However, in most situations we envision that these year-to-year changes
may not impact the necessity to report. We seek comment on ways to
fairly account for these limited situations.
    In this action, we are proposing that EPA would be responsible for
publicly disclosing that a party notified us of exceeding the
threshold. We already maintain and regularly update a centralized
website for RFS data \187\ that has become the hub for up-to-date
program information and transparency. Stakeholders, as well as the
public at large, who want to know the identity of those that hold RINs
in excess of the amount that flags potential market power concerns
would only need to go to one place, EPA's website, to find all publicly
available information on the topic. We seek comment on our proposal to
publish the names of parties that exceed the RIN holding disclosure
threshold on the EPA website.
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    \187\ Public EMTS data can be found on EPA's website at https://www.epa.gov/fuels-registration-reporting-and-compliance-help/public-data-renewable-fuel-standard.
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2. Reform Two: Increase RFS Compliance Frequency
    The second potential reform we address in this action is
establishing a requirement for more frequent retirement of RINs for
purposes of program compliance. The fundamental concept underpinning
this reform is that, if it were finalized, obligated parties would be
required to retire RINs in their accounts gradually over the year
rather than all at once at the end of the year. We believe that
requiring RINs to be retired for compliance on a more frequent basis
could potentially help minimize opportunities for hoarding or other
behavior that could negatively impact the RIN market. Further, we
believe this regulatory modification would have the added benefit of
helping obligated parties reduce the risk of non-compliance at the end
of the year since they would be required to obtain RINs to meet a
portion of their individual RVO on a quarterly basis.
    Under this reform, we are proposing to establish RIN retirement
requirements for the first three quarters of the compliance year,
calculated as the gasoline and diesel production and import volume
through the end of the quarter multiplied by 80 percent of the current
year renewable fuel standard. We are proposing to include the 80
percent factor for these interim RIN retirements to address the
inherent uncertainty of projecting an obligated party's obligation
without full information. Obligated parties would submit reports to EPA
60 days after the end of the quarter to demonstrate compliance with
these requirements and could use any D-code RINs to do so. This reform
would not impact the current annual RVO calculations or compliance,
including the two-year RIN life, the annual deficit carryover, or the
20 percent carryover provisions. Specifics on the calculations,
reporting requirements and schedules are discussed in more detail
below.
    Some stakeholders have voiced concern about asymmetry in the market
if EPA were to establish a more frequent compliance period for
obligated parties without requiring RIN holders to make RINs available
more frequently, and vice versa. Taking this concern under
consideration, we have tried to balance this reform with our proposed
reform that would limit the duration that a non-obligated party could
hold separated RINs (discussed in Section III.E.4). Namely, this
proposal would establish that both program compliance and the
requirement for non-obligated parties to sell their separated RINs
apply at quarterly intervals. We believe this symmetry will help to
facilitate more frequent compliance and reduce the risk of one party
having an unfair advantage over the other since both sides would face
similar obligations to buy and sell RINs within the required
timeframes.
    We believe that more frequent RIN retirement could help smooth
demand for RINs across the year. However, under this proposed reform,
RIN demand could still increase at certain times of the year due to
circumstances beyond EPA's control, which could make purchasers
particularly vulnerable to manipulative terms from sellers at those
times. Even though the magnitude of the obligation would be roughly
decreased by a factor of four, sellers with excess RINs beyond their
quarterly retirement requirements could still exercise power over the
RIN market--now several times throughout the year before each quarterly
deadline instead of just once annually. Market power is relative, and
we recognize that a smaller stockpile of RINs in a party's account
relative to a smaller pool of available RINs can still result in market
power. Therefore, the ultimate benefit of this reform on the RIN market
and on parties' behavior is unclear.
a. Implications on the Annual RVO
    In this action, we are not proposing to change the timeframe of the
annual RVO or the annual RVO compliance obligation. Rather, we are
proposing to maintain the annual RVO and annual RVO compliance
obligation and to add requirements for periodic RIN retirement
throughout the year. This is similar to personal tax requirements
imposed by the IRS and states; money is generally withheld from an
individual's paycheck throughout the year based on an estimate of their
annual tax burden, but the actual annual tax burden is only calculated
and due for full payment once the tax year is over. By proposing a
requirement for obligated parties to retire RINs periodically through
the year, we are able to leave intact the many elements of the RFS
program that are based on an annual program (e.g., the annual deficit
provision, the annual 20 percent carryover provision, and the two-year
life of a RIN). We believe that these annual program components, as

described further below, are functioning effectively and that changing
these annual program components could create harmful unintended
consequences. We believe we can leave these annual elements of the
program unchanged while still accomplishing the objective of this
reform.
    The current RFS program is designed around an annual RVO. As
specified in 40 CFR 80.1407(a), obligated parties wait until the
compliance year has passed to calculate their annual RVOs using their
actual annual gasoline and diesel production and import volume. The RVO
equations also account for deficits on an annual basis, such that a
deficit incurred in the prior year is carried over into the current
year. 40 CFR 80.1427(a) specifies how obligated parties demonstrate
compliance with this annual RVO. These equations were designed so that
an obligated party has an entire year to collect enough RINs to address
any deficit carried over from the prior year. We believe that this
annual approach to satisfying prior year deficits should continue
unchanged. Therefore, we are not proposing any edits to 40 CFR
80.1407(a) or 80.1427(a).
    The deficit provision comes from direction in the CAA for EPA to
include provisions allowing any person to carry forward a renewable
fuel deficit from one calendar year to the next when certain conditions
are met. The conditions outlined in the CAA are ``that the person, in
the calendar year following the year in which the renewable fuel
deficit is created (i) achieve compliance with the renewable fuel
requirements under paragraph (2); and (ii) generates or purchases
additional renewable fuel credits to offset the renewable fuel deficit
of the previous year.'' \188\ Since the statute specifies that an
obligated party can create a deficit on an annual basis, we are
proposing in this action to maintain that annual flexibility.
Therefore, an obligated party would be allowed to fall short of its RIN
retirement requirements in any or all periods of one compliance year as
long as it retired RINs at some point in the following compliance year
to offset the following year's obligation, which includes the current
year deficit. See Section III.E.2.e for further discussion on such RIN
retirement shortfalls.
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    \188\ See CAA sec. 211(o)(5)(D).
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    Finally, 40 CFR 80.1427(a)(5) specifies that no more than 20
percent of an obligated party's current year RVO can be satisfied with
prior year RINs. In this action, we are not proposing any amendments to
this part of the regulation. We propose that this carryover provision
continue to only apply to the annual RVO. We are not proposing to apply
this provision to any interval other than annually. Therefore, an
obligated party that retired RINs periodically during the year,
pursuant to this action, could use any amount of prior year RINs to do
so, subject to the requirements that the final annual RVO compliance
demonstration is consistent with the 20-percent carryover provision.
b. Compliance Frequency
    During the development of this proposed rule, we considered
establishing compliance frequencies other than quarterly. Ultimately,
however, we chose to propose a quarterly compliance frequency for
obligated parties; a quarterly requirement appears to balance the
objectives of a more frequent compliance requirement without being
overly burdensome or introducing excessive complexity. As such,
obligated parties would be required to use new equations proposed at 40
CFR 80.1427(d) for the first, second, and third quarters of a year.
Obligated parties would not have a separate RIN retirement requirement
for the fourth quarter and would instead continue to use the existing
RVO equations at 40 CFR 80.1427(a) to demonstrate compliance with the
annual RVO. We seek comment on a quarterly frequency and on whether
obligated parties that reporting gasoline and diesel production and
import volumes to the Energy Information Agency (EIA) weekly and
monthly would prefer a frequency greater than quarterly that aligns
with the EIA survey frequency.
    We considered a provision that would require RIN retirement for
every batch of gasoline or diesel immediately or shortly after it is
produced or imported, but we do not believe a practical implementation
framework for this concept exists. It would be virtually impossible for
the market to instantaneously meet such tight demand for RINs by
obligated parties. The generation of RINs and the production and import
of transportation fuel are not time aligned over the course of the
year. We believe that a quarterly RIN retirement requirement is close
enough to ``real time'' compliance to meet the objectives of this
reform while still providing enough flexibility for obligated parties
to feasibly comply.
    As part of our analysis, we reviewed the historic pace of RIN
generation throughout a calendar year. We observed that RIN generation
is not consistent throughout the year and varies depending on the month
or season. For example, in calendar year 2017, the monthly generation
of biomass-based diesel (D4) RINs is lowest in January because
biodiesel blending drops in the winter months when gelling of biodiesel
can occur in some regions. The monthly D4 generation rate increased
gradually until July when it began to decrease again. Finally,
generation spiked higher in December than in any other month as parties
worked to meet the RFS requirement that renewable fuel must be
generated and blended in the same calendar year (and in some years
rushed to take advantage of expiring tax credits). In fact, generation
of all four D-code RINs peaked in December. When we compared these
monthly generation rates to a potential monthly RIN retirement
requirement based on estimated monthly gasoline and diesel
volumes,\189\ we saw that in many months, the demand for RINs exceeded
the generation of new RINs. In addition, when we compared the monthly
generation of all D-code RINs with potential monthly RIN retirement
requirement, we found that cumulative RIN generation would not catch up
to the cumulative RIN retirement requirement until December. This lack
of alignment in time between RIN generation and gasoline/diesel fuel
demand renders ``real time'' RIN retirement infeasible. We concluded
from this analysis that it is important to provide some margin of time-
flexibility to allow obligated parties to acquire RINs for compliance
and that too-frequent retirement requirements would be too restrictive
and counterproductive.
---------------------------------------------------------------------------

    \189\ See calculation in the memorandum, ``Comparison of Monthly
RIN Generation Rates to a Potential Monthly RVO,'' available in the
docket for this action.
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    We seek comment on the appropriateness of a quarterly frequency
requirement and on other potential frequencies, such as monthly or bi-
annually. Because of the need for flexibility, we also considered
several compliance deadlines, by which obligated parties would need to
achieve the quarterly compliance requirements. See Section III.E.2.f
for a discussion of deadline options considered and the deadlines we
are proposing in this action.
c. Scope
    As discussed earlier in this preamble, for each reform we
considered whether we could limit its scope to reduce the risk of
unintended negative consequences while still meeting the objective of
the reform. In particular, we considered whether we could limit the

