Mode............................................................      16
25th percentile.................................................      12
75th percentile.................................................      21
------------------------------------------------------------------------
\a\ All volumes are ethanol-equivalent gallons

 Table II.C-3--Potential Approaches to Determining the Final Cellulosic
  Biofuel Requirement (All Potential Cellulosic Biofuel Producers) \a\
                  [million ethanol-equivalent gallons]
------------------------------------------------------------------------

------------------------------------------------------------------------
Mean............................................................      67
50th percentile.................................................      67

Mode............................................................      67
25th percentile.................................................      61
75th percentile.................................................      73
------------------------------------------------------------------------
\a\ All volumes are ethanol-equivalent gallons

    In today's NPRM, we are proposing to use the mean value for the
final volume requirement for cellulosic because we believe it best
represents a neutral aim at the volumes that could reasonably be
supplied. However, we request comment on whether one of the alternative
values shown in Table II.C-2 would be more appropriate as the basis for
the required volume of cellulosic biofuel in the final rule.
    It is important to note that the final cellulosic biofuel standard
for 2014 may be set at a volume outside the proposed range of 8-30
million ethanol-equivalent gallons. If EPA finalizes the pathways
discussed in the recent proposed rulemaking \21\ before the applicable
volume of cellulosic biofuel for 2014 is finalized, volumes of fuel
from companies intending to utilize these pathways may be included in
our projected available volume for 2014 as discussed above. Foreign
producers of cellulosic biofuel who inform EPA of their intent to
export the fuel they produce to the United States may also be included.
Finally, a variety of factors may affect our production projections for
the companies considered in this proposal, including unexpected project
modifications or cancellations or the inclusion of volumes of
cellulosic biofuel from sources other than those listed above.
---------------------------------------------------------------------------

    \21\ 78 FR 36042 (June 14, 2013).
---------------------------------------------------------------------------

    We will continue to monitor the progress of the cellulosic biofuel
industry, in particular the progress of the companies which form the
basis of our proposed 2014 volume projection. We expect that for the
final rule there will be greater certainty on the appropriate volume of
fuel that we can reasonably expect to be produced and made commercially
available in 2014. We request comment on our analysis and
estimates.\22\
---------------------------------------------------------------------------

    \22\ Since EPA is proposing to reduce the applicable volume of
cellulosic biofuel under section 211(o)(7)(D), EPA will be required
to make available cellulosic biofuel credits. EPA will set the price
for the cellulosic biofuel credits in the final rule, using the same
approach to applying the criteria in section 211(o)(7)(D)(ii) that
was used in setting the price for cellulosic biofuel credits for
2013. See 78 FR 49794.
---------------------------------------------------------------------------

D. Rescission of the 2011 Cellulosic Biofuel Standards

    On January 25, 2013, the United States Court of Appeals for the
District of Columbia Circuit issued its decision concerning a challenge
to the 2012 cellulosic biofuel standard. The Court found that in
establishing the applicable volume of cellulosic biofuel for 2012, EPA
had used a methodology in which ``the risk of overestimation [was] set
deliberately to outweigh the risk of underestimation.'' The Court held
EPA's action to be inconsistent with the statute because EPA had failed
to apply a ``neutral methodology'' aimed at providing a prediction of
``what will actually happen,'' as required by the statute. As a result
of this ruling, the Court vacated the 2012 cellulosic biofuel standard,
and we removed the 2012 requirement from the regulations in a previous
action. Industry had also challenged the 2011 cellulosic biofuel
standard by, first, filing a petition for reconsideration of that
standard, and then seeking judicial review of our denial of the
petition for reconsideration. This matter was still pending at the time
of the DC Circuit's ruling on the 2012 cellulosic biofuel standard.
Since we used essentially the same methodology to develop the 2011
cellulosic biofuel standard as we did to develop the 2012 standard, we
requested, and the Court granted, a partial voluntary remand to enable
us to reconsider our denial of the petition for reconsideration of the
2011 cellulosic biofuel standard. Given the Court's ruling that the
methodology EPA used in developing the 2012 cellulosic biofuel standard
was flawed, we have decided to grant reconsideration of the 2011
cellulosic biofuel standard, and are today proposing to rescind the
2011 cellulosic biofuel standard. If this proposal is finalized, the
money paid by obligated parties to purchase cellulosic waiver credits
to comply with the 2011 cellulosic biofuel standard would be refunded.

III. Proposed National Volume Requirement for Biomass-Based Diesel in
2014 and 2015

    EPA set the national volume requirement for biomass-based diesel
for 2013 at 1.28 bill gal of biomass-based diesel.\23\ This national
volume is then used to determine the applicable percentage standard
that determines the specific renewable volume obligations for refiners
and importers. Subsequently, EPA received two Petitions for
Reconsideration requesting that EPA reconsider the final rule setting
the 2013 biomass-based diesel volume requirement at 1.28 bill gal.\24\
After review and consideration of the issues raised by petitioners, EPA
denied both petitions.\25\
---------------------------------------------------------------------------

    \23\ 77 FR 59458 (September 27, 2012).
    \24\ Letter dated November 20, 2012 to Honorable Lisa Jackson
from Richard Moskowitz, American Fuel & Petrochemical Manufacturers,
``Re: Petition for Reconsideration--Docket No. EPA-HQ-OAR-2010-0133.
Letter dated November 26, 2012 to Honorable Lisa Jackson from Robert
L. Greco, III, American Petroleum Institute, ``Re: Request for
Reconsideration of EPA's Final Rulemaking `2013 biomass-Based Diesel
Renewable Fuel Volume.' ''
    \25\ 78 FR 49411, August 14, 2013.
---------------------------------------------------------------------------

    In today's action we are proposing an applicable volume of 1.28
bill gal biomass-based diesel for 2014 and 2015. In proposing the 2015
applicable volume of biomass-based diesel, we are not at this time
proposing the percentage standards that would apply to obligated
parties in 2015. The percentage standards for 2015 will be proposed in
a subsequent rulemaking as required by the statute once the requisite
gasoline and diesel fuel volumes for 2015 are determined.

A. Statutory Requirements

    Section 211(o)(2)(B)(i) of the Clean Air Act specifies the
applicable volumes of renewable fuel on which the annual percentage
standards must be based, unless the applicable volumes are waived or
adjusted by EPA in accordance with the Act.\26\ Applicable volumes are
provided in the statute for years through 2022 for cellulosic biofuel,
advanced biofuel, and total renewable fuel. For biomass-based diesel,
applicable volumes are provided through 2012. For years after those
specified in the statute (i.e. 2013+ for biomass-based diesel and 2023+
for all others), EPA is required under 211(o)(2)(B)(ii) to determine
the applicable volume, in coordination with the Secretary of Energy and
the Secretary of Agriculture, based on a review of the implementation
of the program during calendar years for which the statute specifies
the applicable volumes and on analysis of the following factors:
---------------------------------------------------------------------------

    \26\ For example, EPA may waive a given standard in whole or in
part following the provisions at CAA 211(o)(7).
---------------------------------------------------------------------------

     The impact of the production and use of renewable fuels on
the environment, including on air quality, climate change, conversion
of wetlands, ecosystems, wildlife habitat, water quality, and water
supply;
     The impact of renewable fuels on the energy security of
the United States;
     The expected annual rate of future commercial production
of renewable

fuels, including advanced biofuels in each category (cellulosic biofuel
and biomass-based diesel);
     The impact of renewable fuels on the infrastructure of the
United States, including deliverability of materials, goods, and
products other than renewable fuel, and the sufficiency of
infrastructure to deliver and use renewable fuel;
     The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
     The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
    The statute also specifies that the applicable volume of biomass-
based diesel cannot be less than the applicable volume for calendar
year 2012, which is 1.0 bill gallons. The statute does not, however,
establish any other numeric criteria or overarching goals for EPA to
achieve in setting the applicable volumes in years after those
specifically set forth in the provision.
    Finally, the statute also specifies the timeframe within which
these volumes must be promulgated: the applicable volumes must be
established no later than 14 months before the first year for which
such applicable volume will apply. We did not propose a 2014 volume for
biomass-based diesel in the February 7, 2013 NPRM because at that time
we were still evaluating the potential market impacts of current
production levels. In order to provide sufficient time for this
evaluation, we delayed our proposal for the 2014 volume requirement for
biomass-based diesel. Consequently, today we are proposing volume
requirements for both 2014 and 2015.

B. Compliance With 2013 Volume Requirement of 1.28 Billion Gallons

    In making a determination regarding the volume requirement for
biomass-based diesel to propose for 2014 and 2015, we first
investigated the recent historical and current circumstances in the
biodiesel market. According to data collected through the EPA-Moderated
Transaction System (EMTS) production of biodiesel in 2012 exceeded 1.14
bill gal.\27\ This demonstrates that the industry was able to meet the
applicable 2012 volume requirement of 1 bill gal. It also provides
evidence that the industry will meet the 1.28 bill gal requirement in
2013. Additional volumes above 1.28 bill gal are possible in 2013, and
may be used to help meet the advanced biofuel standard. Indeed current
production rates in the biodiesel industry for the first seven months
of 2013 were 25% above monthly production rates for the same time
period in 2012 and are consistent with a total production volume of at
least 1.6 bill gal for 2013.\28\
---------------------------------------------------------------------------

    \27\ Fuels and Fuel Additives 2012 EMTS Data, http://www.epa.gov/otaq/fuels/rfsdata/2012emts.htm (last accessed September
16, 2013).
    \28\ Fuels and Fuel Additives 2013 EMTS Data, http://www.epa.gov/otaq/fuels/rfsdata/2013emts.htm (last accessed September
16, 2013).
---------------------------------------------------------------------------

    While annual production volume has been increasing, a review of
EIA's Monthly Biodiesel Production Reports \29\ since 2009 indicates
that there has been some variability both in monthly production volume
and in the number of facilities producing that volume. For example,
there were significant biodiesel facility closures during the 2009 and
2010 calendar years. Since that time the overall number of biodiesel
facilities in operation has stabilized and overall capacity in the
biodiesel industry has remained stable from 2009-2012 at more than 2
bill gal. It is also clear that overall industry-wide utilization rates
have increased during this time period from 25% in 2009 to
approximately 46% in both 2011 and 2012. Thus it is clear that total
production capacity at facilities already operating is above 1.28 bill
gal. There are also indications that new or idle facilities have begun
production in response to the 1.28 bill gal mandate for 2013.
Specifically, EIA's monthly reports indicate that nine additional
producers have become operational in the U.S. since the rule for 2013
biomass-based diesel was finalized.\30\ The latest EIA monthly
biodiesel report, available for July 2013, indicates that U.S.
production was 128 million gallons in July, and came from 111 biodiesel
plants in 38 states with total operating capacity of 2.1 bill gal per
year.\31\ As described in Section IV.B.2.b, total biodiesel production
by the end of 2013 could be as high as 1.7 bill gal, and the facilities
contributing to this production collectively have a capacity of well
over 2 bill gal.
---------------------------------------------------------------------------

    \29\ The U.S. Energy Information Administration as part of it
responsibilities under section 1508 of the 2005 Energy Policy Act,
amended its ICR and has begun collecting and publishing biodiesel
production information on a monthly basis including production of
biodiesel in a given month, the number of plants operating and
contributing to the monthly total volume by state, and their total
operating capacity for the year. U.S. Energy Information
Administration/Monthly Biodiesel Production Report, Form EIA-22m
Monthly Biodiesel Production Survey. U.S. Energy Information
Administration, Monthly Biodiesel Production Report, For 2012 data
collected showed that 2012 production was 969 mil gallons, which was
up from production 967 million gallons during 2011.
    \30\ EIA data indicates that in December 2011, after the close
of the comment period, 103 biodiesel plants existed with an
operating capacity of 2.1 bill gal per year. In March 2012, 104
biodiesel plants were operational and the report indicates that for
the first quarter of 2012 production was up 78% over the first
quarter of 2011. As EPA finalized the 2013 volume mandates in
September 2012 there were 105 biodiesel producers operating in the
U.S. By late November 2012 that number had increased to 112.
    \31\ http://www.eia.gov/biofuels/biodiesel/production/ (last
accessed September 16, 2013).
---------------------------------------------------------------------------

    Further discussion of the factors we must consider in the context
of the biomass-based diesel volume of 1.28 bill gallons for 2013 is
contained in both the final rule adopting this level for 2013 \32\ and
in EPA's denial of two petitions requesting the Agency reconsider the
2013 biomass-based diesel final rule.\33\ As discussed in that final
rule, the assessment of these factors supported a volume of 1.28 bill
gallons for 2013. As we would expect that the impacts of 1.28 bill gal
in 2014 and 2015 would not be materially different, we are not
repeating the discussion of those analyses here. However, we
specifically request data and analyses suggesting that the factors we
considered in 2013 have changed significantly for 2014 or 2015.
---------------------------------------------------------------------------

