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

    \53\ Annual compliance data can be found on EPA's Web site at
https://www.epa.gov/fuels-registration-reporting-and-compliance-help/annual-compliance-data-obligated-parties-and.
    \54\ According to EPA's EMTS Web site (https://www.epa.gov/fuels-registration-reporting-and-compliance-help/2015-renewable-fuel-standard-data) net cellulosic RIN generation was approximately
140 million RINs in 2015, while the cellulosic biofuel volume
requirement for 2015 was 123 million gallons.
    \55\ According to data from Argus, the average 2016 cellulosic
biofuel RIN price has been $1.84 through September 2016. We believe
this price is reasonable, as is it is somewhat below the
``theoretical maximum'' cellulosic RIN price of $2.19 (the
cellulosic waiver price plus the average price of all non-cellulosic
advanced RINs) and significantly above the ``theoretical minimum''
cellulosic RIN price of $0.86 (the average price of all non-
cellulosic advanced RINs; we consider this the ``theoretical
minimum'' price for a cellulosic biofuel RINs as excess cellulosic
biofuel RINs can be used to satisfy an obligated party's advanced
biofuel obligation).
---------------------------------------------------------------------------

    We believe our range of projected production volumes for each
company (or group of companies for cellulosic CNG/LNG producers)
represents the range of potential production volumes for each company,
and that projecting overall production in 2017 in the manner described
above results in a neutral estimate (neither biased to produce a
projection that is unreasonably high or low) of likely cellulosic
biofuel production in 2017 (311 million gallons). A brief overview of
individual companies we believe will produce cellulosic biofuel and
make it commercially available in 2017 can be found in a memorandum to
the docket.\56\ 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.\57\
---------------------------------------------------------------------------

    \56\ ``Cellulosic Biofuel Producer Company Descriptions (October
2016)'', memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-
OAR-2016-0004.
    \57\ For individual company information see ``October 2016
Cellulosic Biofuel Individual Company Projections for 2017 (CBI)'',
memorandum from Dallas Burkholder to EPA Air Docket EPA-HQ-OAR-2016-
0004.
---------------------------------------------------------------------------

IV. Advanced Biofuel Volume for 2017

    The national volume targets for advanced biofuel to be used under
the RFS program each year through 2022 are specified in CAA section
211(o)(2)(B)(i)(II). Congress set annual renewable fuel volume targets
that envisioned growth at a pace that far exceeded historical growth
and prioritized that growth as occurring principally in advanced
biofuels (contrary to historical growth patterns where most growth was
in conventional renewable fuel, namely corn-ethanol). Congressional
intent is evident in the fact that the portion of the total renewable
fuel volume target that is not required to be advanced biofuel is 15
billion gallons in the statutory volume tables for all years after
2014, while the advanced volumes continue to grow through 2022 to a
total of 21 billion gallons, for a total of 36 billion gallons in 2022.
    We have evaluated the capabilities of the market and have concluded
that the 9.0 billion gallons specified in the statute for advanced
biofuel cannot be reached in 2017. This is primarily due to the
expected continued shortfall in cellulosic biofuel; production of this
fuel type has consistently fallen short of the statutory targets by 95%
or more, and again in 2017 will fall far short of the statutory target
of 5.5 billion gallons. In addition, although in earlier years of the
RFS program we determined that the available supply of non-cellulosic
advanced biofuel and other considerations justified our retaining the
statutory advanced biofuel target

notwithstanding the shortfall in cellulosic biofuel production, several
factors preclude such a determination for 2017, including:
     The more ambitious statutory target for 2017
     The fact that a greater proportion of that target was
intended to be satisfied by cellulosic biofuels \58\
---------------------------------------------------------------------------

    \58\ For example, while the statutory tables indicate that 61.1%
of the 2017 advanced biofuel target would be satisfied by cellulosic
biofuel, the corresponding value for 2013 was only 36.4%.
---------------------------------------------------------------------------

     The continued slow pace of growth in cellulosic biofuel
production
     Limited volumes of advanced biofuels that we believe are
appropriate to backfill for missing volumes of cellulosic biofuel

As a result, we are exercising the authority granted by the statute to
reduce the applicable volume of advanced biofuel using the cellulosic
waiver authority. The final volume requirement for advanced biofuel
recognizes the ability of the market to respond to the standards we set
while staying within the limits of reasonable feasibility, providing
for a partial backfilling of missing cellulosic biofuel volumes with
volumes of advanced biofuel we have determined are appropriate to
require for this purpose. The net impact of this volume requirement is
that the required volume of advanced biofuel for 2017 will be
significantly greater than volumes required or used in the past, but
below the statutory target.
    To help inform today's action, we investigated whether the market
is on track to meet the 2016 advanced biofuel volume requirement of
3.61 billion gallons. As described in a memorandum to the docket,
supply through the end of September coupled with a review of seasonal
variations in supply for previous years indicate that the 2016
standards are indeed attainable.\59\ For comparison, we have also
reviewed RINs available for compliance in previous years, along with
the effective volume requirements in those years.\60\
---------------------------------------------------------------------------

    \59\ ``Comparison of 2016 availability of RINs and 2016
standards,'' memorandum from David Korotney to docket EPA-HQ-OAR-
2016-0004.
    \60\ ``Comparison of availability of RINs and standards for
previous years,'' memorandum from David Korotney to docket EPA-HQ-
OAR-2016-0004.
---------------------------------------------------------------------------

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

    As described in Section II.A, when making reductions in advanced
biofuel and total renewable fuel under the cellulosic waiver authority,
the statute limits those reductions to no more than the reduction in
cellulosic biofuel. As described in Section III.D, we are finalizing a
2017 volume requirement for cellulosic biofuel of 311 million gallons,
representing a reduction of 5,189 million gallons from the statutory
target of 5,500 million gallons. As a result, 5,171 million gallons is
the maximum volume reduction for advanced biofuel and total renewable
fuel that is permissible using the cellulosic waiver authority.\61\ If
we were to use the cellulosic waiver authority to this maximum extent,
the resulting 2017 volumes would be 3.83 and 18.83 billion gallons for
advanced biofuel and total renewable fuel, respectively.
---------------------------------------------------------------------------

    \61\ If we determined it necessary to provide further reductions
to address inadequate domestic supply or severe economic or
environmental harm, such further reductions would be possible using
the general waiver authority.

   Table IV.A-1--Lowest Permissible Volume Requirements Using Only the
                       Cellulosic Waiver Authority
                            [Million gallons]
------------------------------------------------------------------------
                                             Advanced          Total
                                              biofuel     renewable fuel
------------------------------------------------------------------------
Statutory target........................           9,000          24,000
Maximum reduction permitted under the              5,189           5,189
 cellulosic waiver authority............
Lowest 2017 volume requirement permitted           3,811          18,811
 using only the cellulosic waiver
 authority..............................
------------------------------------------------------------------------

    We are authorized under the cellulosic waiver authority to reduce
the advanced and total renewable fuel volumes ``by the same or a
lesser'' amount as the reduction in the cellulosic biofuel volume.
Thus, we are not required to use the authority to its maximum extent.
And, as discussed in Section II.A, EPA has broad discretion in using
the cellulosic waiver authority, since Congress did not specify the
circumstances under which it may or should be used nor the factors to
consider in determining appropriate volume reductions. We believe that
advanced biofuel should be permitted to compensate for a portion of the
shortfall in cellulosic biofuel, thereby promoting the larger RFS goals
of reducing GHG emissions and enhancing energy security. To that end,
we have investigated the volume of advanced biofuel that is reasonably
attainable and appropriate to require in 2017, and have determined that
such volumes are higher than the lowest permissible volumes shown in
the table above.

B. Determination of Reasonably Attainable and Appropriate Volumes

    In the NPRM we proposed to use only the cellulosic waiver authority
to reduce volumes of advanced biofuel, and to use both the cellulosic
and general waiver authorities to reduce volumes of total renewable
fuel. As noted above, and described in more detail in this section and
in Section V, we have determined that use of the general waiver
authority is not necessary for any renewable fuel category in 2017.
However, in response to the NPRM, some commenters misstated our
obligations under the cellulosic waiver authority and our intent with
respect to its use in setting the volume requirement for advanced
biofuel. For instance, some stakeholders expressed concern that EPA had
not proposed to set the advanced biofuel volume requirement at the
maximum achievable level, but rather at a level that was
``reasonable.'' Many of these stakeholders suggested that it would be
most consistent with the statutory goals if we were to set the volume
requirement for advanced biofuel equal to the maximum achievable
volume.
    In the NPRM, as well as in the 2014-2016 final rule, we made a
clear distinction between our approach in setting volumes under the
cellulosic waiver authority versus our approach in setting volumes
under the general waiver authority. The prerequisite for the general
waiver authority as EPA has exercised it to date is a finding that
there is an ``inadequate domestic supply'' of renewable fuel. In using
this authority in the 2014-2016 final rule we noted that our objective
was to waive volumes to the point where the inadequacy of supply is
removed.

Therefore, we set volume requirements at the level we determined to be
the maximum achievable. When using the cellulosic waiver authority, in
contrast, we are only required to ensure that any reduction is no
larger than that provided for cellulosic biofuel. The statute does not
specify other prerequisites for its use, nor any criteria or factors
that EPA should consider in determining whether, and to what extent, to
use the authority. Thus, under the cellulosic waiver authority,
Congress provided EPA with broad discretion to lower advanced biofuel
and total renewable fuel applicable volumes in instances where it
lowers the cellulosic biofuel requirement, as in today's rule. In
exercising this broad discretion in the context of the 2014-2016 final
rule, our intent was to require the use of ``reasonably attainable''
volumes to partially backfill for missing cellulosic biofuel volumes.
We explained that we were not required, and did not intend, to
necessarily require the use of the ``maximum'' volumes of advanced
biofuel, and that our assessment of ``reasonably attainable'' volumes
was similar to, but not intended to be as exacting, as our assessment
of ``maximum achievable'' supplies when using the general waiver
authority based on a finding of inadequate domestic supply.
    In using the cellulosic waiver authority to set the 2017 advanced
biofuel volume requirement, we have been mindful of the fact that the
statute concentrates all of the very substantial growth in the
statutory targets for renewable fuel on advanced biofuel for years
after 2014, and that advanced biofuels are required to provide
significantly greater lifecycle GHG reductions (at least 50%) in
comparison to non-advanced renewable fuel (20%, or no reduction if
grandfathered under Sec.  80.1403). In addition, we generally believe
that greater use of renewable fuel enhances energy security. These
considerations, taken alone, would support the commenters' suggestion
that when using the cellulosic waiver authority we should require
maximum achievable levels of advanced biofuel to backfill to the
greatest extent possible for missing volumes of cellulosic biofuel.
However, we note, first, that our assessments contain some uncertainty.
To the extent we may over-estimate supply in setting the advanced
biofuel volume requirement, we can create a situation where compliance
costs dramatically escalate and/or obligated parties are either unable
to comply or compliance requires a substantial drawdown in the
collective bank of carryover RINs. While our assessment of ``maximum
achievable'' volumes for the 2014-2016 final rule reflected our view of
what is achievable, if proven to be correct such negative implications
will not materialize. Nevertheless, we believe that it is appropriate
given the broad discretion afforded under the cellulosic waiver
authority to allow an additional cushion to ensure that the standards
can be met, and we describe this less exacting approach as one designed
to identify ``reasonably attainable'' volumes based on supply
considerations. In the 2014-2016 final rule we set the advanced biofuel
volume requirement so as to require all reasonably attainable volumes
of advanced biofuel, and we proposed a similar approach for 2017.
    However, some commenters suggested that EPA should take into
consideration the fact that higher advanced biofuel volume requirements
could create an incentive for switching advanced biofuel feedstocks
from existing uses to biofuel production, and that in light of such
market reactions we should set the advanced biofuel volume requirement
at less than the reasonably attainable level. We agree with these
commenters that we have the broad discretion when using the cellulosic
waiver authority to take into consideration such implications. We
believe that in the short-term, every increment in the advanced biofuel
standard should not necessarily be expected to result in a
corresponding incremental increase in the volume of advanced biofuel
feedstocks produced on a global scale, since increasing demand for such
feedstocks for advanced biofuel production could potentially be filled
through diversion of feedstocks from other non-biofuel markets. There
is significant uncertainty related to the GHG emission benefits
associated with fuels produced in this way. Moreover, rapidly
increasing the required volumes of advanced biofuels without giving the
market adequate time to adjust by increasing supplies could also result
in diversion of advanced biofuels from foreign countries to the U.S.
without increasing total global supply, contribute to shortages and/or
reallocation of raw materials in other sectors, disrupt markets, and/or
increase prices.\62\ We believe that we are authorized to take these
factors into account in exercising our discretion under the cellulosic
waiver authority. Although we are not able to quantify these factors at
this time, we believe that they would be a likely consequence of
setting the 2017 volume requirement for advanced biofuel at the highest
possible level, and that they justify our taking a more measured
approach in determining the volume of advanced biofuel that should
backfill for missing cellulosic biofuel volumes in 2017.\63\ These
considerations are described in more detail in the following section
describing our assessment of advanced biodiesel and renewable diesel
volumes. Our final approach results in a volume requirement that
provides for significant growth in the production and use of advanced
biofuels above all historic levels, is within the range of what is
reasonably attainable from a supply perspective and is also
appropriate, taking other considerations into account.
---------------------------------------------------------------------------