reforms to just D6 RINs since D6 RINs are the main source of market
manipulation concern.
    For the compliance frequency reform outlined here in Section
III.E.2, we concluded that, because of the nested nature of the RIN
system, we could not require retirement of only D6 RINs. For example,
an obligated party could choose to retire only D3, D4, and D5 RINs,
which are nested in the renewable fuel obligation, to comply with its
renewable fuel RVO. Therefore, we are proposing a quarterly RIN
retirement requirement based on only the renewable fuel RVO in this
action and allowing obligated parties to retire any D-code of RINs to
meet it.
d. Incurring a Shortfall
    In this action, we are proposing that an obligated party would be
allowed to fall short of a quarterly RIN retirement requirement if it
met certain conditions. This shortfall provision would mirror the
flexibility provided by the annual deficit provision described above.
Under one set of conditions, a party would be allowed to incur a
shortfall in a quarter of a given year as long as in the following year
it satisfied all three quarterly RIN retirement obligations. Under a
second set of conditions, a party would be allowed to incur a shortfall
in a quarter of a given year and in a quarter of the following year if
its annual RVO for the current year were equal to zero (e.g., as the
result of an approved small refinery exemption). Under this proposal, a
shortfall in one quarter would have the same effect as a shortfall in
all three quarters of the year on a party's ability to incur shortfalls
in the following year. We are proposing amendments to 40 CFR 80.1427(b)
to reflect this provision.
    We considered an alternative approach under which a party's
shortfall in one or more quarters of a year would not affect a party's
ability to incur a shortfall in one or more quarters of the following
year. However, we believe this alternative would create a loophole to
this reform that could be exploited by obligated parties to circumvent
the proposed quarterly RIN retirement requirements. By way of example,
consider an obligated party that retired no RINs in the first three
quarters of a given year and then fully complied with its annual RVOs
at the end of the year by retiring all required RINs. Under the
alternative approach, the obligated party would be allowed to incur
shortfalls in all three quarters of the following year and could repeat
this compliance strategy again and again. This would amount to a
circumvention of the proposed quarterly compliance reform altogether.
Considering this example under the proposed approach instead, the
obligated party that retired no RINs in the first three quarters of a
given year would be required to meet the quarterly RIN retirement
requirements of the following year. We seek comment on allowing
shortfalls under certain conditions and on our approach to preventing
shortfalls over multiple years. We seek comment on the alternative we
considered as well as other alternative approaches commenters
recommend.
e. Calculating the RIN Retirement Requirement
    We are proposing in this action that the RIN retirement
requirements for the first three quarters of a compliance year would be
calculated as 80 percent of an obligated party's cumulative gasoline
and diesel production and import volume multiplied by the renewable
fuel percentage standard for the current year. As explained above, the
quarterly RIN retirement equations would not include an input for any
prior year deficit carried over or a limitation on the year of the RINs
used. We believe that an 80-percent flexibility would address the
seasonal variability in RIN generation that could impede a party's
ability to acquire 100 percent of its required RINs. We also believe
that an 80-percent flexibility would provide some leeway for volume
errors identified at the end of the year through the attest engagement
process. We seek comment on this approach to providing obligated
parties with this flexibility and on the value of 80 percent that we
chose to propose and whether a different value would be more
appropriate.
    We considered, but are not proposing, setting a RIN holding
requirement rather than a RIN retirement requirement. Under this
approach, obligated parties would need to demonstrate that they owned
at least 80 percent of their cumulative volumes multiplied by the
renewable fuel percentage standard. One reason for this approach is
that it could better align with the RIN holding threshold calculations
proposed in Section III.E.1, which would not adjust the threshold as
RINs were retired every quarter. As such, an obligated party that had
retired 60 percent of its annual renewable fuel obligation after three
quarters would only have a legitimate need to hold the 40 percent of
its annual obligation remaining plus 30-percent headroom, but it would
be allowed under our proposal to hold 130 percent. We proposed these
calculations in Section III.E.1 to keep them simple, but we realize
that some commenters may find it unbalanced and unfair. We seek comment
on adjusting this reform to a holding rather than retirement
requirement to address concerns with the threshold calculations.
f. Compliance Deadline
    Under the existing regulations, the deadline by which obligated
parties must demonstrate compliance with their annual RVOs is March 31
of the year following the compliance year. As such, parties have three
months after the last day of the compliance period to compile their
gasoline and diesel production and import volumes, calculate their
RVOs, acquire the necessary number of RINs, and submit their annual
compliance reporting forms. This three-month administrative period is
necessary for obligated parties to complete all of the required
compliance steps properly.
    In this action, we are proposing that an administrative period be
added to the end of the first, second, and third quarters for
demonstration of compliance with the periodic RIN retirement
requirements. We are proposing a two-month administrative period such
that the compliance demonstration deadlines would be June 1, September
1, and December 1 of the compliance year. This delayed schedule would
provide obligated parties with additional time to gather production and
import volumes, acquire RINs, and complete the reporting forms and
would align with existing quarterly reporting deadlines. RINs generated
during the administrative period could be used for compliance in the
previous quarter. We are proposing that a three-month administrative
period and the March 31 compliance demonstration deadline continue to
apply to the annual RVO. We seek comment on these proposed deadlines
and on whether a different administrative period or periods would be
more appropriate.
g. Reporting and Recordkeeping
    In this action, we are proposing that compliance with the quarterly
RIN retirement requirements would be demonstrated to EPA through
reporting. The quarterly deadlines described above would be reporting
deadlines and would align with the existing deadlines for RIN
generation, transaction, and activity reports. We believe that aligning
our proposed quarterly deadlines with deadlines for existing reporting
requirements would be an easier adjustment for parties. To implement
this reporting requirement, we are proposing that obligated parties
would report cumulative gasoline and diesel production and import
volumes and demonstration of compliance with

requirements in the first three quarters. We are also proposing to
update recordkeeping requirements to include all applicable quarterly
values and calculations. We are not proposing to amend the attest
engagement due date, so it would continue to be required once at the
end of each compliance year. The RIN generation, transaction, and
activity reports would continue to be required quarterly.
    We are proposing that any minor adjustments that an obligated party
would need to make to a prior quarter's reported volumes due to an EPA-
reported remedial action would be required to be accounted for in the
next RIN retirement calculation and demonstration. Since the obligated
party would be certifying that their reported values were accurate to
the best of their knowledge, we believe that the risk of gaming the
regulations by consistently under-calculating a quarterly RIN
retirement requirement is low. A continued pattern of under-calculating
by one party could potentially result in an enforcement action. We seek
comment to this approach to remedial action volume adjustments and on
alternatives to account for them in this action.
h. Small Refinery Exemptions
    Under this reform, we are proposing that all obligated parties
would be required to meet RIN retirement requirements on a quarterly
basis. This means that small refineries that submit a petition for an
extension of the small refinery exemption would typically face
reporting and RIN retirement requirements before EPA issues a decision
on the petition. Even under the current annual reporting requirements,
many small refineries already choose to retire RINs before EPA acts on
their petitions, understanding that EPA will later ``unretire'' those
RINs should EPA ultimately decide exemption is warranted for that
refinery in that compliance year. However, we recognize that quarterly
RIN retirement obligations for small refineries that may receive an
exemption would not necessarily be efficient. As described below, small
refineries that expect to receive hardship relief can alternatively
defer quarterly reporting under the retirement shortfall provisions
proposed in this action provided they did not carry a deficit from the
previous compliance year (e.g., if they received hardship relief in the
previous year).
    Under this proposal, all refineries including small refineries
would be able to incur a full RIN requirement shortfall in the first
three quarters as long as they had not incurred a deficit in the prior
year. When EPA grants an RFS exemption, the exempt refinery has no RFS
obligation during the compliance year for which an exemption has been
granted. For small refineries that received RFS hardship exemptions,
their annual RVO would be zeroed out. Since the small refineries
wouldn't trigger the annual deficit provision in that year, they could
repeat the same steps in the next year if they still faced hardship. We
note that an obligated party reporting at an aggregated level for
multiple refineries, including at least one small refinery, would not
zero out its total annual RVO. Rather, when EPA approved its small
refinery exemption(s), it would exclude the small refinery volumes from
its annual RVO calculations but still include volumes from the other
refineries. As such, we believe that a small refinery that would like
to take the compliance path outlined above would have to report on a
facility-by-facility basis, rather than on an aggregated basis. An
obligated party that wished to report at an aggregated level would have
to account for any small refinery volumes when calculating and
complying with its quarterly RIN retirement requirement.
    If the small refinery chose to comply with the proposed quarterly
RIN retirement requirements and then received an RFS exemption from
EPA, then we would work with the small refinery to unretire its RINs as
we do now under the current annual reporting requirements. We are not
seeking comment on whether EPA can unretire RINs after granting a small
refinery exemption. If the small refinery chose to incur a RIN
retirement shortfall in the first three quarters but did not receive an
exemption from EPA, then it would be required to comply with the annual
RVO by March 31 as they also do under the current annual reporting
requirement by either obtaining the appropriate number of RINs or by
taking a deficit. In that case, whether they met the annual obligation
or carried a deficit into the following year, they would be prohibited
from incurring a shortfall in any quarter of the following year.
3. Reform Three: Limiting Who Can Purchase Separated RINs
    The third potential reform from the President's Directive that we
address in this action is limiting the purchasing of separated RINs to
obligated parties only. Canada structured its Federal Renewable Fuels
Regulations this way by only permitting primary suppliers, the
regulated parties under those regulations, to acquire compliance units
from others.\190\ This is also how the credit provisions in our
gasoline sulfur and benzene programs are structured. In those EPA
programs, the obligated parties are both the generators of the credits
and the users of the credits and are the only parties that need to take
any action. Conversely, in the RFS program, obligated parties are
typically dependent on the action of other parties, such as renewable
fuel producers and blenders, to actually introduce the renewable fuel
and the RINs into the marketplace. Consequently, the RFS program was
set up differently.
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    \190\ See ``Questions & Answers on the Federal Renewable Fuels
Regulations'' (2012), available at https://www.canada.ca/en/environment-climate-change/services/canadian-environmental-protection-act-registry/publications/revised-questions-answers-renewable-fuels.html.
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    Supporters of this regulatory change argue that, since obligated
parties are the only parties who need to purchase RINs for the purpose
of compliance, obligated parties should be the only parties allowed to
purchase separated RINs. The goal of this reform is to minimize the
number of parties trading RINs so as to reduce the risk of hoarding or
other actions by non-obligated parties that could improperly impact the
prices of RINs and thus impact the cost of compliance for obligated
parties. In developing this proposed reform, EPA is taking into
consideration the concerns that limiting the parties that can trade in
the RIN market could have negative unintended consequences, as
discussed below.
    Under this reform, we are proposing that only obligated parties,
exporters and certain non-obligated parties be allowed to purchase
separated D6 RINs. Non-obligated parties would be exempt from this
proposed provision if they were a corporate affiliate or a contractual
affiliate of an obligate party.
    As explained in Section III.B of this action, RINs are generated
with the generation of renewable fuel and move downstream of the
producer attached to the renewable fuel. When a blender acquires the
renewable fuel and blends it with conventional fuel, the blender is
required to separate the RIN from the renewable fuel. The separated RIN
becomes its own commodity separate from the renewable fuel that can be
traded and used separately. By the very nature of the blender's role in
the fuel distribution system and the requirements of the RFS program,
blenders must become owners of separated RINs. Therefore, this reform
is limited to only the purchase of separated RINs.

