[Federal Register Volume 87, Number 250 (Friday, December 30, 2022)]
[Proposed Rules]
[Pages 80582-80756]
[FR Doc No: 2022-26499]

Vol. 87

Friday,

No. 250

December 30, 2022

Part II

 Environmental Protection Agency

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40 CFR Parts 80 and 1090

Renewable Fuel Standard (RFS) Program: Standards for 2023-2025 and
Other Changes; Proposed Rule

Federal Register / Vol. 87 , No. 250 / Friday, December 30, 2022 /
Proposed Rules

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 80 and 1090

[EPA-HQ-OAR-2021-0427; FRL-8514-01-OAR]
RIN 2060-AV14

Renewable Fuel Standard (RFS) Program: Standards for 2023-2025
and Other Changes

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: Under the Clean Air Act, the Environmental Protection Agency
(EPA) is required to determine the applicable volume requirements for
the Renewable Fuel Standard (RFS) for years after those specified in
the statute. This action proposes the applicable volumes and percentage
standards for 2023 through 2025 for cellulosic biofuel, biomass-based
diesel, advanced biofuel, and total renewable fuel. This action also
proposes the second supplemental standard addressing the remand of the
2016 standard-setting rulemaking. Finally, this action proposes several
regulatory changes to the RFS program including regulations governing
the generation of qualifying renewable electricity and other
modifications intended to improve the program's implementation.

DATES:
    Comments. Comments must be received on or before February 10, 2023.
    Public Hearing. EPA will announce information regarding the public
hearing for this proposal in a supplemental Federal Register document.

ADDRESSES:
    Comments. You may send your comments, identified by Docket ID No.
EPA-HQ-OAR-2021-0427, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov
(our preferred method). Follow the online instructions for submitting
comments.
     Email: [email protected]. Include Docket ID No. EPA-
HQ-OAR-2021-0427 in the subject line of the message.
     Mail: U.S. Environmental Protection Agency, EPA Docket
Center, Air Docket, Mail Code 28221T, 1200 Pennsylvania Avenue NW,
Washington, DC 20460.
     Hand Delivery or Courier: EPA Docket Center, WJC West
Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004.
The Docket Center's hours of operation are 8:30 a.m.-4:30 p.m., Monday-
Friday (except Federal Holidays).
    Instructions: All submissions received must include the Docket ID
No. for this rulemaking. Comments received may be posted without change
to https://www.regulations.gov, including any personal information
provided. For the full EPA public comment policy, information about CBI
or multimedia submissions, and general guidance on making effective
comments, please visit http://www.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: David Korotney, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number:<PHONE_NUMBER>; email address: [email protected]. Comments on this proposal should not be submitted
to this email address, but rather through http://www.regulations.gov as
discussed in the ADDRESSES section.

SUPPLEMENTARY INFORMATION: Entities potentially affected by this
proposed rule are those involved with the production, distribution, and
sale of transportation fuels (e.g., gasoline and diesel fuel),
renewable fuels (e.g., ethanol, biodiesel, renewable diesel, biogas,
and renewable electricity), and electric vehicles. Potentially affected
categories include:

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                                                   NAICS \a\
                   Category                          Codes          Examples of potentially affected entities
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Industry......................................          112111  Cattle farming or ranching.
Industry......................................          112210  Swine, hog, and pig farming.
Industry......................................          221117  Biomass electric power generation.
Industry......................................          221210  Manufactured gas production and distribution,
                                                                 and distribution of renewable natural gas
                                                                 (RNG).
Industry......................................          221320  Sewage treatment plants or facilities.
Industry......................................          324110  Petroleum refineries.
Industry......................................          325120  Biogases, industrial (i.e., compressed,
                                                                 liquefied, solid), manufacturing.
Industry......................................          325193  Ethyl alcohol manufacturing.
Industry......................................          325199  Other basic organic chemical manufacturing.
Industry......................................          336110  Electric automobiles for highway use
                                                                 manufacturing.
Industry......................................          424690  Chemical and allied products merchant
                                                                 wholesalers.
Industry......................................          424710  Petroleum bulk stations and terminals.
Industry......................................          424720  Petroleum and petroleum products merchant
                                                                 wholesalers.
Industry......................................          454319  Other fuel dealers.
Industry......................................          562212  Landfills.
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\a\ North American Industry Classification System (NAICS).

    This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be affected by this
proposed action. This table lists the types of entities that EPA is now
aware could potentially be affected by this proposed action. Other
types of entities not listed in the table could also be affected. To
determine whether your entity would be affected by this proposed
action, you should carefully examine the applicability criteria in 40
CFR part 80. If you have any questions regarding the applicability of
this proposed action to a particular entity, consult the person listed
in the FOR FURTHER INFORMATION CONTACT section.

Outline of This Preamble

I. Executive Summary
    A. Summary of the Key Provisions of This Regulatory Action
    B. Environmental Justice
    C. Comparison of Costs to Impacts
    D. Policy Considerations
    E. Endangered Species Act
II. Statutory Requirements and Conditions
    A. Requirement To Set Volumes for Years After 2022
    B. Factors That Must Be Analyzed
    C. Statutory Conditions on Volume Requirements
    D. Authority To Establish Percentage Standards for Multiple
Future Years
    E. Considerations for Late Rulemaking
    F. Impact on Other Waiver Authorities
    G. Severability
III. Candidate Volumes and Baselines

    A. Number of Years Analyzed
    B. Production and Import of Renewable Fuel
    C. Candidate Volumes for 2023-2025
    D. Baselines
    E. Volume Changes Analyzed
IV. Analysis of Candidate Volumes
    A. Climate Change
    B. Energy Security
    C. Costs
    D. Comparison of Costs and Impacts
    E. Assessment of Environmental Justice
V. Response to Remand of 2016 Rulemaking
    A. Supplemental 2023 Standard
    B. Authority and Consideration of the Benefits and Burdens
VI. Proposed Volume Requirements for 2023-2025
    A. Cellulosic Biofuel
    B. Non-Cellulosic Advanced Biofuel
    C. Biomass-Based Diesel
    D. Conventional Renewable Fuel
    E. Summary of Proposed Volume Requirements
    F. Request for Comment on Volume Requirements for 2026
    G. Request for Comment on Alternative Volume Requirements
VII. Proposed Percentage Standards for 2023-2025
    A. Calculation of Percentage Standards
    B. Treatment of Small Refinery Volumes
    C. Proposed Percentage Standards
VIII. Regulatory Program for Renewable Electricity
    A. Historical Treatment of Electricity in the RFS Program
    B. The eRIN Generation and Disposition Chain
    C. Policy Goals in Developing the eRIN Program
    D. Regulatory Goals in Developing the eRIN Program
    E. Proposed Applicability of the eRIN Program
    F. Proposed Program Structure for Light-Duty Vehicles
    G. How the Proposed Program Structure Meets the Goals
    H. Alternative eRIN Program Structures
    I. Equivalence Value for Electricity
    J. Regulatory Structure and Implementation Dates
    K. Definitions
    L. Registration, Reporting, Product Transfer Documents, and
Recordkeeping
    M. Testing and Measurement Requirements
    N. RFS Quality Assurance Program (QAP)
    O. Compliance and Enforcement Provisions and Attest Engagements
    P. Foreign Producers
IX. Other Changes to Regulations
    A. RFS Third-Party Oversight Enhancement
    B. Deadline for Third-Party Engineering Reviews for Three-Year
Updates
    C. RIN Apportionment in Anaerobic Digesters
    D. BBD Conversion Factor for Percentage Standard
    E. Flexibility for RIN Generation
    F. Changes to Tables in 40 CFR 80.1426
    G. Prohibition on RIN Generation for Fuels Not Used in the
Covered Location
    H. Seeking Public Comment on Hydrogen Fuel Lifecycle Analysis
    I. Biogas Regulatory Reform
    J. Separated Food Waste Recordkeeping Requirements
    K. Definition of Ocean-Going Vessels
    L. Bond Requirement for Foreign RIN-Generating Renewable Fuel
Producers
    M. Definition of Produced From Renewable Biomass
    N. Limiting RIN Separation Amounts
    O. Technical Amendments
X. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act (NTTAA) &
Incorporation by Reference
    J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations, and Low-Income
Populations
XI. Statutory Authority

    A red-line version of the regulatory language that incorporates the
changes in this action is available in the docket for this action.

I. Executive Summary

    The Renewable Fuel Standard (RFS) program began in 2006 pursuant to
the requirements of the Energy Policy Act of 2005 (EPAct), which were
codified in Clean Air Act (CAA) section 211(o). The statutory
requirements were subsequently amended by the Energy Independence and
Security Act of 2007 (EISA). The statute sets forth annual, nationally
applicable volume targets for each of the four categories of renewable
fuel for the years shown below.

     Table I-1--Years for Which the Statute Provides Volume Targets
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                          Category                               Years
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Cellulosic biofuel..........................................   2010-2022
Biomass-based diesel........................................   2009-2012
Advanced biofuel............................................   2009-2022
Renewable fuel..............................................   2006-2022
------------------------------------------------------------------------

    For calendar years after those for which the statute provides
volume targets, the statute directs EPA to determine the applicable
volume targets in coordination with the Secretary of Energy and the
Secretary of Agriculture, based on a review of the implementation of
the program for prior years and an analysis of specified factors:
     The impact of the production and use of renewable fuels on
the environment, including on air quality, climate change, conversion
of wetlands, ecosystems, wildlife habitat, water quality, and water
supply; \1\
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    \1\ CAA section 211(o)(2)(B)(ii)(I).
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     The impact of renewable fuels on the energy security of
the U.S.; \2\
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    \2\ CAA section 211(o)(2)(B)(ii)(II).
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     The expected annual rate of future commercial production
of renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and biomass-based diesel); \3\
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    \3\ CAA section 211(o)(2)(B)(ii)(III).
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     The impact of renewable fuels on the infrastructure of the
U.S., including deliverability of materials, goods, and products other
than renewable fuel, and the sufficiency of infrastructure to deliver
and use renewable fuel; \4\
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    \4\ CAA section 211(o)(2)(B)(ii)(IV).
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     The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
\5\ and
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    \5\ CAA section 211(o)(2)(B)(ii)(V).
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     The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.\6\
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    \6\ CAA section 211(o)(2)(B)(ii)(VI).
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    While this statutory requirement does not apply to cellulosic
biofuel, advanced biofuel, and total renewable fuel until compliance
year 2023, it applied to biomass-based diesel (BBD) beginning in
compliance year 2013. Thus, EPA established applicable volume
requirements for BBD volumes for 2013-2022 in prior rulemakings.\7\
This action proposes the volume targets and applicable percentage
standards for cellulosic biofuel, BBD, advanced biofuel, and total
renewable fuel for 2023-2025. In association with these volume targets,
we are also proposing new regulations governing the generation of
Renewable Identification Numbers (RINs) for electricity made from
renewable biomass that is used for transportation fuel, as well as a
number of other regulatory changes intended to improve the operation of
the RFS program.
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    \7\ See, e.g., 87 FR 39600 (July 1, 2022), establishing the 2022
BBD volume requirement.
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    Low-carbon fuels are an important part of reducing greenhouse gas
(GHG) emissions in the transportation sector, and the RFS program is a
key federal policy that supports the development,

production, and use of low-carbon, domestically produced renewable
fuels. This ``Set rule'' proposal marks a new phase for the program,
one which takes place following the period for which the Clean Air Act
enumerates specific volume targets. We recognize the important role
that the RFS program can play in providing ongoing support for
increasing production and use of renewable fuels, particularly advanced
and cellulosic biofuels. For a number of years, RFS stakeholders have
provided their input on what policy direction this action should take,
and the Agency greatly appreciates the sustained and constructive input
we have received from stakeholders. The RFS program is entering a new
phase, and we are introducing a new regulatory program governing
renewable electricity. We welcome comments not only on the volumes we
are proposing in this rule but also on the analyses we conducted and
the proposed regulatory changes. EPA looks forward to continued
engagement with stakeholders on this rule, through the formal public
comment process, the public hearing we will hold, and through meetings
with program participants and others.