    \62\ For example, see comments from Action Aid USA & The Hunger
Project (EPA-HQ-OAR-2016-0004-1817), American Cleaning Institute
(EPA-HQ-OAR-2016-0004-1735) and Union of Concerned Scientists (EPA-
HQ-OAR-2016-0004-1672).
    \63\ We have also considered comments raising additional factors
that stakeholders deemed relevant in setting the advanced biofuel
standard, as described in the response to comments document. We
believe the volume requirement established today reflects an
appropriate balancing of these often competing considerations.
---------------------------------------------------------------------------

    Having determined the reasonably attainable and appropriate volume
reduction for advanced biofuel, we used the cellulosic waiver authority
to provide an equivalent reduction in total renewable fuel. That step
is described in more detail in Section V.A, together with our
assessment that no further increment of reduction is required for total
renewable fuel in 2017 on the basis of supply considerations.
1. Imported Sugarcane Ethanol
    In the NPRM, we noted that the predominant source of advanced
biofuel other than cellulosic biofuel and BBD was imported sugarcane
ethanol, and we proposed that the volume of imported sugarcane ethanol
for purposes of determining the reasonably attainable volume of
advanced biofuel for 2017 would be 200 million gallons. This is the
same volume that we used in setting the 2016 standards, and we said
that the information currently available to us did not suggest that the
circumstances would be significantly different for 2017 than they are
for 2016. We also pointed to the high variability in ethanol import
volumes in the past (including of Brazilian sugarcane ethanol, the
predominant form of imported ethanol), the fact that imports of
Brazilian sugarcane ethanol in 2014 and 2015 reached only 64 and 89
million gallons, respectively, increasing gasoline consumption in
Brazil, and variability in Brazilian production of sugar.

    In response to the NPRM, stakeholders representing some refiners
and conventional ethanol interests said that our estimate of 200
million gallons was too high given recent import levels. We agree that
200 million gallons is considerably higher than actual imports of
Brazilian sugarcane ethanol in 2014 and 2015, of 64 and 89 million
gallons, respectively, but it is far lower than the historic maximum of
680 million gallons of Brazilian sugarcane ethanol imports in 2006 or
the more recent high volume of 486 million gallons imported in 2012.
[GRAPHIC] [TIFF OMITTED] TR12DE16.004

    In proposing to use 200 million gallons in assessing reasonably
attainable supply of advanced biofuel in 2017, we attempted to balance
indications of lower potential imports from more recent data with
indications that higher volumes were possible based on older data, as
depicted in the figure above.
    Stakeholders who represent advanced biofuel interests generally
believed that our assumption of 200 million gallons of imported
sugarcane ethanol for 2017 was too low. Some commenters cited
projections from other sources that were considerably higher than 200
million gallons, and even pointed to the historical maximum of 681
million gallons for sugarcane ethanol imported in 2006 as evidence that
volumes larger than 200 million gallons are possible. We generally
believe that this information is of limited probative value in
determining the volume of sugarcane ethanol that should be assumed in
the context of determining reasonably attainable volumes of advanced
biofuel for 2017. Sources providing projections for 2017 and beyond
have not accurately predicted current and past import levels,
highlighting the uncertainty in such projections.\64\ As for the
historical maximum of 681 million gallons in 2006, there is no basis
for believing that the economic and market circumstances which led to
that import volume would be repeated in 2017, more than a decade later,
when more recent years have shown far more modest import levels.
---------------------------------------------------------------------------

    \64\ For instance, the FAPRI-MU report ``U.S. Baseline Briefing
Book,'' (March 2016) indicates that ethanol imports in 2015 reached
167 mill gal, nearly double the actual imports of 89 mill gal
according to data from EMTS. Also, the FAPRI-ISU report ``2012 World
Agricultural Outlook'' projected that the U.S. would be a net
ethanol exporter in 2013-2015, when in fact it was a net importer.
---------------------------------------------------------------------------

    The Brazilian Sugarcane Industry Association (UNICA) said that it
was not appropriate for EPA to use actual import data from 2010-2015 as
the basis for estimating the potential import volume in 2017. While
these years reflects the period when the RFS2 program has been in
place, UNICA argued that the low import volumes in 2014 and 2015
resulted from the fact that EPA had not established applicable RFS
percentage standards until the end of 2015. However, UNICA also noted
that weather, harvests, and world prices also affect ethanol exports
from Brazil. As discussed in the 2014-2016 final rule, total ethanol
exports from Brazil in 2014 and 2015 were at their lowest levels since
2004, suggesting the possibility that unusual factors were at work in
these two years to minimize exports from Brazil. For instance, Brazil
increased the ethanol concentration requirement in its gasoline in
early 2015 and indications from available data suggest that total
gasoline consumption will continue rising in 2016.65 66
Given the high variability of ethanol imports in the past and the
difficulty in precisely identifying the reasons for that variability,
there is no way to know whether the lack of applicable standards in
2014 and 2015 was the primary

reason for low import levels, or a less significant contributing
factor.
---------------------------------------------------------------------------

    \65\ See discussion at 80 FR 77477.
    \66\ ``Gasoline Demand in Brazil: An empirical analysis,''
Tha[iacute]s Machado de Matos Vilela, Pontifical Catholic University
of Rio de Janeiro, Figure 2.
---------------------------------------------------------------------------

    Since release of the NPRM, some data on imports in 2016 have become
available. Imports of sugarcane ethanol in 2016 through September have
reached 34 million gallons, with essentially all of this volume
occurring since June.\67\ Historically, ethanol imports have been
higher in the summer and early fall than at other times of the year, so
it is possible that the monthly average that has occurred in June-
September could continue through the end of the year. If so, then total
sugarcane ethanol imports for 2016 could reach 76 million gallons,
similar to the levels imported in 2014 and 2015. Nevertheless, the low
observed 2016 volume indicates that an increase in the advanced biofuel
standard does not necessarily result in an increase in imports of
sugarcane ethanol, and also implies that even California's Low Carbon
Fuel Standard (LCFS) has not spurred demand for the large volumes of
advanced ethanol imports that UNICA predicted.\68\
---------------------------------------------------------------------------

    \67\ Data from the International Trade Commission, from which
EIA derives their reported values of imports of ethanol. See ``2016
imports of ethanol from Brazil through September,'' docket EPA-HQ-
OAR-2016-0004.
    \68\ For instance, UNICA said that ``. . . sugarcane ethanol
should continue to be a major renewable fuel source in California.''
---------------------------------------------------------------------------

    As they did in response to the 2014-2016 proposed standards, UNICA
again commented on the proposed 2017 standards that potential ethanol
exports from Brazil to the U.S. are driven primarily by a combination
of Brazilian ethanol production capacity and opportunities created by
the RFS program itself. The RIN value of advanced biofuels is
undoubtedly a factor in the volume of ethanol that Brazil exports to
the U.S., and the RIN value is a function of the level of the advanced
biofuel standard. However, recent data on imports of sugarcane ethanol
into the U.S. suggest that it would be inappropriate to increase the
volume used in the determination of the applicable volume requirement
for advanced biofuel above 200 million gallons.
    UNICA went on to say that sugarcane mills have significant
flexibility in the amount of sugar versus ethanol that they produce,
and that the amount of ethanol required to be blended into gasoline is
likewise flexible based on opportunities for ethanol exports. We
continue to believe that UNICA has underestimated the uncertainty
associated with other market factors, including the E10 blendwall in
the U.S., ongoing growth in gasoline demand in Brazil, and competing
world demand for sugar, and has overstated the flexibility and speed
with which Brazil can change the relative production of sugar versus
ethanol and the required ethanol content of gasoline.
    Based on these facts, we continue to believe that recent low import
levels and high variability in longer-term historical imports are
significant and must be taken into account in the context of
determining reasonably attainable volumes of advanced biofuel for 2017.
However, we do not agree with commenters who argued for deviating from
the 200 million gallons of sugarcane ethanol that we proposed using in
the determination of the 2017 advanced biofuel volume requirement. We
believe that this level reflects a reasonable intermediate point
between the lower levels imported recently and the considerably higher
levels that have been achieved in earlier years. Regardless of this
assumed level used only in deriving the advanced biofuel volume
requirement, we note that actual imports of sugarcane ethanol could be
higher or lower than 200 million gallons as shown in the scenarios for
how the market could respond in Section V.C below.
    Aside from the specific assessment of sugarcane ethanol imports,
one stakeholder said that the inclusion of any imported renewable fuels
in the determination of applicable standards was inconsistent with
Congressional intent to increase domestic energy security. However, the
statute does not discriminate between domestically-produced and
imported biofuels, and an increased diversity of fuels, including those
imported from a variety of countries, helps contribute to the stability
of the energy supply.
2. Biodiesel and Renewable Diesel
    With regard to biodiesel and renewable diesel, there are many
different factors that could potentially constrain the total volume of
these fuels that can be used as transportation fuel or heating oil in
the United States. These constraints could include such factors as the
availability of qualifying biodiesel and renewable diesel feedstocks,
limitations on the market's ability to distribute biodiesel, and
limitations related to diesel engine manufacturers recommendations for
biodiesel use in the engines they produce. Each of these factors, and
the degree to which they may constrain the total supply of biodiesel
and renewable diesel in 2017, is discussed in detail in Section V.B.2.
Of these potential constraints, however, the primary constraint
considered in our determination of the reasonably attainable and
appropriate volume of advanced biodiesel and renewable diesel
considered in the context of deriving the advanced biofuel standard for
2017 is the availability of advanced biodiesel and renewable diesel
feedstock.\69\ This is because most registered biodiesel and renewable
diesel production facilities are capable of producing either advanced
or non-advanced biofuels depending on a number of economic and
regulatory factors, and the combined production capacity of the
registered biodiesel and renewable diesel facilities exceeds the volume
of these fuels we project can be supplied in 2017.\70\ Since the
reasonably attainable and appropriate volume of advanced biodiesel and
renewable diesel for 2017 projected in the context of deriving the
advanced biofuel standard (determined primarily by an assessment of
advanced biodiesel and renewable feedstocks) is less than the maximum
reasonably achievable volume of all biodiesel and renewable diesel in
2017, other potential constraints (such as limitations on the market's
ability to distribute and use biodiesel and renewable diesel) are not
expected to limit the supply of advanced biodiesel and renewable
diesel. This section will therefore focus on the availability of
qualifying feedstocks, while other potential constraints related to the
distribution and use of biodiesel and renewable diesel are discussed in
Section V.B.2.
---------------------------------------------------------------------------

    \69\ Throughout this section we refer to advanced biodiesel and
renewable diesel as well as advanced biodiesel and renewable diesel
feedstocks. In this context, advanced biodiesel and renewable diesel
refers to any biodiesel or renewable diesel for which RINs can be
generated that satisfy an obligated party's advanced biofuel
obligation (i.e., D4 or D5 RINs). An advanced biodiesel or renewable
feedstock refers to any of the biodiesel, renewable diesel, jet
fuel, and heating oil feedstocks listed in Table 1 to Sec.  80.1426
that can be used to produce fuel that qualifies for D4 or D5 RINs.
These feedstocks include soy bean oil; oil from annual cover crops;
oil from algae grown photosynthetically; biogenic waste oils/fats/
greases; non-food grade corn oil; camelina sativa oil; and canola/
rapeseed oil (See pathways F, G, and H of Table 1 to Sec.  80.1426).
    \70\ See Section V.B.2.ii for a discussion of the current
production capacity for biodiesel and renewable diesel. While some
biodiesel facilities are limited to certain types of feedstocks
(typically virgin vegetable oils) we note that some virgin vegetable
oils qualify as advanced biofuels, while others can only be used to
produce non-advanced renewable fuel (fuel that qualifies to produce
D6 RINs) when used at facilities that qualify for an exemption from
the 20% lifecycle greenhouse gas reduction requirements under 40 CFR
80.1403.
---------------------------------------------------------------------------

