majority of these emissions are related to farming and ethanol
production. Both farms and ethanol plants are generally located in
ozone attainment areas.
    Table VIII.B.1-4 shows estimates of annual emissions expected to
occur nationwide due to increased production of biodiesel. These
estimates include a reduction in emissions related to the distribution
of the displaced diesel fuel.

Table VIII.B.1-4.--Annual Emissions Nationwide From Biodiesel Production
                           and Transportation
                             [Tons per year]
------------------------------------------------------------------------
                                                             Change in
                                             Reference       emissions
                                           inventory: 28  Inventory: 300
                Pollutant                    mill gal        mill gal
                                           biodiesel per   biodiesel per
                                               year            year
------------------------------------------------------------------------
VOC.....................................           1,300          12,700
NOX.....................................           1,400          13,600
CO......................................             800           7,200
PM10....................................              50           1,000
SOX.....................................             200           1,800
------------------------------------------------------------------------

    The potential emission increases related to biodiesel production
and distribution are generally much smaller, with the possible
exception of VOC emissions. Again, these emissions are generally
expected to be in ozone attainment areas.
2. Sensitivity Analysis
    The national emission inventories for VOC and NOX in
2012 with current fuels are summarized in Table VIII.B.2-1. Here, the
emission effects contained in the EPA Predictive Models are assumed to
apply to all vehicles, not just Tier 0 vehicles. Also shown are the
changes in emissions projected for the two cases for future ethanol
volume and the two cases of ethanol use in RFG. CO emissions are the
same as in the primary analysis, as they are not affected by the EPA
Predictive Models.

   Table VIII.B.2-1.--2012 Emissions Nationwide From Gasoline Vehicles and Equipment Under Several Ethanol Use
                                         Scenarios: Sensitivity Analysis
                                                 [Tons per year]
----------------------------------------------------------------------------------------------------------------
                                     Inventory                 Change in inventory in control cases
                                 -------------------------------------------------------------------------------
                                                  7.2 Billion gallons of ethanol  9.6 Billion gallons of ethanol
            Pollutant                            ---------------------------------------------------------------
                                  Reference case    Minimum RFG     Maximum RFG     Minimum RFG     Maximum RFG
                                                        use             use             use             use
----------------------------------------------------------------------------------------------------------------
VOC.............................       5,775,000           4,000          -8,000          14,000          -5,000
NOX.............................       2,610,000          49,000          45,000          95,000          89,000
CO..............................      64,799,000        -843,000      -1,229,000      -1,971,000      -2,319,000
Benzene.........................         175,000          -9,000          -5,000         -14,000        - 10,000
Formaldehyde....................          39,300               0            -200             300               0
Acetaldehyde....................          19,200           5,800           4,700           9,000           8,000
1,3-Butadiene...................          17,900            -600            -400          -1,100            -800
----------------------------------------------------------------------------------------------------------------

    The overall VOC and NOX emission impacts of the various
ethanol use scenarios change to some degree when all motor vehicles are
assumed to be sensitive to fuel ethanol content. The increase in VOC
emissions either decreases substantially or turns into a net decrease
due to a greater reduction in exhaust VOC emissions from onroad
vehicles. However, the increase in NOX emissions gets
larger, as more vehicles are assumed to be affected by ethanol.
Emissions of the four air toxics generally decrease slightly, due to
the greater reduction in exhaust VOC emissions.
3. Local and Regional VOC and NOX Emission Impacts in July
    We also estimate the percentage change in VOC and NOX
emissions from gasoline fueled motor vehicles and equipment in those
areas which actually experienced a significant change in ethanol use.
Specifically, we focused on areas where the market share of ethanol
blends was projected to change by 50 percent or more. We also focused
on summertime emissions, as these are most relevant to ozone formation.
Finally, we developed separately estimates for: (1) RFG areas,
including the state of California and the portions of Arizona where
their CBG fuel programs apply, (2) low RVP areas (i.e., RVP standards
less than 9.0 RVP, and (3) areas with a 9.0 RVP standard. This set of
groupings helps to highlight the emissions impact of increased ethanol
use in those areas where emission control is most important.
    Table VIII.B.3-1 presents our primary estimates of the percentage
change in VOC and NOX emission inventories for these three
types of areas. While ethanol use is going up in the vast majority of
the nation, ethanol use in RFG areas under the ``Minimum Use in RFG''
scenarios is actually decreasing compared to the 2012 reference case.
This is important to note in order to understand the changes in
emissions indicated.

    Table VIII.B.3-1.--Change in Emissions From Gasoline Vehicles and Equipment in Counties Where Ethanol Use
                                     Changed Significantly--Primary Analysis
----------------------------------------------------------------------------------------------------------------
           Ethanol use                      7.2 Billion gallons                     9.6 Billion gallons
----------------------------------------------------------------------------------------------------------------
       Ethanol use in RFG               Minimum             Maximum             Minimum             Maximum
----------------------------------------------------------------------------------------------------------------
                                                    RFG Areas
----------------------------------------------------------------------------------------------------------------
Ethanol Use.....................  Down..............  Up................  Down..............  Up.
VOC.............................  1.6%..............  0.4%..............  1.6%..............  0.4%.
NOX.............................  -5.2%.............  2.4%..............  -5.2%.............  2.4%.
----------------------------------------------------------------------------------------------------------------
                                                  Low RVP Areas
----------------------------------------------------------------------------------------------------------------
Ethanol Use.....................  Up................  Up................  Up................  Up.
VOC.............................  3.1%..............  3.2%..............  4.1%..............  3.5%.
NOX.............................  4.1%..............  6.0%..............  4.8%..............  4.4%.
----------------------------------------------------------------------------------------------------------------
                                                   Other Areas
----------------------------------------------------------------------------------------------------------------
Ethanol Use.....................  Up................  Up................  Up................  Up.
VOC.............................  4.1%..............  4.1%..............  5.4%..............  4.4%.
NOX.............................  4.6%..............  6.0%..............  5.8%..............  4.8%.
----------------------------------------------------------------------------------------------------------------

    As expected, increased ethanol use tends to increase NOX
emissions. The increase in low RVP and other areas is greater than in
RFG areas, since the RFG in the RFG areas included in this analysis all
contained MTBE. Also, increased ethanol use tends to increase VOC
emissions, indicating that the increase in non-exhaust VOC emissions
exceeds the reduction in exhaust VOC emissions. This effect is muted
with RFG due to the absence of an RVP waiver for ethanol blends. The
reader is referred to Chapter 2 of the DRIA for discussion of how
ethanol levels will change at the state-level.
    Table VIII.B.3-2 presents the percentage change in VOC and
NOX

emission inventories under our sensitivity case (i.e., when we apply
the emission effects of the EPA Predictive Models to all motor
vehicles).

    Table VIII.B.3-2.--Change in Emissions From Gasoline Vehicles and Equipment in Counties Where Ethanol Use
                                   Changed Significantly--Sensitivity Analysis
----------------------------------------------------------------------------------------------------------------
                                     7.2 Bgal Min        7.2 Bgal Max        9.6 Bgal Min        9.6 Bgal Max
----------------------------------------------------------------------------------------------------------------
                                                    RFG Areas
----------------------------------------------------------------------------------------------------------------
Ethanol Use.....................  Down..............  Up................  Down..............  Up.
VOC.............................  2.6%..............  0.2%..............  2.6%..............  0.2%.
NOX.............................  -9.0%.............  4.7%..............  -9.0%.............  4.7%.
----------------------------------------------------------------------------------------------------------------
                                                  Low RVP Areas
----------------------------------------------------------------------------------------------------------------
Ethanol Use.....................  Up................  Up................  Up................  Up.
VOC.............................  2.1%..............  2.1%..............  3.1%..............  2.5%.
NOX.............................  8.2%..............  10.6%.............  9.8%..............  8.9%.
----------------------------------------------------------------------------------------------------------------
                                                   Other Areas
----------------------------------------------------------------------------------------------------------------
Ethanol Use.....................  Up................  Up................  Up................  Up.
VOC.............................  3.4%..............  3.4%..............  4.6%..............  3.7%.
NOX.............................  8.4%..............  10.1%.............  10.3%.............  8.8%.
----------------------------------------------------------------------------------------------------------------

    Directionally, the changes in VOC and NOX emissions in
the various areas are consistent with those from our primary analysis.
The main difference is that the increases in VOC emissions are smaller,
due to more vehicles experiencing a reduction in exhaust VOC emissions,
and the increases in NOX emissions are larger.

C. Impact on Air Quality

    We estimate the impact of increased ethanol use on the ambient
concentrations of two pollutants: ozone and PM. Quantitative estimates
are made for ozone, while only qualitative estimates can be made
currently for ambient PM. These impacts are described below.
1. Impact of 7.2 Billion Gallon Ethanol Use on Ozone
    We use a metamodeling tool developed at EPA, the ozone response
surface metamodel (Ozone RSM), to estimate the effects of the projected
changes in emissions from gasoline vehicles and equipment for the 7.2
billion gallon ethanol use case. The changes in diesel emissions are
negligible in comparison. We did not include the estimated changes in
emissions from renewable fuel production and distribution, because of
their more approximate nature. Their geographical concentration also
makes it more difficult to simulate with the Ozone RSM.
    The Ozone RSM was created using multiple runs of the Comprehensive
Air Quality Model with Extensions (CAMx). Base and proposed control
CAMx metamodeling was completed for the year 2015 over a modeling
domain that includes all or part of 37 Eastern U.S. states, plus the
District of Columbia. For more information on the Ozone RSM, please see
the Chapter 5 of the DRIA for this proposal.
    The Ozone RSM limits the number of geographically distinct changes
in VOC and NOX emissions which can be simulated. As a
result, we could not apply distinct changes in emissions for each
county. Therefore, two separate runs were made with different VOC and
NOX emissions reductions. We then selected the ozone impacts
from the various runs which best matched the VOC and NOX
emission reductions for that county. This models the impact of local
emissions reasonably well, but loses some accuracy with respect to
ozone transport. No ozone impact was assumed for areas which did not
experience a significant change in ethanol use. The predicted ozone
impacts of increased ethanol use for those areas where ethanol use is
projected to change by more than a 50% market share are summarized in
Table VIII.C.1-1. As shown in Table 5.1-2 of the DRIA, national average
impacts (based on the 37-state area modeled) which include those areas
where no change in ethanol use is occurring are considerably smaller.

                Table VIII.C.1-1.--Impact on 8-hour Design Value Equivalent Ozone Levels (ppb) a
----------------------------------------------------------------------------------------------------------------
                                                                  Primary Analysis        Sensitivity Analysis
                                                             ---------------------------------------------------
                                                              Min RFG Use  Max RFG Use  Min RFG Use  Max RFG Use
----------------------------------------------------------------------------------------------------------------
Minimum Change..............................................       -0.030       -0.025       -0.180        0.000
Maximum Change..............................................        0.395        0.526        0.637        0.625
Average Change b............................................        0.137        0.171        0.294        0.318
Population-Weighted Change b................................        0.134        0.129        0.268        0.250
----------------------------------------------------------------------------------------------------------------
a In comparison to the 80 ppb 8-hour ozone standards.
b Only for those areas experiencing a change in ethanol blend market share of at least 50 percent.