A. Summary of the Key Provisions of This Regulatory Action

1. Volume Requirements for 2023-2025
    Based on our analysis of the factors required in the statute, and
in coordination with the Departments of Agriculture and Energy, we
propose to establish the volume targets for three years, 2023 to 2025,
as shown below. In addition to the volume targets, we are also
proposing to complete our response to the D.C. Circuit Court of
Appeals' remand of the 2016 annual rule in Americans for Clean Energy
v. EPA, 864 F.3d 691 (2017) (hereafter ``ACE'') by proposing a
supplemental volume requirement of 250 million gallons of renewable
fuel for 2023. This ``supplemental standard'' follows the
implementation of a 250-million-gallon supplement for 2022 in a
previous action.\8\
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    \8\ 87 FR 39600 (July 1, 2022).

                                     Table I.A.1-1--Proposed Volume Targets
                                               [Billion RINs] \a\
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                                                                       2023            2024            2025
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Cellulosic biofuel..............................................            0.72            1.42            2.13
Biomass-based diesel \b\........................................            2.82            2.89            2.95
Advanced biofuel................................................            5.82            6.62            7.43
Renewable fuel..................................................           20.82           21.87           22.68
Supplemental standard...........................................            0.25             n/a             n/a
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\a\ One RIN is equivalent to one ethanol-equivalent gallon of renewable fuel. Throughout this preamble, RINs are
  generally used to describe total volumes in each of the four categories shown above, while gallons are
  generally used to describe volumes for individual types of biofuel such as ethanol, biodiesel, renewable
  diesel, etc. Exceptions include BBD (which is always given in physical volumes) and biogas and electricity
  (which are always given in RINs).
\b\ The BBD volumes are in physical gallons (rather than RINs).

    As discussed above, the statute requires that we analyze a
specified set of factors in making our determination of the appropriate
volume requirements to establish. However, many of those factors,
particularly those related to economic and environmental impacts, would
be difficult to analyze in the abstract. As a result, we needed to
identify a set of renewable fuel volumes to analyze prior to
determining the volume requirements that would be appropriate to
propose. To this end, we began by using a subset of the statutory
factors that are most closely related to production and consumption of
renewable fuel to identify ``candidate volumes'' that we then subjected
to the other economic and environmental factors that we are required to
analyze. The derivation of these candidate volumes is discussed in
Section III. Section IV discusses the analysis of those candidate
volumes for the other economic and environmental factors. Finally,
Section VI discusses our conclusions regarding the appropriate volume
requirements to propose in light of all of the analyses that we
conducted.
    We believe that proposing volume targets for more than one year is
appropriate as it will provide the market with the certainty of demand
needed for longer term business and investment plans. At the same time,
setting volume targets too far out into the future can be difficult
given the higher uncertainty associated with projecting supply for
longer time periods and the increasing likelihood for unforeseen
circumstances to upset supply. By proposing volume requirements for
three years in this action but leaving the development of volume
requirements for 2026 and beyond to a subsequent action, we believe we
are striking a reasonable balance between certainty in our projections
and providing certainty for investment. Nevertheless, recognizing that
many regulated parties would appreciate knowing the applicable
standards for as many years as is reasonably possible, we are
requesting comment on establishing standards for 2026 in addition to
2023-2025 through this rulemaking.
    The volume targets that we are proposing in this action would have
the same status as those in the statute for the years shown in Table I-
1. That is, they would be the basis for the calculation of percentage
standards applicable to producers and importers of gasoline and diesel
unless they are waived in a future action using one or more of the
available waiver authorities in CAA section 211(o)(7).
2. Applicable Percentage Standards for 2023-2025
    Although the statute requires EPA to establish applicable
percentage standards annually by November 30 of the previous year, as
discussed in Section II, this requirement does not apply to years after
2022.\9\ For years after 2022, EPA can establish percentage standards
for any number of years at the same time that it establishes the volume
targets for those years. As this proposed rule is being released in
2022, we are proposing the applicable percentage standards for 2023 in
this action. In addition, we are proposing the percentage standards for
the two other years (2024 and 2025) for which we are proposing volume
requirements, the merits of which we discuss in Section II.D. The
proposed percentage standards corresponding to the proposed volume
requirements from Table I.A.1-1 are shown below.
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    \9\ CAA section 211(o)(3).

                                  Table I.A.2-1--Proposed Percentage Standards
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                                                                       2023            2024            2025
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Cellulosic biofuel..............................................            0.41            0.82            1.23
Biomass-based diesel............................................            2.54            2.60            2.67
Advanced biofuel................................................            3.33            3.80            4.28
Renewable fuel..................................................           11.92           12.55           13.05
Supplemental standard...........................................            0.14             n/a             n/a
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    The formulas used to calculate the percentage standards in 40 CFR
80.1405(c) require that EPA specify the projected volume of exempt
gasoline and diesel associated with exemptions for small refineries
granted because of disproportionate economic hardship resulting from
compliance with their obligations under the program. For this proposed
rulemaking we have projected that based on the information available at
the present time there are not likely to be small refinery exemptions
(SREs) for 2023-2025. This issue is discussed further in Section VII
along with the total nationwide projected gasoline and diesel
consumption volumes used in the calculation of the percentage
standards.
    As in previous annual standard-setting rulemakings, the applicable
percentage standards for 2023-2025 would be added to the regulations at
40 CFR 80.1405(a).
3. Regulatory Provisions for eRINs
    We are proposing regulatory changes to prescribe how RINs from
renewable electricity (eRINs) would be implemented and managed under
the RFS program. These changes are intended to address many of the
outstanding issues which to date have prevented EPA from registering
parties to allow them to generate eRINs produced from qualifying
renewable biomass and used as transportation fuel. The regulations we
propose as part of this action address a number of important areas,
including which parties can generate eRINs, prevention of double-
counting, and data requirements for valid eRIN generation. The proposed
changes are intended to provide clarity on how electricity would be
incorporated into the RFS so that the existing RIN-generating pathway
can be effectively utilized in a manner that ensures RINs are generated
only for qualifying electricity. We recognize that multiple
stakeholders have expressed interest in the design of the regulations
governing the generation of eRINs, and while this action proposes
regulations to implement one chosen approach, this package also
describes alternative approaches. We welcome comments on both the
proposed and alternative approaches.
    In addition to the general program requirements for eRINs we are
also proposing to revise the equivalence value for renewable
electricity in the RFS program under 40 CFR 80.1415. The current value
of 22.6 kWh/RIN would be replaced by a value of 6.5 kWh/RIN. We believe
that this change would more accurately represent the use of electricity
as a transportation fuel relative to the production of biogas.
    Given the timing of this rulemaking and the need for sufficient
time for regulated parties to become familiar with the new eRIN
regulatory requirements and to register for eRIN generation, we propose
that those requirements would become effective beginning on January 1,
2024. To this end, the proposed cellulosic volume requirements shown in
Table I.A.1-1 include our projected volumes for eRINs for years 2024
and 2025, but does not include any projection for eRINs for 2023.
4. Other Regulatory Changes
    We have identified several areas where regulatory changes would
assist EPA in implementing the RFS program. These proposed regulatory
changes include:
     Enhancements to the third-party oversight provisions
including engineering reviews, the RFS quality assurance program, and
annual attest engagements;
     Establishing a deadline for third-party engineering
reviews for three-year registration updates;
     Updating procedures for the apportionment of RINs when
feedstocks qualifying for multiple D-codes (e.g., D3 and D5) are
converted to biogas simultaneously in an anaerobic digester;
     Revising the conversion factor in the formula for
calculating the percentage standard for BBD to reflect increasing
production volumes of renewable diesel;
     Amending the provisions for the generation of RINs for
straight vegetable oil to ensure that RINs are valid;
     Clarifying the definition of fuel used in ocean-going
vessels; and
     Other minor changes and technical corrections
    Each of these regulatory changes is discussed in greater detail in
Section IX.
5. Request for Comment on Alternative Volume Requirements
    We are requesting comment on various alternative approaches that we
could take with respect to volumes as well as certain other policy
parameters. Specifically, we request comment on whether we should
establish volume requirements for one or two years instead of three
years, whether the implied conventional renewable fuel volume
requirement should be 15.00 billion gallons rather than 15.25 billion
gallons in 2024 and 2025, or whether the implied conventional renewable
fuel volume requirement should be reduced by some other amount, such as
below the E10 blendwall, while keeping the total renewable fuel volume
requirement unchanged. Section VI.G provides additional discussion of
these alternatives.

B. Environmental Justice

    Executive Order 12898 (59 FR 7629, February 16, 1994) establishes
federal executive policy on environmental justice. It directs federal
agencies, to the greatest extent practicable and permitted by law, to
make achieving environmental justice part of their mission by
identifying and addressing, as appropriate, disproportionately high and
adverse human health or environmental effects of their programs,
policies, and activities on communities with environmental justice
concerns in the United States.
    This proposed rule is projected to reduce GHG emissions, which
would benefit communities with environmental justice concerns who are
disproportionately impacted by climate change due to a greater reliance
on climate sensitive resources such as localized food and water
supplies which may be adversely impacted by climate change, as well as
having less access to information resources that would enable them to
adjust to such impacts.\10\ \11\ The

manner in which the market responds to the provisions in this proposed
rule could also have non-GHG impacts. For instance, replacing petroleum
fuels with renewable fuels will also have impacts on water and air
exposure for communities living near biofuel and petroleum facilities
given the potential for biofuel facilities to have relatively high
emission rates in local communities. Replacing petroleum fuels with
renewable fuels is also projected to increase food and fuel prices, the
effects of which will be disproportionately borne by the lowest income
individuals. Our assessment of potential economic impacts on people of
color and low-income populations is provided in Section IV.E.3.
---------------------------------------------------------------------------

    \10\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United
States: Fourth National Climate Assessment, Volume II [Reidmiller,
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K.
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.
    \11\ USGCRP, 2016: The Impacts of Climate Change on Human Health
in the United States: A Scientific Assessment. Crimmins, A., J.
Balbus, J.L. Gamble, C.B. Beard, J.E. Bell, D. Dodgen, R.J. Eisen,
N. Fann, M.D. Hawkins, S.C. Herring, L. Jantarasami, D.M. Mills, S.
Saha, M.C. Sarofim, J. Trtanj, and L. Ziska, Eds. U.S. Global Change
Research Program, Washington, DC, 312 pp. http://dx.doi.org/10.7930/J0R49NQX.
---------------------------------------------------------------------------

C. Comparison of Costs to Impacts

    CAA section 211(o)(2)(B)(ii) requires EPA to assess a number of
factors when determining volume targets for calendar years after those
shown in Table I-1. These factors are described in the introduction to
this Executive Summary, and each factor is discussed in detail in the
draft Regulatory Impact Analysis (DRIA) accompanying this proposed
rule. However, the statute does not specify how EPA must assess each
factor. For two of these statutory factors, costs and energy security
impacts, we provide monetized impacts for the purpose of comparing
costs and benefits. For the other statutory factors, we are either
unable to quantify impacts, or we provide quantitative estimated
impacts that cannot be easily monetized for comparison. Thus, we are
unable to quantitatively compare all of the evaluated impacts when
assessing the overall costs and impacts of this proposed rulemaking. We
request comment generally on how costs and benefits quantified in this
proposed rule are calculated and accounted for, methods to quantify and
monetize additional statutory factors, and appropriate means of
comparing the costs and benefits. Table ES-1 in the DRIA provides a
list of all of the impacts that we assessed, both quantitative and
qualitative. Our assessments of each factor, including the different
components of the estimated costs, energy security methodology, climate
impacts, and other environmental and economic impacts, are summarized
in Section IV of this document. Additional detail for each of the
assessed factors is provided in DRIA Chapters 4 through 10.
    Monetized cost and energy security impacts are summarized in Table
I.C-1 below using two discount rates (3 percent and 7 percent)
following federal guidance on regulatory impact analyses.\12\
Summarized impacts are calculated in comparison to a No RFS baseline as
discussed in Section III.D and are summed across all three years of
standards.
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    \12\ Office of Management and Budget (OMB). Circular A-4.
September 17, 2003.