    Before considering availability of qualifying feedstocks that could
be used to produce advanced biodiesel and renewable diesel, it is
helpful to review the supply of biodiesel and renewable

diesel to the United States in recent years. While historic supply data
and trends alone are insufficient to project the volumes of biodiesel
and renewable diesel that are reasonably attainable and appropriate in
future years, historic data can serve as a useful frame of reference in
considering future volumes. Past experience suggests that a high
percentage of the supply of biodiesel and renewable diesel to the
United States qualifies as advanced biofuel.\71\ In previous years
biodiesel and renewable diesel produced in the United States has been
almost exclusively advanced biofuel.\72\ Imports of advanced biodiesel
have increased in recent years and will likely continue in 2017, as
discussed in Section V.B.2.iii. Setting the 2017 advanced biofuel
volume requirement so as to require that a high percentage of the
projected total supply of biodiesel and renewable diesel would be
advanced biofuel would not only be consistent with our experience in
previous years, but would also be consistent with the goal of seeking
to increase volumes of fuels with higher potential GHG reductions.
---------------------------------------------------------------------------

    \71\ From 2011 through 2015 over 95% of all biodiesel and
renewable diesel supplied to the United States (including
domestically-produced and imported biodiesel and renewable diesel)
qualified as advanced biodiesel and renewable diesel (6,836 million
gallons of the 7,159 million gallons) according to EMTS data.
    \72\ From 2011 through 2015 over 99.8% of all the domestically
produced biodiesel and renewable diesel supplied to the United
States qualified as advanced biodiesel and renewable diesel (6,538
million gallons of the 6,545 million gallons) according to EMTS
data.

                                  Table IV.B.2-1--Advanced (D4 and D5) Biodiesel and Renewable Diesel From 2011 to 2016
                                                                  [million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2011            2012            2013            2014            2015          2016 \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)......................       967 (N/A)     1,014 (+47)    1,376 (+362)     1,303 (-73)     1,253 (-50)             N/A
Domestic Renewable Diesel (Annual Change)...............        58 (N/A)        11 (-47)        92 (+81)       155 (+63)       175 (+20)             N/A
Imported Biodiesel(Annual Change).......................        44 (N/A)         40 (-4)      156 (+116)       130 (-26)      261 (+131)             N/A
Imported Renewable Diesel \b\ (Annual Change)...........         0 (N/A)        28 (+28)      145 (+117)       129 (-16)        121 (-8)             N/A
Exported Biodiesel \c\ (Annual Change)..................        48 (N/A)       102 (+54)       125 (+23)        134 (+9)        133 (-1)             N/A
                                                         -----------------------------------------------------------------------------------------------
    Total (Annual Change)...............................      1021 (N/A)       991 (-30)    1,644 (+653)     1,583 (-61)     1,677 (+94)    2,100 (+423)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data for 2011-2015 from EMTS. EPA reviewed all advanced biodiesel and renewable diesel RINs retired for reasons other than demonstrating
  compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the
  supply in each year.
\b\ Volumes for 2016 are those determined reasonably attainable in the final rule deriving the 2016 standards. This projection was for all advanced
  biodiesel and renewable diesel and did not differentiate between domestically produced and imported fuels or between biodiesel and renewable diesel.
\c\ In calculating the supply of advanced biodiesel and renewable diesel we have assumed all exported biodiesel must retire 1.5 RINs per gallon
  consistent with 80.1130. No parties reported exports of advanced renewable diesel from 2011-2015.

                              Table IV.B.2--2 Supply of Conventional (D6) Biodiesel and Renewable Diesel From 2011 to 2016
                                                                  [million gallons] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2011            2012            2013            2014            2015          2016 \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic Biodiesel (Annual Change)......................         0 (N/A)          0 (+0)          6 (+6)          1 (-5)          0 (+0)             N/A
Domestic Renewable Diesel (Annual Change)...............         0 (N/A)          0 (+0)          0 (+0)          0 (+0)          0 (+0)             N/A
Imported Biodiesel (Annual Change)......................         0 (N/A)          0 (+0)        31 (+31)        52 (+21)        74 (+22)             N/A
Imported Renewable Diesel \b\ (Annual Change)...........         0 (N/A)          0 (+0)        53 (+53)         0 (-53)      106 (+106)             N/A
Exported Biodiesel \c\ (Annual Change)..................         0 (N/A)          0 (+0)          0 (+0)          0 (+0)          0 (+0)             N/A
                                                         -----------------------------------------------------------------------------------------------
    Total (Annual Change)...............................         0 (N/A)          0 (+0)        90 (+90)        53 (-37)      180 (+127)      400 (+220)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All data for 2011-2015 from EMTS. EPA reviewed all conventional biodiesel and renewable diesel RINs retired for reasons other than demonstrating
  compliance with the RFS standards and subtracted these RINs from the RIN generation totals for each category in the table above to calculate the
  supply in each year.
\b\ Volumes for 2016 are those used in deriving the total renewable fuel standard in the final rule deriving the 2016 standards. This projection was for
  all conventional biodiesel and renewable diesel and did not differentiate between domestically produced and imported fuels or between biodiesel and
  renewable diesel.
\c\ In calculating the supply of conventional biodiesel and renewable diesel we have assumed all exported biodiesel must retire 1.5 RINs per gallon
  consistent with 80.1130. No parties reported exports of renewable diesel from 2011-2015.

    Since 2011 the year-over-year increases in the volume of advanced
biodiesel and renewable diesel in the United States have varied
greatly, from a low of negative 61 million gallons from 2011 to 2012 to
a high of 653 million gallons from 2012 to 2013. These changes in
supply were likely influenced by a number of factors such as the cost
of biodiesel feedstocks and petroleum diesel, the status of the
biodiesel blenders tax credit, growth in marketing of biodiesel at high
volume truck stops and centrally fueled fleet locations, demand for
biodiesel and renewable diesel in other countries, and the volumes of
renewable fuels (particularly advanced biofuels) required by the RFS.
This historical information does not indicate that the maximum
previously observed increase of 653 million gallons of advanced
biodiesel and renewable diesel is reasonably attainable and appropriate
from 2016 to 2017, nor does it indicate that the low growth rates
observed in other years represent the limit of

potential growth in 2017. Rather, these data illustrate both the
magnitude of the increases in advanced biodiesel and renewable diesel
in previous years and the significant variability in these increases.
    We also acknowledge that the volume of conventional (D6) biodiesel
and renewable diesel use in the United States has increased in recent
years, and that these fuels are likely to continue to contribute to the
supply of renewable fuel in the United States in 2017.\73\ If there are
constraints on the total volume of all forms of biodiesel and renewable
diesel related to the ability of the market to distribute and/or
consume biodiesel and renewable diesel, as we believe will likely be
the case in 2017, setting the RFS standards in such a way that the
projected volume of advanced biodiesel and renewable diesel was equal
to the projected volume of total biodiesel and renewable diesel
(including both advanced and conventional fuels) would require all of
the reasonably attainable volume of biodiesel and renewable diesel to
qualify as an advanced biofuel (See Section V.B.2 for more detail on
these constraints). This would assume that the standards we set could
effectively close the market for conventional biodiesel and renewable
diesel, as constraints related to the distribution and use of
additional volumes of biodiesel and renewable diesel would be expected
to make the use of conventional fuels in addition to the advanced
volumes unlikely.\74\ If effective, establishing the RFS volumes in
this way could significantly disrupt the supply chains established to
supply the United States with conventional biodiesel and renewable
diesel. However, it is also possible that the conventional forms of
these fuels would continue to be imported in 2017 despite our action in
setting the advanced biofuel standard, consistent with past practice
and established contracts and supply chains, and that the result, due
to constraints related to distribution and/or consumption of all forms
of biodiesel and renewable diesel, would be an inability to satisfy the
advanced biofuel volume requirement through the production and use of
advanced biofuels (as opposed to use of carryover RINs).
---------------------------------------------------------------------------

    \73\ As shown in Table IV.B.2-2, there was no qualifying
conventional biodiesel and renewable diesel used in the United
States in 2011 and 2012, and the volume of these fuels rose to 90
million gallons, 53 million gallons, and 180 million gallons from
2013-2015.
    \74\ We also note that the potential constraints related to the
distribution and use of biodiesel may lead to an increasing demand
for renewable diesel, which faces fewer potential constraints
related to distribution and use than biodiesel. Much of the
renewable diesel produced globally would qualify as conventional,
rather than advanced biofuel, and we therefore expect that
conventional renewable diesel will continue to be an important
source of renewable fuel used in the United States in 2017.
---------------------------------------------------------------------------

    Although there is uncertainty regarding EPA's ability to
effectively constrain the entry into commerce in the U.S. of
conventional biodiesel and renewable diesel through setting a higher
advanced biofuel standard, we believe our decision for 2017 is
reasonably made on the basis of an analysis of feedstock availability.
The primary difference between conventional and advanced forms of
biodiesel and renewable diesel is the type of feedstock used for
production. EPA received several comments on our proposed rule related
to the availability of qualifying advanced biodiesel and renewable
diesel feedstocks. Some of these comments argued that the expected
increase of qualifying advanced feedstocks was less than the proposed
increase of 200 million gallons of advanced biodiesel and renewable
diesel from 2016 to 2017 (from 2.1 billion gallons to 2.3 billion
gallons). These parties generally argued that because the available
supply of qualifying advanced feedstocks would not increase in line
with the proposed volume requirements, the proposed standards would
likely result in feedstock substitution, with an increased use of
qualifying advanced feedstocks for biodiesel and renewable diesel
production, while the parties previously using these feedstocks for
food, feed, or industrial purposes would turn to alternative
feedstocks. These commenters generally speculated that as biodiesel and
renewable diesel producers sought out more qualifying advanced
feedstocks, other parties would likely turn to greater use of palm oil
as a substitute. Alternatively, other parties argued that there were
sufficient qualifying advanced feedstocks to achieve significantly
higher volumes of advanced biodiesel and renewable diesel than the
volumes in EPA's proposed rule. They requested that in light of the
availability of these feedstocks EPA should finalize increases from
both the proposed advanced biofuel standard for 2017 and the proposed
biomass-based diesel standard for 2018. Commenters arguing for either
lower or higher advanced biofuel standards in 2017 on the basis of the
availability of qualifying advanced feedstocks both included feedstock
assessments to support their claims. These assessments are discussed
briefly below. More detail on EPA's evaluation of each of these
assessments can be found in Section 2.4.5 of the RTC document.
    Commenters claiming that qualifying feedstocks would not increase
sufficiently to meet the proposed increase in advanced biodiesel and
renewable diesel from 2016 to 2017 generally relied on a study by
Nelson and Searle.\75\ This study builds upon a 2015 study by Brorsen
\76\ of available feedstocks capable of being utilized to produce
biodiesel. The Nelson and Searle study focused on the production and
recovery of feedstocks in the United States that can be used to produce
advanced biodiesel, after accounting for demand from other sectors
(e.g., food, feed, industrial, etc.). It concluded that feedstocks for
advanced biofuels (e.g., soy oil, canola oil, yellow grease etc.) were
expected to increase so that biodiesel fuel could increase by 23
million gallons in 2017, and increase at an annual average rate of 31.5
million gallons through 2022.\77\ The study's strength is its
transparent methodology in accounting for the different types of
feedstocks that can be utilized to produce advanced biofuels.
---------------------------------------------------------------------------

    \75\ Nelson, B. and Searle, S., ``Projected availability of
fats, oils, and greases in the U.S.'', 2016, ICCT Working Paper.
EPA-HQ-OAR-2016-0004-1800.
    \76\ Brorsen, W., ``Projections of U.S. Production of Biodiesel
Feedstock'', 2015, EPA-HQ-OAR-2015-0111.
    \77\ Producing one gallon of biodiesel or renewable diesel
requires approximately one gallon of feedstock.
---------------------------------------------------------------------------

    The Nelson and Searle study is a fairly conservative view of the
increased availability of advanced biodiesel/renewable diesel
feedstocks from planted crops in the United States in the next few
years. For the following reasons we believe it likely under-estimates
the total availability of advanced feedstocks for biodiesel and
renewable diesel production in 2017. USDA's most recent World
Agricultural Supply and Demand Estimates (WASDE) has larger increases
in vegetable oils in the U.S. than the Nelson and Searle study (see
discussion below).\78\ The Nelson and Searle study did not consider the
availability of feedstocks for advanced biodiesel and renewable diesel
production in countries other than the United States. It also assumed
no significant increases in distillers corn oil or the recovery of
additional waste oils such as yellow grease or brown grease.\79\
---------------------------------------------------------------------------

    \78\ USDA, World Agricultural Supply and Demand Estimates,
September 2016, p. 10.
    \79\ The study also did not account for the potential decline in
soybean oil use in food, as a result of a June 2015 FDA
determination requiring the elimination by 2018 of all partially
hydrogenated oil in food use (See the determination on the RFS Web
site at http://www.fda.gov/Food/IngredientsPackagingLabeling/FoodAdditivesIngredients/ucm449162.htm). To the extent that soy oil
continues to be phased down for food purposes, this will free up
some supply of soy oil for biodiesel. Any reduction in soybean oil
used for food purposes, however, would be expected to lead to an
increased use of other vegetable oils for food purposes. These
alternative oils, then, would not be available as potential
feedstocks for renewable fuel.