a. Implications and Discussion
    As described above, this reform would limit the purchasing of
separated D6 RINs to obligated parties and certain non-obligated
parties. Some stakeholders have commented that this reform would be
beneficial because it would specifically block market traders and
brokers whose only intention is to make a profit in the RIN market and
may have an incentive to engage in manipulative or anti-competitive
behavior to boost their profits.\191\ (We note, however, that simply
making a profit on the RIN market is not manipulative or anti-
competitive behavior.) Limiting non-obligated parties from purchasing
separated D6 RINs could help deter or prevent that potential behavior
from occurring in the future. Conversely, some have claimed that
limiting the number of parties participating could harm the RIN market
and have other unintended consequences. In fact, this specific reform
was explicitly raised for consideration in the 2019 RVO proposal, and
we received multiple comments in opposition, citing the harm this
reform would likely cause. For example, many parties commented that the
liquidity of the RIN market would decline if RIN market participation
were curtailed. These comments stated that some parties without a
compliance obligation alleviate the burden on the seller of finding a
counterpart willing to buy the exact amount of RINs for sale at that
exact time. They do so by aggregating small RIN bundles for large
buyers, disaggregating large RIN parcels for sale to multiple buyers,
and holding RINs until the parties are ready to buy. Some commenters
also stated that, especially in a market as sensitive to policy
announcements as the RIN market, higher participation can reduce
volatility and help the market adjust to a policy or other shock more
quickly than curtailed participation. As such, these comments warned
that restricting participation in the RIN market would reduce
liquidity, increase volatility, and ultimately increase RIN
prices.\192\
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    \191\ See, e.g., comments from HollyFrontier (Docket Item No.
EPA-HQ-OAR-2018-0167-1198), Monroe Energy (Docket Item No. EPA-HQ-
OAR-2018-0167-0622), and Valero (Docket Item No. EPA-HQ-OAR-2018-
0167-1041).
    \192\ See, e.g., comments from ACT Commodities (Docket Item No.
EPA-HQ-OAR-2018-0167-0615), Phillips 66 (Docket Item No. EPA-HQ-OAR-
2018-0167-1267), and Shell (Docket Item No. EPA-HQ-OAR-2018-0167-
0513).
---------------------------------------------------------------------------

    Some commenters explained that a RIN price reflecting higher
transaction costs would not be representative of the fundamentals of
the market and thus would weaken the market signal function of RIN
prices. For example, the RIN price is used by obligated parties to
estimate the compliance cost they need to recover through their fuel
pricing, by biofuel producers to gauge supply and demand of the biofuel
market, and by downstream parties to decide whether to build out more
blending infrastructure. Curtailed market liquidity could weaken
everyone's ability to react to the market effectively.
    Some stakeholders have also provided comment to EPA outside of the
2019 RVO rulemaking about how this reform would harm them and their
business operations directly. Specifically, we heard from some non-
obligated parties who play a large role in the existing fuel market by
blending biofuel with petroleum-based fuel and moving the blended fuel
downstream to retailers. These blenders enter into term contracts with
obligated parties for delivery of a specific quantity of RINs at the
end of the contract period. Blenders base their commitment on expected
fuel blending volumes, which relate to expected fuel production and
fuel demand. However, if fuel production or demand fell shorter than
expected, RIN separation by the blender would also fall short. In order
to meet its contractual obligation in this situation, the blender would
have to buy separated RINs on the RIN market. A reform that prohibited
blenders from buying separated RINs would require blenders and their
obligated party counter-parties to restructure the RIN delivery
guarantees in the current contracts. Therefore, some of these blenders
have expressed concern with the harm to them and the operation of the
RFS program that this reform could cause. They've also highlighted the
asymmetry this would create in the fuels system between refineries and
blenders; blenders who fall short of their RIN supply contracts with
refineries would not be able to fill the gap while refineries who fall
short of their petroleum-based fuel contracts with blenders would be
able to fill the gap by purchasing gasoline, diesel, or blendstock on
the market as needed. Therefore, they characterize a reform that
prohibits them from purchasing separated RINs as creating an uneven
playing field in the fuels industry.
    For all of the reasons listed above, we are not proposing to
prohibit all but obligated parties from purchasing separated D6 RINs
because we recognize that doing so could cause harm to parties, the D6
RIN market, and to the RFS program. Thus, our proposal to limit this
reform reflects a weighing of the beneficial aspects of deterring
potential market manipulation against the potential negative
consequences on the RFS program. We seek comment on these potential
consequences as well as comments on alternative approaches to implement
this reform.
b. Scope
    We are proposing to limit the scope of this reform to D6 RINs only.
D6 RINs are the D-code about which we have heard concerns related to
hoarding and market manipulation. In order to limit any unintended
consequences of this action, we believe it is sensible to limit this
action to D6 RINs. For example, we believe that it would be very
challenging to restrict the purchasing of separated D3 RINs because D3
RINs generated from biogas to fuel natural gas vehicles are generated
at the same time as they are separated; it would not be possible to
distinguish parties who own a D3 RIN from parties who separated it. We
seek comment on our narrow application of this reform to D6 RINs only
and on concerns of anti-competitive behavior related to the purchasing
of other D-code RINs.
    In this action, we are proposing that obligated parties as well as
a limited set of non-obligated parties would be allowed to purchase
separated D6 RINs freely. We considered a firm prohibition on all
transactions of all parties other than obligated parties from
purchasing D6 RINs, but we believe that certain limited situations
involving non-obligated parties should continue to be allowed for the
RFS to function properly. We outline those situations and allowances
below.
    First, we are proposing that a party that is a corporate affiliate
or a contractual affiliate, as proposed at 40 CFR 80.1401, to an
obligated party would be allowed to execute a separated D6 RIN purchase
transaction. This would include a party that is owned more than 20
percent by an obligated party or that owns more than 20 percent of an
obligated party. This would also include a party that has an agreement
to deliver RINs to an obligated party. Based on discussions with some
obligated parties, we believe that they routinely contract with third-
parties, such as traders, to deliver separated D6 RINs. We have also
learned, as described in Section III.E.3.a, that some non-obligated
parties routinely commit under contract to deliver D6 RINs to obligated
parties based on their anticipated future blending volumes and must
purchase separated D6 RINs on the market to satisfy the contract if
their blending volumes fall short. We believe all of these contractual
transactions are helpful to obligated parties and that obligated
parties, the

very parties this reform is attempting to protect, would be harmed if
these types of contractual transactions were prohibited.
    Second, we are proposing that non-obligated parties needing to
replace invalid RINs would also be allowed to purchase separated RINs
for that purpose. Parties that generate renewable fuel with RINs
attached sometimes make errors in their renewable fuel and RIN
calculations, and blenders that purchase RINs attached to renewable
fuel sometimes learn too late that the RINs they've acquired are
fraudulent or erroneous. We believe that the most straightforward and
practical way to allow these parties to stay compliant with the RFS
program is to continue to allow them to replace invalid RINs by
purchasing new separated RINs from the market.
    Third, we are proposing that exporters of renewable fuel that
needed D6 RINs to satisfy their exporter RVOs according to 40 CFR
80.1430 would be allowed to purchase separated D6 RINs in these limited
situations. Parties that export conventional fuel blended with
renewable fuel must acquire and retire RINs to account for the portion
of their exported product that is renewable fuel. These exporters do
not necessarily receive, generate or separate RINs, so they need
another way to acquire RINs in order to comply with the program.
    Ultimately, we believe that our proposal would successfully exclude
from the RIN market those parties that serve no function in the fuels
market and that may enter the RIN market for speculative or
manipulative reasons only. We seek comment on providing allowances in
this reform, including whether doing so would create any gaming
opportunities and, if so, how that could be avoided. For example, a
non-obligated party could create a contract with an obligated party at
a minimum level as a way to game this reform. We seek comment on how we
could tighten this reform but still allow enough compliance flexibility
for obligated parties with contractual relationships with non-obligated
parties. We also seek comment on the appropriateness of these
allowances and on any other limited situations, in which non-obligated
parties should be allowed to purchase separated D6 RINs.
    We recognize that a reform prohibiting non-obligated parties from
certain activities could create strong incentives for non-obligated
parties to become obligated parties. This can be done relatively easily
by importing a small volume of fuel or blending small volumes of
blendstock to produce fuel. This type of gaming could circumvent the
entire purpose of this reform and create a sizable implementation
burden on EPA to no avail. We seek comment on ways this gaming could be
prevented should we finalize this reform, including limiting the number
of separated D6 RINs that importers, blender refiners, and non-
obligated parties exempted from this prohibition can purchase. This is
similar to the limitation we placed on the ability of certain obligated
parties to separate RINs under 40 CFR 80.1429(b)(9).
c. Reporting and Recordkeeping
    As described in Section III.E.1.h, we are proposing to add a yes/no
field on the D6 RIN holding threshold to the RIN Activity Report that
all RIN holding parties already submit to EPA quarterly. Since all RIN
holding parties already submit these reports quarterly, we believe the
incremental reporting burden of filling out a new threshold field would
be minimal. In order to maintain compliance oversight of this RIN
purchasing restriction on non-obligated parties, we are proposing to
also add a field to the quarterly RIN Activity Report on whether a non-
obligated party purchased D6 RINs in the quarter. If the non-obligated
party reported purchasing any amount of separated D6 RINs, it would
then have to report whether a valid reason (e.g., invalid RINs,
exports, contract with obligated party) applied. As with the threshold
field, we believe it would be important for parties to certify that
they were in compliance with this proposed provision. We are also
proposing that non-obligated parties would be required to keep all
applicable records related to this restriction, such as actual
contracts with obligated parties or evidence of invalid RINs and make
those records available to their attest engagement auditor. The auditor
would review the records and confirm that the party made the proper
calculations and reported accurately to EPA on compliance with the
proposed provision. We seek comment on this proposed approach to
compliance oversight.
d. Alternative Approaches Considered
    In addition to the specific reform we are proposing to restrict to
certain parties the ability to purchase separated D6 RINs, we seek
comment on alternatives that also meet the objective of this reform in
the President's Directive but in a more simple and direct way. We
recognize that prohibiting a class of parties from taking an action but
then carving out a list of exceptions to that prohibition has the
potential to be confusing and unwieldy. Instead of the reform that we
are proposing, an alternative approach to accomplishing the intended
goals of this reform objective could be to rely only on the first
reform discussed in Section III.E.1. Rather than restricting who could
purchase and who could sell to whom, we could address the concern that
non-obligated parties might hoard RINs only by imposing a limit on
their D6 RIN holding. The holding limit specifically on non-obligated
parties could be lower than the three percent of the annual
conventional biofuel volume requirement proposed. We seek comment on
these alternatives and on any other alternatives commenters recommend.
4. Reform Four: Limiting Duration of RIN Holdings by Non-Obligated
Parties
    The fourth potential reform from the President's Directive that we
address in this action is limiting the duration a non-obligated party
can hold RINs. In Section III.E.3, we describe our proposal to restrict
certain non-obligated parties from purchasing separated RINs but still
allowing them to own separated RINs that they acquire by blending
renewable fuel into petroleum-based fuel. This fourth reform would
restrict non-obligated parties further by limiting how long they could
hold the separated RINs acquired at blending. The concept behind this
reform is to require non-obligated parties to inject their RINs into
the market soon after acquiring them to maximize liquidity for
obligated parties who need the RINs for compliance.
    Under this reform, we are proposing a limit on the duration that a
non-obligated party can hold separated D6 RINs. Specifically, we are
proposing that a non-obligated party must sell or retire as many RINs
as it obtained in a quarter by the quarter's end. For example, both a
RIN separated on January 1 and a RIN separated on March 31 would each
need to be offset by a RIN sale in the first quarter. The proposed
provision would not apply to potentially invalid D6 RINs that are
required to be held and prohibited from being sold. This proposed
provision would not apply to obligated parties. Additional information
on calculations and reporting are discussed in more detail in Section
III.E.4.e.
    The potential anti-competitive behavior related to non-obligated
parties holding RINs that would be avoided with this action is the
potential to accumulate enough RINs to gain market power and then use
that market power to manipulate the price of RINs. We note that such
market power is also addressed by the public disclosure reform outlined
in Section III.E.1. However, we are additionally proposing

