
the basis for RIN generation. This structure, like the vehicle owner
and public charging station structures, is focused on quantifying the
amount of electricity used as transportation fuel and less well-suited
to ensuring that the electricity is generated from qualifying renewable
biomass pursuant to an approved pathway (e.g., biogas from an
appropriate source). Currently, however, the principle constraint in
the biogas to electricity to transportation fuel pathway is the use of
electricity as transportation fuel, precisely what would be reflected
in the EV's state of charge. Therefore, the state of charge data which
could be provided by vehicle manufacturers (or their designated
intermediary) may constitute a logical source of data for RIN
generation. Furthermore, many vehicle manufacturers are already
collecting vehicle charging data, increasing the availability of EV
charging data for potential inclusion in the RFS program.
    The vehicle manufacturer structure, due to the ability of OEMs to
independently generate charging data, could be adopted unilaterally or
this structure could be used in conjunction with another structure
(e.g., the charging station model) to incentivize infrastructure. Use
of a vehicle manufacturer structure alone could potentially reduce the
variety of data being submitted and help with the process of data
verification for RIN generation. Additionally, EV manufacturers are
positioned to pass on the revenue from the sale of RINs to the customer
directly by discounting the purchase price of EVs or through other
rebate mechanisms. This would allow the RFS program to be used to
address an important factor currently limiting the amount of renewable
electricity used as transportation fuel: The number of EVs in the U.S.
There may be concerns that setting up the program structure in this
manner would result in the automotive manufacturers collecting a
windfall profit, rather than reducing the sale price of the EVs they
sell. However, market forces may ultimately transfer a substantial
portion of the RIN revenue to the EV owners. Automotive manufacturers
have enticed costumers to purchase their products over their
competitors for decades through the use of incentives. Automotive
manufacturers, which have existing requirements motivating them to sell
EVs, may use the RIN revenue to further incentivize vehicle buyers to
purchase their product over a competitors.
    From a program administration perspective, the parties that would
be able to generate RINs for renewable electricity in a vehicle
manufacturer structure would be a small pool of relatively homogenous
applicants. It has been suggested that vehicle manufacturer telematics
data could be used, in a raw or processed form, as the basis for RIN
generation. However, EMTS is not currently configured to accept,
process, or track the quantity and format of information that may be
provided from vehicle telematics. Although these data could perhaps
provide reliable information for RIN generation, the parsing of the
substantial amount of information down to the vehicle level would be
difficult to review for RIN verification. Significant modifications to
EMTS and the registration system would still be needed to allow for the
appropriate generation and tracking of RINs using data from EV
manufacturers at this time.
    Another aspect of the vehicle manufacturer centric structure is
that it could also be administered to allow for the use of assumptions
or models rather

than empirical charging data for the basis of RIN generation. Under
this approach, the burden of collecting and verifying data could be
greatly reduced. For example, EV electricity consumption models could
range from something as simple as average U.S. vehicle miles travelled
to usage models based on samples taken from the local EV population.
The number of vehicles that each manufacturer has in the fleet could be
determined based on vehicle registration data or estimated based on
sales data and vehicle scrappage rates. Using these types of averages
or models is one way that could also address consumer privacy concerns
associated with EV manufacturers using charging data from individual
EVs as the basis for RIN generation.
    Like the utility centric structure, the vehicle manufacturer
centric structure does not preclude a hybrid option where public or
private charging stations could also be RIN generators. In order to
avoid the double-counting of RINs, many different approaches could be
adopted. A simplistic hybrid approach would be to adopt a market
segmentation similar to that employed by California in the LCFS. Under
this structure a certain percentage of the market, based on the
percentage of EV charging that is expected to take place at public
charging stations, is reserved for public charging stations. The number
of RINs that vehicle manufacturers would be able to generate would be
reduced by a corresponding percentage which could vary depending on the
extent to which vehicles produced by a particular manufacturer are
designed to use public charging stations. The intent of this reduction
would be for vehicle manufacturers to capture only the charging of EVs
that happens at the vehicle owner's homes. This approach is coarse in
the sense that discounting the total RINs which were measured (or
modeled) by the vehicle manufacturers by a percentage and then allowing
charging stations to generate RINs based upon their aggregated charging
data could result in more or less RINs being awarded than should have
been depending upon the actual home to public charging split. However,
this approach would simplify implementation and allow a hybrid system
to incentivize both EVs and charging infrastructure.
    In summary, the vehicle manufacturer centric structure has several
potential advantages (potential for simplicity of implementation and
providing financial incentives to increase the adoption rate of EVs),
as well as some issues which would need to be resolved. Vehicle
manufacturers have a privileged position in terms of access to charging
data, and would thereby have the least amount of need to create complex
registration requests. Vehicle manufacturers also have an opportunity
to resolve potentially complex data ownership issues surrounding EV
charging data. There is also flexibility in this program structure for
the use of assumptions and models that could serve to reduce
administrative and applicant resource expenditure, which could lead to
greater program participation. Vehicle manufacturers, however, would
have to rely on contractual mechanisms to verify that the electricity
used as the basis for RIN generation was generated from qualifying
biogas and that the electricity was introduced into a grid servicing
their customers. A single vehicle manufacturer would likely need to
rely on a sizable number of contracts with IPPs, given the small scale
of many IPPs that generate electricity from biogas and the necessity
for the IPPs to be able to supply electricity onto the electrical grid
from which the manufacturer's EVs draw electricity.

D. Equivalence Value and Other Issues Related to Generating RINs for
Renewable Electricity

    The EPA has received input from various parties regarding the
equivalence value assigned to RINs generated for renewable electricity
used as transportation fuel. A number of these parties have voiced
concern that the unique nature of electric vehicles warrants an
equivalence value calculated using a different set of parameters than
those used to calculate the equivalence value of other renewable fuels
under the RFS program. The EPA acknowledges that there are undoubtedly
differences between vehicles that use internal combustion engines
(ICEs) for propulsion and those that utilize electric motors. Whether
the equivalence value for RINs generated for renewable electricity
should be evaluated differently in light of these differences is a
considerably more complex issue, and as such, the EPA would like to
open up the issue of the renewable electricity RIN equivalence value
for public comment. We are not at this time seeking comment on the how
equivalence value is calculated for fuels other than renewable
electricity.
    The history of how equivalence values were conceived and calculated
plays an important role in how the discussion on potentially
establishing a unique equivalence value for RINs generated for
renewable electricity should be framed. In the preamble to RFS1 final
rule we stated: \305\
---------------------------------------------------------------------------

    \305\ See 72 FR 23920 (May 1, 2007).

To appropriately account for the different energy contents of different
renewable fuels as well as the fact that some renewable fuels actually
contain some non-renewable content, we are requiring that Equivalence
Values be calculated using both the renewable content of a renewable
fuel and its energy content. This section describes the calculation
methodology for Equivalence Values. In order to take the energy content
of a renewable fuel into account when calculating the Equivalence
Values, we must identify an appropriate point of reference. Ethanol is
a reasonable point of reference as it is currently the most prominent
renewable fuel in the transportation sector, and it is likely that the
authors of the Act saw ethanol as the primary means through which the
required volumes would be met in at least the first years of the RFS
program. By comparing every renewable fuel to ethanol on an equivalent
energy content basis, each renewable fuel is assigned an Equivalence
Value that precisely accounts for the amount of petroleum in motor
vehicle fuel that is reduced or replaced by that renewable fuel in
comparison to ethanol. To the degree that corn-based ethanol continues
to dominate the pool of renewable fuel, this approach allows actual
volumes of renewable fuel to be consistent with the volumes required by
---------------------------------------------------------------------------
the Act.

    This language establishes two important precepts: (1) Equivalence
values are to be calculated using both the renewable content of the
fuel and its energy content; and (2) Corn-based ethanol was selected as
the reference fuel. These principles were reaffirmed in the current
regulatory structure for the RFS program in 2010 when the EPA decided,
through a notice and comment rulemaking, to retain the use of an energy
and renewable content-based equivalence value for purposes of
calculating the number of RINs generated for any quantity of renewable
fuel. Therefore, the EPA has maintained the position that although
there are efficiency differences present in the operation of ICEs,
including those powered by different fuels, the current equivalence
value of 22.6 kWh per gallon of ethanol is appropriate. However, due to
concerns raised by various parties that maintaining this position may
unduly negatively affect the renewable electricity pathway, we are
seeking comment on whether a

