obligations. It also means that obligated parties may use BBD RINs in
excess of their BBD obligations to satisfy their advanced biofuel and
total renewable fuel obligations. Higher advanced biofuel and total
renewable fuel standards, therefore, can create demand for BBD if there
is an insufficient supply of other advanced or conventional renewable
fuels to satisfy the standards, or if BBD RINs can be acquired at or
below the price of other advanced or conventional biofuel RINs.
    In reviewing the implementation of the RFS program to date, it is
apparent that the advanced and/or total renewable fuel requirements
were in fact helping to provide a market for volumes of biodiesel above
the BBD standard. Table III.D.1-1 below shows the number of BBD RINs
generated and available for use towards demonstrating compliance \93\
in each year from 2011-2013. As can be seen from the table, in 2011 and
2013 the number of BBD RINs available for use exceeds the BBD standard.
In 2013 the number of advanced RINs generated from fuels other than BBD
is not large enough to satisfy the implied standard for ``other
advanced'' biofuel (advanced biofuel that is not BBD or cellulosic
biofuel). In fact, the amount by which the available BBD RINs exceed
the BBD standard (421 million RINs) is slightly larger than the amount
by which the non-BBD RINs fall short of the ``other advanced'' biofuel
implied standard (285 million RINs). This supports the theory that the
advanced biofuel standard provided an incentive to support BBD
production and import into the United States in excess of the BBD
standard.
---------------------------------------------------------------------------

    \93\ RINs available for use is number of RINs generated minus
the number of RINs retired (or that we anticipate will be retired)
for any reason other than a demonstration of annual compliance, such
as RINs retired for exported biofuel, volume error corrections,
enforcement actions, fuel used in applications other than
transportation fuel, heating oil, or jet fuel, etc.

             Table III.D.1-1--Biomass-Based Diesel and Advanced Biofuel RIN Generation and Standards
                                                [Million gallons]
----------------------------------------------------------------------------------------------------------------
                                                                            Available  non-   ``Other'' Advanced
                                  Available BBD RINs     BBD standard          biodiesel            biofuel
                                                            (RINs)         advanced biofuel       requirement
----------------------------------------------------------------------------------------------------------------
2011............................               1,484               1,200                 225                 150
2012............................               1,465               1,500                 597                 500
2013............................               2,360               1,920                 552                 830
----------------------------------------------------------------------------------------------------------------

    The prices paid for advanced biofuel and BBD RINs also support the
theory that advanced biofuel and/or total renewable fuel standards
provided sufficient incentive for additional biodiesel production and
import. Because the BBD standard is nested within the advanced biofuel
and total renewable fuel standards, we would expect the price of BBD
RINs to exceed that of advanced and renewable RINs. If, however, BBD
RINs are being used by obligated parties to satisfy their advanced
biofuel and/or total renewable fuel obligations, above and beyond the
BBD standard, we would expect the price of renewable fuel, advanced
biofuel, and BBD RINs to converge. When examining RIN prices data from
2011 through 2014, shown in Figure III.D.1-1 below, we see that until
January 2013 there is a consistent price differential between the price
of BBD and the relatively cheaper advanced biofuel and renewable fuel
RINs. Beginning in 2013 the price of BBD RINs and advanced biofuel RINs
converge, and remain at a similar price throughout 2014. This is more
evidence that suggests that the advanced biofuel standard and/or total
renewable fuel standard is capable of incentivizing increased
production and importation of BBD beyond the BBD standard, and that it
in fact operated in this manner in 2013 and 2014.

[GRAPHIC] [TIFF OMITTED] TP10JN15.006

2. Biomass-Based Diesel as a Fraction of Advanced Biofuel
    Another implication of the fact that the BBD standard is nested
within the advanced biofuel standard is that, for any given advanced
biofuel standard, the higher the BBD standard is, the lower the
opportunity for other non-BBD fuels to compete for market share within
the context of the advanced biofuel standard. The statutory volumes of
renewable fuel established by Congress in CAA section 211(o)(2)(B)
allow for an opportunity for other advanced biofuels (advanced biofuels
that do not qualify as cellulosic biofuel or BBD) to be used to satisfy
the advanced biofuel standard after the cellulosic biofuel and BBD
standards have been met. This unspecified advanced biofuel volume
starts at 0.25 billion gallons in 2013 and grows to 3.5 billion gallons
in 2022. It is, however, heavily dependent on EPA actions. Increasing
the BBD standard above 1 billion gallons, as we did in 2013, reduces
the potential market for other advanced biofuels to contribute towards
meeting the advanced biofuel standard. Conversely, reducing the
cellulosic biofuel standard while simultaneously maintaining the
advanced biofuel standard (or reducing it by a lesser amount), as we
have done each year since 2010, increases the potential market for
other advanced biofuels.
    Both BBD and other advanced biofuels achieve estimated greenhouse
gas reductions of at least 50% relative to the petroleum fuels they
replace. Increasing the guaranteed market for BBD, rather than allowing
excess BBD to compete for market share with other advanced biofuels
within the advanced biofuel standard, would likely reduce competition
and thus result in increased costs associated with the RFS program with
no additional GHG reductions. It will also have a negative impact on
investment in the development and deployment of other advanced
biofuels, as these fuels will have a lower potential market if the BBD
standard is increased. The long term success of the RFS program will
depend on the growth in a variety of advanced biofuels. The standards
we set today must therefore provide an incentive for the ongoing
research, development, and commercialization of a variety of types of
advanced biofuels beyond just BBD. We note again, however, that
allowing for a greater use of other advanced biofuels by setting a
lower BBD standard does not limit the amount of BBD that may be used
towards satisfying the advanced biofuel standard. If BBD can be
supplied at a lower cost than other advanced biofuels it can--and we
expect would--be used to satisfy the majority or even all of the
unspecified volume of advanced biofuels. Allowing for a larger portion
of the advanced biofuel standard to be unspecified, by setting a lower
BBD standard, maintains an incentive for the development and deployment
of other advanced biofuels, while at the same time allowing a level of
competition that can reduce compliance costs while also allowing growth
in the supply of BBD and maintaining the greenhouse gas emissions
reductions achieved by the use of advanced biofuels in the RFS program.
We believe these are important considerations in determining the
required BBD volumes in the 2015-2017 time period, as well as in future
years.
3. Ensuring Growth in Biomass-Based Diesel and Other Advanced Biofuel
    While the ability of the advanced and total renewable fuel
standards to incentivize increasing production of BBD and the desire to
allow other advanced biofuels to compete with BBD for market share
under the advanced standard suggest that a flat or even decreasing BBD
volume requirement may be the optimal solution, these are not the only
considerations. Despite many of these same issues being present

in 2013, EPA decided to increase the BBD standard in 2013 to 1.28
billion gallons. EPA's decision to establish the higher 1.28 billion
gallon BBD volume for 2013 was made against the backdrop of the BBD
industry having increased production from about 400 million gallons in
2010 to over 1 billion gallons in 2011.\94\ At that time, we were not
confident in the ability of other advanced biofuels to be able to
supply all the necessary volume of advanced biofuel needed to offset
the shortfall in cellulosic biofuel and to meet the statutory volume
target of 2.75 billion gallons for advanced biofuel. EPA was also not
completely confident in the ability of the BBD industry to further
increase production without an increased BBD standard. While BBD
production had performed well in 2011 and the early part of 2012, the
biodiesel industry had gone through a period of instability in 2009 and
2010.\95\
---------------------------------------------------------------------------

    \94\ 77 FR 59461 col. 1, September 27, 2012.
    \95\ Regulations of Fuels and Fuel Additives: 2013 BBD Renewable
Fuel Volume; Proposed Rule. 77 FR 59458, 59460-59461. http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm (last accessed
May 20, 2014).
---------------------------------------------------------------------------

    During the development of the 2013 standards rulemaking, we were
also concerned that the cellulosic biofuel standard, also nested within
the advanced biofuel requirement, was lagging significantly behind the
1 billion gallon statutory volume target. The shortfall in cellulosic
biofuel volume meant that either other sources of advanced biofuel
would be necessary to fulfill the specified volumes in the statute for
the advanced biofuel standard, or EPA would need to waive a portion of
the advanced biofuel standard. It is in this context that EPA
determined that raising the BBD requirement to 1.28 billion gallons was
appropriate. Most importantly, an applicable volume requirement of 1.28
billion gallons was expected to encourage continued investment and
innovation in the BBD industry, providing necessary assurances to the
industry to increase production for 2013 while also serving the long
term goal of the RFS statute to increase volumes of advanced biofuels
over time.\96\
---------------------------------------------------------------------------

    \96\ 77 FR 59458, 59462 and 59483.
---------------------------------------------------------------------------

    There are also advantages to increasing the BBD standard in order
to help provide stability to the BBD industry. This industry is
currently the single largest contributor to the advanced biofuel pool,
one that to date has been largely responsible for providing the growth
in advanced biofuels envisioned by Congress. Nevertheless, there has
been variability in the number of biodiesel facilities in production
over the last few years, as well as the percent utilization of
individual facilities, both of which contribute uncertainty in the rate
of production in the near future, and which can be mitigated to some
degree with an increase in the BBD applicable volume. Increasing the
BBD standard should help to provide market conditions that allow these
BBD production facilities to operate with greater certainty. This
result would be consistent with the goals of the Act to increase the
production and use of renewable fuels.
4. Proposed Volumes for 2015-2017
    With these considerations in mind, as well as our analysis of the
factors specified in the statute and described below, and in
coordination with the Departments of Agriculture and Energy, we are
proposing to increase the applicable volume of BBD to 1.70 billion
gallons for 2015, and to further increase the BBD volume requirement by
0.1 billion gallons in 2016 and 2017, respectively. We believe this
proposal strikes the appropriate balance between providing a market
environment where other advanced biofuels can compete, and achieving
the benefits associated with increasing the required volume of BBD.
Given our proposed volumes for advanced biofuel in these years, setting
the BBD standard in this manner continues to allow a considerable
portion of the advanced biofuel volume to be satisfied by either
additional gallons of BBD or by other unspecified types of qualifying
advanced biofuels (see Table III.D.4-1 below). While we have not yet
determined the applicable volume of advanced biofuel for 2017, we
anticipate the continued growth in the advanced biofuel standard such
that the advanced biofuel standard will provide an incentive for both
increasing volumes of BBD and other advanced biofuels. We believe
maintaining this unspecified or other advanced biofuel volume will
provide the incentive for development and growth in other types of
advanced biofuels. At the same time, allowing the portion of the
advanced biofuel volume requirement that is dedicated to BBD to
increase concurrently with the increase in the overall advanced biofuel
volume requirement will contribute to market certainty for both the BBD
industry and the renewable fuels program in general.