to limit the duration that non-obligated parties can hold separated
RINs in this action as an alternative or additional method to address
this concern. We seek comment on the value of limiting the duration
that a non-obligated party can hold separated RINs, and specifically on
whether it adds any safeguards against manipulative behavior beyond the
public disclosure reform.
    Some obligated parties have complained that blenders routinely
withhold separated RINs from the market until the price is high enough
to secure a large profit. We note that such actions are not necessarily
price manipulation or evidence of anti-competitive behavior.
a. Implications and Discussion
    As described above, this reform would limit the duration that a
non-obligated party could hold a D6 RIN and would therefore interfere
with attempts at increasing its market power. This reform could also
increase the availability of D6 RINs on the market for obligated
parties who want or need to acquire RINs for quarterly retirement. A
final benefit of this reform is that it provides symmetry to the
quarterly RIN retirement requirement for obligated parties as discussed
in Section III.E.2; that reform would increase the frequency of D6 RIN
demand and this reform would increase the frequency of D6 RIN supply.
    This reform could also have harmful consequences for some parties
in the market. At an even more basic level, a fuel blender with
separated RINs to sell may not be able to find a party willing to buy
those RINs at the time of blending. Therefore, a duration limit that is
set too short could take too much flexibility away from non-obligated
parties and make it difficult for them to participate in the RIN
system. As such, we have proposed a duration limit of a quarter that we
believe minimizes the risk of causing harm to parties in the RIN
system.
    Finally, we note that non-obligated parties who want to evade the
duration limit for holding separated RINs could easily take the minimal
action necessary to become an obligated party. For example, a blender
could easily blend a small volume of blending stocks to produce
gasoline or diesel or import a small volume of petroleum-based fuel in
order to become an obligated party. As an obligated party, the blender
would no longer be subject to a restriction on how long it could hold
its RINs. While such gaming would not directly harm any party or the
RIN market, it could harm the integrity of the program if done widely
and could increase the implementation and oversight burden on EPA. We
seek comment on the implications of such gaming and on any ideas to
prevent it, including imposing the duration limit on RINs held by
importers and blender refiners that are in excess of their RVO
requirements. This is similar to the limitations we placed on the
ability of these obligated parties to separate RINs under 40 CFR
80.1429(b)(9).
b. Scope
    We are proposing to limit the scope of this reform to D6 RINs only.
D6 RINs are the only D-code about which we have heard concerns related
to hoarding and market manipulation. In order to limit any unintended
consequences of this action, we believe it is sensible to limit the
type of RIN it applies to while still meeting the objective of the
reform. For example, since most D3 RINs are generated only once a
month, we believe parties might need more flexibility on the time
between RIN generation and RIN sale than other D-codes. Furthermore, D4
RINs attached to biodiesel produced by a small or unknown company may
not be well received on the market, so a non-obligated party that
blends such biodiesel into petroleum-based diesel and separates such D4
RINs might need time to find a willing buyer. A restriction on how long
they can hold such D4 RINs before selling could upset the balance in
purchase negotiations and force non-obligated parties to sell these D4
RINs at significantly discounted prices to stay in compliance with this
proposed regulation. We seek comment on our narrow application of this
reform to D6 RINs only and on concerns of anti-competitive behavior
related to the purchasing of other D-code RINs.
    We are also proposing that separated D6 RINs that are potentially
invalid would not be accounted for by a non-obligated party in its
count of D6 RINs separated in a quarter. A party would leave those D6
RINs out of the count of D6 RINs it would have to sell or retire. The
non-obligated party would continue to be subject to the requirements at
40 CFR 80.1431.
c. Duration
    Although we did not identify this reform concept in the list of
reforms under EPA consideration in the 2019 RVO proposal, several
parties proactively commented on this concept. Some commenters
suggested a 30-day duration, others suggested 60 days, and still others
suggested 90 days. We considered each of these potential durations and
decided to propose in this action a 90-day cycle, whereby the number of
separated D6 RINs that a non-obligated party would be required to sell
or retire in a quarter would be number of separated D6 RINs that the
party separated or purchased in that same quarter. Requiring non-
obligated parties to sell RINs by the end of the quarter would have the
significant benefit of matching the quarterly RIN retirement cycle that
would be required of obligated parties under this Section III.E.2 of
this action. Coordinating these two frequencies may help maintain
equilibrium in the RIN market and create equity among all RIN system
participants. We seek comment on the appropriateness of this duration
and of any other potential durations. We note that the reform proposed
under Section III.E.2 would require RIN retirement of only 80 percent
of the renewable fuel standard, so we seek comment on whether the RIN
holding duration should only apply to 80 percent of RINs separated or
purchased in order to better align the two reforms.
d. Implementation
    In this action, we are proposing that a non-obligated party would
be required to count the total number of RINs it separated or purchased
each quarter and sell or retire that many total RINs by the end of the
same quarter. For example, a non-obligated party would count the total
number of RINs it separated or purchased between January 1 and March 31
of a given year and then would sell or retire that many RINs between
January 1 and March 31 of that year. This approach would meet the
intention of this reform to prevent RIN hoarding and increase liquidity
without getting stuck needlessly in the details of which specific RIN
is being sold. It would also allow non-obligated parties the
flexibility to hold onto some D6 RINs that may be more difficult to
sell for a longer period of time, provided they are selling an equal
number of D6 RINs by the established deadline. We are also proposing
that, for a non-obligated party, any D6 RINs acquired in one quarter
through a remedial action with an EPA-generated separation date in the
previous quarter would add the D6 separated RINs to its separated total
for the current quarter.
    We also considered a slightly longer period between RIN separation
and sale in which a non-obligated party would be required to count the
number of RINs it separated each quarter and sell at least that many
RINs in that quarter and the following quarter. For example, a non-
obligated party that sold 100 RINs between January 1 and March 31 would

have to sell at least 100 RINs between January 1 and June 30. RINs
separated on January 1 would need to be sold within 180 days and RINs
separated on March 31 would need to be sold within 90 days. Such a
scheme would create overlapping periods, however, in which the same RIN
sale could be counted towards two different quarterly requirements. We
ultimately decided to propose a quarterly requirement, but we seek
comment on this alternative approach.
    We also considered an approach that would initiate a 90-day
expiration timer for each separated RIN batch on the day it is
separated by a non-obligated party. Under this design, a blender would
need to sell each RIN or batch of RINs within 90 days of separating it
from the underlying renewable fuel. However, such an implementation
scheme would place a large burden on non-obligated parties to keep
track of multiple expiration timers, possibly dozens or hundreds at a
time. It would also be very costly, if not infeasible, for EPA to
update EMTS to track so many individual expiration deadlines, which
across the entire system could total in the thousands or millions at
any given time. A slightly more manageable version that we considered
but are not proposing would be to require that an individual RIN
separated in one quarter by a blender be sold by that blender by that
quarter's compliance deadline for obligated parties. This approach
would still tag each RIN or RIN batch with an expiration date, but the
same expiration date would be applied to all RINs generated in the
quarter. This approach would result in a total of four expiration dates
a year across the whole RIN system for EPA to keep track of rather than
thousands or millions. However, we believe that any approach that
requires EMTS to tag individual RINs or RIN batches with a specific
date would be technically infeasible. We seek comment on the proposed
approach and on any other alternative approaches that commenters
recommend.
    The approach we are proposing, if finalized, as well as all of the
other approaches considered, would allow a non-obligated party to
maintain the RIN holdings it would have on the day before the effective
date of this reform. This aspect of the reform could incentivize non-
obligated parties to build up their RIN holdings in advance of the
final rule effective date, which would be counter to the goal of this
reform. We seek comment on an approach to addressing this concern.
    We are proposing that all non-obligated parties would be subject to
this D6 RIN holding duration limit, with no exception. For the third
reform discussed in Section E.III.3, we are proposing situations that
should be excluded from its restriction, namely situations in which
exporters would need to satisfy export RVOs, non-obligated parties
would need to replace invalid RINs, and non-obligated parties would
need to satisfy contract terms with obligated parties. We believe those
exceptions are warranted because they either allow parties to meet the
RFS requirements or because they help the RFS program run smoothly for
obligated parties. For the reform discussed in this section, however,
we do not believe that any exceptions are necessary. For example, a
non-obligated party that needs D6 RINs to satisfy a contract with an
obligated party could still do so while meeting the holding duration
limit. We seek comment on whether any exceptions to this reform would
be warranted, and if so which exceptions and why.
e. Reporting and Recordkeeping
    In order to maintain compliance oversight of this RIN holding
duration reform on non-obligated parties, we propose in this action to
add a field to the quarterly RIN Activity Report on whether the
proposed D6 RIN holding duration limit was exceeded in the quarter. We
are also proposing that the attest engagement auditor would review the
D6 RIN separation and sales numbers and confirm that the parties made
the proper calculations and reported accurately to EPA on compliance
with the proposed provision. This proposed approach to reporting,
recordkeeping, and compliance oversight is similar to our proposals for
the first and third reforms discussed in this action. We seek comment
on this proposed approach to compliance oversight.
5. Enhancing EPA's Market Monitoring Capabilities
    In addition to the four reforms proposed in this action, we are
considering taking additional steps to enhance our market monitoring
capabilities in order to better detect potential market manipulation.
The items listed below represent options we are currently considering,
and we welcome public input on any aspects related to enhancing our
data collections, enhancing our data systems, and/or seeking third-
party RIN market surveillance assistance. We are also seeking comment
on how these options could work in conjunction with the four reforms
outlined in Sections III.E.1-4.
a. Enhance Data Collection
    Monitoring a commodities market as large and complex as the RIN
market requires a substantial amount of market data. We currently
require parties to submit some data under the RFS related to RIN
trades. These data include trade prices, RIN volumes traded, and the
parties involved in the transaction. These current data collections can
be used to assess the RIN market for manipulative activities, but we
recognize that we have an opportunity in this action to diversify the
data we collect to enhance our ability to monitor the market. We also
recognize the importance of balancing the benefits of additional data
with the burden imposed both on the regulated industry and EPA of
reporting and handling the data. Considering these factors, we are
requesting comment on additional data collections that would enhance
our ability to monitor the RIN market for instances of manipulation.
    As described in Section III.E.1, we are proposing that parties
would be required to report to EPA when their aggregate RIN holdings,
including holdings of corporate affiliates, exceed a specified
threshold. In order to provide meaning to this proposed reform and to
enhance our market monitoring capabilities, we are proposing in this
section that auditors would include in their annual attest engagements
submitted to EPA by June 1 following the compliance year the names of
the party's corporate and contractual affiliates in the compliance
year. Parties that meet both definitions would need to be identified in
both categories.\193\ Given the complexity of contracts and RIN
transactions, it is very challenging for EPA to confirm whether parties
have common ownership and whether any group of corporate affiliates
reached a level of aggregated D6 RIN holdings in a compliance year that
would trigger the thresholds established in Section III.E.1 of this
action. Therefore, we believe we need to collect information on
corporate affiliates to allow us to properly conduct oversight of the
RIN market. We are also proposing that this list would contain the
names of contractual affiliates so that we could maintain some insight
into any additional market share parties could have control over. We
note that this list would include parties that are not registered with
EMTS to hold RINs. While only registered affiliates are included in the
threshold equations in