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

    Commenters arguing that there is sufficient available feedstock for
much higher volumes of advanced biodiesel and renewable diesel
generally cited studies conducted by LMC International.\80 81\ The 2016
LMC International study is an update to a previous study that LMC
International undertook for the previous RFS Annual Rule (2014-2016).
Both of the LMC International studies sought to quantify the global
availability of feedstocks for advanced biodiesel and renewable diesel
production, after accounting for demand for these feedstocks in other
markets. The most recent LMC International study concluded that the
global availability of feedstocks for use in advanced biodiesel and
renewable diesel production is expected to grow from 8.6 billion
gallons in 2017 to 9.2 billion gallons in 2018 and 9.8 billion gallons
in 2020. While they do not provide an estimate of feedstock
availability broken down by qualifying oils and fats in 2016, they do
state that the global supply of advanced feedstock is expected to
``rise steadily'' over the forecast period. In part, this is due to an
upward revision of the projected level of soy oil production worldwide
since their 2015 study. This would suggest an annual increase in
advanced feedstock availability of up to 600 million gallons per year.
The most recent LMC International study does not attempt to determine
how much of the increase in this feedstock, or the resulting biodiesel
or renewable diesel, could be expected to be used in the United States
versus other international markets, however they do note that
approximately one third of the existing feedstock is produced in North
America.
---------------------------------------------------------------------------

    \80\ LMC International, ``Current and Future Supply of Biodiesel
Feedstocks'', 2016, EPA-HQ-OAR-2016-0004-2904 (Attachment 14).
    \81\ LMC International, ``Current and Future Supply of Biodiesel
Feedstocks'', 2015, EPA-HQ-OAR-2016-0004-2904 (Attachment 14).
---------------------------------------------------------------------------

    Both of the LMC International studies may overestimate feedstock
availability. For example, when estimating availability, the studies
consider the theoretical maximum amount of oil that could be extracted
from an oil seed, or ``oil in seed'', versus the amount of oil actually
expected to be extracted/produced. Some amount of the soybean supply is
not crushed, and is fed directly to livestock, and in other instances
the soybean is crushed, and oil is extracted, but it is added as a
necessary element to feed and thus doesn't enter the oil market. These
unaccounted for alternate practices contribute to oil supply estimates
that are in some cases significantly higher than USDA estimates. For
example, the most recent LMC International estimate of global soybean
oil supply is more than 25 percent greater than that projected by USDA-
WASDE in 2016/2017.\82\
---------------------------------------------------------------------------

    \82\ USDA, World Agricultural Supply and Demand Estimates,
August 2016. http://usda.mannlib.cornell.edu/usda/waob/wasde//2010s/2016/wasde-08-12-2016.pdf
---------------------------------------------------------------------------

    NBB also submitted a study that contained updated results from the
World Agricultural Economic and Environmental Services model (WAEES
model).\83\ Rather than project the availability of advanced biodiesel
and renewable diesel feedstocks in 2017, this study instead looked at
the likely impacts of meeting a ``market reality'' scenario with an
advanced biofuel standard of 4.75 billion gallons in 2017 and 2018 and
biomass-based diesel standards of 2.0 and 2.50 billion gallons in 2017
and 2018, respectively. In the ``market reality'' scenario, the WAEES
model projected that approximately 2.3 billion gallons of biodiesel and
0.6 billion gallons of renewable diesel would be used to satisfy the
RFS standards for 2017 assumed in this scenario.\84\ The study
concludes that these higher standards could be met with a rise in
biodiesel costs from $3.02 in 2016 to $3.34 in 2017 and $3.58 in 2018.
---------------------------------------------------------------------------

    \83\ Kruse, J., ``Implications of Higher Biodiesel Volume
Obligations for Global Agriculture and Biofuels'', 2016, World
Agricultural Economic and Environmental Services (WAEES), EPA-HQ-
OAR-2016-0004-2904 (Attachment 13).
    \84\ This study assumes that all of the biodiesel is advanced
biodiesel, but notes that the volume of renewable diesel includes
both advanced and conventional renewable diesel.
---------------------------------------------------------------------------

    These WAEES model results, however, are significantly impacted by a
number of fairly optimistic assumptions. Each individual assumption may
be justifiable, but when compiled together the results of the study
imply an outlook for biodiesel/renewable diesel feedstocks that is more
favorable than is likely. For example, WAEES assumes the U.S. biodiesel
blenders tax credit is in place for 2017 and 2018; that foreign
countries do not meet their renewable fuel mandates thus freeing up
biodiesel supplies for the United States market; \85\ that biodiesel
consumption in 2015 was higher than the volumes reported in EMTS; and
that much higher volumes of ethanol are used in higher level ethanol
blends than EPA believes is possible.\86\ Also, in contrast to the
Nelson and Searle study, the WAEES model predicts that corn oil
extraction rates from distillers' grains increase, resulting in an
increase in the supply of corn oil available for biodiesel production
in the United States. Using different assumptions, such as higher
demand for biodiesel in the rest of the world, would result in higher
cost impacts, and less availability of feedstocks to produce biodiesel
for meeting the high potential standards evaluated by the WAEES model.
The combined impact of the key assumptions including the renewal of the
biodiesel blenders tax credit, higher ethanol than EPA believes is
possible etc., are significant. This means that achieving these volumes
is likely to be more difficult than the results from the WAEES model
indicate.
---------------------------------------------------------------------------

    \85\ Many foreign countries have their own biodiesel mandates.
Most countries have increasing stringency in their levels of
required biodiesel, although past performance does not equate to
future results and some past mandates have not been satisfied. See
an assessment entitled, ``Biomass-Based Diesel Mandates and Trade
Trends around the World'' (available at http://www.biofuelsdigest.com/bdigest/2016/08/31/biomass-based-diesel-mandates-and-trade-trends-around-the-world/), for an overview of the
status of biomass-based diesel mandates outside of the United
States.
    \86\ The WAEES model projects 621 million gallons of ethanol
will be used in mid to high level ethanol blends in 2016/2017 and
600 million gallons of ethanol will be used in mid to high level
ethanol blends in 2017/2018. These volumes are significantly higher
than those we project can be consumed in Section V.B.1 of this rule.
---------------------------------------------------------------------------

    In assessing the expected increase in the availability of
feedstocks that can be used to produce advanced biodiesel and renewable
diesel from 2016 to 2017, EPA has looked to a number of different
sources. We believe the most reliable source for projecting the
expected increase in vegetable oils in the United States is USDA's
WASDE. The September 2016 WASDE report projects that the production of
vegetable oils in the United States will increase by 0.33 million
metric tons from 2016 to 2017.\87\ This quantity of vegetable oils
could be used to produce approximately 94

million gallons of advanced biodiesel or renewable diesel.\88\
---------------------------------------------------------------------------

    \87\ The September WASDE was the most recent published WASDE
report available to EPA at the time the advanced biodiesel and
renewable diesel feedstock assessment was conducted. It is available
online at: http://www.usda.gov/oce/commodity/wasde/latest.pdf. The
WASDE projects the supply of agricultural commodities by
agricultural marketing year, rather than calendar year. The
agricultural marketing year runs from October 1 through September
30. We have therefore used the WASDE projections from 2015/2016 to
represent available feedstocks in 2016, and the projections from
2016/2017 to represent available feedstocks in 2017.
    \88\ To calculate this volume we have used a conversion of 7.7
pounds of feedstock per gallon of biodiesel. This is based on the
expected conversion of soy oil (http://extension.missouri.edu/p/G1990), which is the largest source of feedstock used to produce
advanced biodiesel and renewable diesel. We believe that it is also
a reasonable conversion factor to use for all virgin vegetable oils.
---------------------------------------------------------------------------

    In addition to virgin vegetable oils, we also expect increasing
volumes of distillers corn oil to be available for use in 2017. In
assessing the likely increase in the availability of distillers corn
oil from 2016 to 2017, the authors of the WAEES model considered the
impacts of an increasing adoption rate of distillers corn oil
extraction technologies, as well as increased corn oil extraction rates
enabled by advances in this technology. They project that the
availability of distillers corn oil will increase by approximately 83
million gallons from 2016 to 2017.\89\ We believe that this is a
reasonable projection of the increased production of distillers corn
oil from 2016 to 2017. While the vast majority of the increase in
advanced biodiesel and renewable diesel feedstocks produced in the
United States from 2016 to 2017 is expected to come from virgin
vegetable oils and distillers corn oil, increases in the supply of
other sources of advanced biodiesel and renewable diesel feedstocks,
such as biogenic waste oils, fats, and greases, may also occur. These
increases, however, are expected to be modest. In total, we expect that
increases in feedstocks produced in the United States are sufficient to
produce approximately 200 million more gallons of advanced biodiesel
and renewable diesel in 2017 relative to 2016. We note that this is
consistent with the results from the LMC model, mentioned above, which
projected a global increase of 600 million gallons of advanced
biodiesel and renewable diesel feedstocks and notes that historically
approximately one third of the total quantity of these feedstocks has
been produced in North America.
---------------------------------------------------------------------------

    \89\ Kruse, J., ``Implications of Higher Biodiesel Volume
Obligations for Global Agriculture and Biofuels'', 2016, World
Agricultural Economic and Environmental Services (WAEES), EPA-HQ-
OAR-2016-0004-2904 (Attachment 13).
---------------------------------------------------------------------------

    In addition to the expected increase in advanced feedstocks
produced in the United States, we have also considered the expected
increase in the imports of advanced biodiesel and renewable diesel
produced in other countries. We believe this is appropriate in light of
the significant expected increase in advanced biodiesel and renewable
diesel feedstocks in countries other than the United States (estimated
at approximately 400 million gallons using the global results from the
LMC model together with our estimate of the increase in the domestic
production of these feedstocks discussed above), and the increasing
volumes of imported advanced biodiesel and renewable diesel in recent
years. While there has been significant variation in the volume of
advanced biodiesel and renewable diesel imports in previous years, the
general trend has been for increasing volumes of imports. From 2011
through 2015, the average annual rate of increase in the imported
volume of advanced biodiesel and renewable diesel has been
approximately 85 million gallons per year.\90\ From 2012 through 2015
the average annual rate of increase for these fuels was approximately
105 million gallons per year.\91\
---------------------------------------------------------------------------

    \90\ This number is calculated using the information in Table
IV.B.2-1 above. The total imports of advanced biodiesel and
renewable diesel was 44 million gallons in 2011, rising to 382
million gallons in 2015.
    \91\ This number is calculated using the information in Table
IV.B.2-1 above. The total imports of advanced biodiesel and
renewable diesel was 68 million gallons in 2012, rising to 382
million gallons in 2015.
---------------------------------------------------------------------------