  Table III.D.4-1--Proposed Biomass-Based Diesel, Cellulosic Biofuel, and Advanced Biofuel Standards: 2015-2017
                                                [Billion gallons]
----------------------------------------------------------------------------------------------------------------
                                                                    Cellulosic       Advanced       Unspecified
                                  BBD  (gallons)    BBD  (RINs)       biofuel         biofuel        advanced
----------------------------------------------------------------------------------------------------------------
2015............................            1.70            2.55            0.11            2.90            0.24
2016............................            1.80            2.70            0.20            3.40            0.50
2017............................            1.90            2.85             TBD             TBD             TBD
----------------------------------------------------------------------------------------------------------------

    In proposing these standards for BBD for 2015-2017 EPA has taken
into account the statutory requirements found in CAA section
211(o)(2)(B)(ii), including coordination with the Departments of Energy
and Agriculture, review of the implementation of the renewable fuels
program to date, and analysis of the statutory factors specified in CAA
section 211(o)(2)(B)(ii)(I)-(VI). Of particular relevance in our review
of the implementation of the renewable fuels program to date were the
circumstances and context that led us to increase the BBD standard from
1.0 billion gallons in 2012 to 1.28 billion gallons for 2013, and the
biofuel industry's successful performance in 2013. We have also
reviewed the statutory factors in the context that the BBD volume
requirement is nested within the advanced biofuels and total renewable
fuels volume requirements. This discussion of the statutory factors is
found in Section III.E., below.
    In deciding to propose an applicable volume of 1.70 billion gallons
of BBD for 2015, with annual increases of 0.10 billion gallons for 2016
and 2017, we

considered not only the short-term impacts, but also the potential
long-term impacts of our action on the RFS program. We took into
account the competitive impact such an increase in the BBD set-aside
would likely have on other advanced biofuel producers already in the
marketplace as well as on potential new market entrants. This increase
in the BBD set-aside through 2017 should result in a requirement for
unspecified advanced biofuel sufficient to provide opportunity for
continued investment in and growth of advanced biofuels other than BBD.
    Raising the guaranteed BBD volume beyond the proposed volumes to a
volume that approaches the maximum possible supply of BBD could result
in a less competitive advanced biofuels market, increasing RIN prices,
and a less efficient market-driven renewable fuels program. Our
decision today to propose increasing the BBD volume in 2015-2017 by 100
million gallons per year would not be expected to lead to such adverse
result. We believe that the proposed increases for 2015-2017 will both
contribute to market stability for the renewable fuels program and
continue to promote a growing and competitive advanced biofuels
marketplace, one which encourages the growth and development of diverse
biofuels along with additional volumes of BBD beyond the volumes
required by the BBD standard. We request comment on our proposal for
increasing the BBD applicable volumes in 2015-2017 and whether higher
or lower volume requirements for BBD for 2015-2017 would be more
appropriate.

E. Consideration of Statutory Factors for 2014-2017

    In this section we discuss our considerations of the statutory
factors set forth in CAA section 211(o)(2)(B)(ii)(I)-(VI). As discussed
earlier in Section III.D.1, the BBD volume requirement is nested within
both the advanced biofuel and the total renewable fuel volume
requirements; so that any BBD produced beyond the mandated BBD volume
can be used to satisfy both these other applicable volume requirements.
The result is that in considering the statutory factors when setting
the biomass-based standard we must consider the potential impacts of
increasing BBD in comparison to other advanced biofuels,\97\ not to
diesel fuel. Greater or lesser applicable volumes of BBD do not change
the amount of advanced biofuel used to displace petroleum fuels;
rather, increasing the BBD applicable volume may result in the
displacement of other types of advanced biofuels that could have been
used to meet the advanced biofuels volume requirement.
---------------------------------------------------------------------------

    \97\ While BBD can be used to satisfy the total renewable fuel
requirement we anticipate that it will be used to satisfy the
advanced biofuel volume requirement in 2015-2017. See Table II.D.2-
2, ``Volume Scenarios Illustrating Possible Compliance with 3.40
Bill Gal Advanced Biofuel\a\ and 17.40 Bill Gal Bill Gal Total
Renewable Fuel''.
---------------------------------------------------------------------------

1. Primary and Supplementary Statutory Factors Assessment for 2015-2017
Biomass-Based Diesel Applicable Volumes
    EPA's primary assessment of the statutory factors for years 2015
through 2016 is that because the proposed advanced biofuel volume
requirements for 2015-2016 reflect the maximum volumes of all advanced
biofuels (including BBD) that can reasonably be expected to be produced
and consumed, and because the BBD requirement is nested within the
advanced biofuel volume requirement, we expect that the advanced
biofuel volume requirement will determine the level of BBD production
and import; the same volume of BBD will be produced and imported
regardless of the BBD applicable volumes that we require for 2015-2016.
This assessment is based in part on our review of implementation of the
RFS program to date, as discussed in Sections III. B and D. Since our
decision on the BBD applicable volumes for 2015-2016 is not expected to
impact the volume of BBD produced and imported during this time period,
we do not expect our decision to result in a difference in any of the
factors we are required to evaluate pursuant to CAA section
211(o)(2)(B)(ii)(I)-(VI), with the exception, that in considering
statutory factor 211(o)(2)(B)(ii)(III), we believe that our decision on
the level of the nested BBD volume requirement can have an impact on
the future development and marketing of non-BBD advanced biofuels and
can also be seen as sending a supportive or non-supportive signal to
potential investors in BBD.
    Similarly for 2017, even though we are proposing only the 2017 BBD
requirement at this time and not the 2017 advanced biofuel requirement,
we believe this same primary assessment is appropriate since, as in
previous years, the 2017 advanced biofuel requirement will be set to
reflect the maximum volumes of all advanced biofuels (including BBD)
that can reasonably be expected to be produced and consumed for 2017,
and it is the advanced standard that can be expected to drive BBD
production and use.
    As an additional supplementary assessment, we have considered the
potential impacts of modifying the applicable volume of BBD from the
proposed levels of 1.70 billion gallons in 2015, 1.80 billion gallons
in 2016, and 1.90 billion gallons in 2017, based on the assumption that
in guaranteeing BBD volumes at any given level there could be greater
use of BBD and a corresponding decrease in the use of other types of
advanced biofuels for years 2015-2017. However, setting a higher or
lower BBD volume requirement than the levels proposed would only be
expected to impact BBD volumes on the margin, protecting to varying
degrees this advanced biofuel from being outcompeted by other advanced
biofuels. This assessment analyzes all of the statutory factors, and is
described in a memorandum to the docket.\98\ Overall, the supplemental
assessment does not appear, based on available information, to provide
a good reason for setting a higher or lower nested standard for BBD
than 1.70 billion gallons in 2015, 1.80 billion gallons in 2016, and
1.90 billion gallons in 2017.
---------------------------------------------------------------------------

    \98\ ``Memorandum to docket: Statutory Factors Assessment for
2015-2017 BBD Applicable Volumes'' EPA-HQ-OAR-2015-0111.
---------------------------------------------------------------------------

2. Assessment for 2014 Biomass-Based Diesel Applicable Volume
    Given the fact that the 2014 compliance year has passed, we believe
that our action in setting the 2014 BBD volume requirement will result
in no real-world impacts, including no impacts with respect to the
factors listed under CAA section 211(o)(2)(B)(ii)(I)-(VI). For example,
there is no longer any ability for other advanced biofuels to compete
with BBD for a greater share of the advanced biofuel pool in 2014, so
there would be no marginal benefit in terms of incentivizing production
of such fuels in setting a lower volume requirement than the volume of
BBD that was actually produced and imported and available for
compliance in 2014. Setting the applicable volume at a higher level
would require a draw-down in the bank of carryover RINs, which EPA does
not consider prudent for the reasons discussed in Section II.E. of this
preamble. In light of these considerations, we propose to establish the
2014 applicable volume as equal to the volume actually produced and
imported, which is available for compliance.

IV. Proposed Cellulosic Biofuel Volume for 2014-2016

    In the past several years the cellulosic biofuel industry has made
significant progress towards commercial scale production. Quad County
Corn Processors produced the first cellulosic biofuel RINs from corn
kernel fiber at a corn ethanol plant in 2014. In addition, in 2014 two
large scale cellulosic ethanol facilities owned and operated by the
experienced biofuel production companies Abengoa and Poet completed
construction. EPA also determined that compressed natural gas (CNG) and
liquefied natural gas (LNG) produced from biogas from landfills,
municipal waste-water treatment facility digesters, agricultural
digesters, and separated municipal solid waste (MSW) digesters is
eligible to generate cellulosic RINs. This determination lead to a
significant increase in cellulosic RIN generation, as fuel that
previously had been qualified to generate advanced biofuel RINs began
to be used to generate cellulosic RINs. Efforts continue to be made at
facilities across the country to reduce both capital costs and
production costs associated with cellulosic biofuel production through
technology advances and the development of best practices gained
through operating experience. EPA also continues to support the ongoing
development of cellulosic biofuels through actions such as the
evaluation of new pathways with the potential to generate cellulosic
biofuel RINs.\99\ This section describes the available supply of
cellulosic biofuel RINs in 2014, the volumes that we project will be
produced or imported in 2015 and 2016, and some of the uncertainties
associated with those volumes.
---------------------------------------------------------------------------

    \99\ Additionally, on April 3rd, 2015 EPA published a direct
final rule modifying the process by which the cellulosic waiver
credit prices are established, and indicating the prices for these
credits in 2014 and 2015 using the regulations modified by this rule
(80 FR 18136, April 3, 2015).
---------------------------------------------------------------------------

    In order to project the volume of cellulosic biofuel production in
2015 and 2016 we considered data reported to EPA through the EPA
Moderated Transaction System (EMTS) and information we collected
regarding individual facilities that have produced or have the
potential to produce qualifying volumes for consumption as
transportation fuel, heating oil, or jet fuel in the U.S. in 2014,
2015, or 2016. New cellulosic biofuel production facilities projected
to be brought online in the United States over the next few years would
significantly increase the production capacity of the cellulosic
industry. Operational experience gained at the first few commercial
scale cellulosic biofuel production facilities should also lead to
increasing production of cellulosic biofuel from existing production
facilities. The following section discusses the companies the EPA
reviewed in the process of projecting qualifying cellulosic biofuel
production in the United States in 2015 and 2016. Information on these
companies forms the basis for our production projections of cellulosic
biofuel that will be produced for use as transportation fuel, heating
oil, or jet fuel in the United States in these years (see Table IV-1
below). We request comment on the projected volumes of cellulosic
biofuel production for each of these years, as well as the methodology
used to project these volumes.

            Table IV-1--Proposed Cellulosic Biofuel Standards
------------------------------------------------------------------------
                                                       Volume (million
                       Year                               gallons)
------------------------------------------------------------------------
2014..............................................                    33
2015..............................................                   106
2016..............................................                   206
------------------------------------------------------------------------

A. Statutory Requirements

    The volumes of renewable fuel to be used under the RFS program each
year (absent an adjustment or waiver by EPA) are specified in CAA
section 211(o)(2). The volumes of cellulosic biofuel specified in the
statute for 2014, 2015, and 2016 are shown in Table IV.A-1 below. The
statute provides that if EPA determines, based on EIA's estimate, that
the projected volume of cellulosic biofuel production in a given year
is less than the statutory volume, then EPA is to reduce the applicable
volume of cellulosic biofuel to the projected volume available during
that calendar year.\100\
---------------------------------------------------------------------------

    \100\ 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. In this
decision the Court stated that in projecting potentially available
volumes of cellulosic biofuel EPA must apply a ``neutral
methodology'' aimed at providing a prediction of ``what will
actually happen,'' as required by the statute.

          Table IV.A-1--Statutory Volumes of Cellulosic Biofuel
------------------------------------------------------------------------
                                                      Volume  (million
                       Year                               gallons)
------------------------------------------------------------------------
2014..............................................                 1,750
2015..............................................                 3,000
2016..............................................                 4,250
------------------------------------------------------------------------

    In addition, if EPA reduces the required volume of cellulosic
biofuel below the level specified in the statute, the Act also
indicates that we may reduce the applicable volumes of advanced
biofuels and total renewable fuel by the same or a lesser volume, and
we are required to make cellulosic waiver credits available. Our
consideration of the 2014, 2015, and 2016 volume requirements for
advanced biofuels and total renewable fuel is presented in Section II.