    \32\ 77 FR 59458 (September 27, 2012).
    \33\ 78 FR 49411, August 14, 2013.
---------------------------------------------------------------------------

C. Determination of Applicable Volume for 2014 and 2015

    The biodiesel industry has clearly demonstrated that it can produce
the volumes of biomass-based diesel up to the minimum required by the
statute, and that 1.28 bill gal of biodiesel is readily attainable. We
have no real concerns that a level of 1.28 bill gal will be achieved
effectively in 2013, and that once it is met this level of production
and consumption can also be achieved in years after 2013. Production
costs associated with 1.28 bill gal of biodiesel could be affected by
various factors, including the expiration of the biodiesel tax credit
and projected lower soy oil prices.
    EPA's evaluation of the applicable volume that we should set for
biomass-based diesel takes into account the context of the larger
advanced biofuel and total renewable fuel volume requirements. The
biomass-based diesel standard is a subset of both the advanced biofuel
and total renewable fuel standards, and biomass-based diesel volumes
can be used to meet all three standards. As discussed in Section IV
below, we are proposing to reduce the applicable volumes of advanced
biofuel and total renewable fuel. The reductions are designed to
address several factors that affect achievement of

the volume goals that Congress established in the statute for these
categories of renewable fuel. These factors include limitations in
production or importation of the necessary volumes, and factors that
limit supplying those volumes to the vehicles that can consume them.
These same factors impact our consideration of the biomass-based diesel
volume requirement for 2014. For example, EPA considers the
availability of feedstocks for production of biodiesel.
    More importantly, the production and use of biomass-based diesel
can be supported by both the need to comply with the required volume
for biomass-based diesel as well as the need to comply with the
required volume for advanced biofuel or even the volume for total
renewable fuel. This provides EPA additional flexibility in considering
the appropriate national volume to set for the biomass-based diesel
volume requirement, as this requirement is not the only mechanism in
the RFS program that can support production and use of biomass-based
diesel. For example, while the applicable volume that EPA sets for
biomass-based diesel will ensure that at least that volume of biomass-
based diesel would be produced and used, the advanced biofuel standard
provides an alternative potential source of support for production and
use of additional volumes of biomass-based diesel. It does this because
obligated parties have discretion whether to choose biomass-based
diesel or another advanced biofuel to satisfy their advanced biofuel
obligation, and because the diesel pool can accommodate considerably
more than 1.28 bill gal of biodiesel. EPA believes there is value in
providing obligated parties increased flexibility in how they meet
their required volume obligations in 2014. As discussed in Section IV,
EPA is reducing the statutory volumes of advanced biofuel and total
renewable fuel based on concerns of inadequate domestic supply of these
renewable fuels. Providing obligated parties additional flexibility to
address future supply circumstances is of increased importance under
these circumstances.
    In setting the applicable volume for biomass-based diesel for 2013,
EPA discussed various impacts of requiring volumes of biomass-based
diesel in light of the relevant factors to be considered under CAA
section 211(o)(2)(B)(ii).\34\ We believe this analysis continues to be
appropriate, and supports the proposed applicable volume of biomass-
based diesel for 2014. In considering all of these factors, we see no
need to reduce the minimum biomass-based diesel volume requirement from
2013 levels. We have a high degree of confidence that this volume of
1.28 bill gal could be achieved effectively without any real risk of
production or supply problems.
---------------------------------------------------------------------------

    \34\ 77 FR 59458 (September 27, 2012), especially Sections IV
and V of the preamble.
---------------------------------------------------------------------------

    At the same time, as discussed above, the volume requirement for
biomass-based diesel is nested within the advance biofuel standards
that we are proposing to reduce in 2014. We believe that volumes of
biomass-based diesel above 1.28 bill gal can, and likely will, be
produced in 2014 to meet the requirements of the advanced biofuel
standard, though the degree to which this occurs will also depend on
whether the biodiesel tax subsidy is extended beyond December 31, 2013.
We do not expect that there would be a significant difference between
additional volumes of biomass-based diesel above 1.28 bill gal and
other advanced biofuels, as far as the overall impact of those fuels in
terms of the factors we are required to consider under section
211(o)(2)(B)(ii). Any such differences would also be hard to quantify.
At the same time, providing obligated parties the discretion to choose
the method to comply with their advanced biofuel volume requirement
most appropriate for their circumstances is likely to reflect the most
effective or efficient way to achieve the advanced biofuel volume
requirements given the market circumstances present in 2014. In
addition, as noted above, providing obligated parties additional
flexibility to address the 2014 supply circumstances is of increased
importance under the circumstances surrounding supply and consumption
as discussed in Section IV. Therefore we are not proposing to increase
the volume of biomass-based diesel that will be required in 2014 and
2015.\35\
---------------------------------------------------------------------------

    \35\ While the statute requires EPA to establish the applicable
volume of cellulosic biofuel at projected production levels, this is
not the case with respect to the applicable volume of biomass-based
diesel. For biomass based-diesel, EPA may set the applicable volume
at any level above 1 bill gal after consideration of the factors set
forth in the statute and consultation with the Departments of
Agriculture and Energy.
---------------------------------------------------------------------------

    We invite comment on any different approaches that might be
appropriate for balancing the factors noted above, including requiring
an increase in the minimum volume of biomass-based diesel above 1.28
bill gal in both 2014 and 2015. As discussed above, volumes above 1.28
bill gal should be available, whether to meet a minimum biomass-based
diesel requirement or the advanced biofuel requirement. Requiring a
minimum volume of biomass-based diesel greater than 1.28 bill gal would
place less emphasis on the benefits of preserving flexibility in how
the required volume of advanced biofuel is achieved, and more emphasis
on production of biomass-based diesel, without specific regard to the
existence of a tax subsidy or to potential supplies of carryover
biomass-based diesel RINs generated in 2013. We invite comment on all
aspects of this issue, including information related to the statutory
factors that we must consider as described in Section III.A. We also
invite comment on the extent to which carryover biomass-based diesel
RINs from 2013 would affect production levels of biomass-based diesel
or other advanced biofuels in 2014, whether to meet the 1.28 bill gal
biomass-based diesel volume or to achieve higher levels as a part of
achieving the advanced biofuel requirement. We also seek comment on how
EPA should take such information on biomass-based diesel carryover RINs
into account when setting these volume requirements and the degree to
which those carryover RINs support the goal of maintaining flexibility
in how obligated parties meet the advanced biofuel mandate.
    In the overall context of the RFS program, the level of the
biomass-based diesel applicable volume can be seen as the minimum
amount of biomass-based diesel that is required, recognizing that
additional volumes of biomass-based diesel may be used, along with
other advanced biofuels, to satisfy the volume requirements for
advanced biofuel and total renewable fuel. Having considered the
statutory factors, in the context of proposing the volume requirements
for advanced biofuel and total renewable fuel, we believe the minimum
required volume of biomass-based diesel should be set at the same level
as 2013. This approach would also recognize that volumes of biomass-
based diesel could be produced and consumed above the required volume
level, and that obligated parties could well choose to use more
biomass-based diesel than is required to satisfy their volume
obligations for advanced and total renewable fuel. A volume requirement
of 1.28 bill gal for biomass-based diesel in 2014 and 2015 would
provide an assured minimum volume level for biomass-based diesel while
also providing a clear opportunity for greater growth as part of the
advanced biofuel category. Greater use of biomass-based diesel would be
a recognized compliance path for the advanced and total renewable fuel
volume obligations being proposed today. The proposed levels of those
standards provide a

significant opportunity for greater volumes of biomass-based diesel to
be produced and used if the market chooses them. We request comment on
this proposed approach to the biomass-based diesel volume requirement
for 2014 and 2015.

IV. Proposed National Volume Requirements for Advanced Biofuel and
Total Renewable Fuel for 2014

    As described in Section I, the national volumes of renewable fuel
to be used under the RFS program each year are specified in CAA
211(o)(2). For 2014, the applicable volume of advanced biofuel is 3.75
bill gal and the applicable volume of total renewable fuel is 18.15
bill gal. However, two statutory provisions authorize EPA to reduce
these volumes. EPA may reduce these volumes if it reduces the
applicable volume for cellulosic biofuel, or if the criteria are met
under the general waiver authority.\36\ We are proposing to exercise
our discretion under these provisions to reduce the applicable volumes
of advanced biofuel and total renewable fuel to address several factors
that affect achievement of the volume goals that Congress established
in the statute. These factors include limitations in production or
importation of the necessary volumes, and factors that limit supplying
those volumes to the vehicles that can consume them. Based on a
detailed analysis of these limitations, we are proposing reductions in
the statutory volumes of both advanced biofuel and total renewable fuel
as shown below.
---------------------------------------------------------------------------

    \36\ See CAA section 211(o)(7)(D) and (A).

                                      Table IV-1--Proposed Volumes for 2014
                                                [billion gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                Proposed volume
                                                                  Statutory    ---------------------------------
                                                                    volume           Range             Mean
----------------------------------------------------------------------------------------------------------------
Advanced biofuel.............................................            3.75        2.00-2.51             2.20
Total renewable fuel.........................................           18.15      15.00-15.52            15.21
----------------------------------------------------------------------------------------------------------------

    We are proposing to use a combination of the cellulosic biofuel
waiver authority and the general waiver authority to ensure that the
proposed volumes are reasonably achievable given limitations in the
volume of ethanol that can be practically consumed in motor vehicles
considering constraints on the supply of higher ethanol blends to the
vehicles that can use them and other limits on ethanol blend levels
approved for use in motor vehicles and the volume of non-ethanol
renewable fuels that we expect would be reasonably achievable. To
accomplish this, we are proposing an approach involving the following
three steps:
     First, we would determine the total volume of ethanol that
can reasonably be supplied to and consumed in the transportation sector
as both E10 and higher ethanol blends such as E85. We would then add to
this the volume of all non-ethanol biofuels that we expect could be
reasonably available for meeting all four of the applicable volume
requirements (cellulosic biofuel, biomass-based diesel, advanced
biofuel, and total renewable fuel). This first step would determine the
volume of renewable fuel that can adequately be produced and supplied
to consumers in light of limitations on the consumption of ethanol
(commonly referred to as the ``ethanol blendwall'') and other relevant
constraints, and would form the basis for the required volume of total
renewable fuel as adjusted pursuant to EPA's waiver authorities.
     Second, we would determine the volumes of all sources of
advanced biofuel that could be reasonably achieved to ensure that the
required volume of advanced biofuel be set no higher than the volume
that is projected to be reasonably available.
     Third, we would determine an appropriate volume of
advanced biofuel at or below the projected available volume determined
in the second step. This volume would include the required volume of
cellulosic biofuels and biomass-based diesel, which are set separately,
as well as any additional volumes of non-ethanol advanced biofuels
projected to be reasonably achievable. This approach would account for
the contribution of ethanol volumes in the advanced biofuel category to
the supply concerns related to total renewable fuel, including
considerations of both production and consumption. While ensuring that
both advanced biofuel and non-advanced renewable fuels play a role in
addressing the ethanol blendwall, it would also support Congress's goal
in the RFS program of continued growth in the advanced biofuel category
as reflected in the volume requirements established in the statute. As
discussed in detail in Section IV.C.2, we have examined several
alternative approaches to this third step, but we believe this approach
best accommodates the objectives of the RFS program, while accounting
for the limitations in the ability to produce and consume renewable
fuels. We request comment, however, on alternative approaches and on
all aspects of the framework discussed in this section.

We anticipate that the framework described in this section would apply
not only to 2014, but to subsequent years as well. The specific
estimates of volumes for each potential source of renewable fuel would
be different in each future year, but the manner in which we aggregate
those estimates to determine appropriate volume requirements would
follow the overall approach described above. If circumstances differ
substantially from those described here, or if further analysis
suggests that our proposed approach is inadequate, we may consider the
need for additional measures.