    As can be seen, ozone levels generally increase to a small degree
with increased ethanol use. This is likely due to the projected
increases in both VOC and NOX emissions. Some areas do see a
small decrease in ozone levels. In our primary analysis, where exhaust
emissions from Tier 1 and later onroad vehicles are assumed to be
unaffected

by ethanol use, the population-weighted increase in ambient ozone
levels in those areas where ethanol use changed significantly is 0.129-
0.134 ppb. Since the 8-hour ambient ozone standard is 80 ppb, this
increase represents about 0.16 percent of the standard, a very small
percentage.
    In our sensitivity analysis, where exhaust emissions from Tier 1
and later onroad vehicles are assumed to respond to ethanol like Tier 0
vehicles, the population-weighted increase in ambient ozone levels is
roughly twice as high, or 0.250-0.268 ppb. This increase represents
about 0.32 percent of the standard.
    There are a number of important caveats concerning these estimates.
First, the emission effects of adding ethanol to gasoline are based on
extremely limited data for recent vehicles and equipment. Second, the
Ozone RSM does not account for changes in CO emissions. As shown above,
ethanol use should reduce CO emissions significantly, directionally
reducing ambient ozone levels in those areas where ozone formation is
VOC-limited. (Ozone levels in areas which are NOX-limited
are unlikely to be affected by a change in CO emissions.) The Ozone RSM
also does not account for changes in VOC reactivity. With additional
ethanol use, the ethanol content of VOC should increase. Ethanol is
less reactive than the average VOC. Therefore, this change should also
reduce ambient ozone levels in a way not addressed by the Ozone RSM,
again in those areas where ozone formation is predominantly VOC-
limited.
    Moving to health effects, exposure to ozone has been linked to a
variety of respiratory effects including premature mortality, hospital
admissions and illnesses resulting in school absences. Ozone can also
adversely affect the agricultural and forestry sectors by decreasing
yields of crops and forests. Although the health and welfare impacts of
changes in ambient ozone levels are typically quantified in regulatory
impact analyses, we do not evaluate them for this analysis. On average,
the changes in ambient ozone levels shown above are small and would be
even smaller if changes in CO emissions and VOC reactivity were taken
into account. The increase in ozone would likely lead to negligible
monetized impacts. We therefore do not estimate and monetize ozone
health impacts for the changes in renewable use due to the small
magnitude of this change, and the uncertainty present in the air
quality modeling conducted here, as well as the uncertainty in the
underlying emission effects themselves discussed earlier.
2. Particulate Matter
    Ambient PM can come from two distinct sources. First, PM can be
directly emitted into the atmosphere. Second, PM can be formed in the
atmosphere from gaseous pollutants. Gasoline-fueled vehicles and
equipment contribute to ambient PM concentrations in both ways.
    As described above, we are not currently able to predict the impact
of fuel quality on direct PM emissions from gasoline-fueled vehicles or
equipment. Therefore, we are unable at this time to project the effect
that increased ethanol use will have on levels of directly emitted PM
in the atmosphere.
    PM can also be formed in the atmosphere (termed secondary PM here)
from several gaseous pollutants emitted by gasoline-fueled vehicles and
equipment. Sulfur dioxide emissions contribute to ambient sulfate PM.
NOX emissions contribute to ambient nitrate PM. VOC
emissions contribute to ambient organic PM, particularly the portion of
this PM comprised of organic carbon. Increased ethanol use is not
expected to change gasoline sulfur levels, so emissions of sulfur
dioxide and any resultant ambient concentrations of sulfate PM are not
expected to change. Increased ethanol use is expected to increase
NOX emissions, as described above. Thus, the possibility
exists that ambient nitrate PM levels could increase. Increased ethanol
is generally expected to increase VOC emissions, which could also
impact the formation of secondary organic PM. However, some VOC
emissions, namely exhaust VOC emissions, are expected to decrease,
while non-exhaust VOC emissions are expected to increase and the impact
on PM is a function of the type of VOC emissions.
    The formation of secondary organic PM is very complex, due in part
to the wide variety of VOCs emitted into the atmosphere. Whether or not
a specific gaseous VOC reacts to form PM in the atmosphere depends on
the types of reactions that VOC undergoes, which in turn can depend on
other pollutants present, such as ozone, NOX and other
reactive compounds. The relative mass of secondary PM formed per mass
of gaseous VOC emitted can also depend on the concentration of the
gaseous VOC and the organic PM in the atmosphere. Most of the secondary
organic PM exists in a continually changing equilibrium between the
gaseous and PM phases. Both the rates of these reactions and the
gaseous-PM equilibria depend on temperature, so seasonal differences
can be expected.
    Recent smog chamber studies have indicated that gaseous aromatic
VOCs can form secondary PM under certain conditions. These compounds
comprise a greater fraction of exhaust VOC emissions than non-exhaust
VOC emissions, as non-exhaust VOC emissions are dominated by VOCs with
relatively high vapor pressures. Aromatic VOCs tend to have lower vapor
pressures. As increased ethanol use is expected to reduce exhaust VOC
emissions, emissions of aromatic VOCs should also decrease. In
addition, refiners are expected to reduce the aromatic content of
gasoline by 5 volume percentage points as ethanol is blended into
gasoline. Emissions of aromatic VOCs should decrease with lower
concentrations of aromatics in gasoline. Thus, emissions of gaseous
aromatic VOCs could decrease for both reasons.
    Overall, we expect that the decrease in secondary organic PM is
likely to exceed the increase in secondary nitrate PM. In 1999,
NOX emissions from gasoline-fueled vehicles and equipment
comprised about 20% of national NOX emissions from all
sources. In contrast, gasoline-fueled vehicles and equipment comprised
over 60% of all national gaseous aromatic VOC emissions. The percentage
increase in national NOX emissions due to increased ethanol
use should be smaller than the percentage decrease in national
emissions of gaseous aromatics. Finally, in most urban areas, ambient
levels of secondary organic PM exceed those of secondary nitrate PM.
Thus, directionally, we expect a net reduction in ambient PM levels due
to increased ethanol use. However, we are unable to quantify this
reduction at this time.
    EPA currently utilizes the CMAQ model to predict ambient levels of
PM as a function of gaseous and PM emissions. This model includes
mechanisms to predict the formation of nitrate PM from NOX
emissions. However, it does not currently include any mechanisms
addressing the formation of secondary organic PM. EPA is currently
developing a model of secondary organic PM from gaseous toluene
emissions. We plan to incorporate this mechanism into the CMAQ model in
2007. The impact of other aromatic compounds will be added as further
research clarifies their role in secondary organic PM formation.
Therefore, we expect to be able to quantitatively estimate the impact
of decreased toluene emissions and increased NOX emissions
due to

increased ethanol use as part of future analyses of U.S. fuel
requirements required by the Act.

IX. Impacts on Fossil Fuel Consumption and Related Implications

    Renewable fuels have been of significant interest for many years
due to their ability to displace fossil fuels, which have often been
targeted as primary contributors to emissions of greenhouse gases such
as carbon dioxide and national energy concerns such as dependence on
foreign sources of petroleum. Because significantly more renewable fuel
is expected to be consumed over the next few years than has been
consumed in the past, there is increased interest in the degree to
which their increased use will impact greenhouse gas emissions and
fossil fuel consumption.
    Based on our analysis, we estimate that increases in the use of
renewable fuels will reduce fossil fuel consumption and GHG emissions
as shown in Table IX-1 in 2012. The results represent the percent
reduction in total transportation sector emissions and energy use. The
ranges result from different cases evaluated of the amount of renewable
fuel (7.5 billion gallons versus 9.9 billion gallons) that will
actually be produced in 2012.

 Table IX-1.--Lifecycle Impacts of Increased Renewable Fuel Use Relative
                       to the 2012 Reference Case
------------------------------------------------------------------------
                                                7.5 Billion  9.9 Billion
                                                   case a       case b
------------------------------------------------------------------------
Percent Reduction in Transportation Sector              1.0          1.6
 Petroleum Energy Use.........................
Percent Reduction in Transportation Sector              0.5          0.8
 Fossil Fuel Energy Use.......................
Percent Reduction in Transportation Sector GHG          0.4          0.6
 Emissions....................................
Percent Reduction in Transportation Sector CO2          0.6          0.9
 Emissions....................................
------------------------------------------------------------------------
a 7.2 billion gallons of ethanol.
b 9.6 billion gallons of ethanol.

    This section provides a summary of our analysis of the fossil fuel
impacts of the RFS rule.

A. Lifecycle Modeling

    Although the use of renewable fuels in the transportation sector
directly displaces some petroleum consumed as motor vehicle fuel, this
displacement of petroleum is in fact only one aspect of the overall
impact of renewable fuels on fossil fuel use. Fossil fuels are also
used in producing and transporting renewable feedstocks such as plants
or animal byproducts, in converting the renewable feedstocks into
renewable fuel, and in transporting and blending the renewable fuels
for consumption as motor vehicle fuel. To estimate the true impacts of
increases in renewable fuels on fossil fuel use, modelers attempt to
take many or all these steps into account. Similarly, energy is used
and GHGs emitted in the pumping of oil, transporting the oil to the
refinery, refining the crude oil into finished transportation fuel,
transporting the refined gasoline or diesel fuel to the consumer and
then burning the fuel in the vehicle. Such analyses are termed
lifecycle or well-to-wheels analyses.
    A variety of approaches are available to conduct lifecycle
analysis. This variety largely reflects different assumptions about (1)
the boundary conditions and (2) the estimates of input factors. The
boundary conditions determine the scope of the analysis. For example, a
lifecycle analysis could include energy required to make farm equipment
as part of the estimate of energy required to grow corn. The agency
chose a lifecycle analytic boundary that encompasses the fuel-cycle and
does not include the example used above. Differing estimates on input
factors (e.g. amount of fertilizer to grow corn) can also affect the
results of the lifecycle analysis.
    For this proposed rulemaking, we have made use of a fuel-cycle
model, GREET,\87\ developed at Argonne National Laboratory (ANL) under
the sponsorship of the U.S. Department of Energy's Office of Energy
Efficiency and Renewable Energy (EERE). GREET has been under
development for several years and has undergone extensive peer review
through multiple updates. Of the available sources of information on
lifecycle analyses of energy consumed and emissions generated, we
believe that GREET offers the most comprehensive treatment of the
transportation sector. For instance, GREET provides lifecycle
assessments for ethanol made from corn and cellulosic materials,
biodiesel made from soybean oil, and petroleum-based gasoline and
diesel fuel. Thus GREET provides a means for calculating the relative
greenhouse gas (GHG) and petroleum impacts of renewable fuels that
displace conventional motor vehicle fuels. For this proposal, we used
version 1.7 of the GREET model, with a few modifications to its input
assumptions as described in more detail below.
---------------------------------------------------------------------------

    \87\ Greenhouse gases, Regulated Emissions, and Energy use in
Transportation.
---------------------------------------------------------------------------

    We do not believe that it would be appropriate at this time to base
the regulatory provisions for this rule on lifecycle modeling, as
described in more detail in Section III.B.4. Although the GREET model
does provide a peer-reviewed source for lifecycle modeling, a consensus
on all the assumptions, including point estimates, that are used as
inputs into that model does not exist.\88\ Also, given the short
timeframe available for the development of this proposal, we have not
had the opportunity to initiate the type of public dialogue on
lifecycle modeling that would be necessary before such analyses could
be incorporated into a regulatory framework. We have therefore chosen
to use lifecycle modeling only as a means to estimate the impacts of
the increased use of renewable fuel.
---------------------------------------------------------------------------

    \88\ See Chapter 6.1.2 of the RIA for further discussion of
input assumptions used for the GREET modeling. Also see IX.A.2 of
this preamble section for a discussion about the differing
estimates.
---------------------------------------------------------------------------

    In addition to the GREET model tool, EPA has also developed a
lifecycle modeling tool that is specific to individual fuel producers.
This FUEL-CO2 model is intended to help fuel producers estimate the
lifecycle greenhouse gas emissions and fossil energy use for all stages
in the development of their specific fuel. EPA will evaluate whether
the FUEL-CO2 model would be an appropriate tool for fuel providers who
wish to demonstrate their actual reductions in greenhouse gas emissions
and fossil energy use. This may also be the best way for ethanol
producers to quantify the benefits of their renewable process energy
use when qualifying corn ethanol as cellulosic biomass ethanol (an
option for ethanol producers, stipulated in the Act).