B. Cellulosic Biofuel Industry Assessment

    In order to project cellulosic biofuel production for 2015 and 2016
we have tracked the progress of several dozen potential cellulosic
biofuel production facilities. As we did in establishing the 2013
annual volumes, we have focused on facilities with the potential to
produce commercial volumes of cellulosic biofuel rather than small R&D
or pilot-scale facilities. We did so because the larger commercial-
scale facilities are much more likely to generate RINs for the fuel
they produce and the volumes they produce will have a far greater
impact on the cellulosic biofuel standards for 2015--2016. From this
list of facilities we used information from EMTS and publically
available information, and information provided by representatives of
potential cellulosic biofuel producers, to make a determination of
which facilities are the most likely candidates to produce cellulosic
biofuel and generate cellulosic biofuel RINs in 2015 and 2016. Each of
these companies was investigated further in order to determine the
current status of its facilities and its likely cellulosic biofuel
production and RIN generation volumes for 2015 and 2016. Both in our
discussions with representatives of each company \101\ and as part of
our internal evaluation process we gathered and analyzed information
including, but not limited to, the funding status of these facilities,
current status of the production technologies, anticipated construction
and production ramp-up periods, facility registration status, and
annual fuel production and RIN generation targets.
---------------------------------------------------------------------------

    \101\ In determining appropriate volumes for CNG/LNG producers
we did not contact individual producers but rather relied primarily
on discussions with industry associations, and information on likely
production facilities that are already registered under the RFS
program. In some cases where further information was needed we did
speak with individual companies.
---------------------------------------------------------------------------

    EPA is proposing to use a slightly different methodology for
projecting the available volume of cellulosic biofuel for each of the
three years. Our approach to each of these years can

broadly be described as one that seeks to use actual production volumes
where they are available (such as for all of 2014 and several months of
2015) and to project production volumes from likely production
facilities for future months in which actual production volumes are not
available. In previous projections of cellulosic biofuel production
EPA, as directed by the CAA, has considered information provided by EIA
in making our projections. EPA received a letter from EIA on February
19, 2014 containing cellulosic biofuel projections for 2014,\102\ but
to date have not received any projections of cellulosic biofuel
production for 2015 or 2016. As discussed in more detail below EPA now
has data, through EMTS, on the actual number of cellulosic RINs
generated in 2014 and we are proposing to establish the 2014 cellulosic
biofuel standard using this data rather than EIA's projection from
early 2014. We anticipate that for the final rule EIA will provide EPA
with projected production volumes of cellulosic biofuel in 2015 and
2016 and we intend to consider these projections in our final rule.
---------------------------------------------------------------------------

    \102\ Letter from Adam Sieminski, EIA Administrator to Gina
McCarthy, EPA Administrator February 19, 2014.
---------------------------------------------------------------------------

    Our approach for each of the three years is discussed in more
detail in Sections IV.D-IV.F below. The remainder of this Section
discusses the current status of the companies and facilities EPA
expects may be in a position to produce commercial scale volumes of
cellulosic biofuel by the end of 2016. This information forms the basis
for our proposed standards for cellulosic biofuel for 2014, 2015, and
2016.
1. Potential Domestic Producers
    There are a number of companies and facilities \103\ located in the
United States that have either already begun producing cellulosic
biofuel for use as transportation fuel, heating oil, or jet fuel at a
commercial scale, or are anticipated to be in a position to do so by
the end of 2016. The financial incentive provided by cellulosic biofuel
RINs, combined with the fact that all these facilities intend to
produce fuel for domestic consumption using approved pathways, gives us
a high degree of confidence that cellulosic biofuel RINs will be
generated for any fuel produced. In order to generate RINs, each of
these facilities must be registered under the RFS program and comply
with all the regulatory requirements. This includes using an approved
RIN-generating pathway and verifying that their feedstocks meet the
definition of renewable biomass. Many of the companies and facilities
have already successfully completed facility registration, and several
have successfully generated RINs. A brief description of each of the
companies that EPA believes may produce commercial scale volumes of RIN
generating cellulosic biofuel by the end of 2016 can be found in a
memorandum to the docket for this proposed rule.\104\ These
descriptions are based on a review of the publicly available
information and information provided to EPA in conversations with
company representatives. The key data for each of these companies used
in our projection of the potentially available volume of cellulosic
biofuel in 2015 and 2016 is summarized in Table IV.B.3-1 below.
---------------------------------------------------------------------------

    \103\ The volume projection from CNG/LNG producers does not
represent production from a single company or facility, but rather a
group of facilities utilizing the same production technology.
    \104\ ``Cellulosic Biofuel Producer Company Descriptions'',
memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-
0111.
---------------------------------------------------------------------------

2. Potential Foreign Sources of Cellulosic Biofuel
    In addition to the potential sources of cellulosic biofuel located
in the United States, there are several foreign cellulosic biofuel
companies that may produce cellulosic biofuel in 2015 or 2016. These
include facilities owned and operated by Beta Renewables, Enerkem,
GranBio, and Raizen. All of these facilities use fuel production
pathways that have been approved by EPA for cellulosic RIN generation
provided eligible sources of renewable feedstock are used. These
companies would therefore be eligible to register these facilities
under the RFS program and generate RINs for any qualifying fuel
imported into the United States. While these facilities may be able to
generate RINs for any volumes of cellulosic biofuel they import into
the United States, demand for the cellulosic biofuels they produce is
expected to be high in local markets. EPA is charged with projecting
the volume of cellulosic biofuel that will be produced or imported into
the United States. Based on information available to EPA at the time of
this proposed rulemaking, including the lack of cellulosic biofuel
imports to date, we do not believe cellulosic biofuel will be imported
into the United States from foreign cellulosic biofuel production
facilities other than the Ensyn facility in Ontario, Canada. As such,
production volumes from foreign facilities (with the exception of
Ensyn) have not been included in our projection of potentially
available volume for 2014-2016. EPA plans to continue to monitor the
progress of foreign cellulosic biofuel facilities and may include
volumes from foreign facilities in future rulemakings if appropriate
and supported by new information.
3. Summary of Volume Projections for Individual Companies
    The information we have gathered on cellulosic biofuel producers,
described above, along with the data collected through EMTS forms the
basis for our projected volumes of cellulosic biofuel production for
each facility in 2015 and 2016. As in 2013, we have focused on
commercial scale cellulosic biofuel production facilities. This focus
is appropriate, as the volume of cellulosic biofuel produced from R&D
and pilot scale facilities is quite small in relation to that expected
from the commercial scale facilities. R&D and demonstration scale
facilities have also generally not generated RINs for any fuel they
have produced.
    By 2016 there are a number of cellulosic biofuel production
facilities that have the potential to produce fuel at commercial scale.
Each of these facilities is discussed in a memorandum to the
docket,\105\ and the relevant information used to project a likely
production range for each company is summarized in Table IV.B.3-1
below.\106\ We will continue to monitor the status of these facilities
and will update this information for the final rule.\107\ If we receive
information that suggests facilities not currently included in this
table, either foreign or domestic, may produce commercial-scale volumes
of cellulosic biofuel for use as transportation fuel, heating oil, or
jet fuel in the United States by 2016 we will include them in our
projections for our final rule as appropriate. We will also remove
facilities from our projections if new information suggests

they will not produce cellulosic by 2016.
---------------------------------------------------------------------------

    \105\ ``Cellulosic Biofuel Producer Company Descriptions'',
memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-
0111.
    \106\ For the purpose of the preamble discussion we have grouped
together all facilities expected to produce cellulosic CNG/LNG. The
individual facilities included in our assessment are listed in
``Assessment of Cellulosic Biofuel Production from Biogas (2015-
2016)'', memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-
OAR-2015-0111.
    \107\ Given timing constraints for issuing a final rule, EPA
does not anticipate providing an opportunity for comment on any
updated data. Commenters may therefore wish to focus their comments
both on the types of data we are proposing be used, as well as EPA's
proposed approach for using the data.

                                            Table IV.B.3-1--Projected Producers of Cellulosic Biofuel by 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Facility
         Company name                Location          Feedstock            Fuel         capacity (MGY)     Construction       First production \109\
                                                                                \108\          start date
--------------------------------------------------------------------------------------------------------------------------------------------------------
Abengoa.......................  Hugoton, KS......  Corn Stover......  Ethanol.........  25..............  September 2011..  April 2015.
Cool Planet...................  Alexandria, LA...  Wood Waste.......  Gasoline........  1...............  2Q 2015.........  Late 2016.
CNG/LNG Producers \110\.......  Various..........  Biogas...........  CNG/LNG.........  Various.........  N/A.............  August 2014.
DuPont........................  Nevada, IA.......  Corn Stover......  Ethanol.........  30..............  November 2012...  3Q 2015.
Edeniq........................  Various..........  Corn Kernel Fiber  Ethanol.........  Various.........  Various.........  2nd Half 2015.
Ensyn.........................  Renfrew, ON......  Wood Waste.......  Heating Oil.....  3...............  N/A.............  2014.
INEOS Bio.....................  Vero Beach, FL...  Vegetative Waste.  Ethanol.........  8...............  February 2011...  2Q 2015.
Poet..........................  Emmetsburg, IA...  Corn Stover......  Ethanol.........  24..............  March 2012......  3Q 2015.
QCCP..........................  Galva, IA........  Cork Kernel Fiber  Ethanol.........  2...............  Late 2013.......  October 2014.
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. Cellulosic Biofuel Volume for 2014
---------------------------------------------------------------------------

    \108\ The Facility Capacity is generally equal to the nameplate
capacity provided to EPA by company representatives or found in
publicly available information. If the facility has completed
registration and the total permitted capacity is lower than the
nameplate capacity then this lower volume is used as the facility
capacity. For companies generating RINs for CNG/LNG derived from
biogas the Facility Capacity is equal to the lower of the annualized
rate of production of CNG/LNG from the facility or the sum of the
volume of contracts in place for the sale of CNG/LNG for use as
transportation fuel (reported as the actual peak capacity for these
producers).
    \109\ Where a quarter is listed for the first production date
EPA has assumed production begins in the middle month of the quarter
(i.e. August for the 3rd quarter) for the purposes of projecting
volumes
    \110\ For more information on these facilities see ``Assessment
of Cellulosic Biofuel Production from Biogas (2015-2016)'',
memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-
0111.
---------------------------------------------------------------------------

    EPA is charged with projecting the available volume of cellulosic
biofuel for each year, and to reduce the applicable volume of
cellulosic biofuel to the level projected to be available for years in
which the projected available volume falls below the cellulosic biofuel
applicable volume target specified in the CAA 211(o)(2). EPA believes
that for any historical time period, the required projection is best
calculated as the sum of the cellulosic biofuel RINs (D3) and the
cellulosic diesel RINs (D7) generated, adjusted for RINs that are
retired for purposes other than compliance with the annual standards.
EPA publishes the number of cellulosic biofuel and cellulosic diesel
RINs generated on a month by month basis on our Web site.\111\ The
number of cellulosic biofuel and cellulosic diesel RINs generated for
each month of 2014 can be found in Table IV.C-1 below. From this total,
we subtract the number of cellulosic biofuel and cellulosic diesel RINs
retired for reasons other than compliance with the annual standards, as
these RINs are not available to obligated parties.\112\ In calculating
the number of cellulosic biofuel RINs available for compliance with the
annual standards for 2014 we have assumed that there were no exports of
cellulosic biofuel.\113\ EPA proposes to establish the cellulosic
biofuel requirement for 2014 at 33 million gallons. We believe this
number, calculated by subtracting the total number of cellulosic
biofuel RINs (D3 and D7) retired for reasons other than compliance with
the annual standards from the total number of cellulosic biofuel RINs
generated in 2014 (D3 and D7), represents the total available supply of
cellulosic biofuel RINs for 2014.
---------------------------------------------------------------------------

    \111\ http://www.epa.gov/otaq/fuels/rfsdata/index.htm.
    \112\ In 2014 Cellulosic Biofuel and Cellulosic Diesel RINs were
retired for Remedial Actions and Invalid RINs.
    \113\ The vast majority of cellulosic biofuel RINs generated in
2014 (approximately 32 or the 33 million RINs) were for CNG or LNG.
These fuels require verification that the CNG/LNG was used as
transportation fuel in the United States in order for RINs to be
generated.