different means of determining the equivalence value for renewable
electricity would be appropriate. The following discussion is broken
into segments which address the many issues that have been raised
concerning renewable electricity RIN generation.
1. Landfill Gas Pathway Effectiveness
    Proponents of revising the equivalence value for renewable
electricity have noted that aside from electricity, all of the approved
fuels under the RFS are chemical fuels and this difference requires a
novel approach. Their supporting reasoning is as follows: Electric
motors used to propel a vehicle are not subject to the same fundamental
efficiency limitations of ICEs. This makes electricity fundamentally
different and unique and means that a ``gallon of gasoline equivalent''
of electricity in the battery of an EV provides several times more
miles of transportation service than a gasoline vehicle with a gallon
of ethanol in the tank. If we constrain the bounds of the analysis to a
``tank-to-wheels'' efficiency metric as they are suggesting should be
done, then it is undeniable that EVs are far more efficient that ICE
powered vehicles. A representative value for a tank-to-wheels
efficiency for EVs is near 90 percent, whereas a value around 20-30
percent is representative of ICEs. Using this logic, it is
understandable that proponents of revising the equivalence value feel
that the EPA is not capturing the superiority of EVs consuming
renewable electricity compared to ICEs consuming chemical fuels in the
current equivalence value. However, it should be noted that the EPA is
currently giving credit for electric vehicle efficiency to vehicle
manufacturers under the Light Duty Vehicle GHG program.
    An alternative interpretation could also be reached if the scope of
the analysis is broadened. Using a source of renewable electricity,
landfill gas (LFG), as the starting point of this comparison, there are
currently two approved pathways under the RFS program by which LFG can
be utilized to generate RINs. One of these is the direct use of the
cleaned LFG to generate renewable electricity (referred to as
``Electric''), typically in an ICE or a turbine. The other pathway is
to upgrade the LFG to high BTU ``Renewable Gas'' (referred to as
``Gas''), which can then be compressed and used in CNG/LNG vehicles as
transportation fuel. As shown in Figure VII.D.1-1 below, these two
pathways are assessed to determine the quantity of original energy
content from the LFG that is ultimately available to provide drive
energy to propel a vehicle. Starting with a nominal unit of energy,
each conversion process in the value chain for each respective pathway
is assessed a high and low efficiency to provide a rough bandwidth for
drive energy efficiency.
[GRAPHIC] [TIFF OMITTED] TP16NO16.003

    The specific assumptions for this illustrative comparison for the
efficiency of the energy conversion processes in Figure VII.D.1-1 are
presented in Table VII.D.1-1 below.

                                                 Table VII.D.1-1--Landfill Gas Use Scenario Assumptions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Gas         Electricity     Electricity       Battery       ``Tank'' to
       Landfill gas  use scenario           Nominal LFG     compression     compression    transmission   charging [eta]   wheels [eta]    Drive energy
                                              energy         [eta] (%)       [eta] (%)       [eta] (%)          (%)             (%)          available
--------------------------------------------------------------------------------------------------------------------------------------------------------
Electric (High-[eta])...................               1             n/a              45              98              95              90            0.38
Electric (Low-[eta])....................               1             n/a              20              90              65              60            0.07
Gas (High-[eta])........................               1              93             n/a             n/a             n/a              30            0.28
Gas (Low-[eta]).........................               1              93             n/a             n/a             n/a              14            0.13
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The energy required for gas compression for the gas pathway was
calculated assuming an isentropic efficiency of 80 percent, a CNG
pressure of 3600 psi, and it was assumed that the compressor was
consuming electricity generated from LFG at an efficiency of 35
percent. This way of representing the energy penalty of upgrading LFG
to CNG may be simplistic, but we believe it provides sufficient
accuracy for this relative assessment of the two pathways. The ``tank''
to wheels efficiency values for ICE engines \306\ are representative of
the upper and lower bounds of expected fuel energy to drive energy
conversion. The ``tank'' (battery) to wheels efficiency upper-bound is
representative of reported values by manufacturers and the lower-bound
is an assessment based upon reported behavior of EVs in cold weather,
but no reliable empirical data was available to substantiate the value
used of 60 percent.
---------------------------------------------------------------------------

    \306\ See https://www.fueleconomy.gov/feg/atv.shtml.
---------------------------------------------------------------------------

    The key point illustrated by the Figure VII.D.1-1 is that the
Electric pathway is not always superior to the Gas pathway on a drive
energy provided basis when starting with the same quantity of landfill
gas. Depending on the efficiencies for key energy conversion processes,
either of the pathways can appear superior to the other. By contrast,
an analysis using median efficiency values for all the energy
conversion processes highlighted, would find that the overall
efficiency of converting LFG to drive energy in a vehicle is roughly
equivalent regardless of the pathway chosen. If both pathways generated
RINs based upon the quantity of LFG used, the resulting interpretation
of delivered drive energy parity between the pathways for establishing
a novel equivalence value for the electricity pathway would likely be
that no change to the EPA's current energy content methodology would be
warranted. However, neither pathway is currently evaluated based upon
the quantity of LFG used to deliver drive energy.
2. RIN Generation and Measurement Location
    Another important, and tightly coupled aspect, of the equivalence
value issue is where the RINs are generated along the value chain.
Whether bulk gas from the LFG producer, electricity generator LFG
consumption or electricity production, electrical feed to the battery
charging device, or onboard vehicle state of charge is designated as
the point of RIN generation can have a significant effect on the
quantity of RINs generated. The determination of an appropriate point
in the value chain for RIN generation is a major factor highlighted by
parties suggesting an undervaluation of RINs generated from
electricity. Those stakeholders have asserted that there is inequity
created by allowing the Gas pathway for LFG to be measured on the
upstream side of the ICE (the vehicle's ICE) while the Electric pathway
is required to be measured on the downstream side of the ICE (the
electrical generation equipment). This idea is illustrated in Figure
VII.D.2-1 below, where each LFG pathway starts with 1 MMBTU of cleaned
LFG on the left and the required conversion processes for each pathway
are applied cumulatively moving to the right.
[GRAPHIC] [TIFF OMITTED] TP16NO16.004

    The quantity of energy from the nominal cleaned LFG that remains
for Vehicle Drive Energy is very similar for each pathway. However, due
to the point in the process at which energy is measured for RIN
generation in the two pathways currently, the Gas pathway produces
roughly 3.5 times the RINs for an equivalent quantity of cleaned LFG.
The EPA seeks comment on whether the parity that is observed in the
delivered vehicle drive energy between the two pathways should be
reflected by the quantity of RINs generated by the two pathways and
requests comment on the appropriate means of doing so.
    One means of ensuring that the Gas and Electric pathways for LFG
would generate commensurate quantities of RINs would be to have RIN
generation be tied to the quantity of LFG consumed. However, the EPA
has concerns regarding the potential generation of RINs from LFG prior
to the generation of electricity as this may create a perverse
incentive for generators to operate inefficiently. Put