A. Statutory Authorities for Reducing Volumes To Address Biofuel
Availability and the Ethanol Blendwall

    In establishing the annual volume objectives in the statute,
Congress intended that volumes of renewable fuel, advanced biofuel, and
cellulosic biofuel increase every year through 2022, and that volumes
of biomass-based diesel be at least equal to the statutory volume for
2012, while granting EPA discretion to increase the biomass-based
diesel volume based on consideration of several specified factors.
However, Congress recognized that circumstances could arise that might
require a reduction in the volume objectives specified in the statute
as evidenced by the different waiver provisions in CAA 211(o)(7). As
described in more detail below, we

believe that limitations in production or importation of qualifying
renewable fuels, and factors that limit supplying those volumes to the
vehicles that can consume them, both constitute circumstances that
warrant a waiver under section 211(o)(7) as discussed below. With
regard to the ethanol blendwall, a decrease in total gasoline
consumption since EISA was enacted in 2007, coupled with limitations in
the number and geographic distribution of retail stations that offer
higher ethanol blends such as E85 and the number of FFVs that have
access to E85, as well as other market factors, combine to place
significant restrictions on the volume of ethanol that can be supplied
to and consumed in the transportation sector. Based on the types of
renewable fuel that we project are likely to be available in 2014 and
the volume that is likely to be non-ethanol, we believe that the
ethanol blendwall represents a circumstance that warrants a reduction
in the mandated volumes for 2014.
    The statute provides two separate authorities that permit EPA to
reduce volumes of advanced biofuel or total renewable fuel under
certain conditions: The cellulosic waiver authority and the general
waiver authority. Applying a combination of these two authorities is
the most appropriate way to address limitations in production or
importation of the necessary volumes, and factors that limit supplying
those volumes to the vehicles that can consume them, including the
ethanol blendwall. This section discusses both of these statutory
authorities and the manner in which we believe they can be used
together to set standards for 2014.
1. Cellulosic Waiver Authority
    Under CAA section 211(o)(7)(D)(i), if EPA determines that the
projected volume of cellulosic biofuel production for the following
year is less than the applicable volume provided in the statute, then
EPA must reduce the applicable volume of cellulosic biofuel to the
projected volume available during that calendar year. Under such
circumstances, EPA also has the discretion to reduce the applicable
volumes of advanced biofuel and total renewable fuel by an amount not
to exceed the reduction in cellulosic biofuel.
    Section 211(o)(7)(D)(i) provides that ``[f]or any calendar year in
which the Administrator makes such a reduction, the Administrator may
also reduce the applicable volume of renewable fuel and advanced
biofuels requirement established under paragraph (2)(B) by the same or
a lesser volume.'' Thus Congress authorized EPA to reduce the volume of
total renewable fuel and advanced biofuel. As EPA has discussed before,
this indicates a clear Congressional intention that under this
provision EPA may reduce both the total renewable and advanced biofuel
volume together, not one or the other.
    As described in the May 26, 2009 NPRM for the RFS regulations, we
do not believe it would be appropriate to lower the advanced biofuel
standard but not the total renewable standard, as doing so would allow
conventional biofuels to effectively be used to meet the standards that
Congress specifically set for advanced biofuels.\37\ EPA interprets
this provision as authorizing EPA to reduce both total renewable fuel
and advanced biofuel, by the same amounts, if EPA reduces the volume of
cellulosic biofuel. Using this authority the reductions in total
renewable fuel and advanced biofuel can be up to but no more than the
amount of reduction in the cellulosic biofuel volume. Further
discussion of this provision can be found in the final rule
establishing the 2013 RFS standards.\38\
---------------------------------------------------------------------------

    \37\ See 74 FR 24914-15
    \38\ 78 FR 49794, August 15, 2013.
---------------------------------------------------------------------------

    The statute does not provide any explicit criteria that must be met
or factors that must be considered when making a determination as to
whether and to what degree to reduce the advanced biofuel and total
renewable fuel applicable volumes based on a reduction in cellulosic
biofuel volumes under CAA section 211(o)(7)(D)(i). EPA can consider the
criteria described in sections 211(o)(2)(B)(ii) and 211(o)(7)(A) in
determining appropriate reductions in advanced biofuel and total
renewable fuel under the cellulosic waiver authority at section
211(o)(7)(D)(ii), or any other factors that may be relevant. However,
EPA must provide a reasoned explanation for any decision to reduce the
advanced biofuel and total renewable fuel volume requirements under the
cellulosic biofuel waiver authority.
2. General Waiver Authority
    CAA 211(o)(7)(A) provides that EPA, in consultation with the
Secretary of Agriculture (USDA) and the Secretary of Energy (DOE), may
waive the applicable volume requirements of the Act in whole or in part
based on a petition by one or more States, by any person subject to the
requirements of the Act, or by the EPA Administrator on her own motion.
Such a waiver must be based on a determination by the Administrator,
after public notice and opportunity for comment, that:
     Implementation of the requirement would severely harm the
economy or the environment of a State, a region, or the United States;
or
     There is an inadequate domestic supply.

In today's NPRM, we are proposing to use the general waiver authority
to waive the applicable volume requirements based on the statute's
authorization for the Administrator to act on her own motion. We have
initiated discussions with both USDA and DOE on the proposed approach
to determining the applicable volume requirements that is described in
this section.
    Because this provision provides EPA the discretion to waive the
volume requirements of the Act ``in whole or in part,'' we interpret
this section as granting authority to waive any or all of the four
applicable volume requirements in appropriate circumstances. Thus, for
example, unlike the cellulosic waiver authority, a reduction in total
renewable fuel pursuant to the general waiver authority would not
automatically result in the same reduction in advanced biofuel, and
would not be limited by the reduction in cellulosic biofuel.
    EPA has not previously interpreted or applied the waiver provision
in CAA section 211(o)(7)(A)(ii) related to ``inadequate domestic
supply.'' \39\ As explained in greater detail below, we believe that
this ambiguous provision is reasonably and best interpreted to
encompass the full range of constraints that could result in an
inadequate supply of renewable fuel to the ultimate consumers,
including fuel infrastructure and other constraints. This would
include, for instance, factors affecting the ability to produce or
import qualifying renewable fuels as well as factors affecting the
ability to distribute, blend, dispense, and consume those renewable
fuels.
---------------------------------------------------------------------------

    \39\ EPA has applied the waiver provision in section
211(o)(7)(A)(i) related to severe harm to the economy. See 77 FR
70752 (November 27, 2012), 73 FR 47168 (August 13, 2008).
---------------------------------------------------------------------------

    The waiver provision at CAA 211(o)(7)(A)(ii) is ambiguous in
several respects. First, it does not specify what the general term
``supply'' refers to. The common understanding of this term is an
amount of a resource or product that is available for use by the person
or place at issue.\40\ Hence the evaluation of

the supply of renewable fuel, a product, is best understood in terms of
the person or place using the product. In the RFS program, various
parties interact across several industries to drive the ultimate use of
renewable fuel by consumers of transportation fuel. For example,
supplying renewable fuel to obligated parties and terminal blenders is
one part of this process, while supplying renewable fuel to the
ultimate consumer as part of transportation fuel is a different and
later aspect of this process. This is clearly the case with respect to
the renewable fuels ethanol and biodiesel, which are typically supplied
to the obligated parties and terminals as a neat fuel, but in almost
all cases are supplied to the consumer as a blend with conventional
fuel (ethanol and gasoline or biodiesel and diesel). The waiver
provision does not specify what product is at issue (for example, neat
renewable fuel or blended renewable fuel with transportation fuel) or
the person or place at issue (for example, obligated party or ultimate
consumer), in determining whether there is an ``inadequate domestic
supply.''
---------------------------------------------------------------------------

    \40\ For example, see http://oxforddictionaries.com/us/definition/american_english/supply (a stock of a resource from
which a person or place can be provided with the necessary amount of
that resource: ``There were fears that the drought would limit the
exhibition's water supply.''); http://www.macmillandictionary.com/us/dictionary/american/supply (``A limited oil supply has made gas
prices rise.'' and ``Aquarium fish need a constant supply of
oxygen.'').
---------------------------------------------------------------------------

    The waiver provision also does not specify what factors are
relevant in determining the adequacy of the supply. Adequacy of the
supply would logically be seen in terms of the parties who use the
supply of renewable fuel. Adequacy of supply could affect various
parties, including obligated parties, terminal operators, and
consumers. Adequacy of supply with respect to the consumer might well
involve consideration of factors different from those involved when
considering adequacy of supply to the obligated parties. We believe
that interpreting this waiver provision as authorizing EPA to consider
the adequacy of supply of renewable fuel to all of the relevant
parties, including the adequacy of supply to the ultimate consumer of
transportation fuel, is consistent with the common understanding of the
terms used in this waiver provision, especially in the context of a
fuel program that is aimed at increasing the use of renewable fuel by
consumers. In our view, this is the most reasonable and appropriate
construction of this ambiguous language in light of the overall policy
goals of the RFS program.
    EPA has reviewed other fuel related provisions of the Clean Air Act
with somewhat similar waiver provisions, and they highlight both the
ambiguity of the RFS general waiver provision and the reasonableness of
applying it broadly to include adequacy of supply to the ultimate
consumer of transportation fuel. For example, CAA section
211(k)(6)(A)(ii) allows EPA to defer application of reformulated
gasoline (RFG) requirements in a state that opts in to the RFG program
if EPA determines that ``there is insufficient domestic capacity to
produce reformulated gasoline.'' A related RFG waiver provision
concerning the application of RFG requirements in the Ozone Transport
Region, section 211(k)(6)(B)(i) and (iii), provides for a waiver of RFG
requirements based on ``insufficient capacity to supply reformulated
gasoline.'' For these RFG waiver provisions, Congress more clearly and
explicitly indicated that the capacity to supply RFG could include
consideration of factors beyond those concerning the capacity to
produce RFG. In the language of the RFS general waiver provision, in
comparison, Congress used a single, broader and clearly ambiguous
phrase--``inadequate domestic supply''--without elaboration or
clarification as to whether it refers solely to production capacity or
also includes additional factors relevant to the ability to supply the
fuel to various persons such as the ultimate consumer. As in the RFG
provision, however, the adequacy of supply referred to in the RFS
general waiver provision can logically--and we believe should--be read
to include factors beyond capacity to produce that impact the ability
of consumers to use the fuel as a transportation fuel.
    CAA section 211(c)(4)(C)(ii) provides EPA with waiver authority to
address ``extreme and unusual fuel or fuel additive supply
circumstances . . . which prevent the distribution of an adequate
supply of the fuel or fuel additive to consumers.'' The supply
circumstances must be the result of a natural disaster, an Act of God,
a pipeline or refinery equipment failure or another event that could
not reasonably have been foreseen, and granting the waiver must be ``in
the public interest.'' In this case, Congress clearly specified that
the adequacy of the supply is judged in terms of the availability of
the fuel for use by the ultimate consumer, and includes consideration
of the ability to distribute the required fuel or fuel additive to the
ultimate consumer. Although the RFS waiver provision does not contain
any such explicit clarification from Congress, its broad and ambiguous
wording provides EPA the discretion to reasonably interpret the scope
of the RFS waiver provision. EPA's interpretation of the RFS waiver
provision is consistent with the view, expressed more explicitly in the
section 211(c) waiver, that the adequacy of the supply of a fuel or
fuel additive can reasonably be judged in terms of availability for use
by the consumer, and can include consideration of the capacity to
distribute the product to the ultimate consumer.
    CAA section 211(m)(3)(C) allows EPA to delay the effective date of
oxygenated gasoline requirements for certain carbon monoxide
nonattainment areas if EPA finds ``an inadequate domestic supply of, or
distribution capacity for, oxygenated gasoline . . . or fuel
additives'' needed to make oxygenated gasoline. Here, Congress chose to
expressly differentiate between ``domestic supply'' and ``distribution
capacity,'' indicating that each of these elements was to be considered
separately. This would indicate that the term inadequate supply,
although ambiguous for the reasons discussed above, could in
appropriate circumstances be read as more limited in scope. In contrast
to the RFS waiver provision, the section 211(m) waiver provision
includes additional text that makes clear that EPA's authority includes
consideration of distribution capacity--reducing the ambiguity inherent
in using just the general phrase ``inadequate domestic supply.''
Presumably this avoids a situation where ambiguity would result in an
overly narrow administrative interpretation. The oxygenated gasoline
waiver provision is also instructive in that it clarifies that it
applies separately to both finished oxygenated fuel and to oxygenated
fuel blending components. That is, there could be an adequate supply of
the oxygenate, such as ethanol, but not an adequate supply of the
blended fuel which is sold to the consumer. The RFS waiver provision
employs the phrase ``inadequate domestic supply'' without further
specification or clarification, thus providing EPA the discretion to
determine whether the adequacy of the supply of renewable fuel can
reasonably be judged in terms of availability for use by the ultimate
consumer, including consideration of the capacity to distribute the
product to the ultimate consumer. In contrast to the section 211(m)
waiver provision, Congress arguably did not mandate that the RFS waiver
provision be interpreted as providing authority to address problems
affecting the supply of renewable fuel to the ultimate consumer.
However, the RFS waiver provision does provide EPA the discretion to
adopt such an

interpretation, resulting in a policy approach consistent with that
required by the less ambiguous section 211(m) waiver provision.\41\
---------------------------------------------------------------------------