      Table IV.C-1--Cellulosic Biofuel RIN Generation in 2014 \114\
------------------------------------------------------------------------
                                         Cellulosic        Cellulosic
                                        biofuel (D3)       diesel (D7)
------------------------------------------------------------------------
January 2014........................            58,415                 0
February 2014.......................             7,072                 0
March 2014..........................             6,624               472
April 2014..........................               643            10,950
May 2014............................                 0                 0
June 2014...........................                 0                 0
July 2014...........................             4,156             1,248
August 2014.........................         3,492,106             5,532
September 2014......................         7,555,432            17,073
October 2014........................         7,047,762            24,030
November 2014.......................         6,325,080                 0
December 2014.......................         8,863,270                 0
                                     -----------------------------------
    Total...........................        33,360,560            59,305
RINs retired for reasons other than            346,318             4,997
 compliance with the annual
 standards..........................
RINs Available......................        33,014,242            54,308
                                     -----------------------------------
Available Cellulosic RINs (D3 and
 D7)................................              33,068,550
------------------------------------------------------------------------

D. Cellulosic Biofuel Volume for 2015
---------------------------------------------------------------------------

    \114\ All numbers from EPA Web site: http://www.epa.gov/otaq/fuels/rfsdata/index.htm. Accessed February 9, 2015.
---------------------------------------------------------------------------

    To project the volume of cellulosic biofuel in 2015, EPA has relied
on a combination of production information reported to EPA through EMTS
for months in which we have data available and facility or company
specific estimates of likely production for months for which EMTS data
is not available. For months in which information on the production of
cellulosic biofuel is available we have used the methodology discussed
in Section IV.C, subtracting the number of RINs retired for reasons
other than compliance in 2015 from the total number of RINs produced in
2015 that are eligible to be used towards satisfying the cellulosic
biofuel standard (D3 and D7 RINs). We have again assumed that no
cellulosic biofuel was exported in the first three months of 2015. This
data is shown in Table IV.D-1 below.

      Table IV.D-1--Cellulosic Biofuel RIN Generation in Early 2015
------------------------------------------------------------------------
                                         Cellulosic        Cellulosic
                                        biofuel (D3)       diesel (D7)
------------------------------------------------------------------------
January 2015........................         4,076,744                 0
February 2015.......................         7,935,446                 0
March 2015..........................         7,799,749                 0
                                     -----------------------------------
    Total...........................        19,811,939                 0
RINs retired for reasons other than             76,942                 0
 compliance.........................
RINs Available......................        19,734,997                 0
                                     -----------------------------------
        Total Available Cellulosic
         RINs (D3 and D7)...........              19,734,997
------------------------------------------------------------------------

    For months in which information is unavailable EPA has updated our
projection methodology from the methodology used in previous
rulemakings and our proposed rule for 2014. Our projection methodology
starts with estimating a range of potential production volumes for each
company for the portion of 2015 where production data is not
available.\115\ EPA has established a range of potential production
volumes for each company such that it is possible, but unlikely, that
the actual production will be above or below the range. We believe that
it is more appropriate to project a range of potential production
volumes rather than a single point estimate due to the highly uncertain
and variable nature of biofuel production at cellulosic biofuel
facilities, especially those in the early stages of production. The
projected production ranges for each facility are used to generate a
single point estimate for the total production of cellulosic biofuel
from all companies in 2015 for the months in which actual production
volumes through EMTS are not available.
---------------------------------------------------------------------------

    \115\ For the purposes of projecting RIN generation from CNG/LNG
projections were made for parent companies, generally representing
multiple companies. For more detail see ``Assessment of Cellulosic
Biofuel Production from Biogas (2015-2016)'', memorandum from Dallas
Burkholder to EPA Air Docket EPA-HQ-OAR-2015-0111.
---------------------------------------------------------------------------

    In establishing a range for each company, we began by determining
an appropriate low end of the range. The low end of the range for each
company is designed to represent the volume of fuel EPA believes each
company would produce if they are unable to begin fuel production on
their expected start-up date and/or if they experience challenges that
result in reduced production volumes or a longer than expected ramp-up
period. In this proposal EPA has set the low end of the production
range for each company based on the volume of RIN-generating cellulosic
biofuel the company has produced in the most recent 12 months for which
data is available.\116\ Because we are not attempting to determine a
low end of a likely production range for a full year, but rather only
the months in 2015 for which data is not available, this number is then
multiplied by a scaling factor \117\ to appropriately scale this annual
production volume for use as the low end of the range over the number
of months of 2015 for which actual production data is unavailable.
---------------------------------------------------------------------------

    \116\ For the final rule we intend to update this information
and use the data available for the most recent 12 months at the time
of the final rule.
    \117\ The scaling factor is 0.75; equal to the 9 months for
which production data is being projected divided by 12.
---------------------------------------------------------------------------

    This approach provides us with an objective methodology for
calculating the low end of the potential production range for each
company that we believe is appropriate in light of the history of
start-up delays and missed production targets in the cellulosic biofuel
industry. If a company has not yet begun producing RIN-generating
volumes of cellulosic biofuel, our experience suggests that they may
experience challenges in progressing toward commercial-scale production
that would result in the delay of the production of cellulosic biofuel.
We acknowledge that in the majority of cases cellulosic companies that
have begun producing fuel and are currently in the start-up and ramp-up
phases of production will increase their production of cellulosic
biofuel from one year to the next as they work towards production rates
at or near the facility capacity. Fuel production by these companies
may, however, be interrupted, either intentionally or unexpectedly, and
these interruptions may hinder the ability of these companies to
increase biofuel production year over year. We will account for the
likelihood of increasing production in developing the high end of each
company's production range. Finally, there may be cases in which
information is available that suggests a company is unlikely to meet
the production volumes achieved in the previous 12 months for which
data is available, due to technical, financial, or legal difficulties.
We do not believe this is the case with any of the companies projected
to produce cellulosic biofuel in 2015.
    It is important to note that the low end of the range does not
necessarily represent a worst-case scenario. The worst-case scenario
for any of these facilities for the months in which we are projecting
production is no production, as it is always possible that extreme
circumstances or natural disasters may result in extended delays,
facility damages, or liquidation. While not denying such a possibility,
we nevertheless believe it is generally appropriate to use the
production over the previous 12 months as the low end of the range,
with exceptions made where available information indicates that such
production may be unlikely. In situations where a company has not

produced any cellulosic biofuel in the previous 12 months, we believe
it is appropriate to use zero as the low end of the projected
production range given the many uncertainties and challenges associated
with the commissioning and start-up of a new cellulosic biofuel
production facility we have observed to date.
    To determine the high end of the range of expected production
volumes for each company we considered a variety of factors, including
the expected start-up date and ramp-up period, facility capacity, and
fuel off-take agreements. As a starting point, EPA calculated a
production volume using the expected start-up date, facility capacity,
and a benchmark of a six-month straight-line ramp-up period
representing an optimistic ramp-up scenario.\118\ We then compared the
volume calculated using this methodology to the company's own
expectations for the period in which we are projecting production where
they were available. We are proposing that any company projection that
exceeds our benchmark volume not be used for developing the high end of
the range of expected production volumes. If the production estimate
EPA received from a company was lower than the volume calculated using
the projected start-up date, facility capacity, and six month straight-
line ramp-up period, EPA used the company production targets instead.
While we understand that many of these company projections represent
the company's actual expectations for production, rather than a goal or
high end of an expected production range, we do not believe it would be
appropriate to ignore the history of the cellulosic biofuel industry.
In previous years EPA has gathered information, including volume
production projections, from companies with the potential to produce
cellulosic biofuel. Each of these companies supported these projections
with successful pilot- and demonstration-scale facilities as well as
other supporting documentation. In each of these cases the companies
were unable to meet their own volume projections, and in many cases
were unable to produce any RIN-generating cellulosic biofuel.
---------------------------------------------------------------------------

    \118\ We did not assume a six-month straight-line ramp-up period
in determining the high end of the projected production range for
CNG/LNG producers. This is because these facilities generally have a
history of CNG/LNG production prior to producing RINs, and therefore
do not face many of the start-up and scale-up challenges that impact
new facilities. For further information on the methodology used to
project cellulosic RIN generation from CNG/LNG producers see
``Assessment of Cellulosic Biofuel Production from Biogas (2015-
2016)'', memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-
OAR-2015-0111.
---------------------------------------------------------------------------

    The inability of cellulosic biofuel producers in previous years to
achieve their projection production targets does not provide a
sufficient basis for completely discounting production of cellulosic
biofuel in future years, either for these same facilities that were
previously unable to achieve their target projections or from new
facilities expected to start-up in 2015 or 2016. Each of these
companies is an individual case, with their own production
technologies, construction and operations staffs, and financial
situations, and we do not believe it is appropriate to dismiss all
future potential cellulosic biofuel production because of the failure
of several facilities to successfully operate at commercial scale. We
do believe it strongly suggests that we should view the individual
company projections as something other than the most likely outcomes.
In order to take a ``neutral aim at accuracy'' in projecting cellulosic
biofuel production volumes, as directed by the United States Court of
Appeals for the DC Circuit, we have decided to treat these company
projections as the high end of a potential production range unless this
volume exceeds the volume calculated using our six-month straight-line
ramp-up period methodology, suggesting that these company projections
are unreasonably high. We will continue to monitor the progress and
experience of the cellulosic biofuel industry and may adjust our
approach as appropriate in light of additional experience.
    We believe our range of projected production volumes for each
company represents the range of what is likely to actually happen for
each company. A brief overview of each of the companies we believe will
produce cellulosic biofuel and make it commercially available in 2015
can be found in a memorandum to the docket.\119\ In the case of
cellulosic biofuel produced from CNG/LNG we have discussed the
production potential from these facilities as a group rather than
individually. EPA believes it is appropriate to discuss these
facilities as a group since they are utilizing a proven production
technology and face many of the same challenges related to
demonstrating that the fuel they produce is used as transportation fuel
and therefore eligible to generate RINs under the RFS program.\120\
---------------------------------------------------------------------------

    \119\ ``Cellulosic Biofuel Producer Company Descriptions'',
memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-
0111.
    \120\ For individual company information see ``Cellulosic
Biofuel Individual Company Projections for 2014-2016 (CBI)'',
memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2015-
0111.
---------------------------------------------------------------------------