another way, if credits are given based upon the amount of LFG that
gets converted to electricity rather than on the amount of electricity
generated, operators may be incentivized to consume more LFG to meet
demand. This concern is more plausible given the current oversupply of
electricity generated from LFG relative to the quantity of electricity
consumed by EV charging (and eligible for RINs). Consequently, it may
be more appropriate to maintain RIN generation for renewable
electricity after generation of the electricity.
3. Additional Challenges Unique to Electricity
    Unlike the chemical fuels typically used to generate RINs under the
RFS program, which incur very minimal loses from the time they are
produced until they are consumed in the vehicle, renewable electricity
used as a transportation fuel presents some unique challenges. As a
result, one of the requirements being considered for parties interested
in generating RINs for renewable electricity is for the parties to
ensure that a corresponding quantity of biogas-generated electricity is
produced to provide the ultimate kWh converted to transportation fuel.
One interpretation of this provision is that RINs would be awarded
exclusively based on the quantity of kWh increased in the battery of
the EV being fueled, and should therefore account for the efficiency of
the charging system used. The degree to which this value varies from
the quantity of kWh used to charge the vehicle's battery is a function
of the efficiency of the charging system used to alter the battery's
state of charge. Depending on whether a system is inductive or
conductive, level I, II, fast charging, or something yet to be
developed, there will be associated charging losses. Additionally, the
electricity must be generated at facilities that vary in the efficiency
by which they convert landfill gas to renewable electricity. There is
potential for variation in every energy conversion or transfer process
associated with the electricity RIN generation pathway. Furthermore,
the transmission of electricity across the country incurs resistive
losses, which result in approximately 6 percent of the originally
generated kWh being lost before it can even begin the process of being
converted to transportation fuel. We request comment on the degree to
which parties interested in generating RINs for renewable electricity
should be responsible for accounting for electricity generation
efficiency and the losses associated with EV charging efficiency and
the transmission of electricity.
    A related complexity for properly determining the amount of RINs to
be awarded for a charging event is parasitic and vampire losses. Unlike
their ICE counterparts, EVs cannot utilize waste engine heat for
passenger compartment heating and must use electricity, which would
otherwise be used to propel the vehicle, to warm the passenger
compartment. Additionally, parasitic losses associated with maintaining
battery pack temperature, providing passenger compartment air
conditioning, etc., can amount to a non-trivial quantity of electricity
not being used to propel the vehicle. The combined effect of these
system losses will inevitably result in less vehicle miles being driven
on a given charge than would otherwise be anticipated under more mild
conditions. We request comment on whether or not parasitic and vampire
losses should be accounted for in determining the number or RINs that
should be generated for renewable electricity, as well as options for
accounting for these losses.
    Finally, the environmental attributes associated with a unit of
generated electricity have value above and beyond wholesale electricity
depending upon generation source and local environmental compliance
market conditions. Several states and regions currently have programs
that require electric utility companies to produce or procure an
allotment of renewable energy credits (RECs) to be retired annually in
order to promote the buildout of renewable electricity. There are also
FTC regulations that ensure consumers who purchase products based on
advertised reduced environmental impact that these claims are
substantiated. Although RIN generation under the RFS program is not
constrained by state laws, it is the responsibility of the regulated
community to ascertain the extent to which RIN generation under the RFS
program has implications for their actions and obligations under state
programs and laws administered by other federal agencies.
4. RFS Complications and Ancillary Issues
    Several parties have suggested that the equivalence value for
renewable electricity should reflect the higher efficiency of electric
vehicles. Deviating from the current system for determining the
equivalence value, where the number of RINs generated is calculated
strictly on the energy content of the fuel entering the vehicle, to a
system that also considered the engine and vehicle efficiency would
introduce significant complexity to the RFS program. Engine
efficiencies vary not only according to fuel type (e.g., gasoline,
diesel, natural gas, electricity), but also according to a number of
other factors, such as the compression ratio of the engine and final
drive ratio. Further, a number of factors specific to each individual
driver, such as the type of driving (primarily city vs. highway),
environmental conditions (e.g., temperature, elevation change, etc.),
and driver behavior, can impact vehicle efficiency. Perhaps more
importantly, none of these factors remain constant, as vehicle
efficiencies are continuously changing over time. Therefore, it could
introduce considerable complexity to consider engine efficiency when
calculating the number of RINs that can be generated for any given
quantity of fuel under the RFS program. For this reason, at this time
we are only seeking comment on a unique methodology for the
determination of RINs from renewable electricity and not other
biofuels.
    Another issue for consideration is that the EPA currently
administers programs beyond the scope of the RFS (such as the Light
Duty Vehicle and Heavy Duty Vehicle GHG Standards) that already take
into consideration and provide credit for engine and vehicle
efficiency. Including vehicle efficiency in RIN determination would
result in counting the same benefit under multiple programs. For
example, if the vehicle manufacturer approach were ultimately selected
as the RIN generation structure and an equivalence value that
preferentially rewarded the electricity pathway for LFG adopted,
vehicle manufacturers would essentially be receiving large quantities
of credits for producing EVs under both the RFS program and the Light
Duty Vehicle GHG Standard. Such ``double dipping'' may be perceived as
unwarranted and inequitable by the taxpayers supporting those programs
and the consumers purchasing those vehicles. Similar examples of
``double dipping'' could be postulated for other RIN generation
structures. For example, the utility structure where electricity
produced from LFG is already accruing a production tax credit of $11/
MWh for the plant operator. Providing an additional incentive through
the value of the RIN in the RFS program would therefore be providing
two incentives for the same engine efficiency benefit. We seek comment
on the appropriateness of doing so and introducing vehicle/engine
efficiency into the RIN value for RINs generated

for renewable electricity and the appropriate means of doing so.
    The EPA believes that the best-case scenario would be the adoption
of a structure for generating RINs for renewable electricity that would
simultaneously provide greater incentive for EV use and ownership,
increase the amount of renewable electricity produced, and minimize
challenges related to program oversight. The discussion of potential
program structures is meant to elicit comment on the mechanics of the
program, what is most likely to be directly incentivized by each, and
which entities should ultimately be able to generate RINs in a manner
that will minimize the administrative burden of participation for both
the RIN-generating entities and the EPA. By opening up for comment the
subject of the equivalence value for RINs generated for renewable
electricity, the EPA hopes to receive public comment from all
stakeholders to better inform any changes to the RIN values in the
future. This program represents an opportunity to incentivize more
widespread adoption of EVs, but decisions regarding which structure(s)
should be adopted, how and at what point RINs should be generated, and
what types of data and oversight should be required will ultimately
determine the successfulness of any future program. While we are not
proposing a particular structure at this point in time, we do recognize
the importance of resolving this issue as quickly as possible to
support the growth of renewable electricity and electric vehicles. As
such, we request not only comments that comprehensively address the
range of issues raised in this discussion, but also supporting data
that might allow us to move quickly to a proposal.

VIII. Other Revisions to the RFS Program

A. RVO Reporting

    Currently, obligated parties report the total volume of gasoline
and diesel fuel that they produce or import. This volume is used to
calculate their RVOs. In order to more effectively ensure compliance,
we are proposing to revise the RVO reporting requirements for obligated
parties as described in 40 CFR 80.1451(a) in two ways. First, we are
proposing that obligated parties would now report the constituent
products described in 40 CFR 80.1407(c) and (e) separately, instead of
in total beginning with the 2017 compliance year. This would enable the
EPA to more easily track the production of gasoline and diesel by
obligated parties and verify that the reported volumes are accurate.
    Second, beginning with the 2017 compliance year, we are also
proposing to require that obligated parties report heating oil
production volumes as part of their annual compliance reports to help
ensure that RVOs are appropriately calculated. While heating oil
production is not counted towards an obligated party's RVO, it is often
chemically identical to diesel fuel. Numerous states and cities in the
Northeast and Mid-Atlantic \307\ have recently revised their standards
for heating oil such that heating oil sold in those states and cities
is (or soon will be) subject to the same 15 ppm ultra-low sulfur
standard that the EPA established for ultra-low sulfur diesel in 40 CFR
part 80, subpart I.\308\ As such, refineries are now shipping their
heating oil to the Northeast in the same pipelines and in the same
batches as diesel fuel. By aligning the production breakdown by
category more closely with other fuels programs and collecting heating
oil production information, the EPA would be able to help ensure that
heating oil and diesel fuel are appropriately accounted for in
obligated parties' RVOs.
---------------------------------------------------------------------------

    \307\ Connecticut, Delaware, Maine, Massachusetts, New Jersey,
New York, Rhode Island, Vermont, and the city of Philadelphia, along
with a proposal for the District of Columbia.
    \308\ See the New England Fuel Institute's (NEFI) ``State Sulfur
& Bioheat Requirements for No. 2 Heating Oil in the Northeast & Mid-
Atlantic States,'' available in the docket for this action.
---------------------------------------------------------------------------

B. Oil From Corn Oil Extraction

    In the RFS2 final rule,\309\ the EPA established two pathways
(pathways F and H in Table 1 to 40 CFR 80.1426) for biomass-based
diesel (D-code 4) or advanced biofuel (D-code 5) made from ``non-food
grade corn oil.'' The lifecycle GHG analyses for these pathways were
based on the EPA's modeling of corn oil recovered from distillers
grains with solubles (DGS) produced by a dry-mill corn ethanol plant
through corn oil extraction. The EPA is proposing to revise pathways F
and H in Table 1 to 40 CFR 80.1426 to specify that the feedstock is
``oil from corn oil extraction,'' and to include a revised and somewhat
broadened definition of ``corn oil extraction.''
---------------------------------------------------------------------------

    \309\ See 75 FR 14670 (March 26, 2010).
---------------------------------------------------------------------------

    The RFS regulations currently define ``corn oil extraction'' as
``the recovery of corn oil from the thin stillage and/or the distillers
grains and solubles produced by a dry mill corn ethanol plant, most
often by mechanical separation.'' \310\ As the industry has evolved and
matured, new approaches are being used to extract corn oil, and at
different locations in the ethanol production process. Despite the
current regulatory language, we believe that the precise timing and
method of corn oil extraction is not relevant for GHG reductions to be
accomplished pursuant to pathways F and H, provided that: (1) The corn
is converted to ethanol; (2) The corn oil is extracted at a point in
the dry mill ethanol production process that renders it unfit for food
uses without further refining; and (3) The resulting DGS from the dry
mill operation is marketable as animal feed. Therefore, we are
proposing a revised definition of ``corn oil extraction'' to include
these points. The revised definition would include corn oil recovered
at any point downstream of when a dry mill corn ethanol plant grinds
the corn (provided that the three conditions listed above are
satisfied), as corn ground at a dry mill ethanol plant is typically
rendered unsuitable for food uses. For example, this would include
recovery of corn oil before fermentation from the slurry or
liquefaction tanks. It would also include recovery of corn oil after
fermentation from the thin stillage and/or DGS. Further, it would also
include recovery of corn oil by a third-party from DGS produced by a
dry mill corn ethanol plant.\311\ Given that the EPA's modeling of corn
oil from corn oil extraction for approved pathways F and H considered
the impacts of using the DGS co-product as animal feed, the proposed
revision also specifies that the oil extraction results in DGS that is
marketable as animal feed.
---------------------------------------------------------------------------

    \310\ See 40 CFR 80.1401.
    \311\ Like any other renewable fuel producer, such a third-party
would be required to satisfy requirements designed to ensure that
their biofuel product is derived from renewable biomass.
---------------------------------------------------------------------------