    We therefore believe it is reasonable to expect the imports of
advanced biodiesel and renewable diesel to increase by approximately
100 million gallons from 2016 to 2017. We believe that this volume of
imported advanced biodiesel and renewable diesel will continue to
provide the appropriate market demand signal for advanced biodiesel and
renewable diesel, without resulting in the potential negative impacts
of large scale feedstock switching discussed above. We note that we do
not believe that the supply of imported advanced biodiesel and
renewable diesel necessarily could or should increase by 100 million
gallons per year for years beyond 2017. There are several factors, such
as expected slowing growth rates in the production of advanced
biodiesel and renewable diesel feedstocks and increasing demand for
advanced biodiesel and renewable diesel in other countries, which
indicate that this rate of growth in imported volumes of advanced
biodiesel and renewable diesel will likely slow in futures years.
Nevertheless, we believe an increase of 100 million gallons of imported
advanced biodiesel and renewable diesel is reasonable to assume from
2016 to 2017.
    After a careful consideration of the assessments of available
feedstocks, along with comments we received on the proposed 2017 volume
standards and a review of the historic supply of advanced biodiesel and
renewable diesel to the United States in previous years, EPA has
determined that 2.4 billion gallons of advanced biodiesel and renewable
diesel is reasonably attainable and appropriate for use in our
determination of the advanced biofuel standard for 2017. This volume,
which is 300 million gallons higher than the volume of advanced
biodiesel and renewable diesel projected in deriving the advanced
biofuel standard in 2016, reflects EPA's assessment of the expected
increase in advanced feedstocks available for the production of
advanced biodiesel and renewable diesel for the U.S. market from 2016
to 2017. We believe that in not considering potential increases in the
volume of distillers corn oil or waste feedstocks that can be
recovered, and by focusing solely on feedstock availability in the
United States, the Nelson and Seale study significantly under-estimated
the likely increase in available feedstocks from 2016 to 2017.
Conversely, while the LMC model may be a relatively reasonable
assessment of the growth in global availability (with the exception of
the optimistic assumptions noted above), it would be unreasonable to
assume that all of this feedstock can or should be used for biodiesel
and renewable diesel production for use in the United States.
    While we are projecting that 2.4 billion gallons of advanced
biodiesel and renewable diesel will be available to the United States
in 2017 for the purposes of deriving the advanced biofuel standard, we
do not believe that this is the maximum volume that could be supplied.
It is possible that if EPA were to set a higher advanced biofuel
standard that prices for biodiesel and renewable diesel (and the
associated RINs) would rise to levels that would result in a greater
supply of advanced biodiesel and renewable diesel to the United States.
These increases, however, would likely not be the result of additional
production of advanced biodiesel and renewable diesel production
enabled by an increase in the production of advanced feedstocks.
Advanced biodiesel and renewable diesel feedstocks include both waste
oils, fats and greases and oils from planted crops. In recent years the
demand for waste oils, fats, and greases for biodiesel production has
been significant, especially as mandated volumes of renewable fuels in
the United States and around the world have increased. While we believe
an increase in supply of waste oils, fats, and greases is possible in
2017 based in part on the studies cited above, we

believe this increase is limited as much of these oils, fats, and
greases are already being recovered and used in biodiesel and renewable
diesel production or for other purposes. Many of the planted crops that
supply vegetable oil for advanced biodiesel and renewable diesel
production are primarily grown as livestock feed with the oil as a co-
product or by-product, rather than specifically as biodiesel and
renewable diesel feedstocks.\92\ This is true for soy beans and corn,
which are the two largest sources of feedstock from planted crops used
for biodiesel production in the United States.\93\ This means that the
planted acres of these crops are unlikely to respond to additional
demand for vegetable oils for biodiesel and renewable diesel production
in the near term, as the oils produced are not the primary source of
revenue for these crops.
---------------------------------------------------------------------------

    \92\ For example, corn oil is a co-product of corn grown
primarily for feed or ethanol production, while soy and canola oil
are primarily grown as livestock feed. For further discussion on
this issue see the LMC International study, submitted as part of the
NBB comments (EPA-HQ-OAR-2016-0004-2904, Attachment 14).
    \93\ According to EIA data 4,906 million pounds of soy bean oil
and 1,044 million pounds of corn oil were used to produce biodiesel
in the United States in 2015. Other significant sources of feedstock
were yellow grease (1,232 million pounds), canola oil (745 million
pounds), white grease (588 million pounds), tallow (429 million
pounds), and poultry fat (190 million pounds). Numbers from EIA's
February 2016 Monthly Biodiesel Production Report. Available at
http://www.eia.gov/biofuels/biodiesel/production/archive/2015/2015_12/biodiesel.pdf.
---------------------------------------------------------------------------

    Given the limited ability of the markets to provide additional
feedstocks in response to a higher advanced biofuel standard in 2017,
we believe that the primary impact of setting a standard involving more
than a 300 million gallon increase over the 2016 standard could be a
decreased use of advanced biodiesel and renewable diesel in other
countries (as this supply is shifted to the United States) as well as
significant feedstock substitution as the food, feed, and industrial
oil markets switch to non-advanced feedstocks to free up greater
volumes of advanced feedstocks for advanced biodiesel and renewable
diesel production.\94\ Increasing the short-term supply of advanced
biodiesel and renewable diesel to the United States in this manner
(simply shifting the end use of advanced feedstocks and biodiesel and
renewable diesel produced from these feedstocks and displacing
conventional biodiesel and renewable diesel with advanced biodiesel and
renewable diesel) may not advance the GHG goals of the RFS program. In
a worst case scenario, higher standards could cause supply disruptions
to a number of markets as biodiesel and renewable diesel producers seek
additional supplies of advanced feedstocks and the parties that
previously used these feedstocks, both within and outside of the fuels
marketplace, seek out alternative feedstocks. This could result in
significant cost increases, for both biodiesel and renewable diesel as
well as other products produced from renewable oils, while failing to
meaningfully reduce overall GHG emissions or increase U.S. energy
security. Nevertheless, while the growth in the availability of
advanced feedstocks may be slowing both in the U.S. and abroad, as
indicated by some studies,\95\ we believe that a volume of 2.4 billion
gallons of advanced biodiesel and renewable diesel (300 million gallons
more than our projection of the available volume of these fuels in
2016) is both reasonably attainable and appropriate in 2017.
---------------------------------------------------------------------------

    \94\ Given the constraints in the use of total biodiesel and
renewable diesel in the U.S. described in Section V, increasing the
use of advanced biodiesel and renewable diesel in the U.S. in 2017
could be expected to also lead to a decrease in the use of
conventional biodiesel and renewable diesel. Any energy security
benefits gained from additional volumes of advanced biodiesel and
renewable diesel would be expected to be off-set by the
corresponding lower consumption of conventional biodiesel and
renewable diesel.
    \95\ See the results of the LMC International study, which
projects that the availability of advanced feedstocks for biodiesel
and renewable diesel production will increase by 600 million gallons
from 2017 to 2018 (8.6 billion gallons to 9.2 billion gallons), but
these increases will be only 300 million gallons per year from 2018-
2020 (9.2 to 9.8 billion gallons over two years).
---------------------------------------------------------------------------

    The 300 million gallon annual increase we are using for 2017 is a
little less than the increase in advanced biodiesel and renewable
diesel we assumed in deriving the 2016 advanced biofuel standard would
occur from 2015 to 2016 (approximately 370 million gallons). We believe
that this is reasonable because the circumstances we are facing in this
action are different from those we were facing in the 2014-2016 final
rule. The 2016 standards followed two years where standards had not
been set by the statutory deadlines. Relatively modest increases in the
supply of advanced biodiesel and renewable diesel occurred in 2014 and
2015. This meant that there was greater opportunity in 2016 to take
advantage of market changes that had not been fully utilized in the
preceding two years.
    EPA also received comments on the equivalence value EPA used to
convert the volume of advanced biodiesel and renewable diesel into a
projected number of RINs for the purpose of deriving the proposed
advanced biofuel standard. Biodiesel has an equivalence value of 1.5,
while renewable diesel generally has an equivalence value of 1.7.\96\
In the proposed rule EPA assumed an equivalence value of 1.5,
consistent with the past rules, using the simplifying assumption that
the vast majority of volume was biodiesel. Commenters noted, however,
that using an equivalence value of 1.5 did not properly account for the
significant volumes of renewable diesel that is expected to be supplied
to the United States in 2017. EPA agrees with these comments. In this
final rule we have used an equivalence value of 1.55 to convert the
projected volume of advanced biodiesel and renewable diesel to a volume
of RINs for the purpose of deriving the advanced biofuel standard. We
have similarly used this higher equivalence value (1.55) to convert the
projected volume of total biodiesel and renewable diesel (both advanced
and conventional) to a volume of RINs for the purpose of deriving the
total renewable fuel standard for 2017. This higher equivalence value
is generally consistent with the volume weighted average equivalence
value for the volume of advanced biodiesel and renewable diesel
supplied to the United States in recent years.\97\ Note that this
higher equivalence value does not impact the volume of biodiesel and
renewable diesel, but does increase the number of RINs that is expected
to be generated for this volume of biodiesel and renewable diesel,
which impacts both the advanced and total renewable fuel standards.
---------------------------------------------------------------------------

    \96\ This means that biodiesel producers generally generate 1.5
RINs for every gallon of biodiesel they produce, while renewable
diesel producers generally generate 1.7 RINs for every gallon of
renewable diesel they produce.
    \97\ ``Converting volumes to RINs for biodiesel & renewable
diesel,'' docket EPA-HQ-OAR-2016-0004.
---------------------------------------------------------------------------

    We note that the reasonably attainable and appropriate volume of
advanced biodiesel and renewable diesel projected for the purpose of
deriving the advanced biofuel volume requirement cannot itself be
viewed as a volume requirement. This volume is merely the basis on
which we have determined the volume requirements for advanced biofuel
and total renewable fuel. As discussed in more detail in Section V.C
below, there are many ways that the market could respond to the
percentage standards we establish, including use of advanced biodiesel
and renewable diesel volumes higher or lower than those projected in
this section.

3. Other Advanced Biofuel
    In addition to cellulosic biofuel, imported sugarcane ethanol, and
advanced biodiesel and renewable diesel, there are other advanced
biofuels that can be counted in the determination of reasonably
attainable and appropriate volumes of advanced biofuel for 2017. These
other advanced biofuels include biogas, naphtha, heating oil, butanol,
and jet fuel. However, the supply of these fuels has been relatively
low in the last several years.

                          Table IV.B.3-1--Historical Supply of Other Advanced Biofuels
                                      [Million ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                Renewable
                                      Biogas        Heating oil       Naphtha        diesel a          Total
----------------------------------------------------------------------------------------------------------------
2013............................              26               0               3              64              93
2014............................              20               0              18              15              53
2015............................               0               1              24               8              33
----------------------------------------------------------------------------------------------------------------
\a\ Some renewable diesel generates D5 rather than D4 RINs as a result of being produced through coprocessing
  with petroleum or being produced from the non-cellulosic portions of separated food waste or annual cover
  crops.

    The downward trend over time in biogas as advanced biofuel with a D
code of 5 is due to the re-categorization in 2014 of landfill biogas
from advanced (D code 5) to cellulosic (D code 3).\98\ The average of
the remaining sources over all three years is 44 million gallons. Based
on historical supply and the expectation that growth in the advanced
biofuel standard will continue to provide incentives for growth in the
supply of these other advanced biofuels, we proposed using 50 million
gallons in the context of determining the advanced biofuel volume
requirement.
---------------------------------------------------------------------------

    \98\ 79 FR 42128, July 18, 2014.
---------------------------------------------------------------------------

    While some stakeholders suggested that volumes higher than 50
million gallons were possible in 2017, they relied primarily on
opportunities for other biofuels to qualify as advanced under the
existing regulations, including jet fuel, liquefied petroleum gas
(LPG), and liquefied natural gas (as distinct from compressed natural
gas). We agree that such opportunities exist, and believe that they
could help the total volume of other advanced biofuels to reach 50
million gallons in 2017. However, since they have been produced in only
de minimis amounts in the past, we do not have a basis for projecting
substantial volumes from these sources in 2017. We have taken into
consideration that the market supplied 67 million gallons of non-biogas
advanced biofuel in 2013, demonstrating that it is capable of achieving
supply of more than 50 million gallons. However, overall supply of
other advanced biofuel decreased in 2014 and 2015, albeit during years
when the RFS standards were not in place to drive increased production
and use. Since it is not possible to discern the precise cause of the
reduced volumes achieved in 2014 and 2015, we do not believe it would
be reasonable to ignore these data points. We believe it is most
reasonable to assume reasonably attainable volumes somewhat lower than
the historic maximum, but higher than the low volumes seen in 2014 and
2015 that likely reflect in part the absence of a driving RFS standard.
In light of these considerations, we believe it is reasonable to assume
reasonably attainable and appropriate volumes of 50 million gallons of
other advanced biofuel in 2017.
    Some stakeholders suggested that we should ignore supply from other
advanced biofuel sources altogether, citing the low volumes supplied in
the past. We disagree. Some volumes are clearly attainable, and we do
not believe it would be appropriate to ignore them. Therefore, for the
purposes of determining the final advanced biofuel volume requirement,
we have used 50 million gallons of other advanced biofuel.
4. Total Advanced Biofuel
    The combination of all sources of advanced biofuel described in the
previous sections leads us to believe that 4.28 billion gallons of
advanced biofuel is reasonably attainable and appropriate to require in
2017, and that it is not necessary to reduce the advanced biofuel
statutory target by the full amount permitted under the cellulosic
waiver authority. This is the advanced biofuel volume requirement that
we are establishing for 2017.