    After establishing a projected production range for each facility
(or group of facilities for CNG/LNG producers), we must then determine
a method for using these projected production ranges to project the
volume of cellulosic biofuel most likely to be produced by the
cellulosic biofuel industry as a whole in 2015. As discussed above, the
high and the low end of the range for each company represents values
such that it is possible but unlikely that actual volumes would fall
outside of those ranges. At present, data does not exist to allow EPA
to develop a unique production probability distribution for each
company based on the available information. Even if EPA were able to
undertake such a task there is no evidence that the distributions we
developed would necessarily be more accurate than a standardized
distribution curve as the cellulosic biofuel industry is still in its
infancy and there is a high degree of uncertainty associated with many
of the factors that will impact production at each individual facility.
This is supported by the poor accuracy of the individual company
estimates in previous years, which were made by individuals with
significant technical expertise and knowledge of each individual
company and technology.
    Rather than attempting to develop a unique probability distribution
curve that represents likely cellulosic biofuel production for each
company, EPA has instead separated the list of potential cellulosic
biofuel producers into two groups; those who have already achieved
consistent commercial-scale production and those who have not. We
believe grouping the potential cellulosic biofuel producers using the
criteria of whether or not they have achieved consistent commercial-
scale production is appropriate for the purposes of projecting a likely
production volume. While each of these groupings contains a diverse set
of companies with their own production technologies and challenges, we
believe there is sufficient commonality in the challenges related to
the funding, construction, commissioning, and start-up of commercial-
scale cellulosic biofuel facilities to justify aggregating these
company projections into a single group for the purposes of projecting
the most likely production volume of cellulosic biofuel. The challenges
new production facilities face are also significantly different than
those of facilities ramping up production volumes to the facility

capacity and maintaining consistent production. After separating the
companies into these two groups we then summed the low and high ends of
each of the ranges for each individual company (or group of companies
for CNG/LNG producers) within the group to calculate an aggregate
projected production range for each group of companies. The ranges for
each group of companies are shown in Tables IV.D-2 and IV.D-3 below.

  Table IV.D-2--2015 Production Ranges for Companies Without Consistent
                       Commercial Scale Production
                            [Million gallons]
------------------------------------------------------------------------
                                       Low end of the    High end of the
                                           range a           range a
------------------------------------------------------------------------
Abengoa.............................                 0                12
CNG/LNG Producers (New Facilities)..                 0                37
CoolPlanet..........................                 0                 0
DuPont..............................                 0                 5
Edeniq..............................                 0                 1
Ineos BIO...........................                 0                 4
Poet................................                 0                 4
                                     -----------------------------------
    Total...........................                 0                63
------------------------------------------------------------------------
a Rounded to the nearest million gallons.

   Table IV.D-3--2015 Production Ranges for Companies With Consistent
                       Commercial Scale Production
                            [Million gallons]
------------------------------------------------------------------------
                                       Low end of the    High end of the
                                          range a            range a
------------------------------------------------------------------------
CNG/LNG Producers (Currently                      b X                 88
 generating RINs)..................
Ensyn..............................               b X                  1
Quad County Corn Processors........               b X                  2
                                    ------------------------------------
    Total..........................              c 49                 91
------------------------------------------------------------------------
a Rounded to the nearest million gallons.
b The low end of the range for each individual company is based on
  actual production volumes and is therefore withheld to protect
  information claimed to be confidential business information.
c This number includes all cellulosic biofuel and cellulosic diesel RINs
  generated in the previous 12 months, as well as all advanced biofuel
  RINs generated for CNG/LNG derived from biogas prior to August 18,
  2014 and within the last 12 months.

    Because the cellulosic biofuel industry is still in its infancy and
it is therefore not possible to predict with any degree of certainty
the precise production volume each individual company will achieve, we
believe that it would not be appropriate to choose a specific value
within the projected range for each individual company/source. We
believe it is more appropriate to identify a specific value within the
aggregated ranges from Tables IV.D-2 and IV.D-3 that best reflects the
likely production volume for each group of companies. For companies
that have not yet achieved consistent commercial-scale production
(Table IV.D-2) we are proposing to use the 25th percentile of the
projected production range. We believe this volume is appropriate as,
in addition to the uncertainties listed above, there is also
significant technology risk as these facilities attempt to operate
their technologies at commercial scale. In the early years of the
cellulosic biofuel industry several companies, including Cello Energy,
Range Fuels, and KiOR experienced significant technical difficulties in
scaling up their technologies and were able to produce little, if any,
volumes of cellulosic biofuels. It is necessary to consider this
history when projecting production volumes from companies who have not
yet achieved consistent production at commercial scale.\121\
---------------------------------------------------------------------------

    \121\ While ``new'' CNG/LNG facilities may not face the same
challenges related to start-up and scale-up there is still a
significant amount of uncertainty related to RIN generation from
facilities that have not yet begun generating RINs. RIN generation
from these facilities may be delayed or reduced if they are unable
to verify that all or a portion of the CNG/LNG they produce is used
as transportation fuel, or if they decide to sell the CNG/LNG they
produce into non-transportation markets. These uncertainties can
significantly impact the number of RINs generated by a CNG/LNG
producer, and we therefore believe that projecting projection from
these ``new'' facilities at the 25th percentile of the range is
appropriate.
---------------------------------------------------------------------------

    For the group of companies that have achieved consistent
commercial-scale production (Table IV.D-3) we are proposing to use the
mid-point (50th percentile) of the projected range. We believe that
this point accounts for the uncertainty related to the scale-up of
production from the volume produced in the previous 12 months (through
March 2015) as well as other uncertainties related to the generation of
RINs such as documenting that the fuel is used as transportation fuel,
heating oil, or jet fuel. This is not to say that we anticipate that
each of these facilities within each group will produce at the 25th or
50th percentile, but rather that as a group the 25th and 50th
percentile, respectively, are realistic projections for each group of
companies. We believe this methodology accounts for the fact that some
individual company may be able to deliver the volume of cellulosic
biofuel they expect and produce at or near the high end of the range,
while others may experience difficulty transitioning to commercial
production and produce closer to the low end of the range. The result
of applying this methodology is shown in Table IV.D-4 below.

         Table IV.D-4--Projected Volume of Cellulosic Biofuel in 2015 for Months Without Production Data
                                               [Million gallons] a
----------------------------------------------------------------------------------------------------------------
                                                  Low end of the    High end of                      Projected
                                                      range b       the range b     Percentile       volume b
----------------------------------------------------------------------------------------------------------------
Companies without consistent commercial-scale                  0              63            25th              16
 production.....................................
Companies with consistent commercial-scale                    49              91            50th              70
 production.....................................
                                                 ---------------------------------------------------------------
    Total.......................................             N/A             N/A             N/A              86
----------------------------------------------------------------------------------------------------------------
a The projections in this table are for April 2015--December 2015. The low end of the range is equal to the
  number of RINs produced by the companies over the most recent 12 months for which data is available multiplied
  by a factor of 0.75 (since it is only a projection for 9 months of the year). The high end of the range is
  based on projected production for the final 9 months of 2015.
b Rounded to the nearest million gallons.

    EPA anticipates that if the same methodology is used in future
years that as cellulosic biofuel companies successfully achieve
commercial scale production, application of this methodology will
appropriately generate increasing volume projections, both for the
individual companies and for the industry as a whole. This will happen
in two ways. First, as companies successfully produce cellulosic
biofuel the low end of the range (which is based on the most recent 12
months of production for which data is available) will increase.
Second, we would use the 50th percentile value, rather than the 25th
percentile, for all companies who have achieved consistent commercial-
scale production. If merited by the available data, we will also
consider using a higher (or lower) percentile for both new facilities
and facilities that have already achieved consistent commercial-scale
production. We will consider comments on this matter, and after
establishing percentile values for use in this rulemaking we expect we
will annually review the percentile values and adjust them as
appropriate, taking into account the success of past projections, to
ensure that our methodology produces a production projection that takes
a neutral aim at accuracy. As new pathways for the production of
cellulosic biofuel are approved, we will also consider volumes produced
using these pathways in our projections.
    The final step in projecting the potentially available volume of
cellulosic biofuel in 2015 is to combine the volumes of cellulosic
biofuel actually produced in months for which data is available with
the projected production volumes for the remaining months of 2015. This
is shown in Table IV.D-5 below. For 2015 we are proposing a cellulosic
biofuel standard of 106 million gallons. We request comment on the
methodology used to project cellulosic biofuel volumes in 2015, as well
as the general methodology used to project future cellulosic biofuel
production.

      Table IV.D-5--Projected Available Cellulosic Biofuel in 2015
------------------------------------------------------------------------
                                                              Million
                                                              gallons
------------------------------------------------------------------------
Cellulosic Biofuel Production (Jan. 2015-March 2015)....              20
Projected Cellulosic Biofuel Production (April 2015-                  86
 December 2015).........................................
Projected Available Volume of Cellulosic Biofuel in 2015             106
------------------------------------------------------------------------

E. Cellulosic Biofuel Volume for 2016

    To project the volume of potentially available cellulosic biofuel
in 2016 we are proposing to use a methodology very similar to the one
proposed for projecting cellulosic biofuel production in 2015 for
months in which actual production data was not available. For 2016 we
separated the list of potential producers of cellulosic biofuel into
two groups according to whether or not the facilities have already
begun producing commercial-scale volumes of cellulosic biofuel or who
are expected to do so by July 1, 2015 (See Table IV.E-1 and Table IV.E-
2).\122\ We next defined a range of likely production volumes for each
group of potential cellulosic biofuel producers. The low end of the
range for each group of producers is intended to reflect actual
production data. Rather than simply use the most recent 12 months for
which information is currently available for each company, however, we
are proposing to project what that data will be at the time of our
final rule. We used zero as the low end of the aggregated projected
production range for 2016 for facilities expected to begin producing
fuel after July 1, 2015 (Table IV.E-1). We used our projected
production volume for 2015 (106 million gallons) as the low end of the
aggregated range for facilities expected to be producing commercial-
scale volumes of cellulosic biofuel on or before July 1, 2015 (Table
IV.E-2). This is consistent with the approach we used to project
volumes for 2015 where we set the low end of the range for each group
of companies at the volume produced over the preceding 12 months, as we
believe very little of the volume produced in 2015 will come from
facilities starting up after July 1, 2015 and the vast majority of
cellulosic biofuel production in 2016 will come from facilities that
begin before this date. We also believe this will align our proposed
rule more closely with the final rule than would be the case if we
based our proposal only on the data from the most recent 12 months of
data available to EPA at this time. For our final rule, we intend to
update the low end of the projected production range for each company
using data from the most recent 12 months for which data is available.
---------------------------------------------------------------------------

    \122\ We are projecting that facilities that begin producing
commercial-scale volumes by July 2015 will achieve consistent
production by the end of 2015. This is consistent with the approach
used to project volumes for 2015 where we separated companies into
two groups based on whether or not they have achieved consistent
commercial-scale production. For the final rule we intend to assess
whether or not the facilities in our projected volumes have achieved
consistent commercial-scale production and will re-categorize them
as necessary.
---------------------------------------------------------------------------

    To calculate the high end of the projected production range for
each group of companies we considered each company individually (with
the exception of the CNG/LNG producers) and used the same methodology
in 2016

as for the months in 2015 for which actual past production data was not
available (this methodology is covered in further detail in Section
IV.D above). The high end of the range for each company within each
group was added together to calculate the high end of the projected
production range for that group.
    After defining likely production ranges for each group of companies
we projected a likely production volume from each group of companies
for 2016. We projected a total production volume from the companies
that we do not anticipate will begin commercial-scale production by
July 1, 2015 using the 25th percentile of the projected production
range (Table IV.E-1). For the companies that have already achieved
consistent commercial-scale production or anticipate starting
commercial-scale production by July 1, 2015, we used the 50th
percentile of the aggregate projected production range (Table IV.E-2).
This is consistent with the approach we used for projecting volumes in
2015, which is discussed in more detail in the preceding section. We
intend to re-evaluate our categorization of the companies for the final
rule using the most up to date information available.