1. Modifications to GREET Assumptions
    GREET is subject to periodic updates by ANL, each of which results
in some changes to the inputs and assumptions that form the basis for
the lifecycle estimates of emissions generated and energy consumed.
These updates generally focus on those input values for those fuels or
vehicle technologies that are the focus of ANL at the time. As a result
there are a variety of other inputs related to ethanol and biodiesel
that have not been updated in some time. In the context of the RFS
program, we determined that some of the GREET input values that were
either based on outdated information or did not appropriately reflect
market conditions under a renewable fuels mandate should be examined
more closely, and updated if necessary.
    In the timeframe available for developing this proposal, we chose
to concentrate our efforts on those GREET input values for ethanol that
had significant influence on the lifecycle emissions or energy
estimates and that were likely to be based on outdated information. We
reviewed the input values only for ethanol made from corn, since this
particular renewable fuel is likely to continue to dominate the
renewable fuel pool through at least 2012. For cellulosic ethanol and
biodiesel the GREET default values were used in this proposal. However,
we have also initiated a contract with ANL to investigate a wider
variety of GREET input values, including those associated with the
following fuel/feedstock pathways:
     Ethanol from corn.
     Ethanol from cellulosic materials (hybrid populars,
switchgrass, and corn stover).
     Biodiesel from soybean oil.
     Methanol from renewable sources.
     Natural gas from renewable sources.
     Renewable diesel formulations.
    The contract focuses on the potential fuel production developments
and efficiency improvements that could occur within the time-frame of
the RFS program. The GREET input value changes resulting from this work
are projected to be available in the fall of 2006, not in time for this
proposal, but they will be incorporated into revised lifecycle
assessments for the final rule.
    We did not investigate the input values associated with the
production of petroleum-based gasoline or diesel fuel in the GREET
model for this proposal. However, the refinery modeling discussed in
Section VII will provide some additional information on the process
energy requirements associated with the production of gasoline and
diesel under a renewable fuels mandate. We will use information from
this refinery modeling for the final rule to determine if any GREET
input values should be changed.
    A summary of the GREET corn ethanol input values we investigated
and modified for this proposal is given below. We also examined several
other GREET input values, but determined that the default GREET values
should not be changed for a variety of reasons. These included ethanol
plant process efficiency, corn and ethanol transport distances and
modes, corn farming inputs, CO2 emissions from corn farming
land use change, and byproduct allocation methods. Our investigation of
these other GREET input values are discussed more fully in Chapter 6 of
the RIA. The current GREET default factors for these other inputs were
included in the analysis for this proposal.
    a. Wet-Mill Versus Dry Mill Ethanol Plants. The two basic methods
for producing ethanol from corn are wet milling and dry milling. In the
wet milling process, the corn is soaked to separate the starch, used to
make ethanol, from the other components of the corn kernel. In the dry
milling process, the entire corn kernel is ground and fermented to
produce ethanol. The remaining components of the corn are then dried
for animal feed (dried distillers grains with solubles, or DDGS). Wet
milling is more complicated and expensive than dry milling, but it
produces more valuable products (ethanol plus corn syrup, corn oil, and
corn gluten meal and feeds). The majority of ethanol plants in the
United States are dry mill plants, which produce ethanol more simply
and efficiently. The GREET default is 70 percent dry mill, 30 percent
wet mill.
    For this analysis, we expect most new ethanol plants will be dry
mill operations. That has been the trend in the last few years as the
demand for ethanol has grown, and our analysis of ethanol plants under
construction and planned for the near future has verified this.
Therefore, it was assumed that essentially all new ethanol facilities
would be dry mill plants.
    b. Coal Versus Natural Gas in Ethanol Plants. The type of fuel used
within the ethanol plant for process energy, to power the various
components that are used in ethanol production (dryers, grinders,
heating, etc.) can vary among ethanol plants. The type of fuel used has
an impact on the energy usage, efficiency, and emissions of the plant,
and is primarily determined by economics. Most new plants built in the
last few years have used natural gas. Based on specific situations and
economics, some new plants are using coal. In addition, EPA is
promoting the use of combined heat and power, or cogeneration, in
ethanol plants to improve plant energy-efficiency and to reduce air
emissions. This technology, in the face of increasing natural gas
prices, may make coal a more attractive energy source for new ethanol
plants.
    GREET assumes that 20 percent of plants will be powered by coal.
However, our review of plants under construction and those planned for
the near future indicates that coal will only be used for approximately
10% of the plants. This is the value we assumed in GREET for our
analysis. However, as new plants are constructed to meet the demands of
the RFS, this percentage is expected to go up. Future work in
preparation for the final rule will evaluate the potential trends for
combined heat and power and coal as process fuel.
    c. Ethanol Production Yield. It is generally assumed that 1 bushel
of corn yields 2.7 gallons of ethanol. However, the development of new
enzymes continues to increase the potential ethanol yield. We used a
value of 2.71 gal/bu in our analysis. This value represents pure
ethanol production (i.e. no denaturant). This value is consistent with
the cost modeling of corn ethanol discussed in Section VII.
2. Controversy Concerning the Ethanol Energy Balance
    Although we have made use of lifecycle impact estimates from ANL's
GREET model, there are a variety of lifecycle impact analyses from
other researchers that provide alternative and sometimes significantly
different estimates. The lifecycle energy balance for corn-ethanol, in
particular, has been the subject of numerous and sometimes contentious
debates.
    Several metrics are commonly used to describe the energy efficiency
of renewable fuels. We have chosen to use displacement indexes for this
proposal because they provide the least ambiguous and most relevant
mechanism for estimating the impacts of renewable fuels on GHGs and
petroleum consumption. However, other metrics, such as the net energy
balance and energy efficiency, have more commonly been used in the
past. The use of these metrics has served to complicate the issue since
they do not involve a direct comparison to the gasoline that the
ethanol is replacing.
    Among researchers who have studied the lifecycle energy balance of
corn-ethanol, the primary differences of opinion appear to center on
fossil energy associated with fertilizers, the

energy required to convert corn into ethanol, and the value of co-
products. As a result of these differences, the net energy balance has
been estimated to be somewhere between -34 and + 31 thousand Btu/gal,
and the energy efficiency has been estimated to be somewhere between
0.6 and 1.4.\89\ A concern arises in cases where a researcher concludes
that the net energy balance is negative, or the energy efficiency is
less than 1.0. Such cases would indicate that the fossil energy used in
the production and transportation of ethanol exceeds the energy in the
ethanol itself, and this is generally interpreted to mean that
lifecycle fossil fuel use negates the benefits of replacing gasoline
with ethanol. However, since the metrics used do not actually compare
ethanol to gasoline, such interpretations are unwarranted.
---------------------------------------------------------------------------

    \89\ A net energy balance of zero, or an energy efficiency of
1.0, would indicate that the full lifecycle fossil fuels used in the
production and transportation of ethanol are exactly equal to the
energy in the ethanol itself.
---------------------------------------------------------------------------

    The primary studies that conclude that the energy balance is
negative were conducted by Dr. David Pimental of Cornell University and
Dr. T. Patzek of University of California, Berkeley 90 91.
Many other researchers, however, have criticized that work as being
based on out-dated farming and ethanol production data, including data
not normally considered in lifecycle analysis for fuels, and not
following the standard methodology for lifecycle analysis in terms of
valuing co-products. Furthermore, several recent surveys have concluded
that the energy balance is positive, although they differ in their
numerical estimates.92 93 94 Authors of the GREET model have
also concluded that the lifecycle amount of fossil energy used to
produce ethanol is less than the amount of energy in the ethanol
itself. Based on our review of all the available information, we have
concluded that the energy balance is indeed positive, and we believe
that the GREET model provides an accurate basis for quantifying the
lifecycle impacts.
---------------------------------------------------------------------------

    \90\ Pimentel, David ``Ethanol Fuel: Energy Balance, Economics,
and Environmental Impacts are Negative'', Vol. 12, No. 2, 2003
International Association for Mathematical Geology, Natural
Resources Research.
    \91\ Pimentel, D.; Patzek, T. ``Ethanol production using corn,
switchgrass, and wood; biodiesel production using soybean and
sunflower.'' Nat. Resour. Res. 2005, 14 (1), 65-76.
    \92\ Hammerschlag, R. ``Ethanol's Energy Return on Investment: A
Survey of the Literature 1990--Present.'' Environ. Sci. Technol.
2006, 40, 1744-1750.
    \93\ Farrell, A., Pelvin, R., Turner, B., Joenes, A., O'Hare,
M., Kammen, D., ``Ethanol Can Contribute to Energy and Environmental
Goals'', Science, 1/27/2006, Vol. 311, 506-508.
    \94\ Hill, J., Nelson, E., Tilman, D., Polasky, S., Tiffany, D.,
``Environmental, economic, and energetic costs and benefits of
biodiesel and ethanol biofuels'', Proceedings of the National
Academy of Sciences, 7/25/2006, Vol. 103, No. 30, 11206-11210.
---------------------------------------------------------------------------

B. Overview of Methodology

    The GREET model does not provide estimates of energy consumed and
emissions generated in total, such as the total amount of natural gas
consumed in the U.S. in a given year by ethanol production facilities.
Instead, it provides estimates on a national average, per fuel unit
basis, such as the amount of natural gas consumed for the average
ethanol production facility per million Btus of ethanol produced. As a
result we could not use GREET directly to estimate the nationwide
impacts of replacing some gasoline and diesel with renewable fuels.
    Instead, we used GREET to generate comparisons between renewable
fuels and the petroleum-based fuels that they displace. These
comparisons allowed us to develop displacement indexes that represent
the amount of lifecycle GHGs or fossil fuel reduced when a Btu of
renewable fuel replaces a Btu of gasoline or diesel. In order to
estimate the incremental impacts of increased use of renewable fuels on
GHGs and fossil fuels, we combined those displacement indexes with our
renewable fuel volume scenarios and GHG emissions and fossil fuel
consumption data for the conventional fuels replaced. For example, to
estimate the impact of corn-ethanol use on GHGs, these factors were
combined in the following way:

SGHG,corn ethanol = Rcorn ethanol x
LCgasoline x DIGHG,corn ethanol

Where:

SGHG,corn ethanol = Lifecycle GHG emission reduction
relative to the 2012 reference case associated with use of corn
ethanol (million tons of GHG).
Rcorn ethanol = Amount of gasoline replaced by corn
ethanol on an energy basis (Btu).
LCgasoline = Lifecycle emissions associated with gasoline
use (million tons of GHG per Btu of gasoline).
DIGHG,corn ethanol = Displacement Index for GHGs and corn
ethanol, representing the percent reduction in gasoline lifecycle
GHG emissions which occurs when a Btu of gasoline is replaced by a
Btu of corn ethanol.

    Variations of the above equation were also generated for impacts on
all four endpoints of interest (emissions of CO2, emissions of GHGs,
fossil fuel consumption, and petroleum consumption) as well as all
three renewable fuels examined (corn-ethanol, cellulosic ethanol, and
biodiesel). Each of the variables in the above equation are discussed
in more detail below. Section 6 of the DRIA provides details of the
analysis.
1. Amount of Conventional Fuel Replaced by Renewable Fuel (R)
    In general, the volume fraction (R) represents the amount of
conventional fuel no longer consumed--that is, displaced--as a result
of the use of the replacement renewable fuel. Thus R represents the
total amount of renewable fuel used under each of our renewable fuel
volume scenarios, in units of Btu. We make the assumption that vehicle
energy efficiency will not be affected by the presence of renewable
fuels (i.e., efficiency of combusting one Btu of ethanol is equal to
the efficiency of combusting one Btu of gasoline).
    Consistent with the emissions modeling described in Section VII,
our analysis of the GHG and fossil fuel consumption impacts of
renewable fuel use was conducted using three volume scenarios. The
first scenario was a base case representing 2004 renewable fuel
production levels, projected to 2012. This scenario provided the point
of comparison for the other two scenarios. The other two renewable fuel
scenarios for 2012 represented the RFS program requirements and the
volume projected by EIA. In both scenarios, we assumed that the
biodiesel production volume would be 0.3 billion gallons based on an
EIA projection, and that the cellulosic ethanol production volume would
be 0.25 billion gallons based on the Energy Act's requirement that 250
million gallons of cellulosic ethanol be produced starting in the next
year, 2013. The remaining renewable fuel volumes in each scenario would
be ethanol made from corn. The total volumes for all three scenarios
are shown in Table IX.B.1-1. For the purposes of calculating the R
values, we assumed the ethanol volumes are 5% denatured, and the
volumes were converted to total Btu using the appropriate volumetric
energy content values (76,000 Btu/gal for ethanol, and 118,000 Btu/gal
for biodiesel).