Section III.E.1 for simplicity, we believe we need a wider picture of
affiliations to, for example, monitor for a non-registered party that
has established contracts with multiple parties to purchase and own a
large number of aggregated RINs on its behalf. We would treat these
lists as CBI and would not make them publicly available. We recognize
that there may be challenges that we may not be aware of for parties to
disclose this information to auditors and for auditors to pass it along
to EPA, and therefore we are seeking comment on any potential concerns
and how these concerns may outweigh the benefits of adding this data to
market oversight.
---------------------------------------------------------------------------

    \193\ For diagrams and examples of different types of
affiliates, see the memorandum, ``Affiliates and Groups Definitional
Relationship and Requirements,'' available in the docket for this
action.
---------------------------------------------------------------------------

    We are also proposing amendments to 40 CFR 80.1452(c)(12) to
specify how parties report prices of RIN transactions to EPA.
Currently, some RIN prices reported are illogical numbers, so we are
providing further instruction on how to report the true price
correctly. Specifically, we are proposing that a per gallon RIN price
would be required for a separated RIN transaction and that a price of
$0.00 would only be allowed for intracompany and tolling agreement
transactions. We are also seeking comment on any other legitimate
reasons for reporting a $0.00 RIN price besides the reasons identified
above.
    We are also planning to update business rules in EMTS to require
that both parties in a RIN transaction enter the same RIN price. EMTS
already has a business rule that requires both parties in a RIN
transaction to enter the same RIN volume, and this business rule has
been very helpful in maintaining high quality volume data that we can
reliably publish and use for compliance oversight. These and other
business rules prevent data entry errors and prompt parties that
haven't properly followed the instructions in the regulations to
correct their numbers. By adding a similar business rule to EMTS on
prices, we believe we can prevent reporting errors and improve the
quality and reliability of our price data.
    Finally, we are proposing to update the transaction type options at
40 CFR 80.1452(c)(6) to capture whether a RIN transaction is the result
of a spot trade or of delivery from a term contract. We believe that
collecting this additional information will improve our understanding
of the RIN price reported because we will know whether the price was
established on the transaction date or sometime prior. With this
information in hand, we could filter term contract prices out of the
RIN price dataset that we publish and analyze internally for compliance
oversight. Thus, the published price would be a better reflection of
market prices on a given day. We seek comment on this updated reporting
requirement.
b. Third-Party Market Monitoring
    We are considering whether we should employ third-party monitoring
of the RIN market. We are aware of other environmental commodity
markets that employ third-party market monitoring services to conduct
analysis of the market, including screening for potential anti-
competitive behavior or market manipulation. For example, the Western
Climate Initiative, Inc. provides administrative services to the linked
cap and trade programs in Quebec and California, including managing a
contract with a company that provides independent marketing monitoring
for the jurisdictions.\194\ Quebec and California each maintain market
monitoring capabilities to oversee the joint market. In addition, RGGI
contracts with a third-party to monitor its CO2 allowance
trading market and produce and publish quarterly and annual reports
summarizing their findings.\195\ We believe additional RIN market
oversight and monitoring from an independent third-party could serve as
a deterrent to manipulative behavior and increase market transparency,
enabling the market to more easily function as designed. However, we
also recognize this added feature would come at a cost that may or may
not outweigh the benefits. For example, there would be additional
financial and staff time costs to manage the contracts and system with
the third party, including ensuring proper data security, transfer, and
training that would divert EPA's already limited resources away from
the many high priority areas under the RFS program. Therefore, we are
seeking comment on whether we should consider employing third-party
monitoring of the RIN market, including production of market analysis
reports and how to share findings in these reports and still protect
confidential business information.
---------------------------------------------------------------------------

    \194\ See ``Annual Report 2017 Activities and Accomplishments''
(May 1, 2018), available at http://www.wci-inc.org/docs/Attachment%206a.%20WCI_Inc_2017_Annual_Report_Final.pdf.
    \195\ See ``Annual Report on the Market for RGGI CO2
Allowances: 2017'' (May 2018), available at https://www.rggi.org/auctions/market-monitor-reports.
---------------------------------------------------------------------------

F. RIN Market Reform Economic Impacts

1. Benefits of RIN Market Reform
    The goal of the proposed reforms is to discourage or help prevent
anti-competitive market practices that may introduce uncertainty or
volatility into the RIN market. If these anti-competitive behaviors
were to occur in the RIN market, then it comes at a cost to both
obligated parties and biofuel producers if the prices are artificially
inflated or deflated. Therefore, if the proposed reforms deliver on
their intended goal, we believe the net benefit of this should help
reduce undue costs and lower the risks for both obligated parties and
renewable fuel producers. These proposed reforms also provide the added
benefit of increasing transparency into the RIN market. In general,
true commodities markets function optimally when all participants have
access to as much information possible, without infringing on
confidential business information, and this information is disseminated
or shared with all parties at the same time. This helps create a level
playing field and minimize any potential advantage one party may have
over the another. The net benefit of greater transparency helps market
participants, such as obligated parties, plan short- and long-term
strategies to manage their compliance costs.
2. Costs of RIN Market Reform
    As detailed in Sections III.E.1-4, we are proposing to require
additional reporting and recordkeeping for obligated parties under the
RFS program and non-obligated parties that participate in the RIN
market. As a result, we expect modest costs associated with these new
requirements.\196\ Specifically, we anticipate new costs associated
with reporting and recordkeeping requirements related to RIN holdings,
affiliated parties, increased compliance frequency, and any other data
elements EPA collects as informed by Section III.E.5.a. We also
anticipate some costs associated with prohibiting certain non-obligated
parties from purchasing separated D6 RINs. Many of these parties have
developed business models and enter into contracts that may require
them to leverage the ability to purchase separated D6 RINs on spot
markets. Prohibiting this practice would require that these parties
adjust their business models.
---------------------------------------------------------------------------

    \196\ For a quantitative breakdown of new recordkeeping and
reporting burden imposed by this action, see ``ICR _Detailed Burden
Tables'' and ``E15 RVP RIN Market Reform Rule ICR _Supporting
Statement'' materials in the docket for this action.
---------------------------------------------------------------------------

G. Conclusion

    On October 11, 2018, President Trump issued a White House statement
explaining that EPA was being directed to initiate a rulemaking.
Consequently, in this action, we are proposing

regulatory changes in line with the President's Directive that could
serve to prevent anti-competitive behavior from potentially taking root
in the future.
    In Section III.E.1, we are proposing to set two thresholds that
would work in tandem to identify parties with separated D6 RIN holdings
significantly larger than needed for normal business functions and
which may indicate an attempt to assert inappropriate market power.
Although we are not proposing that exceeding the threshold would be a
prohibited act, we are proposing that we would publish on our website
the names of any parties that reported exceeding the thresholds. We are
also proposing that the RIN holdings of corporate affiliates be
included in a party's threshold calculations. In Section III.E.2, we
are proposing to establish RIN retirement requirements for the first
three quarters of the compliance year. Obligated parties could use any
D-code RINs to do so. This reform would not impact the current annual
RVO calculations or compliance. In Section III.E.3, we are proposing
that only obligated parties, exporter, and certain non-obligated
parties be allowed to purchase separated D6 RINs. Non-obligated parties
would be exempt from this proposed restriction if they were a corporate
or contractual affiliate to an obligated party. In Section III.E.4, we
are proposing a limit on the duration that a non-obligated party could
hold separated D6 RINs. Specifically, we are proposing that a non-
obligated party would be required to sell or retire as many RINs as it
obtained in a quarter by the end of that quarter. In Section III.E.5,
we outline our consideration of taking additional steps to enhance our
market monitoring capabilities. We discuss the possibility of employing
a third-party market monitor to conduct analysis of the RIN market,
including screening for potential anti-competitive behavior.
    Overall, we are proposing to amend existing reports to collect
quarterly RIN retirement information and information on whether the
proposed D6 RIN holding thresholds were exceeded and whether the
proposed requirements on purchasing and holding separated D6 RINs were
met. We are proposing that parties would keep all records related to
these reporting requirements and would submit them to auditors for the
attest engagement process. In particular, we are proposing that each
party would submit a complete list of its corporate and contractual
affiliates to the auditor for review and that the auditor would submit
that list to EPA with its attest engagement report. Finally, we are
proposing enhancements to existing reporting fields in EMTS to improve
our RIN price data for analysis.
    We are seeking comment on all of the reform details proposed in
this action, including the proposed reporting and recordkeeping
requirements. We also seek comment on means to reduce the burden of
implementation of these reforms, including on small entities. We are
not seeking comment on the many elements of the RFS program that are
not proposed for amendment in this action, and those program elements
and regulatory provisions are outside the scope of this action.

IV. Statutory and Executive Order Reviews

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

    This action is a significant regulatory action that was submitted
to the Office of Management and Budget (OMB) for review. Any changes
made in response to OMB recommendations have been documented in the
docket.

B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs

    This action is not expected to be an Executive Order 13771
regulatory action. Details on the estimated costs of this proposed rule
can be found in EPA's analysis of the potential costs and benefits
associated with this action.

C. Paperwork Reduction Act (PRA)

    With respect to the E15 1-psi waiver portion of this action, no new
information collection burden is imposed under the PRA. OMB has
previously approved the information collection activities contained in
the existing regulations and has assigned OMB control number 2060-0675.
The proposed changes to the regulations would remove a small segment of
language on PTDs required to be generated and kept as records by
parties that make and distribute gasoline under the regulations at 40
CFR part 80, subpart N. These proposed changes would not require any
additional information from regulated parties nor do we believe that
these proposed changes would substantively alter practices used by
regulated parties to satisfy the PTD regulatory requirements.
    The information collection activities related to the RIN market
reform portion of this proposed rule have been submitted for approval
to OMB under the PRA. The Information Collection Request (ICR) document
that EPA prepared has been assigned EPA ICR number 2592.01. You can
find a copy of the ICR in the docket for this rule, and it is briefly
summarized here.
    This ICR includes all additional RFS related information collection
activities resulting from the Modifications to Fuel Regulations to
Provide Flexibility for E15; Modifications to RFS RIN Market
Regulations proposed rulemaking. These information collection
activities include new recordkeeping and reporting requirements
proposed under 40 CFR part 80, subpart M.
    Respondents/affected entities: The respondents to this information
collection fall into the following general industry categories:
Petroleum refineries, ethyl alcohol manufacturers, other basic organic
chemical manufacturing, chemical and allied products merchant
wholesalers, petroleum bulk stations and terminals, petroleum and
petroleum products merchant wholesalers, gasoline service stations, and
marine service stations.
    Respondent's obligation to respond: Mandatory.
    Estimated number of respondents: 22,119.
    Frequency of response: Quarterly, annually.
    Total estimated burden: 216,891 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
    Total estimated cost: $20,445,451 (per year).
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.
    Submit your comments on the Agency's need for this information, the
accuracy of the provided burden estimates and any suggested methods for
minimizing respondent burden to EPA using the docket identified at the
beginning of this rule. You may also send your ICR-related comments to
OMB's Office of Information and Regulatory Affairs via email to
<EMAIL_ADDRESS>Attention: Desk Officer for EPA. Since OMB
is required to make a decision concerning the ICR between 30 and 60
days after receipt, OMB must receive comments no later than April 22,
2019. EPA will respond to any ICR-related comments in the final rule.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, the impact of concern is

any significant adverse economic impact on small entities. An agency
may certify that a rule will not have a significant economic impact on
a substantial number of small entities if the rule relieves regulatory
burden, has no net burden or otherwise has a positive economic effect
on the small entities subject to the rule.
    With respect to the E15 1-psi waiver portion of this action, the
proposed regulatory changes do not substantively alter the regulatory
requirements on parties that make and distribute gasoline.
Additionally, the proposed interpretation to allow E15 to receive the
1-psi waiver would allow parties that make and distribute E15,
including small entities, more flexibility in the summer to satisfy
market demands.
    With respect to the proposed RIN market reform provisions of this
action, we have conducted a screening analysis to assess whether we
should make a finding that this action will not have a significant
economic impact on a substantial number of small entities.\197\ As
detailed in that analysis, we believe that the existing flexibilities
for small entities provide sufficient compliance flexibility and no
additional flexibilities are necessary.
---------------------------------------------------------------------------

    \197\ See ``Screening Analysis for the Proposed Modifications to
RFS RIN Market Regulations,'' available in the docket for this
action.
---------------------------------------------------------------------------

    We have therefore concluded that this action will have no net
regulatory burden for all directly regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. This action
implements mandates specifically and explicitly set forth in CAA sec.
211 and we believe that this action represents the least costly, most
cost-effective approach to achieve the statutory requirements.