   Table I.C-1--Cumulative Monetized Cost Impacts and Energy Security
   Benefits of 2023-2025 Standards With Respect to the No RFS Baseline
                            [2021$, millions]
------------------------------------------------------------------------
                                                   Discount rate
                                         -------------------------------
                                                3%              7%
------------------------------------------------------------------------
Excluding Supplemental Standard:
    Cost Impacts........................          28,801          27,835
    Energy Security Benefits............             623             600
Including Supplemental Standard:
    Cost Impacts........................          29,458          28,492
    Energy Security Benefits............             634             611
------------------------------------------------------------------------

D. Policy Considerations

    This proposed rule comes at a time when major policy developments
and global events are affecting the transportation energy and
environmental landscape in unprecedented ways. The recently passed
Inflation Reduction Act (IRA) makes historic investments in a range of
areas, including in clean vehicle and alternative fuel technologies,
that will help decarbonize the transportation sector and bolster a
variety of clean technologies. Provisions in the IRA will accelerate
many of the pollution-reducing shifts that are already occurring as
part of a broad energy transition in the transportation, power
generation, and industrial sectors. Major new incentives in legislation
for cleaner vehicles, carbon capture and sequestration, biofuels
infrastructure, clean hydrogen production and other areas have
effectively shifted the policy ground--and it is on this new ground
that EPA must develop forward-looking policies and implement existing
regulatory programs, including the RFS program.
    Even as the IRA bolsters future investments in clean transportation
technologies, EPA recognizes that maintaining and strengthening energy
security in the near term remains a policy imperative. The war in
Ukraine has significantly destabilized multiple global commodity
markets, including petroleum markets. In addition, global reductions in
refining capacity, which accelerated during the pandemic, have further
tightened the market for transportation fuels like gasoline and diesel.
Programs like the RFS program help boost energy security by supporting
domestic production of fuels and diversifying the fuel supply, and it
has played an important role in incentivizing the production of low-
carbon alternatives. At the same time, EPA recognizes that the
transition to such alternatives will take time, and that during this
transition maintaining stable fuel supplies and refining assets will
continue to be important to achieving our nation's energy and economic
goals as well as providing consistent investments in a skilled and
growing workforce.
    It is against this backdrop that EPA is proposing to establish
volume requirements under the RFS program, through the ``Set'' rule
process, for the next three years. The volumes that EPA is proposing
sustain a path of renewable fuel growth for the program and build on
the foundation set by the 2022

required volumes. Beyond providing continued support for fuels like
ethanol and biodiesel, the set proposal provides a strong market signal
for the continued growth of low carbon advanced biofuels, including
``drop-in'' renewable diesel, cellulosic biofuels, and through a newly
proposed program for electricity produced from qualifying renewable
feedstocks and used as transportation fuel. Renewable fuels are a key
policy tool identified by Congress for decarbonizing the transportation
sector, and this rulemaking will set the stage for further growth and
development of low-carbon biofuels in the coming years.
    With this proposal, EPA is asking for public comment on multiple
elements of the rule, including our analysis, volume requirements, and
proposed regulatory amendments. Simultaneously, EPA, having heard from
a range of stakeholders who have raised concerns and questions
reflecting a number of policy considerations that potentially bear on
this proposal, is interested in the public's input about how this
proposal intersects with the larger energy transition and energy
security issues discussed above. EPA is interested, for example, in
understanding how the proposed required RFS volume requirements
interact with domestic refining capacity and associated energy security
considerations. We are also interested in public input regarding ways
in which EPA might enhance program administration to make the RFS
program as efficient as possible, to increase program transparency, to
address climate change, or otherwise improve program implementation.
    More specifically, EPA is interested in public and stakeholder
input on the questions listed below, which will be considered and may
inform the contents of the final rule. We note that for some of these
topics, stakeholders may have previously provided information to EPA.
We therefore ask that information provided in response to this request
focus on new data, new information, or new policy suggestions.
     How can the proposed set rule further Congress' policy
goal of enhancing energy security, specifically with respect to the
transportation sector?
     How do the requirements of this proposed rule intersect
with continued viability of domestic oil refining assets? How does the
structure or positioning of refining assets in the marketplace, such as
refineries that operate on a merchant basis, relate to a given
obligated party's ability to participate, and associated costs with
participation, in the RFS program?
     Are there policy changes or additional programmatic
incentives that EPA should consider implementing under the RFS program
to strengthen or accelerate the transition to a decarbonized
transportation sector?
     If EPA were to incorporate some measure of the carbon
intensity of each biofuel into the RFS program (e.g., providing a
higher RIN value for fuels with a better carbon intensity score), what
approach would best advance the program's environmental objectives, and
at the same time be consistent with the statutory provisions of CAA
section 211(o)?
     How can EPA best build upon the policy investments that
the IRA established to further develop low carbon renewable fuels,
including through incentives established through the RFS program?
     What role can the RFS program play, beyond what exists
today, to further support the development of sustainable aviation fuel?
     Are there steps EPA should consider taking under the RFS
program to integrate carbon capture and storage (CCS) opportunities
related to the production of renewable fuels?
     Are there steps EPA should consider taking under the RFS
program to capture opportunities related to hydrogen derived from
renewable biomass?
     What actions should EPA consider to improve the
transparency of how the Agency administers the RFS program? Are there
steps EPA should consider taking to enhance RIN market liquidity,
transparency, and efficiency, or otherwise improve market
administration? For example, should EPA revisit some of the policy
design conclusions of the 2019 RIN market reform rule such as the RIN
holding thresholds that require parties to publicly disclose their
positions? \13\ Are there other policy designs not considered in that
rule that EPA should be considering in this rule?
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    \13\ 84 FR 26980 (June 10, 2019).
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     As noted earlier, should the conventional renewable fuel
volume requirement be set below the E10 blendwall, while keeping the
total proposed renewable fuel volume requirement unchanged?
    In addition, the inclusion of a new regulatory program for eRINs
significantly increases the uncertainty of our cellulosic biofuel
projections for 2024 and 2025, and that uncertainty may warrant special
consideration. Unlike other types of cellulosic biofuel, EPA has no
history projecting the generation of eRINs under the RFS program. The
number of eRINs generated could also be impacted by a number of
interrelated and complex factors, such as the size and future growth
rate of the EV fleet, the supply of qualifying biogas for electricity
generation, competition for the biogas and electricity from other
markets, and the rate at which electricity generators can register to
participate in the RFS program. Our consideration of these factors in
projecting eRIN volumes can be found in DRIA Chapter 6.1.4. We request
comment on how to account for the uncertainty in projecting the
quantity of eRINs in the RFS program, and specifically, whether we
should be considering lower (or different) cellulosic volume
requirements for 2024 and 2025 in this rule.

E. Endangered Species Act

    Section 7(a)(2) of the Endangered Species Act (ESA), 16 U.S.C.
1536(a)(2), requires that Federal agencies such as EPA, along with the
U.S. Fish and Wildlife Service (USFWS) and/or the National Marine
Fisheries Service (NMFS) (collectively ``the Services''), ensure that
any action authorized, funded, or carried out by the agency is not
likely to jeopardize the continued existence of any endangered or
threatened species or result in the destruction or adverse modification
of designated critical habitat for such species. Under relevant
implementing regulations, the action agency is required to consult with
the Services only for actions that ``may affect'' listed species or
designated critical habitat. 50 CFR 402.14. Consultation is not
required where the action has no effect on such species or habitat. For
several prior RFS annual standard-setting rules, EPA did not consult
with the Services under section 7(a)(2).
    Consistent with ESA section 7(a)(2) and relevant ESA implementing
regulations at 50 CFR part 402, for approximately two years, EPA has
been engaged in informal consultation including technical assistance
discussions with the Services regarding this rule.

II. Statutory Requirements and Conditions

A. Requirement To Set Volumes for Years After 2022

    The CAA provides EPA with the authority to establish the applicable
renewable fuel volume targets for calendar years after those specified
in the Act in Section 211(o)(2).\14\ For total

renewable fuel, cellulosic biofuel, and total advanced biofuel, the CAA
provides volume targets through 2022, after which EPA must establish or
``set'' the volume targets via rulemaking. For biomass-based diesel
(BBD), the CAA only provides volume targets through 2012; EPA has been
setting the biomass-based diesel volume requirements in annual
rulemakings since 2013.
---------------------------------------------------------------------------

    \14\ We refer to CAA section 211(o)(2)(B)(ii) as the ``set
authority.''
---------------------------------------------------------------------------

    This section discusses the statutory authority and additional
factors we are considering due to the lateness of this rulemaking, as
well as the severability of the various portions of this proposed rule.

B. Factors That Must Be Analyzed

    In setting the applicable annual renewable fuel volumes, EPA must
comply with the processes, criteria, and standards set forth in CAA
section 211(o)(2)(B)(ii). That provision provides that the
Administrator shall, in coordination with the Secretary of Energy and
the Secretary of Agriculture,\15\ determine the applicable volumes of
each biofuel category specified based on a review of implementation of
the program during the calendar years specified in the tables in CAA
section 211(o)(2)(B)(i) and an analysis of the following factors:
---------------------------------------------------------------------------

    \15\ In furtherance of this requirement, we have had periodic
discussions with DOE and USDA on this proposed action.
---------------------------------------------------------------------------

     The impact of the production and use of renewable fuels on
the environment; \16\
---------------------------------------------------------------------------

    \16\ CAA section 211(o)(2)(B)(ii)(I).
---------------------------------------------------------------------------

     The impact of renewable fuels on the energy security of
the U.S.; \17\
---------------------------------------------------------------------------

    \17\ CAA section 211(o)(2)(B)(ii)(II).
---------------------------------------------------------------------------

     The expected annual rate of future commercial production
of renewable fuels; \18\
---------------------------------------------------------------------------

    \18\ CAA section 211(o)(2)(B)(ii)(III).
---------------------------------------------------------------------------

     The impact of renewable fuels on the infrastructure of the
U.S.; \19\
---------------------------------------------------------------------------

    \19\ CAA section 211(o)(2)(B)(ii)(IV).
---------------------------------------------------------------------------

     The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
\20\ and
---------------------------------------------------------------------------

    \20\ CAA section 211(o)(2)(B)(ii)(V).
---------------------------------------------------------------------------

     The impact of the use of renewable fuel on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.\21\
---------------------------------------------------------------------------

    \21\ CAA section 211(o)(2)(B)(ii)(VI).
---------------------------------------------------------------------------

    While the statute requires that EPA base its determination on an
analysis of these factors, it does not establish any numeric criteria,
require a specific type of analysis (such as quantitative analysis), or
provide guidance on how EPA should weigh the various factors.
Additionally, we are not aware of anything in the legislative history
of EISA that is authoritative on these issues. Thus, as the Clean Air
Act ``does not state what weight should be accorded to the relevant
factors,'' it ``give[s] EPA considerable discretion to weigh and
balance the various factors required by statute.'' \22\ These factors
were analyzed in the context of the 2020-2022 standard-setting rule
that modified volumes under CAA section 211(o)(7)(F),\23\ which
requires EPA to comply with the processes, criteria, and standards in
CAA section 211(o)(2)(B)(ii). Many commenters provided comments about
how EPA should weigh these factors. We considered those comments and
determined that a holistic balancing of the factors was
appropriate.\24\ We are taking the same approach in this proposal to
holistically balance competing factors. Further evaluation following
the proposed rule, and consideration of comments received, will inform
how we analyze and weigh these factors in establishing final volumes
and standards for 2023 and beyond.
---------------------------------------------------------------------------