 Table IV.E-1--2016 Production Ranges for Companies With Start-Up Dates
                           After July 1, 2015
                            [Million gallons]
------------------------------------------------------------------------
                                       Low end of the    High end of the
                                           range a           range a
------------------------------------------------------------------------
CNG/LNG Producers (New Facilities)..                 0               120
CoolPlanet..........................                 0                 0
DuPont..............................                 0                29
Edeniq..............................                 0                14
Poet................................                 0                20
Aggregate Range.....................                 0               183
                                     -----------------------------------
Projected Production (25th
 Percentile of Range)...............                  46
------------------------------------------------------------------------
a Rounded to the nearest million gallons.

   Table IV.E-2--2016 Production Ranges for Companies With Consistent
    Commercial Scale Production or Start-Up Dates Before July 1, 2015
                            [Million gallons]
------------------------------------------------------------------------
                                       Low end of the    High end of the
                                           range a           range a
------------------------------------------------------------------------
Abengoa.............................               N/A                19
CNG/LNG Producers (Existing                        N/A               185
 Facilities)........................
Ensyn...............................               N/A                 3
Ineos BIO...........................               N/A                 6
Quad County Corn Processors.........               N/A                 2
Aggregate Range.....................               106               215
                                     -----------------------------------
Projected Production (50th
 Percentile of Range)...............                  161
------------------------------------------------------------------------
a Rounded to the nearest million gallons

    The final step in projecting the potentially available volume of
cellulosic biofuel in 2016 is to combine the volumes of cellulosic
biofuel projected to be produced from each of the two groups discussed
above (shown in Table IV.E-3 below). For 2016 we are proposing a
cellulosic biofuel volume requirement of 204 million gallons. For our
final rule we will use the most recent production data and company
information available to update our projections. We request comment on
the methodology and data used to project cellulosic biofuel volumes in
2016.

                          Table IV.E-3--Projected Volume of Cellulosic Biofuel in 2016
                                                [Million gallons]
----------------------------------------------------------------------------------------------------------------
                                                  Low end of the    High end of                      Projected
                                                      range a       the range a     Percentile       volume a
----------------------------------------------------------------------------------------------------------------
Companies beginning production after July 1,                   0             183            25th              46
 2015...........................................
Companies beginning production before July 1,                106             215            50th             161
 2015...........................................
                                                 ---------------------------------------------------------------
    Total.......................................             N/A             N/A             N/A             206
----------------------------------------------------------------------------------------------------------------
a Volumes rounded to the nearest million gallons.

F. 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.\123\ 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 are proposing to rescind the 2011 cellulosic biofuel
applicable standard and refund the money paid by obligated parties to
purchase cellulosic waiver credits to comply with the standard.
---------------------------------------------------------------------------

    \123\ API v. EPA, 706 F 3d 474 (D.C. Cir. January 25, 2013).
---------------------------------------------------------------------------

V. Percentage Standards

A. Background

    The renewable fuel standards are expressed as volume percentages
and are used by each obligated party to determine their Renewable
Volume Obligations (RVO). Since there are four separate standards under
the RFS program, there are likewise four separate RVOs applicable to
each obligated party. Each standard applies to the sum of all gasoline
and diesel produced or imported. The percentage standards are set so
that if every obligated party meets the percentages, then the amount of
renewable fuel, cellulosic biofuel, biomass-based diesel (BBD), and
advanced biofuel used will meet the applicable volumes established in
this rule on a nationwide basis.
    Sections II, III, and IV provide our rationale and basis for the
proposed volumes for advanced biofuel and total renewable fuel, BBD,
and cellulosic biofuel, respectively. The volumes to be used to
determine the four proposed percentage standards are shown in Table
V.A-1.

              Table V.A-1--Proposed Volumes for Use in Setting the Applicable Percentage Standards
----------------------------------------------------------------------------------------------------------------
                                                                       2014            2015            2016
----------------------------------------------------------------------------------------------------------------
Cellulosic biofuel (million gallons)............................           33             106             206
Biomass-based diesel (billion gallons) a........................            1.63            1.70            1.80
Advanced biofuel (billion gallons)..............................            2.68            2.90            3.40
Renewable fuel (billion gallons)................................           15.93           16.30           17.40
----------------------------------------------------------------------------------------------------------------
a Represents physical volume.

B. Calculation of Standards

1. How Are the Standards Calculated?
    The following formulas are used to calculate the four percentage
standards applicable to producers and importers of gasoline and diesel
(see 40 CFR 80.1405):
[GRAPHIC] [TIFF OMITTED] TP10JN15.007

Where:

StdCB,i = The cellulosic biofuel standard for year i, in
percent.
StdBBD,i = The biomass-based diesel standard (ethanol-
equivalent basis) for year i, in percent.
StdAB,i = The advanced biofuel standard for year i, in
percent.

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

    The formulas used in deriving the annual percentage standards rely
on estimates of the volumes of gasoline and diesel fuel, for both
highway and nonroad uses, that are projected to be used in the year in
which the standards will apply.\124\ The projected gasoline and diesel
volumes obtained from EIA include ethanol and biodiesel used in
transportation fuel, which are subtracted out as indicated in the
equations above. Production of other transportation fuels, such as
natural gas, propane, and electricity from fossil fuels, is not
currently subject to the standards, and volumes of such fuels are not
used in calculating the annual standards. Since under the regulations
the standards apply only to producers and importers of gasoline and
diesel, these are the transportation fuels used to set the standards,
as well as to determine the annual volume obligations of an individual
gasoline or diesel producer or importer.
---------------------------------------------------------------------------

    \124\ Monthly values from EIA's May 2015 Short-Term Energy
Outlook (STEO) were used to project gasoline and diesel volumes for
this proposal.
---------------------------------------------------------------------------

2. Small Refineries and Small Refiners
    In CAA section 211(o)(9), enacted as part of the Energy Policy Act
of 2005, Congress provided a temporary exemption to small refineries
\125\ through December 31, 2010. Congress provided that small
refineries could receive a temporary extension of the exemption beyond
2010 based on an EPA determination of disproportionate economic
hardship on a case-by-case basis in response to refiner petitions. EPA
has granted some exemptions pursuant to this process in the past, and
has granted exemptions for three small refineries for 2014. The
proposed applicable percentage standards for 2014 reflect the fact that
the gasoline and diesel volumes associated with these three small
refineries has been exempted. However, at this time, no exemptions have
been approved for 2015 or 2016, and we have calculated the percentage
standards for these years without a small refinery/small refiner
adjustment. Any requests for exemptions for 2014, 2015 or 2016 that are
approved prior to the final rule will be reflected in the relevant
standards in the final rule, as provided in the formulas described in
the preceding section. Any requests for exemption that are approved
after the release of the final 2014, 2015, and 2016 standards will not
affect those standards.
3. Proposed Standards
    As specified in the RFS2 proposed rule,\126\ the percentage
standards are based on energy-equivalent gallons of renewable fuel,
with the cellulosic biofuel, advanced biofuel, and total renewable fuel
standards based on ethanol equivalence and the BBD standard based on
biodiesel equivalence. However, all RIN generation is based on ethanol-
equivalence. For example, the RFS regulations provide that production
or import of a gallon of qualifying biodiesel will lead to the
generation of 1.5 RINs. In order to ensure that demand for the required
physical volume of BBD will be created in each year, the calculation of
the BBD standard provides that the applicable physical volume be
multiplied by 1.5. The net result is a BBD gallon being worth 1.0
gallon toward the BBD standard, but worth 1.5 gallons toward the other
standards.
---------------------------------------------------------------------------

    \126\ 75 FR 14716, March 26, 2010.
---------------------------------------------------------------------------

    The levels of the percentage standards would be reduced if Alaska
or a U.S. territory chooses to participate in the RFS program, as
gasoline and diesel produced in or imported into that state or
territory would then be subject to the standard. Neither Alaska nor any
U.S. territory has chosen to participate in the RFS program at this
time, and thus the value of the related terms in the calculation of the
standards is zero.
    Note that because the gasoline and diesel volumes estimated by EIA
include renewable fuel use, we must subtract the total renewable fuel
volumes from the total gasoline and diesel volumes to get total non-
renewable gasoline and diesel volumes. The values of the variables
described above are shown in Table V.B.3-1.\127\
---------------------------------------------------------------------------

    \127\ To determine the 49-state values for gasoline and diesel,
the amounts of these fuels used in Alaska is subtracted from the
totals provided by DOE. The Alaska fractions are determined from the
June 27, 2014 EIA State Energy Data System (SEDS), Energy
Consumption Estimates.

Table V.B.3-1--Values for Terms in Calculation of the Proposed Standards
                                   128
                            [Billion gallons]
------------------------------------------------------------------------
                   Term                       2014      2015      2016
------------------------------------------------------------------------
RFVCB.....................................     0.033     0.106     0.206
RFVBBD....................................   a 1.67      1.70      1.80
RFVAB.....................................     2.68      2.90      3.40
RFVRF.....................................    15.93     16.30     17.40
G.........................................   136.49    138.37    137.58
D.........................................    55.21     56.77     58.13

RG........................................    13.43     13.36     13.46
RD........................................     1.54      1.44      1.53
GS........................................     0         0         0
RGS.......................................     0         0         0
DS........................................     0         0         0
RDS.......................................     0         0         0
GE........................................     0.01      0.00      0.00
DE........................................     0.04      0.00      0.00
------------------------------------------------------------------------
a Represents the biodiesel-equivalent volume of actual 2014 supply,
  which was 2.50 bill D4 RINs. Actual physical volume was 1.63 billion
  physical gallons, composed of 1.35 bill gal of biodiesel and 0.28 bill
  gal renewable diesel.

    Although the Act specifies that EIA provide EPA with gasoline and
diesel demand for the following year ``no later than October 31'', we
believe it is appropriate to use EIA demand projections that are more
recent than October 31 for a given year when such projections are
available.\129\ For this proposed rule, we have used gasoline, diesel,
and renewable fuel consumption estimates available in the most recent
version of EIA's Short-Term Energy Outlook. For the final rule we will
use projections provided by EIA as required by the statute.
---------------------------------------------------------------------------

    \128\ Details of volumes and calculations are available in the
docket.
    \129\ The use of post-October 31 data for previous years was
addressed in our 2013 Cellulosic Biofuel Standard rulemaking.\129\
As stated in that rulemaking, ``. . . we believe it is appropriate
to rely on EIA's most recent reports of actual gasoline and diesel
consumption . . . Doing so allows a more accurate assessment of a
percentage standard that will help to ensure that the volume of
cellulosic biofuel we have determined should be used for compliance
. . . will in fact be required.''
---------------------------------------------------------------------------

    Using the volumes shown in Table V.B.3-1, we have calculated the
proposed percentage standards for 2014, 2015, and 2016 as shown in
Table V.B.3-2.