    \41\ In CAA section 211(h)(5)(C)(ii), Congress authorized EPA to
delay the effective date of certain changes to the federal
requirements for Reid vapor pressure in summertime gasoline, if the
changes would result in an ``insufficient supply of gasoline'' in
the affected area. As with the RFS general waiver provision,
Congress did not specify what considerations would warrant a
determination of insufficient supply. EPA has not been called upon
to apply this provision to date and has not interpreted it.
---------------------------------------------------------------------------

    As the above review of various waiver provisions in Title II of the
Clean Air Act makes clear, Congress has used the terms ``supply'' and
``inadequate supply'' in different waiver provisions. In the RFS
general waiver provision, Congress spoke in general terms and did not
address the scope of activities or persons or places that are the focus
in determining the adequacy of supply. In other cases, Congress
provided, to varying degrees, more explicit direction. Overall, the
various waiver provisions lend support to the view that it is
appropriate, where Congress has used just the ambiguous phrase
``inadequate domestic supply'' in the general waiver provision, to
consider supply in terms of distribution and use by the ultimate
consumer, and that the term ``inadequate supply'' of a fuel need not be
read as referring to just the capacity to produce renewable fuel or the
capacity to supply it to the obligated parties.
    We are aware that prior to final adoption of the Energy
Independence and Security Act of 2007, Congress had before it bills
that would have provided for an EPA waiver in situations where there
was ``inadequate domestic supply or distribution capacity to meet the
requirement.'' \42\ EPA is not aware of any conference or committee
reports, or other legislative history, explaining why Congress
ultimately enacted the language in EISA in lieu of this alternative
formulation. There is no discussion, for example, of whether Congress
did or did not want EPA to consider distribution capacity, whether
Congress believed the phrase ``inadequate domestic supply'' was
sufficiently broad that a reference to distribution capacity would be
unnecessary or superfluous, or whether Congress considered the
alternative language as too limiting, since it might suggest that other
types of constraints on delivering renewable fuel to the ultimate
consumer should not be considered for purposes of granting a
waiver.\43\ Given the lack of interpretive value typically given to a
failure to adopt a legislative provision, and the lack of explanation
in this case, we find the legislative history to be uninformative with
regard to Congressional intent on this issue. It does not change the
fact that the text adopted by Congress, whether viewed by itself or in
the context of other fuel waiver provisions, is clearly ambiguous.
---------------------------------------------------------------------------

    \42\ H.R. 6 and S. 606 as reported by Senate Envt. & Public
Works in Senate Report 109-74.
    \43\ There are, for example, legal constraints on the amount of
certain renewable fuels that may be blended into transportation
fuels.
---------------------------------------------------------------------------

    We believe the term ``inadequate domestic supply'' should be
interpreted to authorize EPA to consider the full range of constraints,
including fuel infrastructure and other constraints, that could result
in an inadequate supply of renewable fuels to consumers. Under this
interpretation, we would not limit ourselves to consideration of the
capacity to produce or import renewable fuels but would also consider
practical and other constraints related to the fuel delivery
infrastructure and their effect on the volume of qualifying renewable
fuel that would be supplied to the ultimate consumer.
    This interpretation is consistent with the provisions of section
211(o) and promotes Congress's purposes in establishing the RFS
program, which are to ensure that certain volumes of renewable fuel are
used by the ultimate consumer as a replacement for the use of fossil
based transportation fuel.\44\ The RFS program does not achieve the
desired benefits unless renewable fuels are actually used to replace
fossil based transportation fuels. For example, the greenhouse gas
reductions and energy security benefits that Congress sought to promote
through this program are realized only through the use by consumers of
renewable fuels that reduce or replace fossil fuels present in
transportation fuel. Imposing RFS volume requirements on obligated
parties without consideration of the ability of the obligated parties
and other parties to deliver the renewable fuel to the ultimate
consumers, would achieve no such benefits and would fail to account for
the complexities of the fuel system that delivers transportation fuel
to consumers. We do not believe it would be appropriate to interpret
the RFS general waiver provision more narrowly and limit EPA's
consideration of factors related to the distribution and use of
renewable fuels by the ultimate consumers of these fuels.
---------------------------------------------------------------------------

    \44\ See CAA section 211(o)(1)(I) (renewable fuel defined as
``fuel . . . used to replace or reduce the quantity of fossil fuel
present in a transportation fuel''), section 211(o)(2)(A)(i) (EPA's
regulations must ``ensure that transportation fuel sold or
introduced into commerce in the United States . . . contains at
least the applicable volume of [renewable fuels]''). Also see CAA
section 211(o)(1)(A), definition of ``additional renewable fuel.''
As one example, in the RFS program fuels with multiple end uses such
as biogas or electricity are not considered a renewable fuel absent
a demonstration that they will be used by the ultimate consumers as
transportation fuel. As noted above, ethanol is almost always used
as a renewable fuel in the form of E10 or higher, not as neat
ethanol. The supply of neat ethanol, or biogas or electricity, does
not by itself determine the supply of the fuel ethanol used as a
transportation fuel.
---------------------------------------------------------------------------

    We invite comment on all aspects of our proposed interpretation of
the waiver provision based on ``inadequate domestic supply.'' Whether
or not circumstances projected for 2014 justify a waiver on this basis
is discussed in Sections IV.B and IV.C.
3. Combining Authorities for Reductions in Advanced Biofuel and Total
Renewable Fuel
    The two primary drivers that we have considered in today's NPRM for
reductions in the required volumes are limitations in the availability
of qualifying renewable fuels and factors that constrain supplying
those volumes to the vehicles that can consume them. These two drivers
are both relevant forms of inadequate domestic supply, which authorize
reductions under the general waiver authority and can also justify
reductions under the cellulosic biofuel waiver authority. We believe
that reducing both total renewable and advanced biofuel are appropriate
responses to these circumstances, and we propose to use a combination
of the two waiver authorities discussed above to achieve this result as
neither authority independently is sufficient to justify the necessary
volume reductions. As discussed in Section II, EPA is proposing to
reduce the applicable volume of cellulosic biofuel based on a
projection of production for 2014. Given this reduction in the
cellulosic biofuel volumes, EPA is also proposing to reduce the
applicable volume of advanced biofuel using the cellulosic biofuel
waiver authority in Section 211(o)(7)(D)(i). We are proposing a larger
reduction in total renewable fuel volume than in the advanced biofuel
volume. In effect one part of the reduction in total renewable fuel
would be based on both the general waiver authority and the cellulosic
biofuel waiver authority, and the remainder of the reduction in total
renewable fuel would be based solely on the general waiver authority.
Below we discuss the basis for each of the proposed volume reductions.

B. Determination of Reductions in Total Renewable Fuel

    As a first step in our proposed framework for setting the
applicable volumes for total renewable fuel and advanced biofuel, we
would estimate the volume of ethanol that can reasonably be expected to
be available and consumed and the volume of non-ethanol renewable fuel
that can reasonably be expected to be available and consumed. Taken
together, these two considerations provide the basis for the volume of
total renewable fuel that we are proposing to require. Our objective is
that the proposed requirement would reflect a realistic projected
estimate of renewable fuel supply, based to the greatest extent
possible on data and real world circumstances.
    For ethanol, the primary issue is the use of the fuel in the
transportation sector, as the purpose of the RFS program is to ensure
that renewable fuels are used to replace or reduce the use of fossil
fuel based transportation fuel.\45\ For ethanol blends, there are legal
constraints on the amount of ethanol that can be blended into gasoline
and practical constraints on the volume of ethanol that can be consumed
as transportation fuel, notwithstanding the ability to produce higher
volumes. For non-ethanol renewable fuels, the primary issue is the
availability of volumes of the renewable fuel, and much less so the
ability to consume it in the transportation sector if it is available.
For purposes of this proposal, we generally refer to the consumption
concerns related to ethanol, and the availability concerns related to
non-ethanol forms of renewable fuel, recognizing the primary concern
that is raised for each of these types of renewable fuel.
---------------------------------------------------------------------------

    \45\ Renewable fuels in heating oil and jet fuel are also valid
under the RFS program, but ethanol is not used in these contexts.
See CAA section 211(o)(1)(J) (the definition of renewable fuel), and
CAA section 211(o)(2)(A) (the rulemaking authority related to
ensuring renewable fuels are sold or introduced into commerce).
---------------------------------------------------------------------------

    With regard to consumption concerns related to ethanol, it is
important to note that the overall pool of gasoline into which ethanol
must be blended to achieve EISA's statutory volume requirements is
significantly smaller now than it was projected to be prior to
enactment of EISA in 2007, which established both the revised RFS
program requirements and the mandated significant increases in vehicle
fuel economy standards. The total demand for gasoline has been
decreasing over the intervening years due to the recent GHG and CAFE
standards for vehicles, fuel prices, and broader factors affecting the
economy. In the summer of 2006, when the reference case for EIA's
Annual Energy Outlook 2007 (AEO2007) was developed, the projected 2014
gasoline energy demand was 18.68 Quad Btu and could have absorbed 15.43
bill gal of ethanol as E10. By comparison, in the summer of 2012 when
the AEO2013 reference case was developed, the projected 2014 gasoline
energy demand was 15.94 Quad Btu and could absorb 13.17 bill gal
ethanol as E10. The difference between these two projections thus
represents about 2.3 bill gal of ethanol. That is, the gasoline pool
will be able to absorb about 2.3 bill gal less ethanol as E10 in 2014
than it would have been possible to absorb if the gasoline use
projection in AEO2007 had been realized. If 15.43 bill gal of ethanol
were to be consumed in 2014, the gasoline energy demand projected in
AEO2013 would require about 3.4 bill gal of E85 if it is assumed that
intermediate blends such as E15 do not penetrate the market to any
significant extent.

                                  Table IV.B-1--Reduced Gasoline Demand in 2014
----------------------------------------------------------------------------------------------------------------
                                                                                Equivalent E10
                                        Motor gasoline    E85 (Quad Btu) a     Total energy    volume (bill gal)
                                         (Quad Btu) a                          (Quad Btu) a            c
----------------------------------------------------------------------------------------------------------------
AEO2007 b...........................              18.67              0.004              18.68             154.30
AEO2013 b...........................              15.84              0.097              15.94             131.67
Difference..........................  .................  .................  .................              22.63
----------------------------------------------------------------------------------------------------------------
a Higher heating value.
b Table 2 of EIA's Annual Energy Outlook, total delivered energy consumption for all sectors.
c Assumes conversion factors of 3.561 mill Btu per barrel for ethanol and 5.253 mill Btu per barrel for
  gasoline.

    We recognize that EIA's most current projections for motor fuel use
are provided in the Short-term Energy Outlook (STEO), which is updated
monthly, rather than in the AEO2013 reference case that was prepared in
the summer of 2012. EPA understands that the estimate of 2014
transportation fuel use that EIA is required to provide to EPA for
purposes of determining the applicable percentage standards will be
based on the latest available STEO forecast rather than the Annual
Energy Outlook. The forecast for 2014 gasoline use in the October 2013
STEO is about 1.5 percent higher that the AEO2013 reference case
projection for 2014, while the implicit level of E85 use from the
combined gasoline and ethanol forecasts in STEO is less than half of
the AEO2013 E85 projection for 2014.
1. Estimating Ethanol Volumes That Could Reasonably Be Consumed
    The total volume of ethanol that could reasonably be consumed is a
function of three factors:
     The overall demand for gasoline.
     The consumption of ethanol as E10, E15, and E85.
     The presence of non-oxygenated gasoline (E0).