    \22\ See Nat'l Wildlife Fed'n v. EPA, 286 F.3d 554, 570 (D.C.
Cir. 2002) (analyzing factors within the Clean Water Act); accord
Riverkeeper, Inc. v. U.S. EPA, 358 F.3d 174, 195 (2nd Cir. 2004)
(same); BP Exploration & Oil, Inc. v. EPA, 66 F.3d 784, 802 (6th
Cir. 1995) (same); see also Brown v. Watt, 668 F.3d 1290, 1317 (D.C.
Cir. 1981) (``A balancing of factors is not the same as treating all
factors equally. The obligation instead is to look at all factors
and then balance the results. The Act does not mandate any
particular balance, but vests the Secretary with discretion to weigh
the elements . . . .'') (addressing factors articulated in the Out
Continental Shelf Lands Act).
    \23\ See 87 FR 39600 (July 1, 2022).
    \24\ RFS Annual Rules Response to Comments Document at 10.
---------------------------------------------------------------------------

    In addition to those factors listed in the statute, we also have
authority to consider other factors, including both implied authority
to consider factors that inform our analysis of the statutory factors
and explicit authority to consider ``the impact of the use of renewable
fuels on other factors . . . .'' \25\ Accordingly, we have considered
several other factors, including:
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    \25\ CAA section 211(o)(2)(B)(ii)(VI).
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     The interaction between volume requirements for years
2023-2025, including the nested nature of those volume requirements and
the availability of carryover RINs;
     The ability of the market to respond given the timing of
this rulemaking;
     Our obligation to respond to the ACE remand (Section V);
     The supply of qualifying renewable fuels to U.S. consumers
(Section III.A.5) \26\;
---------------------------------------------------------------------------

    \26\ This is based on our analysis of this same statutory factor
as well as of downstream constraints on biofuel use, including the
statutory factors relating to infrastructure and costs.
---------------------------------------------------------------------------

     Soil quality (Chapter 3.4 of the RIA) \27\;
---------------------------------------------------------------------------

    \27\ Soil quality is closely tied to water quality and is also
relevant to the impact of renewable fuels on the environment more
generally.
---------------------------------------------------------------------------

     Environmental justice (Section IV.E and Chapter 8 of the
RIA) \28\;
---------------------------------------------------------------------------

    \28\ Addressing environmental justice involves assessing the
potential for the use of renewable fuels to have a disproportionate
and adverse health or environmental effect on minority populations,
low-income populations, tribes, and/or indigenous peoples.
---------------------------------------------------------------------------

     A comparison of costs and benefits (Section IV.D).\29\;
---------------------------------------------------------------------------

    \29\ The comparison of costs and benefits compares our
quantitative analysis of various statutory factors, including costs,
energy security, and climate impacts.
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C. Statutory Conditions on Volume Requirements

    As indicated above, the CAA does not provide instruction on how EPA
should consider the factors or the weight each factor should be given
when setting the applicable volumes, and thus leaves this to EPA's
discretion. However, the Act does contain three conditions that affect
our determination of the applicable volume requirements:
     A constraint in setting the applicable volume of total
renewable fuel as compared to advanced biofuel, with implications for
the implied volume requirement for conventional renewable fuel;
     Direction in setting the cellulosic biofuel applicable
volume regarding potential future waivers; and
     A floor on the applicable volume of BBD.
    Other than these limits, Congress has not provided instruction on
how EPA must evaluate the statutorily enumerated factors, and courts
have interpreted such congressional silence as conveying substantial
discretion to the Agency.\30\
---------------------------------------------------------------------------

    \30\ Monroe Energy, LLC v. EPA, 750 F.3d 909, 915 (D.C. Cir.
2014) (quoting Catawba Cty., N.C. v. EPA, 571 F.3d 20, 37 (D.C. Cir.
2009) (``[W]hen a statute is silent with respect to all potentially
relevant factors, it is eminently reasonable to conclude that the
silence is meant to convey nothing more than a refusal to tie the
agency's hands.'').
---------------------------------------------------------------------------

1. Advanced Biofuel as a Percentage of Total Renewable Fuel
    While the statute provides broad discretion in setting the
applicable volume requirements for advanced biofuel and total renewable
fuel, it also establishes a constraint on the relationship between
these two volume

requirements, and this constraint has implications for the implied
volume requirement for conventional renewable fuel. The CAA provides
that the applicable advanced biofuel requirement must ``be at least the
same percentage of the applicable volume of renewable fuel as in
calendar year 2022.'' \31\ Meaning that EPA must, at a minimum,
maintain the ratio of advanced biofuel to total renewable fuel that was
established for 2022 for the years in which EPA sets the applicable
volume requirements. In effect, this limits the applicable volume of
conventional renewable fuel within the total renewable fuel volume for
years after 2022.
---------------------------------------------------------------------------

    \31\ CAA section 211(o)(2)(B)(iii).
---------------------------------------------------------------------------

    The applicable advanced biofuel volume requirement is 5.63 billion
gallons for 2022.\32\ The total renewable fuel volume requirement for
2022 is 20.63 billion gallons, resulting in an implied conventional
volume requirement of 15 billion gallons. For 2022, then, advanced
biofuel would represent 27.3 percent of total renewable fuel. The
volume requirements we are proposing in this action for 2023-2025,
shown in Table I.A.1-1, all exceed this 27.3 percent minimum, and thus
the applicable volume requirements that we are proposing are consistent
with this statutory criterion.
---------------------------------------------------------------------------

    \32\ 87 FR 39600 (July 1, 2022).
---------------------------------------------------------------------------

2. Cellulosic Biofuel
    The statute requires that EPA set the applicable cellulosic biofuel
requirement ``based on the assumption that the Administrator will not
need to issue a waiver . . . under [CAA section 211(o)](7)(D)'' for the
years in which EPA sets the applicable volume requirement.\33\ We
interpret this requirement to mean that we must establish the
cellulosic volume requirement at a level that is achievable and not
expected to require us in the future to lower the applicable cellulosic
volume requirement using the cellulosic waiver authority under CAA
section 211(o)(7)(D).\34\ That is, we are setting the volume
requirements such that the mandatory waiver of the cellulosic volume is
not likely to be triggered in those future years. Operating within this
limitation, we are proposing to set the cellulosic volumes for 2023,
2024, and 2025 at the projected volume available in each year,
respectively, consistent with our past actions in determining the
cellulosic biofuel volume.\35\
---------------------------------------------------------------------------

    \33\ CAA section 211(o)(2)(B)(iv).
    \34\ The cellulosic biofuel waiver applies when the projected
volume of cellulosic biofuel production is less than the minimum
applicable volume. CAA section 211(o)(7)(D).
    \35\ See, e.g., 2020-2022 Rule, 87 FR 39600 (July 1, 2022).
---------------------------------------------------------------------------

    CAA section 211(o)(7)(D) provides that if ``the projected volume of
cellulosic biofuel production is less than the minimum applicable
volume established under paragraph (2)(B),'' EPA ``shall reduce the
applicable volume of cellulosic biofuel required under paragraph (2)(B)
to the projected volume available during that calendar year.'' Thus, in
order to avoid triggering the mandatory cellulosic waiver, EPA is
proposing to set cellulosic volumes at the levels we believe to be
achievable. Our discussion of the projected supply of cellulosic
biofuel is addressed in Section III.A.1.
3. Biomass-Based Diesel
    EPA has established the BBD requirement under CAA section
211(o)(2)(B)(ii) since 2013 because the statute only provided BBD
volume targets through 2012. The statute also requires that the BBD
volume requirement be set at or greater than the 1.0 billion gallon
volume requirement for 2012 in the statute, but does not provide any
other numerical criteria that EPA is to consider.\36\ We are proposing
an applicable volume requirement for BBD for 2023, 2024, and 2025 under
these authorities.
---------------------------------------------------------------------------

    \36\ CAA Section 211(o)(2)(B)(iv).
---------------------------------------------------------------------------

D. Authority To Establish Percentage Standards for Multiple Future
Years

    EPA is proposing to establish percentage standards for multiple
future years in a single action. For years after 2022, the CAA does not
expressly direct EPA to continue to implement volume requirements
through percentage standards established through annual rulemakings.
Furthermore, in establishing volumes for years after 2022, EPA is
directed to review ``the implementation of the program'' in years
during which Congress provided statutory volumes.\37\ Thus, Congress
provided EPA discretion as to how to implement the volume requirements
of RFS program in years 2023 and beyond.
---------------------------------------------------------------------------

    \37\ CAA Section 211(o)(2)(B)(ii).
---------------------------------------------------------------------------

    CAA section 211(o)(3)(B)(i) provides that by ``November 30 of each
of calendar years 2005 through 2021, based on the estimate provided [by
EIA], the Administrator . . . shall determine and publish in the
Federal Register, with respect to the following calendar year, the
renewable fuel obligation that ensures that the requirements of
paragraph (2) are met.'' \38\ The next subparagraph (ii) provides
further requirements for the obligation described in paragraph (i). On
its face, this language does not apply to rulemakings establishing
obligations for years subsequent to 2022. Therefore, EPA is not bound
by this language for those years.
---------------------------------------------------------------------------

    \38\ CAA Section 211(o)(3)(b)(i).
---------------------------------------------------------------------------

    EPA could choose to continue to utilize the same procedures
articulated in CAA section 211(o)(3)(B)(i) for establishing percentage
standards for years beyond 2022. However, EPA could also choose to set
percentage standards at one time for several future years (e.g., for
2023-2025 through this rulemaking). Doing so could increase certainty
for obligated parties and renewable fuel producers, as both the
applicable volume requirements and the associated percentage standards
would be established several years in advance of the year in which they
would apply. This would also provide certainty for obligated parties in
determining compliance deadlines. The regulations at 40 CFR
80.1451(f)(1)(i)(A) provide that compliance will not be required for a
given compliance year until after the percentage standards for the
following year are established. Thus, establishing the percentage
standards through this rulemaking process would provide certainty as to
the date of the compliance deadlines for the years prior to those for
which we are proposing to establish percentage standards through this
action (i.e., 2022-2024).
    Setting percentage standards several years in advance, however,
could result in less accurate gasoline and diesel projections being
used in calculating the percentage standards. When gasoline and diesel
demand projections are made only a few months prior to the subsequent
year, those projections tend to be more accurate. Projections further
into the future are inherently more uncertain.
    In this action, we are proposing applicable volume requirements and
the associated percentage standards for 2023-2025, as described further
in Sections VI and VII. We believe that establishing both the volume
requirements and percentage standards for the next three years strikes
an appropriate balance between improving the program by providing
increased certainty over a multiple number of years and recognizing the
inherent uncertainty in longer-term projections. We seek comment on
this approach.