F. Executive Order 13132: Federalism

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

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

    This action does not have tribal implications as specified in
Executive Order 13175.

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

    EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that EPA has reason to believe may disproportionately affect children,
per the definition of ``covered regulatory action'' in section 2-202 of
the Executive Order. This action is not subject to Executive Order
13045 because it does not concern an environmental health risk or
safety risk.

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

    This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution or use of energy. The flexibility provided to E15 blends
by this action will enable additional supply of energy but are not
expected to have an immediate significant effect on supply,
distribution, or use of energy. The modifications to the RFS compliance
system are not expected to have a significant effect on supply,
distribution, or use of energy.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations

    EPA believes that this action does not have disproportionately high
and adverse human health or environmental effects on minority
populations, low income populations, and/or indigenous peoples, as
specified in Executive Order 12898 (59 FR 7629, February 16, 1994).
This proposed rule does not affect the level of protection provided to
human health or the environment by applicable air quality standards.
This action does not substantially relax the control measures on
sources regulated by EPA fuels programs and therefore will not cause
emissions increases from these sources.

V. Statutory Authority

    Statutory authority for this action comes from section 211 of the
Clean Air Act, 42 U.S.C. 7545. Additional support for the procedural
and compliance related aspects of this proposed rule comes from
sections 114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. 7414,
7542, and 7601(a).

List of Subjects in 40 CFR Part 80

    Environmental protection, Fuel additives, Gasoline, Labeling, Motor
vehicle pollution, Penalties, Reporting and recordkeeping requirements.

    Dated: March 12, 2019.
Andrew Wheeler,
Administrator.

    For the reasons set forth in the preamble, EPA proposes to amend 40
CFR part 80 as follows:

PART 80--REGULATION OF FUEL AND FUEL ADDITIVES

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

    Authority: 42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart B--Controls and Prohibitions

0
2. Section 80.27 is amended by revising paragraph (d)(2) to read as
follows:

Sec.  80.27  Controls and prohibitions on gasoline volatility.

* * * * *
    (d) * * *
    (2) In order to qualify for the special regulatory treatment
specified in paragraph (d)(1) of this section, gasoline must contain
denatured, anhydrous ethanol. The concentration of the ethanol,
excluding the required denaturing agent, must be at least 9% and no
more than 15% (by volume) of the gasoline. The ethanol content of the
gasoline shall be determined by the use of one of the testing
methodologies specified in Sec.  80.47. The maximum ethanol content
shall not exceed any applicable waiver conditions under section 211(f)
of the Clean Air Act.
* * * * *
0
3. Section 80.28 is amended by revising paragraphs (g)(6)(iii), (g)(8)
introductory text, and (g)(8)(ii) as follows:

Sec.  80.28  Liability for violations of gasoline volatility controls
and prohibitions.

* * * * *
    (g) * * *
    (6) * * *
    (iii) That the gasoline determined to be in violation contained no
more than 15% ethanol (by volume) when it was

delivered to the next party in the distribution system.
* * * * *
    (8) In addition to the defenses provided in paragraphs (g)(1)
through (g)(6) of this section, in any case in which an ethanol
blender, distributor, reseller, carrier, retailer, or wholesale
purchaser-consumer would be in violation under paragraphs (b), (c),
(d), (e) or (f), of this section, as a result of gasoline which
contains between 9 and 15 percent ethanol (by volume) but exceeds the
applicable standard by more than one pound per square inch (1.0 psi),
the ethanol blender, distributor, reseller, carrier, retailer or
wholesale purchaser-consumer shall not be deemed in violation if such
person can demonstrate, by showing receipt of a certification from the
facility from which the gasoline was received or other evidence
acceptable to the Administrator, that:
* * * * *
    (ii) The ethanol portion of the blend does not exceed 15 percent
(by volume); and
* * * * *

Subpart M--Renewable Fuel Standard

0
4. Section 80.1401 is amended by adding in alphabetical order
definitions for ``Contractual affiliate,'' ``Corporate affiliate,''
``Corporate affiliate group,'' ``DX RIN,'' and ``End of Day'' to read
as follows:

Sec.  80.1401  Definitions.

* * * * *
    Contractual affiliate means one of the following:
    (1) Two parties are contractual affiliates if they have an explicit
or implicit agreement in place for one to purchase or hold RINs on
behalf of the other or to deliver RINs to the other. This other party
may or may not be registered under the RFS program.
    (2) Two parties are contractual affiliates if one RIN-owning party
purchases or holds RINs on behalf of the other. This other party may or
may not be registered under the RFS program.
* * * * *
    Corporate affiliate means one of the following:
    (1) Two parties are corporate affiliates if one owns or controls
ownership of more than 20 percent of the other.
    (2) Two parties are corporate affiliates if one parent company owns
or controls ownership of more than 20 percent of both.
    Corporate affiliate group means a group of parties in which each
party is a corporate affiliate to at least one other party in the
group.
* * * * *
    DX RIN means a RIN with a D code of X, where X is the D code of the
renewable fuel as identified under Sec.  80.1425, generated under Sec.
80.1426, and submitted to EMTS under Sec.  80.1452. For example, a D6
RIN is a RIN with a D code of 6.
* * * * *
    End of day means 7:00 a.m. Coordinated Universal Time (UTC).
* * * * *
0
5. Section 80.1427 is amended by:
0
a. Revising paragraph (b)(1) introductory text;
0
b. Redesignating paragraphs (b)(1)(ii) through (iv) as paragraphs
(b)(1)(iii) through (v);
0
c. Adding new paragraph (b)(1)(ii);
0
d. Revising newly redesignated paragraph b(1)(iii); and
0
e. Adding paragraph (d).
    The revisions and additions read as follows:

Sec.  80.1427   How are RINs used to demonstrate compliance?

* * * * *
    (b) * * *
    (1) An obligated party that fails to meet the requirements of
paragraph (a)(1) or (a)(7) of this section for calendar year i or fails
to meet the requirements of paragraph (d)(1) of this section for any
quarter in calendar year i is permitted to carry a deficit into year i
+ 1 under the following conditions:
* * * * *
    (ii) The party met the requirements of paragraph (d)(1) of this
section in each quarter in calendar year i-1 for the same RVO.
    (iii) The party subsequently meets the requirements of paragraphs
(a)(1) and (d)(1) of this section for calendar year i + 1 and carries
no deficit into year i + 2 for the same RVO.
* * * * *
    (d) Installment requirement. (1) In addition to the annual
demonstration pursuant to Sec.  80.1451(a)(1) that an obligated party
has met its Renewable Volume Obligations under Sec. Sec.  80.1407 and
80.1430, each obligated party must meet an installment requirement by
retiring a sufficient number of RINs for the first three quarters of
the compliance year by the reporting deadlines specified in Table 1 to
Sec.  80.1451, except as specified in paragraph (d)(3) of this section.
    (2) Obligated parties must determine their installment requirements
as follows:

IRi,q = [RFStdRF,i * (GVi,q +
DVi,q) * 0.80] + SHORTi,q-OVERi,q

Where:

IRi,q = The installment requirement is the number of RINs
an obligated party needs to retire for quarter q in compliance
period i, in RINs.
RFStdRF,i = The Renewable Volume Obligation for renewable
fuel for compliance period i, determined by EPA pursuant to Sec.
80.1405, in percent.
GVi,q = The cumulative non-renewable gasoline volume,
determined in accordance with Sec.  80.1407(b), (c), and (f), which
is produced in or imported into the 48 contiguous states or Hawaii
by an obligated party in compliance period i through quarter q, in
gallons.
DVi,q = The cumulative non-renewable diesel volume,
determined in accordance with Sec.  80.1407(d), (e), and (f),
produced in or imported into the 48 contiguous states or Hawaii by
an obligated party in compliance period i through quarter q, in
gallons.
i = The compliance period, typically expressed as a calendar year.
q = The quarter, as defined in Table 1 to Sec.  80.1451, in
compliance period i.
SHORTi.q = Cumulative shortfall from prior quarters in
compliance period i through quarter q, which includes the amount of
additional RINs an obligated party needed to retire to meet the
installment requirement in the prior quarter(s), in RINs. For
quarter one, this term is zero.
OVERi,q = Cumulative overage from the prior quarter(s) in
compliance period i through quarter q, which includes the amount of
excess RINs retired more than the installment requirement in the
prior quarter(s), in RINs. For quarter one, this term is zero.

    (3) An obligated party must satisfy the installment in compliance
period i as required by paragraph (d)(2) of this section unless the
obligated party satisfies all installments in compliance period i + 1
or has no RVO in compliance period i.
0
6. Section 80.1428 is amended by revising paragraph (b)(2) to read as
follows:

Sec.  80.1428   General Requirements for RIN distribution.

* * * * *
    (b) * * *
    (2) Separated RIN ownership. (i) Any person that has registered
pursuant to Sec.  80.1450 can own a separated RIN, except as specified
in paragraph (b)(2)(ii) of this section.
    (ii) Only a person that has registered as an obligated party or
exporter of renewable fuel pursuant to Sec.  80.1450, and who must
satisfy an RVO, may purchase a separated D6 RIN, unless the person
meets one of the following conditions:
    (A) The person meets the definition of contractual affiliate or
corporate affiliate in Sec.  80.1401.
    (B) The person is replacing an invalid D6 RIN under this subpart.

    (iii) Any person who owns a separated D6 RIN under paragraph
(b)(2)(i) of this section and is not an obligated party must either
sell or retire at least the total number of D6 RINs separated or
purchased in a quarter by the quarterly report deadline specified in
Table 1 in Sec.  80.1451.
    (iv) Any person who owns a separated D6 RIN to replace an invalid
D6 RIN, as allowed under paragraph (b)(2)(ii)(B) of this section, may
not sell the separated or purchased D6 RIN and must retire the
separated or purchased D6 RIN within 60 days of the date of separating
or purchasing the RIN pursuant to the applicable provisions of
Sec. Sec.  80.1431 and 80.1474.
* * * * *
0
7. Section 80.1435 is added to read as follows:

Sec.  80.1435  How are RIN holdings and RIN holding thresholds
calculated?