In this section, we provide our assessment of the likely distribution
of ethanol in gasoline, with a particular emphasis on potential volumes
of E85 that could reasonably be achievable. We discuss and request
comment on the assumption that the overall pool of gasoline is
comprised of E10 and E85 in 2014.
a. Projected Composition of 2014 Gasoline Supply
    For the purposes of this proposed rule, we have assumed that all
gasoline-powered vehicles and FFVs would use either E10 or E85. EPA has
taken a series of regulatory steps to enable E15 to be sold in the U.S.
In 2010 and 2011, EPA issued partial waivers to enable use of E15 in
model year 2001 and newer vehicles, and in June of 2011, EPA finalized
regulations to prevent misfueling of vehicles, engines, and equipment
not covered by the partial waiver decisions. However, based on
information currently available to the Agency, the volume of E15 being
supplied in the market to date has been very limited. Therefore, to
simplify the calculations and the discussion, we have assumed that the
volume of E15

that is consumed in 2014 will be negligible, as there are currently
very few retail stations offering E15. Any volumes of other
intermediate blends, such as E30, are assumed to be sold through
blender pumps into FFVs and are thus assumed to be part of the E85
volume consumed by FFVs.
    We have not assumed that any gasoline would be E0 in 2014, since
E10 is commonly used in nonroad engines just as it is used in cars and
trucks. However, it is possible that a limited amount of E0 will be
consumed if refiners are willing to provide it. If so, it would likely
appear in premium gasoline, gasoline sold at marinas, or possibly
unleaded motor gasoline used in light aircraft that do not require
leaded aviation gasoline. There are also several states that require
unblended gasoline to be provided to terminals, though the intention of
these requirements is to ensure that terminals have the option to blend
ethanol into that gasoline. We are not aware of any data that would
provide a direct estimate of the demand for E0, and given that any
ongoing demand for E0 is likely to be small, we have not included it in
our calculations of the total volume of ethanol that can be consumed in
2014. Nevertheless, we request information and data that would permit
us to determine the volume of E0 used in the gasoline pool and the
appropriateness of incorporating some estimate of E0 into the final
standards.
    Aside from the volume of E85 that could reasonably be consumed in
2014, discussed in more detail in the next section, the gasoline pool
would be comprised of E10. We have assumed that gasoline contains 10.0%
denatured ethanol. This is consistent with survey data collected by the
Alliance of Automobile Manufacturers indicating that the average
ethanol content of all gasoline containing at least 5vol% ethanol is
about 9.74%. This estimate is based on the use of ASTM test method D-
5599, which measures only the alcohol portion of the gasoline, not any
denaturant that would have been included with the ethanol before it was
blended into gasoline. Since the denaturant portion of ethanol is at
least 2%, ethanol that is blended into gasoline contains less than 98%
ethanol. When blended into gasoline, therefore, the E98 would result in
a gasoline-ethanol blend containing no more than 9.8% pure ethanol, or
10.0% denatured ethanol. Since all RFS ethanol volumes and RINs are
also calculated on a denatured ethanol basis, it is thus appropriate to
assume 10.0 percent. We request comment, however, on the accuracy of
this assessment, including information with regard to whether and to
what extent there are real world constraints that limit the denatured
ethanol content of E10 to a level lower than 10.0 percent, and if so,
what the implications are with regard to the volume of ethanol that can
reasonably be consumed in 2014.
    For E85 volumes, we recognize that the ethanol content could range
from 51% to 83% according to ASTM D-5798-13. In today's NPRM we have
assumed that the ethanol content of E85 is 74% consistent with the
average value used by EIA in its Annual Energy Outlook. As for E10, we
are treating the ethanol content of E85 as representing denatured
ethanol.
b. Assessment of E85 Consumption
    For purposes of determining the total renewable fuel volume
requirement for 2014, consistent with the waiver authorities we are
proposing to exercise in this action, we have assessed the volume of
E85 that can reasonably be supplied to and consumed in the
transportation sector, based on a variety of factors that limit
supplying E85 in the transportation sector. Our assessment of the range
of E85 volumes that can be reasonably consumed in 2014 considers
factors such as infrastructure and consumer acceptance limitations as
well as the impact that the applicable standards could have on the
relative price of E85 and E10. In projecting the likely range of E85
consumption in 2014, we are not mandating that this amount of E85 be
produced and consumed. The industries involved will decide what
actually occurs in the marketplace. Obligated parties can take actions
to facilitate the sale of E85, to the extent they can and choose to do
so, or they can obtain RINs from non-ethanol sources of renewable fuel
such as excess biodiesel, renewable diesel, heating oil, and biogas. We
expect that the parties involved will resolve this through their
business decisions. Nevertheless, we acknowledge that the renewable
fuel volumes established in this rulemaking will have an impact on the
volume of E85 consumed in 2014.
    There are a variety of sources we have considered in developing our
estimate of the volume of E85 that could reasonably be supplied in the
transportation sector in 2014. To begin with, we investigated available
sources of information on E85 production in 2012 and 2013. One report
from EIA reported an E85 production volume of about 37 mill gal in
2012.\46\ This volume is based on EIA survey data from forms EIA-810
(Monthly Refinery Report) and EIA-815 (Monthly Bulk Terminal and
Blender Report). It likely underestimates actual E85 consumption as
these surveys do not capture other sources of E85 production, such as
the following:
---------------------------------------------------------------------------

    \46\ EIA, ``U.S. Refinery and Blender Net Production'', April
29, 2013.
---------------------------------------------------------------------------

     E85 produced using reformulated gasoline (RFG) or
reformulated gasoline blendstock (RBOB) as the petroleum component of
the fuel.
     E85 produced by refiners or blenders producing small
quantities of E85.
     E85 produced by parties such as ethanol production
facilities.

For the last category, we were able to estimate the potential volume of
E85 produced in 2012 by ethanol facilities using data collected in the
EPA-Moderated Transaction System (EMTS). Ethanol production facilities
are in general prohibited from separating RINs from the ethanol that
they produce. However, if an ethanol producer blends its ethanol into
gasoline to make a transportation fuel, it can separate the RINs from
the ethanol used in this blending. If they do produce transportation
fuel, it is very likely to be E85 rather than E10. Therefore, we
assumed that all RINs separated by ethanol producers represent ethanol
blended as E85. Under this assumption, we determined that ethanol
production facilities separated about 22 million RINs in 2012, which
would correspond to about 30 mill gal of E85. When combined with the 37
mill gal estimate from EIA for E85 produced by refineries and blenders,
the total 2012 E85 production is estimated to be about 70 mill gal.
    At this time, available information regarding the volume of E85
production in 2013 is limited to the first half of the year. Using the
same two sources of information described above--EIA survey data for
E85 production by refineries and blenders, and EMTS data to estimate
E85 production at ethanol facilities--we have estimated that total E85
production for the first half of 2013 was about 36 mill gal. However,
both of these data sources demonstrate a strongly increasing trend over
this timeframe. If this trend continues through the end of 2013, total
E85 production could reach 100 mill gal in 2013. Furthermore, if this
trend continued throughout 2014, total E85 production would reach 240
mill gal in 2014.\47\ If this trend were further augmented to account
for the rate of ongoing growth in both the number of

retail stations offering E85 and in the number of FFVs in the fleet
that would occur over the remainder of 2013 and 2014, the projection
for 2014 could be as high as 300 mill gal.\48\ We anticipate that
better and more detailed information will be available--including
through this notice and comment process--by the time we promulgate the
final rule. We solicit comment and information on 2013 consumption of
E85 and its relevance to projecting reasonable levels of consumption in
2014.
---------------------------------------------------------------------------

    \47\ Korotney, David, ``Extrapolation of E85 production in the
first half of 2013 to the remainder of 2013 and through 2014,''
memorandum to EPA docket EPA-HQ-OAR-2013-0479
    \48\ Based on 25% annual growth in E85 consumption as described
in memo entitled, ``Application of one-in-four E85 access
methodology to 2014'', Memorandum from David Korotney to EPA docket
EPA-HQ-OAR-2013-0479.
---------------------------------------------------------------------------

    It should be noted that historical consumption of E85 represents a
small fraction of the consumption capacity of the FFVs currently in
use. Even counting only those FFVs which have reasonable access to
stations offering E85, their total consumption capacity is at least 1
bill gal. The low historical consumption was most likely due to a
combination of factors including limited access to retail stations
offering E85, the reduced range of vehicles operating on E85, and the
fact that E85 has historically been more expensive than E10 on an
energy-content adjusted basis. A survey conducted by the National
Association of Convenience Stores found that 71% of customers indicated
that price was the most important factor in determining where they buy
gasoline.\49\ We believe the volume of E85 that can and will be sold in
the future is likely highly dependent on the price relationship between
E10 and E85 and the availability of the fuel.
---------------------------------------------------------------------------

    \49\ 2013 NACS Retail Fuels Report.
---------------------------------------------------------------------------

    While historically E85 has been more expensive than E10 on an
energy-content adjusted basis, recent data collected by EIA suggests
that at least in some parts of the country this price relationship
between E10 and E85 may be changing. In a Today in Energy article
published on September 19, 2013, EIA presented data showing that in a
collection of Midwestern states E85 retail prices were less than E10
retail prices on an energy-content adjusted basis in July 2013, the
most recent month for which information was available.\50\ This change
in price relationship between E10 and E85 coincides with reported
increases in sales volumes of E85 in Iowa and Minnesota, two states in
which E85 sales volumes are publically available.\51\ If the conditions
that have led to this price relationship continue in the future E85
sales volumes are likely to continue to increase.
---------------------------------------------------------------------------

    \50\ ''E85 motor fuel is increasingly price-competitive with
gasoline in parts of the Midwest.'' Today in Energy. EIA, 19
September 2013. <http://www.eia.gov/todayinenergy/detail.cfm?id=13031>. Study compared daily average observed E85 and
regular gasoline prices at the same stations in the states of Iowa,
Illinois, Indiana, Kentucky, Michigan, Minnesota, and Ohio.
    \51\ See Table IV.B.1-2.
---------------------------------------------------------------------------

    Moreover, as more gasoline stations sell E85 and more FFVs are sold
in the United States the potential market for E85 will continue to
increase. Through 2013 the number of stations selling E85 has been
increasing at a rate of over 300 stations per year.\52\ The size of the
FFV fleet also increased by approximately 1 million vehicles in
2013.\53\ If the recent pricing trends noted above persist and spread
to other parts of the country the potential growth in E85 sales could
be significant. Increasing E85 sales due to favorable pricing may also
incentivize increasing growth rates in the number of stations selling
E85 and the size of the FFV vehicle fleet. Such a scenario, however, is
dependent on E85 being widely available at a price that is sufficiently
lower than E10 to offset the lower energy content, increased refueling
frequency requirements, and other factors. If the price relationship
between E10 and E85 reverts to historic levels significant growth in
E85 sales volumes is unlikely.
---------------------------------------------------------------------------

    \52\ Memorandum from David Korotney to EPA docket EPA-HQ-OAR-
2013-0479.
    \53\ EIA Annual Energy Outlook 2013, Table 40. Increase in
Ethanol-Flex Fuel Cars and Light Trucks from 2013 to 2014.
---------------------------------------------------------------------------

    The price relationship between E85 and E10 depends on many factors,
but three of the most significant are the prices of corn, crude oil,
and RINs.\54\ Corn and crude oil are the primary contributors to the
cost of production of the ethanol and gasoline, respectively, used in
the United States. The RIN price functions as a mechanism to subsidize
the price of ethanol sold as E85 until it is at or below price parity
with gasoline on an energy-equivalent basis even if the relative prices
of corn and oil would not otherwise support such a pricing structure.
The net effect of a reduction in the price of ethanol is that the price
of E85 should fall relative to the price of E10, since E85 contains
more ethanol than E10. The significant rise in the price of D6 (non-
advanced) RINs and the subsequent drop in the retail price of E85
relative to E10 over the course of 2013 \55\ occurred at a time when
corn and thus ethanol was relatively expensive, indicating that RINs
are already functioning in this manner. The recent shift in E85 prices
relative to E10 and the simultaneous increase in E85 sales suggest the
importance of paying careful attention to more recent data concerning
E85 prices and sales volumes when projecting E85 volumes in 2014. While
the more recent data is available from such a short period of time that
it limits the confidence in using it to make projections for 2014, it
nevertheless provides a basis for expecting that directionally, the
lower the price of E85 compared to the price of E10, the greater the
likelihood that FFV owners will opt to purchase E85. In addition to the
volumetric energy content of E85 compared to E10, the price difference
may also need to accommodate the inconvenience of a greater frequency
of refuelings for a vehicle operating on E85, the potentially the
greater driving distance to a station offering E85, the unfamiliarity
that FFV owners may have with E85 or their own vehicle's capabilities,
and differences in the mix of vehicle types among FFVs compared to
conventional (not flex fuel) vehicles. These factors may also vary from
region to region across the U.S. based on state and local policies,
making it challenging to develop correlations representing the nation
as a whole. While we currently have insufficient data to allow us to
correlate sales volumes of E85 with its price relative to gasoline on
an energy basis for the nation as a whole, information from Minnesota
indicates a moderately strong correlation between E85/E10 price
differential and E85 sales volumes. To further aid our projections for
the final rule, we request comment on the manner and extent to which
RIN prices are affecting gasoline and E85 prices for the nation as a
whole, and any associated changes in E85 consumption.
---------------------------------------------------------------------------