    Based on currently available information, the indirect GHG impacts
of using corn oil recovered through means other than corn oil
extraction as a biofuel feedstock are likely to be different than the
GHG impacts for corn oil extraction that the EPA modeled for the RFS2
final rule. The corn fractionation and wet milling processes to recover
corn oil are not covered either by the existing definition or the
proposed definition of ``corn oil extraction.'' \312\ Given the other
potential market impacts of using corn oil recovered by corn
fractionation or wet milling as a biofuel feedstock, the EPA is not in
a position to determine whether corn oil from those sources meets the
GHG reduction thresholds for

non-grandfathered fuel that is required by the CAA. Companies wishing
to produce non-grandfathered biofuels from corn oil that is not
recovered by corn oil extraction may petition the EPA for approval of
their proposed pathway pursuant to 40 CFR 80.1416.
---------------------------------------------------------------------------

    \312\ The RFS regulations at 40 CFR 80.1401 define corn oil
fractionation as ``a process whereby seeds are divided in various
components and oils are removed prior to fermentation for the
production of ethanol.''
---------------------------------------------------------------------------

C. Allowing Production of Biomass-Based Diesel From Separated Food
Waste

    In the RFS2 final rule, we determined that waste grease biodiesel
achieved an 86 percent reduction in lifecycle GHG emissions compared to
the baseline diesel fuel. This analysis formed the basis for our
determination that the biodiesel from biogenic waste oils/fats/greases
would qualify for generation of biomass-based diesel (D-code 4) and
advanced biofuel (D-code 5) RINs. These pathways are specified in Rows
F and H of Table 1 to 80.1426.
    We have received a request to approve a pathway for the use of non-
cellulosic portions of separated food waste to produce biodiesel. The
process by which the food waste would be converted to biodiesel is
similar to the process we modeled in the RFS2 final rule for waste
oils/fats/greases biodiesel. In addition, as a waste product, separated
food waste would have negligible GHG emissions associated with its
production, as is the case for waste oils/fats/greases. Therefore, we
believe that utilizing separated food waste to produce biodiesel would
have a similar lifecycle emissions profile as using biogenic waste
oils/fats/greases to produce biodiesel. As a result, we are proposing
to amend the pathways specified in Rows F and H of Table 1 to 80.1426
to allow for the generation of D-code 4 and D-code 5 RINs for the
production of biodiesel and advanced biofuel, respectively, from the
non-cellulosic portions of separated food waste. This amendment is
consistent with the CAA, which defines both biomass-based diesel and
advanced biofuels as fuels that result in at least 50 percent less GHG
emissions than the petroleum fuels they replace.
    For the same reasons, and to provide more flexibility to renewable
fuel providers, we are also proposing that renewable diesel made from
the non-cellulosic portions of separated food waste would qualify for
the generation of D-code 4 and D-code 5 RINs. This additional
flexibility is also reflected in proposed amendments to Rows F and H of
Table 1 to 80.1426.

D. Registration of New and Expanded Grandfathered Volumes

    The CAA and the EPA's implementing regulations provide for two
exemptions to the otherwise generally applicable requirement that all
qualifying renewable fuel attain at least a 20 percent lifecycle GHG
reduction as compared to baseline petroleum fuel. The first exemption
is for a baseline volume of fuel from facilities that commenced
construction prior to December 19, 2007, and completed construction by
December 19, 2010, without an 18 month hiatus in construction.\313\ The
second exemption is for a baseline volume of ethanol from facilities
fired by natural gas or biomass that commenced construction after
December 19, 2007, but prior to December 31, 2009, and completed
construction within 36 months without an 18 months hiatus in
construction.\314\ In both cases the baseline volume of exempt fuel for
qualifying facilities is determined by reference to the most
restrictive of all applicable preconstruction, construction, and
operating permits issued prior to December 19, 2007, or December 31,
2009, depending on which exemption is applicable. If permitted capacity
cannot be determined, the baseline volume is calculated by reference to
actual production volumes in a specified historic time period. In the
RFS2 final rule, the EPA noted that verifying the facts underlying
claims related to exempt baseline volumes was likely to become
increasingly difficult over time, and therefore included a requirement
that applications for registration of facilities claiming an exemption
from the 20 percent GHG reduction requirement be submitted to the EPA
by May 1, 2013.\315\ In a later action, the EPA extended this deadline
to July 1, 2013.\316\ The regulation also provided, however, that the
EPA could continue to process registration applications for facilities
seeking an exemption from the 20 percent GHG reduction requirement
after July 1, 2013, if the EPA, in its sole discretion, determined that
it could adequately verify the factual basis for a producer's claims.
---------------------------------------------------------------------------

    \313\ See 40 CFR 80.1403(c).
    \314\ See 40 CFR 80.1403(d).
    \315\ See 75 FR 14690 (March 26, 2010) and 40 CFR 80.1450(f).
    \316\ See 75 FR 26030 (May 10, 2010).
---------------------------------------------------------------------------

    Although the EPA envisioned that it would stop processing
registration requests for facilities claiming an exemption from the 20
percent GHG reduction requirement after the regulatory July 1, 2013,
deadline, we have exercised our discretion to review a number of
additional requests on a case-by-case basis. Since the July 1, 2013,
deadline, we have accepted approximately 12 requests for either new
registrations or for amendments to the registered baseline volume of
exempt fuel at a facility. We are aware of approximately 13 additional
requests of this nature pending with the EPA, but expect that there may
be additional applications undergoing initial processing by EPA
contractors.
    The EPA is proposing November 16, 2016, as a firm cut-off date for
the receipt by the EPA of registration materials related to facilities
not previously registered with the EPA that seek to produce renewable
fuel exempt from the 20 percent GHG reduction requirement, and for
currently-registered facilities that seek to amend their registrations
to increase the registered baseline volume of renewable fuel exempt
from the 20 percent requirement. The primary reason for this proposed
change is that it has become increasingly difficult for EPA staff to
independently verify the authenticity of the air permits, construction
permits, or similar documents that are in some cases over 10 years old,
to determine whether a complete set of such permits has been provided
by the would-be registrant, or, in the alternative where permitted
capacity cannot be determined, to verify the actual production volumes
from facilities during historic time periods. Thus, we believe this
proposal is justified for the reason expressed in the current
regulation--that registration applications, cannot be verified by the
EPA in the same manner as would have been possible with a timely
submission. While this may also be the case for submissions received
prior to November 16, 2016, we are proposing to review those
submissions on a case-by-case basis. A secondary basis for our proposal
is related to the first. The later the date of registration submissions
that are based on data pre-dating 2007 or 2009, the greater the burden
on EPA staff to attempt to verify the claims. This additional burden
prevents or limits EPA staff from timely attending to other critical
implementation and enforcement matters.
    Although there is scant legislative history for EISA to shed light
on the purposes of the statutory exemptions from the 20 percent GHG
reduction requirement, we believe it is likely that the primary purpose
of the exemptions was to protect facilities that had made substantial
investments to supply biofuels to the U.S. market in response to the
incentives provided by Energy Policy Act of 2005, and that might be
financially unable to upgrade their facilities to meet the new 20
percent GHG reduction requirement imposed by EISA. We believe that all
such facilities

would have submitted registration materials with the EPA prior to
November 16, 2016, and at this point in time allowing continued
registration of facilities claiming an exemption is not warranted given
the difficulty in establishing facts and verifying documents going back
a decade and the considerable administrative burden to the EPA in
attempting to do so.
    It should be noted that this proposed change would not affect
facilities that have already registered with the EPA and are producing
renewable fuel pursuant to an exemption from the GHG reduction
requirements under the provisions of 40 CFR 80.1403. Those companies
would continue to be able to produce renewable fuels that are exempt
from the 20 percent GHG reduction requirement, up to their individual
baseline volumes. In addition, facilities can register with the EPA at
any time for the production of fuels meeting the 20 percent (or
greater) lifecycle GHG emissions reduction thresholds applicable to
non-exempt renewable fuel.
    Given the dynamic nature of the renewable fuels marketplace,
facilities are frequently bought and sold, and this proposal is not
intended to change the existing practice allowing facilities that
change ownership to retain the exemptions available in 40 CFR 80.1403.
We are proposing to add language to the regulations to make clear that
when a facility is transferred, the new owners are able to register to
produce renewable fuel subject to an exemption in 40 CFR 80.1403 to the
extent the prior owner's registration reflects eligibility for such an
exemption, provided of course that other regulatory requirements are
satisfied.
    Taken together, these proposed changes would not allow registration
of facilities claiming new or expanded exempt baseline volumes if their
requests were received by the EPA after November 16, 2016, but would
not impact the operations or eligibility for producing fuel pursuant to
the exemptions in 40 CFR 80.1403 for facilities that are already
registered. If finalized, the EPA would undertake a case-by-case review
of all registration applications received prior to November 16, 2016,
to ascertain if the claims for eligibility to produce biofuel exempt
from the 20 percent GHG reduction requirement are accurate and
verifiable, and requests received after that date would be denied for
the reasons stated above.