                Table IX.B.1-1.--Volume scenarios in 2012
                            [billion gallons]
------------------------------------------------------------------------
                                                   RFS
                                  Reference     required      Projected
                                    case      volume:  7.5  volume:  9.9
                                                  B gal         B gal
------------------------------------------------------------------------
Corn-ethanol..................         3.9            6.95          9.35
Cellulosic ethanol............         0.0            0.25          0.25
Biodiesel.....................         0.028          0.3           0.3
                               -----------------------------------------
    Total volume..............         3.928          7.5           9.9
------------------------------------------------------------------------

    Since the impacts of increased renewable fuel use were measured
relative to the 2012 reference case, the value of R actually
represented the incremental amount of renewable fuel between the
reference case and each of the two other scenarios.
2. Lifecycle Impacts of Conventional Fuel Use (LC)
    In order to determine the lifecycle impact that increased renewable
fuel volumes may have on any particular endpoint (fossil fuel
consumption or emissions of GHGs), we also needed to know the
conventional fuel inventory on a lifecycle basis. Since available
sources of GHG emissions are provided on a direct rather than a
lifecycle basis, we converted these direct emission and energy
estimates into their lifecycle counterparts. We used GREET to develop
multiplicative factors for converting direct (vehicle-based) emissions
of GHGs and energy use into full lifecycle factors. Table IX.B.2-1
shows the total lifecycle petroleum and GHG emissions associated with
direct use of a Btu value of gasoline and diesel fuel.

       Table IX.B.2-1.--Lifecycle Emissions and Energy (LC Values)
------------------------------------------------------------------------
                                                  Gasoline      Diesel
------------------------------------------------------------------------
Petroleum (Btu/Btu)...........................         1.11         1.10
Fossil fuel (Btu/Btu).........................         1.22         1.21
GHG (Tg-CO2-eq/QBtu)..........................         99.4         94.5
CO2 (Tg-CO2/QBtu).............................         94.2         91.9
------------------------------------------------------------------------

3. Displacement Indexes (DI)
    The displacement index (DI) represents the percent reduction in GHG
emissions or fossil fuel energy brought about by the use of a renewable
fuel in comparison to the conventional gasoline or diesel that the
renewable fuel replaces. The formula for calculating the displacement
index depends on which fuel is being displaced (i.e. gasoline or
diesel), and which endpoint is of interest (e.g. petroleum energy,
GHG). For instance, when investigating the CO2 impacts of
ethanol used in gasoline, the displacement index is calculated as
follows:
[GRAPHIC] [TIFF OMITTED] TP22SE06.005

    The units of g/Btu ensure that the comparison between the renewable
fuel and the conventional fuel is made on a common basis, and that
differences in the volumetric energy content of the fuels is taken into
account. The denominator includes the CO2 emitted through
combustion of the gasoline itself in addition to all the CO2
emitted during its manufacturer and distribution. The numerator, in
contrast, includes only the CO2 emitted during the
manufacturer and distribution of ethanol, not the CO2
emitted during combustion of the ethanol.
    The combustion of biomass-based fuels, such as ethanol from corn
and woody crops, generates CO2. However, in the long run the
CO2 emitted from biomass-based fuels combustion does not
increase atmospheric CO2 concentrations, assuming the
biogenic carbon emitted is offset by the uptake of CO2
resulting from the growth of new biomass. As a result, CO2
emissions from biomass-based fuels combustion are not included in their
lifecycle emissions results and are not used in the CO2
displacement index calculations shown above.
    Using GREET, we calculated the lifecycle values for energy consumed
and GHGs produced for corn-ethanol, cellulosic ethanol, and soybean-
based biodiesel. These values were in turn used to calculate the
displacement indexes. The results are shown in Table IX.B.3-1. Details
of these calculations can be found in Chapter 6 of the RIA. As noted
previously, different models can result in different estimates. For
example, whereas GREET estimates a net GHG reduction of about 26% for
corn ethanol compared to gasoline, the previously cited works by
Farrell et al. estimates around a 13% reduction.

                            Table IX.B.3-1.--Displacement Indexes Derived From GREET
----------------------------------------------------------------------------------------------------------------
                                                                                Cellulosic
                                                                   Corn ethanol       ethanol        Biodiesel
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
DIPetroleum.....................................................            92.3            92.7            84.6
DIFossil Fuel...................................................            40.1            96.0            47.9
DIGHG...........................................................            25.8            98.1            53.4

DICO2...........................................................            43.9           110.1            56.8
----------------------------------------------------------------------------------------------------------------

    The displacement indexes in this table represent the impact of
replacing a Btu of gasoline or diesel with a Btu of renewable fuel.
Thus, for instance, for every Btu of gasoline which is replaced by corn
ethanol, the total lifecycle GHG emissions that would have been
produced from that Btu of gasoline would be reduced by 25.8 percent.
For every Btu of diesel which is replaced by biodiesel, the total
lifecycle petroleum energy that would have been consumed as a result of
burning that Btu of diesel fuel would be reduced by 84.6 percent.
    Note that our DI estimates for cellulosic ethanol assume that the
ethanol in question was in fact produced from a cellulosic feedstock,
such as wood, corn stalks, or switchgrass. However, the definition of
cellulosic biomass ethanol given in the Energy Act also includes
ethanol made from non-cellulosic feedstocks if 90 percent of the
process energy used to operate the facility is derived from a renewable
source. In the context of our cost analysis, we have assumed this
latter definition of cellulosic ethanol. Further discussion of this
issue can be found in Chapter 1, Section 1.2.2 of the RIA.

C. Impacts of Increased Renewable Fuel Use

    We used the methodology described above to calculate impacts of
increased use of renewable fuels on consumption of petroleum and fossil
fuels and also on emissions of CO2 and GHGs. This section
describes our results.
1. Fossil Fuels and Petroleum
    We used the equation for S above to calculate the reduction
associated with the increased use of renewable fuels on lifecycle
fossil fuels and petroleum. These values are then compared to the total
U.S. transportation sector emissions to get a percent reduction. The
results are presented in Tables IX.C.1-1 and IX.C.1-2.

   Table IX.C.1.-1.--Fossil Fuel Impacts of Increased Use of Renewable
    Fuels in the Transportation Sector in 2012, Relative to the 2012
                             Reference Case
------------------------------------------------------------------------
                                           RFS Required      Projected
                                            volume: 7.5     volume: 9.9
                                               Bgal            Bgal
------------------------------------------------------------------------
Reduction (quadrillion Btu).............             0.2             0.3
Percent reduction.......................             0.5             0.8
------------------------------------------------------------------------

 Table IX.C.1.-2.--Petroleum Impacts of Increased Use of Renewable Fuels
  in the Transportation Sector in 2012, Relative to the 2012 Reference
                                  Case
------------------------------------------------------------------------
                                           RFS Required      Projected
                                            volume: 7.5     volume: 9.9
                                               Bgal            Bgal
------------------------------------------------------------------------
Reduction (billion gal).................             2.3             3.9
Percent reduction.......................             1.0             1.6
------------------------------------------------------------------------

2. Greenhouse Gases and Carbon Dioxide
    One issue that has come to the forefront in the assessment of the
environmental impacts of transportation fuels relates to the effect
that the use of such fuels could have on emissions of greenhouse gases
(GHGs). The combustion of fossil fuels has been identified as a major
contributor to the increase in concentrations of atmospheric carbon
dioxide (CO2) since the beginning of the industrialized era,
as well as the build-up of trace GHGs such as methane (CH4)
and nitrous oxide (N2O). This lifecycle analysis evaluates
the impacts of renewable fuel use on greenhouse gas emissions.
    The relative global warming contribution of emissions of various
greenhouse gases is dependant on their radiative forcing, atmospheric
lifetime, and other considerations. For example, on a mass basis, the
radiative forcing of CH4 is much higher than that of
CO2, but its effective atmospheric residence time is much
lower. The relative warming impacts of various greenhouse gases, taking
into account factors such as atmospheric lifetime and direct warming
effects, are reported on a CO2-equivalent basis as global
warming potentials (GWPs). The GWPs used by GREET were developed by the
UN Intergovernmental Panel on Climate Change (IPCC) as listed in their
Third Assessment Report \95\, and are shown in Table IX.C.2-1.
---------------------------------------------------------------------------

    \95\ IPCC ``Climate Change 2001: The Scientific Basis'', Chapter
6; Intergovernmental Panel on Climate Change; J. T. Houghton, Y.
Ding, D. J. Griggs, M. Noguer, P. J. van der Linden, X. Dai, C. A.
Johnson; and K. Maskell, eds.; Cambridge University Press.
Cambridge, U. K. 2001. http://www.grida.no/climate/ipcc_tar/wg1/index.htm
.

     Table IX.C.2-1.--Global Warming Potentials for Greenhouse Gases
------------------------------------------------------------------------
                        Greenhouse gas                            GWP
------------------------------------------------------------------------
CO2..........................................................          1
CH4..........................................................         23
N2O..........................................................        296
------------------------------------------------------------------------

    Greenhouse gases are measured in terms of CO2-equivalent
emissions, which result from multiplying the GWP for each of the three
pollutants shown in the above table by the mass of emission for each
pollutant. The sum of

impacts for CH4, N2O, and CO2, yields
the total effective GHG impact.
    We used the equation for S above to calculate the reduction
associated with the increased use of renewable fuels on lifecycle
emissions of CO2. These values are then compared to the
total U.S. transportation sector emissions to get a percent reduction.
The results are presented in Table IX.C.2-2.

 Table IX.C.2-2.--CO2 Emission Impacts of Increased Use of Renewable Fuels in the Transportation Sector in 2012,
                                       Relative to the 2012 Reference Case
----------------------------------------------------------------------------------------------------------------
                                                                   RFS Required volume:    Projected Volume: 9.9
                                                                         7.5 Bgal                  Bgal
----------------------------------------------------------------------------------------------------------------
                         Reduction (million metric tons CO2)                    12.6                    19.8
                                           Percent reduction                   0.6 %                   0.9 %
----------------------------------------------------------------------------------------------------------------

    Carbon dioxide is a subset of GHGs, along with CH4 and
N2O as discussed above. It can be seen from Table IX.B.3-1
that the displacement index of CO2 is greater than for GHGs
for each renewable fuel. This indicates that lifecycle emissions of
CH4 and N2O are higher for renewable fuels than
for the conventional fuels replaced. Therefore, reductions associated
with the increased use of renewable fuels on lifecycle emissions of
GHGs are lower than the values for CO2. The results for GHGs
are presented in Table IX.C.2-3.

   Table IX.C.2-3.--GHG Emission Impacts of Increased Use of Renewable
    Fuels in the Transportation Sector in 2012, Relative to the 2012
                             Reference Case
------------------------------------------------------------------------
                                                    RFS
                                                  Required    Projected
                                                volume: 7.5  Volume: 9.9
                                                    Bgal         Bgal
------------------------------------------------------------------------
Reduction (million metric tons CO2-eq.).......          9.0         13.5
Percent reduction.............................         0.4%         0.6%
------------------------------------------------------------------------

D. Implications of Reduced Imports of Petroleum Products

    This section only considers the impacts on imports of oil and
petroleum products. Expanded production and use of renewable fuels
could have other economic impacts such as on the exports of
agricultural products like corn. See section X of the preamble for a
discussion on agricultural sector impacts.
    In 2005, the United States imported almost 60 percent of the oil it
consumed. This compares to just over 35 percent oil imports in
1975.\96\ Transportation accounts for 70% of the U.S. oil consumption.
It is clear that oil imports have a significant impact on the U.S.
economy. Expanded production of renewable fuel is expected to
contribute to energy diversification and the development of domestic
sources of energy. We consider whether the RFS will reduce U.S.
dependence on imported oil by calculating avoided expenditures on
petroleum imports. Note that we do not calculate whether this reduction
is socially beneficially, which would depend on the scarcity value of
domestically produced ethanol versus that of imported petroleum
products.
---------------------------------------------------------------------------

    \96\ Davis, Stacy C.; Diegel, Susan W., Transportation Energy
Data Book: 25th Edition, Oak Ridge National Laboratory, U.S.
Department of Energy, ORNL-6974, 2006.
---------------------------------------------------------------------------

    To assess the impact of the RFS program on petroleum imports, the
fraction of domestic consumption derived from foreign sources was
estimated using results from the AEO 2006. In section 6.4.1 of the DRIA
we describe how fuel producers change their mix in response to a
decrease in fuel demand. We do not expect the projected reductions in
petroleum consumption (0.3 to 0.57 Quads) to impact world oil prices by
a measurable amount. We base this assumption on the overall size of
worldwide petroleum demand and analysis of the AEO 2006 cases. As a
consequence, domestic crude oil production for the 7.5 or 9.9 cases
would not be expected to change significantly versus the RFS reference
case. Thus, petroleum reductions will come largely from reductions in
net petroleum imports. This conclusion is confirmed by comparing the
AEO 2006 low macroeconomic growth case to the AEO 2006 reference case,
as discussed in the RIA 6.4.1. The AEO 2006 shows that for a reduction
in petroleum demand on the order of the reductions estimated for the
RFS, net imports will account for approximately 95% of the reductions.
However, if petroleum reductions were large enough to impact world oil
prices, the mix of domestic crude oil, imports of finished products,
and imports of crude oil used by fuel producers would change. We
discuss this uncertainty in more detail in section 6.4.1 of the RIA and
solicit comments to the extent by which the RFS may have a price effect
and impact the imports of crude oil and refined products.
    We quantified the fraction of net petroleum imports that would be
crude oil versus finished products. Comparison of same cases in the AEO
2006 shows that finished products initially compose all the net import
reductions, followed by imported crude oil once reductions in
consumption reach beyond 1.2 Quads of petroleum product. However, there
is significant uncertainty in quantifying how refineries will change
their mix of sources with a decrease in petroleum demand, particularly
at the levels estimated for the RFS. For example, a comparison between
the AEO low price case (as opposed to low macroeconomic growth case)
and the reference case would yield a 50-50 split between product and
crude imports. We believe that the actual refinery response could range
between these two points, so that finished product imports would
compose between 50 to 100% of the net import reductions, with crude oil
imports making up the remainder. For the purposes of this rulemaking,
we show values for the case where net import reductions come entirely
from imports of finished products, as shown below in Table IX.D-1. We
compare these reductions in imports against the AEO projected levels of
net petroleum imports. The range of reductions in net petroleum imports
are estimated to be between 1 to 2%, as shown in Table IX.D-2.