E. Considerations for Late Rulemaking

    In this rulemaking, we are proposing applicable volume targets for
the 2023 and 2024 compliance years that miss the

statutory deadlines.\39\ EPA has in the past also missed statutory
deadlines for promulgating RFS standards, including the BBD Standards
in 2014-2016, which were established under CAA section
211(o)(2)(B)(ii). The U.S. Court of Appeals for the D.C. Circuit found
that EPA retains authority to promulgate volumes and annual standards
beyond the statutory deadlines, even those that apply retroactively, so
long as EPA exercises this authority reasonably.\40\ In doing so, EPA
must balance the burden on obligated parties of a delayed rulemaking
with the broader goal of the RFS program to reduce GHG emissions and
enhance energy security through increases in renewable fuel use.\41\ In
upholding EPA's late and retroactive standards in ACE, the court
considered several specific factors, including the availability of RINs
for compliance, the amount of lead time and adequate notice for
obligated parties, and the availability of compliance flexibilities. In
addressing rulemakings that were late (i.e., those issued after the
statutory deadline), but not retroactive, the court emphasized the
amount of lead time and adequate notice for obligated parties.\42\ Most
relevant here is EPA's action in 2015 that established the BBD volume
requirements for 2014 and 2015.\43\ There, EPA missed the statutory
criterion that EPA establish an applicable volume target for BBD no
later than 14 months before the first year to which that volume
requirement will apply.\44\ However, the court found that EPA properly
balanced the relevant considerations and had provided sufficient notice
to parties in establishing the applicable volume requirements for 2014
and 2015.\45\
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    \39\ See CAA Section 211(o)(2)(B)(ii), requiring EPA promulgate
applicable volume requirements no later than 14 months prior to the
first year in which they will apply.
    \40\ Americans for Clean Energy v. EPA, 864 F.3d 691 (D.C. Cir.
2017) (ACE) (EPA may issue late applicable volumes under CAA section
211(o)(2)(B)(ii)); Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C.
Cir. 2014); NPRA v. EPA, 630 F.3d 145, 154-58 (D.C. Cir. 2010).
    \41\ NPRA v. EPA, 630 F.3d 145, 164-165.
    \42\ ACE, 864 F.3d at 721-22.
    \43\ 80 FR 77420, 77427-77428, 77430-77431 (December 14, 2015).
    \44\ CAA section 211(o)(2)(B)(ii).
    \45\ ACE, 864 F.3d at 721-23.
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    In this rulemaking, we are proposing to exercise our authority to
set the applicable renewable fuel volume requirements for 2023 and 2024
after the statutory deadline to promulgate volumes no later than 14
months before the first year to which those volume requirements
apply.\46\ We also expect the final rule to be partly retroactive, as
the 2023 standards are unlikely to be finalized prior to the beginning
of the 2023 calendar year. Nevertheless, as discussed in Section VI.E,
we believe that the 2023 standards being proposed in this action could
be met. Additionally, we plan to finalize the 2024 standards prior to
the beginning of the 2024 calendar year and do not expect those
standards to apply retroactively.
---------------------------------------------------------------------------

    \46\ CAA section 211(o)(2)(B)(ii).
---------------------------------------------------------------------------

    In addition, in completing its response to the ACE remand of the
2016 annual rule, we are proposing a supplemental standard for
2023.\47\ We are proposing this supplemental standard after the
statutory deadline for the 2016 standards (November 30, 2015). However,
the proposed supplemental standard would prospectively apply to
gasoline and diesel produced or imported in 2023. We further discuss
our response to the ACE remand in Section V.
---------------------------------------------------------------------------

    \47\ We also established a supplemental standard for 2022 in a
prior action. 87 FR 39600 (July 1, 2022).
---------------------------------------------------------------------------

F. Impact on Other Waiver Authorities

    While we are proposing to establish applicable volume requirements
in this action for future years that are achievable and appropriate
based on our consideration of the statutory factors, we retain our
legal authority to waive volumes in the future under the waiver
authorities should circumstances so warrant.\48\ For example, the
general waiver authority under CAA section 211(o)(7)(A) provides that
EPA may waive the volume targets in ``paragraph (2).'' CAA section
211(o)(2) provides both the statutory applicable volume tables and
EPA's set authority (the authority to set applicable volumes for years
not specified in the table). Therefore, in the future, EPA could modify
the volume targets for 2023 and beyond through the use of our waiver
authorities as we have in past annual standard-setting rulemakings.
---------------------------------------------------------------------------

    \48\ See J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Intern.,
Inc., 534 U.S. 124, 143-44 (2001) (holding that when two statutes
are capable of coexistence and there is not clearly expressed
legislative intent to the contrary, each should be regarded as
effective).
---------------------------------------------------------------------------

    However, we note that as described above CAA section
211(o)(2)(B)(iv) requires that EPA set the cellulosic biofuel volume
requirements for 2023 and beyond based on the assumption that the
Administrator will not need to waive those volume requirements under
the cellulosic waiver authority. Because we are, in this action,
proposing to establish the applicable volume targets for 2023-2025
under the set authority, we do not believe we could also waive those
requirements using the cellulosic waiver authority in this same action
in a manner that would be consistent with CAA section 211(o)(2)(B)(iv),
since that waiver authority is only triggered when the projected
production of cellulosic biofuel is less than the ``applicable volume
established under [211(o)(2)(B)].'' In other words, it does not appear
that EPA could use both the set authority and the cellulosic waiver
authority to establish volumes at the same time in this action.
    Establishing the volume requirements for 2023-2025 using our set
authority apart from the cellulosic waiver authority would have
important implications for the availability of cellulosic waiver
credits (CWCs) in these years. When EPA reduces cellulosic volumes
under the cellulosic waiver authority, EPA is also required to make
CWCs available under CAA section 211(o)(7)(D)(ii). In this rule we are,
for the first time, proposing to establish a cellulosic biofuel
standard without utilizing the cellulosic waiver authority. We
interpret CAA section 211(o)(7)(D)(ii) such that CWCs are only made
available in years in which EPA uses the cellulosic waiver authority to
reduce the cellulosic biofuel volume. Because of this, cellulosic
waiver credits would not be available as a compliance mechanism for
obligated parties in these years absent a future action to exercise the
cellulosic waiver authority. We recognized this likelihood in the
recent rule establishing volume requirements for 2020-2022.\49\ There,
we cited to the fact that CWCs were unlikely to be available in 2023 as
part of our rationale for not requiring the use of cellulosic carryover
RINs in setting the cellulosic volume requirements for 2020-2022.
Despite the absence of CWCs, we expect that obligated parties will be
able to satisfy their cellulosic biofuel obligations for these years
because we are proposing to establish the cellulosic biofuel volume
requirement based on the quantity of cellulosic biofuel we project will
be produced and imported in the U.S. each year. Nevertheless, we
recognize that the absence of CWCs is potentially a significant change
to the operation of the RFS program, and we request comment on EPA's
authority to offer CWCs in years in which we do not establish volume
requirements using our cellulosic waiver authority.
---------------------------------------------------------------------------

    \49\ 87 FR 39600 (July 1, 2022).
---------------------------------------------------------------------------

G. Severability

    We intend for the volume requirements and percentage standards for
a single year (i.e., 2023, 2024, and 2025) to be severable from the
volume

requirements and percentage standards for other years. Each year's
volume requirements and percentage standards are supported by analyses
for that year. Similarly, we intend for the 2023 supplemental standard
and percentage standard to be severable from the annual volume
requirements and percentage standards. We also intend for the other
regulatory amendments to be severable from the volume requirements and
percentage standard. The regulatory amendments are intended to improve
the RFS program in general, and, with the exception noted below, are
not part of EPA's analysis for the volume requirements and percentage
standards for any specific year in 2023 or beyond. Each of the
regulatory amendments in Section IX is also severable from the other
regulatory amendments because they all function independently of one
another. However, we do not intend for the eRIN regulatory provisions
(Section VIII) to be severable from the volumes for 2024 and 2025, such
that if a reviewing court were to set aside the eRIN program, the
volumes for 2024 and 2025 would also be set aside, as those volumes
will take into account considerable volumes of cellulosic biofuel
expected to be generated utilizing those regulatory provisions. While
the projected volumes for years 2024 and 2025 are dependent in part on
the eRIN program being in place, the eRIN program, which is designed to
last for years beyond 2024 and 2025, is not dependent on the volumes
for 2024 and 2025.
    If any of the portions of the rule identified in the preceding
paragraph (i.e., volume requirements and percentage standards for a
single year, the 2023 supplemental standard, the eRIN program, the
individual regulatory amendments) is vacated by a reviewing court, we
intend the remainder of this action to remain effective as described in
the preceding paragraph. To further illustrate, if a reviewing court
were to vacate the volume requirements and percentage standards and
supplemental standard, we intend the eRIN provisions and the other
regulatory amendments to remain effective. Or, for example, if a
reviewing court vacates the BBD conversion factor provisions, we intend
the volume requirements and percentage standards as well as the
supplemental standard and other regulatory amendments to remain
effective.

III. Candidate Volumes and Baselines

    The statute requires that we analyze a specified set of factors in
making our determination of the appropriate volume requirements to
establish for years after 2022. These factors are listed in Section
II.B. Many of those factors, particularly those related to economic and
environmental impacts, are difficult to analyze in the abstract, and so
we have opted to analyze those factors based on specific ``candidate
volumes'' for each category of renewable fuel. To accomplish this, we
derived a set of renewable fuel volumes that we then used to conduct
the required multi-factor analyses. We then determined, based on the
results of those analyses, the volume requirements that would be
appropriate to propose. Our approach can be summarized as a three-step
process:
    1. Development of candidate volumes;
    2. Multifactor analysis based on candidate volumes; and
    3. Determination of proposed volumes based on a consideration of
all factors analyzed.
    For the first step in this process, we analyzed a subset of the
statutory factors that are most closely related to supply of and demand
for renewable fuel. These supply-and-demand-related factors
(hereinafter ``supply-related factors'') \50\ include the production
and use of renewable fuels (as a necessary prerequisite to analyzing
their impacts under CAA section 211(o)(2)(B)(ii)(I)), the expected
annual rate of future commercial production of renewable fuels (CAA
section 211(o)(2)(B)(ii)(III)), and the sufficiency of infrastructure
to deliver and use renewable fuel (CAA section 211(o)(2)(B)(ii)(IV)).
Consideration of these supply-related statutory factors necessarily
included a consideration of imports and exports of renewable fuel,
consumer demand for renewable fuel, and the availability of qualifying
feedstocks. Since the statute also requires us to review the
implementation of the program in prior years, an analysis of renewable
fuel supply includes not just projections for the future but also an
assessment of the historical supply of renewable fuel.
---------------------------------------------------------------------------

    \50\ We use this shorthand (``supply-related factors'') only for
ease of explanation in the context of identifying candidate volumes
for analysis under CAA section 211(o)(2)(B)(ii). We recognize that
this shorthand (``supply-related factors'') utilizes the term
``supply'' in a manner that is incongruent with the D.C. Circuit's
interpretation of the scope of the term ``supply'' in the general
waiver authority provision in CAA section 211(o)(7)(A). ACE v. EPA
(holding that the term ``inadequate domestic supply'' under the
general waiver authority excludes ``demand-side factors'').
References to ``supply-related factors'' in the context of our
discussion of the candidate volumes for analysis under CAA section
211(o)(2)(B)(ii) have no bearing on our interpretation of the term
``inadequate domestic supply'' under the general waiver authority
under CAA section 211(o)(7)(A).
---------------------------------------------------------------------------

    This section describes the derivation of ``candidate volumes''
based on a consideration of supply-related factors as the first step in
our consideration of all factors that we are required to analyze under
the statute. The candidate volumes represent those volumes that might
be reasonable to require based on the supply-related factors, but which
have not yet been evaluated in terms of the other economic and
environmental factors. Basing the candidate volumes on supply-related
considerations is a reasonable first step because doing so narrows the
scope for the multifactor analysis in a commonsense way. Without this
step, it would be difficult to meaningfully analyze the remaining
statutory factors. Our determination of the volume requirements to
propose was based not only on our consideration of supply-related
factors, but also on the results of our analysis of the other economic
and environmental factors discussed in Section IV. Section VI provides
our rationale for the proposed volume requirements in light of all the
analyses that we conducted.
    This section begins with a discussion of the years that we
determined would be reasonable to analyze. Section III.B describes our
analysis of the supply-related factors for those years, and Section
III.C summarizes the resulting candidate volumes. Finally, Sections
III.D and III.E describe, respectively, the No RFS baseline that we
believe would be the most appropriate point of reference for the
analysis of the other statutory factors, and the volume changes
calculated in comparison to that baseline.