E. Flexibilities for Renewable Fuel Blending for Military Use

    The EPA proposes to amend 40 CFR 80.1440 to allow parties that
blend renewable fuel to produce fuels for use as transportation fuel,
heating oil, or jet fuel under a national security exemption or that
sell neat renewable fuel for use in vehicles, engines, and equipment
that have a national security exemption for emissions certification to
delegate to an upstream party the RIN-related responsibilities (i.e.,
RIN separation, reporting, recordkeeping, and attest engagement
requirements). These parties could include the U.S. Military itself, or
contractors working for the U.S. Military. The EPA currently has a
provision that allows blenders who handle and blend small volumes of
renewable fuel per year (less than 250,000 gallons per year) to
delegate RIN-related responsibilities to an upstream party. The EPA has
received a number of inquiries from parties that have wished to provide
renewable fuel, either neat or blended into transportation fuel, for
use by the U.S. Military as part of Department of Defense (DOD)
renewable military initiatives. One obstacle to this use of renewable
fuel by the DOD is that, unlike other EPA fuels programs, there are no
exemptions related to national security uses in the RFS regulatory
program.
    The EPA believes that it would be appropriate to allow DOD or its
contractors to delegate RFS RIN responsibilities to upstream parties;
doing so would remove a potential obstacle to the use of renewable
fuels by DOD and would promote use of renewable fuel by the military.
Therefore, we are proposing similar upstream delegation provisions for
neat and blended renewable fuels supplied to DOD under a NSE as those
already in place for small renewable fuel blenders. The EPA seeks
comment on whether this is appropriate.

F. Heating Oil Used for Cooling

    We are proposing to amend the definition of heating oil in 40 CFR
80.1401. This amendment would expand the current definition of heating
oil to include fuels that differ from those meeting the current
definition only because they are used to cool, rather than heat,
interior spaces of homes or buildings to control ambient climate for
human comfort. We are also proposing to make minor modifications to the
registration, reporting, PTD, and recordkeeping requirements for
renewable heating oil to correspond with this change. We have received
questions related to the use of renewable heating oil in equipment that
cools interior spaces. We believe that displacing the use of petroleum
based fuel oil with renewable heating oil for cooling is consistent
with the CAA section 211(o) requirements and should be allowed. We seek
comment on whether this approach is appropriate.

G. Separated Food Waste Plans

    We are proposing to amend the RFS registration procedures for
separated food waste plans. The current regulations require that plans
include: ``(1) The location of any municipal waste facility or other
facility from which the waste stream consisting solely of separated
food waste is collected; and (2) A plan documenting how the waste will
be collected, how the cellulosic and non-cellulosic portions of the
waste will be quantified, and for ongoing verification that such waste
consists only of food waste (and incidental other components such as
paper and plastics) that is kept separate since generation from other
waste materials.'' \317\ In addition to submission of separated food
waste plans during RFS registration, the EPA also requires that
renewable fuel producers using separated food waste feedstock update
the registration information whenever there is a change to the plan,
and in some cases, the newly updated plan must be reviewed by a third-
party engineer in accordance with EPA registration procedures. The EPA
has received numerous company updates for production facilities with
separated food waste plans, and some parties have noted that the
requirement to identify and update suppliers of feedstocks through a
plan is overly burdensome.
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    \317\ See 40 CFR 80.1450(b)(1)(vii)(B).
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    Recognizing that business relationships for recovery of food wastes
evolve and that a renewable fuel producer may elect over time to
purchase feedstocks from different or multiple parties, the EPA
proposes to remove the requirement to provide the location of every
facility from which separated food waste feedstock is collected. It
should also be noted that renewable fuel producers are required to
retain records that contain this information under the recordkeeping
requirements under 40 CFR 80.1454. The RFS regulations only allow
renewable fuel producers to generate RINs for fuel if they can
demonstrate, pursuant to the recordkeeping requirements, that the fuel
was produced from renewable biomass. The recordkeeping section of the
regulations requires renewable fuel producers to

keep documents associated with feedstock purchases and transfers that
identify where the feedstocks were produced and are sufficient to
verify that the feedstocks meet the definition of renewable
biomass.\318\ Removing this registration requirement would alleviate
numerous company registration updates as a facility's feedstock
supplier list evolves, as well as make it easier for renewable fuel
producers to have their separated food waste plans reviewed in a
timelier manner. However, renewable fuel producers would still be
required to establish that they used a qualifying feedstock to generate
RINs.
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    \318\ See 40 CFR 80.1426(a) and 80.1454(c) and (d).
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    We are also proposing to modify the regulations to specify that
separated food waste plans identify the type(s) of separated food waste
to be used and the type(s) of establishment the waste will be collected
from. For instance, CAA section 211(o) identifies ``recycled cooking
and trap grease'' as an example of a type of separated food waste.
Examples of types of establishments could be restaurants,
slaughterhouses, or specific food production plants (the kind of food
production should be provided). We believe this information is
necessary for the EPA to determine whether a renewable fuel producer
can make fuel from its proposed feedstock under currently approved
separated food waste pathways. Without this information, we would not
know what the specific feedstock is (e.g., tallow, yellow grease, etc.)
or whether it would qualify as a separated food waste.
    We are also proposing to require that producers of renewable fuels
made from biogenic waste oils/fats/greases that are not separated food
waste to submit a plan at registration with many of the same
requirements as the plan for producers of renewable fuels made from
separated food waste. We would henceforth refer to such plans as
``waste oils/fats/greases feedstock plans.'' There is significant
overlap between the two categories of feedstock, with a considerable
quantity of biogenic waste oils/fats/greases qualifying as renewable
biomass as a result of its additional qualification as separated food
waste. For these reasons, the EPA has required parties intending to use
biogenic waste oils/fats/greases as a renewable fuel feedstock to
submit separated food waste plans at registration. In addition to
helping the EPA determine if the feedstock in question meets renewable
biomass requirements, the EPA has found that the plans help the EPA
assess whether the feedstocks specified by a prospective producer
qualify as biogenic waste oils/fats/greases. This assessment is made on
a case-by-case basis. This proposed amendment will conform the
regulations to the EPA's current practice. A party fully describing
their feedstock in a separated food waste plan would not be required to
submit an additional waste oils/fats/greases plan. Since most, if not
all, producers of renewable fuel from biogenic waste oils/fats/greases
have submitted a separated food waste plan at registration, we do not
believe that this revision would add much, if any, burden to existing
registered facilities. We propose that those few registered producers
using biogenic waste oils/fats/greases who have not previously
submitted a separated food waste plan at registration or in a
subsequent registration update would be required to do so as part of
their next periodic registration update. We seek comment on whether
requiring waste oils/fats/greases feedstock plans for producers of
renewable fuels from biogenic waste oils/fats/greases is appropriate
and whether we should require any additional information.

H. RFS Facility Ownership Changes

    We are proposing to amend the RFS registration, EMTS reporting, and
RIN generation requirements to more explicitly outline requirements for
renewable fuel producers that transfer the ownership of a facility that
was registered immediately preceding the sale. Throughout the
implementation of 40 CFR part 80 fuels programs (e.g., RFG, Anti-
dumping, Gasoline Sulfur, RFS, etc.), the EPA has treated the transfer
of ownership of a facility as requiring a new registration. However,
the EPA has recognized that many elements of the registration for the
facility previously registered to another renewable fuel producer
remain the same upon change of ownership and has, in some cases,
allowed parties to rely upon previously submitted registration
materials. The EPA has tried to work with companies to minimize
disruption of continued operation of the facility. However, some new
owners have expressed confusion over what the appropriate registration
procedures are incident to the transfer of ownership of a previously
registered facility. To help ameliorate this potential confusion, we
are proposing to amend the RFS registration, EMTS reporting, and RIN
generation requirements in three ways.
    First, we are proposing that the regulations explicitly note that
RINs cannot be generated nor assigned to any batches of renewable fuels
in EMTS until a renewable fuel producer has completed all applicable
registration requirements and the EPA has accepted that renewable fuel
producer's registration. Although this requirement is apparent under
the current regulations, since the requirements for RIN generation at
40 CFR 80.1426 only allow for the generation of RINs if all
registration requirements under 40 CFR 80.1450 are satisfied, we
believe that the requirement can be re-iterated for additional clarity.
    Second, we are proposing specific requirements for parties that are
assuming ownership of a facility that was already registered by another
renewable fuel producer. The renewable fuel producer that would newly
acquire the previously registered facility would have to submit all
applicable registration information required for the registration of a
new renewable fuel producer, an appropriately conducted engineering
review, and a letter from the responsible corporate officers (RCOs) of
both companies notifying the EPA of the date the transfer of ownership
is expected to take place. In addition, proof of sale would need to be
submitted after the transfer of ownership is completed. Consistent with
the requirements of the registration of a new renewable fuel producer,
the new renewable fuel producer would need to supply all information to
the EPA (with one exception noted below) 60 days prior to the
generation of RINs.\319\
---------------------------------------------------------------------------