        Table IX.D-1.--Reductions in Imports of Finished Products
                            [barrels per day]
------------------------------------------------------------------------
                           Cases                                 2012
------------------------------------------------------------------------
7.5........................................................      145,454
9.9........................................................      240,892
------------------------------------------------------------------------

   Table IX.D-2.--Percent Reductions in Petroleum Imports Compared to
                       AEO2006 Import Projections
------------------------------------------------------------------------
                             Cases                                 2012
------------------------------------------------------------------------
7.5............................................................     1.1%
9.9............................................................     1.7%
------------------------------------------------------------------------

    One of the effects of increased use of renewable fuel is that it
diversifies the energy sources used in making transportation fuel. To
the extent that diverse sources of fuel energy reduce the dependence on
any one source, the risks, both financial as well as strategic, of
potential disruption in supply or spike in cost of a particular energy
source is reduced.
    To understand the energy security implications of the RFS, EPA will
work with Oak Ridge National Laboratory (ORNL). As a first step, ORNL
will update and apply the approach used in the 1997 report Oil Imports:
An Assessment of Benefits and Costs, by Leiby, Jones, Curlee and
Lee.\97\ This paper was cited and its results utilized in previous DOT/
NHTSA rulemakings, including the 2006 Final Regulatory Impact Analysis
of CAFE Reform for Light Trucks.\98\ This approach is consistent with
that used in the Effectiveness and Impact of Corporate Average Fuel
Economy (CAFE) Standards Report conducted by the National Research
Council/National Academy of Sciences in 2002. Both reports estimate the
marginal benefits to society, in dollars per barrel, of reducing either
imports or consumption. This ``oil premium'' approach emphasizes
identifying those energy-security related costs that are not reflected
in the market price of oil, and which may change in response to an
incremental change in the level of oil imports or consumption.\99\
---------------------------------------------------------------------------

    \97\ Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and
Russell Lee,Oil Imports: An Assessment of Benefits and Costs, ORNL-
6851, Oak Ridge National Laboratory, November 1, 1997. (http://pzl1.ed.ornl.gov/energysecurity.html
).

    \98\ US DOT, NHTSA 2006. ``Final Regulatory Impact
Analysis:Corporate Average Fuel Economy and CAFE Reform for MY 2008-
2011 Light Trucks,'' Office of Regulatory Analysis and Evaluation,
National Center for Statistics and Analysis, March. (http://www.nhtsa.dot.gov/staticfiles/DOT/NHTSA/Rulemaking/Rules/Associated%20Files/2006_FRIAPublic.pdf
).

    \99\ For instance, the 1997 ORNL study gave a range for the
``oilpremium'' $0 to $13 per barrel (adjusted to $2004) based on
1994 market conditions. The actual value depended on assumptions
about the market power of foreign exporters and the monopsony power
of the U.S., the risk of future oil price shocks and the employment
of hedging strategies, and the connections between oil shocks and
GNP.
---------------------------------------------------------------------------

    Since the 1997 publication of this report changes in oil market
conditions, both current and projected, suggest that the magnitude of
the ``oil premium'' may have changed. Significant factors that should
be reconsidered include: Oil prices, current and anticipated levels of
OPEC production, U.S. import levels, potential OPEC behavior and
responses, and disruption likelihoods. ORNL will apply the most
recently available careful quantitative assessment of disruption
likelihoods, from the Stanford Energy Modeling Forum's 2005 workshop
series, as well as other assessments \100\. ORNL will also revisit the
issue of the macroeconomic consequences of oil market disruptions and
sustained higher oil prices. Using the ``oil premium'' calculation
methodology which combines short-run and long-run costs and benefits,
and accounting for uncertainty in the key driving factors, ORNL will
provide an updated range of estimates of the marginal energy security
implications of displacing oil consumption with renewable fuels. The
results of this work effort are not available for this proposal but
will be part of the assessment of impacts of the RFS in the final rule.
Although not directly applicable, financial economics literature has
examined risk diversification. The agency is interested in ways to
examine changes in risks associated with diversifying energy sources in
general and solicits comments as such.
---------------------------------------------------------------------------

    \100\ Stanford Energy Modeling Forum, Phillip C. Beccue and
Hillard G.Huntington, 2005. ``An Assessment of Oil Market Disruption
Risks,'' FINAL REPORT, EMF SR 8, October 3. (http://www.stanford.edu/group/EMF/publications/search.htm
).

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

    We also calculate the decreased expenditures on petroleum imports
and compare this with the U.S. trade position measured as U.S. net
exports of all goods and services economy-wide. All reductions in
petroleum imports are expected to be from finished petroleum products
rather than crude oil. The reduced expenditures in petroleum product
imports were calculated by multiplying the reductions in gasoline and
diesel imports by their corresponding price. According to the EIA, the
price of imported finished products is the market price minus domestic
local transportation from refineries and minus taxes.\101\ An estimate
was made by using the AEO 2006 gasoline and distillate price forecasts
and subtracting the average Federal and state taxes based on historical
data.\102\
---------------------------------------------------------------------------

    \101\ EIA (September 1997), ``Petroleum 1996: Issues and
Trends'', Office of Oil and Gas, DOE/EIA-0615, p. 71. (http://tonto.eia.doe.gov/FTPROOT/petroleum/061596.pdf
)

    \102\ The average taxes per gallon of gasoline and diesel have
stayedrelatively constant. For 2000-2006, gasoline taxes were $0.44/
gallon ($2004) while for 2002-2006, diesel taxes were $0.49/gallon.
The average was taken from available EIA data (http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
).

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

    We compare these avoided petroleum import expenditures against the
projected value of total U.S. net exports of all goods and services
economy-wide. Net exports is a measure of the difference between the
value of exports of goods and services by the U.S. and the value of
U.S. imports of goods and services from the rest of the world. For
example, according to the AEO 2006, the value of total import
expenditures of goods and services exceeds the value of U.S. exports of
goods and services to the rest of the world by $695 billion for 2006
(for a net export level of minus $695 billion).\103\ This net exports
level is projected to diminish to minus $383 billion by 2012. In Table
IX.D-3, we compare the avoided expenditures in petroleum imports versus
the total value of U.S. net exports of goods and services for the whole
economy for 2012. Relative to the 2012 projection, the avoided
petroleum expenditures due to the RFS would represent 0.9 to 1.5% of
economy-wide net exports.
---------------------------------------------------------------------------

    \103\ For reference, the U.S. Bureau of Economic Analysis (BEA)
reports that the 2005 import expenditures. on energy-related
petroleum products totaled $235.5 billion (2004$) while petroleum
exports totaled $13.6 billion--for a net of $221.9 billion in
expenditures. Net petroleum expenditures made up a significant
fraction of the $591.3 billion current account deficit in goods and
services for 2005 (2004$). (http://www.bea.gov/)

      Table IX.D-3.--Avoided Petroleum Import Expenditures for 2012
                             [$2004 billion]
------------------------------------------------------------------------
                                                               Percent
                                                  Avoided       versus
    AEO2006 total net exports      RFS Cases   expenditures   total net
                                               in petroleum    exports
                                                  imports     (Percent)
------------------------------------------------------------------------
-$383...........................          7.5           3.5          0.9
                                          9.9           5.8          1.5
------------------------------------------------------------------------

X. Agricultural Sector Economic Impacts

    As described in more detail in the Draft Regulatory Impact Analysis
accompanying this proposal, we plan to evaluate the economic impact on
the agricultural sector. However, due to the timing of that analysis,
it will not be completed until the final rule. In the meantime, we
briefly describe here (and in more detail in the draft RIA) our planned
analyses and the sources of assumptions which could critically impact
those assessments. Finally, we ask for specific comment on the best
sources of information we use in these analyses.
    We will be using the Forest and Agricultural Sector Optimization
Model (``FASOM'') developed over the past 30 years by Bruce McCarl,
Texas A&M University and others. This is a constrained optimization
model which seeks to allocate resources and production to maximize
producer plus consumer surpluses. We have consulted with a range of
experts both within EPA as well as at our sister agencies, the U.S.
Departments of Agriculture and Energy and they support the use of this
model for assessing the economic impacts on the agricultural sector of
various renewable fuel pathways evaluated in this rule. The objective
of this modeling assessment is to predict the economic impacts that
will directly result from the expanded use of farm products for
transportation fuel production. We anticipate that the growing demand
for corn for ethanol production in particular but also soybeans and
other agricultural crops such as rapeseed and other oil seeds for
biodiesel production will increase the production of these feedstocks
and impact farm income. The additional corn to produce ethanol may come
from several sources, including (1) more intensive cultivation of
existing land that currently produces corn, (2) switching production
from soybean and cotton to corn, (3) additional acres of land being
cultivated, or (4) diversion from corn exports. The implications to
U.S. net exports and environment effects partially depend on which
source supplies more corn. Eventually various cellulose sources such as
corn stover and switchgrass for cellulose-based ethanol production may
well become highly demanded and also significantly impact the
agricultural sector.
    Using the FASOM model, we will estimate the direct impact on farm
income resulting from higher demand for corn and soybeans, for example.
Additionally, we will estimate impacts on farm employment. Since we
expect the higher demand for feedstock will increase both the supply
and cost of feedstock, we will also consider how the higher renewable
fuel feedstock cost impacts the cost of other agricultural products
(corn and soy meal are important sources not only for directly making
food for human consumption but also as feed for farm animals). As an
estimate of the impact on corn and soybeans prices, we are relying on
the estimates provided by the U.S. Department of Agriculture \104\
rather than using the FASOM model to derive these price impacts.
Additionally, we will rely on the Energy Information Agency's estimates
for fuel mix in predicting the amount of ethanol and biodiesel in the
fuel pool. Other than these external constraints, we expect to use
FASOM as the basic model for estimating economic impacts on farm sector
and how these might more generally impact the U.S. economy. Note that
this FASOM analysis is a partial equilibrium analysis, focusing almost
exclusively on impacts in the U.S. agricultural sector. As a result, it
cannot be utilized to make broader assessments of net social benefits
resulting from this rulemaking, which for example would require
evaluation of the transfer payments to farmers and ethanol producers
from consumers and refiners.
---------------------------------------------------------------------------

    \104\ ``USDA Agricultural Baseline Projections to 2015.''
---------------------------------------------------------------------------

XI. Public Participation

    We request comments on all aspects of this proposal. The comment
period for this proposed rule will be November 12, 2006. Comments can
be submitted to the Agency through any of the means listed under
ADDRESSES above.
    We will hold a public hearing on October 13, 2006. The public
hearing will start at 10 a.m. (Central) at the Sheraton Gateway Suites
Chicago O'Hare, 6501 North Mannheim Road, Rosemont, Illinois 60018. If
you would like to present testimony at the public hearing, we ask that
you notify the contact person listed under FOR FURTHER INFORMATION
CONTACT above at least ten days beforehand. You should estimate the
time you will need for your presentation and identify any needed audio/
visual equipment. We suggest that you bring copies of your statement or
other material for the EPA panel and the audience. It would also be
helpful if you send us a copy of your statement or other materials
before the hearing.
    We will arrange for a written transcript of the hearing and keep
the official record of the hearing open for 30 days to allow for the
public to supplement the record. You may make arrangements for copies
of the transcript directly with the court reporter.