  Table IV.B.4-1--Volumes Used To Determine the Final Advanced Biofuel
                       Volume Requirement for 2017
          [Million ethanol-equivalent gallons except as noted]
------------------------------------------------------------------------
                                                              311
------------------------------------------------------------------------
Advanced biodiesel and renewable diesel (ethanol-            3,720/2,400
 equivalent volume/physical volume)..................
Imported sugarcane ethanol...........................                200
Other non-ethanol advanced...........................                 50
                                                      ------------------
    Total advanced biofuel...........................              4,281
------------------------------------------------------------------------

    The final volume requirement for advanced biofuel for 2017 is an
increase of about 300 million gallons from the proposed volume of 4.0
billion gallons, primarily reflecting our updated assessment of
biodiesel and renewable diesel.
    The volume of advanced biofuel that we are establishing for 2017
will require increases from current levels that are substantial yet
reasonably attainable and appropriate, taking into account the
constraints on supply discussed previously, our judgment regarding the
ability of the standards we set to result in marketplace changes,
feedstock availability, and the various

uncertainties we have described. Figure IV.B.4-1 shows that the
advanced biofuel volume requirement for 2017 will be significantly
higher than the volume requirements for advanced biofuel in previous
years.
[GRAPHIC] [TIFF OMITTED] TR12DE16.005

    In response to the NPRM, stakeholders were strongly divided on
whether the proposed 2017 advanced biofuel volume of 4.0 billion
gallons was too high or too low. Parties representing advanced biofuel
production, including biodiesel and sugarcane ethanol, expressed
concern that 4.0 billion gallons would not provide enough incentive for
the market to grow. However, the final volume of 4.28 billion gallons
is about 700 million gallons higher than the 2016 volume requirement,
providing significant opportunities for growth as discussed in more
detail in Section V.C
    Among commenters who suggested an alternative, higher volume for
the 2017 advanced biofuel volume requirement, most based it primarily
on a higher assumed level of BBD of between 2.5 and 2.9 billion
gallons. As discussed in Section IV.B.2, after consideration of
stakeholder comments, we do not believe that BBD volumes this high are
reasonably attainable or appropriate in 2017. One stakeholder also
believed that the methodology that we developed for determination of
cellulosic biofuel underestimated potential 2017 volumes, and suggested
that an additional 100 million gallons of cellulosic biofuel was
possible. As discussed in Section III.D, we continue to believe that
our methodology for cellulosic biofuel appropriately accounts for
uncertainty in projections for that emerging industry, and that while
an additional 100 million gallons of cellulosic biofuel could be
considered possible, it is unlikely and thus should not be included in
volumes used as the basis for the 2017 standards.
    Parties representing the refining industry generally believed that
the proposed volume of 4.0 billion gallons for advanced biofuel was too
high. They suggested an alternative 2017 advanced biofuel volume
requirement of 3.2 billion gallons, considerably below the 2016 volume
requirement of 3.61 billion gallons. Although there are many problems
with the assumptions these commenters used to justify their suggestion,
we note first that, as described in Section I.B.1, available evidence
indicates that the 2016 standard for advanced biofuel is on track to be
met. Since available evidence indicates that the 2016 advanced biofuel
standard is likely to be met, we see no reason to expect that at least
the same volumes cannot be attained in 2017.
    These stakeholders also assumed that imports of sugarcane ethanol
and other advanced biofuel would be zero in 2017. Making such an
assumption would be inconsistent with all past experience and there is
no basis to assume that imports cannot contribute at least some volume
in 2017.
    The suggested advanced biofuel volume requirement of 3.2 billion
gallons also assumes that cellulosic biofuel will only reach 200
million gallons instead of the 312 million gallons that we proposed. As
described in Section III.D, we do not believe that using only historic
cellulosic production volumes is appropriate when making projections
for the future; the statute directs EPA to set the cellulosic volume at
the ``projected volume . . . of production,'' rather than on the basis
of past production alone.
    Finally, these stakeholders' suggestion of 3.2 billion gallons of
advanced biofuel assumes that the supply of BBD will not exceed the
applicable BBD standard, which is 2.0 billion gallons for 2017. There
is no basis for this assumption in setting the advanced biofuel volume
requirement. The total supply of BBD has consistently exceeded the
applicable BBD standard in the past, and is expected to do so again in
2016. Moreover, actual supply of BBD in 2016 is likely to exceed 2.0
billion gallons as shown in a memorandum to the docket.\99\ As
described in the NPRM and in the 2014-2016 final rule, the advanced
biofuel standard creates a significant incentive for supply of BBD at
levels higher than the BBD standard. Commenters supporting 3.2 billion
gallons of advanced biofuel for 2017 gave no compelling reason why BBD
cannot reach levels higher than 2.0 billion gallons.
---------------------------------------------------------------------------

    \99\ ``Comparison of 2016 availability of RINs and 2016
standards,'' memorandum from David Korotney to docket EPA-HQ-OAR-
2016-0004.
---------------------------------------------------------------------------

    As noted before, the volumes actually used to satisfy the advanced
biofuel volume requirements may be different than those shown in Table
IV.B.4-1 above. The volumes of individual types of renewable fuel that
we have used in this analysis represent our best estimate of volumes
that are reasonably

attainable by a market that is responsive to the RFS standards.
However, given the uncertainty in these estimates, the volumes of
individual types of advanced biofuel may be higher or lower than those
shown above.

V. Total Renewable Fuel Volume for 2017

    The national volume targets of total renewable fuel to be used
under the RFS program each year through 2022 are specified in CAA
section 211(o)(2)(B)(i)(I). For 2017 the statute stipulates that the
volume of total renewable fuel should be 24 billion gallons. Since we
have determined that the statutory volume target for cellulosic biofuel
must be reduced to reflect the projected production volume of that fuel
type in 2017, we are authorized under CAA section 211(o)(7)(D)(i) to
reduce the advanced biofuel and total renewable fuel targets by the
same or a lesser amount. We also have the authority to reduce any
volume target under the general waiver authority under specific
conditions as described in Section II.A.2. Although in the NPRM we had
proposed to use a combination of the cellulosic waiver authority and
the general waiver authority to reduce the statutory volume target for
total renewable fuel for 2017, we have determined, based on comments
received in response to the NPRM and a review of updated information,
that 2017 supply is adequate to meet a total renewable fuel volume
requirement of 19.28 billion gallons resulting from the use of the
cellulosic waiver authority alone. The use of the general waiver
authority for 2017 to further reduce the total renewable fuel standard
is therefore not necessary. As a result, the implied volume for
conventional (non-advanced) renewable fuel will be 15.0 billion
gallons.
    Today's standards are significantly higher than have been achieved
in the past and will drive significant growth in renewable fuel use
beyond what would occur in the absence of the requirements. The final
volume requirements for both advanced biofuel and total renewable fuel
recognize the ability of the market to respond to the standards we set,
thereby accomplishing the goals of the statute to increase renewable
fuel use.
    We investigated whether the market is on track to meet the 2016
total renewable fuel volume requirement of 18.11 billion gallons, which
EPA projected to be the maximum achievable volume for that year in the
context of our use of the general waiver authority. As described in a
memorandum to the docket, supply through the end of September coupled
with a projection based on consideration of seasonal variations in
supply for previous years indicate that compliance with the 2016
standards is indeed within reach.\100\ We believe these results support
the assessment conducted for purposes of establishing the 2016 total
renewable fuel standard. For this final rule, we have taken a similar
approach to assessing the adequacy of supply of total renewable fuel
that differs in some particulars as described below.
---------------------------------------------------------------------------

    \100\ ``Comparison of 2016 availability of RINs and 2016
standards,'' memorandum from David Korotney to docket EPA-HQ-OAR-
2016-0004.
---------------------------------------------------------------------------

A. Volumetric Limitation on Use of the Cellulosic Waiver Authority

    In Section IV.B we explained our use of the cellulosic waiver
authority to reduce the statutory volume target for advanced biofuel to
a level that we have determined is reasonably attainable and
appropriate given a consideration of factors related to the likely
constraints on imports, distribution and use, and global GHG impacts of
incremental growth in advanced biodiesel and renewable diesel. This did
not require a reduction as large as the reduction in the statutory
volume target for cellulosic biofuel, and so this reduction was within
the authority provided by CAA section 211(o)(7)(D)(i).
    As discussed in Section II.A.1, we believe that the cellulosic
waiver provision is best interpreted to require equal reductions in
advanced biofuel and total renewable fuel. We have consistently
articulated this interpretation.\101\ Having determined that we should
establish the advanced biofuel volume at a level requiring a reduction
of 4,719 million gallons from the statutory target, applying an equal
reduction to the statutory target for total renewable fuel yields the
results shown below.
---------------------------------------------------------------------------

    \101\ For instance, see discussion in the final rule setting the
2013 standards: 78 FR 49809-49810, August 15, 2013.

Table V.A-1--Applying Equal Volume Reductions to Total Renewable Fuel as
         for Advanced Biofuel Under Cellulosic Waiver Authority
                            [Million gallons]
------------------------------------------------------------------------
                                             Advanced          Total
                                              biofuel     renewable fuel
------------------------------------------------------------------------
Statutory target........................           9,000          24,000
Reduction under the cellulosic waiver              4,719           4,719
 authority..............................
                                         -------------------------------
    Resulting volume....................           4,281          19,281
------------------------------------------------------------------------

    If we were to determine that there is an inadequate domestic supply
to satisfy the total renewable fuel volume resulting from use of the
cellulosic waiver authority alone, we could use the general waiver
authority, described in Section II.A.2, to provide further reductions.
Indeed, we proposed such an approach. However, we have re-evaluated the
situation in light of new data and consideration of comments, and as
described below we have determined that there will be adequate supply
to meet a total renewable fuel volume requirement of 19.28 billion
gallons in 2017.\102\ As a result of this assessment, we have
determined that further reductions in the total renewable fuel
applicable volume using the general wavier authority are not necessary.
---------------------------------------------------------------------------

    \102\ Stakeholder comments most directly impacting our
assessment of the adequacy of supply of total renewable fuel were
directed at distribution issues associated with biodiesel and
renewable diesel. See Section V.B.2 for further discussion.
---------------------------------------------------------------------------

B. Assessing Adequacy of Supply

    As noted above, the applicable volume of total renewable fuel was
derived by applying the same volume reduction to the statutory volume
target for total renewable fuel as was determined to be appropriate for
advanced biofuel, using the cellulosic waiver authority. This section
describes our assessment that there is adequate

supply to meet an applicable volume requirement of 19.28 billion
gallons. The objective of our assessment is different than our analysis
in the NPRM, where we sought to identify the maximum reasonably
achievable volume of total renewable fuel based on the sum of estimates
of each type of renewable fuel, such as total ethanol, biodiesel and
renewable diesel, biogas, and other non-ethanol renewable fuels. In
this final rule, in contrast, we instead are evaluating those sources
to determine if in the aggregate it appears that there is adequate
supply to meet the total renewable fuel volume shown in Table V.A-1.
Based on our conclusion that there is sufficient supply as discussed
below, it is unnecessary to address any inadequate domestic supply
through use of the general waiver authority.
    Despite the different objective, we face much the same challenges
that we noted in the NPRM: It is a very challenging task to estimate
the adequacy of supply in light of the myriad complexities of the fuels
market and how individual aspects of the industry might change in the
future, and also because we cannot precisely predict how the market
will respond to the volume-driving provisions of the RFS program. This
is the type of assessment that is not given to precise measurement and
necessarily involves considerable exercise of judgment.
    Our investigation into whether there is adequate supply to meet the
total renewable fuel volume shown in Table V.A-1 was driven primarily
by a consideration of the total amount of ethanol that can be
reasonably attained in light of various constraints, and the total
volume of biodiesel and renewable diesel that can be reasonably
attained. We also considered smaller contributions from non-ethanol
cellulosic and other non-ethanol renewable fuels (i.e. naphtha, heating
oil, butanol, and jet fuel). With regard to the more dominant
contributors, the information that is available has allowed us to make
a relatively more precise estimate of total supply of ethanol than of
biodiesel/renewable diesel. This is due to the fact that the primary
constraints in the supply of ethanol in 2017 are readily identifiable,
although still challenging to quantify, while there are many different
factors that could potentially constrain the supply of biodiesel and
renewable diesel in 2017. As a result, we did not attempt to derive a
specific estimate of reasonably attainable supply of total biodiesel
and renewable diesel. Instead, after estimating what we consider to be
reasonably attainable supply of ethanol in 2017, and taking into
account the estimates of non-ethanol cellulosic biofuel supply
discussed in Section III.D above and estimates of other non-ethanol
renewable fuel supply discussed in Section IV.B.3, we considered
whether the supply of total biodiesel and renewable diesel would be
adequate to satisfy a requirement of 19.28 billion gallons.\103\ The
following sections provide our assessment of ethanol and biodiesel/
renewable diesel volumes.
---------------------------------------------------------------------------