    \319\ See 40 CFR 80.1450(b).
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    The only exception to the 60-day requirement would be that the new
renewable fuel producer may supply the proof of sale or ownership
within three business days of the effective date of the transfer of
ownership. We recognize that it will likely be impractical for parties
to provide appropriate proof of sale or ownership until on or after the
actual effective date of the transfer of ownership. Therefore, we are
proposing to allow some flexibility on when renewable fuel producers
may submit the proof of sale or ownership. The EPA would be able to
review all other registration materials well in advance of the
effective date of the transfer of ownership and be in a position to
approve the new renewable fuel producer's registration shortly after
receiving the proof of sale or ownership.
    Third, we are proposing that the regulations state that the EPA has
the sole discretion to allow the new renewable fuel producer to
retroactively generate RINs for renewable fuel produced and sold in the
interim between the effective date of transfer of ownership of the
facility and EPA acceptance of new registration materials. With EPA
approval, the RINs could be assigned in EMTS and back-

dated to the time of renewable fuel sale. In most cases, the EPA should
be able to accommodate renewable fuel producers that submit
registration materials in accordance with the proposed deadlines for
facility ownership changes (i.e., the EPA would be able to accept the
registration submission and administratively activate the company in
CDX and EMTS with sufficient time for the company to generate RINs
within the five business day limitation for such transactions in EMTS).
However, instances may arise where the EPA cannot administratively act
even when a company has satisfied all the proposed regulatory
requirements (e.g., an upgrade to EMTS or government closure). In such
cases, the EPA would need to allow the company to bypass certain
administrative business rules in CDX and EMTS to generate RINs. This
discretion should allow the EPA an adequate amount of time to
thoroughly review the submitted registration materials while not
risking the continued operation or profitability of facilities that
were previously registered. The EPA would not, however, use this
discretion to allow the retroactive generation of RINs at a facility
for which the new owner did not satisfy all RFS registration
requirements.
    Taken together, we believe these changes outline what requirements
parties are required to meet to register a facility that is changing
ownership. We also believe that the proposed changes would allow the
EPA the flexibility to work with parties to ensure that companies can
continue operation of the facility and generate RINs, when appropriate.
We seek comment on whether there are any additional requirements we
should specify for parties that are assuming the ownership of a
facility, and whether our proposed approach is appropriate.

I. Changes to the Requirements for Independent Third-Party Professional
Engineers and Electronic Submission of Engineering Reviews

    Independent third-party auditors and professional engineers play
critical roles in ensuring the integrity of the RFS program and if
renewable fuel is allowed to be produced through the use of
biointermediates as we are proposing, there will be a significant
expansion in the scope and number of regulated entities under the RFS
program, making third-party verifications even more critical. However,
in recent years the EPA has taken a number of enforcement actions
against renewable fuel producers that generated invalid RINs,\320\ and
the extent of unlawful and fraudulent activities associated with the
RFS program, as demonstrated by these cases, is troubling given the
roles that independent third-parties play in the RFS program. The
independent third-party professional engineer ensures that a renewable
fuel producer can actually produce renewable fuel in accordance with
the RFS regulations and thus generate valid RINs, and the independent
third-party auditor (when hired by a renewable fuel producer) verifies
that the renewable fuel produced adheres to its registered and approved
feedstocks and processes, and therefore qualifies for RIN generation
under the QAP program. Because we are concerned that independent third-
party auditors and professional engineers may not be mitigating
unlawful and fraudulent activities in the RFS program to the extent
needed for a successful program, we are proposing to strengthen the
requirements that apply to these entities. Specifically, we are
proposing to modify the requirements for the independent third-party
auditors that use approved QAPs to audit renewable fuel production to
verify that RINs were validly generated by the producer. The purpose of
these modifications is to strengthen the independence requirements that
protect against conflicts of interest.
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    \320\ See https://www.epa.gov/enforcement/civil-enforcement-renewable-fuel-standard-program.
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    We are also proposing several changes to the requirements for the
professional engineer serving as an independent third-party conducting
an engineering review for a renewable fuel producer as part of the RFS
registration requirements and/or conducting other duties in connection
with a renewable fuel producer's registration updates. First, we are
proposing to strengthen the independence requirements for third-party
professional engineers by requiring those engineers to comply with
similar requirements (including the additional requirements we are
proposing) to those that currently apply to independent third-party
auditors. Second, we are proposing that the third-party professional
engineer would be required to register directly with the EPA (as is
currently required for third-party auditors). This includes submission
of documentation that the third-party engineer meets minimum
qualifications (e.g., independence and professional competency
requirements) and maintains professional liability insurance. Third, as
part of any engineering review, the third-party engineer would be
required to submit electronic engineering reports directly to the EPA.
This would be a change from current provisions, which require that the
renewable fuel producer submits the engineering review report and
allows the option for submission of hardcopy engineering review reports
via the mail. Fourth, we are proposing that third-party professional
engineers provide documents and more detailed engineering review write-
ups that demonstrate the professional engineer performed the required
site visit and independently verified the information through the site
visit and independent calculations. Fifth, we are proposing new
prohibited acts applicable to third-party professional engineers to
reduce the potential of a conflict of interest with the renewable fuel
producer. The purpose of these requirements is to help the EPA and
obligated parties better ensure that third-party audits and engineering
reviews are being correctly conducted, provide greater accountability,
and ensure that third-party auditors and professional engineers
maintain a proper level of independence from the renewable fuel
producer. Taken together, we believe these proposed requirements would
help avoid RIN fraud by strengthening third-party verification of
renewable fuel producers' registration information.
1. Third-Party Auditors
    As discussed extensively in the EPA's Accidental Release Prevention
Requirements: Risk Management Programs under the Clean Air Act proposed
rule,\321\ third-party independence is critical to the success of any
third-party compliance program. Based on the research discussed in that
proposal, we believe that the independence requirements applicable to
third-party auditors in the RFS program should be clarified and
strengthened to further minimize (and hopefully eliminate) any
conflicts of interest between auditors and renewable fuel producers
that might facilitate improper RIN validation. Currently, the RFS
regulations require the auditor to be free from any interest, or the
appearance of any interest, in the renewable fuel producer's
business.\322\ We believe that an appearance of a conflict of interest
exists in situations where auditors may have incentives to ensure that
their customers continue to produce RINs by not reporting potential
issues arising from audits. We are proposing language that clarifies
the current prohibition against an appearance of a conflict of interest
to include:
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    \321\ See 81 FR 13638, 13654-62 (March 14, 2016).
    \322\ See 40 CFR 80.1471(b)(4) and (5).

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     Acting impartially when performing all auditing
activities.
     Not having conducted research, development, design,
construction, or consulting services for the producer within the last
three years.\323\
---------------------------------------------------------------------------

    \323\ For purposes of this requirement, consulting does not
include performing or participating in third-party audits pursuant
to 40 CFR 80.1472.
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     Not providing business or consulting services for the
producer for a period of at least three years following submission of
the final QAP audit for the producer.
     Ensuring that all personnel involved in audit activities
for a specific producer do not accept future employment with that
producer for a period of at least three years following submission of
the final QAP audit for the producer.
    These provisions are intended to prevent third-party auditors from
expecting, anticipating, or conducting prospective ``cross-selling'' of
other services unrelated to the QAP verification. They are also
intended to prevent third-party auditors from seeking or obtaining
employment from producers for which the auditors are conducting QAP
verification activities. In both instances, we believe that third-party
auditors could be unduly influenced in their QAP verification
activities as a result. With regard to companies that employ personnel
who previously worked for or otherwise engaged in consulting services
with a producer, those companies meet the independence criteria when
such personnel do not participate on, manage, or advise the audit
teams. Additionally, employees of these companies are not prohibited
from accepting future employment with a producer as long as they were
not involved in performing or managing the audit.
    Additionally, we are proposing to preclude third-party auditors
from providing initial and triennial engineering reviews for the same
renewable fuel producers. In the RFS QAP final rule, we stated that we
continued to be concerned that allowing an auditor to also perform
engineering reviews and attest engagements will tie the auditor's
financial interests too closely with the renewable fuel producers being
audited and could create incentives for auditors to fail to report
potentially invalid RINs; however, we did not want to exclude potential
third-party auditors that had significant knowledge of the RFS program
and renewable fuel production facilities from participating in the QAP
program.\324\ To balance those concerns, the final rule prohibited
third-party auditors from continuing to provide annual attest
engagements and QAP implementation to the same audited renewable fuel
producer, but allowed third-party auditors to continue to conduct
engineering reviews. After further evaluation, we continue to have
significant concerns that third-parties that perform engineering
reviews and provide QAP services to the same producer may have
financial incentives to overlook certain registration and/or RIN
generation issues to continue a revenue stream from a renewable fuel
producer. Precluding the same entity from providing both engineering
reviews and QAP services for the same renewable fuel producer adds an
additional level of assurance that RINs are being generated validly.
Furthermore, the EPA was initially concerned that the number of third-
parties available to conduct both engineering reviews and QAP services
was limited. However, the EPA now believes that there are a sufficient
number of parties with RFS knowledge to provide these services.
Therefore, we believe that allowing these parties to perform both
services is no longer needed. We are also proposing that a third-party
auditor that provided an engineering review for a renewable fuel
producer prior to November 16, 2016, would not be precluded from
implementing a QAP for that producer so long as the auditor provides no
more engineering review services in the future.
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    \324\ See 79 FR 42094 (July 18, 2014).
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    We seek comment on whether these criteria are appropriate and
sufficient to prevent any conflict of interest or the appearance of any
conflict of interest between the third-party auditor and the renewable
fuel producer and to provide maximum assurances that RINs are being
generated validly. We seek comment on whether any adjustments to these
criteria are necessary for maximum effectiveness and efficiency,
including comments or suggestions on how to provide more flexibility
into these criteria. We also seek comment on whether the proposed
three-year timeframe to separate the audit from other business
arrangements is appropriate.
2. Third-Party Professional Engineers
    In 2013, a report from the Inspector General for the EPA
highlighted concerns with the independence requirements of third-party
professional engineers in the RFS program.\325\ One way to partially
address those concerns is to strengthen the independence requirements
for third-party professional engineers and to require submission of
engineering reviews from third-party professional engineers directly to
the EPA. Currently, third-party professional engineers conduct the
engineering review and often provide the report for submission to the
renewable fuel producer, who must then submit the report to the EPA.
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    \325\ U.S. EPA, Office of Inspector General, ``The EPA Should
Improve Monitoring of Controls in the Renewable Fuel Standard
Program,'' Report No. 13-P-0373, September 5, 2013.
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    Engineering reviews from independent third-party professional
engineers are integral to the successful implementation of the RFS
program. Not only do they ensure that RINs are properly categorized,
but they also provide a check against fraudulent RIN generation. As we
have designed our registration system to accommodate the association
between third-party auditors and renewable fuel producers to implement
the RFS QAP, we have realized that both the way engineering reviews are
conducted and the nature of the relationships among the third-party
professional engineers, affiliates, and renewable fuel producers are
analogous to third-party auditors and renewable fuel producers. As a
result, we are proposing to strengthen the independence requirements
for third-party professional engineers by requiring those engineers to
comply with similar requirements (including the additional requirements
we are proposing) to those that currently apply to independent third-
party auditors. We seek comment on whether the independence
requirements that apply to third-party auditors should also apply to
third-party professional engineers, and whether any adjustments to the
third-party auditor independence criteria are necessary for third-party
engineers.
    We are also proposing that third-party professional engineers
become regulated parties under the RFS program and register with the
EPA. Requiring third-party professional engineers to register would
allow the EPA to determine that the basic minimum qualifications (e.g.,
independence and professional competency requirements) are met. One
goal we have with proposing the registration submission changes is to
leverage the IT infrastructure that we developed to implement the RFS
QAP program to deal more directly with the third-party professional
engineers. This means that third-party professional