A. Number of Years Analyzed

    Before assessing future supply of renewable fuel, we first
considered the number of years to which this assessment would apply,
since the nature of this assessment can be different for the nearer
term than for the longer term. We focused our assessment of renewable
fuel supply on the three years immediately following the end of the
statutory volume targets (i.e., 2023-2025). To some degree,
establishing volume targets and the associated percentage standards for
a greater number of years would increase market certainty for all
parties, and would suggest that EPA should do so for as many years as
possible. However, the uncertainty inherent in making future
projections increases for longer timeframes. Moreover, our experience
with the RFS program since its inception is that unforeseen market
circumstances involving not only renewable fuel supply but also
relevant economics mean that fuels markets are continually evolving and
changing in ways that cannot be predicted. These

facts affect all supply-related elements of biofuel: projections of
production capacity, availability of imports, rates of consumption,
availability of qualifying feedstocks, and the gasoline and diesel
demand projections that provide the basis for the calculation of
percentage standards. Greater uncertainty in future projections means a
higher likelihood that those future projections could turn out to be
inaccurate, leading to the potential need to revise them after they are
established through, for instance, one of the statutory waiver
provisions. Such actions to revise applicable standards after they have
been set could be expected to increase market uncertainty. Based on our
desire to strengthen market certainty by establishing applicable
standards for as many years as is practical, tempered by the knowledge
that longer time periods increase uncertainty in projected volumes and
increase the likelihood that applicable standards turn out to be not
reasonably achievable and might need to be waived at a later date, we
believe that three years represents an appropriate balance at this
time.
    Nevertheless, in our assessment of renewable fuel supply, we have
also made projections for one additional year, 2026. As discussed more
fully in Section VI.F, we believe that 2026 represents a transitional
year in the market's response to the availability of eRINs. Prior to
2026, we expect eRIN generators to use primarily existing generating
capacity. By 2026, however, we expect additional electricity generating
capacity to come online to take advantage of the new eRIN market. Both
this projection and the projection of the amount of electricity that
will be used as transportation fuel have uncertainty associated with
them, especially at the inception of the eRIN program. Thus, projecting
the availability of eRINs for 2026 carries with it greater uncertainty
than doing so for 2025 does. This is one important reason that we are
not proposing volume requirements for 2026. However, based on the
interest on the part of some stakeholders to see volume requirements
established for as many years as possible, we believe it is in the
public interest for us to estimate potential eRIN generation in 2026
despite the additional uncertainty involved. This estimate is discussed
in Section III.C.5 below.

B. Production and Import of Renewable Fuel

1. Cellulosic Biofuel
    In the past several years, production of cellulosic biofuel has
continued to increase. Cellulosic biofuel production reached record
levels in 2021, driven by compressed natural gas (CNG) and liquified
natural gas (LNG) derived from biogas. The projected volumes of
cellulosic biofuel production in 2022 are even higher than the volume
produced in 2021. While the production of liquid cellulosic biofuel has
remained limited in recent years (see Figure III.B.1-1), the inclusion
of eRINs into the program affords another opportunity for dramatic
growth of cellulosic biofuel (see DRIA Chapter 6 for a projection of
RIN generation from eRINs in 2023-2025). Despite the significant
increase in cellulosic biofuel production since 2014 and the dramatic
growth that would result from this proposal, several cellulosic biofuel
producers have stated that uncertainty in the demand for cellulosic
biofuels and volatility in the cellulosic RIN price has hindered the
production of cellulosic biofuel. We recognize the importance of
consistent and dependable market signals to the cellulosic biofuel
industry. Further discussion of how the RFS program might be able to
provide greater certainty to the cellulosic biofuel industry can be
found in Section VI.A. This section describes our assessment of the
rate of production of qualifying cellulosic biofuel from 2023 to 2025,
and some of the uncertainties associated with these volumes. Further
detail on our projections of the rate of cellulosic biofuel production
and import can be found in DRIA Chapter 5.1.
[GRAPHIC] [TIFF OMITTED] TP30DE22.000

a. CNG/LNG Derived From Biogas
    To project the production of CNG/LNG derived from biogas, we used
the same industry wide projection approach that we have used to project
the production of this fuel in the RFS standard-setting annual rules
since 2018 and that has been reasonably successful in projecting
volumes. This methodology projects the production of CNG/LNG derived
from biogas based on a year-over-year growth rate applied to the
current rate of production of cellulosic biogas. We calculated the
year-over-year growth rate in CNG/LNG

derived from biogas by comparing RIN generation from January 2021 to
December 2021 (the most recent 12 months for which data are available)
to RIN generation in the 12 months that immediately precede this time
period (January 2020 to December 2020). The growth rate calculated
using this data is 13.1 percent. These RIN generation volumes are shown
in Table III.B.1.a-1.

            Table III.B.1.a-1--Generation of Cellulosic Biofuel RINs for CNG/LNG Derived From Biogas
                                          [Ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                                 RIN generation  (June
        RIN generation  (June 2020-May 2021)  (million)              2021-May 2022)      Year-over-year increase
                                                                       (million)                    (%)
----------------------------------------------------------------------------------------------------------------
526.1.........................................................                    595.1                     13.1
----------------------------------------------------------------------------------------------------------------

    In previous annual rules we applied the year-over-year growth rate
to actual supply in the most recent calendar year for which a full year
of data is available. For instance, when determining the original 2020
standards for cellulosic biofuel, we used actual supply of cellulosic
RINs generated and made available for compliance in 2018. For this
proposal, the most recent full calendar year for which we have data on
RIN supply is 2021. Applying the 13.1 percent annual growth rate twice
to the 2021 RIN supply provides a two-year projection, i.e., for 2023.
Applying this same growth rate can then be used to project volumes of
CNG/LNG derived from biogas in subsequent years. This methodology
results in the projections of CNG/LNG derived from biogas in 2023 to
2025 shown in Table III.B.1.a-2.

       Table III.B.1.a-2--Projected Generation of Cellulosic Biofuel RINs for CNG/LNG Derived From Biogas
                                          [Ethanol-equivalent gallons]
----------------------------------------------------------------------------------------------------------------
                                                                                Growth rate   Volume  (RINs)
                     Year                                   Date type                   (%)          (million)
----------------------------------------------------------------------------------------------------------------
2021..........................................  Actual..........................             N/A           561.8
2023..........................................  Projection......................            13.1           719.3
2024..........................................  Projection......................            13.1           813.9
2025..........................................  Projection......................            13.1           920.9
----------------------------------------------------------------------------------------------------------------

    While we have successfully used this methodology in previous years
to project the production of CNG/LNG derived from biogas with
reasonable accuracy there are several factors that may impact the
accuracy of this methodology out to 2025. In previous annual rules this
methodology was used to project the production of CNG/LNG derived from
biogas out 1-2 years in the future. As the methodology relies on
historical data to project future production, the uncertainty
associated with the projections is expected to increase the further out
into the future the projections are extended. In particular, we are
aware of several market factors that may impact the rate of growth of
CNG/LNG derived from biogas in future years. One important factor is
the quantity of CNG/LNG able to be used for transportation fuel. Under
the RFS program RINs may only be generated for CNG/LNG that is used as
transportation fuel, and the quantity of CNG/LNG used as transportation
fuel is relatively limited in the U.S. We currently project that use of
CNG/LNG as transportation fuel will be approximately 1.4-1.75 billion
ethanol-equivalent gallons in 2023-2025.\51\ While these projections of
CNG/LNG use as transportation fuel might appear unlikely to limit RIN
generation for the candidate volumes through 2025, it is highly
unlikely that registered parties will be able to document and verify
the use of all CNG/LNG use in the transportation sector. Since this
documentation is a requirement under the regulations, generation of
RINs for CNG/LNG derived from biogas will likely be limited to a
quantity somewhat less than the total amount of CNG/LNG used in the
transportation sector.
---------------------------------------------------------------------------

    \51\ See Chapter 6.1.3 for a further discussion of our estimate
of CNG/LNG used as transportation fuel in 2023-2025.
---------------------------------------------------------------------------

    There are also potential limitations related to the available
supply of CNG/LNG derived from biogas. Currently, a significant volume
of biogas is produced at landfills and wastewater treatment plants
across the U.S.\52\ Some of this biogas is currently being flared or
used to produce electricity onsite. There are also significant
opportunities for increasing the production of biogas from manure and
other agricultural residues. However, biogas must be used as
transportation fuel to be eligible to generate RINs.\53\ Raw biogas
from landfills, wastewater treatment facilities, or agricultural
digesters must be treated before it can be used as transportation fuel,
either at on site fueling stations or transported to fueling stations
via the natural gas pipeline network. Collecting and treating the raw
biogas to enable it to be used as CNG/LNG requires a significant
capital investment. While the quantity of biogas that could be used as
transportation fuel exceeds the quantity of CNG/LNG actually used as
transportation fuel, much of this biogas is not currently being treated
to the level necessary to enable its use as CNG/LNG and thus to
generate RINs.\54\
---------------------------------------------------------------------------

    \52\ EPA Landfill Methane Outreach Program Landfill and Project
Database; Accessed March 2022.
    \53\ See definition of ``renewable fuel'' in 40 CFR part 80
Section 1401.
    \54\ According to the American Biogas Council there are
currently over 2,200 sites producing biogas in the U.S. (see Biogas
Industry Market Snapshot--American Biogas Council, available in the
docket). Approximately 860 of these sites use the biogas they
produce, and of this total 138 facilities generated RINs for CNG/LNG
derived from biogas used as transportation fuel in 2021.
---------------------------------------------------------------------------

    Another factor that may limit the future rate of growth in the
installation of equipment necessary to upgrade raw

biogas to transportation fuel quality is the availability of financial
incentives provided by state Low Carbon Fuel Standard (LCFS) programs.
Since its inception in 2011 California's LCFS program has provided
credits for CNG/LNG derived from biogas that is used as transportation
fuel in California. Since 2014 when CNG/LNG derived from biogas was
determined to qualify as cellulosic biofuel in the RFS program, the
quantity of this fuel used with the incentives of both programs (RFS
and California's LCFS) has increased dramatically. It is likely that
this rapid expansion was driven by the ability for this fuel to
generate lucrative credits under both programs. As of 2021, however,
the LCFS data indicates that the quantity of fossil CNG/LNG generating
credits under the LCFS program had decreased to approximately 4 million
diesel gallon equivalents.\55\ This significant reduction suggests that
the ability for new sources of CNG/LNG derived from biogas to displace
CNG/LNG derived from fossil-based natural gas in California and
generate LCFS credits may be limited, which may in turn have an impact
on the economics and rate of developing new projects to produce this
fuel going forward. Currently Oregon is the only other state that has
adopted a clean fuels program, and the opportunity for CNG/LNG derived
from biogas to realize financial incentives in this program is limited
by the size of the Oregon CNG/LNG fleet. If other states adopt programs
similar to California's LCFS or Oregon's Clean Fuels program, these
other state programs could provide additional incentives for the
increased production and use of CNG/LNG derived from biogas.\56\
---------------------------------------------------------------------------

    \55\ Data from the LCFS Data Dashboard (https://www.arb.ca.gov/fuels/lcfs/dashboard/dashboard.htm). For context, in 2021
approximately 174 million diesel gallon equivalents of bio-CNG/LNG
generated credits in the LCFS program.
    \56\ For instance, Washington is in the process of developing
its own Clean Fuels Program and is targeting January of 2023 for it
to begin. See ``Clean Fuel Standard--Washington State Department of
Ecology,'' available in the docket.
---------------------------------------------------------------------------

    Another significant limitation on the growth of CNG/LNG derived
from biogas is the cost associated with establishing a pipeline
interconnect. Not all CNG/LNG vehicles will be situated such that they
can refuel at the location where the biogas is produced and upgraded.
Therefore, getting the upgraded biogas to CNG/LNG vehicles requires
that it be put into common carrier pipelines. If there are no pipelines
near the source of the biogas, then it can quickly become cost
prohibitive and/or require considerable time to put in place a stub
pipeline to connect to the common carrier pipeline.
    An important new variable in this limitation on biogas-based CNG/
LNG production is the eRIN provisions being proposed in this action.
With the opportunity to generate eRINs from biogas beginning January 1,
2024, instead of requiring a natural gas pipeline interconnect, a
facility would only need an electrical connection--something far less
expensive and more readily available. While these proposed regulations
are expected to quickly incentivize the expansion of the use of biogas
for electricity, their expansion may outcompete further development of
projects to produce CNG/LNG derived from biogas; the economics may make
it more cost effective to convert biogas to electricity to generate
eRINs than to upgrade the biogas for use in CNG/LNG vehicles. For
further discussion of the relative costs of using of biogas as CNG/LNG
versus using that biogas to produce electricity, see DRIA Chapter 9.
    With these potential limitations in mind, it may be appropriate to
view the projected production volumes of CNG/LNG derived from biogas in
this section based on the historical methodology using historical
trends as the highest volumes that could be achieved through 2025.
b. Renewable Electricity
    Because we are proposing a new, comprehensive regulatory program
for eRINs, it was necessary to derive a projection methodology for the
quantity of renewable electricity that can be made available. This
methodology is described in DRIA Chapter 6.1.4. In overview, the
methodology relies on an evaluation of just two pieces of information:
projected electricity demand from the fleet of electric vehicles (EVs)
in 2024 and 2025 and the projected production of renewable electricity
from combustion of qualifying biogas in those same years. We assessed
potential electricity demand using EV sales projections from the
Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas
Emissions Standards,\57\ along with information on the size of the
existing EV fleet. We assessed potential renewable electricity
production using data from a number of sources and adjusted that
production level to account for line losses. The lesser of renewable
electricity production and demand then determined the maximum quantity
of eRINs that could be generated in each year of the program. We are
proposing to use these resulting maximum values in setting the
cellulosic biofuel standards for 2024 and 2025. For 2024 and 2025 the
electricity demanded by the EV fleet would be the limiting factor,
however, this is likely to flip in future years. These RIN generation
volumes are shown in Table III.B.1.b-1. We seek comment on the
appropriateness of the methodology used as described more fully below
and in DRIA Chapter 6.1.4, as well as on the resulting eRIN volume
projections.
---------------------------------------------------------------------------

    \57\ 86 FR 74434 (December 30, 2021).