    \54\ Other factors, including Federal and State taxes, subsidies
and distribution costs, and relative convenience costs may also
affect the price relationship. It is therefore very difficult to
accurately predict fuel prices.
    \55\ ''E85 motor fuel is increasingly price-competitive with
gasoline in parts of the Midwest.'' Today in Energy. EIA, 19
September 2013. <http://www.eia.gov/todayinenergy/detail.cfm?id=13031>. E85 prices have fallen steadily since the
beginning of 2013 relative to E10 prices.
---------------------------------------------------------------------------

    EPA is not in a position to estimate E85 consumption based on data
or modeling involving the price relationship between E10 and E85.
Therefore, in addition to information on E85 consumption in 2012 and
2013 discussed above, we have considered other sources in developing
our estimate of the volume of E85 that could reasonably be consumed.
The following discussion presents the various sources and approaches
used to inform our estimate.
    To begin with, we considered that even without further reductions
in the price of E85 relative to the price of E10,

higher E85 consumption in 2014 could reasonably be expected compared to
2012 and 2013 based on business-as-usual growth in the number of FFVs
in-use and the number of retail stations offering E85. The combined
effect of these two factors could raise the total E85 consumption
volume from our 2013 estimate of about 100 mill gal to about 125 mill
gal in 2014 if the purchasing behavior of individual FFV owners remains
constant.\56\
---------------------------------------------------------------------------

    \56\ This estimate is based on two years of growth in stations
offering E85 and two years of growth in in-use FFVs. Growth factors
are discussed further in a memo entitled, ``Application of one-in-
four E85 access methodology to 2014'', Memorandum from David
Korotney to EPA docket EPA-HQ-OAR-2013-0479.
---------------------------------------------------------------------------

    In the March 2010 RFS final rule we presented a means for
estimating the E85 consumption capacity of FFVs based on historical
market practices with diesel fuel.\57\ We defined ``reasonable access''
to E85 as a situation in which one out of every four service stations
to which an FFV owner had access offered E85, such that an FFV owner
could be considered to have a reasonable option of refueling on E85.
All other FFVs would then be assumed not to have reasonable access to
E85, and would therefore always refuel on gasoline (here presumed to be
E10). Following this one-in-four access approach, we estimated that
approximately 8.6% of FFVs would have access to E85 in 2014 based on
projections of the number of retail stations likely to offer E85.
Similarly, the total amount of energy \58\ consumed by all FFVs in 2014
would be about 9% of all the energy consumed by all light-duty vehicles
and trucks. If the price of E85 reflected only the energy difference
between it and E10, the total volume of E85 consumed under this
approach could be about 160 mill gal. If the price of E85 was lower
than this level and as a result half of all FFV owners with access used
E85, the total volume of E85 consumed could reach 640 mill gal. Details
of these calculations can be found in a memorandum in the docket.\59\
---------------------------------------------------------------------------

    \57\ See discussion at 75 FR 14761, March 26, 2010.
    \58\ This estimate includes energy consumed from all fuel
sources, including both E10 and E85.
    \59\ ``Application of one-in-four E85 access methodology to
2014,'' Memorandum from David Korotney to EPA docket EPA-HQ-OAR-
2013-0479.
---------------------------------------------------------------------------

    We have also considered other projections of E85 usage, recognizing
the varying assumptions made in developing these projections as well as
the differing purposes of the projections. For example, in their
comments on the NPRM for the 2013 standards, the University of Illinois
included an article from the February 13, 2013 issue of Farmdoc Daily
in which E85 consumption in 2014 was assumed to be 300 mill gal if E85
prices were sufficiently low in comparison to E10 prices, though they
did not quantify the prices needed to reach this E85 consumption level.
    Finally, in the context of EPA's response to requests for a waiver
of the 2012 renewable fuel volume requirements due to drought, the
Department of Energy provided its own analysis of the maximum volume of
E85 that could be consumed based on a technical analysis of retail
station throughput.\60\ Based on assumptions about E85 tank sizes at
retail stations and the associated refill frequencies, DOE estimated
that the maximum sales of E85 would be 600 mill gal.\61\ This DOE
analysis focused on the potential throughput at E85 stations given
certain underground tank refueling frequencies, and did not consider
such things as vehicle refueling frequencies. DOE's analysis also noted
that to achieve its potential, E85 may need to be priced at a greater
discount than it would be based on the energy content differential
between E85 and gasoline alone to account for the more frequent
refueling that E85 requires. We request comment on how DOE's analysis
could be refined to better estimate potential E85 consumption.
---------------------------------------------------------------------------

    \60\ ``Department of Energy Analyses in Support of the EPA
Evaluation of Waivers of the Renewable Fuel Standard'', November
2012, EPA-HQ-OAR-2012-0632-2544.
    \61\ In generating this estimate, DOE assumed that the number of
retail stations offering E85 would be about 2,300. We estimate that
the number of stations offering E85 will be closer to 3,300 in 2014,
which would correspond to a maximum E85 throughput of about 860 mill
gal.
---------------------------------------------------------------------------

c. Proposed Projection of E85 Consumption in 2014
    Our goal for this proposal is to generate a realistic estimate of
the amount of E85 that could reasonably be supplied to and consumed in
the transportation sector in 2014 in light of the various circumstances
involved with distribution and sale of E85. As with other volumes of
renewable fuel, we believe that it is most appropriate to project a
range of E85 volumes that reflects the volume that could reasonably be
consumed in 2014. This projected range for E85 is used to determine a
range for the total volume of ethanol that can be consumed, which is
further combined with projected ranges for non-ethanol renewable fuels
to determine a range for the total renewable fuel standard. For the
final rule, we will determine a single value within the projected range
that is our best estimate of a realistic projection of total renewable
fuel in 2014 for purposes of exercising the waiver authority. Once the
applicable volume requirements are set, the parties in the market will
determine whether our estimated volume of E85 is in fact consumed, or
whether other renewable fuels are consumed instead of the volume of
ethanol that we estimate could be consumed as E85.
    Based on our analysis of the available information described above,
we are estimating a range of 100-300 mill gal of E85 consumption for
2014. We believe that this estimated range of E85 encompasses the most
likely possibilities. Volumes below 100 mill gal are possible, but we
believe that they are unlikely given that we expect such volumes to be
reached in 2013 and the market conditions that resulted in these values
to continue. Likewise volumes above 300 mill gal are possible, but we
believe that they are unlikely. As described above, we believe that 300
mill gal of E85 could be consumed in 2014 if the monthly trends from
the first half of 2013 continue unabated through both 2013 and 2014,
and further increase due to growth in both retail stations offering E85
and FFVs in the fleet. E85 consumption above 300 mill gal in 2014 would
require that these trends increase even further, and in a sustained
fashion, through the end of 2014. Therefore 300 mill gal is the highest
value we would consider at this time as an upper end of the range of
possible volumes of E85 for 2014. However, we acknowledge that the
volume of E85 sold into the market is likely also a function of the
standard for total renewable fuel that we set. We request comment and
data from the public that would help estimate the impact of lowering
the volumetric requirements on the incentive to sell ethanol blends
higher than E10.
    In light of current uncertainties and the limited information
available at this time, we are proposing that the specific volume of
E85 that we would use in determining total ethanol consumption for 2014
would be based on the mean value from the Monte Carlo analysis within
the range of potential E85 volumes. As explained in Section IV.B.4
below, the Monte Carlo analysis for E85 is based on a half-normal
distribution, consistent with our view that a reasonable level of E85
consumption is more likely to be towards the lower end of the proposed
range. Based on this analysis, the mean value for E85 consumption would
be about 180 mill gal. The mean provides a balance between the
projected higher and lower volumes of E85 that could be reasonably
achievable. While we believe that

volumes of E85 at the high end of our proposed range are achievable and
well within the capabilities of the existing vehicle and refueling
infrastructure, basing the total renewable fuel volume on E85 volumes
at the high end of what is achievable could present an increased risk
of non-compliance for obligated parties if more E85 is called for than
was projected in setting the percentage standards. This could occur,
for example, if uncertainties in projected gasoline and diesel
consumption for 2014 led to a requirement for more than 300 mill gal
E85. By using the mean, we would reduce the likelihood of potential
outcomes such as this.
    The proposed mean volume of 180 mill gal for E85 is consistent with
the recent upward trend in E85 production described above, where E85 is
estimated to have been about 70 mill gal in 2012 and could reach and
potentially exceed 100 mill gal in 2013. With regard to 2013, the
increase is also consistent with available state-specific data on E85
production increases in the first two quarters.

                                    Table IV.B.1.c-2--E85 Production in 2013
                                                   [Mill gal]
----------------------------------------------------------------------------------------------------------------
                                                                   First quarter  Second quarter     % change
----------------------------------------------------------------------------------------------------------------
Minnesota.......................................................             1.9             3.0            +58%
Iowa............................................................             1.8             2.6            +44%
----------------------------------------------------------------------------------------------------------------

    We request comment more generally on the range of E85 consumption
that could reasonably be achieved under appropriate conditions in 2014,
including the methodologies and approaches that would provide a
projection of E85 that could reasonably be consumed in light of the
various factors affecting the distribution and sale of E85. We
reiterate our recognition that there is a short time period in which to
achieve infrastructural and market changes that would affect E85
consumption in 2014 and that the approach to estimating E85 consumption
described above, consistent with best available information, is
appropriate. We request comment in particular on methodologies and
approaches that would be appropriate in light of these considerations.
d. Estimating Total Ethanol Consumption in 2014
    To estimate the total volume of ethanol that could reasonably be
consumed in 2014, we assumed that volumes of E0 and E15 would be
essentially zero, that E85 consumption would be in the range of 100-300
mill gal and contain 74% denatured ethanol, and that all remaining
gasoline would be E10 with a denatured ethanol content of 10%. We
assumed that the total energy consumption for all gasoline-powered
vehicles and engines would be 14.33 Quadrillion Btu,\62\ and that this
amount of total energy consumption is fixed regardless of the relative
amounts of E10 and E85. Based on a denatured ethanol energy content of
77,000 Btu/gal and a gasoline (E0) energy content of 115,000 Btu/gal,
we determined that an E85 consumption range of 100-300 mill gal would
correspond to a total ethanol consumption volume of 12.95-13.09 bill
gal. This ethanol volume would include non-advanced ethanol such as
that made from corn as well as advanced biofuels such as sugarcane
ethanol or other domestically-produced advanced ethanol.
---------------------------------------------------------------------------

    \62\ EIA Annual Energy Outlook 2013, Table 37. Represents lower
heating value. For determining the total volume of ethanol that can
be consumed in 2014, AEO provides 2014 gasoline consumption
projections in the required energy units. However, EIA's Short-Term
Energy Outlook provides 2014 projections that are more recent, but
in units of volume. EPA understands that the estimate of 2014
transportation fuel use that EIA is required to provide to EPA for
purposes of determining the applicable percentage standards will be
based on the latest available STEO forecast rather than the Annual
Energy Outlook.
---------------------------------------------------------------------------

2. Estimating Availability of Non-Ethanol Renewable Fuel Volumes
    In addition to the volume of ethanol that could reasonably be
consumed in 2014, the total volume of renewable fuel depends on the
volume of non-ethanol renewable fuels that are projected to be
available in 2014. These include both advanced and non-advanced non-
ethanol renewable fuels of all types that could reasonably be supplied
to meet all four standards.
a. Non-Ethanol Cellulosic Biofuel
    The production of non-ethanol cellulosic biofuel in 2014 is
projected to be between 0 and 9 million ethanol-equivalent gallons.
This volume could be significantly greater if additional pathways for
the generation of cellulosic biofuel RINs are approved and additional
volumes of heating oil generate cellulosic RINs. For more details on
the potential production of non-ethanol cellulosic biofuels in 2014,
and the companies expected to produce these fuels, see Section II.
b. Biomass-Based Diesel
    Obligated parties are required to fulfill a Renewable Volume
Obligation (RVO) based on a national applicable volume for biomass-
based diesel of 1.28 bill gal of biodiesel (1.92 bill ethanol-
equivalent gallons) in 2013.\63\ As described in Section III, in
today's NPRM we are proposing that the national applicable volume for
biomass-based diesel remain the same for 2014. However, this proposed
requirement is not based exclusively on projected availability and we
recognize that greater volumes could be available for purposes of
satisfying the advanced biofuel and total renewable fuel volume
requirements.
---------------------------------------------------------------------------

    \63\ 77 FR 59458, September 27, 2012 (establishing the national
applicable volume for BBD).
---------------------------------------------------------------------------

    There is a large amount of excess production capacity for biomass-
based diesel, including at facilities that were in operation in 2012.
While the total production capacity for all registered and unregistered
biodiesel facilities is about 3.6 bill gal, the production capacity for
only those facilities that produced some volume in 2012 is 2.4 bill
gal, and the production capacity for facilities that utilized at least
20% of their individual production capacities in 2012 was about 1.6
bill gal.\64\
---------------------------------------------------------------------------

    \64\ ``Biodiesel plant list 2-6-13'' in docket EPA-HQ-OAR-2013-
0479.