engineers would need to register with the EPA through CDX, the EPA's
electronic reporting site, and submit engineering reviews
electronically on forms established by the EPA.
    Currently, third-party professional engineers conduct the
engineering review and often provide the report for submission to the
renewable fuel producer, who must then submit the report to the EPA.
This creates an opportunity, or at least the perception of an
opportunity, for the renewable fuel producer to alter the information
submitted to the EPA. Additionally, renewable fuel producers have
several options for submitting their engineering review to the EPA: (1)
A hard-copy typically as a written report and attachments in a three-
ring binder sent through the mail; (2) An engineering review form with
accompanying report and attachments in PDF format uploaded to the EPA's
registration system (CDX or OTAQREG); or (3) Submission using an EPA-
developed electronic webform. The current submission of hard-copy
engineering reviews presents a significant administrative burden on EPA
staff to process the mail, scan the engineering review report, and
upload it to the EPA system to route to the team for review. The hard-
copy engineering reviews also create a large volume of paper records
that the EPA must further store and protect following CBI requirements,
as appropriate. By requiring engineering reviews to be submitted
electronically, the EPA would be able to reduce the administrative
burden of processing these reports, as well as reduce a significant
amount of paper that is used since these reports are typically hundreds
of pages long. This proposed change may reduce burden for the
submitters as well.
    These proposed requirements would eliminate the current options for
renewable fuel producers to submit engineering review reports directly
to the EPA and for third-party professional engineers to submit
engineering review reports in hardcopy via the mail, which could be a
concern for some parties. We seek comment on these proposed changes.
    If the proposed changes to engineering reviews are finalized, we
plan to develop and require a new electronic webform for engineering
reviews reflecting those changes at some point in the future. The added
benefits of the electronic reporting form are a reduction in errors and
omissions for engineering reviews and a more IT-accessible format that
would reduce the amount of time that the EPA takes to review and accept
RFS registrations. This should allow EPA acceptance of registrations
for renewable fuel producers in a timelier manner. However, since the
electronic webforms for the engineering reviews may require the EPA to
develop new or revise existing systems, including troubleshooting, we
may require significant time to fully implement this component after
the effective date of these requirements.
    We are also proposing to improve the RFS registration requirements
for engineering reviews by requiring site visits to take place when the
facility is producing renewable fuel. This will provide the regulated
community and the EPA with greater confidence in the production
capabilities of the renewable fuel facility. Since the adoption of the
RFS2 requirements in 2010, most engineering reviews are conducted by a
handful of third-party professional engineers. Some of these engineers
are using templates that make it difficult for the EPA to determine
whether registration information was verified. We are concerned that,
in some instances, the third-party engineers are relying too heavily on
information provided by the renewable fuel producers, and not
conducting a truly independent verification. In order to provide
greater confidence in third-party engineering reviews, we are proposing
that the engineering review submission include evidence of a site visit
while the facility is producing renewable fuel(s) that it is registered
to produce. We also propose to incorporate the EPA's current
interpretation and guidance into the regulations regarding actions that
third-party engineers must take to verify information in the renewable
fuel producer's registration application. The amendments would explain
that in order to verify the applicable registration information, the
third-party auditor must independently evaluate and confirm the
information, and cannot rely on representations made by the renewable
fuel producer. We believe these amendments would help provide greater
assurance that third-party professional engineering reviews are based
upon independent verification of the required registration information
in 40 CFR 80.1450, helping to provide enhanced assurance of the
integrity of the registration materials submitted by the facility, as
well as the renewable fuel they produce.
    Finally, we are proposing prohibited activities for third-party
professional engineers. Specifically, we are proposing to prohibit
third-party professional engineers from failing to identify incorrect
information in a renewable fuel producer's registration, failing to
properly conduct an engineering review, failing to disclose to the EPA
any financial, professional, business, or other interest with parties
for whom the third-party professional engineer provides services for
under the RFS registration requirements. The EPA staff that review RFS
registrations have concerns that third-party professional engineers may
be acting, independently or through an affiliate, as consultants and
agents for the same renewable fuel producer, or that, directly or
through an affiliate, they may have a financial interest in the
renewable fuel producer, may not appropriately conduct engineering
reviews, or may not meet the requirements for independence to qualify
as a third-party. We believe that making third-party professional
engineers more accountable for properly conducting engineering reviews
under the regulations and requiring that they interact more directly
with the EPA will help our ability to identify potential conflicts of
interests and bring enforcement actions against third-party
professional engineers should an issue arise.
    We seek comment on these proposed changes and input on whether
there is anything else the EPA should do to help ensure that third-
party professional engineering reviews are conducted so as to maximize
the submission of relevant and accurate information to the EPA.

J. Additional Registration Deactivation Justifications

    We are proposing additional circumstances in which the EPA may
deactivate the registration of a company, third-party auditor, or
third-party engineer under 40 CFR 80.1450(h). In July 2014, the EPA
finalized requirements that describe circumstances under which the EPA
may deactivate a company registration and an administrative process to
initiate deactivation that provides companies an opportunity to respond
to and/or submit the required information in a timely manner.\326\
Since finalizing these requirements, the EPA has identified a number of
other cases in which it would be appropriate to deactivate the
registration of a company. In addition we believe the provisions should
be extended to cover deactivation of registrations for third-party
auditors and third-party engineers. Specifically, we propose to amend
the current regulations to provide that the EPA may deactivate
registrations of a company,

third-party auditor, or third-party engineer for the following reasons:
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    \326\ Under this administrative process, the company will have
14 calendar days from the date of the notification to correct the
deficiencies identified or explain why there is no need for
corrective action. See 40 CFR 80.1450(h)(2)(i).
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     The company, third-party auditor, or third-party engineer
fails to comply with the registration requirements of 40 CFR 80.1450.
     The company, third-party auditor, or third-party engineer
fails to submit any required report within thirty days of the required
submission date.
     The company, third-party auditor, or third-party engineer
fails to pay a penalty or to perform any requirements under the terms
of a court order, administrative order, consent decree, or
administrative settlement agreement between the company and the EPA.
     The company, third-party auditor, or third-party engineer
submits false or incomplete information.
     The company, third-party auditor, or third-party engineer
denies the EPA access or prevents the EPA from completing authorized
activities under CAA section 114 despite our presenting a warrant or
court order. This includes a failure to provide reasonable assistance.
     The company, third-party auditor, or third-party engineer
fails to keep or provide the EPA with the records required in 40 CFR
80.1450.
     The company, third-party auditor, or third-party engineer
otherwise circumvents the intent of the CAA or 40 CFR part 80, subpart
M.
    These deactivation circumstances are consistent with cases where
the EPA may deny or revoke a certificate of conformity under 40 CFR
1051.255(c) and 86.442-78 for engines and vehicles manufactured in or
imported into the U.S. In addition, we are proposing that in instances
of willfulness or those in which public health, interest, or safety
requires otherwise, the EPA may also deactivate the registration of a
company, third-party auditor, or third-party engineer registration
without providing notice to the company, third-party auditor, or third-
party engineer prior to deactivation, and would send written
notification to the RCO describing the reasons for the deactivation.
Companies, third-party auditors, or third-party engineers could still
submit new registrations after appropriate actions were taken by the
company, third-party auditor, or third-party engineer.
    We believe these proposed amendments would help parties better
understand when the EPA intends to restrict a party's participation in
the RFS program as well as the procedures that will be used in such
circumstances. We seek comment on whether there are any additional
circumstances when the EPA should deactivate the registration of a
company, third-party auditor, or third-party engineer.