 Table III.B.1.b-1--Projected Generation of Cellulosic Biofuel RINs for
                     Electricity Derived From Biogas
                      [Ethanol-equivalent gallons]
------------------------------------------------------------------------
                                                         Volume (million
                         Year                                 RINs)
------------------------------------------------------------------------
2023..................................................               n/a
2024..................................................               600
2025..................................................             1,200
------------------------------------------------------------------------

    We are aware that there is inherent uncertainty for both supply and
demand when it comes to projecting eRIN volumes. Regarding demand,
qualifying renewable electricity will be a direct function of the
number of EVs sold and registered over the timeframe of this action.
The size of the existing fleet of EVs is known, but due to the rapid
rate of growth of EV sales, we anticipate that the current size of the
EV fleet will comprise a relatively small proportion of the total
quantity of EVs eligible to generate RINs by 2025. Consequently, the
cellulosic biofuel volumes that we are proposing in this action are
highly dependent upon the EV sales projections we are using.
    Regarding the supply of renewable electricity generated from
qualifying biogas (i.e., biogas that is produced from renewable biomass
consistent with an EPA-approved pathway), there is less uncertainty
because data is collected and reported by EIA on this activity.
However, two predominant sources of uncertainty remain despite EIA data
collection. First, the EIA data does not delineate between which
sources of biogas may or may not qualify for the existing EPA-approved
pathways. Second, although we anticipate there being ample financial
benefit from the eRIN program to justify participation, the rate at
which small and independent generators may be able to begin
participation in the program is unknown. As described in DRIA Chapter
<IP_ADDRESS>, our assessment is that a majority of the generating capacity
will be able to participate at the onset of the

program and that the remaining capacity will register within a few
years.
    The addition of cellulosic volumes for electricity from renewable
biomass to the RFS program will comprise a large, and growing, fraction
of the cellulosic standard over the timeframe of this action. We
anticipate that as the eRIN program matures the associated uncertainty
in projecting future volumes will decrease. As mentioned in the prior
section on biogas to CNG/LNG, we anticipate that the addition of
regulations governing the generation of RINs for renewable electricity
may influence the decision making of biogas project developers.
Nevertheless, the cellulosic volumes we are proposing for eRINs are not
dependent upon any potential shift in developer preference for
electricity projects. We will continue to monitor the market closely
and intend to use updated data and information to project the potential
production of eRINs through 2025 in the final rule.
c. Ethanol From Corn Kernel Fiber
    While there are several different technologies currently being
developed to produce liquid fuels from cellulosic biomass, these
technologies are by and large highly unlikely to produce significant
quantities of cellulosic biofuel by 2025. One possible exception is the
production of ethanol from corn kernel fiber, for which several
different companies have developed processes. Many of these processes
involve co-processing of both the starch and cellulosic components of
the corn kernel. To be eligible to generate cellulosic RINs, facilities
that are co-processing starch and cellulosic components of the corn
kernel must be able to determine the amount of ethanol that is produced
from the cellulosic portion of the corn kernel. This requires the
ability to accurately and reliably calculate the amount of ethanol
produced from the cellulosic portion as opposed to the starch portion
of the corn kernel; EPA has to date had significant concerns with
facilities' abilities to accurately perform this calculation. In
September 2022 EPA published a document providing updated guidance on
analytical methods that could be used to quantify the amount of ethanol
produced when co-processing corn kernel fiber and corn starch.\58\ This
guidance highlighted several outstanding critical technical issues that
need to be addressed. At this time there is still considerable
uncertainty about whether resolution of existing questions will allow
for significant additional volume of cellulosic biofuel to be available
through 2025 as well as the volume of cellulosic ethanol that could be
produced from corn kernel fiber. We therefore have not included volumes
from additional facilities that intend to produce cellulosic ethanol
from corn kernel fiber co-processed with corn starch in our projections
of cellulosic biofuel production in 2025. We request comment on whether
EPA should include additional volumes of cellulosic ethanol produced
from corn kernel fiber in our projection of cellulosic biofuel for
2023-2025, and if so, how we should project it and what those volumes
should be.
---------------------------------------------------------------------------

    \58\ Guidance on Qualifying an Analytical Method for Determining
the Cellulosic Converted Fraction of Corn Kernel Fiber Co-Processed
with Starch. Compliance Division, Office of Transportation and Air
Quality, U.S. EPA. September 2022 (EPA-420-B-22-041).
---------------------------------------------------------------------------

d. Other
    For the 2023-2025 timeframe, we expect that commercial scale
production of cellulosic biofuel in the U.S. will be limited to
electricity and CNG/LNG derived from biogas. In previous years several
foreign cellulosic biofuel facilities have also supplied ethanol
produced from sugarcane bagasse and heating oil produced from slash,
precommercial thinnings, and tree residue. Further, there are several
cellulosic biofuel production facilities in various stages of
development, construction, and commissioning that may be capable of
producing commercial scale volumes of cellulosic biofuel by 2025. These
facilities generally are focusing on producing cellulosic hydrocarbons
that could be blended into gasoline, diesel, and jet fuel from
feedstocks such as separated municipal solid waste (MSW) and slash,
precommercial thinnings, and tree residue. In light of the fact that no
parties have been able to achieve consistent production of liquid
cellulosic biofuel in the U.S., production from these facilities in
2023-2025 is highly uncertain and likely to be relatively small (see
Chapter 5.1 of the RIA for more detail on the potential production of
liquid cellulosic biofuel through 2025). For the candidate volumes we
projected that there would be no production of liquid cellulosic
biofuel in 2023, and that liquid cellulosic biofuel would grow to 5
million and 10 million ethanol-equivalent gallons in 2024 and 2025
respectively.
2. Biomass-Based Diesel
    Since 2010 when the biomass-based diesel (BBD) volume requirement
was added to the RFS program, production of BBD has generally
increased. The volume of BBD supplied in any given year is influenced
by a number of factors including production capacity, feedstock
availability and cost, available incentives including the RFS program,
the availability of imported BBD, the demand for BBD in foreign
markets, and several other economic factors. From 2010 through 2015 the
vast majority of BBD supplied to the U.S. was biodiesel. While
biodiesel is still the largest source of BBD supplied to the U.S.,
increasing volumes of renewable diesel have also been supplied.
Production and import of renewable diesel are expected to continue to
increase in future years.

[GRAPHIC] [TIFF OMITTED] TP30DE22.001

    There are also very small volumes of renewable jet fuel and heating
oil that qualify as BBD, and there are currently significant efforts
underway to incentivize growth in renewable jet fuel in particular
(often referred to as sustainable aviation fuel or SAF).\59\ Jet fuel
has qualified as a RIN-generating advanced biofuel under the RFS
program since 2010, and must achieve at least a 50 percent reduction in
GHGs in comparison to petroleum-based fuels. The technology and
feedstocks that can be used to produce SAF today are often the same as
those currently used to produce renewable diesel. For example, the same
refinery process that produces renewable diesel from waste fats, oils,
and greases or plant oils also produces hydrocarbons in the
distillation range of jet fuel that can be separated and sold as SAF
instead of being sold as renewable diesel. While relatively little SAF
has been produced since 2010--less than 5 million gallons per year--
opportunities for increasing this category of advanced biofuel exist.
In particular, other technologies and feedstocks are being developed
that might enable new sources of SAF. In addition, in April 2022 the
Administration announced a new Sustainable Aviation Fuel Grand
Challenge to inspire the dramatic increase in the production of
sustainable aviation fuels to at least 3 billion gallons per year by
2030. This effort is accompanied by new and ongoing funding
opportunities to support sustainable aviation fuel projects and fuel
producers totaling up to $4.3 billion.
---------------------------------------------------------------------------

    \59\ According to EMTS data renewable jet fuel production has
ranged from 2-4 million gallons per year from 2016-2021.
---------------------------------------------------------------------------

    Since the vast majority of BBD is biodiesel and renewable diesel,
and since feedstock limitations are likely to cause any growth in
renewable jet fuel to come at the expense of biodiesel and renewable
diesel, we have focused on just biodiesel and renewable diesel in this
section. The remainder of this section summarizes our assessment of the
rate of production and use of qualifying BBD from 2023 to 2025, and
some of the uncertainties associated with those volumes. Further
details on these volume projections can be found in DRIA Chapter 6.2.
a. Biodiesel
    Historically the largest volumes of biomass-based diesel and
advanced biofuel supplied in the RFS program have been biodiesel.
Domestic biodiesel production increased from approximately 1.3 billion
gallons in 2014 to approximately 1.8 billion gallons in 2018. Since
2018 domestic biodiesel production has remained at approximately 1.8
billion gallons per year. The U.S. has also imported significant
volumes of biodiesel in previous years and has been a net importer of
biodiesel since 2013. Biodiesel imports reached a peak in 2016 and
2017, with the majority of the imported biodiesel coming from
Argentina.\60\ In August 2017, the U.S. announced tariffs on biodiesel
imported from Argentina and Indonesia.\61\ These tariffs were
subsequently confirmed in April 2018.\62\ Since that time no biodiesel
has been imported from Argentina or Indonesia, and net biodiesel
imports have been relatively small.
---------------------------------------------------------------------------

    \60\ EIA U.S. Imports by Country of Origin (https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_a.htm). According
to EIA data 67 percent of all biodiesel imports in 2016 and 2017
were from Argentina.
    \61\ 82 FR 40748 (August 28, 2017).
    \62\ 83 FR 18278 (April 26, 2018).
---------------------------------------------------------------------------