    \103\ As noted earlier, ``reasonably attainable'' volumes may be
less than the ``maximum achievable'' volumes we would seek to
identify when using the general waiver authority based on a finding
of inadequate domestic supply. It follows that if there are
sufficient reasonably attainable volumes of renewable fuel to
satisfy a total renewable fuel requirement of 19.28 billion gallons,
that there is no basis for a finding of inadequate domestic supply.
---------------------------------------------------------------------------

1. Ethanol
    Ethanol is the most widely produced and consumed biofuel, both
domestically and globally. Since the beginning of the RFS program, the
total volume of renewable fuel produced and consumed in the United
States has grown substantially each year, primarily due to the
increased production and use of corn ethanol. However, the rate of
growth in the supply of ethanol to the U.S. market has decreased in
recent years as the gasoline market has become saturated with E10, and
efforts to expand the use of higher ethanol blends such as E15 and E85
have not been sufficient to maintain past growth rates. Although we
believe ethanol use is growing and can continue to grow, the low number
of retail stations selling these higher-level ethanol blends, along
with poor price advantages compared to E10, and a limited number of
FFVs, among others, represent challenges to the rate of growth of
ethanol as a transportation fuel in the United States.
    In the 2014-2016 final rule we discussed in detail the factors that
constrain growth in ethanol supply and the opportunities that exist for
pushing the market to overcome those constraints.\104\ That discussion
generally remains relevant for 2017, though we believe that the supply
of ethanol can be somewhat higher in 2017 than in 2016.
---------------------------------------------------------------------------

    \104\ 80 FR 77456-77465.
---------------------------------------------------------------------------

    Ethanol supply is not currently limited by production and import
capacity, which is in excess of 15 billion gallons.\105\ Instead, the
amount of ethanol supplied is constrained by the following:
---------------------------------------------------------------------------

    \105\ ``RFA 2016 Annual Industry Outlook,'' docket EPA-HQ-OAR-
2016-0004.
---------------------------------------------------------------------------

     Overall gasoline demand and the volume of ethanol that can
be blended into gasoline as E10 (typically referred to as the E10
blendwall).
     The number of retail stations that offer higher ethanol
blends such as E15 and E85.
     The number of vehicles that can both legally and
practically consume E15 and/or E85.
     Relative pricing of E15 and E85 versus E10 and the ability
of RINs to affect this relative pricing.
     The supply of gasoline without ethanol (E0).
    The applicable standards that we set under the RFS program provide
incentives for the market to overcome many of these ethanol-related
constraints.
    While in the short term the RFS program is unlikely to have a
direct effect on overall gasoline demand or the number of vehicles
designed to use higher ethanol blends, it can provide incentives for
changes in some other market factors, such as the number of retail
stations that offer higher ethanol blends and the relative pricing of
those higher ethanol blends in comparison to E10. The RFS program
complements other efforts to increase the use of renewable fuels, such
as the following:
     USDA's Biofuel Infrastructure Partnership (BIP) program
which has provided $100 million in grants for the expansion of
renewable fuel infrastructure in 2016 (supported by additional State
matching funds)
     USDA's Biorefinery Assistance Program which has provided
loan guarantees for the development and construction of commercial-
scale biorefineries with a number of the new projects focused on
producing fuels other than ethanol.
     The ethanol industry's Prime the Pump program, which has
committed more than $45 million to date for retail refueling
infrastructure \106\
---------------------------------------------------------------------------

    \106\ ``Email dialogue with Robert White on Prime the Pump,''
docket EPA-HQ-OAR-2016-0004.
---------------------------------------------------------------------------

    In response to the NPRM, many stakeholders repeated their views
from the 2014-2016 rulemaking regarding the existence and nature of the
E10 blendwall. Ethanol proponents generally regard the blendwall as a
fictional idea created by refiners, and said or implied that increases
in ethanol supply beyond the blendwall are only limited by refiners'
unwillingness to invest in the necessary infrastructure. Some also said
that EPA's approach to setting standards, in which constraints on the
supply of ethanol are used as justification for reducing the volume
requirement below the statutory targets, was a self-fulfilling prophecy
that guaranteed that the blendwall would

never be exceeded. Refiners and marketers typically viewed the
constraints associated with the blendwall as representing a firm
barrier that could not or should not be crossed, with costs for
necessary infrastructure changes being prohibitively high and the
associated opportunities for greater profits at retail being
inconsequentially low. In their views, higher level ethanol blends such
as E15 and E85 would be negligible in 2017 and standards that required
higher ethanol blends to increase dramatically would compel refiners to
reduce domestic supply of gasoline and diesel or risk non-compliance.
    As stated in the 2014-2016 final rule and in the NPRM, our view of
the E10 blendwall falls between these two viewpoints. We continue to
believe that there are real constraints on the ability of the market to
exceed an average nationwide ethanol content of 10%. However, these
constraints do not have the same significance at all ethanol
concentrations above 10%. Instead, for the state of infrastructure that
can be available in 2017, the constraints represent a continuum of mild
resistance to growth at the first increments above 10% ethanol and
evolve to significant obstacles at higher levels of ethanol. In short,
the E10 blendwall is not the barrier that some stakeholders believe it
to be, but neither are increases in poolwide ethanol concentrations
above 10% unlimited in the 2017 timeframe.
    We continue to believe that the constraints associated with the E10
blendwall do not represent a firm barrier that cannot or should not be
crossed. Rather, the E10 blendwall marks the transition from relatively
straightforward and easily achievable increases in ethanol consumption
as E10 to those increases in ethanol consumption as E15 and E85 that
are more challenging to achieve. Comments received in response to the
NPRM provided no compelling evidence that the nationwide average
ethanol concentration in gasoline cannot exceed 10.0%.
    However, we also recognize that the market is not unlimited in its
ability to respond to the standards we set. This is true both for
expanded use of ethanol and for non-ethanol renewable fuels. The fuels
marketplace in the United States is large, diverse, and complex, made
up of many different players with different, and often competing,
interests. Substantial growth in the renewable fuel volumes beyond
current levels will require action by many different parts of the fuel
market, and a constraint in any one part of the market can act to limit
the growth in renewable fuel supply. Whether notable constraints are in
the technology development and commercialization stages, as has been
the case with cellulosic biofuels, the development of distribution
infrastructure as is the case with ethanol, or in the distribution and
use of biodiesel, the end result is that these constraints limit the
growth rate in the available supply of renewable fuel as transportation
fuel, heating oil, or jet fuel. These constraints were discussed in
detail in the 2014-2016 final rule, and we believe that the same
constraints will operate to limit supply for 2017 as well.\107\ Other
factors outside the purview of the RFS program also impact the supply
of renewable fuel, including the price of crude oil and global supply
and demand of both renewable fuels and their feedstocks. These factors
add uncertainty to the task of estimating the adequacy of supply of
renewable fuel in the future.
---------------------------------------------------------------------------

    \107\ See 80 FR 77450.
---------------------------------------------------------------------------

    While the constraints are real and must be taken into account in
our evaluation of whether there is adequate supply to meet 19.28
billion gallons of total renewable fuel, none of those constraints
represent insurmountable barriers to growth. Rather, they are
challenges that are in the process of being addressed and will be
overcome in a responsive marketplace given enough time and with
appropriate investment. The speed with which the market can overcome
these constraints is a function of whether and how effectively parties
involved in the many diverse aspects of renewable fuel supply respond
to the challenges associated with transitioning from fossil-based fuels
to renewable fuels, the incentives provided by the RFS program, and
other programs designed to incentivize renewable fuel use.
i. E0
    We based the proposed total renewable fuel volume requirement in
the NPRM on the same expectation from the 2014-2016 final rule
regarding supply of E0: The RFS program would result in all but a tiny
portion--estimated at 200 million gallons--of gasoline to contain at
least 10% ethanol. We based this determination on the following two
considerations:
    1. The RFS program will continue incentivizing the market to
transition from E0 to E10 and other higher level ethanol blends through
the RIN mechanism.
    2. Recreational marine engines represent a market segment that we
believe would be particularly difficult to completely transition from
E0 since they are used in a water environment where there is a greater
potential for water contamination of the fuel. Some consumers are
concerned that there could be a potential for consequent engine damage
following phase separation of the water and fuel.\108\
---------------------------------------------------------------------------

    \108\ We note that a recent report from the National Renewable
Energy Laboratory calls into question the significance of water
contamination for recreational marine engines. See ``Gas becomes
stale before water uptake becomes a concern,'' Ethanol Producer
Magazine, September 21, 2016. See also original report ``Water
Uptake and Weathering of Ethanol-Gasoline Blends in Humid
Environments,'' by Christensen & McCormick, National Renewable
Energy Laboratory, September, 2016.
---------------------------------------------------------------------------

    Based on the analysis conducted for the 2014-2016 final rule, it is
most likely that any recreational marine engines refueled at retail
service stations (i.e., not at marinas) would use only E10 since E0 is
not typically offered at retail. Moreover, only a small minority of
recreational marine engines refuel at marinas where E0 is more likely
to be available, catering to that particular market. In a memorandum to
the docket, we evaluated the information that had been supplied to us
by stakeholders, highlighting the uncertainty in that information and
concluding that about 200 million gallons of E0 was a reasonable
estimate of the volume likely to be consumed by recreational marine
engines.\109\ In the NPRM, we expressed our belief that this analysis
also reflected reasonable expectations for 2017.
---------------------------------------------------------------------------

    \109\ ``Estimating E0 use in recreational marine engines,''
memorandum from David Korotney to docket EPA-HQ-OAR-2015-0111.
---------------------------------------------------------------------------

    In response to the proposal for the 2017 standards, some
stakeholders said that we had significantly underestimated the volume
of E0 used by recreational marine engines. However, no new information
was provided that was not already considered in the 2014-2016 final
rule and discussed in the aforementioned memorandum and, as before, no
stakeholders provided any data on actual consumption of E0 by
recreational marine engines. Moreover, the anecdotal information
suggesting that most if not all recreational marine engines are fueled
on E0 does not represent an appropriate basis for increasing our
estimate since it was not based on any form of data and moreover
appears highly unlikely given our expectation that only a small
minority of recreational marine engines refuel at marinas where E0 is
likely to be more prevalent.
    Other stakeholders said that we had ignored significant demand for
E0 in our determination of the total volume of

ethanol that can be supplied. They pointed beyond recreational marine
engines to other small engines where there is demand for E0, and to Web
sites like Pure-gas.org, which claim to list more than 11,000 stations
which offer E0. Several stakeholders pointed to a report from EIA
suggesting that 5.3 billion gallons of E0 was consumed in 2015.\110\
Several refiners reiterated their comments responding to the 2014-2016
proposal which used EIA data to conclude that there is ongoing demand
for E0 at a level of at least 3% of the total gasoline pool. This
estimate of E0 demand was the primary basis for their request that the
2017 standards be set in such a way that the poolwide gasoline ethanol
concentration is no higher than 9.7%.
---------------------------------------------------------------------------

    \110\ ``Almost all U.S. gasoline is blended with 10% ethanol,''
Energy Information Administration, Today In Energy, May 4, 2016.
---------------------------------------------------------------------------

    Other than references to data and analyses collected by EIA, no
stakeholder provided any data on actual E0 consumption. With regard to
data from EIA, in the 2014-2016 final rule we addressed refiners' claim
that 3% of the gasoline pool has been E0 for several years, concluding
that those estimates were generated from incomplete EIA gasoline supply
data which overestimated the potential demand for E0 at retail.\111\
Comments from refiners in response to the 2017 proposal did not provide
any new or different information that would change our conclusions with
regard to that 3% estimate.
---------------------------------------------------------------------------