K. Registration of Biogas Producers

    Consistent with our proposed approach for biointermediate
producers, we are proposing that biogas producers whose biogas is used
to produce renewable electricity or CNG/LNG would be required to
register with the EPA and would be liable for violations of the
applicable RFS requirements, and that renewable fuel producers may only
generate RINs for renewable fuel produced from biogas sourced from a
registered biogas producer.\327\ A biogas producer would be defined as
the owner of any landfill, municipal wastewater treatment facility
digester, agricultural digester, or separated MSW digester that
produces biogas used to produce renewable electricity or CNG/LNG.
Biogas producers registering with the EPA would be required to undergo
a third-party engineering review, which we believe would help ensure
that the RINs generated for fuel derived from this biogas are indeed
valid. We are not proposing that biogas producers submit additional
reports to the EPA since the existing reporting requirements for
parties that generate RINs for fuel made from biogas are sufficient. We
also do not believe that additional PTD, attest engagement, or
recordkeeping requirements are necessary. Our intent is not to
substantially alter the current requirements for renewable electricity
or CNG/LNG produced from biogas, but rather to provide an additional
level of assurance through registration of biogas producers that biogas
used to make renewable electricity or CNG/LNG meets regulatory
requirements. \328\ However, we recognize that additional reporting and
third-party verification (i.e., through attest engagements) could help
ensure that RINs generated for fuel derived from biogas have the same
level of compliance assurance as RINs generated for fuel produced
through other pathways. We request comment on this proposed change and
whether there are any additional requirements that should be imposed on
biogas producers.
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    \327\ It should be noted that in cases where the biogas producer
is the RIN-generating party, the producer would already be
registered with EPA, and no additional registration would be
required.
    \328\ Biogas producers would have to keep records related to
their registration similar to other parties.
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L. New RIN Retirement Section

    We are proposing to create a new section in the RFS regulations for
RIN retirements. The regulations have specific sections that address
when and how parties may generate and separate RINs. However, the cases
where parties must retire RINs are identified in various sections
throughout the regulations. The new section of the RFS regulations for
RIN retirements would simply organize these current sections into one
place. The EPA is aware of some confusion for some responsible parties
causing those parties to improperly retire RINs or fail to retire RINs
when they have a responsibility to do so under the regulations.
Improper retirements can lead to a time-consuming remediation process,
both for the EPA and responsible parties. This new section attempts to
organize these requirements into one location in the regulations to
make these determinations simpler to locate and understand.
    We are also proposing new regulatory language for cases requiring
RIN retirement that are identified in EMTS, but may not be clear in the
regulations, given their current organization. Our intent is not to add
additional burden on parties that must retire RINs under the RFS
program, but rather to make the regulations consistent with how parties
retire RINs in EMTS and help reduce potential confusion regarding the
situations when parties must retire RINs.
    Taken together by enumerating the specific instances in which a
party must retire RINs in a new specific section of the regulations and
by making those retirements consistent with how parties
administratively retire RINs in EMTS, we believe that the newly
proposed RIN generation section would provide beneficial clarification.

M. New Pathway for Co-Processing Biomass With Petroleum To Produce
Cellulosic Diesel, Jet Fuel, and Heating Oil

    One of the potential technologies that may be enabled to
participate in the RFS program by the proposed regulations for
biointermediates is the production of bio-oil from cellulosic
feedstocks. While these bio-oils can be upgraded to finished
transportation fuels at stand-alone facilities that process only
renewable biomass and RINs can be generated for these fuels under the
existing RFS regulations, it may be more efficient and cost-effective
to upgrade these bio-oils along with petroleum crude oils at existing
refineries. Currently, pathways exist for renewable gasoline and
gasoline blendstock (Pathway M in Table 1 to 40 CFR 80.1426) and
naphtha (Pathway N in Table 1 to 40 CFR 80.1426) produced from
cellulosic biomass that is co-processed with petroleum. However, there
is currently no pathway for diesel,

jet fuel, or heating oil produced in this manner.
    The current pathway for cellulosic diesel, jet fuel, and heating
oil (Pathway L in Table 1 to 40 CFR 80.1426) excludes processes that
co-process renewable biomass and petroleum. To qualify as cellulosic
diesel, a fuel must meet the requirements for both cellulosic biofuel
and biomass-based diesel. The definition of biomass-based diesel
explicitly excludes renewable fuels that are derived from co-processing
biomass with petroleum, and therefore a process that produces diesel,
jet fuel, or heating oil by co-processing renewable biomass with
petroleum cannot qualify as biomass-based diesel or cellulosic diesel
under Pathway L in Table 1 to 40 CFR 80.1426. The EPA is proposing a
new pathway that would allow these fuels to qualify as cellulosic
biofuel and generate cellulosic (D-code 3) RINs, as cellulosic biofuels
that are not prohibited from being derived from biomass co-processed
with petroleum. We are also proposing to amend the definition of
cellulosic diesel to no longer require that it meet the definition of
biomass-based diesel, and proposing to create a new definition for
cellulosic biomass-based diesel to refer to fuels that meet the
definition for both cellulosic biofuel and biomass-based diesel. Fuels
that meet the cellulosic biomass-based diesel definition would be able
to generate D7 RINs, while fuels that meet the cellulosic diesel
definition but not the cellulosic biomass-based diesel definition due
to co-processing with petroleum would be able to generate D3 RINs.
    We believe that the lifecycle modeling that was done for the
current pathway for cellulosic diesel, jet fuel, and heating oil
provides sufficient basis for concluding that fuels produced using
similar processes and technologies, where the only difference is that
the bio-oil is co-processed with petroleum, meet the appropriate GHG
reduction thresholds. Any emissions related to the transportation of
bio-oil from the production site to a refinery or other facility that
co-processes renewable biomass with petroleum to produce transportation
fuel is not expected to have a significant impact on the emissions of
these fuels. We seek comment on whether this proposed approach is
appropriate.

N. Vegetable Oil as Feedstock and Renewable Fuel

    Vegetable oils (e.g., soy oil, algal oil, corn oil, and many waste
plant oils) can be used as feedstock both for biodiesel production and
for the production of drop-in renewable diesel that meets the same
specifications as petroleum-based diesel fuel. However, vegetable oils
can also be blended without processing into petroleum diesel fuel in
concentrations up to 5 percent for use in conventional diesel engines,
and can be used in their neat form in vehicle engines that have been
specifically modified to run on it. Given the possible use of vegetable
oils both directly as a transportation fuel and as a feedstock for the
production of biodiesel and drop-in renewable diesel fuels, it has been
the subject of an overwhelming number of the enforcement actions taken
by the EPA for RIN fraud under the RFS program. Typically, parties
engaging in fraudulent activity simply purify or clean up vegetable oil
to produce a product that they generate RINs for, claiming that it
would be used as transportation fuel, but instead sell the vegetable
oil to another facility that uses it to produce biodiesel for which
RINs are also generated. These cases of RIN fraud have substantially
undermined the integrity of the RFS program and significantly increased
compliance costs for affected parties as they have had to retire and/or
replace the invalid RINs. We believe the RIN fraud problem with
vegetable oil is so pervasive that it merits a different approach to
RIN generation than most other types of renewable fuels.
    As an initial matter, the EPA is proposing two regulatory
definitions for vegetable oil that differentiate between its use as a
feedstock and its use as a renewable fuel. When vegetable oil is used
as a feedstock, we propose to refer to it as ``straight vegetable oil
(SVO)''. If the same material is used as renewable fuel (either in a
blend with petroleum diesel or in neat form for use in a modified
engine), we propose to refer to it as ``viscous non-ester renewable
diesel (VRD).'' RINs would not be generated for SVO because it is
intended to be used as a feedstock rather than as a renewable fuel, but
RINs could be generated for VRD under appropriate conditions.
    However, to avoid the enforcement problems noted above, we are
proposing unique provisions related to RIN generation for VRD. Although
under the RFS program it is generally the renewable fuel producer that
generates RINs for renewable fuel, we propose that for VRD this would