XII. Administrative Requirements

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order (EO) 12866, (58 FR 51735, October 4, 1993)
this action is a ``significant regulatory action'' because of the
policy implications of the proposed rule. Even though EPA has estimated
that renewable fuel use through 2012 will be sufficient to meet the
levels required in the standard, the proposed rule reflects the first
renewable fuel mandate at the Federal level. Accordingly, EPA submitted
this action to the Office of Management and Budget (OMB) for review
under EO 12866 and any changes made in response to OMB recommendations
have been documented in the docket for this action.

B. Paperwork Reduction Act

    The information collection requirements in this proposed rule have
been submitted for approval to the Office of Management and Budget
(OMB) under the Paperwork Reduction

Act, 44 U.S.C. 3501 et seq. The Information Collection Request (ICR)
document prepared by EPA has been assigned EPA ICR number 2242.01.
    The information is planned to be collected to ensure that the
required amount of renewable fuel is used each year. The credit trading
program required by the Energy Act will be satisfied through a program
utilizing Renewable Identification Numbers (RIN), which serve as a
surrogate for renewable fuel consumption. Our proposed RIN-based
program would fulfill all the functions of a credit trading program,
and thus would meet the Energy Act's requirements. For each calendar
year, each obligated party would be required to submit a report to the
Agency documenting the RINs it acquired, and showing that the sum of
all RINs acquired were equal to or greater than its renewable volume
obligation. The Agency could then verify that the RINs used for
compliance purposes were valid by simply comparing RINs reported by
producers to RINs claimed by obligated parties. The Agency will then
calculate the total amount of renewable fuel produced each year.
    For fuel standards, Section 208(a) of the Clean Air Act requires
that manufacturers provide information the Administrator may reasonably
require to determine compliance with the regulations; submission of the
information is therefore mandatory. We will consider confidential all
information meeting the requirements of Section 208(c) of the Clean Air
Act.
    The annual public reporting and recordkeeping burden for this
collection of information is estimated to be 3.1 hours per response.
Burden means the total time, effort, or financial resources expended by
persons to generate, maintain, retain, or disclose or provide
information to or for a Federal agency. This includes the time needed
to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements
which have subsequently changed; train personnel to be able to respond
to a collection of information; search data sources; complete and
review the collection of information; and transmit or otherwise
disclose the information.
    A document entitled ``Information Collection Request (ICR); OMB-83
Supporting Statement, Environmental Protection Agency, Office of Air
and Radiation,'' has been placed in the public docket. The supporting
statement provides a detailed explanation of the Agency's estimates by
collection activity. The estimates contained in the docket are briefly
summarized here:
    Estimated total number of potential respondents: 4,945.
    Estimated total number of responses: 4,970.
    Estimated total annual burden hours: 15,560.
    Estimated total annual costs: $2,911,000, including $1,806,240 in
purchased services.
    An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.
    To comment on the Agency's need for this information, the accuracy
of the provided burden estimates, and any suggested methods for
minimizing respondent burden, including the use of automated collection
techniques, EPA has established a public docket for this rule, which
includes this ICR, under Docket ID number EPA-OAR-2005-0161. Submit any
comments related to the ICR for this proposed rule to EPA and OMB. See
the ADDRESSES section at the beginning of this notice for where to
submit comments to EPA. Send comments to OMB at the Office of
Information and Regulatory Affairs, Office of Management and Budget,
725 17th Street, NW., Washington, DC 20503, Attention: Desk Office for
EPA. Since OMB is required to make a decision concerning the ICR
between 30 and 60 days after publication in the Federal Register, a
comment to OMB is best assured of having its full effect if OMB
receives it by October 30, 2006. The final rule will respond to any OMB
or public comments on the information collection requirements contained
in this proposal.

C. Regulatory Flexibility Act

1. Overview
    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201 (see table below); (2) a small governmental jurisdiction that
is a government of a city, county, town, school district or special
district with a population of less than 50,000; and (3) a small
organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field. The
following table provides an overview of the primary SBA small business
categories potentially affected by this regulation:

----------------------------------------------------------------------------------------------------------------
                                                                                NAICS
                    Industry                              Defined as small entity by SBA if:           codes\a\
----------------------------------------------------------------------------------------------------------------
Gasoline refiners...............................  < =1,500 employees and a crude capacity of               324110
                                                   < =125,000 bpcd\b\.
----------------------------------------------------------------------------------------------------------------
\a\ North American Industrial Classification System.
\b\ barrels of crude per day.

2. Background--Small Refiners Versus Small Refineries
    Title XV (Ethanol and Motor Fuels) of the Energy Policy Act
provides, at Section 1501(a)(2) [42 U.S.C. 7545(o)(9)(A)-(D)], special
provisions for ``small refineries'', such as a temporary exemption from
the standards until calendar year 2011. The Act defines the term
``small refinery'' as ``* * * a refinery for which the average
aggregate daily crude oil throughput for a calendar year * * * does not
exceed 75,000 barrels.'' This term is different from a small refiner,
which is what the Regulatory Flexibility Act is concerned with. A small
refiner is a small business that meets the criteria set out in SBA's
regulations at 13 CFR 121.201; whereas a small refinery, per the Energy
Policy Act, is a refinery where the annual crude throughput is less
than or equal to 75,000 barrels (i.e., a small-capacity refinery), and
could be owned by a

larger refiner that exceeds SBA's small entity size standards.
    Previous EPA fuel regulations have afforded regulatory flexibility
provisions to small refiners, as we believe that refineries owned by
small businesses generally face unique economic challenges, compared to
larger refiners. As small refiners generally lack the resources
available to larger companies (including those larger companies that
own small-capacity refineries) to raise capital for any necessary
investments for meeting regulatory requirements, these flexibility
provisions were provided to reduce the disproportionate burden on those
refiners that qualified as small refiners.
3. Summary of Potentially Affected Small Entities
    The refiners that are potentially affected by this proposed rule
are those that produce gasoline. For our recent proposed rule ``Control
of Hazardous Air Pollutants From Mobile Sources'' (71 FR 15804,
Wednesday, March 29, 2006), we performed an industry characterization
of potentially affected gasoline refiners; we used that industry
characterization to determine which refiners would also meet the SBA
definition of a small refiner under this proposal. From the industry
characterization, we determined that there were 20 gasoline refiners
that met the definition of a small refiner. Of these 20 refiners, 17
owned refineries that also met the Energy Policy Act's definition of a
small refinery.
4. Impact of the Regulations on Small Entities
    As previously stated, many aspects of the RFS program, such as the
required amount of annual renewable fuel volumes, were specified in the
Energy Policy Act. As shown above in Table III.D.3.c-2, the annual
projections of ethanol production exceed the required annual renewable
fuel volumes. When the small refinery exemption ends, it is anticipated
that there will be over one billion gallons in excess RINs available.
We believe that this large volume of excess RINs will also lower the
costs of this program. If there were a shortage of RINs, or if any
party were to `hoard' RINs, the cost of a RIN could be high; however
with excess RINs, we believe that this program will not impose a
significant economic burden on small refineries, small refiners, or any
other obligated party. Further, we have determined that this proposed
rule will not have a significant economic impact on a substantial
number of small entities.
    When the Agency certifies that a rule will not have a significant
economic impact on a substantial number of small entities, EPA's policy
is to make an assessment of the rule's impact on any small entities and
to engage the potentially regulated entities in a dialog regarding the
rule, and minimize the impact to the extent feasible. The following
sections discuss our outreach with the potentially affected small
entities and proposed regulatory flexibilities to decrease the burden
on these entities in compliance with the requirements of the RFS
program
5. Small Refiner Outreach
    Although we do not believe that the RFS program would have a
significant economic impact on a substantial number of small entities,
EPA nonetheless has tried to reduce the impact of this rule on small
entities. We held meetings with small refiners to discuss the
requirements of the RFS program and the special provisions offered by
the Energy Policy Act for small refineries.
    The Energy Policy Act set out the following provisions for small
refineries:
     A temporary exemption from the Renewable Fuels Standard
requirement until 2011;
     An extension of the temporary exemption period for at
least two years for any small refinery where it is determined that the
refinery would be subject to a disproportionate economic hardship if
required to comply;
     Any small refinery may petition, at any time, for an
exemption based on disproportionate economic hardship; and,
     A small refinery may waive its temporary exemption to
participate in the credit generation program, or it may also ``opt-
in'', by waiving its temporary exemption, to be subject to the RFS
requirement.
    During these meetings with the small refiners we also discussed the
impacts of these provisions being offered to small refineries only. As
stated above, three refiners met the definition of a small refiner, but
their refineries did not meet the Act's definition of a small refinery;
which naturally concerned the small refiners. Another concern that the
small refiners had was that if this rule were to have a significant
economic impact on a substantial number of small entities a lengthy
SBREFA process would ensue (which would delay the promulgation of the
RFS rulemaking, and thus provide less lead time for these small
entities prior to the RFS program start date).
    Following our discussions with the small refiners, they provided
three suggested regulatory flexibility options that they believed could
further assist affected small entities in complying with the RFS
program standard: (1) That all small refiners be afforded the Act's
small refinery temporary exemption, (2) that small refiners be allowed
to generate credits if they elect to comply with the RFS program
standard prior to the 2011 small refinery compliance date, and (3)
relieve small refiners who generate blending credits of the RFS program
compliance requirements.
    We agreed with the small refiners'' suggestion that small refiners
be afforded temporary exemption that the Act specifies for small
refineries. Regarding the small refiners' second and third suggestions
regarding credits, our proposed RIN-based program will automatically
provide them with credit for any renewables that they blend into their
motor fuels. Until 2011, small refiners will essentially be treated as
oxygenate blenders and may separate RINs from batches and trade or sell
these RINs.
6. Conclusions
    After considering the economic impacts of today's proposed rule on
small entities, we certify that this action will not have a significant
economic impact on a substantial number of small entities.
    While the Energy Policy Act provided for a temporary exemption for
small refineries from the requirements of today's proposed rule, these
parties will have to comply with the requirements following the
exemption period. However, we still believe that small refiners
generally lack the resources available to larger companies, and
therefore find it necessary to extend the small refinery temporary
exemption to all small refiners. Thus, we are proposing to allow the
small refinery temporary exemption, as set out in the Act, to all
qualified small refiners. In addition, past fuels rulemakings have
included a provision that, to qualify for EPA's small refiner
flexibilities, a refiner must have no more than 1,500 total corporate
employees and have a crude capacity of no more than 155,000 bpcd
(slightly higher than SBA's crude capacity limit of 125,000 bpcd). To
be consistent with these previous rules, we are also proposing to allow
those refiners that meet these criteria to be considered small refiners
for this rulemaking. Lastly, we are proposing that small refiners may
separate RINs from batches and trade or sell these RINs prior to 2011
if the small refiner operates as a blender

    We continue to be interested in the potential impacts of this
proposed rule on small entities and welcome comments on issues related
to such impacts.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under Section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. Before promulgating an EPA rule for which a written statement
is needed, Section 205 of the UMRA generally requires EPA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective or least burdensome alternative
that achieves the objectives of the rule. The provisions of Section 205
do not apply when they are inconsistent with applicable law. Moreover,
Section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted.
    Before EPA establishes any regulatory requirements that may
significantly or uniquely affect small governments, including tribal
governments, it must have developed under Section 203 of the UMRA a
small government agency plan. The plan must provide for notifying
potentially affected small governments, enabling officials of affected
small governments to have meaningful and timely input in the
development of EPA regulatory proposals with significant Federal
intergovernmental mandates, and informing, educating, and advising
small governments on compliance with the regulatory requirements.
    EPA has determined that this rule does not contain a Federal
mandate that may result in expenditures of $100 million or more for
State, local, and tribal governments, in the aggregate, or the private
sector in any one year. EPA has estimated that renewable fuel use
through 2012 will be sufficient to meet the required levels. Therefore,
individual refiners, blenders, and importers are already on track to
meet rule obligations through normal market-driven incentives. Thus,
today's rule is not subject to the requirements of Sections 202 and 205
of the UMRA.
    This rule contains no Federal mandates for State, local, or tribal
governments as defined by the provisions of Title II of the UMRA. The
rule imposes no enforceable duties on any of these governmental
entities. Nothing in the rule would significantly or uniquely affect
small governments.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have Federalism implications.''
``Policies that have Federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
    This proposed rule does not have Federalism implications. It will
not have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. Thus, Executive Order 13132 does
not apply to this rule.
    In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comment on this proposed rule
from State and local officials.