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

[GRAPHIC] [TIFF OMITTED] TP29NO13.003

    While there is a large amount of excess production capacity, the
degree to which it will be used to produce biodiesel in excess of 1.28
bill gal depends on a variety of factors. One of those factors is the
federal tax credit for biodiesel that was most recently extended
through the end of 2013 under the American Taxpayer Relief Act of 2012.
Under this Act, parties that produce a mixture of biodiesel and diesel
fuel can claim a $1.00-per-gallon credit against their tax
liability.\65\ This tax credit has enabled biodiesel to be more
competitive with other advanced biofuels. However, as of this writing
it is unclear if this tax credit will apply in 2014. Since many expect
the tax credit to have a direct impact on the economic attractiveness
of biodiesel, the fact that it does not yet apply in 2014 adds
uncertainty to the volume of biodiesel above 1.28 bill gal that may be
produced and consumed in the U.S. As discussed further in Section
IV.B.4-2 below, we have assumed that the tax subsidy for biodiesel will
not be extended past 2013. This is reflected in an upper end of the
range for biomass-based diesel no higher than the volume that may be
used in 2013, and through the use of a half-normal distribution in the
context of the Monte Carlo process. We request comment on the degree to
which the presence of the biodiesel tax credit in 2014 would affect our
projections of the volumes that could be reasonably available in 2014.
To the extent we have new information on the status of the tax credit
in 2014, EPA will consider that information in the development of the
final rule.
---------------------------------------------------------------------------

    \65\ See Section 405.
---------------------------------------------------------------------------

    According to production data available through EMTS, the total
volume of biomass-based diesel produced through August 2013 was 1,053
million gallons. Depending on how monthly production continues through
the remainder of 2013, we would expect total 2013 biodiesel production
to be between 1.6 and 1.8 bill gal. A projection of 1.8 bill gal
results from the assumption that the August production rate continues
through the rest of 2013. If the trend in production follows the
downward trend that occurred in 2012 in the September-December
timeframe (representing, for example, potential seasonality of
available feedstocks or demand), the total 2013 production would be 1.6
bill gal.

[GRAPHIC] [TIFF OMITTED] TP29NO13.004

    These 2013 biodiesel production volumes are occurring in the
context of a $1/gal tax credit. While they provide a clear indication
of the production capabilities of the industry, they do not provide an
accurate indicator of the volumes that would be produced in the absence
of the tax credit.
    In the past some stakeholders have expressed concern that there may
be limitations in biodiesel consumption that could be imposed by
manufacturer warranties and cold-weather operation, and that this could
impact use of biodiesel above 1.28 bill gal. However, we do not believe
that this is the case for 2014. For instance, most diesel engines are
warrantied by their manufacturer to B5. That is, the use of biodiesel
in concentrations above 5vol% will void these warranties. While not a
legal limitation on the use of biodiesel, it does present a practical
limitation. Assuming a total diesel consumption volume of about 56 bill
gal for 2014,\66\ B5 for the diesel pool as a whole would correspond to
a biodiesel volume of 2.8 bill gal. However, some diesel truck engines
have been warrantied by their manufacturers to consume B20, starting in
2011.\67\ This could potentially raise the limit on biodiesel
consumption even higher, assuming retailers would dedicate a pump
exclusively to B20 for this pool of diesel fuel consumers. Since 2.8
bill gal is significantly higher than the range of biodiesel volumes we
are considering in this proposal, manufacturer warranties do not
represent a limitation on biodiesel use in 2014.
---------------------------------------------------------------------------

    \66\ EIA Annual Energy Outlook 2013, Table 11.
    \67\ Very few engine models are warrantied by manufacturers to
consume B20 have been sold in the U.S. As such, this volume of
biodiesel was assumed to be negligible for purposes of this
estimate.
---------------------------------------------------------------------------

    Production of biodiesel in 2014 is likely to be impacted
significantly by feedstock prices. Since their peak in August and
September of 2012 during the height of uncertainty about the effects of
the 2012 drought, prices of soybeans and soybean products have been
trending downward. The USDA World Agricultural Supply and Demand
Estimates (WASDE) Report's estimate \68\ of soybean prices for the
2012/2013 marketing year have declined from an August 2012 range of
$15-17 per bushel to a June 2013 estimate of $14.35 per bushel for the
2012/2013 marketing year. WASDE's June Outlook Report estimates that
for the 2013/2014 marketing year (which includes the months of October
through December 2013) soybean prices will range from $9.75-$11.75 per
bushel which is in line with the projections used by EPA in the 2013
biomass-based diesel volume final rule.\69\
---------------------------------------------------------------------------

    \68\ See http://www.usda.gov/oce/commodity/wasde/index.htm (last
accessed June 7, 2013); The WASDE report is a monthly report
published by the U.S. Department of Agriculture (USDA) providing
comprehensive forecast of supply and demand for major crops both for
the U.S. and globally. Throughout the growing season and afterwards,
estimates are compared with new information on production and
utilization, and historical revisions are made as necessary. It is
widely considered to be the benchmark to which all other private and
public agricultural forecasts are compared.
    \69\ Compare Cf 77 FR 59458 at 59465 with the May 10, 2013 WASDE
Report released on May 10, 2013, Table 518-15. See http://www.usda.gov/oce/commodity/wasde/index.htm (last accessed June 7,
2013).
---------------------------------------------------------------------------

    At the same time, even biodiesel blends as low as B5 cannot be
utilized year-round due to cold weather constraints. The cloud point
for B5 soy methyl ester (SME) blended with No. 2 diesel is estimated to
be approximately 5 [deg]F. Thus, the use of B5 is highly unlikely in
any region where temperatures regularly drop below 5 [deg]F. Assuming
that biodiesel cannot be blended in such regions during any month where
the 10% percentile temperature falls below 5 [deg]F would result in a
reduction of the 2014 biomass-based diesel volume by only about 3%.
This would still permit more than 2 bill gal of biodiesel to be
consumed in 2014. Thus, it appears that for 2014, the ability to
consume biodiesel in the vehicle fleet is not constrained by cold
weather.
    There are a variety of other sources that provide benchmarks for
what volumes of biodiesel could be

reasonably available in 2014 in excess of 1.28 bill gal. For instance,
in the 2013 standards final rule,\70\ we assessed potential feedstocks
for biodiesel production, concluding that excess soy oil and corn-oil
could be used to produce an additional 200 mill gal of biodiesel in
2013 above the 1.28 bill gal requirement. For 2014 the additional
biodiesel from these sources could be higher. According to USDA,
domestic soybean production is expected to increase by 13% in the 2013
soybean marketing year which extends through September 2014, in
comparison to the 2012 marketing year.\71\ If this occurs, then
domestic production of soy oil could increase by about 240 mill gal.
Regarding corn-oil, more than one third of the 320 mill gal total
production was exported in 2012. These exports could be diverted to
biodiesel production depending on relative prices and other factors.
Taken together, the use of both additional soy oil production and the
diversion of corn oil exported could bring the total biodiesel
production volume to about 1.62 bill gal.
---------------------------------------------------------------------------

    \70\ 78 FR 49794, August 15, 2013.
    \71\ Pete Riley, ``Grains and Oilseeds Outlook; 2013
Agricultural Outlook Forum,'' USDA/Farm Service Agency, February 22,
2013. 13% is assumed to apply only during the first 9 months of
2014.
---------------------------------------------------------------------------

    We continue to receive requests for approval of additional RIN-
generating pathways for new feedstocks to expand the availability of
feedstock types and for new production processes to produce
biodiesel.\72\ While the degree to which these new processes and
feedstocks may be viable for the 2014 production year is uncertain,
given their directional impacts on lowering cost and improving
feedstock availability, we would expect that approval of such new
pathways would add biodiesel production volume in 2014. For example,
since the adoption of the final rule in March 2010, we have added
canola and camelina oil as valid biodiesel feedstocks and analyzed the
potential to produce up to 600 million gallons of biodiesel from these
new feedstocks by 2022 through expanded crop production.\73\ These
feedstocks were added in response to industry requests based on their
intention to expand production of these feedstocks to support biodiesel
production. Since canola and camelina are established crops that can be
grown for biodiesel use today, some portion of these maximum volumes
could be produced in 2014, adding to the volume of feedstock otherwise
available for biodiesel production.
---------------------------------------------------------------------------

    \72\ For example, as of June 2013, EPA had 5 petitions for new
biodiesel pathways under review and had approved 3 additional
petitions for new biodiesel pathways.
    \73\ See for example the final rules adding giant reed and
napier grass feedstocks (74 FR 41703) and final rule adding camelina
and energy cane as feedstocks and renewable gasoline and renewable
gasoline pathways (74 FR 14190).
---------------------------------------------------------------------------

    We are aware of three other sources that provide potential
benchmarks for biodiesel production volume in 2014. In 2011, IHS Global
Insight estimated the potential for biodiesel production over the
following decade.\74\ Under specified assumptions for crude oil price,
crop yields, technology, and tax policies, this report concluded that
it would be economically feasible to produce 1.54 bill gal biodiesel in
the U.S. in calendar year 2014. This estimate assumed that the
biodiesel tax credit would be extended beyond 2013, and did not examine
a case in which the tax credit is not extended.
---------------------------------------------------------------------------

    \74\ John R. Kruse, ``Biodiesel Production Prospects for the
Next Decade'', March 11, 2011.
---------------------------------------------------------------------------

    In their comments on the NPRM for the 2013 standards, the
University of Illinois provided the results of an analysis of both
production and consumption limitations for ethanol and biodiesel. They
concluded that 1.7 bill gal of biodiesel could be available without
overwhelming feedstock supplies, but provided little detail on the
limits of feedstock supply. It also assumed the extension of the
biodiesel tax credit. Darling International, Inc. also evaluated
available feedstocks and concluded that 1.9 bill gal of biodiesel could
be produced without diverting feedstocks from domestic food
requirements. Their analysis, however, was silent with respect to
whether it assumed the extension of the tax credit.
    Finally, we note that there are also international sources of
biodiesel that could be imported into the U.S. and which could be
eligible to generate either D4 (biomass-based diesel) or D6 (renewable
fuel) RINs in 2014. While there is a significant volume of biodiesel
that is produced around the globe, it is unclear how much could
potentially be imported into the U.S. in 2014 and accordingly we have
not included these sources in our analysis of available supply.
    Based on the discussion above, we have good reason to believe that
the volume of biodiesel that can be produced in 2014 will be higher
than the applicable volume requirement of 1.28 bill gal. A summary of
all of the sources we have considered is provided below.

 Table IV.B.2.b-1--Projections of 2014 Biomass-Based Diesel Ordered From
                            Lowest to Highest
                            [Million gallons]
------------------------------------------------------------------------

------------------------------------------------------------------------
Biomass-based diesel volume requirement.............               1,280
IHS Global Insight report...........................               1,540
Extrapolated 2013 production........................               1,570
All registered biodiesel facilities that operated at               1,600
 least 20% of capacity in 2012......................
Additional soy oil production and diversion of                     1,620
 exported corn oil to biodiesel production..........
University of Illinois estimate in their comments...               1,700
Darling International, Inc. estimate in their                      1,900
 comments...........................................
Production capacity of all registered biodiesel                    2,400
 facilities that produced some biodiesel in 2012....
------------------------------------------------------------------------

    As with E85, we believe that it would be most appropriate to
project a range of possible biodiesel production volumes for 2014,
using the values in Table IV.B.2.b-1 as a guide. As explained above,
the volumes in the table above represent potential technical
availability. We recognize that multiple factors would ultimately
influence actual production volumes. For the purposes of this NPRM, we
are estimating a range of 1.28-1.6 bill gal of biodiesel production for
2014. While it would not be below 1.28 bill gal, as that is the
required volume, it could be above the high end of 1.6 bill gal.
However we estimate that it would be unlikely to be above this value,
especially if the federal tax credit is not extended beyond 2013. For
instance, the 1.9 bill gal estimate from Darling international, Inc.
was based on extrapolating the historically high production rate from
December 2011 into the future. The circumstances in December 2011 were
unique: the tax credit for biodiesel was to expire at the

end of that month, prompting a jump in production. Thus while it is
possible that the production rate from December 2011 might be sustained
in the future, we believe it is unlikely if the biodiesel tax credit is
not extended past 2013. Likewise the analysis provided by the
University of Illinois which projected 1.7 bill gal biodiesel in 2014
assumed that the tax credit would be extended beyond 2013. A 2011
report prepared on behalf of the National Biodiesel Board indicated
that the expiration of the tax credit at the end of 2010 caused a
substantial reduction in biodiesel production in 2011 compared to
2010.\75\
---------------------------------------------------------------------------

    \75\ Urbanchuk, John, ``Economic Impact of Removing the
Biodiesel Tax Credit for 2010 and Implementation of RFS2 Targets
Through 2015,'' Prepared by Cardno Entrix for the National Biodiesel
Board, June 8, 2011 (revised).
---------------------------------------------------------------------------

    For the purposes of this NPRM, we have assumed that the biodiesel
tax credit will not be extended beyond 2013. As a result, we believe
that biodiesel production volumes in 2014 are more likely to be towards
the lower end of our proposed range of 1.28-1.6 bill gal. To reflect
this assumption, we have used a half-normal distribution to represent
biomass-based diesel in the context of the Monte Carlo process
described in Section IV.B.4 below. This distribution has a mean value
of 1,405 mill gal for biodiesel.
c. Non-Ethanol Advanced Biofuel
    Non-ethanol advanced biofuel other than cellulosic biofuel and
biomass-based diesel has a D code of 5, and could include biodiesel and
renewable diesel that is co-processed with petroleum ,\76\ heating oil,
biogas, jet fuel, naphtha, and LPG. In 2012, RINs were generated for
only three of these fuel types, as summarized in the following table.
---------------------------------------------------------------------------

    \76\ Biodiesel and renewable diesel that is co-processed with
petroleum does not meet the requirements for biomass based diesel
(D4 RIN), however it may qualify as an advanced biofuel (D5 RIN).