    (a) RIN holdings calculation. (1) Each party must calculate daily
end-of-day separated D6 RIN holdings by aggregating its end-of-day
separated D6 RIN holdings with the end-of-day separated D6 RIN holdings
of all corporate affiliates in a corporate affiliate group and use the
end-of-day separated D6 RIN holdings as specified in paragraph (b) of
this section.
    (2) Each party must calculate, as applicable, the holdings-to-
market percentage under paragraph (b)(1) of the section and the
holdings-to-obligation percentage under paragraph (b)(2) of this
section quarterly in accordance with the schedule specified in Table 1
to Sec.  80.1451.
    (3) Each obligated party that is part of a corporate affiliate
group that has a holdings-to-market percentage, as calculated under
paragraph (b)(1) of this section, greater than 3.00 percent for any
calendar day in a compliance period must calculate their holdings-to-
obligation percentage as specified in paragraph (b)(2) of this section.
    (4) Each party must individually keep copies of all calculations
and supporting information for separated D6 RIN holding threshold
calculations required under this section as specified in Sec.
80.1454(u).
    (b) RIN holding thresholds calculations.--(1) Primary test
calculations. For each day in a compliance period, each party that owns
RINs must calculate the holdings-to-market percentage for their
corporate affiliate group using the method specified in paragraph
(b)(1)(i) or (b)(1)(ii) of this section, as applicable.
    (i) For each day beginning January 1 through March 31, calculate
the holdings-to-market percentage for a corporate affiliate group as
follows:

HTMPd = [([sum]D6RINd)a/
(CNV_VOLTOT,i * 1.25)] * 100

Where:

HTMPd = The holdings-to-market percentage is the
percentage of separated D6 RINs a corporate affiliate group holds on
calendar day d relative to the total expected number of separated D6
RINs in the market in compliance period i, in percent.
d = A given calendar day.
i = The compliance period, typically expressed as a calendar year.
a = Individual corporate affiliate in a corporate affiliate group.
([sum]D6RINd)a = Sum of the number of
separated D6 RINs each individual corporate affiliate a holds at the
end of calendar day d, in RIN-gallons.
CNV_VOLTOT,i = The total expected annual volume of
conventional renewable fuels for the compliance period i, in
gallons. Unless otherwise specified, this number is 15 billion
gallons.

    (ii) For each day beginning April 1 through December 31, calculate
the holdings-to-market percentage for a corporate affiliate group as
follows:

HTMPd = [([sum]D6RINd)a/
(CNV_VOLTOT,i)] * 100

Where:

HTMPd = The holdings-to-market percentage is the
percentage of separated D6 RINs a corporate affiliate group holds on
calendar day d relative to the total expected number of separated D6
RINs in the market in compliance period i, in percent.
d = A given calendar day.
i = The compliance period, typically expressed as a calendar year.
a = Individual corporate affiliate in a corporate affiliate group.
([sum]D6RINd)a = Sum of the number of
separated D6 RINs each individual corporate affiliate a holds at the
end of calendar day d, in RIN-gallons.
CNV_VOLTOT,i = The total expected annual volume of
conventional renewable fuels for compliance period i, in gallons.
Unless otherwise specified, this number is 15 billion gallons.

    (2) Secondary threshold calculations. For each day in a
compliance period where a corporate affiliate group is required to
calculate with the secondary threshold requirement under Sec.
80.1435(a)(4), each obligated party must calculate the holdings-to-
obligation percentage for their corporate affiliate group using the
methods at paragraph (b)(2)(i) or (b)(2)(ii) of this section, as
applicable.
    (i) For each day beginning January 1 through March 31, calculate
the holdings-to-obligation percentage as follows:

HTOPd = [([sum]D6RINd)a/
{[([sum]CNV_RVOi-1)a +
([sum]CNV_DEFi-1)a +
([sum]CNV_DEFi-2)a] * 1.25{time} ] * 100

Where:

HTOPd = The holdings-to-obligation percentage is the
percentage of separated D6 RINs a corporate affiliate group holds on
calendar day d relative to their expected separated D6 RIN holdings
based on the corporate affiliate group's conventional RVO for
compliance period i-1, in percent.
d = A given calendar day.
i = The compliance period, typically expressed as a calendar year.
a = Individual corporate affiliate in a corporate affiliate group.
([sum]D6RINd)a = Sum of the number of
separated D6 RINs each individual corporate affiliate a holds on
calendar day d, in RIN-gallons.
([sum]CNV_RVOi-1)a = Sum of the conventional
RVOs for each individual corporate affiliate a for compliance period
i-1 as calculated in paragraph (b)(2)(iii) of this section, in RIN-
gallons.
([sum]CNV_DEFi-1)a = Sum of the conventional
deficits for each individual corporate affiliate a as calculated in
paragraph (b)(2)(iv) of this section for compliance period i-1, in
RIN-gallons.
([sum]CNV_DEFi-2)a = Sum of the conventional
deficits for each individual corporate affiliate a as calculated in
paragraph (b)(2)(iv) of this section for compliance period i-2, in
RIN-gallons.

    (ii) For each day beginning April 1 through December 31, calculate
the holdings-to-obligation percentage as follows:

HTOPd = {([sum]D6RINd)a/
[([sum]CNV_RVOi-1)a +
([sum]CNV_DEFi-1)a]{time}  * 100

Where:

HTOPd = The holdings-to-obligation percentage is the
percentage of separated D6 RINs a corporate affiliate group holds on
calendar day d relative to their expected separated D6 RIN holdings
based on the corporate affiliate group's conventional RVO for
compliance period i-1, in percent.
d = A given calendar day.
i = The compliance period, typically expressed as a calendar year.
a = Individual corporate affiliate in a corporate affiliate group.
([sum]D6RINd)a = Sum of the number of
separated D6 RINs each individual corporate affiliate a holds on
calendar day d, in RIN gallons.
([sum]CNV_RVOi-1)a = Sum of the conventional
RVOs for each individual corporate affiliate a for compliance period
i-1 as calculated in paragraph (b)(2)(iii) of this section, in RIN-
gallons.
([sum]CNV_DEFi-1)a = Sum of the conventional
deficits for each individual corporate affiliate a as calculated in
paragraph (b)(2)(iv) of this section for compliance period i-1, in
RIN-gallons.

    (iii) As needed to calculate the holdings-to-obligation percentage
in paragraphs (b)(2)(i) and (b)(2)(ii) of this section, calculate the
conventional RVO for an individual corporate affiliate as follows:

CNV_RVOi = {[RFStdRF,i * (GVi +
DVi)]-[RFStdAB,i * (GVi +
DVi)]{time}  + ERVORF,i

Where:

CNV_RVOi = The conventional RVO for an individual
corporate affiliate for compliance period i without deficits, in
RIN-gallons.
i = The compliance period, typically expressed as a calendar year.
RFStdRF,i = The standard for renewable fuel for
compliance period i determined by EPA pursuant to Sec.  80.1405, in
percent.
RFStdAB,i = The standard for advanced biofuel for
compliance period i determined by EPA pursuant to Sec.  80.1405, in
percent.
GVi = The non-renewable gasoline volume, determined in
accordance with Sec.  80.1407(b), (c), and (f), which is produced in
or imported into the 48 contiguous states or Hawaii by an obligated
party for compliance period i, in gallons.
DVi = The non-renewable diesel volume, determined in
accordance with Sec.  80.1407(b), (c), and (f), which is produced in
or imported into the 48 contiguous states or Hawaii by an obligated
party for compliance period i, in gallons.
ERVORF,i = The sum of all renewable volume obligations
from exporting renewable fuels, as calculated under Sec.  80.1430,
by an obligated party for compliance period i, in RIN-gallons.

    (iv) As needed to calculate the holdings-to-obligation percentage
in paragraphs (b)(2)(i) and (b)(2)(ii) of this section, calculate the
conventional deficit for an individual corporate affiliate as follows:

CNV_DEFi = DRF,i-DAB,i

Where:

CNV_DEFi = The conventional deficit for an individual
corporate affiliate for compliance period i, in RIN-gallons. If a
conventional deficit is less than zero, use zero for conventional
deficits in paragraphs (b)(2)(i) and (b)(2)(ii) of this section.
i = The compliance period, typically expressed as a calendar year.
DRF,i = Deficit carryover from compliance period i for
renewable fuel, in RIN-gallons.
DAB,i = Deficit carryover from compliance period i for
advanced biofuel, in RIN-gallons.

    (c) Exceeding the D6 RIN holding thresholds. (1) Primary threshold
test. If a party or corporate affiliate group has a holdings-to-market
percentage greater than three percent for any calendar day in a
compliance period, as determined under paragraph (b)(1) of this
section, and the corporate affiliate group does not contain an
obligated party, each party in the corporate affiliate group must
separately submit a report to EPA as specified in Sec.  80.1451(c).
    (2) Secondary threshold test. If an obligated party or a corporate
affiliate group required to calculate a holdings-to-obligation
percentage under paragraph (a)(3) of this section has a holdings-to-
obligation percentage greater than 130.00 percent for any calendar day
in a compliance period, as determined under paragraph (b)(2) of this
section, each party in the corporate affiliate group must separately
report to EPA as specified in Sec.  80.1451(c).
    (3) Reporting deadline. Parties required to report to EPA under
this section as specified under Sec.  80.1451(c), must report to EPA by
the deadlines specified in Table 1 to Sec.  80.1451.
0
8. Section 80.1451 is amended by revising paragraphs (a)(3) and (c)(2)
to read as follows:

Sec.  80.1451   What are the reporting requirements under the RFS
program?

    (a) * * *
    (3) The quarterly RIN activity reports required under paragraph
(c)(2) of this section to also include:
    (i) For obligated parties, all of the following information:
    (A) The installment requirement calculated using the procedures in
Sec.  80.1427(d) for the applicable quarterly reporting period.
    (B) The cumulative shortfall from prior quarters as calculated in
Sec.  80.1427(d).
    (C) The cumulative overage from the prior quarters as calculated in
Sec.  80.1427(d).
    (D) The resulting balance after applying total RINs retired for
compliance as calculated in Sec.  80.1427(d).
    (ii) Any additional information that the Administrator may require.
* * * * *
    (c) * * *
    (2) Reports related to a person's RIN activity must be submitted to
EPA according to the schedule specified in paragraph (f)(2) of this
section. Each report must summarize RIN activities for the reporting
period and must include all of the following information:
    (i) The submitting party's name.
    (ii) The submitting party's EPA-issued company identification
number.
    (iii) Primary registration designation or compliance level for
compliance year (e.g., ``Aggregated Refiner,'' ``Exporter,''
``Renewable Fuel Producer,'' ``RIN Owner Only,'' etc.).
    (iv) Number of prior-year and current-year separated D3, D4, D5,
D6, and D7 RINs owned at the end of the quarter.
    (v) Indicate if the submitting party exceeded the separated D6 RIN
holding threshold in the quarter, as determined by the applicable
calculation specified in Sec.  80.1435. If the answer is yes, then EPA
may publish the name and EPA-issued company identification number of
the party.
    (vi) For non-obligated parties who purchased separated D6 RINs
during the reporting period, the reason(s) for the purchase consistent
with Sec.  80.1428(b)(2)(ii).
    (vii) Total number of assigned D6 RINs separated during the
reporting period.
    (viii) Total number of separated D6 RINs purchased during the
reporting period.
    (ix) Total number of separated D6 RINs sold during the reporting
period.
    (x) Total number of separated D6 RINs retired during the reporting
period.
    (xi) For non-obligated parties, total number of separated D6 RINs
subject to the requirement in Sec.  80.1428(b)(2)(iii) held past the
stated RIN distribution deadline.
    (xii) The volume of renewable fuel (in gallons) owned at the end of
the quarter.
    (xiii) The total number of assigned RINs owned at the end of the
quarter.
    (xiv) Any additional information that the Administrator may
require.
* * * * *
0
9. Section 80.1452 is amended by:
0
a. Revising paragraph (c)(12); and
0
b. Adding paragraph (c)(15).
    The revision and addition read as follows:

Sec.  80.1452   What are the requirements related to the EPA Moderated
Transaction System (EMTS)?