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

    Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.''
    This proposed rule does not have tribal implications, as specified
in Executive Order 13175. This rule would be implemented at the Federal
level and collectively apply to refiners, blenders, and importers. EPA
expects these entities to meet the standards on a collective basis
through 2012 even without imposition of any RFS obligations on any
individual party. Tribal governments will be affected only to the
extent they purchase and use regulated fuels. Thus, Executive Order
13175 does not apply to this rule. EPA specifically solicits additional
comment on this proposed rule from tribal officials.

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

    Executive Order 13045: ``Protection of Children from Environmental
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies
to any rule that: (1) Is determined to be ``economically significant''
as defined under Executive Order 12866, and (2) concerns an
environmental health or safety risk that EPA has reason to believe may
have a disproportionate effect on children. If the regulatory action
meets both criteria, the Agency must evaluate the environmental health
or safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by the Agency.
    EPA interprets Executive Order 13045 as applying only to those
regulatory actions that are based on health or safety risks, such that
the analysis required under Section 5-501 of the Order has the
potential to influence the regulation. This proposed rule is not
subject to Executive Order 13045 because it does not establish an
environmental standard intended to mitigate health or safety risks and
because it implements specific standards established by Congress in
statutes.

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

    This rule is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy.
    EPA expects the provisions to have very little effect on the
national fuel supply, since normal market forces alone are promoting
greater renewable fuel use than required by the RFS mandate.
Nevertheless, the rule is an important part of the nation's efforts to
reduce dependence on foreign oil. We discuss our analysis of the energy
and supply effects of the increased use of renewable fuels in Sections
VI and X of this preamble.

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. The NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.
    This proposed rulemaking does not involve technical standards.
Therefore, EPA is not considering the use of any voluntary consensus
standards.

XIII. Statutory Authority

    Statutory authority for the rules proposed today can be found in
section 211 of the Clean Air Act, 42 U.S.C. 7545. Additional support
for the procedural and compliance related aspects of today's proposal,
including the proposed recordkeeping requirements, come from Sections
114, 208, and 301(a) of the CAA, 42 U.S.C. 7414, 7542, and 7601(a).

List of Subjects in 40 CFR Part 80

    Environmental protection, Air pollution control, Fuel additives,
Gasoline, Imports, Incorporation by reference, Labeling, Motor vehicle
pollution, Penalties, Reporting and recordkeeping requirements.

    Dated: September 7, 2006.
Stephen L. Johnson,
Administrator.
    40 CFR part 80 is proposed to be amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

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

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

    2. Section 80.1100 is revised to read as follows:

Sec.  80.1100  How is the statutory default requirement for 2006
implemented?

    (a) Definitions. The definitions of Sec.  80.2 and the following
additional definitions apply to this section only.
    (1) Renewable fuel. (i) Renewable fuel means motor vehicle fuel
that is used to replace or reduce the quantity of fossil fuel present
in a fuel mixture used to operate a motor vehicle, and which:
    (A) Is produced from grain, starch, oil seeds, vegetable, animal,
or fish materials including fats, greases, and oils, sugarcane, sugar
beets, sugar components, tobacco, potatoes, or other biomass; or
    (B) Is natural gas produced from a biogas source, including a
landfill, sewage waste treatment plant, feedlot, or other place where
decaying organic material is found.
    (ii) The term ``renewable fuel'' includes cellulosic biomass
ethanol, waste derived ethanol, biodiesel, and any blending components
derived from renewable fuel.
    (2) Cellulosic biomass ethanol means ethanol derived from any
lignocellulosic or hemicellulosic matter that is available on a
renewable or recurring basis, including dedicated energy crops and
trees, wood and wood residues, plants, grasses, agricultural residues,
fibers, animal wastes and other waste materials, and municipal solid
waste. The term also includes any ethanol produced in facilities where
animal wastes or other waste materials are digested or otherwise used
to displace 90 percent or more of the fossil fuel normally used in the
production of ethanol.
    (3) Waste derived ethanol means ethanol derived from animal wastes,
including poultry fats and poultry wastes, and other waste materials,
or municipal solid waste.
    (4) Small refinery means a refinery for which the average aggregate
daily crude oil throughput for a calendar year (as determined by
dividing the aggregate throughput for the calendar year by the number
of days in the calendar year) does not exceed 75,000 barrels.
    (5) Biodiesel means a diesel fuel substitute produced from
nonpetroleum renewable resources that meets the registration
requirements for fuels and fuel additives established by the
Environmental Protection Agency under section 211 of the Clean Air Act.
It includes biodiesel derived from animal wastes (including poultry
fats and poultry wastes) and other waste materials, or biodiesel
derived from municipal solid waste and sludges and oils derived from
wastewater and the treatment of wastewater.
    (b) Renewable fuel standard for 2006. The percentage of renewable
fuel in the total volume of gasoline sold or dispensed to consumers in
2006 in the United States shall be a minimum of 2.78 percent on an
annual average volume basis.
    (c) Responsible parties. Parties collectively responsible for
attainment of the standard in paragraph (b) of this section are
refiners (including blenders) and importers of gasoline. However, a
party that is a refiner only because he owns or operates a small
refinery is exempt from this responsibility.
    (d) EPA determination of attainment. EPA will determine after the
close of 2006 whether or not the requirement in paragraph (b) of this
section has been met. EPA will base this determination on information
routinely published by the Energy Information Administration on the
annual domestic volume of gasoline sold or dispensed to U.S. consumers
and of ethanol produced for use in such gasoline, supplemented by
readily available information concerning the use in motor fuel of other
renewable fuels such as cellulosic biomass ethanol, waste derived
ethanol, biodiesel, and other non-ethanol renewable fuels.
    (1) The renewable fuel volume will equal the sum of all renewable
fuel volumes used in motor fuel, provided that:
    (i) One gallon of cellulosic biomass ethanol or waste derived
ethanol shall be considered to be the equivalent of 2.5 gallons of
renewable fuel; and
    (ii) Only the renewable fuel portion of blending components derived
from renewable fuel shall be counted towards the renewable fuel volume.
    (2) If the nationwide average volume percent of renewable fuel in
gasoline in 2006 is equal to or greater than the standard in paragraph
(b) of this section, the standard has been met.
    (e) Consequence of nonattainment in 2006. In the event that EPA
determines that the requirement in paragraph (b) of this section has
not been attained in 2006, a deficit carryover volume shall be added to
the renewable fuel volume obligation for 2007 for use in calculating
the standard applicable to gasoline in 2007.
    (1) The deficit carryover volume shall be calculated as follows:

DC = Vgas* (Rs-Ra)

Where:

DC = Deficit carryover in gallons of renewable fuel.
Vgas = Volume of gasoline sold or dispensed to U.S. consumers in
2006, in gallons.
Rs = 0.0278.
Ra = Ratio of renewable fuel volume divided by total gasoline volume
determined in accordance with paragraph (d)(2) of this section.

    (2) There shall be no other consequence of failure to attain the
standard in paragraph (b) of this section in 2006 for any of the
parties in paragraph (c) of this section.

    3. Section 80.1101 is added to read as follows:

Sec.  80.1101  Definitions.

    The definitions of Sec.  80.2 and the following additional
definitions apply for purposes of this subpart.
    (a) Cellulosic biomass ethanol means either of the following:
    (1) Ethanol derived from any lignocellulosic or hemicellulosic
matter that is available on a renewable or recurring basis, which
includes any of the following:
    (i) Dedicated energy crops and trees.
    (ii) Wood and wood residues.
    (iii) Plants.
    (iv) Grasses.
    (v) Agricultural residues.
    (vi) Animal wastes and other waste materials.
    (vii) Municipal solid waste.
    (2) Ethanol made at facilities at which animal wastes or other
waste materials are digested or otherwise used onsite to displace 90
percent or more of the fossil fuel that is combusted to produce thermal
energy integral to the process of making ethanol and which comply with
the recordkeeping requirements of Sec.  80.1151(a)(4).
    (b) Other waste materials means either of the following:
    (1) Waste materials that are residues rather than being produced
solely for the purpose of being combusted to produce energy (e.g.,
residual tops, branches, and limbs from a tree farm could be waste
materials while wood chips used as fuel and which come from plants
grown solely for such purpose would not be waste materials).
    (2) Waste heat that is captured from an off-site combustion process
(e.g., furnace, boiler, heater, or chemical process).
    (c) Otherwise used means either of the following:
    (1) The direct combustion of the waste materials to make thermal
energy.
    (2) The use of waste heat as a source of thermal energy.
    (d) Waste derived ethanol means ethanol derived from either of the
following:
    (1) Animal wastes, including poultry fats and poultry wastes, and
other waste materials.
    (2) Municipal solid waste.
    (e) Biogas means methane or other hydrocarbon gas produced from
decaying organic material, including landfills, sewage waste treatment
plants, and animal feedlots.
    (f) Renewable fuel. (1) Renewable fuel is motor vehicle fuel that
is used to replace or reduce the quantity of fossil fuel present in a
fuel mixture used to operate a motor vehicle, and is produced from
either of the following:
    (i) Grain.
    (ii) Starch.
    (iii) Oilseeds.
    (iv) Vegetable, animal or fish materials including fats, greases
and oils.
    (v) Sugarcane.
    (vi) Sugar beets.
    (vii) Sugar components.
    (viii) Tobacco.
    (ix) Potatoes.
    (x) Other biomass; or is natural gas produced from a biogas source,
including a landfill, sewage waste treatment plant, feedlot, or other
place where decaying organic material is found.
    (2) The term ``Renewable fuel'' includes cellulosic biomass
ethanol, waste derived ethanol, biodiesel (mono-alkyl ester), non-ester
renewable diesel, and blending components derived from renewable fuel.
    (3) Small volume additives less than 1.0 percent of the total
volume of a renewable fuel shall be counted as part of the total
renewable fuel volume.
    (4) A fuel produced by a renewable fuel producer that is used in
boilers or heaters is not a motor vehicle fuel, and therefore is not a
renewable fuel.
    (g) Blending component has the same meaning as ``Gasoline blending
stock, blendstock, or component'' as defined at Sec.  80.2(s), for
which the portion that can be counted as renewable fuel is calculated
as set forth in Sec.  80.1115(a).
    (h) Motor vehicle has the meaning given in Section 216(2) of the
Clean Air Act (42 U.S.C. 7550).
    (i) Small refinery means a refinery for which the average aggregate
daily crude oil throughput for the calendar year 2004 (as determined by
dividing the aggregate throughput for the calendar year by the number
of days in the calendar year) does not exceed 75,000 barrels.
    (j) Biodiesel (mono-alkyl ester) means a motor vehicle fuel or fuel
additive which:
    (1) Is registered as a motor vehicle fuel or fuel additive under 40
CFR part 79;
    (2) Is a mono-alkyl ester;
    (3) Meets ASTM D-6751-02a;
    (4) Is intended for use in engines that are designed to run on
conventional diesel fuel, and
    (5) Is derived from nonpetroleum renewable resources (as defined in
paragraph (o) of this section).
    (k) Non-ester renewable diesel means a motor vehicle fuel or fuel
additive which:
    (1) Is registered as a motor vehicle fuel or fuel additive under 40
CFR part 79;
    (2) Is not a mono-alkyl ester;
    (3) Is intended for use in engines that are designed to run on
conventional diesel fuel; and
    (4) Is derived from nonpetroleum renewable resources (as defined in
paragraph (o) of this section).
    (l) Biocrude means plant oils or animal fats that are used as
feedstocks to any production unit in a refinery that normally processes
crude oil to make gasoline or diesel fuels.
    (m) Biocrude-based renewable fuels are renewable fuels that are
gasoline or diesel products resulting from the processing of biocrudes
in atmospheric distillation or other process units at refineries that
normally process petroleum-based feedstocks.
    (n) Importers, for the purposes of this subpart only, are those
persons who:
    (1) Are considered importers under Sec.  80.2(r); and
    (2) Are persons who bring gasoline into the 48 contiguous states of
the United States from areas that have not chosen to opt in to the
program requirements of this subpart (per Sec.  80.1143).
    (o) Nonpetroleum renewable resources include, but are not limited
to, either of the following:
    (1) Plant oils.
    (2) Animal fats and animal wastes, including poultry fats and
poultry wastes, and other waste materials.
    (3) Municipal solid waste and sludges and oils derived from
wastewater and the treatment of wastewater.
    (p) Export of renewable fuel means:
    (1) Transfer of a batch of renewable fuel to a location outside the
United States; and
    (2) Transfer of a batch of renewable fuel from the contiguous 48
states to Alaska, Hawaii, or a United States territory, unless that
state or territory has received an approval from the Administrator to
opt-in to the renewable fuel program pursuant to Sec.  80.1143.
    (q) Renewable Identification Number (RIN), is a unique number
generated to represent a volume of renewable fuel in accordance with
Sec.  80.1126.
    (r) Standard-value is a RIN generated to represent renewable fuel
with an equivalence value up to and including 1.0.
    (s) Extra-value RIN is a RIN generated to represent renewable fuel
with an equivalence value greater than 1.0.
    (t) Batch-RIN is a RIN that represents a batch of renewable fuel
containing multiple gallons. A batch-RIN uniquely identifies all of the
gallon-RINs in that batch.
    (u) Gallon-RIN is a RIN that represents an individual gallon of
renewable fuel.