              Table V.B.3-2--Proposed Percentage Standards
------------------------------------------------------------------------
                                      2014      2015      2016
                                       (%)       (%)       (%)
----------------------------------------------------------------
Cellulosic biofuel................     0.019     0.059     0.114
Biomass-based diesel..............     1.42    a 1.41      1.49
Advanced biofuel..................     1.52      1.61      1.88
Renewable fuel....................     9.02      9.04      9.63
------------------------------------------------------------------------
a Although the proposed BBD volume requirement for 2015 is higher than
  it is for 2014, projected volumes of gasoline and diesel are also
  higher in 2015 than they were for 2014. The result is that the
  percentage standard, rounded to two decimal places, is the same for
  both years.

VI. Proposed Amendments to Regulations

    We are proposing several revisions to the RFS regulations, which
are described below. The first proposed revision relates to the
definition of terms in Table 1 to 40 CFR 80.1426, which describes
approved biofuel production pathways. The second set of revisions would
address annual compliance reporting and associated attest reporting
deadlines. We request comment on all aspects of these proposed
amendments.

A. Proposed Changes to the Algal Biofuel Pathways

    In the March 2010 RFS rule (75 FR 14670), EPA established two
pathways for biofuels derived from algae to generate D-Code 4 (Biomass-
Based Diesel) or 5 (Advanced) RINs. The pathways approved in the March
2010 RFS rule assumed that algae would be grown photosynthetically
(i.e., using predominantly sunlight and CO2 as inputs) and harvested
for their oil.\130\ Biofuel produced with algae grown through other
means is likely to have different lifecycle GHG emissions impacts. The
EPA has recently received an inquiry regarding production of biofuel
from algae grown non-photosynthetically, and we believe it would be
appropriate to clarify that the algal oil pathways adopted as part of
the March 2010 RFS rule do not apply to such algae. Therefore, we are
proposing to replace ``algal oil'' as a feedstock in Table 1 to 40 CFR
80.1426 with ``oil from algae grown photosynthetically.'' We are also
proposing to add a new definition for ``algae grown
photosynthetically'' to 40 CFR 80.1401. We do not anticipate this
definition will impact current renewable fuel production under the
existing pathway. Companies wishing to produce biofuels from algae
grown with a non-photosynthetic stage of growth must apply to EPA for
approval of their pathway pursuant to 40 CFR 80.1416. We invite comment
on these proposed changes.\131\
---------------------------------------------------------------------------

    \130\ See 75 FR 14696 (March 26, 2010).
    \131\ EPA is not proposing a regulartory definition of
``algae.'' Any comments related to the definition of ``algae'' will
be considered beyond the scope of this rulemaking.
---------------------------------------------------------------------------

    We also note that any companies wishing to produce fuel using
genetically modified algae must conform to all other appropriate EPA
regulations. For example, EPA's Office of Pollution Prevention and
Toxics (OPPT) Biotechnology Program regulates the use of new
genetically-engineered microorganisms (including bacteria, fungi,
algae, viruses, protozoa, etc.) that are used in the production of
biofuels under Section 5 of the Toxic Substances Control Act
(TSCA).\132\
---------------------------------------------------------------------------

    \132\ Microbial Products of Biotechnology; Final Regulation
Under the Toxic Substance Control Act; Final Rule. 62 FR 17910
(April 11, 1997).
---------------------------------------------------------------------------

B. Annual Compliance Reporting and Attest Engagement Deadlines Under
the RFS Program

    The RFS regulations establish deadlines for parties with renewable
volume obligations (obligated parties and renewable fuel exporters) to
submit

annual compliance demonstration reports to the EPA, and later deadlines
for the same parties to submit associated attest engagement reports. A
number of other regulated parties, including RIN-generating renewable
fuel producers, RIN-generating renewable fuel importers, other parties
owning RINs and 3rd party auditors, are also required to submit annual
attest engagement reports according to a schedule specified in the
regulations. As a result of the delay in issuing the RFS annual rules
for 2014 and 2015, the EPA is proposing to amend certain reporting
deadlines applicable to the 2013, 2014 and 2015 compliance years.
1. Obligated Parties and Renewable Fuel Exporters
a. Background.
    Under existing RFS regulations (40 CFR 80.1451(a) and 80.1464(d)),
obligated parties and renewable fuel exporters must submit compliance
demonstration reports for each calendar year by March 31 of the
following year, and associated attest engagements by June 1 of the
following year. The EPA has recognized that it is important for
obligated parties preparing a compliance demonstration report for a
given calendar year to have an understanding of their RFS obligations
for the next compliance year.\133\ Therefore, in light of the delay in
issuing the 2014 RFS annual standards, the EPA previously amended the
regulations to provide that the annual compliance demonstration reports
for obligated parties and exporters for the 2013 compliance year would
not be due until 30 days after publication in the Federal Register of
the 2014 RFS percentage standards. 40 CFR 80.1451(a)(1)(xiv).
Similarly, the EPA extended the deadline for attest engagement reports
for 2013 compliance demonstrations to 90 days after publication in the
Federal Register of the 2014 RFS percentage standards. 40 CFR
80.1464(g). Because the EPA has not yet issued the 2014 RFS standards,
2013 compliance demonstration reports and associated attest engagement
reports from obligated parties and renewable fuel exporters are not yet
due.
---------------------------------------------------------------------------

    \133\ 78 FR 49823, August 15, 2013.
---------------------------------------------------------------------------

    Although the EPA has not yet issued a final 2014 RFS annual rule,
and the generally-applicable March 31 deadline for compliance
demonstration reports for the 2014 compliance year has now passed, the
EPA has not adopted amendments to the regulations applicable to 2014
compliance demonstration and attest engagement reporting as it did with
respect to the 2013 compliance year. Instead the EPA issued an
Enviroflash on March 17, 2015 to clarify that obligated parties are not
required to submit compliance demonstration reports or associated
attest engagements for the 2014 compliance year until the EPA issues a
final rule establishing the final 2014 RFS standards and sets (in that
action) deadlines for 2014 compliance demonstrations and associated
attest engagements for obligated parties. We noted in the Enviroflash
our interpretation of the current regulatory deadlines as being
inoperative for obligated parties for the 2014 compliance year because
final 2014 RFS standards have not been established and it is therefore
impossible for obligated parties to assess and demonstrate their
compliance with the applicable standards. However, in that same
Enviroflash we clarified that the situation is different for exporters
of renewable fuel. Exporter renewable volume obligations are based on
renewable fuel export volume, not on the RFS percentage standards.
Therefore we stated in the Enviroflash that renewable fuel exporters
must comply with the operative deadlines in the regulations for 2014
reporting, although precise obligations may differ depending on the
portion of the year during which exports occurred, in light of
regulatory amendments related to the deadline for exporter RIN
retirements that were adopted in the July 18, 2014 RFS Quality
Assurance Plan rule.\134\ The details are explained in the March 17
Enviroflash.
---------------------------------------------------------------------------

    \134\ 79 FR 42078.
---------------------------------------------------------------------------

b. Proposal.
    The Agency now believes that setting a firm calendar date for 2013
compliance and attest engagement reports is preferable to the current
approach of tying the deadlines for 2013 reporting to the date of
publication of the 2014 annual rule in the Federal Register. The EPA
seeks to establish reporting deadlines for three calendar years, and
establishing firm deadlines for 2013 reporting will allow the EPA to
sequence and time reports for subsequent years in a reasonable manner
that reduces uncertainty.
i. Obligated Parties
    We are proposing that compliance demonstration reports for
obligated parties be submitted no later than January 31, 2016 for the
2013 compliance year, June 1, 2016 for the 2014 compliance year, and
December 1, 2016 for the 2015 compliance year. Associated attest
engagement reports would be due no later than June 1, 2016 for the 2013
compliance year, December 1, 2016 for the 2014 compliance year, and
June 1, 2017 for the 2015 compliance year. We believe that this
sequencing of reports, and the time allowed between them will allow
obligated parties to proceed in a logical and orderly fashion to submit
required reports, with sufficient intervening time so as not to pose an
unreasonable burden.
ii. Exporters
    For exporters of renewable fuel, we are proposing the same
amendments to 2013 compliance year reporting deadlines as for obligated
parties--annual compliance demonstration reports would be due no later
than January 31, 2016, and associated attest engagement reports would
be due no later than June 1, 2016. For 2014, the issue is more complex.
For the 2014 compliance period from January 1, 2014 through September
16, 2014, partial annual compliance reports containing an exporter's
name, registration number, and renewable volume obligation (ERVO) for
that period were required to be submitted no later than March 31, 2015
as currently proscribed in the regulations under Sec.
80.1451(a)(1).\135\ For the 2014 compliance period from January 1, 2014
through September 16, 2014, we are proposing that full annual
compliance reports containing an exporter's name, registration number,
ERVO, as well as RINs retired to satisfy the ERVO and any cellulosic
waiver credits used for that period be submitted no later than January
31, 2016, and that associated attest engagements be due no later than
June 1, 2016. For the 2015 compliance year, full compliance reports
will be due on March 31, 2016, as required by existing Sec.
80.1451(a)(1), and associated attest engagements will be due by June 1,
2016 as required by Sec.  80.1464(d).
---------------------------------------------------------------------------

    \135\ We are not amending the regulations as they pertain to
exporters of renewable fuel for the 2014 compliance period from
September 17, 2014 through December 31, 2014. We reiterate that
under current regulations at Sec.  80.145l(a)(1), reports containing
an exporter's name, registration number, ERVO, as well as RINs
retired to satisfy the ERVO and any cellulosic waiver credits used
for that period were due March 31, 2015.
---------------------------------------------------------------------------

2. Other Parties
a. Background
    Following issuance of the March 17, 2015 Enviroflash to address
reporting deadlines for obligated parties and renewable fuel exporters
for the 2014 compliance year, the Agency received comments from attest
engagement

auditors concerning the June 1, 2015 attest engagement deadline for
RIN-generating renewable fuel producers, RIN-generating renewable fuel
importers, other parties holding RINs, and independent third-party
auditors. The auditors stated that it is impractical for them to
perform the 2014 compliance year attestations before completing the
2013 compliance year attestations. The auditors explained that they
generally rely on the beginning balance of RINs based on attest
procedures performed in the previous year. They asserted that if they
have not attested to the ending balance of RINs for the 2013 compliance
year, they cannot effectively attest to the beginning balance of RINs
for the 2014 compliance year.
    The auditors also cited other reasons for why the 2013 and 2014
compliance year attestations should be revised. The auditors stated
that there is confusion and uncertainty in industry about whether the
June 1, 2015 deadline still applies to RIN-generating renewable fuel
producers, RIN-generating renewable fuel importers, other parties
holding RINs, and independent third-party auditors because they were
not explicitly mentioned in the March 17, 2015 Enviroflash and because
the Agency previously issued a broader attest extension related to
reporting deadlines for the 2013 compliance year and thus, any
subsequent communication by the Agency would be expected to address all
regulated parties. Since many parties have not yet completed their 2013
compliance year attestations because they are not required to do so,
they do not have any expectation that the attestations for the 2014
compliance year are due June 1, 2015.
    In 2014, the EPA changed the annual reporting deadline for all 40
CFR part 80 fuel programs from February 28 to March 31 and the attest
deadline from May 31 to June 1. This is the first year that these new
deadlines are in effect. The effects of the shorter time period between
the annual reporting deadline and the deadline for attest engagement
reports are exacerbated this year by the confusion surrounding the June
1, 2015 attest reporting deadline for RIN-generating renewable fuel
producers, RIN-generating renewable fuel importers, other parties
holding RINs, and independent third-party auditors. Auditors need a
reasonable amount of time to plan and execute any type of assurance
engagement. The planning phase involves the evaluation of independence,
execution of engagement letters, and scheduling of resources.
    In light of the confusion surrounding the reporting deadlines for
the 2014 compliance year for RIN-generating renewable fuel producers,
RIN-generating renewable fuel importers, other parties holding RINs,
and independent third-party auditors, the EPA's Assistant Administrator
for Air and Radiation sought a no action assurance from the Assistant
Administrator for the Office of Enforcement and Compliance Assurance
regarding enforcement of the 2014 reporting deadlines for these
parties. In response, the Office of Enforcement and Compliance
Assurance issued a conditional no action assurance on May 21, 2015 that
provides, in part, as follows:

the EPA will exercise its enforcement discretion not to pursue
enforcement actions against a RIN-generating renewable fuel producer
(domestic and foreign), a RIN-generating importer, any other party
owning RINs, and an independent third-party auditor solely for
violations of the 2014 attest engagement reporting deadline at 40
CFR Sec. Sec.  80.1464(d). This No Action Assurance does not apply
to the June 1, 2015 deadline for exporters of fuel to submit their
reports for the 2014 compliance year, nor does it extend to any
other RFS-related requirement.\136\ Furthermore, as applied to an
individual regulated party, this No Action Assurance is conditioned
upon the regulated party complying with all other RFS requirements
applicable to it. This No Action Assurance will remain in effect
until either (1) 11:59 p.m. EST, January 30, 2016, or (2) the
effective date of a final rule addressing the 2014 attest engagement
deadlines, whichever occurs earlier.
---------------------------------------------------------------------------