* * * * *
    (c) * * *
    (12)(i) For RIN buy or sell transaction types including assigned
RINs, the per-gallon RIN price or the per-gallon price of renewable
fuel with RINs included.
    (ii) For RIN buy or sell transaction types including separated
RINs, the per-gallon RIN price.
* * * * *
    (15) For buy or sell transactions of separated RINs, the mechanism
used to purchase the RINs (e.g., spot market or fulfilling a term
contract).
* * * * *
0
10. Section 80.1454 is amended by adding paragraphs (i)(1) and (2) and
paragraphs (u) through (y) to read as follows:

Sec.  80.1454   What are the recordkeeping requirements under the RFS
program?

* * * * *
    (i) * * *
    (1) For buy or sell transactions of separated RINs, parties must
retain records substantiating the price reported to EPA under Sec.
80.1452.
    (2) For buy or sell transactions of separated RINs, parties must
retain

records demonstrating the transaction mechanism (e.g., spot market or
fulfilling a term contract).
* * * * *
    (u) Requirements for recordkeeping of RIN holdings for all parties
transacting or owning RINs. (1) Parties must retain records related to
end-of-day separated D6 RIN holdings, conventional RVO calculations,
and any associated calculations recorded in order to meet the RIN
holdings requirements described in Sec.  80.1435. Such records must
include information related to any corporate affiliates and their RIN
holdings and calculations.
    (2) Parties must retain records related to their reports to EPA
regarding threshold compliance under Sec. Sec.  80.1435 and 80.1451.
    (v) Requirements for recordkeeping for installment requirement. (1)
Obligated parties must retain records related to gasoline and diesel
production levels used for RVO calculation in Sec. Sec.  80.1427 and
80.1451.
    (2) Obligated parties must retain records related to the RVO
calculation inputs as listed in Sec. Sec.  80.1427 and 80.1451.
    (3) Obligated parties must retain records related to any remedial
actions submitted after the quarterly compliance deadline.
    (w) Recordkeeping requirements for parties prohibited from
purchasing separated D6 RINs. (1) Non-obligated parties must retain all
records pertaining to why they purchased separated D6 RINs. This may
include, but is not limited to, legal contracts with obligated parties
or documents indicating the need to replace invalid D6 RINs.
    (2) [Reserved]
    (x) Requirements for recordkeeping of D6 RIN holdings by non-
obligated parties. (1) Non-obligated parties must retain all records
related to the number of D6 RINs separated in a given quarter,
purchased in a given quarter, and sold in a given quarter to
demonstrate compliance with the requirements in Sec.  80.1428.
    (2) [Reserved]
    (y) Requirements for recordkeeping of contractual and corporate
affiliates. (1) Parties must retain records including, but not limited
to, the name, address, business location, contact information, and
description of relationship, for each corporate affiliate. For the
corporate affiliate group, a relational diagram.
    (2) Parties must retain records including, but not limited to, the
name, address, business location, contact information, and contract or
other agreement for each contractual affiliate.
0
11. Section 80.1460 is amended by revising paragraphs (c)(1) and (d) to
read as follows:

Sec.  80.1460   What acts are prohibited under the RFS program?

* * * * *
    (c) * * *
    (1) Fail to acquire sufficient RINs, fail to retire sufficient
RINs, or use invalid RINs to meet the person's RVOs or quarterly
compliance requirements under Sec.  80.1427.
* * * * *
    (d) RIN retention violation. No person may do any of the following:
    (1) Retain RINs in violation of the requirements in Sec.
80.1428(a)(5).
    (2) Purchase separated RINs in violation of the requirements in
Sec.  80.1428(b)(2).
* * * * *
0
12. Section 80.1464 is amended by:
0
a. Revising paragraph (a)(3)(ii);
0
b. Adding paragraphs (a)(4) through (5);
0
c. Revising paragraph (b)(3)(ii);
0
d. Adding paragraph (b)(5);
0
e. Revising paragraph (c)(2)(ii); and
0
f. Adding paragraph (c)(3).
    The revisions and additions read as follows:

Sec.  80.1464  What are the attest engagement requirements under the
RFS program?

    (a) * * *
    (3) * * *
    (ii) Obtain the database, spreadsheet, or other documentation used
to generate the information in the RIN activity reports; compare the
RIN transaction samples reviewed under paragraph (a)(2) of this section
with the corresponding entries in the database or spreadsheet and
report as a finding any discrepancies; compute the total number of
current-year and prior-year RINs owned at the start and end of each
quarter, purchased, separated, sold, retired and reinstated, and for
parties that reported RIN activity for RINs assigned to a volume of
renewable fuel, the volume and type of renewable fuel (as defined in
Sec.  80.1401) owned at the end of each quarter; as represented in
these documents; obtain a list of all corporate affiliates and a list
of all contractual affiliates and review the information regarding
their documented relationship to the submitter (e.g., contracts, or
other legal documents); and identify any contractual affiliates that
had a contract with the party that did not result in transfer of RINs
to the party during the calendar year; report a separate list for all
corporate affiliates and all contractual affiliates including
identification information for each corporate or contractual affiliate
(e.g., company ID, company name, corporate address, etc) and any
findings to EPA.
    (4) Quarterly installment requirement for obligated parties. (i)
Compare the volumes of products listed in Sec.  80.1407(c) and (e)
reported to EPA in the report required under Sec.  80.1451(a)(3) with
the volumes, excluding any renewable fuel volumes, contained in the
inventory reconciliation analysis under Sec.  80.133 and the volume of
non-renewable diesel produced or imported. Verify that the volumes
reported to EPA agree with the volumes in the inventory reconciliation
analysis and the volumes of non-renewable diesel produced or imported,
and report as a finding any exception.
    (ii) Compare the calculated installment requirement for each
quarter using the required steps found in 80.1427(d) with any RINs
retired for compliance. Verify that any cumulative shortfall or
cumulative overage is carried through as applicable into any subsequent
quarter.
    (5) RIN holdings. (i) Obtain and read copies of the RIN holdings
calculations kept under Sec.  80.1454(u) for the obligated party and
any corporate affiliates.
    (ii) Report as a finding any date where the aggregated calculation
exceeded the RIN holding threshold(s) specified in Sec.  80.1435. State
whether this information agrees with the party's reports (notification
of threshold exceedance) to EPA.
    (b) * * *
    (3) * * *
    (ii) Obtain the database, spreadsheet, or other documentation used
to generate the information in the RIN activity reports; compare the
RIN transaction samples reviewed under paragraph (b)(2) of this section
with the corresponding entries in the database or spreadsheet and
report as a finding any discrepancies; report the total number of each
RIN generated during each quarter and compute and report the total
number of current-year and prior-year RINs owned at the start and end
of each quarter, purchased, separated, sold, retired and reinstated,
and for parties that reported RIN activity for RINs assigned to a
volume of renewable fuel, the volume of renewable fuel owned at the end
of each quarter, as represented in these documents; review the
information regarding contractual affiliates and corporate affiliates
(as defined in Sec.  80.1401) and their documented relationship to the
submitter; identify any contractual affiliates that had a contract with
the party that did not result in transfer of RINs to the party during
the calendar year; report a separate list for all corporate affiliates
and all contractual

affiliates including identification information for each corporate or
contractual affiliate (e.g., company ID, company name, corporate
address, etc) and any findings to EPA.
* * * * *
    (5) RIN holdings. (i) Obtain and read copies of the RIN holdings
calculations for the renewable fuel producers and RIN-generating
importers and any corporate affiliates.
    (ii) Report as a finding any date where the aggregated calculation
exceeded the RIN holding threshold(s) specified in Sec.  80.1435.
    (c) * * *
    (2) * * *
    (ii) Obtain the database, spreadsheet, or other documentation used
to generate the information in the RIN activity reports; compare the
RIN transaction samples reviewed under paragraph (c)(1) of this section
with the corresponding entries in the database or spreadsheet and
report as a finding any discrepancies; compute the total number of
current-year and prior-year RINs owned at the start and end of each
quarter, purchased, sold, retired, separated, and reinstated and for
parties that reported RIN activity for RINs assigned to a volume of
renewable fuel, the volume of renewable fuel owned at the end of each
quarter, as represented in these documents; review the information
regarding corporate affiliates and contractual affiliates (as defined
in Sec.  80.1401) and their documented relationship to the submitter
(e.g., contract); identify any contractual affiliates that had a
contract with the party that did not result in transfer of RINs to the
party during the calendar year; report a separate list for all
corporate affiliates and all contractual affiliates including
identification information for each corporate or contractual affiliate
(e.g., company ID, company name, corporate address, etc) and any
findings to EPA.
    (3) RIN holdings. (i) Obtain and read copies of the RIN holdings
calculations for the renewable fuel producers and RIN-generating
importers and any corporate affiliates.
    (ii) Report as a finding any date where the aggregated calculation
exceeded the RIN holding threshold specified in Sec.  80.1435. State
whether this information agrees with the party's reports (notification
of threshold exceedance) to EPA.
* * * * *

Subpart N--Additional Requirements for Gasoline-Ethanol Blends

0
13. Section 80.1503 is amended by:
0
a. Revising paragraph (a)(1)(vi)(B);
0
b. Removing and reserving paragraph (a)(1)(vi)(C);
0
c. Revising paragraph (b)(1)(vi)(B); and
0
d. Removing and reserving paragraphs (b)(1)(vi)(C) through (E).
    The revisions read as follows:

Sec.  80.1503  What are the product transfer document requirements for
gasoline-ethanol blends, gasolines, and conventional blendstocks for
oxygenate blending subject to this subpart?

    (a) * * *
    (1) * * *
    (vi) * * *
    (B) The conspicuous statement that the gasoline being shipped
contains ethanol and the percentage concentration of ethanol as
described in Sec.  80.27(d)(3).
* * * * *
    (b) * * *
    (1) * * *
    (vi) * * *
    (B)(1) For gasoline containing less than 9 volume percent ethanol,
the following statement: ``EX--Contains up to X% ethanol. The RVP does
not exceed [fill in appropriate value] psi.'' The term X refers to the
maximum volume percent ethanol present in the gasoline.
    (2) The conspicuous statement that the gasoline being shipped
contains ethanol and the percentage concentration of ethanol as
described in Sec.  80.27(d)(3) may be used in lieu of the statement
required under paragraph (b)(1)(vi)(B)(1) of this section.
* * * * *
0
14. Section 80.1504 is amended by removing and reserving paragraphs (f)
and (g).

[FR Doc. 2019-05030 Filed 3-20-19; 8:45 am]
 BILLING CODE 6560-50-P