  Table IV.B.2.c-1--Other Non-Ethanol Advanced Biofuel Produced in 2012
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------

------------------------------------------------------------------------
Heating oil....................................................      0.2
Biogas.........................................................      2.9
Renewable diesel...............................................     20.5
                                                                --------
  Total........................................................     23.6
------------------------------------------------------------------------

    These volumes were produced domestically and there were no volumes
of non-ethanol advanced biofuel imported into the U.S. in 2012.
    In order to estimate a range of possible volumes of other non-
ethanol advanced biofuel for 2014, we examined the Production Outlook
Reports that are required to be submitted by all registered renewable
fuel producers under Sec.  80.1449.

 Table IV.B.2.c-2--Projections From Production Outlook Reports for Other
             Non-Ethanol Advanced Biofuel Production in 2014
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------
                                                              Biodiesel
------------------------------------------------------------ ----------------
Biogas.............................................     45.8
Naphtha............................................      6.6
Renewable diesel...................................     79.1
                                                    --------------------
  Total............................................    131.7
------------------------------------------------------------------------

    Because biogas cannot be used in conventional gasoline or diesel
vehicles, we investigated more closely whether the 45.8 mill gal shown
in the above table was realistic for 2014. According to EPA's Landfill
Methane Outreach Program, about 360 mill ethanol-equivalent gallons of
biogas is currently being purified and injected into existing natural
gas pipelines.\77\ Under Sec.  80.1426 this biogas can generate
advanced biofuel RINs if it is demonstrated to have been used to fuel
CNG vehicles and meets all other regulatory requirements. However, this
amount of biogas is on the same order of magnitude as the total volume
of CNG used in all CNG vehicles each year, which is about 420 mill
ethanol-equivalent gallons.\78\ While establishing contracts to ensure
that all CNG vehicles are fueled with landfill biogas rather than
fossil-based natural gas is highly unlikely to occur in the short term
given the rapid expansion underway of CNG vehicles in the marketplace,
we believe it is reasonable that some smaller portion of all CNG
vehicles could be fueled with landfill biogas in 2014. Since the 45.8
mill ethanol-equivalent gallons of biogas from the Production Outlook
Reports, shown in Table IV.B.2.c-2, represents about 11% of the annual
CNG vehicle consumption, it is reasonable to expect that this volume
could be used in 2014 to fuel CNG vehicles and thus generate advanced
biofuel RINs. We request comment, however, on whether this level of
consumption can reasonably be achieved within the relevant time frame.
---------------------------------------------------------------------------

    \77\ Based on list of operational landfill gas (LFG) energy
projects provided at http://www.epa.gov/lmop/projects-candidates/operational.html.
    \78\ EIA's Short-Term Energy Outlook, Table 5a, released in
September 2013. Projection of 0.093 bill cubic feet per day for
2014. Conversion factor is 0.96 thousand Btu per cubic foot.
---------------------------------------------------------------------------

    Therefore, based on the actual production in 2012 and the projected
production for 2014, for this NPRM we have used a range of 24-132 mill
gal to represent non-ethanol advanced biofuel with a D code of 5. While
the actual volume could be above 132 mill gal, we believe this is
unlikely as this volume is based on the projections made by the
producers themselves in light of their assessment of their own
capabilities and plans. Likewise, while the actual volume could be
below 24 mill gal, we believe this is unlikely since the industry has
demonstrated that it can produce at this level. For the final rule we
will update this range based on more recent data on actual production
in 2013 and more recent versions of the Production Outlook Reports.
d. Non-Ethanol Non-Advanced Renewable Fuel
    To determine a range for the non-ethanol non-advanced renewable
fuel volume, we used the same approach as for the non-ethanol advanced
biofuel volume. That is, we used actual 2012 production to represent
the low end of the range and 2014 projections from Production Outlook
Reports to represent the high end of the range. This approach resulted
in a range of 1-25 mill gal, mostly representing production of
biodiesel at facilities that have been grandfathered under Sec.
80.1403 and which may use feedstocks for which there is currently no
valid RIN-generating pathway, such as sunflower or cottonseed oil. For
the final rule we will update this range based on more recent data on
actual production in 2013 and more recent versions of the Production
Outlook Reports.
3. Treatment of Carryover RINs in 2014
    In the final rule establishing the applicable standards for 2013,
we estimated the volume of ethanol that would need to be consumed to
meet the statutory volume requirements prior to consideration of RINs
carried over from 2012 in 2013.\79\ The total estimated volume of
ethanol was 14.5 bill gal. If no ethanol blends higher than E10 were
consumed in 2013, the total volume of E10 would be 131.1 bill gal
(ignoring small amounts of E0) and the maximum volume of ethanol that
could be consumed would thus be 13.1 bill gal. On the basis of these
estimates, the volume of ethanol that is estimated to exceed the amount
that could be consumed as E10 in 2013 was 1.4 bill gal.
---------------------------------------------------------------------------

    \79\ 78 FR 49794, August 15, 2013.
---------------------------------------------------------------------------

    In addition to the option of using E85 and/or more non-ethanol
renewable fuels, the 2013 standards final rule also pointed to the
substantial number of

RINs carried over from 2012 into 2013 that could be used in lieu of
physical volumes. We determined that there would be about 2.6 billion
such carryover RINs available in 2013. If the 1.4 bill gal of ethanol
that is in excess of that which can be consumed as E10 in 2013 is
covered entirely by carryover RINs, then there would still be at least
1.2 billion RINs that could be carried over from 2013 and available for
use in 2014.
    As described in the 2007 rulemaking establishing the RFS
program,\80\ carryover RINs are intended to provide flexibility in the
face of a variety of circumstances that could limit the availability of
RINs. More specifically, carryover RINs provide a mechanism for
offsetting the negative effects of fluctuations in either supply of or
demand for renewable fuels. The flexibility afforded by these carryover
RINs was evidenced in the recent response of the market to the drought
in 2012. The flexibility of these carryover RINs is also what we
highlighted in the 2013 standards final rulemaking as providing the
opportunity for compliance despite potential constraints on physical
ethanol consumption.
---------------------------------------------------------------------------

    \80\ 72 FR 23900, May 1, 2007.
---------------------------------------------------------------------------

    In the context of determining the appropriate volume requirements
for 2014, as for 2013 it would be appropriate to consider carryover
RINs that may be available. However, we believe it is also important to
the viability of the market that some reasonable amount of carryover
RINs continue to be available. Carryover RINs act as a buffer, and
allow the regulated parties to address unforeseen circumstances that
could limit the availability of RINs, and to address renewable fuel
supply circumstances that differ from those assumed in the process of
generating the projected volume ranges discussed above. The provision
for carryover RINs recognizes that Congress structured the RFS program
to provide a degree of flexibility for the obligated parties. In 2013
preserving such a buffer was not a concern, since even if the 1.4 bill
gal of ethanol that is estimated to be in excess of that which can be
consumed as E10 in 2013 is covered entirely by carryover RINs, there
would remain at least 1.2 billion additional, unused carryover RINs.
For 2014, however, if we accounted for all 1.2 billion carryover RINs
in setting the applicable standards, obligated parties would be left
with no flexibility for addressing other unforeseen circumstances. We
believe that a standard-setting process that included an assumption
that the carryover RIN balance would be reduced to zero would be
contrary to the original intention of the provision for providing a
degree of flexibility through carryover RINs. For this reason, we have
not accounted for carryover RINs in our assessment of the reductions in
the statutory volume requirements that would be appropriate in setting
the RFS standards for 2014. For years after 2014, if circumstances
differ substantially from those described here, we may again consider
the existence of carryover RINs in the standard-setting process
depending on the number of carryover RINs expected to be available and
projections of supply and consumption of renewable fuels. We request
comment on whether and how to account for carryover RINs in setting the
standards.
4. Proposed Range for the Volume Requirement for Total Renewable Fuel
    As discussed in the preceding sections, we have estimated volume
ranges for five different categories of renewable fuel as a step
towards estimating the volume requirement for total renewable fuel for
2014. These ranges are summarized below.

Table IV.B.4-1--Volume Ranges for Estimating Total Renewable Fuel Volume
                                for 2014
                  [Million ethanol-equivalent gallons]
------------------------------------------------------------------------

------------------------------------------------------------------------
Ethanol that can be consumed........................       12,954-13,087
Available volumes of non-ethanol cellulosic biofuel.                 0-9
Available volumes of biomass-based diesel...........     \a\ 1,920-2,400
Available volumes of non-ethanol advanced biofuel...              24-132
Available volumes of non-ethanol non-advanced                       1-25
 renewable fuel.....................................
------------------------------------------------------------------------
\a\ Represents a physical volume range of 1.28-1.6 bill gal.

    By aggregating these five categories, we can estimate the total
volume of renewable fuel that represents both the volume of ethanol
that could reasonably be consumed as E10 and higher ethanol blends, and
the volume of all non-ethanol renewable fuels that could reasonably be
available to meet the four applicable standards. We note that in
practice these five categories are not independent from one another,
since different types of renewable fuel will differ in terms of their
cost and higher volumes of one type of renewable fuel will reduce the
need for volumes from another category in the context of meeting the
applicable volume requirements. However, since the ranges shown above
are intended to encompass reasonably achievable volumes for each type
of renewable fuel, we believe that they can be treated as independent
for the purposes of the aggregation described below.
    In order to aggregate the ranges in Table IV.B.4-1 into a single
range for total renewable fuel, we used a Monte Carlo analysis to
account for the need to aggregate multiple ranges, each having
different likely distributions of likelihood across their range. As
discussed in the preceding sections, the high and the low end of each
range represents values such that it is possible but unlikely that
volumes would be outside of those ranges. We have therefore treated
these individual ranges as representing the 90% confidence interval of
a distribution of possible volumes. In other words, the low end of the
range would represent the 5th percentile and the high end of the range
would represent the 95th percentile. This approach is consistent with
our judgment that, while the ranges shown in Table IV.B.4-1 are
intended to encompass the vast majority of possible volumes, there
remains a small possibility that volumes outside of those ranges are
possible. We believe it is reasonable to treat these ranges as
representing 90% confidence intervals for purposes of the Monte Carlo
analysis, though we request comment on treating them as a different
confidence interval such as 80% or 95%.
    As an alternative to a Monte Carlo process for aggregating the
volumes in Table IV.B.4-1, we could use a simple summation of the
ranges (i.e. basing the low end of the range of total renewable fuel on
the sum of the low ends of the ranges for each of the five different
categories, and likewise for the high end

of the range). However, we do not believe that such an approach would
be appropriate. Doing so would tend to exaggerate the width of the
range for the required volume of total renewable fuel as it is highly
unlikely that 2014 volumes for each of these categories will
simultaneously be at the extreme low or high end of the proposed
ranges, and would also mischaracterize biofuel categories wherein one
end of the range is expected to be more likely than the other.
Nevertheless, we request comment on this or alternative methods to the
Monte Carlo approach for aggregating the volumes shown in Table IV.B.4-
1.