Sec. Sec.  80.1102-80.1103  [Added and Reserved]

    4. Sections 80.1102 and 80.1103 are added and reserved.
    5. Sections 80.1104 through 80.1107 are added to read as follows:

Sec.  80.1104  What are the implementation dates for the Renewable Fuel
Standard Program?

    The RFS standards and other requirements of this subpart are
effective beginning the day after [DATE 60 DAYS AFTER PUBLICATION OF
THE FINAL RULE IN THE FEDERAL REGISTER.

Sec.  80.1105  What is the Renewable Fuel Standard?

    (a) The annual value of the renewable fuel standard for 2007 shall
be 3.71 percent.
    (b) Beginning with the 2008 compliance period, EPA will calculate
the value of the annual standard and publish this value in the Federal
Register by November 30 of the year preceding the compliance period.
    (c) EPA will base the calculation of the standard on information
provided by the Energy Information Administration regarding projected
gasoline volumes and projected volumes of renewable fuel expected to be
used in gasoline blending for the upcoming year.
    (d) EPA will calculate the annual renewable fuel standard using the
following equation:
[GRAPHIC] [TIFF OMITTED] TP22SE06.006

Where:

RFStdi = Renewable Fuel Standard in year i, in percent.
RFVi = Nationwide annual volume of renewable fuels
required by section 211(o)(2)(B) of the Act (42 U.S.C. 7545) for
year i, in gallons.
Gi = Amount of gasoline projected to be used in the 48
contiguous states, in year i, in gallons.
Ri = Amount of renewable fuel blended into gasoline that
is projected to be used in the 48 contiguous states, in year i, in
gallons.
GSi = Amount of gasoline projected to be used in
noncontiguous states or territories (if the state or territory opts-
in) in year i, in gallons.
RSi = Amount of renewable fuel blended into gasoline that
is projected to be used in noncontiguous states or territories (if
the state or territory opts-in) in year i, in gallons.
GEi = Amount of gasoline projected to be produced by
exempt small refineries and small refiners in year i, in gallons
(through 2010 only).
Celli = Beginning in 2013, the amount of renewable fuel
that is required to come from cellulosic sources, in year i, in
gallons (250,000,000 gallons minimum).

(e) Beginning with the 2013 compliance period, EPA will calculate the
value of the annual cellulosic standard and publish this value in the
Federal Register by November 30 of the year preceding the compliance
period.
(f) EPA will calculate the annual cellulosic standard using the
following equation:
[GRAPHIC] [TIFF OMITTED] TP22SE06.007

Where:

RFCelli = Renewable Fuel Cellulosic Standard in year i,
in percent.
Gi = Amount of gasoline projected to be used in the 48
contiguous states, in year i, in gallons.
Ri = Amount of renewable fuel blended into gasoline that
is projected to be used in the 48 contiguous states, in year i, in
gallons.
GSi = Amount of gasoline projected to be used in
noncontiguous states or territories (if the state or territory opts-
in) in year i, in gallons.
RSi = Amount of renewable fuel blended into gasoline that
is projected to be used in noncontiguous states or territories (if
the state or territory opts-in) in year i, in gallons.
Celli = Amount of renewable fuel that is required to come
from cellulosic sources, in year i, in gallons (250,000,000 gallons
minimum).

Sec.  80.1106  To whom does the Renewable Volume Obligation apply?

    (a)(1) An obligated party is a refiner or blender which produces
gasoline within the 48 contiguous states, or an importer which imports
gasoline into the 48 contiguous states.
    (2) If the Administrator approves a petition of Alaska, Hawaii, or
a United States territory to opt-in to the renewable fuel program under
the provisions in Sec.  80.1143, then ``obligated party'' shall include
any refiner or blender which produces gasoline within that state or
territory, or an importer which imports gasoline into that state or
territory.
    (b)(1) For each calendar year starting with 2007, any obligated
party is required to demonstrate, pursuant to Sec.  80.1127, that they
have satisfied the Renewable Volume Obligation for that calendar year,
as specified in Sec.  80.1107(a), except as otherwise provided in this
section.
    (2) The deficit carryover provisions in Sec.  80.1127(b) only apply
if all of the requirements specified in Sec.  80.1127(b) are fully
satisfied.
    (c) Any blender whose sole blending activity in a calendar year is
to blend a renewable fuel (or fuels) into gasoline, RBOB, CBOB, or
diesel fuel is not required to meet the renewable volume obligation
specified in Sec.  80.1107(a) for that gasoline for that calendar year.

Sec.  80.1107  How is the Renewable Volume Obligation calculated?

    For the purposes of this section, all reformulated gasoline,
conventional gasoline and blendstock, collectively called ``gasoline''
unless otherwise specified, is subject to the requirements under this
subpart, as applicable.
    (a) The Renewable Volume Obligation for an obligated party is
determined according to the following formula:
RVOi = RFStdi x GVi +
Di-1
Where:

RVOi = The Renewable Volume Obligation for a refiner,
blender, or importer for calendar year i, in gallons of renewable
fuel.
RFStdi = The renewable fuel standard for calendar year i
from Sec.  80.1105, in percent.
GVi = The non-renewable gasoline volume, determined in
accordance with paragraphs (b), (c), and (d) of this section, which
is produced or imported, in year i, in gallons.
Di-1 = Renewable fuel deficit carryover from the previous
year, per Sec.  80.1127(b), in gallons.

    (b) The non-renewable gasoline volume for a refiner, blender, or
importer for a given year, GVi, specified in paragraph (a)
of this section is calculated as follows:
[GRAPHIC] [TIFF OMITTED] TP22SE06.008

Where:

x = Batch.
n = Total number of batches of gasoline produced or imported.
Gx = Total volume of gasoline produced or imported, per
paragraph (c) of this section, in gallons.
    RBx = Total volume of renewable fuel blended into
gasoline, in gallons.

    (c) For the purposes of this section, all of the following products
that are produced or imported during a calendar year are to be included
in the volume used to calculate a party's renewable volume obligation
under paragraph (a) of this section, except as provided in paragraph
(d) of this section:
    (1) Reformulated gasoline.
    (2) Conventional gasoline.
    (3) Reformulated gasoline blendstock for oxygenate blending
(``RBOB'').
    (4) Conventional gasoline blendstock that becomes finished
conventional gasoline upon the addition of oxygenate (``CBOB'').
    (5) Gasoline treated as blendstock (``GTAB'').
    (6) Blendstock that has been combined with other blendstock or
finished gasoline to produce gasoline.
    (d) The following products are not included in the volume of
gasoline produced or imported used to calculate a party's renewable
volume obligation under paragraph (a) of this section:
    (1) Any renewable fuel as defined in Sec.  80.1101(f).
    (2) Blendstock that has not been combined with other blendstock or
finished gasoline to produce gasoline.
    (3) Gasoline produced or imported for use in Alaska, Hawaii, the
Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, and the Commonwealth of the Northern Marianas, unless the area
has opted into the RFS program under Sec.  80.1143.
    (4) Gasoline produced by a small refinery that has an exemption
under Sec.  80.1141 or an approved small refiner that has an exemption
under Sec.  80.1142 during the period that such exemptions are in
effect.
    (5) Gasoline exported for use outside the United States.
    (6) For blenders, the volume of finished gasoline, RBOB, or CBOB to
which a blender adds blendstocks.
    (e) Compliance period. (1) For 2007, the compliance period is [DATE
60 DAYS AFTER PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER]
through December 31, 2007.
    (2) Beginning in 2008, and every year thereafter, the compliance
period is January 1 through December 31.

Sec. Sec.  80.1108-80.1114  [Added and Reserved]

    6. Sections 80.1108 through 80.1114 are added and reserved.
    7. Section 80.1115 is added to read as follows:

Sec.  80.1115  How are equivalence values assigned by renewable fuel
producers?

    (a) Each gallon of a renewable fuel shall be assigned an
equivalence value. The equivalence value is a number assigned to every
renewable fuel that is used to determine how many gallon-RINs can be
generated for a batch of renewable fuel according to Sec.  80.1126.
Equivalence Values for certain renewable fuels are assigned in
paragraph (d) of this section. For other renewable fuels, the
equivalence value shall be calculated using the following formula:

EV = (R / 0.931) * (EC / 77,550)
Where:

EV = Equivalence Value for the renewable fuel.
R = Renewable content of the renewable fuel. This is a measure of
the portion of a renewable fuel that came from a renewable source,
expressed as a percent, on an energy basis, of the renewable fuel
that comes from a renewable feedstock.
EC = Energy content of the renewable fuel, in Btu per gallon (lower
heating value).

    (b) Technical justification and approval of calculation of the
Equivalence Value.
    (1) Producers of renewable fuels must prepare a technical
justification of the calculation of the Equivalence Value for the
renewable fuel including a description of the renewable fuel, its
feedstock and production process.
    (2) Producers shall submit the justification to the EPA for
approval.
    (3) The Agency will review the technical justification and assign
an appropriate Equivalence Value to the renewable fuel based on the
procedure in paragraph (c) of this section.
    (c) The equivalence value is assigned as follows:
    (1) A value rounded to the nearest tenth if such value is less than
0.9.
    (2) 1.0 if the calculated equivalence value is in the range of 0.9
to 1.2.
    (3) 1.3, 1.5, or 1.7, for calculated values over 1.2, whichever
value is closest to the calculated equivalence value, based on the
positive difference between the calculated equivalence value and each
of these three values, except as specified in paragraphs (c)(4) and
(c)(5) of this section.
    (4) 2.5 for cellulosic biomass ethanol that is produced on or
before December 31, 2012.
    (5) 2.5 for waste derived ethanol.
    (d) Equivalence values for some renewable fuels are as given in the
following table:

 Table 1 of Sec.   80.1115.--Equivalence Values for Some Renewable Fuels
------------------------------------------------------------------------
                                                             Equivalence
                    Renewable fuel type                       value (EV)
------------------------------------------------------------------------
Cellulosic biomass ethanol and waste derived ethanol                2.5
 produced on or before December 31, 2012...................
Ethanol from corn, starches, or sugar......................         1.0
Biodiesel (mono-alkyl ester)...............................         1.5
Non-ester renewable diesel.................................         1.7
Butanol....................................................         1.3