    Available data suggests that there is significant unused biodiesel
production capacity in the U.S., and thus domestic biodiesel production
could grow without the need to invest in additional production
capacity. Data reported by EIA shows that biodiesel production capacity
in February 2022 was approximately 2.2 billion gallons per year.\63\
According to EIA data biodiesel production capacity grew slowly from
about 2.15 billion gallons in 2012 to a peak of approximately 2.5
billion gallons in 2018. This facility capacity data is collected by
EIA in monthly surveys, which suggests that this capacity represents
the production at facilities that are currently producing some volume
of biodiesel and likely does not include inactive facilities that are
far less likely to complete a monthly survey. EPA separately collects
facility capacity information through the facility

registration process. This data includes both facilities that are
currently producing biodiesel and those that are inactive. EPA's data
shows a total domestic biodiesel production capacity of 3.1 billion
gallons per year in April 2022, of which 2.8 billion gallons per year
was at biodiesel facilities that generated RINs in 2021. These
estimates of domestic production capacity strongly suggest that
domestic biodiesel production capacity is unlikely to limit domestic
biodiesel production through 2025.
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    \63\ EIA Monthly Biofuels Feedstock and Capacity Update (https://www.eia.gov/biofuels/update).
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b. Renewable Diesel
    Renewable diesel has historically been produced and imported in
smaller quantities than biodiesel as shown in Figure III.B.2-1. In
recent years, however, both domestic production and imports of
renewable diesel have increased. Renewable diesel production facilities
generally have higher capital costs and production costs relative to
biodiesel, which likely accounts for the much higher volumes of
biodiesel production relative to renewable diesel production to date.
The higher cost of renewable diesel production can largely be off-set
through the benefits of economies of scale as renewable diesel
facilities tend to be much larger than biodiesel production facilities.
More importantly, because renewable diesel more closely resembles
petroleum-based diesel than biodiesel fuel (both renewable diesel and
petroleum-based diesel are hydrocarbons while biodiesel is a methyl-
ester) renewable diesel can be blended at much higher levels than
biodiesel. This allows renewable diesel producers to benefit to a
greater extent from the LCFS credits in California and other states in
addition to the RFS incentives and the federal tax credit and provides
a significant advantage over biodiesel, which has largely saturated the
California market.\64\ We expect that an increasing number of states
will adopt clean fuels programs, and that these programs could provide
an advantage to renewable diesel production relative to biodiesel
production in the U.S. See DRIA Chapter 6.2 for further discussion.
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    \64\ In 2021 nearly all renewable diesel consumed in the U.S.
was consumed in California. Together renewable diesel and biodiesel
represented approximately 26 percent of all diesel fuel consumed in
California in 2021.
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    Domestic renewable diesel production capacity has increased
significantly in recent years from approximately 280 million gallons in
2017 to nearly 1.5 billion gallons in February 2022.\65\ Additionally,
a number of parties have announced their intentions to build new
renewable diesel production capacity with the potential to begin
production by the end of 2025. These new facilities include new
renewable diesel production facilities, expansions of existing
renewable diesel production facilities, and the conversion of units at
petroleum refineries to produce renewable diesel. In total over 5
billion gallons of new renewable diesel capacity has been
announced,\66\ though it is likely that not all these announced
projects will be completed, and not all of those that are completed
will necessarily produce renewable diesel in the 2023-2025 timeframe
addressed by this rule.\67\ In previous years, domestic renewable
diesel production has increased in concert with increases in domestic
production capacity, with renewable diesel facilities generally
operating at high utilization rates. In future years it is possible
that feedstock limitations may result in renewable diesel facilities
operating below their production capacity. In light of the high capital
cost for these facilities, however, it appears more likely that the
announced renewable diesel facilities will not be built if sufficient
feedstock to operate these facilities at or near their production
capacity cannot be secured. We therefore expect that domestic renewable
diesel production is likely to increase along with production capacity
through 2025.
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    \65\ 2017 renewable diesel capacity based on facilities
registered in EMTS. February 2022 renewable capacity based on EIA
Monthly Biofuels Feedstock and Capacity Update.
    \66\ U.S. Renewable Diesel Capacity Could Increase Due to
Announced and Developing Projects. EIA Today in Energy. July 29,
2021.
    \67\ Reuters. CVR Pauses Renewable Diesel Plans as Feedstock
Prices Surge. August 3, 2021. Available at: https://www.reuters.com/business/energy/cvr-pauses-renewable-diesel-plans-feedstock-prices-surge-2021-08-03.
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    In addition to domestic production the U.S. has also imported
significant volumes of renewable diesel, with nearly all of the
imported renewable diesel coming from Singapore. In more recent years,
the U.S. has also exported increasing volumes of renewable diesel. Net
imports of renewable diesel were approximately 120 million gallons in
2021. This situation, wherein significant volumes of renewable diesel
are both imported and exported, is likely the result of a number of
factors, including the design of the biodiesel tax credit (which is
available to renewable diesel that is either produced or used in the
U.S. and thus eligible for exported volumes as well), the varying
structures of incentives for renewable diesel (with the level of
incentives varying depending on the feedstocks used to produce the
renewable diesel varying as well as by country), and logistical
considerations (renewable diesel may be imported and exported from
different parts of the country). We are projecting that net renewable
diesel imports will continue through 2025 at approximately the levels
observed in recent years, though we also recognize that increasing net
imports of renewable diesel could be a significant source of additional
renewable fuel supply in future years.
c. BBD Feedstocks
    When considering the likely production and import of biodiesel and
renewable diesel in future years the availability of feedstock is an
important consideration. Currently, biodiesel and renewable diesel in
the U.S. are produced from a number of different feedstocks including
fats, oils and greases (FOG), distillers corn oil, and virgin vegetable
oils such as soybean oil and canola oil. As domestic production of
biodiesel has increased since 2014, an increasing percentage of total
biodiesel production has been produced from soybean oil, with smaller
increases in the use of FOG, distillers corn oil, and canola oil.

[GRAPHIC] [TIFF OMITTED] TP30DE22.002

    Use of soybean oil to produce biodiesel increased from
approximately 10 percent of all domestic soybean oil production in the
2009/2010 agricultural marketing year to 38 percent in the 2020/2021
agricultural marketing year. In the intervening years, the total
increase in domestic soybean oil production and the increase in the
quantity of soybean oil used to produce biodiesel and renewable diesel
were very similar, indicating that the increase in oil production was
likely driven by the increasing demand for biofuel. However, as the
production of renewable diesel has increased in recent years there has
been a corresponding increase in competition for these feedstocks
between biodiesel and renewable diesel. Notably, the percentage of the
soybean value that came from the soybean oil (rather than the meal and
hulls) had been relatively stable and averaged approximately 33 percent
from 2016-2020. By August 2021, the percentage of the soybean value
that came from the soybean oil had increased to approximately 50
percent. This competition is expected to continue to increase through
2025.
    Through 2020, most of the renewable diesel produced in the U.S. was
made from FOG and distillers corn oil, with smaller volumes produced
from soybean oil. While many biodiesel production facilities are unable
to use these feedstocks, renewable diesel production facilities are
generally able to use them. Additionally, nearly all the renewable
diesel consumed in the U.S. is used in California, and under
California's LCFS program renewable diesel produced from FOG and
distillers corn oil receive more credits than renewable diesel produced
from soybean oil. Available volumes of FOG and distillers corn oil are
limited, however, and if renewable diesel production in future years
increases rapidly as suggested by the large production capacity
announcements, it will likely require increased use of vegetable oils
such as soybean oil and canola oil. Data from 2021 appears to support
this expectation, with increased soybean oil representing approximately
half of the increase in feedstocks used to produce renewable diesel in
the U.S. from 2020 to 2021.
    One likely source of feedstock for expanding renewable diesel
production in 2023-2025 is soybean oil from new or expanded soybean
crushing facilities. Several parties have announced plans to expand
existing soybean crushing capacity and/or build new soybean crushing
facilities.\68\ This new crushing capacity is expected to come online
in the 2023-2025 timeframe. Increase crushing of soybeans in the U.S.
will increase domestic soybean oil production. If domestic crushing of
soybeans increases at the expense of soybean exports, domestic
vegetable oil production could be increased without the need for
additional soybean production. Alternatively, increased demand for
soybeans from new or expanded crushing facilities could result in
increased soybean production in the U.S. or increasing volumes of
qualifying feedstocks such as soybean oil and canola oil may be
diverted from existing markets to produce renewable diesel, with non-
qualifying feedstocks such as palm oil used in place of soybean and
canola oil in food and oleochemical markets.
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    \68\ For example, see Demaree-Saddler, Holly. Cargill plans US
soy processing operations expansion. World Grain. March 4, 2021, and
Sanicola, Laura. Chevron to invest in Bunge soybean crushers to
secure renewable feedstock. Reuters. September 2, 2021.
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d. Projected BBD Production and Imports
    We project that the supply of BBD to the U.S. will increase through
2025. We project that the largest increases will come from domestic
renewable diesel as new production facilities come online and ramp up
to full production. We project slight decreases in the volume of
biodiesel used in the U.S. as new renewable diesel producers are able
to out-compete some existing biodiesel producers for limited
feedstocks. One significant factor that is likely to negatively impact
biodiesel production is that opportunities for biodiesel expansion in
California, where producers can benefit from LCFS credits in addition
to RFS incentives, are very limited while there is significant
opportunity for the expansion of renewable diesel consumption in
California. The availability of LCFS credits will likely be a
significant factor in the competition between biodiesel producers and
renewable producers for access to new feedstocks, particularly
feedstocks with low carbon intensity (CI) scores in California's LCFS
program. While we project most of the biodiesel and renewable supplied
to the U.S. will be produced domestically, we project that imports of
both biodiesel and renewable diesel will continue to

contribute to the supply of these fuels through 2025.
3. Other Advanced Biofuel
    In addition to BBD, other renewable fuels that qualify as advanced
biofuel have been consumed in the U.S. in the past and would be
expected to contribute to compliance with applicable volume
requirements in the years after 2022. These other advanced biofuels
include imported sugarcane ethanol, domestically produced advanced
ethanol, biogas that is purified and compressed to be used in CNG or
LNG vehicles, heating oil, naphtha, and renewable diesel that does not
qualify as BBD.\69\ However, these biofuels have been consumed in much
smaller quantities than biodiesel and renewable diesel in the past,
and/or have been highly variable. In order to estimate the volumes of
these other advanced biofuels that may be available in 2023-2025, we
employed a methodology originally presented in the annual rulemaking
establishing the applicable standards for 2020-2022.\70\ This
methodology addresses the historical variability in these categories of
advanced biofuel while recognizing that consumption in more recent
years is likely to provide a better basis for making future projections
than consumption in earlier years. Specifically, we applied a weighting
scheme to historical volumes wherein the weighting was higher for more
recent years and lower for earlier years. The result of this approach
is shown in the table below. Details of the derivation of these
estimates can be found in DRIA Chapter 5.4.
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    \69\ Renewable diesel produced through coprocessing vegetable
oils or animals fats with petroleum cannot be categorized as BBD but
remains advanced biofuel. See 40 CFR 80.1426(f)(1).
    \70\ 87 FR 39600 (July 1, 2022).

    Table III.B.3-1--Estimate of Future Consumption of Other Advanced
                                 Biofuel
------------------------------------------------------------------------
                                                                 Volume
                             Fuel                               (million
                                                                 RINs)
------------------------------------------------------------------------
Imported sugarcane ethanol...................................        110
Domestic ethanol.............................................         25
CNG/LNG......................................................          5
Heating oil..................................................          2
Naphtha......................................................         33
Renewable diesel.............................................         81
                                                              ----------
    Total....................................................        256
------------------------------------------------------------------------

    As the available data does not permit us to identify an unambiguous
upward or downward trend in the historical consumption of these other
advanced biofuels, we propose to use the volumes in the table above for
all years covered in this proposed rule (i.e., 2023-2025).
4. Conventional Renewable Fuel
    Conventional renewable fuel includes any renewable fuel made from
renewable biomass as defined in 40 CFR 80.1401, does not qualify as
advanced biofuel, and which meets one of the following criteria:
     Is demonstrated to achieve a minimum 20 percent reduction
in GHGs in comparison to the gasoline or diesel which it displaces; or
     Is exempt (``grandfathered'') from the 20 percent minimum
GHG reduction requirement due to having been produced in a facility or
facility expansion that commenced construction on or before December
19, 2007, as described in 40 CFR 80.1403.\71\
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    \71\ CAA section 211(o)(2)(A)(i).
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    Under the statute, there is no volume requirement for conventional
renewable fuel. Instead, conventional renewable fuel is that portion of
the total renewable fuel volume requirement that is not required to be
advanced biofuel. In some cases, it is referred to as an ``implied''
volume requirement. However, obligated parties are not required to
comply with it per se since any portion of it can be met with advanced
biofuel volumes in excess of that needed to meet the advanced biofuel
volume requirement.
a. Corn Ethanol
    Ethanol made from corn starch has dominated the renewable fuels
market on a volume basis in the past and is expected to continue to do
so for the time period addressed by this rulemaking. Corn starch
ethanol is prohibited by statute from being an advanced biofuel
regardless of its GHG performance in comparison to gasoline.\72\
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    \72\ CAA section 211(o)(1)(B)(i).
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