    \111\ See discussion at 80 FR 77462.
---------------------------------------------------------------------------

    With regard to EIA's more recent estimate that 5.3 billion gallons
of E0 was consumed in 2015, we do not believe that this value
represents consumption of E0 at the retail. EIA's estimate was based on
survey data from most U.S. terminals, which include information about
domestic distribution from the terminal level and exports of ethanol-
free gasoline, with the difference representing domestic disposition.
EIA combines this information with estimates of available ethanol,
assuming that the ethanol is used in a 10% blend with ethanol-free
gasoline. As described in a memorandum to the docket, our analysis of
EIA's estimate of 5.3 billion gallons of E0 concludes that it would
require E85 volumes significantly higher than the volumes likely to
have been supplied in 2015.\112\ In our view, the 5.3 billion gallons
of E0 estimated by EIA must include volumes that are blended with
ethanol downstream of the terminal prior to dispensing from retail and
centralized fleet refueling stations where additional ethanol blending
can and does occur in excess of the blending used in EIA's estimate.
The calculations are very sensitive to the exact volume of total
ethanol available for blending, with EIA and EPA estimated volumes of
total ethanol used differing by about 1 percent. We believe that EMTS
data provides more accurate information on actual use of ethanol in
motor fuel than EIA's survey data on ethanol production, blending,
imports, and exports because it accounts for every gallon of ethanol
produced but not exported, and is verified by the purchaser in the
transaction within EMTS. Based on our analysis, we estimate that E0
consumption at the retail level in 2015 would have been closer to about
700 million gallons.
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    \112\ ``Ethanol Consumption in 2015 and Estimates of E0 Use,''
memorandum from David Korotney to Docket EPA-HQ-OAR-2016-0004.
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    Some stakeholders pointed out that it would be difficult for the
market to transition about 5 billion gallons of E0 to E10 within one
year. However, since we believe that actual consumption of E0 in 2015
was much closer to 700 million gallons than 5.3 billion gallons,
continuing to transition away from E0 since then to 200 million gallons
of E0 by the end of 2017 is achievable. As a result, we continue to
believe that 200 million gallons of E0 is a reasonable value to assume
for purposes of assessing the adequacy of supply of total renewable
fuel, based on our prior assessment that this volume dedicated to
recreational marine engine use may not be significantly influenced by
the standards we set in this time period, and our expectation that the
RFS program will continue to incentivize all but this small portion of
the gasoline pool to be blended with ethanol.
    Stakeholders representing boat owners expressed concern that by
including only 200 million gallons of E0 in the proposed derivation of
maximum achievable total renewable fuel volumes, EPA anticipated
effectively limiting the availability of E0 to 200 million gallons.
This is not the case. The standards that EPA sets are not specific to
ethanol nor to specific ethanol blends. Once the standards are set, the
market has the flexibility to choose the mix of fuel types used to meet
those standards. If, for instance, the demand for E0 in 2017 is higher
than 200 million gallons, the market can compensate by providing higher
volumes of E15 and/or E85, or additional non-ethanol renewable fuels.
ii. E15
    In the NPRM, we proposed that a total ethanol volume of 14.4
billion gallons could be reached in 2017 based on the expectation that
somewhat larger increases in ethanol supply were possible in 2017 than
we had estimated for 2016. We did not provide specific estimates of E15
or E85 use in 2017, but instead said that we generally expected the RFS
program to influence sales of E0, E15, and E85 in such a way as to
produce this increase in ethanol volume. For this final rule, we have
undertaken a more detailed estimate of the volumes of E15 and E85 that
are possible in 2017, so as to more confidently assess whether there is
adequate supply to reach a total renewable fuel volume requirement of
19.28 billion gallons.
    Most comments in response to the NPRM repeated viewpoints they had
expressed in response to the 2014-2016 proposal. Refiners and their
associations, as well as parties representing fuel marketers and
retail, expressed doubt that the number of stations offering E15 could
increase significantly in 2017 and pointed to vehicle warranties that
they believed would hinder many owners of 2001+ model year vehicles
from refueling on E15. They also repeated their concerns about engine
damage and liability for misfueling. Ethanol proponents generally
pointed to the large number of in-use vehicles that are legally
permitted to use E15 and information suggesting that many existing
retail stations are already compatible with E15, or can be
inexpensively upgraded. They also pointed to incentives for expanded
infrastructure provided by programs such as USDA's Biofuels
Infrastructure Partnership (BIP) program and the ethanol industry's
Prime the Pump program. A more detailed discussion of our views of
these comments can be found in the 2014-2016 final rule and in the
Response to Comments document for this final rule.\113\
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    \113\ See discussion at 80 FR 77462-77464.
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    Consistent with our assessment for the 2014-16 final rule, we
believe that neither the number of vehicles that are legally permitted
to use E15, nor the number of owners of such vehicles who would choose
to use it, are the predominant factors in determining the volume of E15
that is reasonably attainable in 2017. Instead, we believe that it is
the number of retail stations offering E15 in 2017 that is more likely
to determine how much E15 is actually consumed. The number of retail
stations registered to offer E15 has grown to about 400 in the fall of
2016 based on information collected by the RFG Survey Association, more
than doubling from the previous year. However, this is

still a very small fraction of the approximately 150,000 retail
stations currently operating. Based on comments received from retail
station owners and their associations, this low number of retail
stations offering E15 is most likely due to liability concerns and low
expectations for a return on an investment in new or upgraded
infrastructure.
    We do not believe, based on past experience, that the core concerns
retailers have with liability over equipment compatibility and
misfueling would change if the RFS volume requirements were increased
significantly. Similarly, while higher RFS volume requirements could
make it incrementally more attractive for retailers to upgrade
infrastructure to offer E15, the concerns they expressed in their
comments about high capital costs and opportunities for return on their
investment would remain. As a result, setting higher volume
requirements would be unlikely to result in dramatic increases in the
number of additional retail stations offering E15 in 2017 beyond those
that may be upgraded through existing grant programs. As a result, we
do not believe that E15 infrastructure expansion can occur on the much
larger scale and faster timeframe that ethanol proponents believe it
can. However, we do believe that retail infrastructure can and will
change to offer more E15 in 2017. We have estimated the expansion that
is possible in 2017 based on information on both the BIP and Prime the
Pump programs, as well as an expectation that independent efforts to
expand infrastructure will continue. As described in a memorandum to
the docket, we believe that the number of stations will increase during
the course of the year, and that an annual average of about 1,640
retail stations will be able to offer E15 in 2017.\114\
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    \114\ ``Projections of retail stations offering E15 and E85 in
2017,'' memorandum from David Korotney to docket EPA-HQ-OAR-2016-
0004.
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    Since actual experience with E15 sales is so limited, and
commenters provided little information on actual E15 sales volumes, we
have made an estimate of possible E15 use in 2017 using the same
methodology that was presented in the 2014-2016 final rule,
supplemented by additional information about E15 that is expected to be
supplied by terminals.\115\ That estimate was based on the following
equation, which was also used in the 2014-2016 final rule:
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    \115\ ``Estimates of E15 and E85 volumes in 2017,'' memorandum
from David Korotney to docket EPA-HQ-OAR-2016-0004.

E15 volume = (Total gasoline throughput per station) x (Number of
stations offering E15) x (Fraction of total gasoline sales which are
---------------------------------------------------------------------------
E15)

We have updated the values used in this calculation based on comments
provided by stakeholders and additional information that has become
available since release of the NPRM. First, we have updated the number
of retail stations that may offer E15 in 2017, as discussed above.
Second, some stakeholders said that retail stations being targeted
under the BIP program had greater total annual gasoline sales than
average, such that it would be inappropriate to assume that the total
gasoline throughput per retail service station in the above equation is
equal to the nationwide average, currently about 0.95 million gallons
per station per year. Available information on the BIP program does not
include gasoline throughput, but larger retail stations would be more
likely to produce the matching funds necessary as a condition of
receiving BIP grant funds. One stakeholder that is actively and
directly working with many of the retailers using funds from the BIP
and Prime the Pump programs indicated that the average total gasoline
throughput for affected retail stations is 2.8 billion gallons per
year. Therefore, we have used this value in our determination of E15
supply for 2017. Further discussion can be found in a memorandum to the
docket.\116\
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    \116\ Ibid.
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    Finally, in the 2014-2016 final rule we used a value of 50% for the
fraction of total gasoline sales which are E15 at stations offering
both E10 and E15 based on the expectation that E10 and E15 could be
priced equally on a volumetric energy basis. While we continue to
believe that 50% is possible, a number of refiners pointed out reasons
that 50% may be too high in the near term, including the fact that
there are likely to be fewer dispensers at a given retail station
offering E15 than those offering only E10, and customer familiarity
with E10. One party indicated that in Iowa in 2015, per-station E15
sales were 15% of per-station E10 sales, though the data on which this
conclusion was based did not rely on retail stations selling both E10
and E15; the per-station estimate for E10 was based on all stations
offering E10, regardless of whether they also offered E15. Not only are
the Iowa data not necessarily representative of stations offering both
E10 and E15, we have no information to indicate whether the experience
in Iowa is representative of conditions that could exist under the
increasing RFS standards in 2017. Nevertheless, we agree that the
fraction of total gasoline sales which is E15 at stations offering both
E15 and E10 is likely to be considerably less than 50% for the reasons
described earlier (e.g., number of dispensers offering E15 at a given
station, consumer unfamiliarity with E15), at least in 2017. Since we
only have one source of data upon which to base our estimate, we are
using that 15% value in our assessment.
    Although E15 has historically been produced at retail stations in
blender pumps, since release of the NPRM we have become aware of new
activities to produce E15 at terminals.\117\ This E15 could be used in
retail equipment that has been certified to be compatible with E15, and
so would expand the use of E15 beyond that available through blender
pumps, including those targeted by the BIP and Prime the Pump programs.
Based on currently available information, four out of the approximately
1,400 terminals in the U.S. would produce E15 in 2017, and we expect
that E15 production at those four terminals would be small in
comparison to E10 production. As described in a memorandum to the
docket, we estimate the E15 produced through terminals would be 41
million gallons in 2017.\118\
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    \117\ ``HWRT & RFA Announce First-Ever Offering of Pre-blended
E15,'' docket EPA-HQ-OAR-2016-0004.
    \118\ ``Estimates of E15 and E85 volumes in 2017,'' memorandum
from David Korotney to docket EPA-HQ-OAR-2016-0004.
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    Based on the above discussion, we have estimated that total E15
supply in 2017 could reach 728 million gallons, resulting in about 38
million gallons of ethanol more than would be supplied if that portion
of the gasoline pool were E10. We have included this in our discussion
of total ethanol volumes in Section V.B.1.iv below.
iii. E85
    As described previously, the NPRM did not provide specific
estimates of E15 or E85 use in 2017, but instead indicated that we
generally expected the RFS program to influence sales of E0, E15, and
E85 in such a way as to produce a total ethanol supply of 14.4 billion
gallons. Nevertheless, stakeholders provided comments on a variety of
topics related to the estimation of achievable volumes of E85.\119\
Many of these comments

focused on an analysis of the relationship between E85 sales volumes
and E85 price discount derived from publically available data from six
states, which was provided with the 2014-2016 final rule.\120\
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    \119\ We note that, in the 2014-2016 final rule, the estimation
of E85 volumes was made in the context of determining the volume
that constituted inadequate domestic supply under our general waiver
authority. For this final rule, we are using the cellulosic waiver
authority alone, and are estimating reasonably attainable volumes of
E85.
    \120\ ``Correlating E85 consumption volumes with E85 price,''
memorandum from David Korotney to docket EPA-HQ-OAR-2015-0111.
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    As for many other aspects of this rule, stakeholders were strongly
divided on the volumes of E85 that are achievable in 2017. Refiners
typically said that E85 volumes are likely to reach little more than
around 100 million gallons in 2017 based on their own estimates of E85
in previous years using data collected by EIA from refiners, blenders,
and ethanol production facilities. For instance, refiners suggested
that E85 use in 2015 reached only 87 million gallons. However, as
discussed in the 2014-2016 final rule, the EIA sources on which this
estimate was based do not capture all E85 that is actually used; not
all production at terminals, ethanol production facilities, or blenders
with less than 50,000 barrels of product storage capacity are included,