    \136\ The EPA provided guidance regarding the 2014 attest
engagement reporting deadlines for renewable fuel exporters in its
March 17, 2015 Enviroflash.
---------------------------------------------------------------------------

b. Proposal
    In this action, we are proposing a new attest engagement reporting
deadline for the 2013 compliance period for RIN-generating renewable
fuel producers, RIN-generating renewable fuel importers, and other
parties owning RINs of no later than January 31, 2016. Additionally, we
are proposing the same attest engagement reporting deadline of January
31, 2016 for these parties and for independent third-party auditors for
the 2014 compliance year.\137\ With respect to the 2015 compliance
year, the EPA is not proposing to amend the current regulations; attest
engagement reports for these parties for the 2015 compliance year are
due on June 1, 2016.
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    \137\ Regarding independent third-party auditors, we permitted
some independent third-party auditors to begin compliance with the
final RFS Quality Assurance Program requirements before the January
1, 2015 effective date for the Q-RIN program. These independent
third-party auditors were allowed to participate in the Q-RIN
program beginning September 16, 2014 and would have been required to
report RIN verification activities to the EPA by March 31, 2015.
Since the information collection request was not approved prior to
the March 31, 2015 deadline, the EPA has allowed independent third-
party auditors that adopted the Q-RIN program early to report RIN
verification activities to the EPA with the first quarter 2015
reports due June 1, 2015. Therefore, since independent third-party
auditor annual attest requirements are dependent upon the submission
of the RIN verification reports to the EPA, the EPA is proposing
that for independent third-party auditors, for the 2014 compliance
year, the attest engagement reporting deadline be no later than
January 31, 2016.
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    Given the many different reporting schedules across the 2013, 2014,
and 2015 compliance years that the Agency is proposing for obligated
parties, exporters, RIN generating renewable fuel producers and
importers, independent third-party auditors, and other parties owning
RINs, and the multiple considerations the Agency is trying to balance
across regulated parties, we seek comment on whether the proposed
deadlines are appropriate and for whether there are other specific
considerations that the Agency should evaluate when establishing the
2013, 2014, and 2015 annual compliance and attest engagement reporting
deadlines.

VII. Public Participation

    We request comment on all aspects of this proposal. This section
describes how you can participate in this process.

A. How do I submit comments?

    We are opening a formal comment period by publishing this document.
We will accept comments during the period indicated under the DATES
section. If you have an interest in the proposed standards, we
encourage you to comment on any aspect of this rulemaking. We also
request comment on specific topics identified throughout this proposal.
    Your comments will be most useful if you include appropriate and
detailed supporting rationale, data, and analysis. Commenters are
especially encouraged to provide specific suggestions for any changes
that they believe need to be made. You should send all comments, except
those containing proprietary information, to our Air Docket (see
ADDRESSES section) by the end of the comment period.
    You may submit comments electronically, by mail, or through hand
delivery/courier. To ensure proper receipt by EPA, identify the
appropriate docket identification number in the subject line on the
first page of your comment. Please ensure that your comments are
submitted within the specified comment period. Comments

received after the close of the comment period will be marked ``late.''
EPA is not required to consider these late comments. If you wish to
submit Confidential Business Information (CBI) or information that is
otherwise protected by statute, please follow the instructions in
Section VII.B below.

B. How should I submit CBI to the Agency?

    Do not submit information that you consider to be CBI
electronically through the electronic public docket,
www.regulations.gov, or by email. Send or deliver information
identified as CBI only to the following address: U.S. Environmental
Protection Agency, Assessment and Standards Division, 2000 Traverwood
Drive, Ann Arbor, MI, 48105, Attention Docket ID EPA-HQ-OAR-2013-0479.
You may claim information that you submit to EPA as CBI by marking any
part or all of that information as CBI (if you submit CBI on disk or CD
ROM, mark the outside of the disk or CD ROM as CBI and then identify
electronically within the disk or CD ROM the specific information that
is CBI). Information so marked will not be disclosed except in
accordance with procedures set forth in 40 CFR part 2.
    In addition to one complete version of the comments that include
any information claimed as CBI, a copy of the comments that does not
contain the information claimed as CBI must be submitted for inclusion
in the public docket. This non-CBI version of your comments may be
submitted electronically, by mail, or through hand delivery/courier. If
you submit the copy that does not contain CBI on disk or CD ROM, mark
the outside of the disk or CD ROM clearly that it does not contain CBI.
Information not marked as CBI will be included in the public docket
without prior notice. If you have any questions about CBI or the
procedures for claiming CBI, please consult the person identified in
the FOR FURTHER INFORMATION CONTACT section.

VIII. Statutory and Executive Order Reviews

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

    This action is an economically significant regulatory action that
was submitted to the Office of Management and Budget (OMB) for review.
Any changes made in response to OMB recommendations have been
documented in the docket. The EPA prepared an analysis of the potential
costs and benefits associated with this action. This analysis is
presented in Sections II.G and III.E of this preamble.

B. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden
under the PRA. OMB has previously approved the information collection
activities contained in the existing regulations and has assigned OMB
control numbers 2060-0637 and 2060-0640. The proposed standards would
not impose new or different reporting requirements on regulated parties
than already exist for the RFS program.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, the impact of concern is any significant
adverse economic impact on small entities. An agency may certify that a
rule will not have a significant economic impact on a substantial
number of small entities if the rule relieves regulatory burden, has no
net burden, or otherwise has a positive economic effect on the small
entities subject to the rule. The small entities directly regulated by
the RFS program are small refiners, which are defined at 13 CFR 121.201
as refiners with 1,500 employees or less company-wide.
    EPA has conducted a screening analysis to assess whether it should
make a finding that there would be no significant economic impact on a
substantial number of small entities. We discuss this analysis below.
The impacts of the RFS program on small entities were already addressed
in the March 26, 2010 RFS2 rulemaking (75 FR 14670), which was a rule
that implemented the entire program required by the Energy Independence
and Security Act of 2007 (EISA 2007). As such, the Small Business
Regulatory Enforcement Fairness Act (SBREFA) panel process that took
place prior to the 2010 rule was also for the entire RFS program and
looked at impacts on small refiners through 2022.
    For the SBREFA process for the March 26, 2010 RFS2 rulemaking, EPA
conducted outreach, fact-finding, and analysis of the potential impacts
of the program on small refiners which are all described in the Final
Regulatory Flexibility Analysis, located in the rulemaking docket (EPA-
HQ-OAR-2005-0161). This analysis looked at impacts to all refiners,
including small refiners, through the year 2022 and found that the
program would not have a significant economic impact on a substantial
number of small entities, and that this impact was expected to decrease
over time, even as the standards increased. The analysis included a
cost-to-sales ratio test, a ratio of the estimated annualized
compliance costs to the value of sales per company, for gasoline and/or
diesel small refiners subject to the standards. From this test, it was
estimated that all small entities would have compliance costs that are
less than one percent of their sales over the life of the program (75
FR 14862).
    This proposed rule would not impose any additional requirements on
small entities beyond those already analyzed, since the impacts of this
proposed rule are not greater or fundamentally different than those
already considered in the analysis for the March 26, 2010 rule assuming
full implementation of the RFS program. As shown above in Tables I.A-1
and I.A-3 (and discussed further in Sections II and IV), this rule
proposes to establish the 2014, 2015, and 2016 volume requirements for
cellulosic biofuel, advanced biofuel, and total renewable fuel at
levels significantly below the statutory volume targets. This exercise
of EPA's waiver authorities reduces burdens on small entities, as
compared to the burdens that would be imposed under the volumes
specified in the Clean Air Act in the absence of waivers. Regarding the
biomass-based diesel standard, we are proposing to increase the volume
requirements for 2014-2016 over the statutory minimum value of 1
billion gallons. However, this is a nested standard within the advanced
biofuel category, for which we are proposing significant reductions
from the statutory volume targets. As discussed in Section III, we are
setting the biomass-based diesel volume requirement at a level below
what is anticipated will be produced and used to satisfy the reduced
advanced biofuel requirement. The net result of our proposed actions
are a reduction in burden as compared to implementation of the
statutory volume targets, as was assumed in the March 26, 2010
analysis. Furthermore, available information shows that the impact on
small entities from implementation of this rule will not be
significant. Using the maximum values of the illustrative costs
discussed in Section II.F., the gasoline and diesel fuel volume
projections in Table V.B.3-1, and current wholesale fuel prices, a
simple cost-to-sales ratio test shows that the costs to small entities
of the RFS standards remain less than 1% of the value of their sales.
    The program also includes compliance flexibilities that can reduce
impacts on small entities. These flexibilities include RIN trading, 20%

RIN rollover allowance (up to 20% of an obligated party's RVO can be
met using previous-year RINs), and deficit carryforward (the ability to
carry over a deficit from a given year into the following year,
providing that the deficit is satisfied together with the next year's
RVO). In the March 26, 2010 final rule, we discussed other potential
small entity flexibilities that had been suggested by the SBREFA panel
or through comments, but we did not adopt them since they are
inconsistent with EPA's authority under the CAA (see 75 FR 14737). Our
statutory authority to issue relief to small entities has not changed
since that time. Additionally, as specified by the statute, the RFS
regulations (at 40 CFR 80.1441(e)(2)) allow for a small refinery \138\
to petition for case-by-case hardship relief.
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    \138\ A small refinery, as defined by the statute, is a refinery
with an average daily crude throughput of 75,000 barrels or less. As
this is a facility-based definition, not company-based as SBA's
small refiner definition is, it follows that not all small refiners'
facilities meet the definition of a small refinery.
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    Given that this proposed rule would not impose additional
requirements on small entities, would decrease burden via a reduction
in required volumes as compared to statutory volume targets, and would
not change the compliance flexibilities currently offered to small
entities under the RFS program, we have therefore concluded that this
action would not have a significant impact on a substantial number of
directly regulated small entities.

D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded mandate as described in
UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect
small governments. The action implements mandates specifically and
explicitly set forth in CAA section 211(o) without the exercise of any
policy discretion by the EPA.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.

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